Clause 4

Channel Tunnel Rail Link (Supplementary Provisions) Bill – in a Public Bill Committee at 11:45 am on 4th December 2007.

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Power of Office of Rail Regulation to charge fees

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

I beg to move amendment No. 4, in clause 4, page 2, line 7, after ‘be’, insert

‘, consistent with the relevant terms of any license fee payable by other operators of railway assets under section 8 of the Railways Act 1993, and.’.

We obviously had some discussion about this point during the oral evidence session. The clause gives the regulator the right to charge the operator of High Speed 1 a fee for carrying out its functions. If we look at the intention of the clause as set out in the explanatory notes, we see that it is not carried through fully into the Bill. It allows the ORR to charge those operating CTRL a fee by reference to the cost that it reasonably incurs.

Photo of Greg Knight Greg Knight Chair, Procedure Committee

Does not the clause state that it gives the ORR a power to charge the costs that it says it reasonably incurs, not the costs that it does reasonably incur, which is a slightly different matter?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

That is the problem. We may incur a load of costs, but what costs are reasonable to the ORR, what costs are reasonable to the people on whom it is seeking to impose them, and what costs are reasonable to outside observation? My amendment would go to the heart of the matter and clear up the problem.

We have discussed many times the meaning of “reasonable” and “reasonably” and “relevant” and “relevantly”. We are now in the same territory. Under the explanatory notes, the proposal is

“similar to the position on the national rail network, where the ORR’s regulatory functions are funded by the licence fee paid by the operator, Network Rail.”

That is not made clear in the Bill. The amendment would bring the CTRL arrangements in line with those for the rest of the network. The basis used by the ORR to set the fee for CTRL should be the same that it uses to calculate the licence fee paid by the operator on other parts of the network.

My amendment would not do anything about timing, about which the Minister spoke in our evidence session. It looks at the costs that are payable. I accept  that the regulator’s functions for CTRL are slightly different from other operators in respect of the access contracts that we have discussed, but only slightly. That does not mean that the basis of calculation that is being used for the setting of the level of the fee should be different from that of the rest of the network. I look to the Minister to make clear why the amendment is not acceptable.

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

I rise with some scepticism as to whether I can persuade the hon. Gentleman of my argument, as I do not have much to add to what I said in our evidence session. However, I shall give it a try. I am grateful to him for outlining the intention behind the amendment. It is not our policy to subject this or any other business to regulation beyond what is necessary. With that in mind, we are clear that the regulatory costs borne by the owner of HS1 should be limited to what is absolutely necessary. That is why subsection (2) makes it clear that the costs should be reasonably incurred when passed on to the owner of HS1.

I understand the point made by the right hon. Member for East Yorkshire. The fees that ORR charges the owners of the infrastructure of HS1 could be challenged legally if they were seen to be unreasonable and not according to the spirit of the Bill as it stands at the moment.

I said earlier that regulation of HS1 would be lighter in some respects than regulation of Network Rail’s network. The ORR has a different set of duties for HS1 than it has for the rest of the network. As the regulators’ costs will reflect a different set of activities, it may not be possible for the fees to be calculated in the same way as Network Rail’s licence fee.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport) 12:00 pm, 4th December 2007

We absolutely accept the point that the regulatory functions of the ORR are, to some extent, different. However, a part of those functions in regard to CTRL is similar to the rest of the network. Costs could be apportioned between the varying regulatory functions because if it is acceptable to use that basis for part of the regulatory function of the network, why cannot it be reasonable to use the same basis for CTRL?

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

The hon. Gentleman expresses one particular point of view. My understanding is that it would be very difficult to make that calculation and that by inserting this amendment, it would make the legislation unnecessarily complicated and over-regulated. I do not accept his view that it is a straightforward, arithmetical position. I fully respect his position, but if he does not withdraw his amendment I will have to ask my hon. Friends to vote against it.

Photo of Greg Knight Greg Knight Chair, Procedure Committee

I thank the Minister for what he has had to say. We all expected him to agree with the main witness whom we heard from earlier. Nevertheless, I have concerns about the drafting of this clause, which he has not satisfied. Even at this late hour, it should be  possible to tighten up the wording of this clause. If, as appears to be the case, the Minister is not willing to accept my hon. Friend’s amendment, I hope that he will reflect on the matter to see whether he can improve the clause in the later stages of this Bill. The Minister is right to say that the word “reasonably” is in the clause, but it is a subjective test, as I mentioned in a question earlier. It is not what a reasonable man would consider to be reasonable. It is what the Office of Rail Regulation considers to be reasonable. I can foresee circumstances in which someone who is managing a sloppy administration and running up unnecessary expense incurs charges which are, in their view, not unreasonable. The test should be objective. I have real concerns about the wording of subsection (6).

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

May I speak now to avoid having to make a contribution at the end of the right hon. Gentleman’s comments? I cannot accept the amendment tabled by the hon. Member for Wimbledon because, as the right hon. Gentleman has already said, it is not perfect, and in that respect it would be very difficult for a Government to accept it. However, if the right hon. Gentleman wishes to draft a new amendment to present on Report, I shall be happy to consider it, but I make no promises at this stage on whether it will be acceptable to the Government.

Photo of Greg Knight Greg Knight Chair, Procedure Committee

How can one argue with such generosity? I will reflect on that.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

The Minister is being characteristically generous, but he has not overcome the problem. I am sure that my right hon. Friend will table several amendments—as he is well known for doing—which we will examine on Report. While the Minister has pointed out that my amendment is unsatisfactory to him in certain elements of its drafting, he has already pointed out that if the Bill is left as it is at the moment, it will leave him open to challenge.

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

That is absolutely not what I said. My point was that if the ORR was to charge a fee that the owners of HS1 considered to be unreasonable, it would be open to challenge. That challenge would be not on the basis of the Bill but on the basis of an unreasonable fee charged by the ORR.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

I thank the Minister for that clarification, but it proves my point. My amendment would do away with the possibility of that challenge. I am not persuaded by the Minister’s reassurances and notwithstanding his, and my, ability to count, I would like to press this to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 10.

Division number 1 Nimrod Review — Statement — Clause 4

Aye: 5 MPs

No: 10 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Clause 4 ordered to stand part of the Bill.