Channel Tunnel Rail Link (Supplementary Provisions) Bill

Public Bill Committee, 4 December 2007.

Peter Atkinson (Conservative, Hexham)

Before we begin, I have a few housekeeping announcements to make. If men wish to take off their jackets, they may. Will everyone please ensure that mobile phones are silenced? I remind the Committee that there is a Ways and Means resolution in relation to the Bill, of which copies are available in the Room, and that adequate notice should be given of amendments, because it is not my general intention to call starred amendments.

The process of taking oral evidence in Public Bill Committees is still quite new, so it may help if I briefly explain what we are going to do. Having said that, it is as new to me as it probably is to many of you, so please bear with us. The Committee first considers the programme motion on the amendment paper. Debate on that, if it is necessary, is limited to half an hour. We shall then proceed to a motion to report written evidence and afterward to a motion to permit the Committee to deliberate in private in advance of the oral evidence session. I hope that we can take those latter motions formally. The purpose of the private session is to consider the brief that we have been given, and to allow questions to be dealt with.

Assuming that the second motion is agreed, the Committee will then move into public session for the oral evidence. If the Committee completes its questioning of witnesses in good time, we will move on to clause-by-clause consideration. If we manage that before 1 pm, we shall have to move to Committee Room 12, for reasons that I shall not bore you with. We shall adjourn for 15 minutes while that happens. Finally, will speakers please remain seated when they speak? The reason is that the microphones in this Room do not work.

Greg Knight (Conservative, East Yorkshire)

On a point of order. If we are to remain seated, Mr. Chairman, will you indicate the method by which you would prefer us to catch your eye?

Peter Atkinson (Conservative, Hexham)

I suggest that hon. Members do as you have just done.

Peter Atkinson (Conservative, Hexham)

We will now hear oral evidence from representatives of the Department for Transport and I welcome the witnesses here today. Minister, will you introduce your colleagues to the Committee?

Stephen Hammond (Conservative, Wimbledon)

May I ask the Minister, in relation to clause 1, what exactly in the provisions of the Channel Tunnel Rail Link Act 1996 and the Railways Act 2005 led him to believe that there was any uncertainty with regard to High Speed 1?

Stephen Hammond (Conservative, Wimbledon)

I understand that point, and I am grateful for the Minister’s briefing to the two Opposition Front-Bench teams. However, having read the Act, I found it difficult to understand why the ambiguity arose. Did the Minister assess the likelihood of that ambiguity occurring?

Greg Knight (Conservative, East Yorkshire)

Was there an incident that led you to take this legal advice?

Susan Kramer (Liberal Democrat, Richmond Park)

The support that was provided by the Government for construction financing for this project was presumably to reduce the risk associated with the construction period, which was obviously a highly uncertain time. That risk has now fallen away, but the same guarantees remain in place. Do you envisage a refinancing that removes all or part of those guarantees, or are you anticipating that those guarantees will remain in place over the foreseeable future?

John Horam (Conservative, Orpington)

Is this avoidance of doubt solely related to a possible sale of the operation, or is it also a factor that you think that there might be some re-financing of existing debt in the future, with the ownership remaining the same?

John Horam (Conservative, Orpington)

Even with existing ownership?

John Horam (Conservative, Orpington)

What I am trying to get clear is whether this saves the taxpayer money and reduces the cost to the Department, even if the ownership remains the same in the event of any re-financing. Does the Bill make it easier to re-finance?

Stephen Hammond (Conservative, Wimbledon)

I understand why there were exclusions from the normal regulatory regime during the construction phase. However, clause 2 is supposed to normalise arrangements and put all access on the same basis. I do not understand why it is therefore appropriate for the Secretary of State, rather than the Office of the Rail Regulator, to exercise those powers? That would be different from normal arrangements.

Stephen Hammond (Conservative, Wimbledon)

I am grateful for that answer, but there are two points that I would like to return to. First, my understanding of clause 2 was that it was supposed to ensure that arrangements across the network were as one. That clearly is not what is going to happen. Secondly, on a five-yearly view, assets will depreciate and move in value. Is it not appropriate for there to be a review of the cost of an asset base, even after five years?

Chris Mole (Labour, Ipswich)

You have explained why you think that it is preferable for you carry out the function rather than the regulator, in terms of managing access contracts. How will you, or the Secretary of State, determine the access rights of those operators that want to run services on HS1?

Chris Mole (Labour, Ipswich)

Does that really tell me exactly what the Secretary of State’s role is, rather than the role of the ORR? Or are you saying that the ORR will provide a supporting role to the Secretary of State by arbitrating on those sorts of disputes?

Chris Mole (Labour, Ipswich)

Moving on to conditions of access, what conditions will be imposed on operators that are granted access to High Speed 1? For instance, will it be possible to require services to stop at particular stations?

