moved Amendment No. 1:
Page 12, line 10, at end insert—
"(1A) An Executive that has been consulted under subsection (1) in relation to a franchise agreement where the services to be provided under the agreement are or include services for the carriage of passengers by railways within the passenger transport area of that Executive may, before the expiry period of 60 days following the date on which that consultation began, make a statement to the Secretary of State specifying—
(a) the services for the carriage of passengers by railway which the Passenger Transport Authority for the area in question considers it appropriate to secure to meet any public transport requirements within that area, so far as relating to the provision of services of the same description as those to be provided under the franchise agreement in question;
(b) any minimum level of quality to which any services so specified are to be provided;
(c) any requirements with respect to the fares to be charged to persons using any services so specified; and
(d) any minimum level of quality with respect to the operation of any station within the area in question which may be required by any such franchise agreement.
(1B) Where a Passenger Transport Executive for an area in England submits a statement under subsection (1A) the Secretary of State shall ensure that the services, and any minimum levels of quality or requirements with respect to fares, specified in that statement are provided for in any franchise agreement into which he may enter in respect of the services in which the Executive have an interest.
(1C) The Secretary of State need not do anything under subsection (1B) if or to the extent that it would—
(a) have an adverse effect on the provision of services for the carriage of passengers or goods by railway (whether inside or outside the area in question); or
(b) increase the amount of any expenditure of the Secretary of State in respect of railways under agreements or any other arrangements entered into with any franchise operator, any franchisee, or any servant, agent or independent contractor of a franchise operator or franchisee, and the Secretary of State considers that the Executive would not fund that increased expenditure."
My Lords, I realise that this may not be of great interest to many people, but I think that the matter before us is extremely important.
The amendment relates to the powers of the passenger transport executives, which were created in 1968 by a late and lamented Member of the House, Barbara Castle. Since that time, the passenger transport executives have been parties to agreements to provide train services in their areas. The aim of the amendment is to keep that arrangement in place. In the Railways Bill, the government are proposing that the passenger transport executives will lose their powers as co-signatories of franchise agreements, even though they are expected to be funders of the services involved.
I cannot understand why the Government are protesting at the amendment. At first, when the PTEs were left out, we thought that that was an oversight, but it strikes me as an absolute contradiction for a government who have said that they are in favour of regional government and in favour of letting powers be exercised locally to take away from the bodies that they created the power to be co-signatories to an agreement to which they contribute financially.
I have tried hard to deal with the objections raised in Grand Committee and on Report by the Minister; namely, that on one or two occasions passenger transport executives have delayed signatures for what could be described as political reasons. We have imported into the amendment the fact that the passenger transport executive authorities will, when the agreement is presented to them, have 60 days in which to be co-signatories.
The PTEs believe that the powers are important because, if they are not co-signatories, their power will be taken away, and the franchisee will take little notice of them. They will cease to be, as it were, a material part of the agreement.
I do not intend to delay the House long. The provision is a fundamental flaw in the Bill. I do not think I have ever had so many messages from people of every political opinion saying that something was wrong and that it needed to be changed. Unless we get a satisfactory answer from the Minister, it will be necessary to test the opinion of the House. I beg to move.
My Lords, I support the amendment. I have been involved in discussions with the Minister, and I am very grateful to him for that. As the noble Lord, Lord Bradshaw, said, in the amendment he has sought to meet the concerns of Ministers that the signatures to franchises could be delayed by PTEs getting difficult.
Given the time that it has taken to award some franchises over the past three or four years, 60 days is not a long period to delay franchises. It is nothing; in fact, it is very short. The key is that at least it gives PTEs, which, after all, represent a local community on transport matters, a say in what happens. As the noble Lord, Lord Bradshaw, said, they often contribute to better services, improved rolling stock or whatever.
The Government's agenda is to devolve power where possible, but here the Bill seems to be contrary to that—it is clawing everything back to the centre. It makes one think that, unless the service happens to be a commuter service into London, no one will take any interest in it, as that is the only service that civil servants use. I hope that that is not true; it would be a great misrepresentation of what is happening in this country.
The other thing that I would like to dispel is a story that has been put around and mentioned by the Minister on a few occasions—that is, if PTEs are allowed to be signatories, the next stop will be the Mayor of London, Transport for London, the Greater London Authority or whatever. It should be clear to everyone that the Greater London Authority and Transport for London are not PTEs. Whatever one may think of what the Mayor and his organisations do in London—I think that they have done an extremely good job—this arrangement has absolutely nothing to do with them. Regional PTEs are at stake, and the amendment puts forward a good compromise that should have the support of the House. I fully support it.
