Clause 15 - Transfer of functions

Railways and Transport Safety Bill – in a Public Bill Committee at 9:45 am on 11th February 2003.

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Photo of Anne McIntosh Anne McIntosh Shadow Minister (Transport) 9:45 am, 11th February 2003

I beg to move amendment No. 53, in

clause 15, page 7, line 35, at end insert—

'(3) The main functions of the Office of Rail Regulation will be the regulation of the monopoly and dominant elements of Network Rail. The Office of Rail Regulation will:

(a) set the contractual and financial framework within which Network Rail works to maintain, renew and expand the network;

(b) ensure that Network Rail's income, a combination of private finance and public subsidy set by the Office of Rail Regulation, is spent on the right things at the right times; and

(c) approve agreements governing the terms and conditions by which train operators gain access to the track and infrastructure and licenses all operators'.

The hon. Member for Bath is ahead of me. Many of the points that I wanted to make in relation to this amendment would have been ruled out of order had I made them in relation to schedule 1. Some of them also relate to schedule 2, but I shall try to save them until the appropriate time.

We tabled amendment No. 53 because we are clear what the present rail regulator does and what his function and purpose are but, mysteriously, I can find no definition anywhere in the Bill, including in the schedules, of the function of the Office of Rail Regulation. Schedule 2, particularly the chart on pages 51 and 52, is deeply confusing. This is by way of assistance to the Government, and I hope that they will accept it as such. Surely, they cannot have intended to leave out a simple, precise definition of what the Office of Rail Regulation is expected to do—hence our amendment. It is no secret that I did not make it up; I had assistance from a Government source. If that is plagiarism, I plead guilty to plagiarising the Government's description of the functions of the rail regulator.

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

I read the amendment with considerable interest, and the hon. Lady correctly points out that it is plagiarism. Therefore, I do not understand the need for it. Clause 15(1) says that

''The functions of the Rail Regulator are hereby transferred to the Office of Rail Regulation.''

That clearly states that the functions will be carried out by the new body. Therefore, there is no need to repeat them. I am at a loss to understand the need for the amendment.

Photo of Anne McIntosh Anne McIntosh Shadow Minister (Transport)

I am a simple soul. I believe that the functions should be stated clearly in the Bill. We have already come across one or two difficulties in schedule 1, and today we are discussing a Bill that will amend the 1993 Act, no copies of which are available. Would it not be simpler to include a description of the functions in the Bill? The Secretary of State said that the Government wish to keep the matter under constant review. A parliamentary question on that subject received a rather lengthy answer on 12 June of last year, at column 1262W. It was of some concern, when we were expecting the Bill, that the Secretary of State went on record in that way.

If the Secretary of State is asking the House to keep the functions of the Office of Rail Regulation under constant review, we must know what the functions are. Even the Select Committee, under the distinguished chairmanship of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), was not satisfied in its report ''Passenger Rail Franchise and the Future of Railway Infrastructure'' that it was entirely clear

about the functions of the rail regulator. The rail regulator gave us a helpful written response, from which I would like to quote. At Ev 291 to the first report of Session 2001–02, he most helpfully states,

''The Regulator has a number of statutory duties. These duties are set by Parliament and can be removed only by Parliament. If the definition of burden and interference is regulatory action carried out in the course of the Regulator exercising his functions by discharging his duties, that is a function of legislation passed in 2000 and brought into force on 1 February 2001.''

We are not assisted by the fact that that Act is not available in the Room either. For the purposes of clarity in debate on the Bill, hon. Members need to know precisely what the regulator's role will be.

The regulator went on to say:

''When Railtrack was privatised, it was done with a weak regulatory system which did not meet the needs of its customers or the public interest. The Regulator's programme for the reform of Railtrack's accountability, which is almost complete, has been widely supported by the industry and Parliament, including the Transport Sub-Committee and the Public Accounts Committee. It would be remarkable if, now that the infrastructure provider is to be recreated or restructured following the railway administration of Railtrack, the strengths of the regime created in the last two years and so recently completed were to be taken out and the weaknesses which caused so many problems in the past retrofitted.''

The evidence continues:

''In respect of Railtrack or its successor''

—and its successor is now with us as Network Rail

''as the Regulator said in his oral evidence to the Sub-Committee, the major failing of Railtrack's management to date has been their lack of focus on their customers and on the actions they should have taken to ensure the competent stewardship of their assets. The greater the customers' dissatisfactions in relation to the adequacy of an industry's asset stewardship plans, the more any regulator will be called upon to intervene. Had Railtrack done the things it should have done to satisfy its customers and plan for the long-term health of its assets, the Regulator would not have had to intervene to require the company to do them. The Regulator does not consider that he required of Railtrack anything that a competent and efficient company would not have chosen to do for itself.''

The final paragraph elucidates matters very well:

''For the railway industry as a whole, whatever the structure, there will be a need for regulation in respect of safety, performance and efficiency, with specific controls to prevent the abuse of monopoly power wherever that might arise.''