Susan Kramer (Liberal Democrat, Richmond Park)

As the Minister will know, there is a great deal of concern in the industry that the legislation as it stands, and as changed by this Bill, will still make it exceedingly difficult for new operators to provide international services. I think that we can say that the taxpayer has contributed very substantially to the creation of this asset. Obviously, the Secretary of State wants an environment that means that the asset can be sold fairly attractively to get a good return to the Treasury on the money that has been put in, but can I suggest that the taxpayer at large also wants to see the maximum opportunity for running new services to continental Europe? Can the Minister give us some comfort that the changes that he is proposing, combined with the existing regime, will create an environment in which it is realistically reasonable for new operators to be able to come in and provide those services, and that we are going to see the maximum and optimal use of the asset? That uncertainty remains, despite the language on the page.

Susan Kramer (Liberal Democrat, Richmond Park)

The Minister is saying that market forces will deal with this, but as I and others have pointed out to him, the way in which the assets are to be sold would allow for cross-ownership between the owner of the track and the owner of Eurostar, creating, some might believe, a disincentive for open access for certain kinds of services that would be highly competitive in various ways to the Eurostar service. The body that has always held the ring, if you like, in disputes of this kind has been the Office of the Rail Regulator, which has now essentially moved to a position of last resort in terms of regulating access. I am looking for him to give us some comfort. Because cross-ownership of both the track and Eurostar is very likely—SNCF currently has such cross-ownership—I am extremely concerned that we do not put an institutional arrangement in place that leaves everybody helpless in the face of that kind of economic pressure. The answer that market forces will deal with the matter leaves me with some concern.

Susan Kramer (Liberal Democrat, Richmond Park)

One last question. I still have my reservations, and while there is hope that there will not be cross-ownership, that is not the word on the street. Obviously there is the potential for HS2 and there have been discussions about that. For example, people are putting together project notions for spurs to Heathrow. There is a whole variety of potential linking routes to HS1. How does the regulatory scheme that the clause puts in place either enable or create issues for linkage into further extensions at high speed?

Adam Holloway (Conservative, Gravesham)

Can the Government trade stakeholders’ shares, and what would be the rough value of that?

Adam Holloway (Conservative, Gravesham)

Can the stakeholders’ share be sold by the Government at some time in the future, or is it just a share of the cash flow after 2020?

Adam Holloway (Conservative, Gravesham)

If that is what it is called, yes.

Adam Holloway (Conservative, Gravesham)

It is not tradable?

John Horam (Conservative, Orpington)

There are no domestic services at the moment on the line. What is the timetable for franchising domestic services on the line?

John Horam (Conservative, Orpington)

If the Eurostar plus the new domestic services operate, that will presumably take a small part only of the capacity of the new line. Will there be a lot of capacity left for other new services?

John Horam (Conservative, Orpington)

That 40 per cent. will not be immediately hit, I imagine.

Peter Atkinson (Conservative, Hexham)

Are there any more questions on access? In that case, we move on to clause 3, on the duties of the Office of the Rail Regulator.

Barry Gardiner (Labour, Brent North)

What is said in section 21(1) of the 1996 Act about the development agreement?

Barry Gardiner (Labour, Brent North)

It is subsection 1 that I am interested in, in relation to the development agreement.

Barry Gardiner (Labour, Brent North)

So how might the Office of the Rail Regulator’s regulatory functions have an adverse impact on the development agreement, in relation to the national railway?

Barry Gardiner (Labour, Brent North)

Sorry, could you clarify?

Barry Gardiner (Labour, Brent North)

So why should the rail regulator give overriding precedence to the development agreement in this situation?

Peter Atkinson (Conservative, Hexham)

Any further questions on clause 3? If not, we shall move to clause 4.

Stephen Hammond (Conservative, Wimbledon)

The clause, as I understand it, allows the ORR to charge CTRL a fee. The phrase that it uses makes reference to “costs reasonably incurred”. Will you provide some explanation or guidance as to what “costs reasonably incurred” might be, in terms of comparison to other arrangements that might exist?

Stephen Hammond (Conservative, Wimbledon)

I have two things to say. We discussed previously in Committee the use of “reasonable”. I was really looking for an explanation of how you intend to define “reasonably” this time round.

I hear what you have just said about the position not being similar to the position under Network Rail and therefore on an ad hoc basis, but the explanatory notes say something entirely different. They say that it is proposed to be in a similar position to Network Rail. Why is there a contradiction?

Stephen Hammond (Conservative, Wimbledon)

I did not want an actual figure from you. I was looking for a definition, given that we have discussed the matter several times. What should we take “reasonably” to mean in this context?

Greg Knight (Conservative, East Yorkshire)

Do you not concede that the clause is very widely drawn? My hon. Friend the Member for Wimbledon was being generous when he said that it allows costs that are reasonably incurred to be charged. The clause does not actually say that. It is not an objective test; it is a subjective test. It deals with costs that the Office of Rail Regulation considers to be “reasonably incurred”, not necessarily what a reasonable man considers to be reasonably incurred. Do you think that that is far too wide?

Greg Knight (Conservative, East Yorkshire)

Yes, but my point is that the wording of subsection (2) (a), which is what I alluded to, does not say, “such amount must be costs which are only reasonably incurred.” It states that the amount of a fee shall be

“such amount as the Office of Rail Regulation considers to represent the costs reasonably incurred by it”.

The Office of Rail Regulation may run a very slack ship with high costs.

