§ Ms. Dawn Primarolo (Bristol, South)
I beg to move amendment No. 1, in page 12, line 16, at end insert—`(1A) If the concession agreement is rendered unworkable as a result of any change in legislation, and the concession agreement is thereby terminated, no compensation shall be payable by the Secretary of State to the concessionaire.'.The amendment seeks to remove the obligation on the Government of the day to hold an unlimited liability to underwrite the private company that is proposing to build the second Severn crossing. I shall not repeat the arguments about the inadequacies of the current Severn crossing or the importance of having a second crossing that can provide communication links across the Severn, but it is important to put on record the fact that the Government have made assumptions about transport 282 policy and especially about the amount of freight traffic that will be carried on roads in the future. Furthermore, they have built those assumptions into the concessionary agreement that they are proposing to make with the private company. That agreement sets tolls for the crossing over a specified period so that the company can meet its obligations to its financiers and, presumably, make a profit. Those assumptions, and the ability of the company to recoup the money that it had invested, could be adversely affected by an incoming Government—I hope a Labour Government—with an environmentally friendly transport policy seeking to shift road traffic on to the railways.
In notes provided in Committee on the concessionary agreement, hon. Members were informed that the agreement could become invalid, with the possibility, first, of compensation being paid to the private company and, secondly, of the Government of the day becoming liable to accept all the debts and running costs of the company under certain circumstances. That might happen if the Bill was amended, if an undertaking was given to a third party during the measure's passage through Parliament or if a change occurred in United Kingdom or EC legislation which had a substantial effect on the second Severn crossing company, such as the introduction of legislation which shifted freight transport from road to rail.
Reference was also made to a possible change in the tax regime which had a material effect on the second crossing. For example, a future Government, of whichever party, might deem it necessary to introduce a new tax regime designed to discourage excessive road traffic. That change might have an effect on the ability of the company to raise the necessary tolls to cover its costs.
At our first Committee sitting, I asked the Minister whether a change in tax regime on an environmental basis to encourage traffic from road to rail would represent a breach of the concessionary agreement and leave the Government of the day open to a claim for compensation by the company. I also asked whether the introduction of legislation which had the effect of shifting freight from road to rail would represent such a breach.
Those are important issues. All political parties pledge themselves to improving, and accept that excessive road traffic is detrimental to, the environment. It seems crazy, therefore, that the Government should give undertakings to a private company which would protect that company from legislation that might be introduced by a future Government to protect the environment.
In Committee, the Minister circulated to Members his response to a number of questions that had been asked. If, whatever the cause, less traffic used the second crossing, the company's initial response would, no doubt, be to apply for an increase in tolls. If the Government of the day refused to allow that increase, the question would arise, according to the Minister, whether the concession was still viable and whether, within the permitted time, the company could recoup its investments and liabilities. If the company deemed that it could not do so, the concessionary agreement would be terminated immediately unless the Government of the day decided to meet the additional costs of the second Severn river crossing. If they failed to meet those additional costs, the entire liability of the second Severn river crossing—the debt, running costs, 283 management and everything for which the company was liable as a direct result of sponsoring the crossing—would automatically become the Government's liability.
I disagree with that principle. It is not for the Government to commit this nation, particularly south Wales and the Avon and Wiltshire area, to suffer heavy road transport in perpetuity by locking us into an agreement which it is too expensive, or the concessions do not allow us, to get out of. If the Government believed in their ideology of a free market, they would say to the company, "This is the basis on which, as a private company on the open market, you take on a second Severn river crossing. If you fail to meet your costs and make your profits, that is your hardship as a private company." It is wrong for the Government totally to underwrtie those costs. It is also unacceptable that the Government should seek to undermine possible future legislation to protect the environment.
The amendment would make it crystal clear that no compensation would be payable by the Secretary of State to the second Severn river crossing company should such circumstances arise as a result of a change in legislation instituted by this House or the EC.
§ Mr. Morgan
I am grateful for the opportunity to reinforce what my hon. Friend the Member for Bristol, South (Ms. Primarolo) has said in her important contribution.