My Lords, I remind your Lordships of my continuing interest as an employee of the National Express Group. I am probably speaking in opposition to what the National Express Group believes. I have not discussed the matter with it, but I understand that ATOC, the umbrella organisation of train operating companies, takes the same view as Her Majesty's Government—that is, that passenger transport executives/authorities should not have a direct role so far as concerns franchising. I hope that it does not get me the sack from the group if I say that I disagree entirely with the view expressed by ATOC.
Having heard my noble friend on the Front Bench reply to this and similar amendments in Grand Committee and at other stages of the Bill's passage through your Lordships' House, I understand the Government's point of view. I cannot see any justification for the measure, although of course it is inconvenient if people elected locally take exception to, or insist on, services that may or may not be provided in the area for which they are elected representatives or if their appointees—the passenger transport executives—administer those areas on their behalf. However, the fact is that it was a Labour government who created the passenger transport executives/authorities in the first place back in the 1960s. As I have said—I do not wish to go down the same road, or railway line, again—many of the local services that now exist around our major cities outside this great city are there because of the efforts, finance and dedication of local councillors who serve on passenger transport authorities and those whom they have appointed to run passenger transport executives.
I see on the Cross Benches a former chairman of British Rail—the noble Lord, Lord Marsh. I do not know his view on the matter but, as someone who had to lobby him on behalf of various organisations, I can understand that he, like members of the Government, occasionally felt that such lobbyists were a bit of a nuisance and that he should get on with the job of running the railway industry. I notice that he is far too polite to agree with me but, although he did not tell me so at the time, I suspect that he thought that about me and about some of the other people who lobbied him during his distinguished career as the chairman of the British Railways Board.
The fact is that, although it is inconvenient, local democracy is worth supporting. As has just been said by my noble friend Lord Berkeley, it is surely inconceivable that a Labour Government who profess to believe in devolution and local decision-making should exclude those who have a direct responsibility for providing train services from any involvement in signing the franchises to provide those services in the first place.
Even at this late hour, I urge my noble friend to reconsider the matter. I have not lobbied him myself because, after what I said the other day, I decided that he was bigger than me and that I had better not take that chance. I hope that he will bear in mind the depth of feeling among those of us who habitually bore your Lordships on such matters. We may well be boring your Lordships again on this occasion, but I hope that my noble friend will accede to the justice of the course that we are putting forward and agree about the issue of local democracy.
My Lords, I gave my views on this amendment and others in the group when moving them on Report on
On Report, the myth that the Bill would speed up negotiations between franchisees and PTEs was exploded. In truth, it would considerably prolong them. Again and in sharp contrast to the pledge in last year's White Paper on devolving responsibilities to the PTEs, decision-making would, in fact, be centralised rather than devolved.
I had hoped that on Report we would be told in full detail where the Government stand. Would they prefer to withdraw the Bill rather than have these amendments included? And, are the other parties determined not to allow the Bill to become law without them? We need to know in this debate exactly where all parties stand in advance of behind-the-scenes haggling on the Bill's future.
Meanwhile, in the proceedings on the Bill in another place on
What happened on
My Lords, we supported the noble Lord, Lord Bradshaw, when he moved the amendment on Report, but we had some concerns, as some PTEs are better than others. The noble Lord, Lord Bradshaw, has taken on board our concerns and added Amendment No. 2 to the group, which means that PTEs cannot hold up any franchise agreements. There is a 60-day period. We believe that that is an important change and I thank the noble Lord for making it so that we can fully support the amendment. Quite frankly, I am somewhat baffled by the Minister's position. I thought that his party believed in improving local representation not in diminishing local rights.
My Lords, I am grateful to all noble Lords who have contributed to this debate, particularly to the noble Lord, Lord Bradshaw, who moved the amendment. He has given an example of precision, which I hope will be followed by all movers of amendments that we shall consider on this Bill and other Bills today.
