Clause 5 - Directions and guidance

Infrastructure Bill [Lords] – in a Public Bill Committee at 4:15 pm on 16th December 2014.

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Photo of Richard Burden Richard Burden Shadow Minister (Transport) 4:15 pm, 16th December 2014

I beg to move amendment 17, in clause 5, page 3, line 36, at end insert—

‘( ) Nothing in this Act shall alter the accountability of the Secretary of State to Parliament for the highways specified under section 2(1)(b)

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

With this it will be convenient to discuss amendment 19, in clause 5, page 3, line 39, at end insert—

“including on matters of remuneration, management, financial arrangements and staffing”

Photo of Richard Burden Richard Burden Shadow Minister (Transport)

The accountability and oversight arrangements for the new company have been among the key issues debated in relation to the Bill and indeed they were relevant to the most recent Division. The Government are putting the Highways Agency at arm’s length without the regulatory safeguards imposed on a utility company.

On Second Reading, the Minister said that he would come back with a clear and impressive description of how Ministers will be accountable to Parliament for the performance and delivery of Highways England and the road investment strategy. I thank him for his words not only in Committee today but in the various letters he has written, because we now know that Ministers will set the strategic direction for the company and network and have the ability to issue statutory guidance and directions. There will be clear means for Ministers to intervene through incentives and sanctions, such as requiring additional reporting and circumscribing Highways England’s autonomy. Ministers will remain accountable to Parliament for how the roads are run, including through written answers and debates. However, it is not clear whether the level of information shared will remain the same, or go up or down. As Members know, we often get the following standard answer to parliamentary questions about the rail network: “It is an operational matter for Network Rail. Full details can be obtained from Mark Carne, chief executive of Network Rail, at Kings Place, 90 York Way, London, N1 9AG.” We know that Network Rail is going to be reclassified in April, and there is an assumption that Department for Transport Ministers will be more accountable once that has been implemented, but it is not yet clear how that will translate into practice.

Currently, information is shared in an inconsistent manner by the Department, Network Rail and Parliament. The means by which Ministers will be held to account for Network Rail’s future performance remain unclear. As far as the Bill is concerned, the Opposition think that such issues should be considered in parallel when it comes to Highways England. We want clarity on what information will be shared between the company and Network Rail; with Parliament and parliamentarians; between the company and the Minister; and between the Minister and Parliament. If we all agree that accountability is crucial—I think we do, because that has been a constant theme of today’s proceedings—do we not come back to square one? Do we not come back to the essential question of why we need this reorganisation in the first place?

The Government recognised that the oversight arrangements needed improvement, and I am grateful for their willingness to change on that. The initial model for the company considered in the other place has changed significantly. That is good, but I suggest that it is not yet good enough. We need proper public scrutiny of our road network, an asset worth £111 billion. That is why we are looking for guarantees that none of the reforms introduced by the Bill will reduce the  accountability of the Secretary of State to elected Members representing the public. From what the Minister said in his opening remarks today, he shares our concerns.

The updated summary document sets out that Parliament and the public will be able to scrutinise the company and hold it accountable for delivery against the roads investment strategy and the performance specification that goes with it. What about public scrutiny of those documents themselves, however? Is there a case for wider consultation on the strategic vision and underpinning of the RIS happening in the same way that there has been with, for example, the national networks policy statement, where there was a lot of discussion and input? I look forward to the Minister giving his responses and to the views of other hon. Members.

On amendment 19, in the Minister’s description of accountability, he confirmed that, as the sole shareholder, the Secretary of State will control how the company is governed. That includes approving board pay and policy, and having the ability to remove some or all of the board. Those things are welcome, particularly if we are to avoid the culture of pay and remuneration that has sometimes prevailed elsewhere, especially in relation to rail. When Network Rail is reclassified as being in the public sector, remuneration for it will also be approved by the Secretary of State and the Treasury. Aside from the fact that the Government have said that remuneration will not

“go beyond what is needed”,

there is no clarity about the reasons why bonuses should or should not be paid or what thresholds there might be.

My hon. Friend the Member for Hayes and Harlington (John McDonnell) expressed concerns on Second Reading that central reviews of remuneration are not effective. He said that what is needed is a ratio between the highest and lowest paid in the organisation. The trade union involved, PCS, is calling for assurances that the directors and senior managers of the SHA will be paid in accordance with the outcome of the deliberations of the civil service’s Senior Salaries Review Body. Will the Minister look at such concerns and provide the House with more clarity on the issue of not seeing pay packets spiralling out of control at the top simply because the company says that that is the only way in which to attract the right kind of talent?

