Railways: Franchises

House of Lords written question – answered on 20th May 2008.

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Photo of Lord Berkeley Lord Berkeley Labour

asked Her Majesty's Government:

In respect of the rail franchise change of control policy statement issued on 28 March (a) which organisations were consulted on the proposals; (b) on what basis the administration fee will be assessed and charged; (c) what is the legal basis for the proposed charge of the greater of £1 million or 5 per cent of the value of the change to the vendor; and (d) what is the purpose of levying that charge.

Photo of Lord Bassam of Brighton Lord Bassam of Brighton Government Whip, Government Whip

(a) This statement provides information about the Secretary of State for Transport's planned approach to exercising her existing powers under franchise agreements. The Department for Transport did not seek the views of any organisation on this contractual matter.

(b) The administration fee (which is separate from the facilitation fee) will represent the costs of processing the application for consent to the change of control. This will vary from case to case.

(c) Under the franchise agreements between the Secretary of State and train operating companies, the Secretary of State's power to grant or refuse permission for a change of control is essentially unfettered. Therefore, as a matter of private law rights and by reason of the statutory duties imposed on the Secretary of State, including the duty to promote improvements in railway service performance, the Secretary of State, acting in the public interest, is entitled to require a payment in return for her consent.

(d) The purpose of the facilitation fee is to allow the public to benefit from a change of control. The value of franchises is often a product of substantial public subsidy or investment. It is therefore reasonable that the Secretary of State should have the opportunity to ensure that passengers and the public purse receive some benefit when franchises change hands.

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