We have discussed this matter at considerable length in Committee and on Report and we are discussing the issue again today. I have had the benefit of meetings with Members of the House who are greatly concerned about the Bill. On this legislation we have come to a point of principle and we do not and cannot accept these amendments. That was made clear in the other place and it is my duty to reflect that position today for the reasons that I have sought to emphasise during previous discussions on these issues, but not because we disavow the role of the passenger transport executives. At times it seemed to be suggested that we wanted to abolish the PTEs. This legislation does not do that. It clearly envisages an important role for the PTEs which will be involved with the Secretary of State in drawing up the requirements that lead to the signing of a franchise.
The point at issue is whether the PTEs should be co-signatories. I recognise that the noble Lord has made an attempt to meet some of the objections that I presented the last time we discussed this issue; namely, that effectively there was an outright veto for passenger transport executives. I heard what the noble Lord said today, that the PTEs make a contribution to services, as indeed they do, but he would be the first to recognise that the great provider of resources for rail services is the Secretary of State and that the contribution of the PTEs, although not unimportant, is on the margins. We are not talking about any equality of partnership under the existing position with regard to co-signatories and who contributes resources. At present, there is equality in terms of being co-signatories.
We seek to change that because a fundamental proposition behind the Bill, and central to it, is the fact that the Secretary of State will be responsible for setting the strategic direction and the amount of national funding that will be invested in the railways. These amendments cut across the fundamental principle of the Bill. That is why, despite the eloquent arguments that have been presented on a number of occasions, I have been unable to move to meet those representations—this is a point of fundamental principle. The Government, of course, have listened to the concerns of the PTEs and we, of course, have moved our position to take account of those concerns as far as possible, but these amendments strike at the principle of the structure under the Bill.
An interesting point that has developed in the discussions today, and in the past, is that the Official Opposition have tended to disavow the past, for fairly good reasons when one considers the Opposition's record on railways, and they have concentrated on the future. My noble friends, and to a certain extent the noble Lord, Lord Bradshaw, have tended to eulogise the past and not look to the future. I want to make it absolutely clear that this Bill is about the future of the railways. In eulogising the past, they have painted it in rather rosy colours. The PTEs have not long been co-signatories—only since the time when Barbara Castle, as she then was, set them up. They have been co-signatories only since 1993, under the structure created by the previous administration, which my noble friends have been only too eager to support me in dismantling and putting in place a more constructive, more accurate and effective system for running the railways.
I say to my noble friends that I recognise the achievements of the passenger transport executives in the past. We will not disavow their role for the future. We see them as constructive contributors to the provision of services in their localities. The point at issue is whether they are co-signatories with the Secretary of State, given his significant responsibility for national resources devoted to the railways under the framework of the Bill and with his overall responsibility for strategy.
The system envisaged in these amendments goes back to an adversarial arrangement that would perpetuate and exacerbate the worst of the old system which the Bill is designed to replace. That is a system where some—not many—passenger transport executives use the fact that they have to co-sign a franchise before it can be let as a powerful lever in negotiations with the Strategic Rail Authority, a lever which, at times, has led to brinkmanship.
My Lords, in Committee, I detailed a number of examples regarding PTEs and other past difficulties. I am not emphasising this as the cardinal point of our argument. I am not saying that the purpose of the debate is to attack the PTEs on their past record, although clearly at times the exercise of their power has caused difficulty in the signing of franchises against a background where delays cost money.
The noble Lord, Lord Bradshaw, says that delays should be limited to 60 days. We have a problem with the definition of 60 days because it is not clear from his amendment where the 60 days begins. We have to be absolutely precise in law about when the clock starts ticking. I am afraid that I must convey that we do not think his amendment is specific enough in that regard.
I am objecting to the principle—that delay costs money. Of course having a limit of 60 days would reduce the ability of the PTEs to create delay. That would not alter the fact that delays could occur over that period of time. Delays in signing such contracts are costly and the cost would be borne by the taxpayer. Who is responsible to the taxpayer? Not the PTEs, but the Secretary of State. That is why the Bill is constructed as it is. So, we are not clear that the 60-day part of the amendment produces significant benefits. We merely see dangers attached to it.
The phrase used is, "when the agreement is being finalised". If the franchise agreement has been finalised, why would the PTEs need 60 days to consider whether they wish to sign? As the terms would be clear at that stage, the only reason could conceivably be if they wished to re-open negotiations in order to secure further concessions. To reach the signature stage and then to seek to start negotiations again would be totally inconsistent with an efficient, cost-effective franchising process.
In many ways I think that the amendment makes the situation worse than is the current system. At present, although PTEs might use the threat of delay to lever advantages, no PTE would think that they could legally refuse to sign for two months. The amendment would give them precisely that power.
