Infrastructure Bill [HL] — Report (1st Day)

– in the House of Lords at 3:00 pm on 3 November 2014.

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Amendment 1

Moved by Lord Whitty

1: Before Clause 1, insert the following new Clause—

“Duties of the Secretary of State

Duties of the Secretary of State shall include—

(a) drawing up and granting of a licence to a strategic highways company as provided for in section 1, but this duty may be delegated to the Office of Rail Regulation,

(b) drawing up and presenting from time to time, and at least every five years, to Parliament for approval a Roads Investment Strategy as provided for in section 3,

(c) issuing from time to time directions and guidance under section 4 both to the Office of Rail Regulation and to the licensed strategic highways company,

(d) reporting periodically to Parliament on the performance of the strategic highways network.”

Photo of Lord Whitty Lord Whitty Labour 3:08, 3 November 2014

My Lords, In moving Amendment 1, I will also speak to the other amendments in my name in this group and comment on some of the others too.

I had hoped that after a lengthy discussion in Committee the Government would have come up with their own draft to address the deficiencies of this part of the Bill, and to clarify the relationship between and responsibilities of the Secretary of State and the various bodies covered by it. Regrettably they have failed to do so. However, they have produced a lot of new documents, many of which are very informative. I thank the Minister for that and for the various briefing sessions that she and her officials have held since that date. However, I have to tell her that, in relation to the issues I am about to raise they have, if anything, confused the situation.

For the benefit of newcomers to this debate, this part of the Bill is intended to place roads investment in a new context by creating a road investment strategy for England and by hiving off the Highways Agency into rather more arm’s-length companies—the strategic highways companies. I very much approve of the first aim but I am not all sure that the second aim concerning the companies is right.

Noble Lords who are long in the tooth will remember that, going back a bit, I was a roads Minister. It is a pretty dreadful job and is always subject to representations by Members of Parliament and others on which roads should take priority, how much more should be spent and so forth. I would welcome a consistent road investment plan with a strategic direction sustained over a number of years as part of a wider sustainable transport policy. The key point for the Government appears to be that the road investment strategy in the Bill will be somehow free from short-term changes, albeit that some of the documentation that the Minister has provided us with, including the draft licence to which I shall return, says that the Secretary of State can vary the strategy at any time, and, of course, the Treasury still decides the funding—so good luck with that.

In principle, I support the road investment strategy but am unclear why it is absolutely necessary for it to be delivered by new strategic highways companies, and why a corporatised Highways Agency would do the job so much better than the present system of delivery, especially since the Government seem to have denied themselves ways of making a company more effective than the Highways Agency. I do not particularly support all these issues but the Government have clearly said that this is not a stage towards privatisation. Indeed, the Bill makes that clear, and I agree. However, they have also said that the company cannot raise its own capital, with which I disagree as that could smooth out any predations by the Chancellor. The Government also say that it is not allowed to engage in anything approaching road charging, although I note that that part is not yet included in the draft licence to which I referred, so watch that space.

Therefore, the benefits of having a separate company are a little unclear. Nevertheless, I recognise that there could be significant advantages in establishing a company, such as coherence of approach, an ability to engage in contractual innovations and possibly less direct pressure from MPs and other vested interests, although I am sure that the Minister will not be entirely free of that. Such a company could develop a long-term strategy on road safety, to which I will return on later amendments, and on issues such as telemetrics in traffic control, traffic management, road design and meeting environmental standards. However, it will deliver only if that company is itself set in a coherent institutional framework, which is normally the case for any large state-owned company. We need clarity of accountability, including the accountability of Parliament. Regrettably, the Bill does not provide for that.

The Bill refers to the possible appointment of a number of companies as strategic highways companies. The Government have made it clear that they are in reality talking about only one company. However, the Bill talks about the possibility of more than one. When questioned, the Minister and officials rather darkly referred to legal advice from counsel, even though it is clearly contrary to the policy and intention of the Government to have more than one company involved. Amendments 3 to 7 in this group, the first of which is mine, seek to ensure that the Bill makes the intention absolutely clear, and therefore we will be able to judge the Government against that.

More profoundly in the long term, the operation of a new set-up has a lack of clarity about the relationship between the Secretary of State, the company and the monitor or regulator. There is going to be an enhanced Office of Rail Regulation, in which presumably some changes will be made, and there is the matter of accountability to Parliament. The Bill refers to appointment of a company, but during the proceedings in Committee, the Minister, on many occasions, when questioned about the relationship between the Secretary of State and the company, referred us to the licence, which was then already in its sixth draft, and is now a lot longer at 35 pages.

The interesting thing about referring to the licence in terms of answering all questions in this area is that the licence is not mentioned in the Bill, nor are we told how or on what basis the licence should be granted and enforced. If we are to have a new licensing system, we need to know who is responsible for granting and enforcing the licence. Is it the Secretary of State? Is it the regulator—the ORR, presumably? How is it to be enforced? Even this has become more obscure since Committee; for example, Clause 5 deals with fines on the company if it fails to meet its objectives, but I see that government Amendment 32 would delete Clause 5, so I am not quite sure where we stand on that.

The Minister, of course, has said we are not actually setting up a licensing system. She said that in a letter to me. As the letter spells out, the Government want to set out, in a single document, all the relationships between the company and the Government. All the queries in the Committee were also directed at the draft licence, which, as I say, does not appear in the Bill.

This single document, to which the Minister refers, must be the draft licence. This interpretation of licence seems to go closer to what is described in Clause 4, on directions and guidance from the Minister, than what is usually thought of as a licence. In most regulatory regimes, there is a difference between a licence to operate—whether from the Secretary of State or the regulator, which is a relatively stable document—and ministerial directions and guidance, which are more flexible and can reflect changes in circumstances or in policy. Putting all this in a draft licence, unreflected in the Bill, adds to the confusion.

There is also the issue of responsibility and accountability to Parliament. What are the Secretary of State’s duties now to be in relation to the strategic roads company? Is the strategic roads company, under state ownership still, no longer susceptible to current levels of parliamentary scrutiny, as, I remind the noble Lords, used to be the case with the old nationalised industries? How, in future, is the remaining parliamentary scrutiny to be conducted? My Amendment 51 deals with that.

We need to see clearly the respective roles of the Secretary of State and the department and chair of the board of a new company, ORR as monitor as regulator. Little is clear as the Bill now stands. These amendments, therefore, seek in a tentative way to try to rectify that. Amendment 1 sets out the role and responsibilities of the Secretary of State in general in this area. Amendment 2, in the name of my noble friend Lord Berkeley, deals with the whole issue of the company. Amendment 2B deals with the licensing system and puts it on a basis which is closer to the rail licensing system. Amendments 3 to 7 deal with the issue of a single company. In a later group Amendments 9 and 10 deal with the functions of the corporation of the new strategic highways company.

These amendments are intended to make clear the Government’s broad intentions, which anybody reading the Bill would find it hard to divine. I am not saying that these amendments are perfect. I had, as I say, hopes that the Government would come up with some themselves. Unless they do, however, and the Minister says today that at a later stage during the passage of the Bill—at Third Reading or during its passage through the Commons; this Bill started in the Lords and has not yet been through the Commons—the Government are determined to make this at least substantially clearer, as I have argued, I despair of the proposition. I am quite taken with the potential of the idea of a standalone company, but it needs to be properly embedded in a system of regulation, oversight and parliamentary accountability.

If we do not provide for that in the Bill, the better course would be to start again. The amendments in the names of my noble friends on the Front Bench would effectively do that by deleting this clause from the Bill. If the Minister wishes to avoid us going down that road at some stage, she needs to come up with a proposition of her own which meets the rather large deficiencies in the Bill. I beg to move.

Photo of Lord Berkeley Lord Berkeley Labour 3:15, 3 November 2014

My Lords, I support my noble friend and will briefly speak to some of the amendments in this group, namely Amendments 2, 2B, 5, 6, 6A, 7 and 7A. I will not repeat all that my noble friend has said, because the various amendments that we have tabled between us provide the basis for the proper link between primary legislation and the licence, which, as my noble friend said, is so lacking in the Bill.

I started off by looking at the relevant clauses of the Railways Act 1993 and the Railways Act 2005, which we discussed in Committee and in some helpful meetings with the Minister and officials, for which I am grateful. It was remarkably easy, at this comparatively high level, to cross out “rail” and put in “road”; they are very similar. If, as my noble friend said, we are to have a company that looks after the strategic roads in a way that is similar to what Network Rail became in September by becoming fully government-owned, it would seem logical that the legislation under which this happens would be similar.

I will not go through all the amendments in detail; my noble friend has done that very well. However, I have two questions for the Minister when she comes to reply. First, under the Bill, will it still be possible for Members of Parliament and of this House to table Written Questions and ask questions of Ministers, as we currently can with the Highways Agency? Noble

Lords will know that we cannot do that for Network Rail, because if you table a question about it the answer comes back, “Write to the chief executive”. I am sure one gets good answers from the chief executive, but one does not see the answers that other noble Lords get to the questions that they ask the chief executive. I hope that the same thing will not happen with the strategic highways company and that we will still be able to table questions about its operations and the company generally, and to get a proper Written Answer or be able to have an Oral Question or debate on it as the circumstances demand.

I also hope that when Network Rail becomes subject to the Freedom of Information Act on 1 April next year, that situation will apply to it. Clearly, we would not want to ask whether a motorway sign or signal had been moved; that would be a ridiculous waste of ministerial time. On the other hand, there are many things that it would be useful to ask such questions about for the purposes of parliamentary scrutiny.

My second question for the Minister concerns my Amendment 7A which relates to Section 48 of the Health and Safety at Work etc. Act 1974. This exempts Crown-owned companies, or officers or companies of the Crown, from being taken to court by the Health and Safety Executive if it believes that they have contravened the Act. I know that the Highways Agency itself is exempt, being a Crown agency. It would be nice to know whether any change was planned in this relationship, and therefore the exemption, when the strategic highways company comes into existence. I believe that Network Rail does not have an exemption, because the Health and Safety Executive, through the Office of Rail Regulation, has taken action against it on several occasions. There should be a balance between the two and as much transparency as possible. I am very much looking forward to what the Minister has to say in response and fully support the amendments of my noble friend.

Photo of Lord Bradshaw Lord Bradshaw Liberal Democrat

I shall say just three things. The Government are mistaken. The Office of Rail Regulation should, under that title, oversee roads as well. In spite of all the arguments, if it were signalled, it could change its name at some future date. It could be planned for and there would not be a lot of expense. It would be much more understandable to motorists and everybody else who the regulator was, whether it was a railway regulator or a transport regulator.

I also endorse the points made by the noble Lord, Lord Berkeley, about safety. One thing that the Office of Rail Regulation has done is to drive up safety standards on the railways. Although the Government keep saying the safety standards on the roads are the best in Europe, these are really quite deplorable, as we see with the continued deaths of cyclists in London, for example.

Lastly—I know I am reaching for the moon here—would it not be better to be honest and say that we have to adopt road pricing some time and, to make it acceptable, to say that the money raised from it would be used for roads and motoring purposes? If you explain what the money is for, people are much more likely to embrace the idea. A recent opinion poll in one of the national papers showed that people were against raising taxes, but if they were specifically asked whether they would pay more tax to improve the health service, they said yes. The same applies to road pricing.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative 3:30, 3 November 2014

My Lords, I yield entirely to the noble Lords, Lord Whitty and Lord Berkeley, for their huge expertise in this field. I have not attempted to master all the details. However, there was one point made by the noble Lord, Lord Whitty, which I am not sure I correctly understood. It was about the licence. My attention was drawn to the Written Statement that was issued by the Government. Indeed, my noble friend on the Front Bench repeated a Statement made by her colleague, the right honourable John Hayes. He was talking about the draft licence, which is a new document that was issued six days ago. I shall come back to that point in a moment. It states that the licence,

“indicates the manner in which the Secretary of State proposes to issue binding statutory directions and guidance to the new company, setting objectives and conditions around how the company must act”.—[ Official Report , Commons, 28/10/14; col. 18WS.]

I do not think that there is anything obscure about that; it is perfectly clear that the licence is issued by the Secretary of State. In those circumstances, the Secretary of State can clearly be held responsible if it does not work properly. But it may be that I misunderstood the noble Lord, Lord Whitty.

The Statement from which I quoted was issued less than a week ago and announces the publication of several substantial new documents which bear on Part 1 of the Infrastructure Bill. I fear that the Government have got themselves into rather a bad habit of publishing documents very shortly before Parliament has to consider them, leaving those of us who perhaps do not have the resources behind us that some may have to find it very difficult to catch up with it all. The most recent example—I do not hold my noble friend Lady Kramer responsible for this—is something that we will debate on Wednesday: the community electricity scheme. A task force looking at exactly that issue has been sitting for a year, but its report was made available only this morning. When I first came into the House, it was not even available in the Printed Paper Office, so I am afraid that I rang up the department concerned and expressed my displeasure, if I may put it in neutral language.

I have to say to my noble friend on the Front Bench that that is no way to treat Parliament. If the Government get into difficulties on some of these issues, it is because officials have been allowed to drag their feet to the point when things are issued only a matter of days before they have to be debated. I leave my noble friend with that thought.

