The Committee divided: - Ayes: 4 / Noes: 7 - Question accordingly negatived.
The House divided: - Ayes: 6 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 1 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
Jerome Mayhew
Thank you, Mr Western, and for agreeing to be in the Chair this afternoon. We are part-way through consideration of the schedule, with a degree of overlap: amendment 109 was selected in a separate group to this one, although its wording is intricately linked to that of amendments 110 to 116. I shall try to minimise the degree of repetition for all concerned.
The amendments in this group seek to constrain the Secretary of State’s ability to modify the licence of Great British Railways without first seeking consent from the Office of Rail and Road and the passengers’ council. The Government’s strategy is for the Bill to be the legislative shell for the creation of GBR. Crucial matters of detail, such as the licence under which GBR will operate, together with important long-term strategies, business plans, targets and so on, which we have mentioned more than once in our deliberations so far, are separate from the Bill.
That detail matters and deserves proper scrutiny by this Committee and elsewhere in the Houses of Parliament. When the Rail Minister and his officials appeared before the Transport Committee on 7 January, Members took several attempts to secure an assurance that the draft licence would be published before Parliament completes scrutiny of the Bill, albeit without a specific date set. It is therefore important to include in the Bill stronger checks and balances than exist now, and that is the purpose of amendments 110 to 115.
At present, the Bill merely requires the Secretary of State to consult the ORR. Legally, that is of course very weak and, after such consultation, the Secretary of State may simply ignore whatever it is that the ORR comes up with. Amendments 110 to 112 therefore require the Secretary of State to obtain the Office of Rail and Road’s agreement for the licence to be issued, and amendments 113 to 115 require the Office of Rail and Road’s agreement for the licence to be modified.
In addition, modification of the licence requirements would need consent from the new passenger watchdog. If the passenger watchdog is to be as powerful in championing the interests of passengers as the Government claim they want it to be, it requires proper powers that go beyond an invitation to be consulted. That leads me to amendment 118, which would leave out line 6 on page 56 of the Bill and would strengthen the right of the ORR to grant a licence to a non-GBR operator.
The schedule contains important powers for the Office of Rail and Road to issue licences to operators other than GBR to operate services on the network. However, proposed new section 8(5)(a) in paragraph 3 of the schedule gives the trump card to the Secretary of State, who must consent to the granting of such a licence. Why is that power of veto required? Perhaps the Minister will explain when he responds.
If the Government wish to reduce their involvement in the day-to-day running of the railways and the Office of Rail and Road deems that an application from a non-GBR operator meets all the requirements and conditions set out in the Bill, why do the Government think it necessary to have that overriding power? It does not appear to make sense. Amendment 118 would remove that power of veto. The group of amendments, together, would require the Secretary of State to obtain a formal recommendation from the Office of Rail and Road, and would require that the GBR licence adequately ensures that licence obligations relating to safety and standards are not compromised or undermined. The amendments would ensure that, as GBR is granted new responsibilities by the licence, it continues to be subject to safety standards obligations that are in the licence issued by the Office of Rail and Road to the current infrastructure manager, Network Rail.
Such licence obligations go beyond obligations under the Railways and Other Guided Transport Systems (Safety) Regulations 2006—which are called ROGS for obvious reasons—and would require Great British Railways to participate in the industry’s collaborative structures around collective decision making, managed by the Rail Safety and Standards Board, and comply with safety and interoperability standards set collectively by the sector, including for freight and supply chain.
For those reasons, this group of amendments, taken as a whole, would provide important strengthening of the role of the ORR. I look forward to hearing the Minister’s response.
The Parliamentary Under-Secretary of State for Transport (Keir Mather)
May I begin, Mr Western, by saying what a pleasure it is to serve under your chairship? I thank the hon. Member for Broadland and Fakenham for tabling this group of amendments. I shall discuss amendment 233 with amendments 110 to 112, which I believe all share the same intent. Provisions to require the agreement of the ORR and the passenger watchdog before the Secretary of State issues the GBR licence would add an additional and unnecessary level of bureaucracy. If the amendments intend to ensure that the ORR and the passenger watchdog can constructively input into the licence, I assure the hon. Member that the Bill already requires the Secretary of State to consult the ORR and the passenger watchdog, and to invite representations more widely, before the licence is issued. If the amendments were accepted, it would no longer be clear who had the right to determine the terms of the licence. It is only appropriate that, following full consultation, the Secretary of State, as the licensing authority, has the sole final sign-off of the licence. The ORR will then, of course, enforce that licence. That is consistent with the clear accountabilities that the Bill establishes. We therefore cannot support the amendments.
On amendments 113 to 116, GBR will not need to apply for a licence, therefore the amendments’ provisions would apply only in relation to non-GBR licences. In any case, the amendments would add unnecessary complexity to the process for making licence application regulations. The amendments also intend to give an approval role to the ORR and the passenger watchdog in relation to modifications of GBR’s licence. The Bill already requires those bodies to be consulted before the Secretary of State modifies GBR’s licence. Again, requiring approval rather than consultation would risk confusing the clear accountabilities that the Bill establishes.
Amendment 118 seeks to strengthen the ORR’s ability to grant non-GBR licences. Under the Railways Act 1993, all licences are granted by the ORR with the consent of the Secretary of State. In practice, that consent is normally given in advance through a general authority, avoiding the need for case-by-case approval. The Bill does not change that aspect of the licensing regime. Removing the provision for specific Secretary of State consent, as the amendment intends, would not meaningfully strengthen the ORR’s ability to grant non-GBR licences. Non-GBR licences could still only be granted within the scope of a general authority approved by the Secretary of State.
In fact, the amendment would remove a useful route that enables the ORR to issue a licence outside the scope of a general authority or in circumstances where amending a general authority would not be practical. Far from strengthening the ORR’s ability to issue non-GBR licences, the amendment would instead likely weaken it.