It is fair to say that we are already in that possible new environment. In one of those U-turns that the Government have been making since the former Prime Minister left office and Ministers have felt freer to introduce new initiatives, the Secretary of State for Transport said that he now believes in revitalising and regenerating the railways and pushing more freight from the roads to the railways.
§ Dr. Kim Howells
Does my hon. Friend agree that it would be far more enlightening if the Minister would tell us exactly where the rail freight depot is to go in south Wales? That would make the issue much clearer.
§ Mr. Morgan
Yes. Since we raised that point earlier, and as a result of the previous amendment on policing, the Avon and Somerset CID and the Gwent CID are now searching Cardiff to discover the whereabouts of the new freight depot.
§ Sir Wyn Roberts
I understand that the new depot will be at Pengam, but the Department has already promised to write.
§ Mr. Morgan
That is undoubtedly the best place for a road-rail interchange in south Wales, and I am grateful for the information.
If the Secretary of State for Transport meant what he said in his speech to the 1990 Conservative party conference, and has now become a believer in the railways, and if that is now part of the Government's policy, is the would-be concessionaire, GTM-Laing, already looking to the Government to underwrite what might happen when the Secretary of State gets round to transforming his speech into policies? The concessionaires are already negotiating with the Department of Transport for a change in the terms of the concession on the ground that if the Government are thinking of shifting so much freight transport from the roads to rail—by subsidy, by regulation and by policy—they will need such a change.
§ Mr. Snape
Is my hon. Friend aware that whatever the Secretary of State says is merely so much rhetoric? The Government's policy is quite the reverse. Traffic is being transferred within the next week from rail to road. The amendment merely seeks guidance from the Government on whether their rhetoric will ever be translated into action to move freight from the roads to rail.
§ Mr. Morgan
I agree that the Government have led the country in that direction over the past 12 years. Now we are being told—not in the House of Commons, however —that the programme is to be put into reverse, and that there will be an attempt to revitalise the railway sector. If so, are the Government actively re-examining the terms of the concession; or have the concessionaires decided that the Secretary of State's major speech, reversing 12 years of Government policy, is just so much wind and they do not need to worry about it? In that case, what did the speech mean?
If the concessionaires have raised these questions with the Minister, in what way might the concession be altered to cover the underwriting in respect of future changes once the bridge is built? Will there be a smaller second Severn crossing because of the Government's change of policy in favour of rail? Would the bridge still be viable then?
The Secretary of State has not discussed these matters in the House, but I hope that the Minister of State will be frank with us and will tell us what the Government have in mind in the context of this Bill.
§ Mr. Dover
It ill becomes the supporters of the amendment to say that this is one of the bases on which the agreement could be terminated. Why do not they look at the other three grounds on which it could be terminated? The concessionaires have negotiated, in lengthy discussions with the Government and the Department, exactly the terms for any termination of the contract; and it is irresponsible to table such an amendment at this late stage. A slight movement of freight from road to rail will only mean that the time over which the tolls will be collected will be slightly extended. That will be to the detriment of the people of Wales who travel by road. There is enough elasticity in the agreement already and it is stupid to expect to be able suddenly to renegotiate in the House the grounds on which the agreement could be terminated.
There is a solid agreement. We should think ourselves fortunate that these companies have stuck out their necks to the tune of hundreds of millions of pounds over decades and taken on a high degree of risk. Knowing as I do the integrity of the firms, I should be most surprised if they had come to the Department and accused it of changing the goalposts. We should chuck out the amendment forthwith.
§ Mr. Livsey
I strongly support the amendment so eloquently moved by the hon. Member for Bristol, South (Ms. Primarolo). Who are we to say what the demands on the road system will be in the next century? I forecast that the M4 will be jammed with traffic by the year 2000. Between Swindon and London it already is. This plan will filter more and more traffic on to the M4. The alternative, of an efficient and fast rail freight and rail passenger service, will become an absolute necessity for the country. The hon. Member for Bristol, South said that we must not give the concessionaires a blank cheque. Modes of transport will change and trains will become a great deal faster than vehicles using the M4 or the new Severn bridge. 285 Rail will become much more attractive for goods and passengers and will be far more environmentally friendly. We need the safeguards in the amendment and are right to be forward looking.