The amendment also does not change the fact that PTEs could use their co-signatory status during the course of the franchise. That would lever in very significant power. We do not deny the contribution that the PTEs can make to the development of an effective rail system. We recognise—it is in the Bill—that the Secretary of State is involved in consultation with PTEs, before he establishes his position regarding a franchise, in order to take account of their position. But that is very different from the concept of co-signatory status.
My Lords, I am most grateful to my noble friend for giving way. Perhaps he can say a little more about the Secretary of State taking into account the views of the PTEs in dealing with the people to whom he is minded to award the franchise. What does "take into account" mean? Is this a 10-minute meeting saying, "This is what I propose to do. What do you think?" or is it a real and meaningful consultation?
It is a real and meaningful consultation, my Lords. The Bill clearly envisages that the Secretary of State cannot be a party to the franchise and develop a position regarding the franchise without taking on board and making arrangements to take on board the views of the PTEs. I am at one here with the noble Lord, Lord Bradshaw, who has articulately expressed his view on several occasions, as have my noble friends. I am at one with their arguments that we should not create a system in which the PTEs, and therefore a local voice, has no effect and no role to play in the development of the railway in signing franchises.
The Bill envisages an effective role for the PTEs in relation to the Secretary of State. But it carries as its absolutely cardinal principle that the Secretary of State bears responsibility for the strategic development of the railways—and of course he is the person who is responsible to and accountable for expenditure on the railways, which is provided to the greatest extent by national taxpayers.
My Lords, am I to use my noble friend's own phrase "na-vely eulogising the past" in pointing out to him that it was a Conservative government who created this shambles in the first place, which allowed all the PTEs—all of them Labour controlled—to be signatories of franchise agreements in their areas? Here we have a Labour government saying to PTEs—most of them Labour controlled—that they cannot have any say in franchises. Am I "na-vely eulogising the past", or are his ears going slightly pink with embarrassment about that particular contradiction?
My Lords, my noble friend is adept at bringing physical characteristics into our exchanges. I hope to sustain them on an intellectual level. I emphasise to my noble friend that—of course he may derive some satisfaction—the PTEs, because of their role as co-signatories, were able to make a minor contribution to what in fact was a totally ineffective structure for the railways.
We knew that it was a totally ineffective structure. That is why in 1997 it was an important part of our manifesto that we would change the system. We duly set out to do so, supported by an overwhelming majority of the elected House. We went before the country in 2001 with the same response, and we come before this House today recognising that the partial change we effected on the railway a few years ago needs to be completed by the Bill.
In doing so, the Bill absolutely clearly—I am sure all my noble friends join me on this—centres the responsibility for the strategic development of the railways on the Secretary of State, because the Secretary of State is responsible for the resources which are used mainly with regard to the railways. That is the proposition behind the Bill. It is why, despite several attempts by those who are motivated by the very best of intentions in seeking to emphasise the constructive role of the passenger transport executive, I am unable to accept the amendment or their arguments. It is not that I am against the role of the PTEs in representing their areas and their transport needs regarding the railways. That role is protected under the Bill. The Secretary of State cannot fulfil his responsibilities effectively without consultation with the PTEs in order to ensure that he has the right background for signing any franchise.
Nevertheless, the position is clear. Fundamentally the Bill places the responsibility where it should be—with the Secretary of State. It is on that basis that I ask the noble Lord to withdraw his amendment.
My Lords, before my noble friend sits down, and reverting to the time-limit of 60 days, if by consultation that can be clarified by redrafting, is he prepared and is the department prepared to join in that process?
My Lords, I fear that my answer to my noble friend is in the negative. As for the 60 days, I am in favour of, and the Bill envisages, effective consultation between the Secretary of State and the appropriate PTE for rail services in its area before any franchise is entered into. I ask my noble friend to accept that the concept of 60 days, even if it were drafted more accurately than it is in the amendment, would give to the PTE a restricted veto—restricted in time, but nevertheless a veto—over the signing of any franchise. That runs counter to the fundamental principle behind the Bill. That is why I cannot accept the amendment.
My Lords, I am grateful to the Minister for his reply; I find it totally unsatisfactory. He protesteth rather too much this afternoon. Yesterday afternoon, we invited the Minister to consider the amendment and suggest alternative phraseology but I assume that there is a time during the negotiation of a franchise when the document is ready. We are saying that there should be 60 days during which the Secretary of State, the PTE and the franchisee, whoever he happens to be, will sign it. Obviously, in any such period, there will be room for further negotiation; there always is.