Finally, I should say how much I agree with the noble Lord, Lord Bradshaw. I am sure that we have to come to some form of road pricing in future, if we are to make sense of this. There has been a huge increase in road traffic and no sign of it declining. The fact of the matter is that, while people of course pay the petrol duty, the licence and other taxes, that is in no way related to the amount of use that they make of the roads. I am quite sure that we will have to come back to that at some stage, and it may be something that emerges from the revised structure being set up in this Bill. As I said at Second Reading, I totally support it, and think it a very good move, but the revised structure may well bring these questions of how it is to be paid for much more to the fore. Then we may have the sort of the reform that my noble friend Lord Bradshaw advocated.

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Transport), Shadow Spokesperson (Treasury)

My Lords, I can keep my own contribution relatively brief because my noble friends Lord Whitty and Lord Berkeley have presented the case with great clarity. I am also grateful to the noble Lord, Lord Jenkin, for pointing out that we are dealing today with a position that is only six days old—the latest change from the Government to this crucial part of the proposals in the Bill. That is to say nothing of the fact that the fracking aspect of the Bill came months after we had considered it in Committee, which was then held up until the Government had concluded their consultation in the summer. So this is not a Bill distinguished by forward planning from the Government, or by a clear rationale of what they are about. However, I suppose I should thank them for having another shot at improving the Bill.

We are pleased to see changes reflective of the representations made in Committee from this side of the House, but we are no clearer on why delivering long-term certainty for roads investment requires a top-down reorganisation of the Highways Agency. The Cook report told us that it is stop-start funding problems that are leading to inefficiencies of between 15% and 20%. Is there any real evidence proving that changing the legal structure of the Highways Agency will, in itself, improve efficiency? Perhaps top-down reorganisation is the metier of this Government in challenging areas. The Minister will be aware of the strength of the concern on our side that this looks like the first step to privatisation. We continue to have that anxiety. Why is the section on the company’s licence for commercial activity and charging for services still unfinished?

We are concerned about the cost implications. There is still no clarity on whether the SHC will be able to reclaim VAT in the same way that the Highways Agency does at present. In Committee, the Minister said that the SHC would not be required to pay VAT, which is exactly the case with the Highways Agency now. That soon cleared up the issue. However, it did not clear up the issue at the other end, because the Minister in the Treasury, David Gauke, in answer to a Question from my honourable friend in the other place, Richard Burden MP, said:

“New bodies are not automatically covered by the … provisions. However, the Department for Transport and HM Treasury are considering this issue”.

HMT is quite important, here, with regard to revenue and dispensations to other departments. It does not seem to be as clear on the matter as the Department for Transport is maintaining that it is. If the new strategic highways authority is no longer able to recover VAT in the same way, that could lead to losses of a considerable amount—as much as £400 million annually. That would be £4 billion over 10 years, which would dwarf the figure of efficiency gains of £2.6 billion that it is proposed will come from the legislation. If the VAT issue is not resolved, therefore, the justification for this reorganisation is even less substantiated.

Turning to Amendment 4, which is in my name, the Minister used two arguments in Committee to reject our attempts to clarify whether the Government envision having more than one company. One argument was that this is only standard legal drafting and there should be no cause for concern. The Minister went on to say that it might be necessary if one wanted a more regional structure for the equivalent of the strategic highways company. Can she not confirm that the Highways Agency is already structured regionally? There appears to be confused thinking within the Government about how many companies there will be, which is why many are concerned that the Government are not being entirely open about their plans for the future.

It is clear that our main reservations about the major government proposal in the Bill have not been assuaged. As my noble friends have indicated, there are other questions, too, to which the Minister needs to respond to convince us that this proposal is acceptable.

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

My Lords, this is obviously a very wide and long group of amendments, which cover quite a range of issues. I do not want to put words in noble Lords’ mouths. but I think that we have progressed to the point at which at least we have a common goal in terms of setting up a structure that will ensure certainty of funding for highways in the way that we have managed to enjoy, and benefited from, with the railways.

Clause 1 allows the Secretary of State to appoint a strategic highways company, thereby conferring duties and functions on it to operate as a highway authority. If we were to drop this clause—there is a stand part debate in this group of amendments—it would be a fundamental change to the model and we would lose many of the key benefits of certainty over funding and plans which, as we have heard today, has been widely supported.

Our aim is to create a different model to deliver road infrastructure. Crucial to this is having a legal body separate from government responsible for our strategic road network and delivering a road investment strategy in the most cost-effective way. We consider the most effective model is a company created under the Companies Act 2006. Let me explain the rationale. We have decades of experience of the fact that the current arrangements—I point this out to the noble Lord, Lord Davies, who will remember the history of the department—have not encouraged a long-term approach to planning infrastructure or provided secure funding. Stop-start has indeed been a definition of a large part of their history and has come with high costs in terms of the efficiency and quality of our infrastructure. For long-term funding certainty and planning, it is crucial for the Secretary of State to be able to have a transparent and binding relationship with a separate legal entity. If the delivery body were to remain the Highways Agency and remain within the DfT, inevitably it would be easy to change funding and plans.

Setting up a strategic highways company as a new company operating under company law with a well established governance and financial framework will reinforce the clarity and robustness of the relationship. We have seen from international experience, for example in the Netherlands and Sweden, that where road delivery bodies have been given long-term funding certainty and a more independent relationship setting out requirements, large efficiency savings have been possible. A company would be constrained to one that is limited by shares and wholly owned by the Secretary of State, ensuring that any company is 100% owned by the Government and remains in the public sector. We have not only no intent but no interest in turning this into a privatisation. That is not part of our agenda and does not achieve the goals that we want.

Let me again take this opportunity to explain that we have no plans to appoint more than one company. We have already made clear that the Highways Agency, in its new legal status as a Government-owned company, will be the only company appointed. The use of plural “companies” in legislation was to allow flexibility for further companies in the future, including how companies would work together: and that is what Amendment 11 seeks to remove. Subsequent provisions in the Bill which refer to a company could therefore refer only to the strategic highways company or to each such company.

We are doing this in part because we recognise that future Governments may want flexibility to create more companies: for example, to give more accountability, to allow a company to look after a specific cluster of roads or area of roads or to promote comparisons and efficiency. Those are not our goals, but they might be those of a future Government. Reference to more than one company would prevent future Governments making change as needed. However, it is not something that we are seeking, so if noble Lords feel strongly on this issue and do not want to give that flexibility to future Governments—even though it is standard in virtually every piece of legislation that this House has seen referring to “companies” and “company” because, as I explained, in law the singular is the plural and the plural is the singular—I could offer a compromise that might reassure noble Lords.

I would be very happy to return at Third Reading with an amendment that would require any Government to seek parliamentary approval to establish additional companies beyond the initial one. I wonder whether this would satisfy noble Lords. It would certainly meet our intent. We see no future Government related to us who would wish to run this in a different way, and this would allow Parliament to have the voice that perhaps noble Lords are seeking.

Turning to the requirement for a licensing regime, we have been and are clear that we do not want to privatise the strategic highway network. Therefore, given that licensing regimes in the traditional sense, which is reflected in quite a number of these amendments, apply to commercial operators, we have been trying to avoid precisely that kind of licence. I find it strange that your Lordships are now pressing for amendments that follow that commercial model. Since we do not intend to privatise, the commercial model is not relevant to our proposals for this company.

In sectors such as rail, aviation, energy and water, the licence is a means of access to an economic activity where there are potentially multiple operators in a commercial market that may seek to apply. Our strategic highways company is funded by government, with no option for a separate revenue income. All its powers and duties to operate as a highways authority already exist in legislation and it is by virtue of their appointment that these powers are switched on.

Of course, we have always wanted a model that seeks to emulate the best practice we see in other commercial sectors. We have therefore been using the term “licence”, though it is only on one document: the draft licence. The noble Lord, Lord Whitty, is right when he says that the Bill returns to the broader title which he will see on the draft licence: Draft Licence, Secretary of State for Transport Statutory Directions and Guidance to the Strategic Highways Company. So, for clarity, we have ensured that in the Bill we refer to, “statutory directions and guidance”. I hope that we can clarify what is slightly confusing, but I know that the noble Lord, Lord Whitty, is sharp enough to work his way through these complexities.

We have used the term “licence” to convey the sense that the Secretary of State’s statutory directions have a legal impact on how the company delivers its obligations, while leaving the company to get on with its daily operations and decision-making. We think that this is an easier way to communicate to stakeholders and the public the model that we are introducing—it is closer to plain English—and the statutory directions are a legal requirement. However, I recognise that this has given rise to some confusion over the legal underpinning. We did not intend the confusion; we actually thought that we were making sure that we were issuing statutory directions and guidance, avoiding a commercial licence but conveying to the public many of the strengths that are embedded in the range of documents.

The Government do not consider the detail in the proposed amendments to be necessary, since the duties included are not appropriate to the company model I explained above, refer to existing powers and responsibilities of the Secretary of State for Transport, or are already sufficiently provided for elsewhere in the Bill or in other parts of the governance framework for the new company. As the noble Lord, Lord Whitty, will recall from our discussions in Committee, he intended that his amendment, which would require the House to debate Part 1 of the Bill again before it comes into force, should apply to the road investment strategy. However, his Amendment 51 still refers to Part 1, so it does not meet his intent.

On the issue of parliamentary approval of the road investment strategy, to which the noble Lord refers in Amendment 1, Ministers, rather than Parliament, have traditionally made decisions on infrastructure funding. As is the case for rail investment, this would not prevent Parliament holding the Government and the company to account, but it would be unprecedented for the Government to require formal approval of a funding and investment plan such as the road investment strategy. This would also add bureaucracy and slow down the delivery of much-needed infrastructure because, as we have said, certainty of funding is exactly what is required.

Section 4 already enables the Secretary of State to issue directions and guidance to the company. The intention to do this was clearly signalled in the draft statutory directions and guidance for the company. Including a legal duty for this is therefore unnecessary. I agree that the Secretary of State should also be able to issue guidance to the monitor, as the noble Lord proposes. The Government have already proposed this under Amendment 48, which we will come to later, which includes broader requirements than those proposed by the noble Lord, including for this guidance to be published by the Secretary of State and for the Office of Rail Regulation to have regard to this guidance. So not only is that point covered, it is beyond covered.

The Secretary of State will of course continue to be responsible, and accountable to Parliament, for setting strategic direction and policy for the road network, and for ensuring that it is well managed. As sole shareholder of the company, the Secretary of State will also be accountable to Parliament for the company’s activities and performance. That may help some noble Lords who raised questions about Parliament’s ability to challenge, but I will try to get back to them in more detail. I just want to be absolutely sure of the mechanisms that would allow that to be done.

Amendment 2 seeks to guide the way in which both the Secretary of State and the ORR exercise functions under the Bill. We have already recognised the importance of this issue as regards the ORR and government Amendment 43, which we will consider later, provides a set of general duties covering performance and efficiency as well as, significantly, important issues such as safety, the environment and support for the economy, which will govern how it exercises its new road functions.

As regards the Secretary of State, we do not agree that such provisions in legislation are necessary or appropriate. The functions that the Secretary of State is exercising are to ensure that the company, which he owns, operates in accordance with a strategy that he sets. The Secretary of State does not need to exercise his functions within an inflexible legislative set of constraints; he is responsible for the Government’s policy on transport matters such as this and always accountable to Parliament for the decisions he takes. That is not to say that the Secretary of State will not be concerned by these matters and it is right that the role of monitoring these issues is delegated to the Office of Rail Regulation by the Secretary of State without ambiguity. They will be considered when setting the road investment strategy, which is rightly the purview of the Secretary of State, and the performance benchmark on which the company will be judged by the Office of Rail Regulation.

As for the amendment concerning Section 48 of the Health and Safety at Work etc. Act 1974 and the question asked by the noble Lord, Lord Berkeley, this will not apply to the company in any case because, in accordance with Cabinet Office guidance on setting up new public bodies, the strategic highways company will not be a Crown body. That issue is already dealt with and there is therefore no need for an explicit exemption for the company which would be somewhat confusing.

I shall pick up on some of the other issues that have been raised. The Government have no intention of considering or initiating road pricing and therefore the Bill does not address that issue. There were questions about the way in which safety is captured within the Bill and the name of the ORR. I ask the indulgence of the House to deal with those issues in the later groupings that cover them in significantly more detail.

The noble Lord, Lord Davies, referred to the powers of the Secretary of State to vary the RIS. However, consultation is required. One of the things that your Lordships have remarked on when looking at this whole package is that it is actually tough for a Secretary of State to vary pricing. It certainly has to be done transparently and with proper consultation. It is not an easy process. That is just as important in making sure that we achieve the goal, which is pretty universally supported around this House, that we avoid the stop/start pattern that we have seen historically.

The noble Lord, Lord Whitty, said that we have deleted a clause about the use of fines by the Secretary of State. However, that is being replaced by the capacity of the monitor to fine. We will go into that in more detail in later groups. There has been a significant strengthening, not weakening, of enforcement. I would hate to leave that misapprehension at this point in our discussion.

The noble Lord, Lord Jenkin, asked about having enough time to absorb various documents. I recognise the frustration of the House. I will pray in aid officials, who have gone so far to try to be responsive, for two reasons. One is that many positive suggestions and ideas for improving the Bill have come from this House and we have sought to capture them. There have also been instances where we have clearly not achieved clarity and we have sought to respond to that. The consequence of this is that there is sometimes a weight of amendment and redrafting of documents which does not come quite as quickly as we would all wish, particularly when we want to have meetings with Peers to discuss some issues to make sure we are addressing the real point. I apologise for that but hope noble Lords will understand that its motivation has been good.

The noble Lord, Lord Davies, said there was confusion over the VAT position of this company. I can confirm to him that HMT has confirmed that the SHC—the strategic highways company—will not be subject to VAT. We have absolute confirmation of that and I can give the noble Lord that reassurance.