§ Mr. Snape
The amendment's aims are clear, contrary to what the hon. Member for Chorley (Mr. Dover) said in his astonishing speech. If the Secretary of State's rhetoric means anything, the Government, who we hope will not be in office for much longer, intend to transfer freight from road to rail. In two interventions I have said that within the next week there will be a substantial transfer of freight the other way because of the closure of the Speedlink network.
The amendment seeks to establish whether the concessionaires will have a financial claim on this or any successor Government and whether the Secretary of State's rhetoric will be translated into reality. We confidently expect to form the next Government and we shall take action on the environment and see that the under-utilised rail network is boosted by the transfer of freight from road to rail.
The amendment asks a simple question: if the happy situation outlined by the Secretary of State comes to pass, will the concessionaires have any fiscal claim on this or any other Government? Will the agreement tie the hands of this or any future Government so that if we try more sensibly to use the rail facilities compensation will have to be paid to the concessionaires? I cannot understand the complaints of the hon. Member for Chorley. He is an expert in these matters and some of us remember his distinguished service on the Greater London council.
We seek to ascertain whether the taxpayer will be liable to pay the concessionaires a not inconsiderable sum if the environmental transfer that all hon. Members appear to want is a reasonable proposition. We did not get much of an answer in Committee and I hope that the Minister will tell us whether the Government are serious about transferring freight. If they are, how much will it cost the taxpayer under the terms of the agreement?
§ Mr. Freeman
The amendment can be seen as abrogating the concession agreement before construction starts. The hon. Member for Bristol, South (Ms. Primarolo) did not touch on that, but it was raised in Committee. The hon. Member for West Bromwich, East (Mr. Snape) said that a Labour Government would not cancel the bridge or seek to abrogate the concession agreement after Royal Assent of the Bill. He said that the compensation, which is currently about £20 million—the amount spent by the concessionaires on preparing designs and other studies—would be payable by the Government if they abrogated the agreement. He felt that that would make it undesirable to cancel the concession agreement.
The hon. Lady asked what the liabilities of the Government would be if the bridge had been constructed, and a change in the legislative ground rules had a substantial effect on the viability of the bridge and the concession were terminated. In Committee, I spelt out clearly the conditions for exceptional increases in tolls, and one was a major change in legislation that had a substantial effect on the viability of the operation. I cannot speculate as to whether our proposed Bill to privatise 286 British Rail and allow free access to all rail tracks by private sector freight operators will have that effect. It depends on when the Bill is presented, and what the effects of it will be.
My right hon. Friend the Secretary of State for Transport has made it plain that he understands that 90 per cent. of freight is carried by road and 10 per cent. by rail. Irrespective of the short-term implications of converting wagon load Speedlink traffic into train load, which makes good, sound commercial sense—a logic that the hon. Member for West Bromwich, East understands and accepts—it will lose a modest proportion of previous wagon load traffic that should be collected by road and taken to a rail head for transhipment by train load long distances—which is where rail road has the competitive advantage.
§ Mr. Snape
Nor do I, but I do not wish the Minister to mislead the House. Road has the advantage because, to quote that well-used cliche, there is not a level playing field. The road haulage business does not pay its true costs, as the Minister knows. The Government insist that rail freight breaks even, taking one year with another, so there is a transfer of freight from rail to road. We still want an answer as to whether, under the terms of the concession, a sensible implementation of the policy that the Government supposedly advocate, as the Opposition do, would breach that agreement. If it does, how much will that cost the taxpayer?