To pretend that 60 days is a long time when some franchises have taken three or more years to finalise is nonsense. I am sure that many Members of the House find it very difficult to give that credence. If we carry the amendment, there will be an opportunity for that to be revisited. I do not think that presents a great difficulty. The Minister should reflect on the fact that we will give the PTEs something from the Bill; whereas I fear that, in his words, "such resources as the Secretary of State may devote to the railways" may leave the PTEs at the very sticky end of the wicket: they will be called on to close down services in their areas without any power to do anything about that and the Secretary of State will shuffle the responsibility on to them, because they will be the part-funding authority.
I have long experience of the matter. The PTEs are a power for good. I beg to test the opinion of the House.
moved Amendments Nos. 2 to 7:
Page 12, line 16, at end insert—
"(2A) Where a Passenger Transport Executive for an area in England submits a statement under subsection (1A) the Executive shall be a party to any franchise agreement in respect of any services specified in the statement providing that the Executive becomes a party to the agreement within 60 days of the agreement being finalised."
Page 12, line 41, leave out from "unless" to end of line and insert "one of the conditions in subsection (5A) is met"
Page 12, line 41, at end insert—
"(5A) The conditions referred to in subsection (5) are—
(a) that the agreement is not for purposes relating to or connected with the provisions of—
(i) services for the carriage of passengers by railway; or
(ii) station services provided for purposes connected with any such services;
(b) that the agreement relates exclusively to the grant of permission for a person to use a railway facility where a Passenger Transport Executive is the facility owner or the person granted permission; and
(c) the agreement is approved by the Secretary of State."
Page 12, line 43, leave out "(5)" and insert "(5A)"
Page 13, line 12, at end insert—
"(8A) If the Secretary of State considers it desirable to do so in relation to any franchise agreement in respect of services for the carriage of passengers by railway he may give a direction to the Passenger Transport Executive or Executives for the area or areas concerned providing that any one or more of subsections (1A), (1B) or (2A), or any part of any one of those subsections, shall not have effect with respect to that franchise agreement."
Page 13, line 17, at end insert "except that in the case of subsection (1A) it is a reference only to a service for the carriage of passengers by railway between places in that area"
On Question, amendments agreed to.
moved Amendment No. 8:
Page 96, line 9, at end insert—
"(2A) The Office of Rail Regulation shall not be entitled to make a determination under paragraph 1G(2) which is likely to lead to the services provided with the use or in respect of any railway facility being curtailed or discontinued (whether as to quality, time or in any other respect) unless the requirements of paragraph 1(G)(2B) have been complied with and the conditions in paragraph 1G(2C) have been satisfied.
(2B) The requirements are that the Office of Rail Regulation has consulted—
(a) the facility owner and the beneficiaries of all access contracts in respect of the railway facility in question; and
(b) the franchisee under every franchise agreement which contemplates the franchisee, or any person on its behalf, using the railway facility in question, and has taken into consideration all representations and objections made to it by those persons in respect of the proposed determination.
(2C) The Office of Rail Regulation may not make a determination under paragraph 1G(2) unless it is satisfied that—
(a) the value of the rights of such facility owner and the beneficiaries under or in respect of that railway facility or those access contracts shall not be adversely affected by the proposed determination, or that adequate financial compensation shall be payable to them out of public financial resources in respect of any such adverse effect; and
(b) in the case of a franchise agreement, the agreement shall be amended so as to relieve the franchisee from the obligation to comply with its terms to the extent that, if the agreement were not amended, compliance would be impossible or more onerous by reason of the proposed determination.
(2D) If the Office of Rail Regulation fails to make a determination under paragraph 1G(2) by reason of one or both of the considerations specified in paragraph 1G(2C), the Secretary of State or Scottish ministers as appropriate shall ensure that public financial resources shall be increased accordingly."
My Lords, it is disappointing at this late stage of a Bill, and this Parliament, that we have been unable to come to an agreement on this issue. The noble Lord, Lord Davies, has been as helpful as he can, but I am afraid that his colleagues down the other end have not been so obliging.
