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Rail Freight (EUC Report)

My Lords, I shall translate into plain English what this debate is about—the need to strengthen and implement EU law to create an open and competitive rail freight market. After all, the original purpose of what is now the European Union was a common market in which goods and services could move freely and competitively. I thank the noble Lord, Lord Faulkner of Worcester, for agreeing to answer this debate. The noble Lord, Lord Young of Norwood Green, in winding up the previous debate, acknowledged that one has to be very careful, because there are always one or two people who know more than you do about a subject. At least two noble Lords who are going to speak know far more than I do about it. I particularly thank the noble Lord, Lord Bradshaw, a member of Sub-Committee B, and the noble Lord, Lord Berkeley, whose knowledge and involvement in furthering an open and competitive rail industry, not just freight but passenger, know no bounds. His activities over the past 30 years in this field deserve congratulations and thanks from us all. I thank colleagues on Sub-Committee B, which deals with the internal market, including Professor Chris Nash, who was our special adviser. Indeed, I think that he was an adviser on an earlier report on a similar topic. Thanks, too, to James Whittle, who has moved on to become second clerk to the Select Committee chaired so excellently by the noble Lord, Lord Roper. I am quite certain that James Whittle will go further and higher in his career—I hope, very much, in Parliament. We took evidence from 23 different bodies and 14 of them gave oral evidence, an indication of the degree of concern, which I shall shortly describe, about the failings of the first rail freight package, which dates back to 2001. There have been several other attempts in the intervening years between now and then to try to develop a competitive market for rail freight, but the original initiative was eight years ago. We produced our report in June this year, and on the same day as publication had an informal response from the noble Lord, Lord Adonis, who was then Minister of State at the Department of Transport. I pay tribute to the degree of interest and expertise that he has developed over a great number of years in the rail industry. He welcomed the report informally. Then we had a formal response from Sadiq Khan MP, the present Minister of State at the Department of Transport. That came very quickly—in July. If Select Committees of this House are going to produce reports, a timely response from government is helpful to your Lordships and to those who represent us in Brussels, as well as to the Commission, Parliament and Ministers who have either given us evidence or taken an interest in our proceedings. I welcome the very positive response from Mr Sadiq Khan. There were areas of minor disagreement or reserve, which the Minister may wish to outline a little later on, but overall it was a positive response, and I therefore hope that the committee’s report has been helpful. The first rail freight package was delivered in 2001. It was a directive, and when concluding my remarks I shall come on to why I believe—I think that the committee generally agrees—that regulations are, frankly, sometimes more effective than directives. Although some would argue that it is not perhaps as democratic as a directive, which allows Parliaments to interpret into their own laws its purposes, a regulation says, "This is what should be done to develop a competitive market". The purpose of the rail freight package was not only environmental—to take more traffic off the roads and onto the railways—but, more importantly, to try to open up an efficient and competitive market for rail freight moving within the European Union. Obviously, we have looked at the difficulties encountered by UK rail freight operators travelling through the tunnel, then through France to other destinations in Europe, and at the restrictions, problems and headaches that they have encountered. Eight years on, the Commission has finally realised that things have not worked out as well as they should. In June 2008, 24 member states were written to, pointing out where they had not fully complied with the requirements of the first rail freight package. I believe that, today, 21 out of that 24 are still in breach of their duties in implementing the directive. I do not wish to single out any particular countries, but I shall mention four that our rail freight operators seek to pass through: France, Germany, Spain and Belgium. I anticipate that those four are shortly to be subject to infraction proceedings for not implementing the package. I appreciate that there has been an economic downturn and consolidation in the industry. Particularly in Germany and France, the larger railway undertakings have been able to snap up, at attractive prices, smaller operators. Once you get that consolidation, competition is therefore obviously under threat. Doubtless, the noble Lords, Lord Berkeley and Lord Bradshaw, and other colleagues, may wish to deal with that issue in greater detail, but for the convenience of your Lordships I shall run through the seven key conclusions that we reached. First, we believe that, as in the United Kingdom, the infrastructure—that is, the track—should be under separate management and, indeed, ownership from the train operators. This happens in the United Kingdom, with Network Rail being separate from the passenger and freight train operators. That is important, because you enhance competition if the individual new entrant to a particular new industry is able to deal with a common infrastructure—of track ownership and maintenance—so that there is a level playing field not only for United Kingdom rail freight operators seeking to pass through European countries, but for anyone from the 27 nations. Secondly, we believe that the regulators should be independent not only of the track owners and train operators but of Government. Government may appoint regulators, but the regulator—as in the United Kingdom’s Office of Rail Regulation—is genuinely able to reach clear, justifiable and economically based decisions. In several European countries the regulator is either part of a government department or, indeed, controlled by the infrastructure under a manager. That cannot be right. Thirdly, we believe that there should be a common definition and transparency in calculating the track access charge—that is, the charge that the freight operator pays to travel along the railway lines in an individual country. Those charges are not transparent at present. They vary widely across Europe, and if there could be a common formula for the calculation it would be fairer, and easier, for the freight operators to calculate the costs of moving their goods. Fourthly, we think that all of the freight operators should have open access to what we call rail services, such as terminals, ports and sidings. That is not true at present, and it is a restriction of trade. Fifthly, we have argued that, as is the case in the United Kingdom, there should be multi-annual funding contracts from Government to the track managers. In this country, as your Lordships will know, we have a five-year periodic review of those charges, which is a long enough period for the manager of a track not only to calculate the access charges over the longer period but, frankly, to give the freight operators from other countries some degree of confidence when they plan their prices and offer their services. Sixthly, we think that legal pressure should continue through the infraction proceedings. The Commission has a duty to take before the courts the failure of Governments to implement the package. Finally, at the same time we think that we have to proceed with a recast—that is, a reformulation—possibly by way of regulation as opposed to directives. We want the Commissioner and his staff to have the courage to say that, in Europe, we have failed over the past eight years—and it will shortly be nine—to have a free and competitive market. It is important for the vitality of the economy of the European Union, and they should get on with the job. I beg to move.