I have tried to capture the issues which have been raised and hope very much that your Lordships will feel much more comfortable with the content of the Bill and the way we have attempted to amend it in order to respond to the points raised in Committee.

Photo of Lord Whitty Lord Whitty Labour 3:45, 3 November 2014

My Lords, I thank the Minister very much for dealing with these issues so comprehensively. We all share the frustration of the noble Lord, Lord Jenkin, but we recognise the efforts which the Minister and her officials have put in to keeping us informed. The problem is that so much relies on what is in the draft licence and it is confusing for many of us if that document is constantly changing as we are going through this Bill. If the noble Lord, Lord Jenkin, has expressed displeasure, the powers that be should be trembling in their shoes and take notice.

The first bit of good news is that the Minister very clearly indicated that the Government have no plans to appoint more than one company and that, whatever it says in the Bill, she was prepared to come forward—I think she said at Third Reading—on the issue of a separate vote of Parliament being required if more than one company were to be appointed in the future. That would go some way to clarifying the position. I still do not totally understand why it is expressed in this way, given the Government’s clear intention in any case. However, I thank the Minister as it partly deals with an issue which is troubling a number of people. The present view is that a single English road network company would be the most effective way of delivering improved roads and transport systems. If a subsequent Government decided that should be regionalised, a whole lot of other issues then arise. A parliamentary brake on them doing that at least goes some way to meeting that point and I thank the Minister for that.

I am partially reassured by what the Minister said on parliamentary accountability, but I am still not clear whether that means that the Secretary of State can be asked in Parliament about the same range of things that he or she can currently be asked about. In other words, is there any change? That important issue will undoubtedly be raised by MPs of all parties when the Bill reaches the Commons.

The central issue of why my noble friends and I felt we had to raise the whole context in which the company was being set up, and the relationship between it and the Secretary of State, is the use of the term “licence” and the use of the content of the licence to explain everything about how the Government intend to conduct the new structure. I think that the Minister came as close as she dared in saying, “Well maybe we should never have called it a licence in the first place”. I think that if she took that further step, we could all sit down and applaud. However, it is very confusing because the Bill refers to “appointment”, which in some cases is the granting of a licence. Therefore, although it is a single state company and not a commercial company in the normal sense, and although there are examples of licences being given to state-owned companies, I think that using the term “licence” in one place and “appointment” in another without describing the process through which the Minister has to go or how the regulator is to enforce the terms of that licence is wrong.

As we pass through the subsequent stages of the Bill, the department and the Minister will need to consider whether they ought to change the terminology entirely and refer, as the subtitle of the draft document now does, to “directions” and “guidance”, with the way in which the appointment is carried out being a clearly separate issue. If the Government were prepared to go along those lines, we might not need quite such a complicated change to the Bill as our amendments taken in total would indicate, but I think that the Government need to think further about how they present this in the Bill. At the end of the day, however much those in the industry understand it and however much subordinate documents spell it out, unless the relationship and the terminology are clear in the Bill, we will run into serious trouble down the line.

I, for one, would quite like to see this company established in some form or other but, as I said earlier, I do not think that we have yet got it right. However, the Minister has moved some considerable way in my direction today. She and her colleagues probably need to move a little bit further before we see this Bill back after the Commons has considered it. For the moment, I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Amendment 2 not moved.

Amendment 2A

Moved by Lord Davies of Oldham

2A: Before Clause 1, insert the following new Clause—

“Public sector rail operators

Within 6 months of the passing of this Act the Secretary of State shall publish a report on allowing a public sector rail operator to take on lines and challenge the train operators in the public interest.”

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Transport), Shadow Spokesperson (Treasury) 4:00, 3 November 2014

My Lords, this amendment requires the Secretary of State to publish a report on allowing a public sector rail operator to take on lines and challenge the train operators on a genuinely level playing field in the public interest, securing value for money for passengers and taxpayers.

Many noble Lords will no doubt recall the exchanges that we had at Question Time last week on the future of east coast rail. I congratulate the Minister on her performance then in defending the Government’s position, which I regarded then, and still do regard, as indefensible, but I hope that today her response will be somewhat different. We should learn the lessons of east coast rail, where we have seen the benefits of a not-for-dividend operator running a rail line.

East coast rail was brought back into public ownership in 2009 after the private operator reneged on its commitments. It is efficient, it has returned more than £600 million to the taxpayer and it invests every penny of that profit back into the company. It provides a quality service, achieving record levels of passenger satisfaction and punctuality. The new timetable that it introduced in 2011 allows it to operate 7,000 more trains each year, and it now has 500,000 more passengers. It has also delivered for passengers. This year’s fare rise was in fact a real-terms cut—something that no private franchise was able to do. In fact, elsewhere, season tickets have risen in price by 30% since 2010—a stark contrast.

Despite that, the Government appear intent on pressing ahead with the privatisation of intercity east coast services. Will the Minister confirm that the cost to the taxpayer of reprivatising the east coast could run to £6 million? It is important that the Minister responds to this question and says what steps the Government are otherwise taking to improve the functioning of the railways. It is unacceptable that our rail lines are, according to the 2011 McNulty review, up to 40% less efficient than the best-performing European networks.

We know that the Conservative Party is unwilling to take a pragmatic approach on this issue. Its Railways Act 1993 effectively prohibits a public sector operator, except in the most restrictive circumstances. But the public do not feel this way. Only 28% of those polled support the sell-off of east coast. Can the Minister say on which side of this divide her own party finds itself? Many will recall her party’s support for a public sector operator while it was in opposition. It is time to put an end to this rigid ideological approach, which also sees the Government trying to rush through a sell-off of the 40% public stake in Eurostar before we have even seen the conclusion of my noble friend Lord Myners’s inquiry into the Royal Mail privatisation.

This amendment would give the Government the opportunity to reflect and to alter their stance. It is time to learn the lessons of east coast and legislate to allow a public sector operator to take on lines. It should be able to challenge the train operators in the public interest on a level playing field. That is the way to secure the best deal for passengers and for taxpayers. I hope that the Minister will accept this amendment so that we can move in that direction. I beg to move.

Photo of Lord Berkeley Lord Berkeley Labour

My Lords, it is worth reminding the House that we already have public sector operators in this country; we have lines owned by Dutch railways, French railways and German railways. They are not called that in this country—they have different names—but they are owned by those countries. On the continent, some of them operate effective, positive and well liked services; some of them are pretty awful. When you hear that Eurostar, which is still 40% owned by the British Government—although it is for sale—is allowed to bid for the east coast, but a company that is perhaps 100% owned by the British Government would not be allowed, it does seem a bit odd. I am sure that the Minister has an answer to that, but it seems to me that we are selling off our crown jewels in the shape of a piece of Eurostar and allowing the companies that buy them—perhaps from the continent, perhaps from elsewhere—to come back and provide a good service on certain occasions, but to compete a little unfairly against what our own companies might do if they existed.

Photo of Lord Snape Lord Snape Labour

My Lords, I have followed this debate over the years with some interest and have a number of questions arising from this amendment that I would like to put to the Minister; perhaps my noble friend on the Opposition Front Bench would also like to consider them. I have no interest to declare in this debate other than the fact that I worked for the railway industry, as did my father. The romantic view, perhaps, of British Rail that some of my colleagues occasionally expressed was one that neither my father nor I shared.

Working for a nationalised railway industry, as I did before being elected to the other place and before being appointed to this House, was a massively depressing experience. Year after year, the amount of finance available to the railway industry was the subject of debate. It was quite often cut back. Short-termism was the only way to describe the finances of BR. Although I am no great supporter of the form of privatisation that the Government have inflicted on us, at least it has provided some degree of long-term continuity so far as railway finances are concerned—a continuity that did not exist when the railways were nationalised. Indeed, some of those in my own party used to mock what they called the concept of Morrisonian nationalisation. They said that it was not nationalisation at all and that the railways were being run by the civil servants. That view was widely shared by many of us who worked in the industry at the time.

I speak to this amendment not from any romantic attachment to a nationalised railway but as a confused supporter of the railway industry who wonders how we got into this particular mess in the first place as far as franchising is concerned. I have said in previous debates that what we have at the present is neither one thing nor the other. It is certainly not franchising. If we look at the new trains that are in the process of being ordered and built, it appears that they were designed by civil servants. The Government or civil servants set the fares as far as companies are concerned. The Japanese build the trains and the rest of us ride around the country in what remains of the whole industry. It is a confused picture, to say the least, but I do not feel that the amendment would help to clarify matters particularly.

I have one or two questions I want to put specifically to the Minister about the current process, before we look at whether or not directly operated railways should be allowed to bid for franchises. How are these decisions actually taken? The whole thing is shrouded in mystery. Various companies, we understand, put forward bids for the franchises, and a process of evaluation takes place behind the scenes. Perhaps the Minister can tell us how this process is conducted and who is involved in it.

If this amendment were to be accepted, would it mean that one desk in the Department for Transport would put together a bid and its merits or otherwise would then be decided by another desk in the Department for Transport? I hope that I am second to none in my admiration of the legal profession, which does not go unrepresented in your Lordships’ House, but if the answer is yes, one can imagine a bonanza for lawyers in the event of an appeal. Indeed, the taxpayer has just paid heavily for the mess that was the west coast main line franchise. Perhaps the Minister could tell us in passing exactly how much that cost.

If the amendment were accepted, how much does she envisage it would cost the taxpayer to fund legal inquiries or complaints if DOR’s bid—an internal departmental bid in some ways—were accepted over and above a private sector bid: or, as my noble friend Lord Berkeley rightly reminded us, a bid from a nationalised railway industry in Germany, France or Holland, to name but three? I hesitate to sound critical, but one can imagine the legal profession rubbing its hands at the prospect of such a financial fracas taking place behind the scenes.

Allowing DOR to bid is not particularly revolutionary. In the debate on privatising the railway industry in 1993, your Lordships’ House accepted an amendment moved by that well known left-winger Lord Peyton of Yeovil to allow the British Railways Board, as it then was, to bid for franchises. That amendment was struck out in the other place and we have the system of privatisation, franchising or whatever you like to call it that we have now. I do not wish to add to the difficulties of the Minister if, as I suspect, she rejects this amendment, but some clarification is long overdue before she does so as to exactly how this process works at present and how it would be affected if the amendment were accepted.

Photo of Lord Palmer Lord Palmer Crossbench 4:15, 3 November 2014

My Lords, I fully support this amendment. The happiest moments of my week are when I get a kiss from all the onboard staff on the east coast line on Thursday lunchtime. It is incredibly important to realise that we have had two failed privatisations on the east coast line. Even at this last stage, very late in the day, I hope and pray the Government will not denationalise the east coast line. In my view—and I spend an enormous amount of my life on the east coast line—it would be absolutely mad, especially bearing in mind the two failed franchise bids.

Photo of Lord Judd Lord Judd Labour

My Lords, I spend a great deal of my time on the west coast line. All I can say is that when for one reason or other I use the east coast, I look at it with some envy. It is a very successful operation. I cannot believe that this is happening for any reason other than ideological commitment. That is a daft way to run an essential national public service. Pragmatism is the order of the day.

My noble friend Lord Berkeley referred to what is happening with Eurostar. I find it extraordinarily irresponsible that a railway system of that kind, which is so basic to the strength of our economy and well-being—the European market, whether we are in the Common Market or not, is so crucial to our economic success—should be handed away from public accountability and control. That is a basic lifeline. Of course this is happening in other industries as well. When I read of the Chinese coming in on certain strategic areas, I begin to wonder where on earth our economic policies tie up with our strategic analysis of the world in which we live.

The great thing to remember—my noble friend Lord Berkeley referred to this too—is that when public companies on the European mainland take the opportunity to provide public services in this country, they do so in a context in which in their own countries this is not seen as an ideological test of purity but a matter of pragmatism: what makes sense to be practically and pragmatically in the public sector and what makes sense in the private sector. In that context, they have been highly successful.

I personally favour—and I find myself cheered to realise that the majority of public opinion seems to be in that direction—a completely publicly owned rail system within this country because it is so crucial to our economy and every other matter. I also think it has a good deal to do with the morale of those working on it. If they feel they are actually providing a public service, and get a professional pride from providing a public service rather that simply providing profits, that has an impact and some significance.

If we are not to have that in the Bill—I hope we may have it at some stage—then it seems that this is a very effective damage limitation exercise. Nobody could accuse it of being doctrinaire politics because it accepts that the private sector will be there; it just says, is it not sensible? If the opportunity occurs, it makes pragmatic good sense and there is a rational way to undertake it, the public sector should be running part of the railway system. It would be a very good test of the comparative merits of both. I find the present situation ridiculous and I am alarmed that this kind of oversimplified thinking can dictate policy on something as vital to our economy as this.

Photo of Lord Bradshaw Lord Bradshaw Liberal Democrat

My Lords, I ask the Minister to consider what will happen if the bids received under the franchise competition actually give less money—or are worth less to the taxpayer—than the present east coast trains. If the bids are lower than that being achieved by the present operator, that really does sound like the economics of the madhouse. Those who are bidding have the sword of Damocles hanging over them, because open access operators are allowed access to the track at a much lower price than the franchised operator. It appears that the open access operators are massing for an attack on the east coast line.

Lastly, I recommend to the Minister an article in Passenger Transport, a rather specialist magazine. There is a good two-page article about customer service and its effect on staff morale and how the present franchising system does not allow operators to go strong on customer service. If they do so, they risk losing the next bid because customer service, among other things, cannot be put into a financial evaluation.