Greg Knight (Conservative, East Yorkshire)

May I move on to subsection (6) of this clause? There are no limits on the scope of the ORR. Could not the following scenario arise? A notice is issued and the amount stated in the notice is not paid, so the ORR then decides under subsection (6) to issue a second notice, adding interest on to the fee, which was mentioned in the first notice. That is not paid, so the ORR issues a third notice, adding the lawyers’ fees as well on the basis that these are costs that the ORR feels are reasonably incurred. Could we not get a succession of notices bumping up the price for those who pay late?

Greg Knight (Conservative, East Yorkshire)

So you are happy with this wording?

Peter Atkinson (Conservative, Hexham)

We move on to clause 5 and the meaning of “development agreement”.

Stephen Hammond (Conservative, Wimbledon)

Could you confirm that the definition of rail services includes the rail infrastructure, which means the track, the stations, the depot, the rolling stock and any railway services such as passenger and freight services and maintenance? Is the term “rail services” that widely drawn?

Stephen Hammond (Conservative, Wimbledon)

Do you not concede that if you look at section 6 of the 2005 Act, it provides the definition that I have just given you, which is more widely drawn than you have stated to us.

Stephen Hammond (Conservative, Wimbledon)

Can we be clear, therefore, how we need to amend this clause to ensure that that actually happens because that is not what it says at the moment?

Stephen Hammond (Conservative, Wimbledon)

I understand that point, and this is exactly the same point as the interim latest period that we discussed in another Committee last week. However, it is not only the time period, it is also what you run during that period. That is what I want to be clear about.

Greg Knight (Conservative, East Yorkshire)

Chairman, may I ask that that clarification goes to all members of the Committee?

Peter Atkinson (Conservative, Hexham)

Yes.

Any further questions?

In that case, can I thank you, Minister, for coming here today, and also Mr. Lunn and Mr. Dalton for giving evidence. We will now suspend the Committee for 15 minutes until 11.30 to enable us to move to Committee Room 12, where we will resume. I ask hon. Members to take their papers with them.

Peter Atkinson (Conservative, Hexham)

We are now back on more familiar territory and we begin clause by clause scrutiny of the Bill.

Clause 1

Stephen Hammond (Conservative, Wimbledon)

I beg to move amendment No. 1, in clause 1, page 1, line 5, at end add—

‘(3) In subsection (1) “railway services” refer only to those services that both originate and terminate in the United Kingdom.’.

It is an honour and privilege to serve under your chairmanship, Mr. Atkinson. I am sure that you and other members of the Committee will be relieved to hear that I do not intend to use words such as “consultation”, “arbitration” or “registered delivery”. Those who were in this room last week will understand the significance of that remark.

The Bill is small. In many ways, this is an exercise in refining the Railways Acts of 1993 and 2005, and the Channel Tunnel Rail Link Act 1996. We support that premise because it is important that the new high speed rail link is given the statutory support that it needs so that it can be the success we hope it will be and in order for it to achieve its value.

Clause 1 attempts to clear up possible confusion about whether the Government may continue to provide financial support to the rail link, and the services running on it, now that the construction phase is completed and the services are being phased in. As we have heard from the Minister, that is deemed necessary for the avoidance of doubt in case of any future purchase or re-financing of the rail link. My fear is that the current wording does not confine that financial assistance to domestic services.

The explanatory notes say:

“the Secretary of State will also provide revenue funding for domestic services operating on the CTRL under a franchise.”

That was presumably the intention. However, it is not the intention to provide that funding for the Eurostar international services. The Bill states:

“nothing in sections 31 to 33 of the 1996 Act prevents the powers of the Secretary of State under section 6 of the Railways Act 2005 (c. 14) from being exercised in relation to the rail link or railway services on it.”

I contend that if we leave the phrase

“or railway services on it”

unamended, funding will not be restricted to domestic services. Therefore, in the spirit of helping the Government to remove any ambivalence or query, I contend that the amendment would clarify the matter and make clear that the railway services on the rail link that would potentially attract such support are only those services that originate and terminate in the United Kingdom.

Will the Minister confirm that it was his intention to provide financial assistance only to domestic services? If that is the case, I hope that he agrees that my amendment is the appropriate way of enshrining that in the Bill.

Tom Harris (Labour, Glasgow South)

I also welcome you to the Chair, Mr. Atkinson, and apologise for not having done so earlier. We are all treading in new territory at the moment, and I am not sure when there would have been an earlier opportunity.

The hon. Member for Wimbledon always tries to be helpful. I can tell when he is doing so because he says that he is trying to be helpful. However, as in this particular case, it never quite works out that way. I understand the sentiment behind the amendment, and I sympathise with his intentions and the commercial principle that he promotes. It would be wrong for the UK taxpayer to subsidise services across the continent. Members of the Committee might take comfort in the fact that the Secretary of State would not have the power to do so, even if she wanted to. The power to support services under the 2005 Act extends to Great Britain only—not to France, Belgium, or anywhere else where a commercial operator might wish to run services.

Eurostar is a joint venture. Its present structure is supported by a set of cost and revenue-sharing protocols among the three partner companies in the UK, France and Belgium. Under those agreements, Eurostar UK Ltd—the UK partner owned by London and Continental Railways—pays only the access charges on the UK side, and half of the charges for the tunnel itself. Any restructuring of the joint venture would also have to be on terms that protected taxpayers’ interests.