Finally, amendment 126 would require the ORR to agree to GBR’s business plan before it is approved. I agree that the ORR provides invaluable input as an expert, independent regulator and it must have a robust role in the determination of GBR’s business plans. That is why the Bill gives it an explicit role to run the funding process, provide advice on the business plan and validate the costs within it, and independently publish its advice, whether that advice is supportive or critical of GBR.
However, it is not appropriate for the ORR, an unelected body, to decide how public money is allocated to the railway. Public spending decisions at this level should sit with elected Ministers who are responsible for funding the railway. I hope the hon. Member for Broadland and Fakenham can see this Government’s commitment to a robust and independent role for the ORR, but it is clear that the ORR can fulfil its role assuring the business plan without needing to be a funding approver to do so.
Further, the ORR will have an expanded monitoring role though the powers in the Bill, being able to monitor all GBR’s activities against its business plan. If GBR does not deliver on its plans, the ORR will be able to publish its findings, as well as escalating the matter to the Secretary of State. The ORR will be a trusted expert adviser to the Secretary of State, combining the strengths of an expert regulator with the need for the Government to control taxpayer money.
I encourage the hon. Member for Broadland and Fakenham to withdraw the amendment, and not to press the others in this group to a vote.
Jerome Mayhew
I listened with interest to the explanation the Minister gave and his request that the amendment be withdrawn. I was particularly interested to hear him describe the role of the ORR as a “trusted expert adviser”. In my submission, when we have GBR as the player and referee in many of the areas it will be active in, with a designed-in conflict of interest, we need more than a trusted expert adviser to hold the Government and GBR to account; we need an independent regulator. That is exactly what the ORR currently is.
I intend to press amendment 233 to a vote and, dependent on the outcome, I will not proceed to press amendments 110, 111, 112, 118, 114 and 115 as they address similar wording in other parts of the Bill. However,but I will seek to press amendment 126 to a vote if we get the opportunity to do so this afternoon.
Question put, That the amendment be made.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
New clause 26—Great British Railways: funding review—
“(1) Thirty months after the commencement of any five-year period covered by a funding settlement for Great British Railways, the Secretary of State must publish a review of Great British Railway’s funding.
(2) The review set out in subsection (1) must include figures for—
(a) funding allocated to;
(b) ticket revenue raised by;
(c) amount of government subsidy received by;
Great British Railways.
(3) A copy of the review must be sent to the Transport Committee of the House of Commons.
(4) References in this section to the Transport Committee of the House of Commons—
(a) if the name of that Committee changes, are references to that Committee by its new name, and
(b) if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, are to be treated as references to the Committee by which the functions are exercisable.”
This new clause adds statutory transparency to rail funding cycles.
New clause 34—Great British Railways: Certainty of Funding—
“(1) Within 12 months of the passing of this Act, the Secretary of State must publish a funding certainty framework for Great British Railways (‘the Framework’).
(2) The purpose of the Framework is to establish and maintain terms for the funding of Great British Railways.
(3) The terms of the Framework must include provision that—
(a) The Secretary of State may not vary, reduce, or reopen the funding settlement for an active Control Period, unless either—
(i) a statutory provision made after this Act amends Great British Railway’s duties requiring funding revision, or
(ii) an emergency has been declared within the meaning of section 1 of the Civil Contingencies Act 2004;
(b) the Secretary of State must publish—
(i) the confirmed funding determination,
(ii) the assumptions underpinning it, and
(iii) any exceptional circumstances to justify any adjustments,
within an active Control Period;
(c) the Secretary of State must agree the funding for the next Control Period not less than two years before it is due to start;
(d) when determining the funding settlement for a Control Period, the Secretary of State must take into account—
(i) the Long-Term Rail Strategy,
(ii) Great British Railway’s duties, and
(iii) whole system planning considerations across infrastructure, passenger services and freight;
(e) The Secretary of State must work with Scottish Ministers to align as far as possible funding determinations so that Great British Railways receives a single, coherent, funding determination no less than two years before the relevant Control Period starts.
(4) The Secretary of State must lay before Parliament a report on—
(a) any funding determination for each Control Period;
(b) any exceptional revisions of the funding determination for a Control Period within that Control Period;
(c) whether the Office of Rail and Road, or any other relevant body, has met any relevant deadline to confirm funding for the next Control Period, and where it has failed to do so, the reasons for that failure.
(5) Nothing in this section amends or removes the ability of Office of Rail and Road to carry out Periodic Reviews for each Control Period.
(6) The Secretary of State must annually lay before Parliament a report on—
(a) the stability of Great British Railways’ funding;
(b) the effect of any instability on—
(i) the efficiency of,
(ii) delivery of services by, and
(iii) management of risks associated with projects run by, or associated with,
Great British Railways.
(7) For the purposes of this section, ‘Control Period’ has the meaning given in any final decision taken by the Office of Rail and Road which concludes each periodic review of access charges as described in Schedule 4A of the Railways Act 1993.”
This new clause would require the Secretary of State to prepare a Funding Certainty Framework, with funding for each Control Period set two years before it is due to start, to enable Great British Railways to plan effectively.
New clause 39—Great British Railways: financial duties—
“(1) Great British Railways has a duty to ensure that its operating expenditure does not exceed its operating income in each financial year (‘the duty’).
(2) The duty does not apply to capital expenditure aligned with national infrastructure investment and enhancement pipelines.
(3) Within 12 months of the passing of this Act, the Secretary of State must provide guidance to Great British Railways about its duty under subsection (1).
(4) This duty must include guidance about—
(a) operational income, including fare revenue, access and charging functions, commercial income, and non-fare revenue streams;
(b) operational expenditure, including staffing, operations, support, maintenance, rolling stock operation, management and renewals; and
(c) the exclusion of capital expenditure aligned with national infrastructure investment and enhancement pipelines.