We have good reason to be concerned about the impact that greater freedom on staffing and pay—one of the key DFT reasons for the need for a new commercial model—will have in future. The updated impact assessment for the reform has shown that the costs for the new corporate staff involved, such as human resources, legal, finance, public relations and strategic planning, which were all formerly DFT functions, are already on the rise. The Highways Agency itself had previously stated that about 30 posts, probably amounting to some 20 full- time staff, would be needed. The new operating cost was to be £1.3 million per year. Those figures now stand at an estimated 40 staff at a cost of £2.6 million per year. We are therefore talking about quite big money being anticipated in association with the new company. Spending  on corporate staff seems set to double already. That is hardly the greatest start for a new arm’s length company accountable to Ministers and transparent to the public.

Those figures are still estimates, so the DFT has not yet updated the full impact assessment cost-benefit analysis. Like it or not, we are where we are. The Bill is being considered in Committee. As the Department has not been able to give us its best estimate of what the costs will be, can the Minister give us that figure today? Are we talking about the total cost of transition for 2013 to 2015 being around £100 million? If we are, I go back to what I said at the start: is it really worth it? Is it really necessary?

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich 4:30 pm, 16th December 2014

Briefly, I shall add my strong support to my hon. Friend the Member for Birmingham, Northfield, particularly for his advocacy of amendment 17, which would clarify the continued accountability of the Secretary of State for whatever happens in this field. The Minister touched on that in his introductory remarks this morning. He was clear that he wanted to see that. His hon. Friend the Member for Taunton Deane spoke strongly in favour of that, and he was given assurances by the Minister that that was the objective. I am sure we will hear further assurances.

I simply want to highlight three factors that lead to doubts as to whether the Minister’s assurances can be delivered. The first is something that I was hoping to raise earlier under schedule 1. I hope you will not rule me out of order in now mentioning it, Sir Roger, because it is germane to the issue of accountability, which is the subject of the amendment.

In schedule 1, there are, on my calculation, around 300 amendments to existing legislation, which specify—I use the term carefully—

“or a strategic highways company” to be added to references to the Secretary of State. It is not substitution. It is not in place of the Secretary of State. It is in addition to the Secretary of State, so these cover an enormous range of powers and responsibilities. The question must be: how are we going to ensure clarity as to where responsibility lies? If, under legislation, it is either the responsibility of the Secretary of State or the responsibility of a strategic highways company, there almost inevitably will be some ground for uncertainty and potential confusion.

The second factor is one to which my hon. Friend the Member for Birmingham, Northfield has already alluded, which is the provision in clause 6, which we are due to come to shortly, for the delegation of functions. The powers in clause 6 allow very broad scope for delegation to one or more other organisations. Once again, if the new strategic highways authority chooses to delegate its powers, subject to the Secretary of State’s regulations, how can we be certain about the responsibility and accountability and where that will lie if there is a chain of responsibility that descends from the Secretary of State through the new highways company to bodies that have been given delegated powers by that company? Again, it is a question of clarity.

Thirdly, when we come to clause 7, the Minister will know that subsection (4) makes it clear that schedule 15 to the Deregulation and Contracting Out Act 1994, which involves restrictions on disclosure of information, applies to such delegated responsibilities. So we have a  third area where there could be room not only for lack of clarity, but there could be an opaque framework where it is impossible to obtain information.

Given all those grounds for concern, it is not surprising that members of the Committee raise concerns about the ability of Members of Parliament to represent their constituents and to get responses from Ministers and the Secretary of State. We will need some pretty convincing reassurances that the same standard and the same degree of accountability will exist if the legislation goes through in its current form without the amendment that my hon. Friend has tabled. It seems to me an absolutely admirable amendment that clarifies the continuing responsibility that I believe is the objective that all of us in this Committee want to see. I hope that the Minister, in replying, will give us an assurance the amendment will be accepted to clarify that continuing responsibility on the face of the Bill.

Photo of John Hayes John Hayes Minister of State (Department for Transport)

I will try to deal with both contributions relatively briefly, while not underestimating their significance. The document that the shadow Minister referred to was the licence document, which sets out that Ministers remain clearly accountable to Parliament and can intervene if the company is “failing to deliver”. The emphasis that I want to place here is on intervening in respect of delivery. It is not simply about the Government’s capacity or ability to set the direction or, indeed, to establish the strategy or allocate the funding to make that strategy real. It is about intervening in delivery, should and when that becomes necessary.

I will suggest two additions to the draft document which might be helpful to Members. The first is that the draft document says that Ministers retain the right to issue “additional statutory Directions to the company to take specific action or implement specific policies.”

It would be helpful, as this draft develops, to provide examples of that. It seems to me that saying that without setting out the kind of circumstances which might apply is less helpful than it might be. Similarly, the document says that Ministers can increase

“scrutiny and oversight of company activities, for example by introducing additional reporting requirements.”