Photo of Lord Adonis Lord Adonis Shadow Spokesperson (Treasury)

Does the noble Lord agree that it is the height of nonsense to allow the state operators of France, the Netherlands and Germany to bid for franchises in this country, but not the existing public operator of the east coast line?

Photo of Lord Bradshaw Lord Bradshaw Liberal Democrat

It amazes me that we as a country permit so many foreigners to run our water industry, our gas industry and our electricity industry. They are vital basic services and I think it is rather foolish to leave them in the hands of foreign operators. We have seen what has happened with prices for water, for example, which have gone through the roof. I am sure that in the public sector, such increases would not have been allowed.

Photo of Lord Stoddart of Swindon Lord Stoddart of Swindon Independent Labour

My Lords, I have intervened on this Bill only once, and I probably will not do so again, but I support the amendment. I do so as someone who, first, has worked on the railways—a very long time ago, I have to say: in the late 1940s, when I worked for the Southern Railway. I became not expert but knowledgeable about lock and block signalling, which has now of course been overtaken by electronic signalling.

I also represented Swindon, which was a great railway town. In those days, I spent most of my time trying to save the railway workshops, which were highly efficient and had a good history, from being closed by British Rail. When we talk about public ownership, people appear to believe that we want to go back to British Rail. There are all sorts of ways in which you can introduce public ownership, which have been mentioned. As the noble Lord, Lord Bradshaw, and others have pointed out, we allow foreign nationalised industries to take over our industries, but we will not allow our public services to take them over.

I was very interested to listen to the Chancellor of the Exchequer talking about city regions. There is every reason why, if we are to have city regions, we should allow them, or conglomerates of city regions, to be able to bid for a rail franchise. After all, they are there to serve their electors and probably know better than any railway company what their electors want. Local government has a great history of providing public services. Our water services would not be what they are but for local government and the power given to it under the Local Government Act 1888.

That applies to transport as well. So many local authorities have a background in and knowledge of transport. Up and down the country they are providing high-quality local transport. These things really ought to be considered by the Government: there is room for public enterprise within the railways. The railways should be allowed to bid for franchises; it is not a question of undercutting but of providing decent services at reasonable cost and perhaps more cheaply than is provided by the private companies.

I was pleased to see this amendment on the Marshalled List. I well remember opposing, from those Benches—I do not know whether I was doing so from the Front Bench at the time—the privatisation of the railways as a result, of course, of a European directive, which said that the infrastructure should be separated from the operation of the services themselves. If this simple and easy amendment is put to the vote, I hope that the Minister will accept it. It does not commit the Government to anything other than considering giving public authorities the opportunity to think about franchises in what, after all, are our railway services.

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

My Lords, the temptation is to get into a major discussion about nationalisation of industries, but I shall try to resist and focus on railways and this amendment.

I spend a lot of my time out on the road, talking with the industry at rail conferences and also with users. Our railway is a great success. Virtually every event to which I go now deals with the challenge of a successful railway. Your Lordships will know many of the figures. We have doubled the number of passengers since privatisation. Even outside London over the past few months we have seen passenger numbers going up by something between 9% and 11%. People really want to use the railways. I talk with my continental colleagues who say that they do not have any idea how we do it. They ask how we manage to run so many trains, with such frequency, and engage with so many passengers and build the kind of ridership that we have. They certainly are not finding the same kind of thing where they are. There is a deep admiration of how we run our trains.

There is much more to do. We are catching up with at least of couple of generations of serious underinvestment in the railways, and not just in new lines anywhere north of London—that has been a major absence—as well as with upgrading the railways. We are dealing with a huge challenge at the same time that we have passengers coming on to the lines. To ignore the fact that the privatisation process and the franchises that have come out of that have played a huge part is frankly to fail to recognise what this has contributed.

In terms of the number of people who are being carried on the quantity of trains that we are running, and the range of services that we are offering, we have a model that has been delivering what our ancestors would only have dreamt of. But there is so much more ambition now to go way beyond that. We have done a lot of it by tapping into private sector know-how. We need even more of that as we go forward, because the challenges are increasing dramatically.

I would like to comment on the east coast line. I have great respect for all the people who have run the Directly Operated Railway. Their job is to come in and take over where there has been failure and to stabilise and deliver. They have done a fantastic job. However, I say to the noble Lord, Lord Bradshaw, that everyone must be conscious that part of the reason they have turned to the taxpayer is because we have not invested in the new equipment that is desperately needed on that line. New trains are coming and, as we are negotiating that, I do not want to say anything that could compromise that franchise. However, does the noble Lord think for one moment that we would come up with the figures that we have for that franchise if the franchising company had to pay for the new trains that are desperately needed on the east coast line?

The west coast line is in a different situation. One of the things about franchising is that franchises are not identical: every franchise is customised. If one looks at frequency of service, the newness of equipment and the whole series of features that shape each franchise, one will see that one franchise is in a position to return premiums whereas another will require subsidy. As I say, a franchise will vary depending on the relevant market conditions and whether its equipment and track have been upgraded. Franchises are not identical “cookie cutters”, as the Americans would say; they are customised. I say to the noble Lord, Lord Bradshaw, that I would be shocked if we were to run the east coast line at a standstill. The customers of that line need an increased service and far better trains. That has to be part of the future.

Photo of Lord Adonis Lord Adonis Shadow Spokesperson (Treasury) 4:30, 3 November 2014

The noble Baroness has to address the fundamental issue: why will she not allow a public operator even to bid against the private sector?

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

I will address that point. However, I want to set the context for the discussion because sometimes there is a great deal of confusion around it.

Photo of Lord Bradshaw Lord Bradshaw Liberal Democrat

I am sorry to interrupt the noble Baroness but the new rolling stock that is to be included in the east coast franchise is something that every bidder will have to take into account in the bid that they make. If passengers do not think that the rolling stock, which has been virtually designed in Marsham Street, is set at a reasonable price, that will indicate that a bad decision was made over here. There is no doubt whatever that if the present east coast line company runs the franchise with the new trains its returns will go up, but perhaps by only as much as the extra trains will cost. The extra trains are a burden. It is a fallacy to say that the present east coast operator would be worse than any other because the £600 million has not been invested in the track and many other operators have not invested in new rolling stock. They wait for the rolling stock companies to do it and consider that investment in the track and stations is a matter for Network Rail. Therefore, I think that the Minister’s argument is a bit faulty.

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

I am sorry but, as the noble Lord, Lord Bradshaw, will know, these things will be built into the charges. Of course, the addition of new equipment completely changes the profile as it has to be paid for and that money comes from only two places—the fare box or the taxpayer. As I say, that completely changes the profile and I think that many noble Lords will be aware of that reality.

As regards franchising, I agree that the demands we are placing on franchisees to upgrade equipment are far more significant than has been the case in the past. I think the noble Lord, Lord Bradshaw, said that customer service was not rolled into the franchise. I can tell him that it is now and that a significant number of issues concern customer service. We are building on that because the customer absolutely has to be at the centre of the railway industry. It is true that this has not been done historically and that franchises have been engineering-driven, but that is changing dramatically. The noble Lord will start to see the impact of that coming through with the new franchises.

We are also undertaking a complete technical upgrade as we move from an early 20th century railway to a fully 21st century railway. A digital electronic railway will make huge demands on franchise providers in all kinds of ways. This is a very exciting time. There was a question about British companies’ engagement in the railway. We have some of the most innovative companies now—I speak regularly to the supply chains—who are engaged in this cutting-edge research and cutting-edge supply, which will completely change the nature of the trains running on the track. We are coming much closer to engaging with aerospace technology and other areas. Do not think of the railways as an old, staid industry any more. It is a driving, cutting-edge industry, and that change has to come through for us to meet passengers’ demands. I could go on a great deal longer, but I will come back, because you can tell I am an enthusiast about getting these changes driven all the way through.

One of the questions is, “Why don’t we set up a company and let it bid against the others?”. Let us think about that process. If we are to have any other bidders, they have to know that there is a level playing field and that absolutely no advantage is given to the public bidder. This point was, I think, raised earlier. You may be able to set up enough Chinese walls for us to say that we believe this is being done with integrity, but we would have to convince every other bidder. Think about how the railways are financed. That makes it extremely difficult. Would we be providing government-sourced money to our own public company? Obviously, the private companies go out into the capital markets. Or would it be going out into the capital markets and therefore, in a sense, be as far distant from us as virtually any company that we already describe as being a franchisee?

We would have to be absolutely certain that our assumptions on profit, tax, cost and capital in no way advantaged the public body, or we would lose every other bidder on every bid. If we go back and think carefully about what we would have to set up, we would have to set up the company in order to do this. The salaries alone would, I think, be eye-watering.

Photo of Lord Adonis Lord Adonis Shadow Spokesperson (Treasury)

I hate to point this out to the noble Baroness, but the company already exists. It is called East Coast.

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

That company, as the noble Lord probably knows, will presumably be TUPE-ed—or not TUPE-ed, because it is a share sale. Essentially, that company will be absorbed into whatever is the new bidder on the east coast. Also, we have people running the company who can run it under its current circumstances. But take a look, if you are putting together a bidding group. The noble Lord will know how expensive it is to put together an effective bid team, particularly with those kinds of salaries. Let us, however, not just look at the salaries for putting together the kind of senior management you would need for an effective bid team, which are probably way beyond anything that we would consider paying. If we did, however, each bid would be a minimum of—what?—£10 million. That is probably about right for each individual bid. Fourteen franchises would be £140 million, without even the assurance of winning a single franchise. I simply point out that there are a lot of complexities in this matter that are not reasonably obvious. We had a system that was broken, we had two bids that did not work and we brought in a company that restored it. We are now going out with an effective franchise and we expect a very good bid. Two of the bidders are essentially British and one is not; we have a wide range.

I say to the noble Lord, Lord Snape, that it seems that there is still a romance with the old British Rail, without recognising many of its underlying problems and the limited advantages that could be available under another scenario.

There is one other issue that is often raised. It is said that if we ran one company, we would have a comparator against which to look at the others. That takes us back my original point, which is that every franchise is so different that you cannot carry over from one into the other. If you doubt me on that, look at the pattern of bidders: specific companies that feel they can specialise in the needs of particular franchises bid on those. We do not find every bidder coming in on every franchise. They pick and choose the areas where they have particular knowledge and skills that apply to that franchise. Franchises are not generic and should not be viewed that way, so the comparators essentially do not work.

Photo of Lord Snape Lord Snape Labour

I apologise for interrupting the Minister. Can she name any bidders for any franchises that are not British-owned bus companies or foreign-owned railways?

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

I will just pick up on a point about “foreign-owned”. There is obviously scope for any country to decide that it is going to own an industry. We have certainly done that in the past: we have owned airports, steel companies and railways; you can go on through the list. We made a decision, as a country, that that could be done better by the private sector, but it is still entirely open to any country that it wants to own a series of businesses.

We have made a decision that that is not where we need to put our money. I have plenty of other places where I would much rather put the £140 million that I have just described than on the franchise bids alone, never mind all the overhead costs that would go with them. As I have said, this business, even when it is done well, is also a high-risk, thinly margined business. If one were to decide to go in for buying shares or into commercial ventures with taxpayers’ money, I suggest that one could choose many other businesses with higher returns, or other ways to spend the money. I would put money into services for the public rather than into owning shares in a company that would go out and compete with the private sector. That is the argument that I am making in all this.

We have a successful railway. It is delivering for the British people. We intend to place more and more demands on it. We have private sector companies that can deliver what we need, provided that we negotiate effectively and hard. It seems to me that that is where our energy has to go: delivering for the British people rather than being caught up in an idea of who owns what.

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Transport), Shadow Spokesperson (Treasury)

My Lords, I am grateful to the Minister for her considered and lengthy reply. She will have noticed that she was acting alone in the House, as there was not a supporting voice anywhere—expect that my noble friend Lord Snape, with his considerable knowledge of railways, asked a few questions and expressed anxieties about not returning to the days of nationalised railways, when losses were made and low investment was the order of the day. There is nothing in the amendment or in any proposal conceivable to the Opposition which suggests that.

We have had the illustration of two private companies failing on the east coast main line, and one successful directly operated railway under public auspices producing considerable degrees of success which match the achievements of any on other lines. All we seek is for the Government to think about the possibility of that continuing. That is all that the amendment involves: recognition of ready and conspicuous success under the formula and an eagerness to see that it should persist. It is only dogma on the other side that leads them to indicate that there are so many complexities about running a private railway that one could not anticipate the expertise existing anywhere in any state-operated organisation—except, perhaps, in the German, French and Dutch states, which make successful bids and operate.

I merely ask the House to recognise that this is a modest amendment to keep the ball in play for the huge success in recent events on the railway. The Minister has addressed herself to every issue except that success, which we want to confer. Accordingly, I beg leave to test the opinion of the House.

Division on Amendment 2A

Contents 192; Not-Contents 229.

Amendment 2A disagreed.

Division number 1 Infrastructure Bill [HL] — Report (1st Day)

Aye: 190 Members of the House of Lords

No: 227 Members of the House of Lords

Aye: A-Z by last name


No: A-Z by last name


Clause 1: Appointment of strategic highways companies

Amendments 2B to 8 not moved.

Amendment 9

Moved by Lord Berkeley

9: After Clause 1, insert the following new Clause—

“Strategic highways company licences

(1) A licence under section 1 may include—

(a) such conditions (whether or not relating to the licence holder’s being responsible for assets under the authorisation of the licence) as appear to the grantor to be requisite or expedient having regard to the duties imposed by section 4; and

(b) conditions requiring the rendering to—of a payment on the grant of the licence, or payments during the currency of the licence, or both, of such amounts or amounts as may be determined by or under the licence.

