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EU: Single Market (EUC Report)

My Lords, I follow my noble friend Lord Borrie in not being a member of the committee, but I have read the report with great interest. I congratulate the chairman, the noble Lord, Lord Freeman, and the committee on one of its best reports. I do not quite see the same enthusiasm in the Commission on the railway, which is what I shall concentrate on. I wondered whether the reference to a wallflower was to the Commission’s transport department, but I shall come to that. The foreword of the report summarises everything very well. It talks about competition and the benefits to consumers and relates the failure of member states to implement legislation—as other noble Lords have commented—and the maintenance of barriers. It worries about economic protection and talks about regulatory authorities being independent, which I will come back to. As my noble friend Lord Borrie said, it talks about the problem of national champions and unbundling. Although the report is largely about the energy, telecoms and financial services sectors, most of the comments, problems and successes also apply to the railway sector, which suffers from many of these things. I fear that the Commission is doing less to resolve them than some noble Lords have suggested may be the case in these other sectors. For example, as regards paragraph 81 on ““Restrictions to Effective Competition””, the liberalisation of the railways sector started in 1991, which I suppose is only 17 years ago, and was designed to stimulate competition, as for energy. We still have vertical integration on the railways. There are two different models. One is a holding company with lots of subsidiaries, which are, of course, independent until they choose not to be. I am going to name and shame them, because it is about time they were: Germany and Italy. There is another version, which France has, with totally separate infrastructure and operations, but there is a requirement for the infrastructure manager to use the operations company SNCF as a subcontractor for all its activities. They achieve the same objective of the national champion. There are major problems with access to rail infrastructure, just as there are on energy. I congratulate my noble friend on what the Government are achieving on energy in the Commission, but it must be done on the railways as well. There is a lack of transparency. If an independent train operator wants to ask for a path between A and B in Germany—as happened a couple of years ago—and applies to the infrastructure manager, the infrastructure manager’s operating arm phones the customer within 24 hours, saying ““We could do it for you cheaper””. That is not how the single market is supposed to work. There is a lack of investment and capacity. There is collusion between incumbents, who are very good at making rules and standards designed to keep out the competition. The railways are wonderful at rules. Of course, there is unfair state aid. I could go on at length, but I am not going to. I welcome that the report rightly states that competition brings efficiencies, lower prices, better quality and growth. That applies to rail freight as well. I declare an interest as chairman of the Rail Freight Group and a board member of the European Rail Freight Association, which is pressing the Commission hard on all these issues. We are urging the Commission to come forward with legislation to sort out the failure of the previous legislation alongside enforcement, neither of which they are doing very well. In this instance, I hope that the noble Lord, Lord Freeman, and his committee consider having a look at the railways from the same point of view that they have done in this report. We must press for unbundling, as for energy. It is desperately important. Total separation, as the committee recommends in paragraph 87, is the only model that will work. Independent system operation does not work; there is always collusion, as I have said. It needs comprehensive regulation, which also does not exist. I can see why the member states prefer to have the ISO model as there is less legislation and they can avoid enforcement and regulation. What are they going to do about that? It is very important that our Government press other member states to get in line. I shall now turn to regulation which, like other noble Lords, I see as the key to the success of the single market in all these industries. Regulations must, along with Governments, ensure fair, transparent, competitive environments for growth. The rail regulator here does a good job; in particular, the cost of and process for appeals are about as cost-effective as one can get in this country. Germany also has a very good rail regulator. Unfortunately to appeal one has to go through several levels of courts. One can see how the incumbent hates what the regulator is doing by the strong, public battles that they sometimes have, but at least Germany has a regulator. In France, the regulator consists of one person who has an advisory role only. Given all the other things we have talked about in member states, there is no consistent regulatory policy across the European Union. I understand why this report, the Commission and the department do not want to see a European regulator. That is probably right, but consistency has somehow to be imposed on all the other regulators so that they all do the same things in the same way. On the railways, the regulators meet regularly and swap advice, so I am pleased that the Government are supporting the agency for the co-operation of energy regulators, and I hope there will be something similar for railways soon. For me, the key thing is that national regulatory authorities need to be independent of Governments—as the noble Lord, Lord Bradshaw, said—especially when financial interests are at stake. That is set out in paragraph 157. I welcome the Government’s restatement of that policy, but I hope that my noble friend can ensure that it is consistently applied across other parts of the Government. On the Channel Tunnel Rail Link issue, it is wrong that the regulator is also the Government who have a financial interest in selling the part of the industry that they are about to regulate. It has been said that it is in our interests to regulate the industry to get as high a price as possible. That is contrary to my noble friend’s policy in BERR, and I hope that that can be applied, even at this late stage, to the Department for Transport and the CTRL. I look forward to the response from my noble friend. I urge the Government to continue to intensify their help to the Commission by citing best practice and working as hard as they can to make sure that other member states understand what we have achieved, without being arrogant—I know that we are not arrogant. As the noble Lord, Lord Borrie, said, it has been very difficult in the new accession countries, but it is still possible to get consistency. I hope that in a year when a large amount of railway legalisation and enforcement will be coming out of the Commission the noble Lord, Lord Freeman, and his committee will think it is a good opportunity to have a look at the railway sector across Europe.