The amendment would rule out leaving in place some of the historical support that the Government have already agreed to provide to Eurostar UK Ltd, such as the access charge loan and the guarantees of its rolling stock places. An objective for next year’s restructuring is to make Eurostar and all LCR’s businesses independent, self-standing and financially sustainable. The Government and LCR should be in a position in which a full range of options is available to meet that objective so that decisions taken best protect the taxpayers’ interests.

The hon. Gentleman is right in that the Government’s intention behind the clause is to allow continued subsidy or support for domestic services, not international services. I said on Second Reading:

“It does not mean that the Government have any long-term intention to offer public subsidy to Eurostar.”—[Official Report, 20 November 2007; Vol. 467, c. 1156.]

With that reassurance, I hope that he will withdraw the amendment.

Stephen Hammond (Conservative, Wimbledon)

Before I consider that, may I press the Minister on two things that he said in his explanation? First, he said that there is no power in the 2005 Act for the Secretary of State to subsidise services across the continent. I understand that point. However, in extremis, does not the Bill allow the possibility of part of the service that Eurostar is running in the UK being open to revenue funding? Is that really what the Government intend to do?

Secondly, I fail to understand how my amendment could possibly have an impact on the guarantees that were previously given on access and rolling stock. Will the Minister clarify why he thinks that it would in any way affect those?

Tom Harris (Labour, Glasgow South)

On the hon. Gentleman’s second point, I think that it is quite feasible that if we were to amend the Bill in the way in which he suggests so that it said that international services were precluded from any such public subsidy of any shape or form, any existing financial agreements, such as rolling stock leases, could clearly be challengeable in court.

On the first point—will the hon. Gentleman remind me what his first point was?

Stephen Hammond (Conservative, Wimbledon)

My first point was that the Minister rightly stated—we all understand this—that the intention was to provide financial assistance for revenue operations, potentially regarding the domestic service only. He said that there was nothing in the 2005 Act that would allow the Secretary of State to subsidise services operating on the continent. However, I am saying that if the Bill is not amended, there might be a position in which it will be possible for her to subsidise the UK portion of Eurostar’s operations. Is that really what the Government intend to do?

Tom Harris (Labour, Glasgow South)

I am grateful for that clarification.

In essence, if, in the short term, any extra subsidy were to be provided to Eurostar Ltd, such as through the leasing stock agreements, the hon. Gentleman is right. That could be interpreted as being a short-term subsidy from the Government. However, as I have said repeatedly, it is not the intention of the Government publicly to provide any subsidy to Eurostar in the long term. However, there will be an interim period following the restructuring of LCR in which there will be a necessity for perceived public funds to be available to Eurostar, but it will be only a short period. Certainly, in the long term, we do not expect Eurostar to be publicly funded; we expect it to be a viable commercial operation that stands on its own two feet. The hon. Gentleman’s amendment would preclude us from offering even short-term support in whatever form, such as through subsidy or leasing stock agreements.

Stephen Hammond (Conservative, Wimbledon)

I have listened carefully to what the Minister has said. If he had wanted such a provision, as we have seen from other pieces of legislation that we have examined, he could have done so though the use of an interim period clause. I accept that the Government intend to concentrate revenue funding on domestic services. However, I shall examine carefully why the Minister thinks that the measure has an impact on matters such as the leasing arrangements for Eurostar because it seems to tackle the operation of domestic services. We might revisit that on Report. I beg to ask leave to withdraw the amendment.

Clause 2

Stephen Hammond (Conservative, Wimbledon)

I beg to move amendment No. 2, in clause 2, page 1, line 7, leave out lines 7 to 9 and insert—

‘Section 17 of the 1996 Act (access agreements) is repealed’.

Peter Atkinson (Conservative, Hexham)

With this it will be convenient to discuss amendment No. 3, in clause 3, page 1, line 11, leave out lines 11 to 16 and insert—

‘Section 21 of the 1996 Act (duties of the Office of Rail Regulation as to the exercise of regulatory functions) is repealed’.

Stephen Hammond (Conservative, Wimbledon)

We have already had the benefit of a number of written submissions from the Minister and his officials, together with public evidence today. The 1996 Act gave certain powers and priorities to the Secretary of State and London and Continental Railways to facilitate the construction of High Speed 1. Obviously, the construction is finished, so some of those rights and obligations are no longer required. Clauses 2 and 3 seek to clarify what is still required and what should be repealed. My concern is about not what is being repealed, but what is not being repealed.

Clause 2 relates to access contracts. Previously, all the CTRL access contracts, with the exception of those intersecting with other parts of the network, were immune from the normal procedure set out in the Railways Act 1993. In other words, they were immune from direction by and approval from the ORR. Clause 2 removes the specific provisions relating to access contracts in places where the new line interconnects with the national rail network and will therefore ensure that in future no access contract relating to High Speed 1 will be subject to direction by the ORR. I understand that despite there being no need for ORR approval, it is intended that all High Speed 1 access contracts will be subject to some form of regulation. That regulation would appear to be under the direct oversight of the Secretary of State, who will supervise the access negotiations.