My amendment protects the rights of private-sector investors, passenger and freight operators, in the railway industry who could be aversely affected by cuts in spending imposed by the Secretary of State, if those cuts diminish the value of their existing rights under access contracts or cause them to face impossible or more onerous conditions in fulfilling their franchise agreements.
Under the Bill, the Secretary of State has the power to set network outputs—the things that the network must be and the things that it must be able to do in terms of capacity or its condition. The Bill removes that power from the independent Office of Rail Regulation (ORR) and gives it to the Secretary of State. It does so because the Government wish to reassert complete control over spending on the railway. The problem is that in setting the network outputs in that way the Secretary of State may, due to a cash squeeze from the Treasury, have to put the network into decline. We all know what happened during the days of nationalisation.
If the Secretary of State exercises that power and the network gets worse—for example, to the extent that it can accommodate fewer trains or they must go slower because of speed restrictions related to the condition of the track, or something like that—it could cause serious difficulties for existing private-sector operators. The value of their rights under existing contracts—I stress that we are talking about existing contracts, not future ones—could be diminished, perhaps materially.
Freight operators could find that the maintenance burden on their rolling stock goes up, or that they must use more trains to provide the service levels to which they are committed under their contracts with commercial customers. Passenger operators may find themselves in a bind, with an obligation under their franchise agreements to produce certain outputs in terms of frequency, reliability, punctuality and overcrowding levels on trains, but unable to do so because the network is being cut back. Alternatively, it could be more expensive because to do so their resources need to be increased just to stand still and to provide the agreed level of service under their contract.
None of those things would be the fault of either the freight or passenger operators concerned. The network getting worse because the Treasury has decided that it should be so can hardly be blamed on private-sector operators just trying to do their jobs, so they should not be penalised.
I stress again that the amendment protects only existing contractual rights. What contracts operators may enter into in the future, once they have seen how the regulatory and operating environment has been changed by the Bill, is another matter that is not affected by my amendment. We are concerned about the rights of existing operators, and that they should not be assaulted or trampled on by the Bill.
The Minister said at an earlier stage that his department was working to develop access contracts and the network code to provide protections of the kind that the amendment seeks to establish. But there is a problem: the ORR can change the network code, which is part of every access contract, in a way that could diminish the protections and rights to compensation to operators when cutbacks are made. It has that right. If it exercises that right, it has no obligation to provide any redress or compensation for those who lose out as a result. If that happens—and I know that the ORR is coming under considerable pressure to make changes of that kind—the Minister's assurance that he kindly gave us in Committee will have no effect because operators' rights will already have been diminished. They need more than assurances which have, I am afraid, no bite.
The Minister has helpfully said that the Government accept that franchise agreements would need to be varied in the event of inadequate funding being available for outputs for the network, should the level of services operated by the franchisees be made undeliverable. That is helpful, but it does not go as far as it needs to.
It does not cover the case, which is much more likely than the service being impossible to deliver, of it being more expensive or more difficult to deliver the contracted service. The Government have so far shown no inclination to allow such amendments into the template franchise agreements, which are now being put to the private sector. The Minister will not accept that that protection should be wider than he has proposed or that it should be in the Bill. We believe that it should be both of those things.
The alternative offered by the Minister's department is the inevitable judicial review. What a prospect: what a deterrent—judicially reviewing the Minister; the same Minister you rely on for your contract and for its eventual renewal when the result will not be known until long after the contract has expired. There is the uncertainty and the huge expense. The other alternative offered by the Minister's department was litigation in the courts. That, too, is expensive and uncertain, and the process takes a long time. It can easily take three or four years, which is probably well beyond the unexpired life of a contract.
In offering those alternatives, the department appears plainly to accept that the operators need redress or relief in the circumstances contemplated by the amendment. But rather than dealing with the acknowledged problem here with clarity, certainty and finality, it favours long, drawn-out litigation.
I believe that we should all be looking at the Bill to prevent people having to go to court, not encouraging them into litigation by passing bad legislation. My amendment will help to ensure that the Secretary of State behaves in a reasonable manner and respects the private rights of investors in the industry. Of course, if no cuts are made to the funding of the rail network, which could cause these serious adverse effects to the operators, there will be no need for this process. It is there as a protection if the Treasury gets its way and forces budget cuts.
Without this change, private sector contractors will find their rights and protections diminished. There would be a very costly knock-on effect in the future as anyone contemplating taking on a franchise or an access contract to run any kind of service—whether passenger or freight—will have to build in a huge margin, just in case. So it will eventually cost the taxpayer.