We should give examples of when that might happen and what those additional reporting requirements might be. By providing those instances in both cases, Members might be assured about the determination of Government to retain the lines of accountability which I have been so keen to emphasise.

Furthermore, in the part of the document which talks about the performance contract and the company’s performance being monitored and assessed against that, it seems to me that the measurement of performance needs to be known by Members of this House and certainly by Ministers. I will look again at how that performance might be reported to the House, having first been reported to Ministers. It seems useful for Ministers and the House more generally to have some sense of how the new body is performing. Those are all the things that I am prepared to add to this document. I will go away and look at what is a draft document that is designed to be iterative, as I described earlier. I take the rather old-fashioned view—you might describe it as such, Sir Roger—that Ministers should be influenced by the debates that take place in Committees and that  scrutiny has real purpose. To have purpose, scrutiny requires that Ministers respond in the way that I have tried to today, as illustrated by what I just said.

On the specific issue of money, which is pertinent to these amendments, I am absolutely clear that the Secretary of State will approve the company’s overall pay strategy and executive pay framework. Remuneration packages will comply with public sector rules that require pay above the Prime Minister’s salary of £142,500 to be approved by the Chief Secretary to the Treasury. I share the concerns that if we do not retain those powers, we might end up with the sort of situation that the shadow Minister described. He did not do so in colourful terms; he was very measured in what he said. None the less, I knew what was in his mind and I knew that he was articulating a wider concern of the Committee. It seems absolutely right that there are proper controls on remuneration so that the budget does not get out of control.

On the point raised by the right hon. Member for Greenwich and Woolwich—[Interruption.]

Photo of Richard Burden Richard Burden Shadow Minister (Transport)

Before the Minister moves off that point about money and spending on salaries, I am grateful for his assurance that he will keep an eye on that, but I am worried about how far we have got so far. The Highways Agency was talking about needing 20 full-time equivalent staff, with an operating cost of £1.3 million. Now, that seems to have doubled to £2.6 million and 40 full-time equivalent staff. The estimate was for £100 million of transition costs. I do not know whether he has the up-to-date figures yet. If he has not, he has not, but it would be helpful if he could provide them. We want to know what the current estimates are, because they already seem to be inflating.

Photo of John Hayes John Hayes Minister of State (Department for Transport) 4:45 pm, 16th December 2014

That is absolutely fair and reasonable, and I will write to the Committee with the latest transition costs. In doing that, I will insist that those transition costs are kept as low as they can be. We should not be spending public money irresponsibly in this case or in any case. I re-emphasise, however, that the impact assessment talks about savings of £2.6 billion. The transition costs matter, but we should not take them out of perspective. I would be more than happy to write on that basis.

My father and I were born in Woolwich and my mother was born in Greenwich, so I feel particular affection for the right hon. Member for Greenwich and Woolwich, for that coincidental fact if for no other reason, although I hasten to add that there are many such reasons. On the 300 amendments he mentioned, they all add the strategic highway company and the Secretary of State to the Bill, but there is no change through those amendments to the relationship between the two. It is important to point that out. In that sense, they are technical amendments, but as a direct result of his contribution I will go back and, in belt-and-braces fashion, check that those amendments do not in any way diminish the role of the Secretary of State or leave us in a worse position than we are in now. My ambition is for us to end up in a considerably better position. The current arrangements with the Highways Agency do not have sufficient transparency and clarity on accountability and the role of Ministers and the House.

Finally, it is important to emphasise that the Secretary of State remains the highways authority for concession roads such as the M6 toll road and the Severn crossing, and that is unchanged in the new arrangements. We will think more about this matter, and on that basis I ask the hon. Member for Birmingham, Northfield to withdraw his amendment. He can tell where I am coming from, what my intention is and how, although there is further still to go, we have already gone further than before.

Photo of Richard Burden Richard Burden Shadow Minister (Transport)

As the Minister said, he has been clear about his direction of travel, and we look forward to receiving more on this matter. The one thing I will say is that we have already discussed a number of things where we have said, “This will be done for Report stage.” That is fine, because there is no point in needlessly dividing the Committee if we can come to some accommodation that buys us some time. The only point I would make on that—I suppose this is more a matter for Government business managers than the Opposition—is that if we queue up too many things to come back to on Report, that might have a time consequence for the Report stage. I throw that out as a possible consequence.

I am sure that the Minister is absolutely genuine in his desire to keep costs down as far as possible. He has clearly heard the concern I have articulated on how things should not be allowed to escalate in the way that they might at the moment. He has clearly heard the important points that my right hon. Friend the Member for Greenwich and Woolwich made on an earlier schedule to the Bill. I thank you, Sir Roger, for allowing him licence to raise those points in our deliberation of this part of the Bill. His points are relevant. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.

Clause 6 ordered to stand part of the Bill.