The amendment probes why there should be different regulation for High Speed 1 and why that needs to be different from that for other parts of the rail network now that the construction phase is finished. I was interested to read the written response that the Minister provided to a question asked on Second Reading, in which he said that the key difference is that the domestic network is subject to economic regulation, whereas high speed rail is not. I understand that, but I seek further clarification.

The role of the regulator in relation to access contracts is not merely to set the economic regulation of the access charge—it goes well beyond that. The ORR decides where access needs to be granted to improve train operations and infrastructure. I believe that the access arrangements for High Speed 1 would benefit from such independent oversight by ORR, so amendment No. 2 would make the High Speed 1 access arrangements consistent with those for the rest of the network.

If, as I propose, the whole of section 17 of the 1996 Act were repealed, the rules governing High Speed 1 access contracts would be in line with those for all other such contracts. I believe that that is the Government’s stated intention—the Minister has confirmed that in writing. It seems to me that, by switching power and scrutiny, the amendment would achieve that ambition. If the Bill were to remain in its current form, I am unconvinced that it would be unambiguous as to whether two sets of approval were required. If that were the case, far from being subject to the consistent regime to which the Minister has referred, High Speed 1 would be subject to a different regime.

The form of amendment No. 3 is similar to that of amendment No. 2, in that it would repeal a provision in existing legislation. Section 21 of the 1996 Act deals with the overriding duties of the Office of the Rail Regulator. This is a similar point to one that we have discussed in relation to the Crossrail Bill, as much of what is in that existing legislation is taken as a direct precedent for the Bill.

Clause 3 would repeal the bulk of section 21, but crucially it would leave subsection (1), which reads:

“The Rail Regulator shall have an overriding duty to exercise his regulatory functions in such a manner as not to impede the performance of any development agreement.”

Clause 5 redefines the development agreement to include the operation and not just the construction of the rail rink. Taken together, it seems that those clauses mean that in future the ORR will have to carry out its duties in such a way as to give absolute priority to High Speed 1 services over any other services or any other part of the network. The implication, therefore, is that a much higher test is being applied when the ORR is combined with the term “overriding”.

I understand why the ORR should have that overriding duty during the construction phase, but not once the operational phase is reached. I want to draw the analogy and test the Minister because in our parallel discussions about Crossrail we were talking about interim phases that would be extended only until services are fully operational. The Bill appears, however, to extend those powers well beyond that moment of being fully operational. In other words, if we apply the same rationale, the effects of clauses 3 and 5 would represent a serious inconsistency.

The purpose of section 21 of the 1996 Act, like clause 23 of the Crossrail Bill, was to give the ORR power to give CTRL priority treatment during its construction phase in order to facilitate the project. Clause 3, when taken together with clause 5, extends that obligation well beyond the construction phase. I seek the Minister’s assurance that that is absolutely necessary, because it seems incongruous with the original motivation for granting such powers. The amendment would repeal the whole of section 21 of the 1996 Act, as it contains provisions that should apply only to the construction phase of CTRL, a phase that we all know is complete. I am looking for the Minister to reassure me as to why such wide-ranging powers are now needed during the operational phase.

Tom Harris (Labour, Glasgow South)

The amendments would make all HS1 access contracts subject to prior ORR approval under the 1993 Act. Since the Secretary of State already has oversight of such access contracts under the development agreement, that creates potential for dual regulation, which is what clause 2 was intended to remove. However, that is more of a drafting complaint; there are deeper and more principled reasons for objecting to the hon. Gentleman’s amendment.

Amendment No. 3 would remove the ORR’s duty from the 1996 Act not to impede the development agreement when carrying out its functions under the 1993 Act. That duty has been in place since 1996 and it remains as relevant today, during the operational phase of HS1, as it did during the construction phase. If it were removed, it could have an adverse effect on the value to be secured for the taxpayer on a sale of HS1. Potential investors might well be concerned that the ORR’s regulation of the national network could have unintended consequences for HS1’s revenues if the duty were removed.

The Government’s view in 1996 was that operation of the new railway would not have to be subjected to economic regulation under the 1993 Act. That is also the view of the current Government. It is not our policy to subject this or any other business to regulation beyond what is necessary to protect the wider public interest. Safety, for example, on HS1, as I said in an earlier sitting, will be regulated in a similar way to safety on the national network. However, access charges will not. I hope that, with the benefit of those clarifications, the hon. Member for Wimbledon will be persuaded not to pursue the amendments.

Susan Kramer (Liberal Democrat, Richmond Park)

In providing his explanation, the Minister used the phrase “public interest”. Can he explain why oversight by the ORR would not be in the public interest in terms of maximally benefiting the taxpayer by providing a more optimal service regime?

Tom Harris (Labour, Glasgow South)

It is surely in the taxpayer’s interest to obtain the highest value for the sale of HS1. The amendments proposed by the hon. Member for Wimbledon could prejudice or undermine that case if potential investors were worried that the ORR might give precedence to other domestic services rather than services running on HS1.