(i) the Secretary of State,

(ii) the Office of Rail Regulation, or

(iii) any other person, or any other person of a class or description, specified in the licence, except a Minister of the Crown or Government department,

of a payment on the grant of the licence, or payments during the currency of the licence, or both, of such amounts or amounts as may be determined by or under the licence.

(2) Conditions included in a licence under subsection (1)(a)—

(a) may require the licence holder to enter into any agreement with any person for such purposes as may be specified in the conditions; and

(b) may include provision for determining the terms on which such agreements are to be entered into.

(3) Conditions included in a licence under subsection (1)(a) may require the licence holder—

(a) to comply with any requirements from time to time imposed by a qualified person with respect to such matters as are specified in the licence or are of a description so specified;

(b) except in so far as a qualified person consents to his doing or not doing them, not to do or to do such things as are specified in the licence or are of a description so specified;

(c) to refer for determination by a qualified person such questions arising under the licence as are specified in the licence or are of a description so specified;

(d) to refer for approval by a qualified person such things falling to be done under the licence as are specified in the licence or are of a description so specified;

(e) to furnish to a qualified person such documents or other information as he may require for the purpose of exercising any functions conferred or imposed on him under or by virtue of the licence;

(f) to furnish to the Secretary of State or the Office of Rail Regulation such documents or other information as he may require for the purpose of exercising the functions assigned or transferred to him or it under or by virtue of this Act.

(4) Conditions included in a licence may contain provision for the conditions to cease to have effect or be modified at such times, in such manner and in such circumstances as may be specified in or determined by or under the conditions; and any provision included by virtue of this subsection in a licence shall have effect in addition to the provision made by this Part with respect to the modification of the conditions of a licence.

(5) Subsections (2) and (4) are without prejudice to the generality of subsection (1)(a).

(6) Any reference in subsection (3) to a “qualified person” is a reference to—

(a) a person specified in the licence in question for the purpose in question, or

(b) a person of a description so specified,

and includes a reference to a person nominated for that purpose by such a person pursuant to the licence.

(7) Any sums received by the Secretary of State or the Office of Rail Regulation in consequence of the provisions of any condition of a licence shall be paid into the Consolidated Fund.

Photo of Lord Berkeley Lord Berkeley Labour 5:00, 3 November 2014

I shall be brief in speaking to this group of amendments because we have discussed at some length the licence for the strategic highways company. My Amendment 9 is a provision similar to what Network Rail now has. I was interested in the Minister’s comment that it is a licence for a commercial model and that the strategic highways company is not going to be commercial. I do not know whether Network Rail was ever commercial in her definition of the word, but it certainly is not now and I notice that the Government have not tried to change the licence to reflect any alteration. Perhaps she has a quick view on that. The draft licence that we received on 3 November was certainly an improvement on the previous version, for which I am very grateful.

The only other thing I wish to comment on in this group is my Amendment 17, which is to do with the duties of the strategic highways company. Whether they should go in a licence or in some other document, I do not know, but the draft licence from the Department for Transport is a licence to build roads, to take into account environmental concerns and to do it reasonably efficiently. Given experience of legislation over the years, there is a need to have in the Bill, for preference, or in a licence, if it must be that way, a wider role and wider responsibilities for this company to go cross-modal. That includes looking at road and rail—I declare an interest as chairman of the Rail Freight Group—passenger as well as freight, efficiencies, travel choices, developments in sustainable locations, as sustainability is very important in all this, and different modes to secure the economic, social and environmental gains jointly and severally. I do not think that these are in the draft licence at the moment. If the Minister would look at this again and see whether some—preferably all—these issues could go into a licence, I would be much happier that the strategic highways company was going to be part of a wider transport and environmental structure, taking into account the needs of customers, the environmental needs, roads, railways and developments in local transport. With that short introduction, I beg to move.

Photo of Lord Whitty Lord Whitty Labour

My Lords, I have Amendment 10 in this group. Again, as in the previous debate, my noble friend Lord Berkeley has put his finger on another lacuna in the Bill. Nowhere does the Bill spell out the functions and duties of the proposed strategic highways company. There is a whole schedule, 26 pages long, which largely consists of adding,

“or a strategic highways company”,

but does not actually say what that company should do. I find this extraordinary and not consistent with earlier circumstances in which we have set up public bodies or corporations to do a particular job, some of which are still doing it, where there was clarity in the legislation as to those functions. Those functions have to be economic, social and environmental these days. The Government should at least consider making sure, at later stages, that the Bill spells out the central duties of the companies. I hope that the Minister will take that away.

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

My Lords, again we have a wide range of amendments in this group. I shall focus on the issues that have been raised by the noble Lords, Lord Berkeley and Lord Whitty. We derive from these amendments that they see advantage in the company being issued with a licence: we covered that discussion a few minutes ago. I want to be clear that safety and other duties are being transferred to the company by virtue of its appointment as the highways authority for the strategic road network. These, together with essential environmental duties in existing legislation, will apply to the company. I also make it clear that the new company will be bound by the network management duty in the Traffic Management Act 2004, a duty which would be difficult to perform without co-operating with other local highways authorities.

Sustainable travel, though, is a different kettle of fish. It is an issue of wider transport strategy and policy, which is a matter for the Secretary of State to determine. However, many issues raised in these amendments that may not currently be covered in legislation to the extent proposed—for example, sustainable development, engaging communities or conducting research and development—will be the subject of binding statutory directions and guidance, which is the long title that we have given the licence issued to the company by the Secretary of State. I am sure that noble Lords will have looked at the recently published drafts.

I have the advantage of a marked-up copy, so I can see how extensively all those issues have now been written into the licence, in very significant detail. For example, on the environment the licence holder must:

“Seek to minimise carbon emissions and other greenhouse gases from its operations; adapt to operate its network in a changing climate; and, where relevant, assist the Government in meeting its wider greenhouse gas emission reduction targets and climate change commitments”.

We can see, in each area, that there is very substantial language. On safety, there is language focusing in great detail on these issues, so that they are deeply embedded, as there is, in other places, on collaboration. So it is there in the licence, or, as we are calling it now, the statutory directions and guidance. To me, it is crucial that they are in that document because, of all the documents, it would be the living document that most impacted the company on a regular basis. We want to make sure that those issues are to the fore and centre, right in the eyeline of the new strategic highways company. Directions issued by the Government have legal force and, together with the independent scrutiny of the monitor, which is there to enforce, will ensure that the company is accountable for what it does.

In listening to your Lordships, I understand that there would be a measure of comfort in echoing some of these key issues in the Bill. To me, it is important that they are in the licence because that is where they will drive behaviour and the enforcement capacity is genuinely there. I can see an argument for making sure that these issues are being given the attention that noble Lords wish, particularly for public reassurance. Two stand out—road safety and the environment—as well as co-operation. I can therefore make a commitment to your Lordships that I could come back before Third Reading with an amendment that would impose those provisions as high-level duties on the company in respect of these fundamental matters. As I say, my personal view is that they are where they need to be to have effect but, if it will provide reassurance to the public in general and your Lordships in particular that they are being sufficiently recognised, this is the way in which to tackle them with a great deal more detail, direction and energy within the content of the statutory directions. We could work a way to put those three high-level duties into the Bill.

In this group are Amendments 22 and 24, which relate to setting the road investment strategy and removing subsection (6), which may provide an element of confusion. However, given that it has not been raised, I will not pursue the matter but would be glad to explain to anyone why we think that those amendments miss the point.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

My noble friend has just said that the matter has not been raised. I have been looking through the licence and the Bill, and the noble Lord, Lord Whitty, made the point that there does not seem to be a positive statement that under the licence the strategic highways company must comply with the road investment strategy. Will she consider whether something of that sort could be specifically included? Such a provision may be there; maybe I have missed it, but I cannot see it in the licence.

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

At this point, I cannot remember the exact location of each item, but I will go back. However, we now have the monitor there to enforce the RIS or the strategic highways company’s compliance with it, as well as with the contents of the draft licence or statutory guidance.

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Transport), Shadow Spokesperson (Treasury)

I very much support the point made by the noble Lord, Lord Jenkin. The Minister is right; we have not spoken to Amendment 24, so I do not expect her to comment on it in great detail. However, I hope that she will indicate in her response to this group of amendments—it has been helpful thus far—that she will meet our point: that there is such great complexity about this interrelationship that things will not be rushed. It would be sad if, in pushing things hard to get the Bill on to the statute book and to be acted upon, we pre-empted in a rush what ought to be a long-term perspective on the road investment strategy. We expect the SHC very much to be involved in that new role.

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

I now have a reply, thanks to that helpful intervention and the time associated with it. Clause 3(5) places a duty on the strategic highways company and the Secretary of State to comply with the RIS. So we have that covered. Our concern about removing subsection (6) of Clause 3 is that, without it, the Secretary of State could actually pick and choose when to set a strategy. Frankly, we do not want to give that scope to the Secretary of State—and I am sure that your Lordships do not either.

Your Lordships also propose that the first strategy be set in accordance with the process we have set out in Schedule 2. We have been clear that this time around we are following a compressed timetable. Indeed, we all want to have a strategy in place for day 1 of the company’s operations—but a company that does not yet exist cannot participate in the way that Schedule 2 envisages. If we were to wait until the passage of the Act, we would be in the position of forcing the company to operate without a strategy, delaying much-needed investment in the network. I hope your Lordships will not press that amendment. This is just to deal with the fact that we are pushing ahead with the strategy that I expect your Lordships will see very shortly. However, the assent to the Bill and the creation of the company will come afterwards so it would not be possible the first time around to pursue the proposals in that amendment.

I hope, however, that noble Lords will accept government Amendments 12, 13 and 14. We are proposing several minor and technical amendments to Schedule 1, to ensure that the company has the appropriate powers and functions to carry out its role or to allow the continuation of existing arrangements to apply to the new company in the future. As discussed in Grand Committee, Amendment 12 allows the Parliamentary Ombudsman to consider complaints raised with the company, where a complainant has not been fully satisfied and may wish to refer the issue to independent adjudication.

Amendment 13 ensures that the company provides representations to Transport Focus when it investigates issues on behalf of coach or bus passengers. It also ensures that important highway functions linked to the Dartford crossing are transferred to the company. These include allowing it to regulate the use of large vehicles and vehicles carrying dangerous goods; to appoint traffic officers to work on the crossing; to recover stationary vehicles; to provide services to cyclists; and powers to carry out maintenance works affecting the Thames.

Finally, Amendment 14 ensures consistency between the Deregulation Bill and the Infrastructure Bill on permit schemes, allowing the company powers to make permit schemes and derive the benefit of simplified arrangements proposed in the Deregulation Bill for approval of permit schemes. I hope that your Lordships will approve the government amendments and feel comfortable in not pressing the other amendments in this group.

Photo of Lord Berkeley Lord Berkeley Labour 5:15, 3 November 2014

My Lords, I am grateful to the Minister for her response. We must recognise that she has moved a long way on these discussions in the last month or so and I very much welcome her commitment to come back at Third Reading with some of these issues—particularly those in my Amendment 17—in the Bill. As she says, some of the things are in the draft licence but, as many noble Lords have said, we would like to see it strengthened a little more. I hope that we will be pleased with the result at Third Reading in a week or two. In the meantime, I beg leave to withdraw the amendment.

Amendment 9 withdrawn.

Schedule 1: Strategic highways companies: consequential and supplemental amendments

Amendments 10 and 11 not moved.

Amendments 12 to 14

Moved by Baroness Kramer

12: Schedule 1, page 59, line 17, at end insert—

Parliamentary Commissioner Act 1967 (c. 13)

67A In Schedule 2 to the Parliamentary Commissioner Act 1967, at the appropriate place insert “A strategic highways company for the time being appointed under Part 1 of the Infrastructure Act 2014.””

13: Schedule 1, page 64, line 34, at end insert—

Transport Act 1985 (c. 67)

98A In section 112G of the Transport Act 1985 (representations following an investigation by the Passengers’ Council), in subsection (1), for paragraph (d) substitute—

“(d) a strategic highways company for the time being appointed under Part 1 of the Infrastructure Act 2014;”.

Dartford-Thurrock Crossing Act 1988 (c. 20)

98B In the Dartford-Thurrock Crossing Act 1988, after section 46 (interpretation) insert—

“46A Appointment of a strategic highways company

(1) This section applies in any period in which, by virtue of an appointment under section 1 of the Infrastructure Act 2014, a strategic highways company is the highway authority for the highways comprised in the tunnel crossing or the bridge.

(2) The reference to the Secretary of State in section 12(4) (crossing operator) is to be read as a reference to the strategic highways company.

(3) References to the Secretary of State in the following provisions are to be read as references to the strategic highways company—

(a) section 24(1)(a) and (b) (special traffic restrictions);

(b) section 27(1) and (2) (bicycles);

(c) section 37 (powers in relation to River Thames);

(d) section 38 (restriction on works on crossing);

(e) Schedule 7 (protective provisions), except—

(i) paragraph 2 of Part 1, and

(ii) paragraph 2 of Part 3.””

14: Schedule 1, page 70, line 8, leave out paragraphs 145 and 146

Amendments 12 to 14 agreed.

Clause 2: Areas and highways in an appointment

Amendment 15

Moved by Lord Whitty

15: Clause 2, page 2, line 25, at end insert—

“( ) The strategic highways company shall be responsible for the road safety performance of the network and the improvement of the network’s road infrastructure safety rating, which shall be overseen by the Office of Rail Regulation.”

