Draft Public Service Obligations in Transport Regulations 2023
(Limited Text - Ministerial Extracts only)
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The Parliamentary Under-Secretary of State for Transport (Anthony Browne)
I beg to move,
That the Committee has considered the draft Public Service Obligations in Transport Regulations 2023.
It is a pleasure to serve under your chairmanship, Sir Robert. I realise that we have two chairmen present, although you are sitting in the Chair today.
The draft regulations relate to arrangements to support the effective and efficient provision of transport services to customers, in particular rail passenger services. They will use the powers provided by the Retained EU Law (Revocation and Reform) Act 2023 to revoke EU regulation 1370/2007 and replace it with these Public Service Obligations in Transport Regulations 2023.
In doing that, we will take advantage of the benefits of Brexit to put in place a regime that is better tailored to the transport sector in Great Britain, supporting the provision of services to customers. The draft regulations will allow us to retain a flexible regime for contracting public transport services separate to the mainstream procurement and subsidy regimes, and to provide greater clarity and certainty to industry by retaining the interpretive effects of relevant European Union case law and underlying principles, when in Great Britain’s interest. In addition, the regulations will streamline the existing regime by removing duplicative and unnecessary provisions.
When the UK was a member of the EU, the 1370/2007 regulation created a bespoke procurement and subsidy regime of public service contracts in the transport sector. That was in recognition of the fact that such contracts are needed in the general interests of the public and cannot always be operated on an entirely commercial basis. The regulation contained some important exemptions from the complex rules on subsidies and procurements. It recognised the special status of public passenger services as “critical national networks”. It also provided contracting authorities with the freedom to let passenger service contracts more efficiently via simpler competitive processes and, where necessary, by direct award. Such flexibility helped to minimise disruption to those important public services.
The intent of the regulation was to encourage competition, so that the default process for the award of a passenger services contract is through competition. The regulation recognises, however, that in certain circumstances it is necessary to award a contract without competition by instead making a direct award to maintain the continuity of essential public services—for example, the emergency measures agreements that were put in place following the pandemic to secure train services.
Discussions with experts from across the transport sector have identified opportunities to remove some of the ambiguities and conflicting provisions in the existing regulation. That will provide greater certainty and clarity to industry and contracting authorities. We are using the opportunity of our post-Brexit flexibilities to revoke and replace regulation 1370/2007 to ensure that a robust and reliable regime for public transport service contracts is maintained independent of the mainstream procurement and subsidy regimes. The draft regulations will also increase efficiency by removing duplicative or unnecessary provisions and by clarifying drafting wherever possible—for example, by defining terms that previously were left undefined in the EU regulation. This statutory instrument will also bring the regime in Great Britain into compliance with the subsidy control chapter of the UK-EU trade and co-operation agreement.
Crucially, the draft instrument will preserve existing powers to make direct awards of rail contracts, which would otherwise sunset on 25 December 2023 due to a sunset clause in regulation 1370/2007. Without this draft instrument, therefore, the Department for Transport and other contracting authorities such as Transport for London would lose important powers on which we rely to award rail franchises. Leaving the EU has given us the opportunity to retain those important powers, and it is in the best interests of the railways and Great Britain that we retain the important flexibilities that they provide.
The private sector has an important role to play to drive innovation and growth, and we remain committed to returning to competition for rail contracts as soon as possible. The draft instrument, however, recognises that in certain circumstances it will be necessary to award a contract by making a direct award.
Lastly, the draft instrument will provide greater clarity and assurance to industry by retaining the interpretive effects of EU case law and underlying principles. Under the Retained EU Law (Revocation and Reform) Act, EU case law will no longer be binding on UK courts after 31 December 2023. Relevant EU case law relating to procurement notices and in-life change of contracts, which was not codified by the regulation, has been relied on for clarity by authorities and contractors. The case law is therefore being codified by this instrument as it provides helpful clarity.
Likewise, EU principles will no longer apply to underpin public service obligation procurements from the year end. The instrument replaces those with principles based on the new mainstream procurement regime for England and Wales, and with principles based on Scottish procurement law for Scotland. Beyond the changes that I have outlined, this instrument largely maintains the status quo. That will provide certainty, clarity and confidence to contracting authorities, operators and passengers alike.
The Government are using the opportunities provided by the Retained EU Law (Revocation and Reform) Act to revoke regulation 1370/2007 and replace it with an instrument that optimises the regime for the railways in Great Britain. Without this instrument, important powers to make direct awards of rail public service obligation contracts would fall away, with the potential to cause disruption to vital public transport services.
The instrument will also create a simpler, more effective regime by removing duplicative or unnecessary provisions. Furthermore, it will provide greater certainty by codifying important case law and ensuring consistency with the mainstream procurement and subsidy regimes, as well as with the subsidy control chapter of the trade and co-operation agreement. I commend the regulations to the Committee.
Anthony Browne
I thank hon. Members for their consideration of the draft regulations and for their helpful and constructive points. I should note that this regulation has gone through and been supported by the devolved Administrations in both Wales and Scotland and, indeed, been approved by the Scottish Parliament and the Welsh Government.
To come first to the points from the SNP shadow Minister, the hon. Member for Paisley and Renfrewshire North, he asked when the response to the Union connectivity review, the Hendy review, would be published. As he knows, I am not the Rail Minister; I am standing in for the Minister of State, Department for Transport, my hon. Friend the Member for Bexhill and Battle (Huw Merriman) for this debate, but I will write to the hon. Gentleman with information about that.
The Labour shadow Minister, the hon. Member for Wakefield, raised quite a few specific points. One was whether the regulations apply to operators. This is not expected to apply to operators; they would be covered by the mainstream procurement regime. He asked a whole series of questions about the impact on public passenger services in terms of cost, improvements to services and holding poor performance to account, and about the impact on workers. As I said in my opening remarks, the point of these regulations is to ensure improved services for passengers and it would be very disruptive not to have the regulations in place. But I am very happy to get the Rail Minister to write to the hon. Gentleman with a more detailed explanation of the different ways this instrument would help with all the points that he raised.
In summary, this instrument will put in place a regime for the award of public service obligation contracts in the rail, light rail, bus and tram sectors that is tailored to the transport sector in Great Britain, while largely enabling contracting authorities and operators to continue operating as they do now, by maintaining the default position of competitively tendering for public service obligation contracts. It will enable the Government to meet their international obligations and will ensure consistency with other domestic legislation. Lastly and crucially, it will retain important flexibilities in the way we award contracts, which would not have been possible had we remained a member of the EU.
I am grateful to hon. Members for considering these regulations today and I hope that they will join me in supporting them.
Question put and agreed to.