Susan Kramer (Liberal Democrat, Richmond Park)

I thank the Minister for being extremely generous about interventions, but in saying that what the taxpayer wants is the maximum from the sale of HS1, how is he balancing that with the fact that the original motivation of the taxpayer to invest in this huge asset from the beginning was to improve overall transport and rail services for people living in the UK? Those two elements can of course come into conflict. Perhaps he can explain how he has balanced them in deciding to give priority to a one-time cash return over, as it were, an almost infinite maximal service operation.

Tom Harris (Labour, Glasgow South)

The hon. Lady makes my point for me. She raised two issues. One is the interest of the taxpayer, which I have already covered. The second is the wider interest of the taxpayer in the viability of HS1 as a going concern. My concern is to ensure that the ORR continues to treat HS1 as a priority when making any decisions, or that access contracts are made on that basis—that nothing should be done to impede the working of HS1. As a side issue, that will generate more money for the Exchequer when it comes to selling, but the main issue is that services on HS1, which of course we are all in favour of seeing as a success, will be protected by the clause in its unamended form.

Surely the whole point of building HS1 was to provide fast and reliable services from London to the continent. The addition of domestic services was introduced by the present Government, but the initial intention of HS1 was to link Britain to the continent with a high-speed line. Surely that is in the interest of the taxpayer and of the fare payer. I am not sure how agreeing to the amendment and making ambiguous the role of the ORR or the effect on HS1 of decisions that the ORR might make could benefit either taxpayer or fare payer. I hope that, with those points in mind, the hon. Member for Wimbledon will see fit to withdraw the amendment.

Stephen Hammond (Conservative, Wimbledon)

I have listened carefully to the Minister’s explanation and his response to the interventions, but I still fail to grasp why the ORR should not be required to look at HS1 in the same way as it looks at the rest of the network. There seems to be no definition regarding the length of special measures. My understanding was that the Government wanted to put the relationships on the same footing, but the clauses do not do that at the moment.

Tom Harris (Labour, Glasgow South)

I am attempting to be helpful to the hon. Gentleman; it was the intention of a previous, Conservative, Secretary of State for Transport that this clause would be maintained during the operational phase of HS1. It was always part of the original vision for HS1 that priority would be given to services on HS1. If the hon. Gentleman wishes to make any criticism of that, I shall be interested to hear it.

Stephen Hammond (Conservative, Wimbledon)

As usual, the Minister is being helpful. With the passing of years, we sometimes have the benefit of wisdom, which clearly means that our original intentions are not always correct.

None the less, I hear what the Minister says, and I understand that High Speed 1 needs to be a success. I still remain cautious. If it will be an operational success, why do special arrangements need to exist in perpetuity, which is what he seems to be implying? With the permission of the Committee, I beg to ask leave to withdraw the amendment.

Clause 4

Stephen Hammond (Conservative, Wimbledon)

I beg to move amendment No. 4, in clause 4, page 2, line 7, after ‘be’, insert

‘, consistent with the relevant terms of any license fee payable by other operators of railway assets under section 8 of the Railways Act 1993, and.’.

We obviously had some discussion about this point during the oral evidence session. The clause gives the regulator the right to charge the operator of High Speed 1 a fee for carrying out its functions. If we look at the intention of the clause as set out in the explanatory notes, we see that it is not carried through fully into the Bill. It allows the ORR to charge those operating CTRL a fee by reference to the cost that it reasonably incurs.

Greg Knight (Conservative, East Yorkshire)

Does not the clause state that it gives the ORR a power to charge the costs that it says it reasonably incurs, not the costs that it does reasonably incur, which is a slightly different matter?

Stephen Hammond (Conservative, Wimbledon)

That is the problem. We may incur a load of costs, but what costs are reasonable to the ORR, what costs are reasonable to the people on whom it is seeking to impose them, and what costs are reasonable to outside observation? My amendment would go to the heart of the matter and clear up the problem.

We have discussed many times the meaning of “reasonable” and “reasonably” and “relevant” and “relevantly”. We are now in the same territory. Under the explanatory notes, the proposal is

“similar to the position on the national rail network, where the ORR’s regulatory functions are funded by the licence fee paid by the operator, Network Rail.”

That is not made clear in the Bill. The amendment would bring the CTRL arrangements in line with those for the rest of the network. The basis used by the ORR to set the fee for CTRL should be the same that it uses to calculate the licence fee paid by the operator on other parts of the network.

My amendment would not do anything about timing, about which the Minister spoke in our evidence session. It looks at the costs that are payable. I accept that the regulator’s functions for CTRL are slightly different from other operators in respect of the access contracts that we have discussed, but only slightly. That does not mean that the basis of calculation that is being used for the setting of the level of the fee should be different from that of the rest of the network. I look to the Minister to make clear why the amendment is not acceptable.

Tom Harris (Labour, Glasgow South)

I rise with some scepticism as to whether I can persuade the hon. Gentleman of my argument, as I do not have much to add to what I said in our evidence session. However, I shall give it a try. I am grateful to him for outlining the intention behind the amendment. It is not our policy to subject this or any other business to regulation beyond what is necessary. With that in mind, we are clear that the regulatory costs borne by the owner of HS1 should be limited to what is absolutely necessary. That is why subsection (2) makes it clear that the costs should be reasonably incurred when passed on to the owner of HS1.