(5) Great British Railways has a duty to ensure its business plan and operational decisions have as a priority its long-term fiscal sustainability within the objectives set out in the rail strategy.
(6) In meeting its duty under subsection (5) Great British Railways must seek to increase its revenue.
(7) For the purposes of subsection (6), ‘revenue’ includes—
(a) fare revenue through passenger growth,
(b) commercial retail income,
(c) income from property, station and land commercialisation,
(d) freight access revenue, and
(e) market expansion.”
This new clause puts duties on Great British Railways to ensure its operating expenditure does not exceed its income, and to deliver long-term fiscal sustainability. It makes further provision relating to those duties.
New clause 40—Great British Railways: non-reliance on taxpayer funding—
“(1) Within its first operational Control Period, Great British Railways must set out a transition plan towards ending any reliance on taxpayer funding.
(2) The transition plan under subsection (1) must identify—
(a) any efficiency improvements Great British Railways can make, and
(b) any cost-reduction measures necessary for Great British Railways to operate in such way as does not rely on taxpayer funding.
(3) For the purposes of this section, ‘Control Period’ has the meaning given in any final decision taken by the Office for Rail and Road which concludes each periodic review of access charges as described in Schedule 4A of the Railways Act 1993.”
This new clause requires Great British Railways to set out a plan towards ending any reliance on taxpayer funding.
New clause 41—Great British Railways: annual statement of financial performance—
“(1) Great British Railways must publish an annual statement of its financial performance, including—
(a) its operating income and expenditure,
(b) whether it achieved operating cost self-reliance,
(c) the reasons for any failure to achieve operating cost self-reliance,
(d) where it has failed to achieve operating cost self-reliance, any actions it will take in the next financial year to achieve it, and
(e) an assessment of its compliance with its duties under section [Great British Railways: financial duties].
(2) The Secretary of State must lay the annual statement before Parliament.
(3) The Office of Rail and Road must review Great British Railway’s performance as set out in the annual statement, and publish an assessment of whether Great British Railways is meeting its efficiency and revenue targets.
(4) Where the Office of Rail and Road concludes that Great British Railways has not met its duties under section [Great British Railways: financial duties], a Minister of the Crown must make a statement to each House of Parliament setting out—
(a) the reasons for Great British Railways’ failure to meet its duties, and
(b) any corrective action to be taken by—
(i) the Secretary of State, or
(ii) Great British Railways.”
This new clause requires Great British Railways to publish an annual statement on its financial performance, and for the Office of Rail and Road to assess that performance.
New clause 44—Great British Railways: savings target—
“(1) The Secretary of State must publish a savings target for each financial year for Great British Railways.
(2) The Secretary of State—
(a) must keep the target under review,
(b) may revise or replace the target, and
(c) must publish any revision or replacement to the target.
(3) Great British Railways must, when exercising its statutory functions, have regard to the target set by the Secretary of State under this section.”
This new clause requires the Secretary of State to set a savings target for Great British Railways.
Keir Mather
Clause 12 establishes a new funding process for GBR that takes what we have learnt from the successes of the periodic review process today and applies them to the new GBR world. That new funding period review will not only provide GBR with five years of funding to carry out its job of operating and maintaining the railway network, but will create a structure through which GBR will develop and own integrated business plans, across track and train, that reflect its role as the directing mind for the railways. That five-year funding certainty will help to drive the best price for Government and the taxpayer, through lower risk and the benefits of economy of scale. It will also generate consistent, longer term work for private partners in the rail supply chain, keeping good, well-paying specialist jobs alive and thriving.
Jerome Mayhew
Clause 12 is an enabling clause. It is very short and merely refers to schedule 2, so I make no representations to change it and shall not seek to divide the Committee on it.
Rebecca Smith
That is a very long time ago. Under privatisation, the unions have done a very good job. In my constituency in the south-west, there are no seven-day contracts, for example. If I want to get a train up from my constituency on a Sunday, those trains are cancelled quite regularly, because the service relies on the good will of the staff to do overtime to make the train even come up to London.
Whatever we do, we need to look carefully at the terms and conditions that will be brought forward into this new public body. Up to this point, it has been down to each individual company to negotiate. That has been done with highly professional and competent union representatives, but we are not on a level playing field at the moment. As a member of the public, I want to be sure that those public sector staff are not receiving undue recompense for what they are doing, which would not be in accordance with other public sector bodies.
Private companies have been expected to give their staff a huge amount of benefits—quite rightly; that is their choice as private companies. If the staff become public sector, things like free rail travel need to be on the table. We must at least acknowledge those issues and make a decision to continue them, rather than assuming it is a given, which is down to unions to negotiate.
There is no conversation in the Bill about that TUPE-ing across of staff members. Value for money is really important. We do not want inequality being built into our public sector workforces simply because we are renationalising something.
Subsection (7) of new clause 39 provides that we should be showing where revenue comes from. That is absolutely justifiable. The private companies that will continue to operate in the railway system will have all that information available to their shareholders—to the people they are reporting to. If Great British Railways does not show that information, there is, again, no opportunity for scrutiny. If commercial retail income is flopping because GBR is not doing a very good job, we have no way to hold it to account for that. I do not see why it should be frightened to share that revenue information. It should instead see this as an opportunity to show good practice and how things could potentially progress under GBR.
I have one more point, which came up right at the end of the Select Committee hearing—I managed a question to the Minister, Lord Hendy, but have not seen a response. There is a huge amount of land and value that belongs to these railway stations, currently run by private companies, in some cases, including for things such as parking. What happens with all that income and all the opportunities for Great British Railways to potentially make some money? How will we know about that money and where it is coming from? New clause 39 seeks to bring that information to the fore and ensure that it is transparent and in the public domain.