Photo of Lord Whitty Lord Whitty Labour

My Lords, I shall speak also to the other amendments standing in my name in this group. In doing so, I need to declare a non-pecuniary interest as the chair of the Road Safety Foundation, which today—if I may make a quick advertisement—published a couple of reports on making road safety pay and the state of British roads. I commend them to the Minister, as I am sure that she will learn from them, and perhaps she would pass on my thanks to her colleague, Robert Goodwill, for attending their launch.

Although some good work on road safety is being done in the department and despite the slightly more encouraging words in response to the previous group of amendments, the problem is that safety does not feature in the Bill. However, the creation of a strategic highways company ought to provide an opportunity for a step change in road safety on the strategic network.

It is often said—and rightly so—that our motorways and most, although not all, of our trunk roads are very safe. In relative terms that is true and it is certainly true in terms of passenger miles. However, it is also true that, because of the intensity of traffic on the motorway system in particular and the severity of the incidents that occur, the number of accidents constitutes nearly 40% of all those killed or seriously injured on our roads. The foundation has calculated that that costs the economy of the country the equivalent of £0.7 billion a year in terms of Highways Agency roads alone. The number of dead and seriously injured on the roads exceeds the total number of people killed in all workplaces in the country in a year. That is a very important fact and it is one that the new highways company is going to have to face up to.

There are essentially four elements of road safety improvement: driver behaviour, vehicle design, traffic management and road design. The last two are clearly the responsibility of the strategic highways company, and so they should be. They also influence behaviour and can interact with the better design of cars. The Highways Agency needs to carry over into the new company the responsibilities that it already has for road safety but it needs to give them an additional boost by making it clear that one of the objectives of investing in roads—in design engineering, in traffic management, in the telemetrics that it deploys and in the design of protection barriers and so forth—needs to be maximising improvements in road safety. That is not clear in the Bill.

As I said, there is a big opportunity to make a step change here, but the step change and the need to make this clear also have a down side. If, as I have just said, a single, quasi-independent, separately incorporated company is responsible—on its premises and with its assets—for more deaths than every workplace in the land, there are issues of liability and litigation to be faced up to. In the Bill, the responsibility for that should clearly rest with the company but there needs to be some oversight of it. As with the ORR, which plays a very important role in enforcing rail safety, the monitor/regulator on the road side needs to enforce the safety requirements on the company.

It is also true that all other businesses where safety is an issue are covered by the Health and Safety at Work etc. Act, as my noble friend Lord Berkeley said earlier. If the new company is not a Crown company, the exemption does not apply. It is therefore even more crucial that the issue of safety is written and embedded in everything that the company does, and that is reflected in the Bill.

The Minister referred to high-level duties for the company, which she could perhaps at a later stage write into the Bill. That would include, in the context in which she made those remarks, references to safety. Not only does safety investment need to be seen as part of every investment decision, but the investments have to be right, because the rate of return on safety investment is much higher than that on other road improvements in many cases.

My amendments are fourfold. The key amendment, Amendment 15, would put the responsibility for safety clearly and squarely on the company. Amendment 20 would ensure that the standards being set by the Government for the company to perform to include road safety and the setting of effective benchmarks and targets. Amendment 23 would ensure that safety projects for investment in the road investment strategy are appraised on their own merits and not just subsumed into larger projects. My noble friend Lord Berkeley will speak to Amendment 44, which deals with the safety role of the regulator. Amendment 50, in my name, would include road safety in the functions explicitly to be transferred to the strategic highways company. That combination of amendments should achieve the high-level duties to which the Minister referred.

The Government have at least taken some note of the discussion on road safety issues in Committee. They have brought forward Amendment 19 in this group, which refers not to the central role of road safety in the operation of the company but to the investment strategy—not directly to the company itself. It states that the Secretary of State must,

“have regard, in particular, to the effect of the Strategy on … the environment, and … the safety of users of highways”.

The phrase “have regard to” is probably the meekest legislative obligation that could be written into the Bill. This is repeated in Part 5.9 of the draft licence, which states that the licence holder,

“must have due regard to the need to protect and improve the safety of the network as a whole”.

It then goes into a bit more detail, which sounds slightly firmer, but the phrase “have due regard to” makes it sound as if safety issues are not an objective of the strategy but a constraint on the strategy. It needs to be clearly written and embedded in the decision-making of the body all the way through. Some things that the Minister said and some things reflected in the draft licence suggest that that is the Government’s intention, but that needs to be clear in the Bill. Amendment 15, leaving aside the others, would make it clear so that none could gainsay it.

It would be sensible for the House and the Government to accept that road safety is a big issue in our strategic network and will continue to be so. There is an opportunity for the new company, with a coherent, consistent and inviolate road investment strategy, to give due priority to road safety in a much more substantial way. The phrase “have regard to” is very weak; my amendment is much stronger. If the Minister is not prepared to accept it, I hope that the House—or Parliament, at some stage, will accept that formulation. I beg to move.

Photo of Lord Berkeley Lord Berkeley Labour 5:30, 3 November 2014

My Lords, I support my noble friend on this group of amendments. I will briefly develop his theme by looking at the amendments in the group that relate to the monitor. I have proposed that the name of the Office of Rail Regulation should be changed, but that does not matter very much.

In Clause 9, the Government have introduced Amendments 41 and 43, both of which are welcome. They are a step forward from our discussions and I am certainly pleased to see them there. I have one or two amendments to those two amendments on the Marshalled List, which are complicated to go through and I am not going to attempt to go into any great detail now. Their purpose is twofold. One relates to safety and the other efficiency.

On the railways, one of the two tasks of the Office of Rail Regulation is to ensure that the network is operated as safely as possible under the Health and Safety at Work etc. Act, which is slightly modified for railways. As my noble friend Lord Whitty said, the approach of the amendments is to do the same for the roads. Let us not forget that, as my noble friend said, just under 2,000 people were killed on the roads in the past year compared with none on the railways—no passengers, very few rail workers and I am not sure about the road workers. Sadly, suicides are a separate issue. The difference between 2,000 on the roads and none on the railways indicates that the structure of the Health and Safety at Work etc. Act is working very well on the railways. In these amendments, I propose that a similar thing should be done on the roads, supervised by the Office of Rail Regulation.

The other relevant matter in this group is that, as we discussed briefly in Committee, the monitor should not only have the ability to check on the efficiency of the strategic highways company, but have powers of enforcement if it felt that the efficiency was not as it should be. Again, that is contained in the amendments. One thing worries me about the Government’s amendments. There is a constraint on the independence of the monitor, which is serious. The rail regulator is totally independent. He cannot be sacked except under extreme circumstances that we do not need to go into. But in Amendment 43 on general duties that the monitor should act under, the Government say that the principles are that:

“(b) regulatory activities should be targeted only at cases in which action is needed”.

Who decides when that takes place? Who decides which actions are needed? Surely it must be the regulator who decides. If that is the case, then proposed new subparagraph (b) in Amendment 43 is superfluous. If it is the Government, I suggest that they would be interfering in the independence of the regulator.

In Amendment 48, the guidance that the monitor would receive in proposed new subsection (2) includes:

“The Secretary of State and the Treasury, acting jointly, must give the Office”,

of Rail Regulation,

“guidance as to the circumstances in which the payment of a fine under [this] section … should be required”.

Whereas the ORR can fine Network Rail whenever it likes if it has due cause, when it comes to the strategic highways authority it has to ask the Treasury’s permission first. That sends completely the wrong message. It would be good if the Minister could agree to look at those two things and the general safety outline as to how it will be implemented under the Health and Safety at Work etc. Act as part of the discussions between now and Third Reading.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

My Lords, I have listened to the argument with interest and some incredulity. Seeking to compare the number of deaths on the railways with the number of deaths on the roads ignores major differences between the two forms of transport. The roads are essentially a matter for individual drivers and many accidents and deaths are caused by serious driver error. It can be because the vehicles have not been properly inspected. Older vehicles always have to have annual road testing. Of course, there are many other causes, such as the terrible bonfire that swept smoke right across the motorway and caused serious accidents. But none of those can conceivably be laid at the door of the highways authority.

The design of the roads, signposting, warning signs and a whole range of things are the responsibility of the highways authority and would be the responsibility of the strategic road company, but a great many of the issues for which the strategic highways authority would be made directly responsible—the noble Lord, Lord Whitty, talked about legal liability—cannot conceivably be laid at the door of that authority. The language that he has used in his various amendments simply does not draw the distinction between issues that are clearly the responsibility of other authorities, notably the whole question of licensing, inspection and testing of vehicles and the question of skills of drivers and so forth. I do not see how the highways authority could be made responsible for all that.

I studied the noble Lord’s amendment and listened to his eloquent speech in which he made it clear that he has a very real interest, although non-pecuniary, in road safety, but it is overstepping the mark to try to lay the liability for that sort of thing at the doors of the strategic highways authority. I will listen to what my noble friend says having studied her amendments on this issue with interest. For the moment, I am not persuaded on this occasion by the noble Lord, Lord Whitty.

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Transport), Shadow Spokesperson (Treasury)

My Lords, I pay tribute to the Government for having listened carefully to what was said in Committee, where pressure was exerted from this side of the House for greater clarity of the functions of the highway company. We are grateful for the progress that has been made in the indications from the Government that they accept some of these arguments. But Amendment 15, to which the Opposition are also committed, does not offend in any way in the manner that the noble Lord, Lord Jenkin, indicated. What it says is that the highways company shall be responsible for the road safety performance of the network. We are talking about the strategic network and it is essential that we recognise that we want enhanced performance over road safety, because in recent years there have been anxieties about the decline in safety for our fellow citizens on the roads.

The noble Lord, Lord Jenkin, said that the same criteria as for railways were being applied. What is indicated in the amendment is that the Office of Rail Regulation will be concerned with the monitoring role, and that is where the overlap occurs. It is not contended on this side of the House, as he will recognise, that there could be any anticipation that the same degree of security could be achieved on roads as on a carefully regulated railway. We are very proud in this country of the excellent safety figures of the railway network, leaving aside level crossings, which, as we know, are a perennial problem for the railway. Regarding roads, it is clear that we want all the factors—a fact which the noble Lord, Lord Jenkin, enumerated—and we want enhanced performance in those areas. Clearly the strategic highways company has a very important role to play. That is why we support Amendment 15.

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

My Lords, on the previous grouping, I was pleased to make it clear that the Government have taken on board the thoughts of this House in putting, basically, the duties around road safety, the environment and co-operation in the Bill. While safety is obviously always at the forefront of our minds, it now seems that given the language in the statutory directions and guidance and what will go in the Bill, we have both belt and braces. If we were to follow the amendments recommended by the noble Lords, Lord Whitty and Lord Berkeley, we would put on constraints which, frankly, would remove flexibility on how to approach these issues and make the strategic highways company somehow responsible for issues that it could not possibly control. The noble Lord, Lord Berkeley, was eloquent in describing that.

One of the principles of the entire roads reform programme is to give the company operational freedom to achieve its objectives. Amendment 15 runs entirely counter to that, and could lock out potential benefits by forcing the company to focus on an important but narrow aspect of road safety; namely, road infrastructure safety ratings. That is a restraint on effective management for the purposes of safety, not a support to it. Both those issues—the constraints that this would impose and the fact that a significant number of these issues are simply not under the control of the SHC—seem to argue for the withdrawal of the amendment and for the use of the belt and braces which we have already agreed will be in place. There is no need to seek a legal requirement to appraise different types of intervention on the basis that some of the amendments propose, because they are already in the Bill. The company will continue to use the department’s transport appraisal guidance, which ensures that interventions are considered on a consistent and proportionate basis.

I come now to the duties of the monitor. In Committee, and just now, your Lordships were persuasive about the need to help improve road safety and the environment. As noble Lords know, we have said that we will move an amendment on that, and your Lordships have been able to see the much stronger and detailed language now in the guidance and direction. Therefore, this amendment should be seen as not only requiring the Secretary of State to have regard to safety and the environment when setting or varying the strategy, but also indirectly generating objectives on those areas that the company would be bound to pursue—thus subject to the independent scrutiny of the watchdog and the monitor.

In Committee, your Lordships made it very clear that consultation over and above the work carried out by the company through the route strategies and the engagement that the Government will carry out as they set or vary the strategy is needed. To provide reassurance that we will engage with the public and shareholders, we are happy to include this requirement in the Bill as well. Government Amendments 28 to 31, if accepted, would add this requirement and some of the necessary consequential changes.

New powers for the monitor contained in other amendments, which we will discuss later—I believe reference was made to Amendment 48 in a later group—would place the ORR in a different role in relation to the new company. In our original drafts of the Bill it was an advisory body; it is now able to act in the manner of an independent regulator. A regulator has formal duties, which it must work within when carrying out its activities. The ORR’s role on the roads demands the same approach. The ORR itself has asked for a set of duties to be included in the Bill, so it has a firm basis from which to act.

The duties in Amendment 43 are designed to ensure that the monitor is always mindful of the need to encourage better performance and greater efficiency. I must stress that performance covers all aspects of the company’s performance. It includes everything from the company’s ability to meet its environmental obligations to its effectiveness in ensuring network safety, as set out in the statutory directions and guidance and in the road investment strategy. The two themes of performance and efficiency will enhance the effectiveness of the company.