I understand the point made by the right hon. Member for East Yorkshire. The fees that ORR charges the owners of the infrastructure of HS1 could be challenged legally if they were seen to be unreasonable and not according to the spirit of the Bill as it stands at the moment.

I said earlier that regulation of HS1 would be lighter in some respects than regulation of Network Rail’s network. The ORR has a different set of duties for HS1 than it has for the rest of the network. As the regulators’ costs will reflect a different set of activities, it may not be possible for the fees to be calculated in the same way as Network Rail’s licence fee.

Stephen Hammond (Conservative, Wimbledon)

We absolutely accept the point that the regulatory functions of the ORR are, to some extent, different. However, a part of those functions in regard to CTRL is similar to the rest of the network. Costs could be apportioned between the varying regulatory functions because if it is acceptable to use that basis for part of the regulatory function of the network, why cannot it be reasonable to use the same basis for CTRL?

Tom Harris (Labour, Glasgow South)

The hon. Gentleman expresses one particular point of view. My understanding is that it would be very difficult to make that calculation and that by inserting this amendment, it would make the legislation unnecessarily complicated and over-regulated. I do not accept his view that it is a straightforward, arithmetical position. I fully respect his position, but if he does not withdraw his amendment I will have to ask my hon. Friends to vote against it.

Greg Knight (Conservative, East Yorkshire)

I thank the Minister for what he has had to say. We all expected him to agree with the main witness whom we heard from earlier. Nevertheless, I have concerns about the drafting of this clause, which he has not satisfied. Even at this late hour, it should be possible to tighten up the wording of this clause. If, as appears to be the case, the Minister is not willing to accept my hon. Friend’s amendment, I hope that he will reflect on the matter to see whether he can improve the clause in the later stages of this Bill. The Minister is right to say that the word “reasonably” is in the clause, but it is a subjective test, as I mentioned in a question earlier. It is not what a reasonable man would consider to be reasonable. It is what the Office of Rail Regulation considers to be reasonable. I can foresee circumstances in which someone who is managing a sloppy administration and running up unnecessary expense incurs charges which are, in their view, not unreasonable. The test should be objective. I have real concerns about the wording of subsection (6).

Tom Harris (Labour, Glasgow South)

May I speak now to avoid having to make a contribution at the end of the right hon. Gentleman’s comments? I cannot accept the amendment tabled by the hon. Member for Wimbledon because, as the right hon. Gentleman has already said, it is not perfect, and in that respect it would be very difficult for a Government to accept it. However, if the right hon. Gentleman wishes to draft a new amendment to present on Report, I shall be happy to consider it, but I make no promises at this stage on whether it will be acceptable to the Government.

Greg Knight (Conservative, East Yorkshire)

How can one argue with such generosity? I will reflect on that.

Stephen Hammond (Conservative, Wimbledon)

The Minister is being characteristically generous, but he has not overcome the problem. I am sure that my right hon. Friend will table several amendments—as he is well known for doing—which we will examine on Report. While the Minister has pointed out that my amendment is unsatisfactory to him in certain elements of its drafting, he has already pointed out that if the Bill is left as it is at the moment, it will leave him open to challenge.

Tom Harris (Labour, Glasgow South)

That is absolutely not what I said. My point was that if the ORR was to charge a fee that the owners of HS1 considered to be unreasonable, it would be open to challenge. That challenge would be not on the basis of the Bill but on the basis of an unreasonable fee charged by the ORR.

Stephen Hammond (Conservative, Wimbledon)

I thank the Minister for that clarification, but it proves my point. My amendment would do away with the possibility of that challenge. I am not persuaded by the Minister’s reassurances and notwithstanding his, and my, ability to count, I would like to press this to a Division.

Clause 5

Stephen Hammond (Conservative, Wimbledon)

I want to have a small debate on the clause because, as I mentioned when I spoke to my amendment to clause 3, I have concerns about the wide-ranging impact of clause 5. I am grateful to the Minister and his officials who, during the suspension, clarified one of the points that I raised during the evidence-taking session about the rail link and rail services on it. I now accept that the clause deals with the rail link, rather than with the services.

None the less, I wonder if the Minister could provide us with a few more examples and explanations. Adding the words “or operation” to the development agreement will have a significant impact on every clause in the Act that relates to development agreements. Rights and obligations provided for in those clauses will be extended, so that they will apply not only during the construction phase but once the rail link is operational. I voiced my concerns about the possible implications of that change during our discussion on clause 3.

I would like to ask the Minister whether there are any other provisions in the 1996 Act which relate to development agreements, and which this measure would retrospectively change. Can he be clear what the impact of those changes might be? It is a wide-ranging change, and I wonder whether the measures in the clause might not have been obtained more prudently by making some specific, rather than general, provisions. The development agreement was supposed to deal with the construction phase, which is now complete. We are now into the operation phase. The clause could potentially be used extremely widely, and I wonder whether the Minister could give some reassurances about the intentions of its operation, perhaps give some examples, and indeed tell us where it will potentially impact on other provisions in the 1996 Act.