The Minister accused me on Monday, at Report, of asking the Secretary of State to sign a blank cheque. That is simply not true. My amendment relates only to the unexpired part of rail franchise and access contracts. I say again: it does not in any way affect future contracts. I think that the Minister now accepts that. In future contracts, if so inclined, the Secretary of State—in the case of franchises—and the ORR—in the case of access contracts and the network code—can ensure that they contain output adjustment mechanisms which avoid the need to compensate the operator in the future.
My amendment ensures that if the Secretary of State changes the circumstances in which the contract has been set, and does not allow those affected relief under their contracts, he must allow changes to their contracts. He must compensate them or he must not do it. The choice will be his. The Secretary of State can avoid that happening by treating the operators fairly. He does not have to cut the network, but if he does he must recognise that existing private sector rights must be honoured and protected. There is no blank cheque, but just a simple, straightforward protection.
My amendment is about fairness. It protects and gives confidence to those who invest in rail. Most importantly, it will benefit the poor, long-suffering passengers who are often overlooked in this debate. I beg to move.
My Lords, my name is added to this amendment. I shall not detain the House because the noble Viscount has set out very succinctly the purpose of the amendment. It would protect train operators, including freight—I declare an interest as chairman of the Rail Freight Group—against government action that adversely affects their business. It is quite simple and is quite a normal principle.
On Monday, at Report, my noble friend basically made two points. The first was that this matter could be resolved by using the network code, which was prepared and run by the independent Office of Rail Regulation. Comfort should be taken that this office was independent. The second point was that the Government did not like to see the word "compensation" in the Bill.
Perhaps I may remind the House that on both those issues the recently published Crossrail Bill does precisely what my noble friend said should not be in this Bill. The Crossrail Bill seeks to fetter very significantly the independence of the rail regulator by allowing the Secretary of State to instruct or direct him to give priority to one group of train operators over another, which would very seriously and adversely affect those who might have to have their access contracts changed. If one accepts that, it is reassuring that the Government have chosen to put in that Bill the fact that those people adversely affected should be capable of receiving compensation.
So compensation is accepted for Crossrail, but it is not apparently accepted for the rest of the railway. Even more seriously, it demonstrates that one cannot rely long-term on the Government accepting that the rail regulator office should remain independent, which is one of the absolute foundations of the private railway network today. Whether people like privatised railways or not, that is what we have. The Office of Rail Regulation ensures that private sector interests, which have invested billions in the railways, should be able to enjoy the benefit of their investment without subsequent interference from the Government.
Both of the arguments put forward by my noble friend should be treated with caution if the Government are prepared to change them so soon. This amendment is a very important part of the comfort that private-sector investors in the railways need if they are to invest with confidence in the future.
My Lords, I am pleased to associate these Benches with the remarks made by the noble Viscount, Lord Astor, and the noble Lord, Lord Berkeley. We are very keen that nothing should stand in the way of people's appetites for investment. That applies particularly to the freight sector, which, as I said at Report, is so vital and for which—I do not expect to treatise on that now—the Government have done very little to deal with the huge problem of congestion on the roads. I am pleased to support the amendment.
My Lords, I am grateful to noble Lords for their contributions to this debate on an issue that we considered in more general terms probably at Report stage. I congratulate the noble Viscount, Lord Astor, on having refined his amendment and for concentrating his comments on the real issues at stake.
I am well aware of and, of course, understand the concern of the train operators regarding the potential impact of any future access charges review on their businesses. I recognise the validity of concern expressed by all three noble Lords who have contributed to this debate.
As we have stated previously, the Government are keen to provide operators with the certainty that they will receive mitigation or compensation should their businesses be affected by these processes. We have made public an exchange of letters between the Secretary of State and the Office of Rail Regulation to that effect. So the debate on the amendment comes down to clear points of principle.
First, we believe—not, as I think was suggested, that compensation should not be offered in proper circumstances—that compensation and mitigation are matters which should be dealt with through the access contracts. That is why we continue to work with the industry to ensure that access contracts and the network code deal as effectively as possible with these issues. If we accepted the amendment, it would bring legislation into an area where the existing contractual arrangements are working well and are clearly understood by the parties. It would be wrong to do this in principle and would set a dangerous precedent that could undermine the commercial stability sought by private sector operators and investors, which was the burden of the remarks made by all three noble Lords.