However, they must not be pursued without reference to wider goals. For that reason, we have included six factors that must be regarded when considering how to drive performance and efficiency. These are: the interests of users of the highways; their safety; the effect on the economy; the effect on the environment; the long-term health of the network; and the principles of better regulation—namely, to regulate only where action is needed and in a way that is transparent, accountable, proportionate and consistent. This will ensure that the views and actions of the monitor remain balanced, and continue to reflect the need for our roads to work as part of a wider society.

I move to Amendments 44 to 47. I thank the noble Lord, Lord Berkeley, for his amendments, which will change our proposed Amendment 43. I believe we are very much in agreement about what we want the monitor to achieve and the only difference between us is over a mechanism for achieving this. I agree wholeheartedly on the importance of considering the safety of those who work on the network. This is an important priority for the new company, and rightly so. However, it is also covered by existing health and safety laws, which the noble Lord refers to in his own amendment, and which the company will be required to comply with. We do not think it is appropriate for the monitor to take over the responsibilities of the experts at the Health and Safety Executive in this area. We are also reassured that the monitor, in going about its work, will need to take full account of the company’s statutory responsibilities, including on health and safety.

Similarly, the noble Lord suggests that the regulator should be responsible for regulatory activities that maximise efficiencies in the design, construction and operation of our strategic roads. Our amendments already ensure that the monitor is under a duty to consider the performance and efficiency of the strategic highways company. The words of subsection (3) are intended to cover the better regulation agenda, and to match those used in the Civil Aviation Act 2012. Given that we believe the points raised by the amendments are actually covered elsewhere—using a slightly different approach but with the same goals in mind—I ask that we retain the existing wording, which gives us consistency with other legislation.

The noble Lord and I part company, however, over Amendment 45, which suggests removing the monitor’s duty to focus its attention on the cases where action is needed. This appears to us common sense, and we want the monitor to have confidence that it can act in this way.

Given all the issues that I have raised and the agreement we have that additional duties will go into the Bill, giving us both belt and braces, particularly around safety, environment and co-operation, I very much hope that the Government’s amendments will be accepted and that your Lordships will feel comfortable not pressing the other amendments in the group.

Photo of Lord Whitty Lord Whitty Labour 5:45, 3 November 2014

My Lords, I shall not reply on the wider issues of the role of the monitor, in which debate on this group has become engaged. I will concentrate simply on the issue of road safety. The Minister, who I thought in her response to the previous group was moving in my direction, has greatly disappointed me in her reply to this one. That belies the good work that her department is doing and has done for many years about road safety and the opportunity that the new company would have to improve it.

I am also sorry that I am falling out with the noble Lord, Lord Jenkin, on the issue of liability. The point I am making is that in certain aspects of road safety—design of roads, traffic management, use of telemetrics and speed controls, information and signing—there is a vital role to be played by the highways authorities, in particular one with the resources, level of responsibility and intensity of traffic which the strategic highways company will have.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

I do not disagree with the single word of what the noble Lord has just said about what should be the responsibilities of the strategic highways company. My fear earlier was that he was extending it to matters which are really the responsibility of other bodies.

Photo of Lord Whitty Lord Whitty Labour

My Lords, in all areas of safety and liability, there may be contributions by many factors. Frequently there is contribution to negligence by people in other areas. That may apply to drivers as well, but there are some firm responsibilities on those who are responsible for the design, management and control of the roads. That area of improvement in road safety has been the least developed until relatively recently. The improvements which have been made have been made largely as a result of general improvements to the road rather than by a focus on road safety improvements, except on a few issues.

As I said, the creation of the company gives us the opportunity of a step change in delivery of road safety on our strategic network. That means giving as clear a signal as possible that this is indeed, to use the Minister’s words earlier, a high duty on the new company. That needs to be expressed unambiguously in the Bill. The words “have due regard to” safety are neither belt nor braces. It is not an objective of the company; nor is it embedding and inculcating that through everything that the company does. If we want to do that, we need to write safety large in the responsibility of the company. If the Minister goes back to her previous remarks about looking at higher duties to be written into the Bill, leaving aside all the other amendments in the group, her adoption of my Amendment 15 would achieve just that. As she has made it clear that she is not prepared to accept it, to try to ensure that road safety is a major function of the new organisation, I need to test the opinion of the House.

Division on Amendment 15

Contents 165; Not-Contents 235.

Amendment 15 disagreed.

Division number 2 Infrastructure Bill [HL] — Report (1st Day)

Aye: 163 Members of the House of Lords

No: 233 Members of the House of Lords

Aye: A-Z by last name


No: A-Z by last name


Amendment 16

Moved by Lord Whitty

16: Clause 2, page 2, line 25, at end insert—

“( ) Before establishing a strategic highways company, the Secretary of State must consult all highways authorities in the area specified under subsection (1)(a) responsible for roads in that area other than the roads specified under subsection (1)(b), and this consultation must cover—

(a) the structure of the new organisation,

(b) the appointment of at least one non-executive director representing those authorities to the board of the new company, and

(c) any other matter which the Secretary of State deems relevant.”

Photo of Lord Whitty Lord Whitty Labour 6:07, 3 November 2014

My Lords, Amendment 16 is about the relationship between the new company and the other highways authorities—essentially the local authorities. It is clear that for the effective operation of the new strategic highways company there will need to be close co-operation with those authorities. I should declare an interest, again non-pecuniary, as a vice-president of the LGA, which supports this amendment. Highways authorities feel that they have not been effectively consulted hitherto. Although they do not oppose the Government’s proposal in the Bill, they consider that Ministers should discuss with them how the company will operate as there will need to be co-operation between the strategic highways company and highways authorities on traffic management and new road schemes. The structure of the new organisation needs to be broadly agreed. There also needs to be some representation on the board of the new structure of those authorities that manage and oversee the other roads in England.

The amendment provides for consultation on the structure of the new company and the appointment of a local authority non-executive director on the board. That would be the minimum that we would need to see for a good and effective co-operative arrangement between the new company and the other highways and traffic authorities. I hope that the Government will accept the amendment. I beg to move.

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Transport), Shadow Spokesperson (Treasury)

My Lords, I should like to speak briefly in support of this amendment, to which I have lent my name. The Government list the “major challenges” facing the strategic road network: stop-start funding, underinvestment, inefficiencies and growing pressure from congestion. If these challenges are so severe, why are more than 90% of our people fairly happy with the condition of the strategic road network and only 30% happy with the condition of local roads?

On the evidence that the DfT is citing to justify its obsession with strategic roads, figure 1 in the summary of reform states that spending on major projects fell sharply in the 1990s and has remained low since, while overall traffic has risen. The figure completely ignores the previous Labour Government’s investment in local roads and tackling traffic in our towns and cities. That is where congestion is obviously most frequently experienced. We spent more than £4.5 billion annually on local roads between 2005 and 2010. That was cut by one-third for 2011-12 by the present coalition Administration. If the DfT wants to talk only about strategic roads, we suggest that it compares the spending on strategic roads with the amount of traffic on them.

Ministers continue to stress that their reforms will deliver a world-class roads network, but throughout the extensive documents that they have published there remains scant mention of the major challenges for local roads, which face a pothole epidemic. Any Member of Parliament will tell you that the transport problem in his area is bound to be represented by potholes in roads. The potholes do not just cause damage to vehicles but affect the pace at which they can travel.

The Government claim that they will deliver more reliable journeys, reduced congestion and less delay and disruption. However, they cannot be listening to local government, which is warning that the new two-tier road system threatens to speed up vehicles travelling significant distances but will lead to greater delays on local roads. I have no doubt that the Minister will say that the department has committed unprecedented funding for local road maintenance—£9.8 billion over the next Parliament and £975 million a year to councils. However, both those figures represent a real decline and more than one-third of the money will be topsliced for the Challenge Fund dreamt up by the department, which means that local authorities spend time and, of course, scarce money on bidding rather than actually fixing the roads.

There is no point in building a world-class strategic road network if 98% of local roads that people use every day are clogged with congestion or are falling apart. That is why this amendment seeks to ensure that the Bill gets the strategic and local road networks working better together and makes a real and tangible difference to tackling congestion. That is why we want to see local representation on the strategic highways company board, which will ensure that the company delivers and complies with its obligations. Local authorities must be actively involved in the creation of the strategic road network.

This issue is of the greatest importance. I understand entirely, of course, why the Bill concentrates on the strategic network but it must not ignore the needs of local road networks. They have to be recognised in the Bill as partners in ensuring that journeys are carried out in the most effective way.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative 6:15, 3 November 2014

My Lords, I have a feeling that the noble Lords who have spoken have not taken account of what is in the draft licence document. Paragraph 5.11, which is headed “Cooperation”, states that,

“the Licence holder must cooperate with other persons or organisations in order to … Take account of local needs, priorities and plans in planning for the operation, maintenance and long-term development of the network”.

Sub-paragraph (d) states:

“Provide reasonable support to local authorities in their planning and the management of their own networks”.

This raises the question of what should be in the Bill and what can be left to the guidance and direction in the licence document. My feeling is that if the final licence document contains those provisions, that should go a very long way to satisfy the objectives which the two noble Lords opposite have put before the House. No doubt my noble friend on the Front Bench will confirm that that is the Government’s view.

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

My Lords, I am delighted that the noble Lord, Lord Davies, appreciates that we are pouring unprecedented amounts of money into the local road network and that a significant amount of it is allocated on a competitive basis, as it were, to make sure that the projects which yield the most improvements get priority. I thank my noble friend Lord Jenkin for making the case so clearly as that enables me to shorten my remarks.

The noble Lords, Lord Whitty and Lord Davies, have proposed amendments—the amendments also stand in the name of the noble Lord, Lord McKenzie—which suggest that local highways authorities are involved with setting up the strategic highways company, that these bodies are consulted when setting the road investment strategy, and that the strategy accounts for potential impacts on local and other networks. I fully accept that these are well intentioned amendments but I contend that they are not needed.

Let me be clear: we want the company to work closely with other highway and traffic authorities to achieve the objectives determined by the Secretary of State. Without close co-operation, both the company and the local highways authorities would not be able to deliver their network management duty as set out in the Traffic Management Act 2004. However, it is important to recognise that the company will not be responsible for the management of local authority roads, and local authorities would be furious if it attempted to do so.

We consulted publicly in October 2013 on the proposals to create the new company and the future governance arrangements, taking into account the views of local highway authorities in our response. That response, published on 30 April this year, formed the foundation of the proposed legislation. It is hard to see what value an additional consultation would bring.

With regard to board representation, we are creating a limited company with a fully functioning board to guide and hold the company’s executive to account. Therefore, involving local authorities in the detailed running of the company would undermine that effective management and oversight of the company and the strengthened arrangements that we intend to put in place.

Our analysis of investment proposals for the strategy will necessarily account for overall transport impacts due to the close links between the strategic road network and other networks, including local highways. Requiring the strategy to include a detailed analysis of the impact on the condition or overall funding arrangements for local roads, or other networks, is unnecessary. Much of this work is already required, while some of the more detailed implications would be a burden and risk causing confusion by making central government take action on issues which are within the purview of local government to deal with. We are very conscious of devolution issues in this regard. Requiring us to consider the condition of the strategic road network as part of setting the strategy is unnecessary because we have considered the state of the network. We reached the decision to invest more money in maintenance and renewals at the last spending round

I turn to the issue of consultation. Given that we have tabled a set of amendments which require consultation to take place as part of setting and varying the strategy, and combined with the requirements on co-operation and the fact that the company would be fully engaged with local highways authorities, there is no need to specify that the company must consult them. It is already embedded.

I hope I have been clear. I have reflected on the amendments about the involvement of local highways authorities in the running of the company and the road investment strategy. I believe that the objectives of the amendments are achieved already within the Bill and the accompanying documents. I hope very much that the noble Lord, Lord Whitty, will feel able to withdraw his amendment.

Photo of Lord Whitty Lord Whitty Labour

My Lords, I think, whatever the realities and wherever they are reflected, they are not reflected in the Bill. The local authorities themselves have drawn this to our attention and no doubt to the Government’s attention, which is why they are supporting most of these amendments. The reality is that most journeys on the strategic network start and finish on the local network. Any new schemes, any maintenance, any accidents, any new traffic management systems on the strategic network have an impact on the local network.

For those reasons, very good co-operation is needed. I am glad that there is a reference, to which the noble Lord, Lord Jenkin, referred, in the draft licence. I am glad that the Minister recognises the need for such co-operation. I would, of course, be more impressed by its being in the licence, if the licence was reflected in the main part of the Bill, and therefore had some at least indirect legislative recognition. The key issue here is co-operation and understanding between the new company and the local highways authorities.

In other pieces of legislation a duty to co-operate has appeared in the Bill, not in any subordinate legislation or subordinate documents. I think there is a strong case for that to be included here. On the structure of the company, I understand the Government’s reluctance to specify who should be on the board, but if the board of the new company does not include somebody who understands the role of local highways authorities, whether or not that is prescribed in the legislation—

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

My Lords, I will not be able to speak again on this amendment. I may not have been very clear but when I talked about the issues I would bring back to put as duties, co-operation was one of the three, along with environment and road safety.

Photo of Lord Whitty Lord Whitty Labour

My Lords, I appreciate that aspect of it. I hope, therefore, that what the noble Baroness comes forward with at a later stage meets the general requirement of co-operation. I was commenting also on the structure of the company, and I understand the reluctance to specify that in the Bill, but some engagement between the governance of the new company and local highways authorities is needed, and that objective was reflected in this amendment.

