The noble Baroness said: I wish to move the amendment standing in my name and those of my noble friends. Amendment No. 344 would insert a new clause after Clause 230 which comprises only a simple phrase, seeking to delete Section 17(5) of the Railways Act 1993. Section 17 states that:
Nothing in this section authorises the Regulator to give directions to any person requiring him to grant a lease of the whole or any part of a railway facility".
The amendment addresses the use and running of railway stations. It would provide that the regulator may intervene to ensure that adequate space is made available in railway stations for the provision of facilities for passengers, rather than being allocated by Railtrack for commercial trading.
§ Railtrack currently manages 16 major stations and seeks to take over many more when the current franchises expire. This is a matter of concern to the train operating companies and to ATOC. The amendment would enable an appeal to be made to the regulator if a proposal to redevelop a station is disadvantageous to passengers or to franchise train operators.
§ An example of the way in which the redevelopment of a station can be disadvantageous is where non-money-making functions, such as the provision of 756 lavatories, rest places for staff, or other facilities, are removed to the furthest corners of the railway station, while places to eat or sell things which provide a good commercial return and for which rental can therefore be charged, to the benefit of Railtrack, are situated in the more prominent parts of the station. The disadvantages to passengers are perfectly clear. I beg to move.
In supporting the amendment, perhaps I may make a couple of points. The important thing is that the train operators believe that they are closest to their customers and have a better knowledge of what customers want at a station. The amendment would also bring some competition into the operation of stations rather than giving them all to Railtrack. It would mean that they could appeal to the rail regulator, as the noble Baroness has said.
Concerns may arise in regard to Railtrack's financial position, but that would be protected by the rail regulator's obligation to ensure that Railtrack is able to finance its activities. We do not feel that there is a problem. I understand that some negotiation is going on between Railtrack and ATOC at the moment. It may well be that by the time the Bill reaches its Report stage the matter will have been resolved. At present, there is a strong feeling among the train operators, which I support, that the amendment is highly desirable.
§ Lord Macdonald of Tradeston
Amendment No. 344 repeals a prohibition on the regulator directing a person to grant a lease of a railway facility or part of one. The aim is to bring leases within the regulatory umbrella, but we think that a more complicated amendment would be necessary to achieve this effect. However, I shall concentrate on the underlying principle rather than any technical omissions.
The current regulatory regime is based on the concept of permission to use railway facilities. It is not directly concerned with "ownership". The amendment therefore seeks to add a new regulatory regime on top of the existing public interest controls through licensing and access arrangements.
We gave careful consideration to the representations that we received from the Association of Train Operators. On balance, we have concluded that the regulatory controls under the Railways Act, as amended by this Bill, are sufficient to protect the public interest.
Even if there is no lease, train operators can secure the rights they need to operate their business through access agreements with Railtrack. The terms of such agreements have to be approved by the regulator, who also has powers of direction under the Railways Act.
The current station access conditions require Railtrack and other station facility owners to reach agreement with or consult various parties before changing arrangements at stations. The regulator can also control the operation of stations through the granting of licences.
757 The Bill clarifies that the regulator has the flexibility to determine that matters in access agreements might better be dealt with alternatively, or as well as, in a licence. This would have the effect of moving enforcement for the matter from the parties to the regulator, subject to the consent of the licence holder or following a referral to the Competition Commission. The regulator is considering changes to the station access regime and the enhanced powers in this Bill may be of assistance.
I understand that the train operators' concerns surfaced after reported statements by Railtrack. I shall therefore move on to this aspect of the train operators' case for legislative change.
Following representations from train operators, Railtrack has moved to reassure them, the shadow SRA and the Government of its intentions. I am pleased to inform the Committee that, after extensive discussions with ATOC, Railtrack has made a commitment to the shadow SRA that it will offer leases on broadly comparable terms to such operators as the franchising director—in future the SRA—nominates during the franchise replacement process. The agreement will provide a mechanism to resolve the terms, in the event that the parties cannot agree. It will cover all of Railtrack's franchised stations and leased areas on major stations for the replacement of every franchise in the country. Railtrack's commitment will be made effective through either a memorandum of understanding or a legally binding agreement between Railtrack and the franchising director.
