Clause 14 - Establishment

Railways and Transport Safety Bill – in a Public Bill Committee at 2:45 pm on 6th February 2003.

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Question proposed, That the clause stand part of the Bill.

Photo of Anne McIntosh Anne McIntosh Shadow Minister (Transport)

We turn now to part 2 of the Bill, which appears a rather innocent beast—I would almost, but not quite, call it a cheeky little number. Clause 14 refers simply to the establishment of the office of rail regulation:

''There shall be a body corporate to be known as the Office of Rail Regulation . . . Schedule 1 (which makes provision about the Office) shall have effect.''

I refer the Committee to the words of the Secretary of State on Second Reading:

''Part 2 provides that the Office of the Rail Regulator should be restructured. The rail regulator is working well, but we want to take this opportunity to bring the railways into line with other regulated industries, replacing the individual regulator with a regulatory board, which is consistent with the recommendations of the Better Regulation Task Force.

The Bill restructures the existing Office of the Rail Regulator, creates a statutory regulatory board in place of the regulator, building on the existing advisory board that he already has, and enables a wide range of experience and views to be brought to decision making. We will not make the change before mid–2004, which will enable the regulator to complete the useful work that he is doing in reviewing access charges.''—[Official Report, 28 January 2003; Vol. 398, c. 772–3.]

I record my enormous admiration for the rail regulator, who has been put through trying circumstances recently. I have a question for the Minister for Transport about the sequence in which the Government intend to implement the recommendations of the Better Regulation Task Force. Is the rail regulator being taken in sequence with the gas industry, the electricity industry and all the others, or is the rail regulator being taken out of turn, perhaps as a one-off? I ask that because it became a real issue to those of us who followed the scenario of Railtrack going into administration.

The former Secretary of State for Transport—the right hon. Member for Tyneside, North (Mr. Byers)—went on the record by giving evidence to the former

Transport, Local Government and the Regions Committee. He said, under the heading ''Ev 104'':

''It is for Parliament to decide the role and the responsibility of a regulator . . . whatever structure we come up with after administration there will be a need for independent, economic regulation.''

The Opposition are concerned, because the present rail regulator, who I hope will be allowed to serve out his term if the changes are not introduced before 2004, is a gentleman of the utmost integrity, who has shown in the most testing circumstances that he is fully independent of the Government of the day. We are concerned that the independence of the economic regulator, and therefore the economic regulation, of the rail sector is being compromised by this sweeping change, which I think is not in kilter with what is happening in the other regulated industries, such as gas, in sectors that are equally subject to the recommendations of the Better Regulation Task Force. The rail regulator has been singled out.

Under Ev 88 on 7 November 2001, the regulator, Mr. Winsor, told the Select Committee:

''My independence can only be taken away by Parliament and Parliament has not done that.''

This is the first opportunity that the Government have had to weaken the independence of the rail regulator, although that independence has worked extremely well. For that reason, I believe that the Bill is regrettable.

Clause 14, which sets out its provisions very simply, and the whole of part 2—we will come to schedule 1 in due course, under which functions are transferred—raises a number of questions to which we alluded earlier, and it would be appropriate to consider them now. What is the relationship between the new Office of Rail Regulation and other bodies? As the Committee will know, the Strategic Rail Authority, the rail regulator and the health and safety commissioner—the three pillars of railway regulation in Great Britain—are expected to work together to ensure that the railways are run safely and in the public interest, for effective and accountable regulation. The relative jurisdiction of the regulator and the Strategic Rail Authority, and the possibility of overlap, have also been issues.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North 3:00 pm, 6th February 2003

I am listening with interest. The hon. Lady suggests that regulators in the railway sector are becoming less significant. Regulators are established in naturally monopolistic industries, which were formerly publicly owned, in order to replace accountability to Parliament and the Government. Therefore, as the railway industry comes back towards Government and public ownership—I welcome that—is not it likely that the need for that kind of regulation will diminish?

Photo of Anne McIntosh Anne McIntosh Shadow Minister (Transport)

I will not rise to that challenge and say whether I think that there should be a return to a total monopoly of the railways, whereby just one provider supplies train services. Nor shall I say whether I would rather have a separate rail network that looks after the track. Even under the revised

structure that the Government propose, the Office of Rail Regulation, albeit supported by a board, will remain as, if not more, important as it is now, given how powerful the Strategic Rail Authority has become. The SRA said in December that its targets would be met, then reversed the announcement in January. However, I do not want to stray too far from my point.

The relative jurisdiction of the regulator and the Strategic Rail Authority and the possibility of overlap have been issues since the mid–1990s, when the structure was first set up under the Railways Act 1993. When the Government came to power, they passed the Transport Act 2000, which made an effort to rationalise the two roles. However, the Government were still not happy, and felt that the situation was inconclusive.