Tom Harris (Labour, Glasgow South)

Further to the hon. Gentleman’s explanation of an earlier discussion during the evidence session, I gave an undertaking to report to the whole Committee and to clarify the issue raised by the right hon. Member for East Yorkshire and the hon. Member for Wimbledon on the development agreement. For the record, the 1996 Act defines a development agreement as

“an agreement...in relation to the design, construction...or maintenance of the rail link”,

which is defined as the HS1 infrastructure. It does not cover train services. In that respect, the 2005 Act is irrelevant. I hope that that clarifies the matter for the Committee. I apologise that due to unusual circumstances, I have not been able to put it in writing for every Committee member.

I shall try to address the points made by the hon. Member for Wimbledon. He can seek further clarification if I fail to do so. The clause will amend the definition of a development agreement in section 56 of the Channel Tunnel Rail Link Act 1996. London and Continental Railways designed and constructed HS1 in accordance with the terms of the development agreement that it signed with the Secretary of State in February 1996. The development agreement contains the terms of the concession to operate the railway and will continue post-construction. To reflect more clearly the fact that the 1996 Act provisions referring to the development agreement apply where relevant to agreements relating to operations, the clause will amend the definition of a development agreement to include the word “operation”.

It is proposed to amend the current development agreement as part of restructuring so that it focuses on the railway’s operation. If the definition of a development agreement in the 1996 Act were not amended, it would be more uncertain whether the revised agreement fell within the definition. The effect of a court finding that the revised development agreement did not fall within the definition could be serious. Under the 2005 regulations, the Secretary of State is required to set a charging framework for access charges to HS1 through the development agreement as defined in the 1996 Act. If there is found to be no development agreement as defined, there will also be no effective charging framework, giving train operators greater scope to challenge access charges levied by the HS1 operator. I hope that that clarifies the matter.

Stephen Hammond (Conservative, Wimbledon)

I think that the Minister is encouraging me to say, “Definitely.” I think that he has clarified the point, but after reading the Hansard report, I may come back to him. I think that he is saying that we need to amend the development agreement so that the charging regime can stay in place through the operational phase. If that is the short summary of what he said, it clarifies the point, and I am grateful to him.

Clause 6

Greg Knight (Conservative, East Yorkshire)

In the interest of fairness, and in the same spirit displayed earlier by the Minister, I thought it right and proper that I should rise to catch your eye, Mr. Atkinson. The Minister was criticised by the Opposition for the loose drafting of clause 4, and he said very fairly that he would be willing to consider it on Report. In the interest of balance, I therefore rise to praise him for the drafting of clause 6, which for once shows positive action. It gives a firm and definite implementation date, not one to be determined on some unspecified day. The Act will come into force two months from the day on which the Bill is passed. Well done, I say.

Tom Harris (Labour, Glasgow South)

I thank the right hon. Gentleman for drawing my attention to that very worrying part of the Bill. [Laughter.] That was the Government’s intention, of course, and we do not intend to amend it.

Tom Harris (Labour, Glasgow South)

I hope that I have my timing right, Mr. Atkinson. During debate on the Crossrail Bill, I tried three times unsuccessfully to offer a vote of thanks to you as the Chair. It has been a short but delightful experience to serve under your chairmanship. The Bill may go down in history as having undergone one of the shortest periods of Committee scrutiny. It is probably equivalent in length to some delegated legislation Committees on which I have served. That is certainly due at least in part to you, Mr. Atkinson.

I also thank your Clerk, of whom I had experience when I was a member of the Select Committee on Science and Technology. He is a fine chap, and I am sure that he has done an excellent job for you. I also thank the Hansard reporters, the Doorkeepers, the police officers, my own officials, who have done an outstanding job, and my private secretary, Sandra St. Louis. I pay tribute to the hon. Member for Wimbledon and the hon. Member for Richmond Park for adopting a very healthy bipartisan and constructive approach. Finally, as I forgot to do so last week, I must thank members of my own party on the Committee. I am grateful to them all for their sterling and reliable support during this very brief sitting.

Stephen Hammond (Conservative, Wimbledon)

I echo all the thanks that the Minister has expressed. It has been a pleasure to serve under your chairmanship in this short Public Bill Committee, Mr. Atkinson. It has been shortened by the Minister’s help to the Opposition in the form of a briefing, and by his answers to a number of our questions, and we are grateful for that. I echo the Minister’s thanks to the Clerk, the Hansard reporters, my researcher, who helped me tremendously with the construction of our amendments, and indeed to my hon. Friends for their support.

Susan Kramer (Liberal Democrat, Richmond Park)

I, too, echo all the various thanks that have been expressed. My first experience of an evidence-taking session was quite useful in abbreviating our discussions in the clause-by-clause consideration stage of the Bill. I thank everybody for allowing us to go early to lunch.

Peter Atkinson (Conservative, Hexham)

I thank Committee members for their co-operation in something that was quite new to us today. The reason why we had to move from the Boothroyd Room to here was the simple one that, if there are officials or witnesses to interrogate, they need a microphone and a place to sit. At the moment, only one Public Bill Committee Room has been kitted out in that way, and that Room had been bagged by another Bill this morning. Despite that disturbance, we have had a very easy and well-mannered Committee, and I thank everyone for that.