Turning to new clause 40—this might be something of a segue, but I am going take the opportunity to put it on the record anyway—there is something about the aspiration to move from heavy taxpayer-funded reliance that speaks to the devolution conversation that we have been having. We have had multiple conversations, and I am sure we will have more, but ultimately GBR is being set up to give more powers to certain local authorities and local areas if they wish it, which is great—we want those communities to be able to control more of what happens. However, as we have been discussing, we are effectively developing a two-tier system, whereby anyone who is not in a mayoral authority will effectively be paying into the railway company and GBR, but not necessarily getting the levers to effect change locally. The Minister has reassured me that that will be done through business units and so on, but given that we do not know the scale of those business units or which regions and communities they represent, it is important that we know how that taxpayer money is to be used for funding across the country.
There has been a huge amount of storm damage in the south-west this weekend. Where will the funding come from under the new GBR? The south-west is not a mayoral strategic authority. Will we get our fair share of funding through the set-up for GBR? New clause 40 sets out the aspiration to move away from taxpayer funding and would surely create a more equitable system for the future.
Finally, new clause 44 would introduce a savings target. My hon. Friend the Member for Broadland and Fakenham has been alluding to the point about the costs we currently see in the system, particularly around infrastructure. That has certainly come up in the Transport Committee, in terms of how much it costs to build a bridge or a new station and the lack of competition and challenge. The new clause would create an opportunity to ensure that we pay as little as possible for the best outcomes. We have had lots of evidence in the past few months to show that other parts of the world can produce the station infrastructure that we need for a lot less than we are paying for it. I believe that is down to how the system currently works, and new clause 44 would force us to look at how it could work under GBR.
Keir Mather
I thank Members for tabling amendments on GBR’s funding and financial framework. In this chunky group of important amendments and new clauses, I first turn to new clause 26, tabled by the hon. Member for Didcot and Wantage, which would require the Secretary of State for Transport to publish a mid-funding period review of GBR’s funding, and new clause 41 from the shadow Minister, which seeks to create a GBR annual statement of financial performance.
In my view, the Bill already creates sufficient transparency about how GBR is funded. Further process could constitute unnecessary bureaucracy. Under paragraph 7(2) of schedule 2, the Secretary of State is already required to publish details of the financial assistance given to GBR using the funding period review funding power. Under paragraph 5 of schedule 2, GBR must publish its business plan and keep it up to date throughout the five-year period. Between those two commitments, the Transport Committee of the House of Commons will already have key information about how much funding the Secretary of State is providing to GBR, and the details on GBR’s business plan to understand what GBR is doing with its money. It would be unnecessary and inefficient to conduct an extra review.
New clause 34 would require the Secretary of State to set funding two years in advance of the funding period. First, I believe that it is misplaced to require that funding be committed two years in advance. There will inevitably be changes to economic circumstances over a five-year period, and new projects will surface. That was well acknowledged by all the witnesses at the oral evidence sessions, including those representing the railways supply chain. If there is no practical discretion, a settlement agreed two years in advance will be redundant before it even starts.
I can also assure the hon. Member for Broadland and Fakenham that the Bill already accounts for the need to provide the railways with certainty, and ensures that the funding process completes before the start of the next five-year funding period. The ORR, which will run the process, intends to set deadlines so that funding is committed in time for the industry to prepare. Secondly as with new clause 26, new clause 34 seeks to introduce additional reporting requirements that are unnecessary, given the transparency requirements already provided for in the Bill.
I now turn to new clauses 39 and 40. New clause 39 would create a duty for GBR to achieve value for money and long-term fiscal sustainability. New clause 40 would require GBR to develop a transition plan toward ending any reliance on taxpayer funding within its first operational funding period. I agree with the hon. Member for Broadland and Fakenham that GBR must deliver as efficiently as it can, ensuring good value for money and reducing costs to the taxpayer, and I assure him that the Bill is already very specific about GBR’s achieving value for money. Clause 18(2)(f) includes a specific legal duty on GBR and the Secretary of State to take into account
“the costs that will need to be met from public funds and the need to make efficient use of those funds”.
The ORR must also provide advice to the Secretary of State on whether GBR’s estimated costs in GBR’s draft business plan represent good value for money, with a requirement to publish a summary of that advice as part of the funding process. That is before the Secretary of State signs off on the business plan. Therefore, the hon. Member’s intent is already achieved by the Bill, and the amendment would only create extra bureaucracy and inflexibility without adding to transparency or financial sustainability.
A statutory transition plan to eliminate taxpayer funding would be unrealistic, and would undermine the railway’s ability to achieve its social goals. The reality is that taxpayer subsidy will always be needed for some parts of the railway. For example, while we aim to have the most profitable and efficient network possible, there will always be some lower-population regions of the UK in which rail travel will not make a profit and will need taxpayer subsidy. Clearly, it would not be appropriate for the Government to withdraw funding and neglect connectivity in those important rural regions, whether that be in Devon, Dorset or elsewhere—constituencies represented by Members across the Committee. Rapidly forcing GBR to operate without public support would be devastating for the economy and for the mobility of the public, not to mention reducing efficiency and the long-term capacity of the network.
Finally, new clause 44 would require the Secretary of State to set and publish an annual savings target for GBR. Introducing a statutory savings target risks creating a rigid measure that might not reflect the operational realities of the railway. Efficiency is already embedded in the Bill’s framework and will be a key consideration when GBR publishes its business plan and sets out how to meet its objectives, including on efficiency. Statutory targets are therefore not required to drive performance.
Edward Argar (Melton and Syston) (Con)
In the context of efficiency and cost, I want briefly to pick up on a point made by my hon. Friend the Member for South West Devon. What assessment have the Government made of the financial cost of bringing together a whole range of diverse terms and conditions and salary structures, from multiple train operating companies, into GBR?
Keir Mather
When it comes to setting up the operational structure of GBR, including questions about workforce and staffing, it is fair to say that no piece of railway legislation for 113 years has specified in statute what the operational decisions will be. Those conversations are ongoing, as they have been while rail companies have been taken into public ownership through DfT Operator, and they are always held, I am pleased to say, in close consultation with the workforce and trade unions.