I sincerely hope that the Government’s amendment on co-operation does the job to the satisfaction of the local highways authorities and that the reality is that the relationship between the new company and the local highways authorities is better than the relationship of the Highways Agency has sometimes been and indeed better than what the department’s relationship with local authorities has sometimes been, despite the amount of money, to which both Front Benches have referred, which is now going to local highway schemes.

I will withdraw this amendment at this stage and look forward to the Government’s proposition later. I beg leave to withdraw the amendment.

Amendment 16 withdrawn.

Amendment 17 not moved.

Clause 3: Road Investment Strategy

Amendment 18 not moved.

Amendment 19

Moved by Baroness Kramer

19: Clause 3, page 3, line 12, at end insert—

“(4A) In setting or varying a Road Investment Strategy, the Secretary of State must have regard, in particular, to the effect of the Strategy on—

(a) the environment, and

(b) the safety of users of highways.”

Amendment 19 agreed.

Amendments 20 to 23 not moved.

Schedule 2: Road Investment Strategy: Procedure

Amendment 24 not moved.

Amendment 25

Moved by Lord Berkeley

25: Schedule 2, page 71, line 19, at end insert—

“Formation of route strategies: consultation and co-operation

1AA (1) The strategic highways company shall produce route strategies for all highways under its control (“specified highways”) and shall ensure such strategies remain up to date.

(2) In deciding how to divide up specified highways into route strategies, the strategic highways company shall have due regard to local government boundaries and travel to work areas.

(3) Route strategies shall consider—

(a) other transport modes, including railways and port facilities, that are served by specified highways or run parallel to them;

(b) the interaction between specified highways and other highways;

(c) opportunities to secure the expeditious movement of people and freight;

(d) opportunities to reduce environmental impacts.

(4) The strategic highways company must—

(a) carry out such consultation, and arrange for such publicity, as the strategic highways company thinks appropriate in relation to a route strategy;

(b) consult such persons, and such descriptions of persons, as may be prescribed;

(c) have regard to the responses to the consultation and publicity in deciding whether to proceed with a route strategy.

(5) In setting or varying a roads investment strategy, the Secretary of State shall have due regard to route strategies.

(6) The Secretary of State may make regulations about route strategies.”

Photo of Lord Berkeley Lord Berkeley Labour

I speak briefly on this amendment. We are in Schedule 2, Part 1 now. It suggests that there need to be route strategies before the Secretary of State can really put forward investment strategies. We have discussed this before—in route strategies it seeks to ensure full consultation. The Minister has been very forthright in her commitment to consultation, which of course I welcome very much. It is, however, another way of saying how important it is, when one is considering route strategies, to look at all different modes, including not only the local government travel to work areas, how to move people around and ensure consultation.

The proposal is a very useful precursor to an investment strategy, and I hope it will give the impression outside, as it is designed to, that transport, surface transport, road, rail and other means of transport are being looked at in the round rather than just having an investment strategy in which we are investing in roads willy-nilly. I beg to move.

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

My Lords, I will speak briefly to the amendment. We recognise that what the noble Lord is seeking to do is to remove some ambiguity, but we are not comfortable with his amendment because we think it would prevent the company from adapting the route strategy process to meet changing needs and circumstances. That would make it somewhat undesirable. We recognise what is driving this. It seems that it is being driven by a desire for greater clarity, so I am happy to commit to him to include a requirement in the final version of the statutory directions and guidance along the lines that the company will agree the process with the Secretary of State and publish it. That should provide the combination we are seeking, both of clarity and of flexibility. I hope that on that basis the noble Lord will feel able to withdraw the amendment.

Photo of Lord Berkeley Lord Berkeley Labour

I am grateful to the Minister for that short reply. I shall read it with interest, but it sounds good. On that basis, I beg leave to withdraw the amendment.

Amendment 25 withdrawn.

Amendments 26 and 27 not moved.

Amendments 28 to 31

Moved by Baroness Kramer

28: Schedule 2, page 72, line 11, at end insert—

“(1A) The Secretary of State may only publish proposals under sub-paragraph (1) if satisfied that appropriate consultation has taken place.”

29: Schedule 2, page 72, line 21, at end insert—

“(1A) The Secretary of State may only publish proposals under sub-paragraph (1)(b) if satisfied that appropriate consultation has taken place.”

30: Schedule 2, page 72, line 28, leave out “Subject to sub-paragraph (3),”

31: Schedule 2, page 72, line 31, leave out sub-paragraph (3)

Amendments 28 to 31 agreed.

Clause 5: Fines

Amendment 32

Moved by Baroness Kramer

32: Clause 5, leave out Clause 5

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

My Lords, in Committee my noble friend Lord Bradshaw raised the question of the power to fine the new company. As originally proposed, this power would have belonged to the Secretary of State. Under our proposed removal of Clause 5 and its replacement following Clause 9—I draw the attention of the noble Lord, Lord Whitty, to that, because I know there can be confusion—which will be covered by Amendment 41, this power will be transferred to the independent monitor.

We have consistently stressed the importance of independent accountability to the strength of the new model for managing highways. The creation of the watchdog and monitor creates a powerful team that can scrutinise performance of the company and can represent the interests both of its users and of wider taxpayers. I am not aware of any country in the world which operates an equivalent model of accountability. This will give England’s road users a powerful voice.

On reflection, however, I can also see the value of going further. We have designed a system that ensures that the Secretary of State is well advised when planning the future of the network and judging the quality of its current management. By introducing this amendment, we will also give the roads monitor the power to directly influence the behaviour of the company, in the manner of a true regulator. The monitor will be given two statutory powers under this system. It will have the power to issue an improvement notice, which will require the company to take specific action to correct a failure in its performance. It will also have the power to issue fines, should matters become particularly serious. This matches the regime in rail, and will make the new highways company accountable in the same way as Network Rail is at present.

It will not be a blunt tool. The ORR has assured me that such powers are used sensitively, not to mechanically punish bad performance but to drive more effective action by encouraging change. A range of non-statutory incentives and measures will exist short of formal improvement notices and fines, and these formal instructions will be available once the softer measures are exhausted. However, it will mean that the company will not be able to ignore the recommendations of the monitor and will never be able to let poor performance or inefficiency become ingrained. In issuing fines, it is important that any fines levied are proportionate and do not represent a risk to the delivery of the road investment strategy. Guidance from the Secretary of State and the Treasury, set out in Amendment 48, will ensure this.

As part of this new arrangement, it is necessary for the Secretary of State to be able to issue wider guidance on how the monitor carries out its responsibilities. The Secretary of State and the Treasury, acting jointly, will also be required to issue guidance to the monitor on the application of powers to fine. In the short term, this will help the new regulator to bed in and adapt to its unique remit. Over time, it will allow the Government to clarify how policy is developing and to ensure that key elements are properly represented. However, I stress that this is not a power for the Secretary of State to overrule the monitor, just as it is not in other sectors, and it cannot be used in such a way. These measures will allow the monitor to act in the manner of an independent regulator, will result in clearer, stronger accountability, and will lead to better outcomes across the network.

Photo of Lord Berkeley Lord Berkeley Labour 6:30, 3 November 2014

My Lords, I will speak to one or two of the other amendments in the group, and hope that the Minister will be able to respond under the slightly odd arrangement we have.

In Clause 8, on my Amendment 33A, the Government have moved a long way in changing the name and activities of the Rail Passengers Council. The point of the amendment is to emphasise the need for them to consider not just the users of the network, but also those who do not currently use it or who cross over the network. In other words, they must look at the people who are not using it, at the potential for modal shift and at reducing the need for travel. They must look at the thing in the round before they come up with their excellent data, which I am sure they will do on the roads as they currently do for railways and, of course, buses.

Moving quickly, I raised a question about Amendment 48 in a previous grouping—I got it wrong—and the Secretary of State giving the Office of the Rail Regulator guidance as to the circumstances in which payments were defined. I hear what the Minister said. My question is whether that is the same guidance and instruction that the ORR currently has with the railways. If not, why not?

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Transport), Shadow Spokesperson (Treasury)

My Lords, I speak to Amendment 33, which asks the watchdog to look after the interests of cyclists and pedestrians. As we know, and as the department has recognised, a strategic road network can often be a barrier for pedestrians and cyclists. That means that there are many potential users of the network who may wish to use it to cycle to work but currently cannot.

The legislation would not allow Passenger Focus to consider their views. The chief executive, Anthony Smith, has been quoted as making clear his view that, given the legislation, Passenger Focus could focus only on actual users of the strategic network along with, perhaps, a second tier of fleet managers marshalling its use. While he quite understood the concerns around the remit, any change must be a matter for government and the legislative process. This is therefore our chance to effect that change, against a background in which the Government continue to respond to the increasing pressure for the use of cycles by saying that they are very much in favour of such growth.

Of course, the greatest deterrent to cycle use in our towns and cities and on connecting roads of any significance is danger. Because we do not set out to protect cyclists adequately, our present figures are dreadful in comparison to many other European countries. In the UK, 2% of journeys are made by bike, compared with 10% in Austria, 19% in Denmark and 27% in the Netherlands. Some 22% of all journeys in the UK are of less than a mile, but a fifth of these are in a car. Some people are, of course, obliged to use a car for a journey of less than a mile. However, the great deterrent to using the far more efficient and effective cycle is that people consider cycling to be dangerous.

The Government promised to support cycling but, of course, Cycling England, the pressure group for cyclists, was shut down; the body which co-ordinated policy and action on cycling, which had a £60 million annual budget, was shut down; and the Government also abandoned the cycling towns and cities initiative which we, as the previous Administration, had initiated—and it was delivering results. The proportion of people cycling at least once a month in England dropped from 15.3% to 14.7% in the year to October 2013. No one is going to say that that is a dramatic drop, but it is movement in the wrong direction when there are calls on all sides, to which the Government subscribe, for cycling to be encouraged. There was a decline in all regions in the United Kingdom.

I am therefore seeking with this amendment for the Government, who alone can take the legislative initiative on this—that is quite clear—to give a voice to cyclists and pedestrians, and to ensure that we make some progress on the aim of improving the use of cycling, and even walking over short distances. In order to achieve that, certainly with cycling, we must overcome the anxiety of the public that cycling on so many of our roads is just not safe enough.

Photo of Baroness Kramer Baroness Kramer Minister of State (Department for Transport)

My Lords, I begin by addressing Amendment 49, which relates back to my original amendments on changing the powers to fine. As I said earlier, the ability to provide overarching governance is a necessary part of a regime in which the ORR is undertaking independent enforcement activity. This is especially true on fines. We want fines to be independent and fair, but we also want to make certain that they do not jeopardise the ability of the company to deliver what it has promised under the RIS. In future, it may also be helpful to have a mechanism to clarify the rules around fines. In the Railways Act these are subject to very detailed instructions, and without the subsection that this amendment removes there would be no way to do this if it were judged necessary.

I now turn to the watchdog. I am aware that the House recognises the value of that role. I am keen that we keep sight of what is important about the creation of the watchdog: the establishment of an organisation that will represent the interests of road users, whose voice must be listened to by those in government. That is something that will make the roads operator publicly accountable in a way that it never has been seen before.

I would like to make a distinction between what the new system of road governance achieves overall, and what role the watchdog plays within that system. Overall, we agree wholeheartedly that the impacts on communities around the network, and on those who walk and cycle in the vicinity, are very important. Environmental enhancements and measures to improve conditions for walkers and cyclists will be important parts of the road investment strategy when it comes into force. I will be discussing a number of issues around cycling in a later group, where a number of cycling-related investments are clustered. That may well answer some of the questions that have been raised at this point.

We expect that the policing of this will belong to the monitor and not to the watchdog. The ORR has monitored Network Rail’s environmental improvements for many years and has the necessary expertise to do the job well. By contrast, looking at the watchdog, Passenger Focus is an organisation focused firmly on gathering, understanding and promoting the views of transport users. It is not an expert in examining environmental impacts or issues, and while it is expanding its remit it does not plan to do so at the expense of its widely praised focus on users’ interests. The purpose of this organisation, whether now or in its new guise as Transport Focus, should be to put forward the views of the people who use the network. Anything else would dilute its ability to do the job well.

I should stress that users include both walkers and cyclists, as Amendment 52 ensures that the definition of “users of highways” includes cyclists and pedestrians, although I must make it clear it is not limited to them. Those who might use the network but do not feel able to are already being heard through the work that Passenger Focus is doing to engage with walking and cycling groups and find out what they feel to be the main barriers to using the network. I can assure your Lordships that this will remain an important part of Transport Focus’s remit. The same is true of potential freight users and potential motorists. All users, of every kind, will contribute to the route strategies that determine the priorities for future investment plans.

I am pleased that we are creating an organisation dedicated to listening to road users’ views, but I would be less happy creating an organisation that tells road users what their views should be. Transport Focus must be free to say what users actually think, and not what we might like them to, otherwise it will not have any credibility with the travelling public. That means we must catch the other issues that your Lordships have raised—including modal shift and environmental impact—elsewhere in the governance system. We have already discussed the new environmental duties on the monitor, and I hope our road investment strategy will do even more.

The proposal to widen the scope of voluntary agreements between the watchdog and local highways authorities is an interesting one. In practice, I believe that the existing wording, “protecting and promoting” the interests of users, is already broad enough to cover anything that a local authority might want the watchdog to do, and more clearly matches their remit as specified in subsection (1).

I therefore hope that your Lordships will feel able to support the government amendments and not to press the others.

Amendment 32 agreed.

Clause 8: Watchdog

Amendments 33 to 35 not moved.

Consideration on Report adjourned until not before 8.30 pm.