§ Mr. Freeman
I tried to answer that point. I said that as and when primary legislation is laid before the House to permit free access to the tracks of British Rail and other rail owners and operators, a judgment will have to be made. I shall not speculate as to whether that will be classified as a major change in the ground rules, permitting the concessionaire to ask for an increase in tolls. It is impossible to speculate because that will be a matter for the next Parliament.
However, I can spell out the procedure. There would be an application to increase the tolls, which would come before the House on an affirmative order. If that were not passed by the House, the concession would terminate, and the Government would have to take over the assets—the bridge—and the liabilities. The hon. Lady may be concerned about that, and her amendment, which I advise the House to resist, implies that there is some doubt about the taking over of the liabilities. However, the hon. Member for Kingston upon Hull, East (Mr. Prescott), who is most anxious to bring the private sector into building the road and rail infrastructure, will not be able to tap those funds from the private sector if the amendment were passed.
The amendment would cloud the ability of any Government to raise much-needed finance from the private sector. It is a risky business building such projects as the Severn bridge, the Dartford to Thurrock crossing or the Birmingham northern relief road. Construction and maintenance costs get out of hand, the traffic might not materialise. If the House were to change the legislative ground rules, it would only be right that, if the concession terminates, the Government should take over not only assets but the liabilities.
§ Ms. Primarolo
I draw the Minister's attention to paragraph 12 of the notes that he circulated in Committee. In addition to taking over the liabilities and the running of the bridge, which we understand because it is an extension of the M4 motorway and it would be difficult to cross the river Severn without the bridge, he said:SRC would be contractually entitled to a certain degree of compensation for its adverse financial effects.I read that to mean over and above taking on the liabilities, and that is what I was specifically asking about.
§ Mr. Freeman
Perhaps I can enlighten the hon. Lady. There may be a lack of clarity in the note. It means that if there is a change in the legislative ground rules and the concessionaire's financial calculations go awry and he seeks some form of financial compensation, that would come principally from an increase in the tolls. That is how the concessionaire would seek to correct the situation. That is what is meant by compensation. If the House refused to agree to the increase in tolls and as a practical matter that meant that the concession therefore terminated, the Government would take over the bridge and the liabilities and continue to toll.
§ Ms. Primarolo
In that case, the Minister is saying that the House would have no option but to accept the company's application for an increased toll if it applied to us on the basis that it needed an increased toll because changes in the Government's transport policy had adversely affected its ability to raise the finance necessary. If we refused that toll and a reduction of the concession was not feasible, we would be liable for compensation. That is what the Minister says in the note. Therefore, we have no choice but to agree to the toll increase if the company says that our legislation has adversely affected its ability to run the bridge viably.
§ Mr. Freeman
If the House in its wisdom rejected the affirmative order and the concession terminated, the Government would take over the bridge, its assets and liabilities, and presumably manage and toll it until the liabilities had been discharged. That does not represent damages paid out in cash to the concessionaire, if that is what the hon. Lady thinks. It is the Government taking over the bridge, standing in the shoes of the concessionaire and then managing its completion.
§ Mr. Morgan
The Minister made blood-curdling threats about possible effects on the policies of my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) and his hopes as part of Labour's transport policy to have joint ventures with the private sector. But he did not answer my question about what the speech made by the Secretary of State for Transport means with regard to this concession. Is it that the concessionaires do not believe a word that the Secretary of State for Transport said when he announced this great reversal of years of policy favouring road over rail to a policy favouring rail over road, or do they think that it does mean something, in which case it has a bearing on the way in which they see their concession and the legislative environment which now must be in prospect if the Secretary of State's speech means anything? That is a public announcement by the Minister's Government, not by my hon. Friend the Member for Kingston upon Hull, East. What does it mean for this concession?
§ Mr. Freeman
I hope that the hon. Gentleman has had a chance to read my right hon. and learned Friend's speech. He talked in part about future legislation and I shall not speculate on whether that would represent a substantial change in the ground rules. I hope that with those reasoned explanations the House will resist the amendment.
§ Amendment negatived.
§ Order for Third Reading read.