On the overall principle of cost, I would point out to the right hon. Member that the Department’s view is that establishing GBR is set to cost £200 million to £400 million overall—which is 1% to 2% of a single year of operating budget—but could unlock up to a billion pounds-worth of efficiencies across the rail sector. Value for money is not only baked into the legal duties under this legislation, but is part of GBR’s operational ethos.
Laurence Turner
I again draw the Committee’s attention to the fact that I am a member of Unite the union. Does the Minister agree that changes to terms and conditions, if they happen at all, often take place on a very long-term transitionary basis? Indeed, that is my understanding of what happened the last time that the railways came under public ownership, when many people remained under pre-1948 terms and conditions for several decades. I would not wish to make assumptions or pre-judge future discussions, but can he confirm that nothing in the Bill would prevent similar transition arrangements in future?
Keir Mather
As my hon. Friend rightly highlights, questions about the operational structure of GBR have been left outside the framework of this Bill. That is precisely to allow those conversations to continue and so that the legislation can be fit for the creation of a railway system that works for the long term.
I thank hon. Members for their contributions, but would encourage them not to press their amendments.
Question put and agreed to.
Clause 12 accordingly ordered to stand part of the Bill.
The Chair
I remind Members that decisions on new clauses are usually taken after decisions on existing clauses and schedules, even though we may have just debated them—one for a future day.
Schedule 2
Funding Great British Railways
Edward Morello
As always when following my hon. Friend, I find myself with little to add. All of the very good points have been made, but it is probably worth reinforcing why we think amendments 216, 147 and 215 are important.
Amendments 216 and 215 speak to an absurd anomaly. I am probably unusual in this Committee in that I am not a rail expert—far from it—but the absurdity of not having aligned funding cycles for passenger and infrastructure strikes any outsider as madness. As somebody who regularly travels on the Salisbury to Exeter line, which is in need of electrification and new rolling stock, I ask any Minister who is responsible to tell me when the operator should make a decision on whether to buy new rolling stock, when they do not know whether electrification is going to happen. Do they wait for the electrification and then buy the rolling stock, having just spent all this money extending the life of diesel carriages? Having the two interoperable is just common sense. I would hope that making the two funding cycles run simultaneously would be a non-contentious idea.
On amendment 147, my hon. Friend the Member for Didcot and Wantage gave the example of the outbreak of war, which is definitely an extreme one, but we must also insulate any piece of legislation against future politicians—Ministers—wanting to meddle and perhaps not adhering to the desire that it was designed around. The amendment is intended to make sure that Ministers, whether in the Department for Transport or the Treasury, cannot rip the funding carpet out from under the rail operators. If the Bill really is about long-term planning, then there has to be long-term security of funding as well, and amendment 147 is about making sure that there is an additional safety net should any future Government, of any make-up, not want to adhere to the spirit of the Bill. For those reasons, I hope the Government will give consideration to our amendments.
Keir Mather
I thank the hon. Member for Broadland and Fakenham for tabling amendment 119, which would require the Government to commit funding for a five-year funding period at least two years before the period starts. I can appreciate and identify with his desire to provide certainty to industry, and agree with the ambition that the amendment presents to generate a stable operating environment for the railway. However, as I said in response to new clause 34, I believe that the desire to require funding to be committed so far in advance is misplaced. There will inevitably be changes to economic circumstances and new projects will surface. If there is no practical discretion, a settlement agreed two years in advance may be redundant before it starts.
I can assure the hon. Member that the Bill already accounts for the need to provide the railway with certainty and ensures that the funding process completes before the start of the next five-year funding period.
Jerome Mayhew
I heard what the Minister said, but it flies in the face of the evidence that the industry itself gives him and all of us about the need for certainty towards the end of a control period. All that the amendment seeks is certainty for two years at the start of a control period. How is he going to address that particular issue?
Keir Mather
It is of course our obligation as the Government to meet the concerns of stakeholders, whether raised in the oral evidence session or elsewhere. It is also incumbent on me to point out that we want to abolish boom and bust in the rail system. On the fear about cliff edges, as was acknowledged by the ORR in its oral evidence, in reality there is not a cliff edge when funding always tends to run over the five-year period. Five years is the basis for the decision process by which funding allocations must take place. It is important to take the oral evidence in the round. It is also important to note that the ORR, which will be running the process, intends to set deadlines so that funding is committed with time for the industry to prepare. The amendment is therefore unnecessary.
Amendments 129 and 147 both seek to prevent or restrict the Secretary of State’s ability to vary the agreed funding settlement. I assure Members that the intention of providing a five-year funding commitment is that it lasts for five years. The Government are signed up to that principle. I also agree that certainty for GBR and industry is beneficial. More funding will mean we can get the best out of the railway and encourage investment, innovation and value for money.
Putting a hard restriction on all change, as amendment 129 suggests, would not be proportionate, as the shadow Minister acknowledged. As he noted, there may be unforeseen circumstances that require changes to funding, either to provide more or to reduce the amount. For example, GBR may outperform expectations and need less than is awarded, in which case Ministers will need to recoup the costs for the taxpayer, and can choose to do so in whatever way they see fit.
Keir Mather
Indeed! The operating environment may also change and GBR may need more funding than is committed. It is right that elected Ministers are able to make decisions on public spending and allocate resources as needed, balanced against the clear benefits of certainty.
Amendment 147 would restrict Ministers’ ability to vary funding by adding a requirement that the ORR must provide written consent. Although the Office of Rail and Road will have an important advisory role, it would not be appropriate for it to entirely determine changes to funding. Responsibility for decisions of public expenditure must remain with the Secretary of State, particularly where changes may be required due to wider fiscal circumstances. The amendment would also result in ORR consent being needed for increases in funding and immaterial changes.