The creation of a new power for the regulator to direct the granting of a lease would be a fundamental shift in railway regulation. It should not be undertaken lightly. The existing matrix provides a high degree of regulatory influence and control. We believe that the controls under the amended Railways Act, supplemented by the new assurances given by Railtrack, are sufficient to protect the public interest in stations.
I hope that, in the light of that information, the noble Baroness will withdraw the amendment.
§ Baroness Thomas of Walliswood
That was a full response—so full, I did not follow every word. I will carefully read the Minister's comments, then consider what to do next. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ Schedule 24 [Review of access charges by Regulator]:
Baroness Thomas of Walliswood moved Amendment No. 345:
Page 283, line 24, after ("agreement") insert ("in respect of such access").
§ The noble Baroness said: This schedule is an addition and allows an appeal to the Competition Commission against the decision of the rail regulator on a periodic review of access charging. Amendment No. 345 confines an appeal to the access charge and does not allow the commission to probe issues such as 758 performance regimes. Amendment No. 349 adds other beneficiaries to those allowed to appeal against the determination of an access charge. At present, the right of appeal is confined to the facility owner, Railtrack. Beneficiaries would be added, among which would be Freightliner. I beg to move.
I support both amendments. There is wide interest in this abstruse but important matter of clarification. Also, it seems extraordinary that a beneficiary cannot appeal when the facility owner and other parties can do so.
§ Earl Attlee
Several of my amendments are in this group but, although I am bright eyed and bushy tailed, we ought to make progress.
§ Lord McIntosh of Haringey
I do not know whether that means I should respond only to Amendments Nos. 345 and 349. The group concerns access charges and the Competition Commission's right to veto proposed licence or access charges. The Bill brings the railways regulatory regime closer into line with equivalent utilities regimes. I do not recognise Amendment No. 345 from the speeches made in favour of it, because it would restrict the scope of the access review mechanism to charges for access, which would be too restrictive. Access contracts cover charges for access but also a number of ancillary services such as signalling and timetabling—without which access would be meaningless. Payment for those services should be capable of review.
Amendments Nos. 347, 349, 351 and 352 would give train operating companies the right to object to the regulator's proposed decision on the access charge review. The companies' rights are effectively preserved by the new arrangements. They do not currently have a right to object to the findings of a review because that is principally a matter between the regulator and Railtrack. TOCs are customers of Railtrack and, in determining the access charge, the regulator effectively supplants what would otherwise be a commercially unequal negotiation between a monopoly supplier and its dependent customers. We have put in place arrangements which prevail in other utilities. We do not believe that it is right to extend to train operating companies the right to a review notice.
Without referring to any other Conservative amendments, I should like to deal with Amendment No. 348 which corrects a cross-referencing error. I am grateful to the noble Earl, Lord Attlee, for noticing that error. I am pleased to accept the noble Earl's amendment, even though he has not spoken to it.
§ 2.15 a.m.
§ Baroness Thomas of Walliswood
We should congratulate the noble Earl for his victory. Perhaps if none of us said anything about our amendments they would all be accepted. That would be a very novel way to conduct the Committee stage. I cannot be quite as bright-eyed and bushy-tailed as the noble Earl because obviously I did not make clear the purpose of Amendment No. 345. Its purpose is not to confine the 759 review of access charging simply to access charges but to the appeal against the review. However, at this late hour I shall not press the amendments. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 346 and 347 not moved.]
Earl Attlee moved Amendment No. 348:
Page 284, line 39, leave out ("17(6)") and insert ("17(7)").
§ On Question, amendment agreed to.
§ [Amendments Nos. 349 to 356 not moved.]
§ Schedule 24, as amended, agreed to.
§ Clauses 231 and 232 agreed to.
§ [Amendment No. 357 not moved.]
§ Clause 233 [Transfer of Regulator's functions to Secretary of State]:
§ [Amendment No. 357A not moved.]
§ Clause 233 agreed to.
§ Clauses 234 to 238 agreed to.
§ Schedule 25 agreed to.
§ Clause 239 agreed to.
§ Clause 240 [Licence modifications following Competition Commission report]:
§ [Amendments Nos. 358 to 360 not moved.]
§ Clause 240 agreed to.
§ Clause 241 [Competition functions of Regulator]:
Earl Attlee moved Amendment No. 360A:
Page 155, leave out line 32.