But the second point of principle is one which I sought to emphasise on Report. Again I address it to all parts of the House, but I suppose that I am bound to address it particularly to my noble friend. It is for the Secretary of State and for Scottish Ministers to determine how much they are willing and able to spend in support of railway services. No statutory requirement should be added to that budget subsequent to their decisions. While I recognise my noble friend's defence of the interests he represents so ably—he has every right to do so—I ask him to accept that we are debating this at a point when the nation is about to decide in a general election who should be its representatives, and that Members of the other place are now putting their own positions on the line. I also ask him and other noble Lords to consider whether it is right that a budget established by the Secretary of State and Scottish Ministers in their area should be increased by statute in circumstances over which they would have no direct control. Surely that goes against the fundamental democratic position of accountability. That ought to be borne in mind by all of us in this House who do not have to stand for election in order to reach our judgments on this issue, one that concerns funding and resources for which the Secretary of State and Scottish Ministers are responsible.
I turn to the second argument put forward by the noble Viscount, Lord Astor. This refined amendment would come into effect only in limited circumstances and would cover only the difference between what would be paid under the contract and what is adequate so that the risk to the Government is not that great. I would argue that we do not know what the risk would be. The amendment establishes the principle that the Secretary of State is open to having his budget extended, and we do not know what the circumstances might be and therefore the sums involved in terms of compensation.
My Lords, I am grateful to my noble friend for giving way. I accept that no one wants the Secretary of State to have a blank cheque. That would be totally stupid. What the amendment is trying to do is suggest that if there is a problem with the overall budget—and these situations do not arise overnight—compared with what the Secretary of State wants to buy in terms of services, he has various options. He could cut the passenger services he is buying, or he could reduce the state of the network so that non-passenger, non-franchise services incur higher costs. He could do any of those things. However, if these companies then incur higher costs, he could include in his budget a contingency for compensation.
The Secretary of State does not need to increase his overall budget. He needs only to recognise that there may be a justifiable claim for compensation and therefore he needs to include in his budget a contingency for meeting such a claim. I suggest to my noble friend that there is no question of the budget having to be increased ad infinitum because of an open-ended claim of the type he suggests.
My Lords, my noble friend must be a little careful with the concept of contingency funding. I can think of certain expenditures from the contingency fund of hugely significant proportions for government, so I am not sure that that concept can be translated to legislation in quite the rather facile way he suggests.
We maintain that the contracts should be signed and the work done on the basis of understanding aspects of risk. Built into that is proper consideration of when things might go wrong. But the idea of having a kind of sinking fund created by the Secretary of State with taxpayers' money available to be dipped into and shelled out under ill defined circumstances is one that I am surprised to see my noble friend supporting. But I am even more surprised that the Conservative Party, on the brink of a general election in which they are spending so much time showing how proper their candidates must be about public expenditure plans, is actually promoting an amendment that is an open-ended demand on a Secretary of State.
I hope that the noble Viscount will recognise the wisdom of withdrawing his amendment and accept that the Government's provisions adequately meet the situation.
My Lords, I have to say to the Minister that that was a good try, but this amendment does not in any way increase public expenditure. He knows that, I know that, and the noble Lords, Lord Berkeley and Lord Bradshaw, know it. But the Minister has to stick to his brief and we sympathise with him.
The noble Lord has talked about principle. We know already that the Government have accepted the principle of my amendment because they have published it in the Crossrail Bill, a point made by the noble Lord, Lord Berkeley. The ORR is independent and I hope that it will remain so, but I remind noble Lords that the Strategic Rail Authority, created by this Government in 2001 and which was supposed to be the answer to managing the rail network for the future, is to be abolished by this Bill. We do not know what is going to happen.
The important point is that the Bill will allow the Secretary of State to change the circumstances in which the contracts were originally negotiated by the private sector. My amendment would ensure that if the Secretary of State does change those circumstances, he will not unfairly penalise those who have signed contracts with the Government. That is an important principle. If the Government do not accept it, it will affect every future contract in the private sector signed with any department. All of them could just be changed.
My amendment does not increase public expenditure and has nothing to do with increasing the Secretary of State's budget. It is a simple protection measure. I am disappointed that the Government will not accept it and, while I understand the Minister's position, I wish to press the amendment to a vote.
My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(Lord Davies of Oldham.)
On Question, Bill passed, and returned to the Commons with amendments.