The Bill provides assurances. If the Secretary of State considers that the impact of a funding reduction could be material, the Bill requires her to notify the ORR, giving it an opportunity to comment publicly on the likely effects on the railway. That balances the need for the Government to retain control over Government funding with the opportunity for independent evaluation and, if needed, public pressure, to protect certainty for the railway.
On amendments 215 and 216, I thank the hon. Member for Didcot and Wantage for so ably setting out, based on his practical experience, and far better than I ever could, the need for a single guiding mind for the railway. His explanation was buttressed by the right hon. Member for Melton and Syston. I thank the hon. Member for Didcot and Wantage for his amendments, which seek to align passenger service funding within the five-year infrastructure funding cycle. I support that intention. The Government agree that many benefits are derived from integrated funding streams. However, I do not agree that the amendments are necessary.
It is important to note that passenger services are already fully considered under GBR’s statutory duties and through the integrated business plan, in which GBR will plan all its activities on a five-year basis across track and train. The Bill requires GBR to deliver safe, reliable and efficient services, taking passenger needs into account.
Jerome Mayhew
GBR may plan on a five year basis, but it is not the same five years, is it?
Keir Mather
The shadow Minister is right to point out that allocation of funding for passenger services, as opposed to other GBR activities, initially takes place through the spending review funding process. I am about to address his point, but I should say that the Bill contains the ability for Ministers to extend the five-year funding process to passenger services once GBR is set up and prepared to manage that. It would not be responsible to do that from the outset when GBR is still in the transition and set-up phase. Ministers need to feel confident that GBR is financially mature enough before they can consider integrating funding further. I hope that addresses both the shadow Minister’s point and the contribution from the hon. Member for Didcot and Wantage.
Olly Glover
I understand what the Minister is saying, but I am sure that in his line of work he has already encountered many instances where, despite noble intentions for something to perhaps happen at some point in the future, it ends up being years, if not decades, before it does. That is why it would be rather more sensible to enshrine the requirement in legislation.
Keir Mather
Respectfully, I believe it is more sensible to be prudent and cautious regarding the funding of passenger services, rather than risk creating a situation that a newly created GBR might not be in an immediate position to sufficiently accommodate within its operating structure. Erring on the side of caution, I encourage Members to withdraw their amendments.
Jerome Mayhew
As I intimated earlier, amendments 119 and 129 are probing and I will not press them to a vote.
I was interested to hear the Minister’s apparent position that there is no boom and bust, that the current situation for infrastructure funding is fine and that the evidence from the industry appears not to be—
Keir Mather
For the record, I said that we shared the aspiration to abolish boom and bust as it exists within the rail system. That applies to our infrastructure as much as it does to any other part of the railway’s operation.
Jerome Mayhew
I am grateful for that clarification, but although the Minister may share that ambition, he is not choosing to do anything about it. Having said that, I said I was not going to press the amendments to a vote and I will not. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Keir Mather
I thank the shadow Minister and the hon. Member for West Dorset for their amendments, all of which look to amend the Secretary of State’s statement of objectives.
First, amendment 120 would require that the statement of objectives contains standards for GBR to meet when conducting its railway activities. I agree that we need to measure GBR’s performance against clear standards to ensure high-quality delivery. However, the statement of objectives, which is a document to set direction and inform the funding process, is not enforceable, and consequently it is not the right place to require standards.
The original drafting provides flexibility, letting the Secretary of State specify what standards should be achieved by GBR when delivering against the objectives in the statement. This allows for circumstances in which providing a standard helps to better articulate the strategic vision for GBR over the five-year funding period.
However, it may not always be appropriate for an objective in the statement of objectives to be accompanied by a standard, particularly when an objective is straightforward or high level, such as a requirement to have regard for security threats or to support economic growth. The Bill contains other mechanisms, including the business plan and the licence, to ensure that there are robust and enforceable measures against which to hold GBR to account.
There is a similar case to be made on amendment 121, which seeks to set a structure for the statement of objectives, and amendment 123, which proposes to expand the list of potential objectives to include a section on productivity and efficiencies. The amendments would change the list from illustrative objectives to a set of requirements. It would fundamentally not be appropriate to impose such a structure on the statement of objectives, which needs to be able to take a different approach each time it is made, in response to wider environmental concerns and socioeconomic circumstances. The intention is that the list serves as a guide to future drafters, and I believe that the flexibility to allow adaptation to circumstances that we cannot predict will ensure that this legislation remains fit for purpose into the future.
Joe Robertson (Isle of Wight East) (Con)
I understand, although I do not agree with, the argument the Minister is making on amending “may” to “must”—he says it would be unenforceable—but he seems, unless I have misunderstood, to have conflated that argument with his point about amendment 122, which seeks not to make a discretionary provision a mandatory one but to expand the considerations. The explanatory statement says:
“This amendment would require the Secretary of State to set the objective for…increasing passenger and freight journeys.”
Perhaps I have misunderstood.
Keir Mather
To my knowledge, I am not conflating the two amendments. My point is that setting objectives that are so closely tied to discernible and prescriptive standards would, in effect, contravene the original intention of the schedule, which is to provide flexibility in setting objectives over the five-year period. If, in the hon. Gentleman’s view, I continue not to meet that intention, I will happily give way again.
Jerome Mayhew
The Minister wants flexibility, and he says that is why amendments 123 and 206—tabled by myself and the hon. Member for Didcot and Wantage respectively—should not be agreed to. Will the Minister set out the circumstances in which he thinks it would not be appropriate for the organisation to focus on
“delivering improved productivity and efficiencies”
or on
“customer experience and satisfaction”?
Why does he need flexibility to ignore those objectives?
