Clause 2

Channel Tunnel Rail Link (Supplementary Provisions) Bill – in a Public Bill Committee at 11:30 am on 4th December 2007.

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Access contracts

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

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

‘Section 17 of the 1996 Act (access agreements) is repealed’.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

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

Section 21 of the 1996 Act (duties of the Office of Rail Regulation as to the exercise of regulatory functions) is repealed’.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

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 Clauses 2 and 3 seek to clarify what is still required and what should be repealed. My concern is about not what is being repealed, but what is not being repealed.

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

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

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

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

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

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

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

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

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

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

Photo of Tom Harris Tom Harris Parliamentary Under-Secretary (Department for Transport) 11:45 am, 4th December 2007

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

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

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

Photo of Susan Kramer Susan Kramer Shadow Secretary of State for Transport, Transport, Shadow Secretary of State, Liberal Democrat Spokesperson (Transport)

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

Photo of Tom Harris Tom Harris Parliamentary Under-Secretary (Department for Transport)

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

Photo of Susan Kramer Susan Kramer Shadow Secretary of State for Transport, Transport, Shadow Secretary of State, Liberal Democrat Spokesperson (Transport)

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

Photo of Tom Harris Tom Harris Parliamentary Under-Secretary (Department for Transport)

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

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

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

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

Photo of Tom Harris Tom Harris Parliamentary Under-Secretary (Department for Transport)

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

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

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

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

Amendment, by leave, withdrawn.

Clause 2 ordered to stand part of the Bill.

Clause 3 ordered to stand part of the Bill.