§ The noble Earl said: Clause 241 threatens market uncertainty in the business of raising finance for new railway rolling stock and thus jeopardises future investment in new trains. The Government introduced Clause 241 into the Bill in another place. There was little, if any, debate on it and this is the first opportunity for Parliament properly to consider it.
§ Clause 241 is said to "clarify" the powers of the rail regulator under the Competition Act 1998. It deals with powers over railway competition issues not explicitly covered by the Railways Act 1993. They are the areas in which the rail regulator exercises concurrent functions with the Director General of Fair Trading. The Competition Act 1998 gave the rail regulator concurrent functions with the DGFT over "railway services".
§ Clause 241(3) replaces "railway services" with the term "services relating to railways" and specifically defines them in paragraphs (a) to (d) as railway services; most importantly, the provision or maintenance of rolling stock; the development, maintenance or renewal of a network; and the development, provision or maintenance of information systems. There is no need for the clause, in particular paragraph (b). That clearly applies to the rolling stock companies (ROSCOs) which own the existing rail rolling stock and lease it to the operators. The ROSCOs are the source of investment in the trains.760
§ The regulator already believes that he has the powers contained in paragraph (b). He has said that he is going to question the train operating companies later this year to check that the rolling stock suppliers are not acting uncompetitively. The ROSCOs accept that they are covered by the Competition Act term "railway services". Any anti-competitive practice would be covered by that Act and the rail regulator would exercise concurrent functions in any OFT inquiry into their market.
§ The ROSCOs have published codes of conduct agreed with the regulator. The codes set out how they will behave towards new and existing customers, particularly if rolling stock moves from one operator to another in the event of a franchise changing hands. If Clause 241 does not represent an extension of the powers of the regulator, there is no need for it. If Clause 241 does represent an extension of the powers of the regulator, the additional regulatory risk will affect the international sources of funding which the ROSCOs use to raise new capital for the trains. It would drive up the cost of capital, make capital harder to obtain and make financing new trains more difficult. And no one has been consulted about it.
§ ROSCOs have already raised £2.4 billion for investment in new rolling stock. Over the next 10 years, £10 billion will have to be found to replace ageing trains and provide new trains to meet the 50 per cent growth in the number of rail passengers, which everyone, including the Government, want.
§ All that will have to come from private investors, who need a stable regulatory environment. At the least, Ministers should state explicitly that Clause 241 does not conceal a hidden agenda for greater interference in the rolling stock market. It must guarantee that a regulator will not use this clarification to extend his powers into detailed interference in the operation of the rolling stock market. I beg to move.
§ Lord McIntosh of Haringey
I listened carefully to the noble Earl, Lord Attlee, and I can assure him that there is no hidden agenda. The amendment would remove the provision and maintenance of rolling stock from the list of services where the rail regulator has concurrent powers with the Director of Fair Trading under the Competition Act. Since 1st April, the rail regulator has had powers under the Competition Act 1998 in relation to anti-competitive agreements and so forth, which relate to the supply of railway services. It is widely assumed that agreements for the maintenance and provision of rolling stock by the rolling stock leasing companies relate to the supply of railway services and in our view that is the correct interpretation.
However, as the Railways Act 1993 de fined "railway services" narrowly as "passenger goods, light maintenance, station and network services", and rolling stock services are none of those, it would not be beyond the wit of the law to argue that agreements relating to railway services should be narrowly construed to mean agreements for railway services and therefore exclude rolling stock services.
761 We want to put the position beyond doubt, with clarification that services provided by the rolling stock leasing companies, and also railway engineering and information services, fall within the orbit of the regulator's jurisdiction under the Competition Act 1998. I hope that that is the assurance for which the noble Earl was looking.
§ Earl Attlee
I shall study carefully what the Minister said. With the usual caveats, I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
Clause 241 agreed to.
Clauses 242 and 243 agreed to.
§ Clause 244 [Passenger Transport Executives]:
§ [Amendments Nos. 361 and 362 not moved.]
§ Clause 244 agreed to.
§ Clause 245 agreed to.
§ Clauses 246 to 248 agreed to.
§ Schedule 26 agreed to.
§ Clause 249 agreed to.
§ [Amendment No. 363 not moved.]
Earl Attlee moved Amendment No. 364:
After Clause 249, insert the following new clause—