§ Motion made, and Question proposed, That the Bill be now read the Third time.—[Mr. Freeman.]11.29 pm
§ Mr. Murphy
The Opposition welcome the crossing, because of the problems of the present bridge and because of its vital significance to Wales's economy in particular; it is, after all, our economic lifeline. None the less, I think that the Minister should take note of what has been said this evening, because of the importance of the bridge in the context of a much wider transport policy. What happens to railways, to motorways, to roads generally and to the Severn bridge is interlinked, and is a significant aspect of both the Welsh economy and the Welsh people's quality of life.
As my hon. Friend the Member for Bristol, South (Ms. Primarolo) pointed out, this is a novel adventure—a unique combination of private and public sector money. That is why, in Committee, we considered various vital safeguards. We examined the question of tolls, the debt problem, public inquiries and local consultation; we considered the future of the staff who are involved with the existing Severn bridge, and the environmental impact on both the English and the Welsh sides.
The Bill will now go to the other place, where it will be considered—as it was in the House of Commons—by a special Select Committee. We hope that the Committee will look again at those safeguards, and will consider some of the doubts that we have expressed with a view to improving the Welsh economy and quality of life.
We believe that this move is right for the Welsh economy; but we also believe that any mistakes now could cost millions in the future.
§ Mr. Michael Stern (Bristol, North-West)
Like the hon. Member for Torfaen (Mr. Murphy), I believe that the Bill is generally welcomed. As he recognised, however, it will affect both sides of the Bristol channel, and, in particular, traffic patterns in my constituency and that of my right hon. Friend the Member for Northavon (Sir J. Cope).
In Committee, the Government gave a number of undertakings that were very welcome to my constituents. Especially welcome was the commitment that the Department of Transport would give all possible assistance to the eventual construction of the much-needed all-directions interchange at Hallen. I am grateful to my right hon. Friend for pointing out a minor error that I made in Committee. I said, on the basis of information that I had received, that the proposed interchange would be entirely within my constituency; in fact, it also affects that of my right hon. Friend.
My constituents still fear that, even following the construction of the desired interchange, there will be a considerable increase in traffic affecting the western end of my constituency. I hope that my right hon. and learned 289 Friend the Secretary of State will extend the undertaking that he has already given, and that the Department will not only facilitate the construction of the interchange but—perhaps more important—consider alternate traffic patterns to avert what will otherwise be a great increase in traffic in Avonmouth and its surroundings owing to the industrial development that will inevitably result from the Bill.
§ Mr. Livsey
My party strongly supports the building of the second Severn crossing. However, some of what the hon. Member for Bristol, North-West (Mr. Stern) has said about traffic congestion should be noted. We need an integrated transport system, involving both roads and rail. The crossing should form part of the building bricks of a truly integrated system, bringing rail much more to the fore.
I hope that in the future, when we see the growth in road traffic in particular, and the effect that it will have on our environment, we shall have much more enlightened policies, which will encourage investment in rail as well as roads. Cost-benefit analysis should be applied to rail investment, just as it is to road investment.
§ Sir John Cope (Northavon)
I also welcome the construction of the second Severn bridge. However, I hope that the House will realise that many of my constituents who live in the area will suffer a great deal as a result of the building of the bridge because of the approach roads which go through, particularly, the parish of Pilning and Severn Beach.
I should like to express my gratitude to the Minister and the Department for the help that they have given in trying to alleviate the inevitably difficult consequences of the building of the approach roads and the bridge. I hope that, as the Minister said in Committee, they will continue to be as helpful as possible in alleviating the conditions that are brought about by the bridge.
In Committee, which the Social and Liberal Democrats did not attend, some Labour Members were dubious about the idea of tolls and some said that they were against them. The Opposition Front-Bench spokesmen have never said that they would do away with tolls or reduce them substantially. On the contrary, as with the previous 290 Labour Government, they seem to support the continuation of tolls. Some Back-Bench Members who have advocated doing away with tolls should not be allowed to get away with it.
§ Question put and agreed to.
§ Bill accordingly read the Third time, and passed.