When Railtrack was put into administration, the then Secretary of State, the right hon. Member for Tyneside, North, announced that he planned to legislate when parliamentary time allowed—it seems that this is the first available occasion—to rationalise the regulatory structure to provide a stronger strategic direction. He also wanted to reduce the burdens of day-to-day interference in the industry, and the self-defeating system of penalties and compensation. We were told that that would deliver clearer accountability and end perverse incentives.

The proposals for reform in clause 14 and part 2 were put out to consultation in October 2002, but in a limited form. Only one change was proposed, and that was to establish a statutory regulatory board that would have all the powers currently exercised by the rail regulator. Part 2 and schedule 1 provide for that regulatory board. A further question is raised about the jurisdiction of the Bill. This part of the Bill applies to England and Wales and to Scotland but is not intended to extend to Northern Ireland. It would be helpful to know why that is so.

The full extent of the amendments that the Government propose is not immediately clear from the very limited drafting. The rail regulator helped the Transport and Regional Affairs Committee, and I think that he can help us to understand the fundamental relationships in the railway industry. The report states—

Photo of Jimmy Hood Jimmy Hood Chair, European Scrutiny Committee, Chair, European Scrutiny Committee

Order. I do not want to restrain the hon. Lady too much, but it is a stand part debate on clause 14. She has been tempted into discussing amendments from the next debate. May I ask her to return to clause 14 stand part?

Photo of Anne McIntosh Anne McIntosh Shadow Minister (Transport)

I am most grateful, Mr. Hood. My point is pertinent to the Bill, because the clause says:

''There shall be a body corporate to be known as the Office of Rail Regulation.''

I want to find out the extent of that body corporate, without discussing any of the functions, which we will have ample opportunity to consider subsequently. Can the Minister explain where the Office of Rail Regulation will interface between the train-operating companies as the provider of the private sector funds and the Treasury as the provider of the public sector funds?

The fundamental point that I wish to raise in connection with the clause is not terribly complicated. To what extent will the Government's amendments strengthen the independence of the rail regulator? The Opposition have a deep-seated fear about that, having seen how the present occupant of the Office of the Rail Regulator has demonstrated his integrity, his independence and his ability to stick within his established office and the rules that set it up. How does the Minister think that the clause will enhance the independence of the regulation of the railway sector? Why is the railway industry being singled out in this way as the pioneer for the better regulation taskforce?

Photo of Don Foster Don Foster Shadow Secretary of State for Transport

I fear, looking around the Room, that I may be occupying the crease but briefly.

First, may I place it firmly on the record that my party fully supports the proposals to establish the Office of Rail Regulation? Secondly, we do not believe that the move is a guinea pig measure for the Better Regulation Task Force, as it is the only regulator that has not already got a board or has plans to put a board in place. The proposal brings the rail regulator in line with all other regulators in the system.

Thirdly, when the hon. Member for Westmorland and Lonsdale (Mr. Collins) spoke on Second Reading he was completely wrong even to imply that the establishment of the Office of Rail Regulation was a means of the Government getting their own back on the individual who holds the current Office of Rail Regulator. Many of us are aware of the difficult relationships that have existed in the rail industry involving the current holder of the post, but many believe that he has done an extremely good job and has fought hard for what he believes to be right. That does not mean to say that it is not right to move forward in establishing the Office of Rail Regulation.

I also place on the record my huge disappointment that neither this nor subsequent clauses honours the pledge given by the former Secretary of State in relation to future plans for the regulatory regime. As I reminded the House on Second Reading, when the former Secretary of State announced his intention to turn Railtrack into a not-for-profit public interest company, he said categorically that it

''would need far less intense regulation. We therefore intend to streamline the existing structure''.—[Official Report, 15 October 2001; Vol. 372, c. 956.]

There is nothing in the proposals that would streamline the regulatory machinery.

The hon. Member for Vale of York who was a member of the Transport Committee will be well aware that in its first report of the 2001–02 session, published on 23 January 2002, the Committee argued strenuously in the light of the commitment made by the former Secretary of State for a more streamlined regulatory system. It stated:

''While the need for an independent economic regulator with clearly defined responsibilities, duties and objectives will continue, the respective roles of the Regulator and the Strategic Rail Authority should be reviewed.''

The Select Committee made a very clear recommendation, and I regret that in this and

subsequent clauses an opportunity has not been taken to review the respective roles of the Office of Rail Regulation and the Strategic Rail Authority. Notwithstanding those two major concerns, the broad principle of the establishment of such a board is welcome on the Liberal Democrat Benches.

Question put and agreed to.

Clause 14 ordered to stand part of the Bill.