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Channel Tunnel Rail Link (Supplementary Provisions) Bill

I was going to offer the noble Earl, Lord Attlee, the opportunity to speak because everybody else has, and I thought he was missing out. This is an interesting group of amendments, and I listened very carefully to the debate. It is not often that the noble Lord, Lord Bradshaw, gets me so interested and excited about his lunching arrangements, but he managed to do that this afternoon. I shall follow his diary with greater interest in future. Clause 1 makes clear that the Secretary of State's powers to support the national rail network also apply to High Speed 1. It does not create any particular funding obligations, but is a necessary power for any future Secretary of State who might choose to support services on High Speed 1 in a range of different ways. Amendment No. 1 makes it less certain that the Secretary of State is able to provide any support to train operators on High Speed 1. That could, for example, rule out the provision of any subsidies to the domestic franchisee, even if agreed through a competitive process. As a result, the Government cannot support this amendment, and I hope the noble Lord will withdraw it. Amendment No. 2 seeks to accomplish a similar goal, perhaps by a different route, which is to prevent the Secretary of State providing financial support to train operators, although it is slightly more complicated. This amendment allows the provision of assistance to domestic services with provision for international services excluded, as we understand it. The amendment is aimed at preventing the Government providing any support to Eurostar when LCR is restructured. I should start by saying that the power the amendment seeks to clarify—the power to support services in the 2005 Act—extends to Great Britain only. The Secretary of State does not have the ability to fund continental train services under existing legislation, making this amendment otiose. In the other place, the Minister made clear that the Government's intentions are to reduce long-term public support for international services and to ensure that they can be run sustainably on a commercial basis. The Government have supported international operations through Eurostar UK's access charge loan and guarantees of the company's rolling stock lease payments, hedging obligations and ability to pay High Speed 1 access charges. For the purposes of this discussion, I am assuming that that is the ““historical support”” referred to in the amendment, although the drafting is not, perhaps, as precise as it might be. The Government’s long-term objectives are to reduce or remove those types of long-term support when LCR is restructured and to ensure that the business is able to compete as a sustainable stand-alone entity. However, to pull away any possibility of support is probably unrealistic now and undesirable in the longer term. Amendment No. 2 would constrain the Government's ability to alter the historical funding structures already in place for Eurostar during the restructuring period. If it became possible to deliver better value for taxpayers or to achieve a higher sale price by reorganising the current support arrangements—for example, by rationalising the rolling stock leases—this amendment would prevent us doing so. Any changes would presumably fall outside the definition of ““historical support””, leaving the Secretary of State unable to continue to provide financial support and stripping value from Eurostar. I do not think noble Lords want to do that. No decisions have been taken on when or how Eurostar will be restructured, and this amendment constrains the Government's ability to take commercial decisions in the best interests of taxpayers. Understandably, noble Lords used the amendment to raise some questions, particularly about the role of the regulator. I shall try to deal with some of those issues now. The noble Lord, Lord Berkeley, asked about the definition relating to development agreement. Clause 5 amends the definition of ““development agreement”” in Section 56 of the Channel Tunnel Rail Link Act 1996. In addition, the term ““development agreement”” occurs in four provisions in the 1996 Act, three of which are of a legal and technical nature: Section 21, the duty of the ORR not to impede the performance of the development agreement in carrying out its regulatory duties under the Railways Act 1993; Section 33, the effectiveness of undertakings given by the Secretary of State in the development agreement; Section 40, application of landlord and tenant law to obligations and rights of parties to a development agreement lease; and Section 41, the disapplication of Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 to a variation of the development agreement. The amendment of the definition of ““development agreement”” in the Channel Tunnel Rail Link Act 1996 has no effect on Section 6 of the Railways Act 2005. The noble Lord, Lord Berkeley, asked what the point is of the development agreement. Post-construction, we expect this agreement to include the contractual obligations that the Secretary of State will want to put in place to assist the owner of High Speed 1. Those obligations might include capping access charges at an appropriate level; and ensuring that future access and charging arrangements are consistent with competition and other legislation. The noble Lord, Lord Berkeley, also looked at the interaction with the Commission. We shall be seeking state-aid clearance from the Commission in relation to restructuring. It is worth pointing out the role of the regulatory bodies—there has been some confusion in the debate on that. The Secretary of State is not the only regulatory body for High Speed 1. The Office of Rail Regulation also has a very important appellate function, which is how it currently operates. One can fairly argue that it is operated to good and reasonable advantage. I have answered the point made by the noble Lord, Lord Hanningfield, about subsidising international services. It is not the intention of the Bill to do that—only in respect of those international services that occur in the UK. Generally, on the point of the Office of Rail Regulation and the Secretary of State’s role, it is important that there is clarity on key commercial points before any sale process starts. Issues such as the level of access charges will remain with the Government as they will affect the value and the Government will recoup on their investment in High Speed 1. That is a benefit because it enables us to ensure continued investment into the rail network as a whole. Under the development agreement the Secretary of State oversees access contracts between the High Speed 1 infrastructure operator and train operating companies for High Speed 1 track and stations. Under the Railways Infrastructure (Access and Management) Regulations 2005, the Secretary of State is also responsible for setting a framework for High Speed 1 access charges and ensuring that the charges comply, quite properly, with the requirements of those regulations. The ORR is the appeal body. It might be worth responding to the point made by the noble Lord, Lord Bradshaw, about regulation by the Secretary of State being somewhat whimsical. I do not think it is; we do not see it that way and the Secretary of State certainly does not see it that way. We are trying to ensure that we have a framework for access charges through a contract. It goes without saying that such a contract would not seek to give the Secretary of State open-ended rights to change the access-charging regime. We have to have a disciplined approach. The noble Lord, Lord Bradshaw, referred to EC advocacy of independent regulation. The EC directive which underpins the 2005 regulation permits the regulatory body of railway infrastructure to be the member state—that is, the Government. It is not uncommon for that to be the case across Europe. I think I have replied to most of the particular issues raised by noble Lords and, having heard those points, I hope that noble Lords will feel content to withdraw their amendments.