Keir Mather
No, I am not willing to say that those objectives, in principle, should not be pursued as a result of this legislation. The question is where within the Bill these things reside. If we are talking about short-term objectives relating to GBR’s operational efficiency as an organisation through, say, a key performance indicator, that is best placed within the business plan. If we want legal duties to ensure that we improve passenger experience or the reliability of train services, they are best placed as legal duties. There is a question about where we apportion the responsibilities and accountability mechanisms within the Bill. I do not believe that schedule 2 is the right place to be as prescriptive as the shadow Minister intends with those specific requirements.
On amendment 123, there is already a mandatory requirement in the Bill for the Secretary of State to obtain advice from the ORR on whether the activities that GBR is to undertake represent value for money. Unlike the list of potential objectives, that is mandatory. I also direct the Member to the assurances that are already in the Bill: there is a duty on GBR to make efficient use of public funds when exercising its functions, and a clear role for the ORR to assess the value for money of GBR’s proposed plans and to publish that assessment.
Edward Argar
Will the Minister confirm that the advice it will be obliged to seek will be published? If it is private advice, it has no teeth whatsoever, because the Secretary of State could accept it or refuse it, as could GBR, and no one would ever know. Would that advice be public?
Keir Mather
The purpose of issuing advice is so that we can enter into an era for the railways where these discussions happen in a way that is far more commonplace than the broken-down patterns of accountability that currently exist. I therefore envisage the sort of adversarial situation that the right hon. Member suggests occurring less than it does under the existing rail system.
The ORR and the Secretary of State are both required to consider value for money when they advise on and approve the business plan. I hope that the relevant measures will show the hon. Member for Broadland and Fakenham that we are serious about getting the best out of GBR and provide him with enough reassurances to seek to withdraw his amendment.
Amendment 122 would specify that the Secretary of State’s statement of objectives may include an objective on increasing passenger numbers and freight. It would narrow the wording of the objective in paragraph 2(3)(a) of schedule 2 from relating to passengers and freight to just increasing the numbers of those things. I do not think it would be wise to require ever-increasing passenger numbers as an objective in itself. Different objectives—such as increased reliability, improved passenger experience or references to spare freight paths—might contribute to that overall outcome while being more important in the moment. Again, that should be for the Government of the day, not inflexible legislation, to decide. I urge the hon. Member for Broadland and Fakenham to withdraw his amendment.
Finally, amendment 206 proposes to expand the list of potential topics that could be covered in the statement of objectives, with the hon. Member for Didcot and Wantage suggesting the inclusion of a section on customer experience and satisfaction. The current list in the Bill is purely illustrative, so Secretaries of State may in future add to the list of topics, and include just some of the topics or slightly different ones in their statement of objectives. I invite the Committee to note that the illustrative objectives already included in the Bill contain reference to the carriage of passengers or goods, as well as to fares and accessibility—all matters that are important to passenger experience—so it is unclear what more would be achieved through the amendment, which would simply add a further example to the list.
Furthermore, the Bill contains a duty for the Secretary of State and GBR to exercise the functions in the manner best calculated to promote the interests of the users and potential users of railway passenger services. Unlike the list of potential objectives, that duty is intended to be mandatory. I hope that demonstrates to the hon. Member for Didcot and Wantage that we consider passenger experience to be absolutely central to GBR’s objectives, and provides him with enough comfort not to press his amendment.
Jerome Mayhew
We have heard with interest what the Minister has to say, but I am wholly unpersuaded that he is adequately reflecting the needs of the industry, so I will seek to press amendment 120 to a Division.
Question put, That the amendment be made.
Jerome Mayhew
We now turn to paragraph 4 of schedule 2, which deals with the business plan and approval by the Secretary of State.
To receive public funding under paragraph 4, GBR is required to include in its business plan an explanation of how it will meet the objectives set by the Secretary of State. Amendment 124 seeks to strengthen this obligation by requiring GBR to set meaningful KPIs against which its performance and meeting its statutory duties—as set out in clause 18, which we will come to in a bit—can be measured. We had the saga of the missing licence; now we have the saga of the missing KPIs—and 19 other documents. This is important, given the absence of any direction from the Government on KPIs, despite being repeatedly requested on the Floor of the House over a number of months. The only response from the Government as a result of that probing is that they will be “robust”, whatever that means, hence the need for amendment 124.
Amendments 125 to 128 would strengthen GBR’s focus on minimising the cost to the taxpayer and increasing the role of the Office of Rail and Road to make sure that that happens. Amendment 125 would require an express focus on how plans will minimise costs to the taxpayer, which is too often overlooked—the Bill makes hardly any reference to value for money. The taxpayer is ignored entirely. This amendment would make it a legal requirement to address that and would—under the maxim that “you get what you measure”—drive behaviour.
Amendment 127 would require the Office of Rail and Road to provide an assessment of whether GBR’s plans to minimise costs to the taxpayer are, in fact, likely to do so. That would be undertaken before the Office of Rail and Road approves the business plan. Again, this is about driving behaviour through focus and making sure that the taxpayer is not forgotten in the deliberations between nationalised Great British Railways and civil servants at the Department for Transport.
Finally, amendment 128 would require GBR to publish its full business plan, save for commercially sensitive sections, which they should of course have a carve-out from displaying to their potential competitors—although most of their competitors have been designed out under the wording of the Bill. Amendment 128 would welcome transparency, which—given the huge amount of public funding that the organisation currently requires and no doubt will continue to require—is necessary, so that the public can see how their money is being spent, and whether the organisation is focused on driving down the cost to the taxpayer and driving up value for money.
I commend all the amendments to the Minister.
Keir Mather
I thank the hon. Member for the amendments, which seek to add requirements to the production of GBR’s business plan and the ORR’s advice on that plan. However, on the subject of the publishing of advice, I briefly return to a question that was put to me by the right hon. Member for Melton and Syston. I feel that I was unnecessarily circumspect in the answer that I gave him, and it did not reflect the incisive nature of his question, which was about a mandatory requirement that exists in the Bill for the Secretary of State to obtain advice from the ORR on whether the activities of GBR represent value for money, and whether or not that advice can be published. I tell him that the ORR must publish a summary of that advice, and it can publish the advice in full. Although I do not wish to predict the future, I expect that it will likely to so, as part of its work in holding the Government to account. I hope that that is a full answer for the right hon. Member.