I simply ask why the Government are not minded to write the provisions of the Transport Act 2000 into the Bill. Would not it have been clearer to specify the functions in the Bill? It is possible, I admit, that I am the only one who finds pages 51 and 52 of the Bill particularly confusing. However, I think that it would be enormously helpful to set out what the Office of Rail Regulation is being asked to do.

The Select Committee was sufficiently concerned to state, in conclusion (t) on page 39 of its report:

''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.''

I repeat that while amendment No. 53 does not encompass the question of the role of the Strategic Rail Authority, the Government might want to take the opportunity before Report of responding to the Select Committee's request to set out the relationship

between the new Office of Rail Regulation and the Strategic Rail Authority.

Conclusion (u) on page 39 of the Select Committee report is also pertinent. It states:

''While private sector companies remain involved in the railways, it is clear that the industry must have an independent Regulator. However, if the Strategic Rail Authority is to play a strategic role, it should be given sole responsibility for allocating funds and deciding how network track capacity be used, and overall responsibility for rail infrastructure. Even though it may take some time before any legislative changes are in place, we further recommend that the Government presents its proposals for changing the regulatory regime before Railtrack's successor emerges from the process of administration.''

That did not happen, but the legislative framework is before us and I plead with the Government to do what the Select Committee recommended.

Conclusion (b) of the minority report on page 56 states:

''If the Strategic Rail Authority is to remain a viable force the Government must allow the authority to operate independently and free from Government interference. The Strategic Rail Authority must be held to its responsibilities to publish an annual report and an updated strategic plan.''

We may wish to return to that matter, which raises the question whether the Office of Rail Regulation will be required to publish an annual report and accounts and, if so, whether the House or the appropriate Select Committee will have an opportunity to debate them.

Schedules 2 and 3 relate to the transfer of functions. I am disappointed that the clause does not state what those functions should be. The functions of the Office of Rail Regulation are broadly as we outlined them and the Library has produced a lengthy resumé of the role of the rail regulator, which states:

''The powers allow him to set the contractual and financial framework''.

We agree that the original regulatory framework was not tight enough and none of us wants the unfortunate scenario involving the rail regulator and the previous Secretary of State to be repeated. In the interests of clarity, it would be helpful if the Government included in the Bill the helpful suggestion in one of their own documents. The Library research paper states that part of the role of rail regulator should be to ensure

''that Network Rail's income . . . is spent on the right things at the right times.''

The paper continues for four pages setting out the functions of the rail regulator. It is staggering that the Bill as drafted does not set out the core functions of the Office of Rail Regulation.

I submit the amendment in a spirit of helpfulness. When we discuss the remaining schedules, I hope that the Minister will see why this part of the Bill should be the least controversial. The Committee wants a strong Office of Rail Regulation. If we are to replace an individual with a board, it is essential to know what its functions will be. I hope that the Government will accept this short, tidy, neat and helpful amendment.

Photo of John Spellar John Spellar Minister of State (Department for Transport) 10:00 am, 11th February 2003

We are still making heavy weather of things. I am not sure that the hon. Lady's contribution in respect of this amendment squares with her lengthy earlier contribution. She paid tribute to the rail regulator and his role in exercising his powers under

current legislation, then seemed to have difficulty with those functions and duties being transferred to the Office of Rail Regulation. It was sensible to make the consequential amendments, which transfer those powers from the rail regulator to the Office of Rail Regulation. The hon. Lady did not make any case to say why that is inappropriate. She asked several pertinent questions, for example on reports and accounts. I advise her that the ORR currently publishes annual reports and accounts and a business plan.

The hon. Lady rightly drew attention to the roles of the Strategic Rail Authority and the rail regulator. She will be aware that when Railtrack was placed in administration, the Government embarked on a review of the regulator's role, and my right hon. Friend the Secretary of State announced the results of that review in a parliamentary answer on 12 June 2002. The proposals were to change to a regulatory board and to issue statutory guidance to the regulator and directions and guidance to the Strategic Rail Authority, having regard to the authority's budget and strategies. Those documents were subsequently issued. The announcement went on to say that the effectiveness of the regulatory regime would continue to be kept under review as the rail sector developed. The Secretary of State set out the overarching principles that applied to that, making it crystal clear that independent economic regulation was an essential continuing requirement.

The hon. Lady must take on board that the principles laid down in the functions and duties in the Railways Act 1993, as amended by the Transport Act 2000, are broad and flexible. That enables the office to be adaptable, and I will give an example. It was possible to accommodate the change in management infrastructure from Railtrack to Network Rail, which, as different types of company, raise significantly different regulatory issues. That transition was accomplished under the existing functions and duties. I hope that the hon. Lady will reflect on that and withdraw her amendment.

Photo of Anne McIntosh Anne McIntosh Shadow Minister (Transport)

I hear what the Minister is saying. I thought that he could have given more credit to, and been more generous with time in responding to the request of the Select Committee, which has been one of the most active in recent years. I say that with a vested interest, as I served on the Committee for two years. It has been one of the most well directed and focused Committees. It asked why, with the review of the SRA, the Government have not taken the opportunity to go forward.

I believe that there are strong arguments. The industry would welcome knowing that the specific functions will be replaced. There will be opportunities to come back to the matter, so for the moment I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15 ordered to stand part of the Bill.