Edward Argar
I thank the Minister very much. I cannot imagine where that flash of inspiration and recollection came from, but I am grateful to him for the clarification.
Keir Mather
Committees move in mysterious ways—that is all I will say.
I will take each amendment in the group in turn, starting with amendment 124, which would require GBR to develop key performance indicators for each of its statutory duties. I am sure the hon. Member for Broadland and Fakenham will agree that KPIs should be realistic and measurable, so they would also need to be grounded in the specific proposals for what GBR intends to deliver over the next five years. They also need to be allowed to evolve over time, to ensure that they are most relevant to GBR’s planned delivery and can be effectively used to track GBR’s progress.
The way an indicator is set out can influence how an organisation behaves, and we should be able to refine them over the course of several funding periods, to get GBR to deliver in the way that it needs to. Therefore, a more flexible process works better than fixing the nature of the indicators in legislation—and I give way to the hon. Member.
Jerome Mayhew
The Minister is a mind reader; I was just about to ask him to give way. He says he cannot agree to amendment 124 because we need flexibility in the future, but he will see that it refers to
“measurable performance indicators for each statutory duty listed in Section 18”,
so that flexibility would only run so far as any alteration to the statutory duties set out in his own clause 18, which GBR has no ability to change. The Government do not intend for there to be flexibility, so why does the Minister say he needs it?
Keir Mather
I respectfully disagree with the shadow Minister’s interpretation. This is about how GBR discharges those legally binding duties, and whether we should be overly prescriptive about the means by which it does so. It is important to have flexibility. Given the amount of technological change that we have seen in railway processes over recent decades, as well as socioeconomic factors and the need for GBR to balance those duties, we cannot be overly prescriptive about how we ask it to meet them—apart from the fact that it is legally required to do so.
I assure the hon. Member that GBR’s business plan will have not just a robust but a comprehensive set of KPIs against which it will be held to account. Progress against them will be tracked, and GBR will publish updates in line with the requirements in the Bill. The ORR will also monitor GBR and its business plan, and provide advice to the Secretary of State.
Rebecca Smith
I am thinking through the schedule. Forgive me if I am wrong, but ultimately, it is GBR’s business plan. Effectively though, there are going to be wheels within wheels, in terms of each of the business sectors, the different mayoralties, and the operators that are doing different things in different countries. To me, it feels overly simplistic: we have got one plan, which is the plan for the funding of the entirety of GBR, but if there are no KPIs at all, how are we supposed to even compare parts of the country against each other? Surely there will be different funding streams and business cases for different things. To me, it just feels like one overarching plan. How on earth are we supposed to hold the Government to account for delivering that, let alone ensuring parity and equality across the country, and making sure that funding is going into the right places, where it is most needed?
Keir Mather
That is a very important point. While the hon. Member points to a system that is simple in the objectives that it sets out for the railway overall, I see one that provides sufficient breadth to allow the organisation to develop over time and offer a system of operation that is closer to the communities it seeks to represent—and which, most importantly, is agile in adapting to changing socioeconomic circumstances and technological innovation.
The need for objectives that are not overly prescriptive, and the place for KPIs being in the business plan, allows a holistic approach to setting objectives for the railway, which can guide work overall for a national organisation, offering a single uniting mind, while at the same time not fettering GBR’s ability to evolve as an organisation in future.
In that sense, I believe we desire the same outcome: to make sure that the railway operates in the most effective way possible. In the light of the measures in the Bill that I have outlined, I hope that the hon. Member for Broadland and Fakenham will withdraw the amendment.
Amendment 125 would require GBR to include in its business plan information about how it will minimise costs to the taxpayer, while amendment 127 would require the ORR to advise the Secretary of State on this. I agree that it is important for GBR to deliver in the most efficient way that it can. That is why GBR, the ORR and the Secretary of State—all the people involved in the railway, and in the business plan—are all subject to a cost and efficiency duty, which is applied by clause 18. That will ensure that GBR aims to be cost-efficient at all times, which aligns with the intent of amendment 125.
Adding additional requirements for GBR in this space could create perverse incentives. For example, a focus on minimising costs, without other checks and balances, could drive GBR to cancel unprofitable lines even if they are important to local communities because doing so will save money. Clearly, it would not be appropriate for GBR to neglect connectivity in those important rural regions. GBR will also be robustly scrutinised from a value-for-money perspective by the ORR, and the Secretary of State will need to consider the ORR’s advice before approving GBR’s business plan. I hope that is enough to assure the hon. Member for Broadland and Fakenham that the Bill can deliver the outcome he seeks without amendment, while allowing GBR the autonomy necessary to plan in the way it sees as most appropriate.
Finally, amendment 128 seeks to limit the information that GBR could redact from its approved business plan. I agree that GBR’s activity must be transparent, and that will be an important part of how we hold GBR to account. That is why the Bill already requires GBR to publish its business plans. The Bill provides for slightly more discretion for GBR to redact sections of the business plan than amendment 128 proposes. That is because it is important that all types of sensitive data, not just the commercially sensitive, are able to be protected. Personal data, security-sensitive information about stations or anything legally privileged are all examples of content that may need redaction from the final plan. A flexible requirement can be better used to navigate these nuances. However, let me be clear that GBR’s public law duties and wider accountabilities framework will ensure that GBR will not be able to hide information that is important and relevant to public scrutiny.
In the light of these considerations, I ask the hon. Member not to press the amendments.
Laurence Turner
On amendments 125 and 127, I have full sympathy with the ambition of reducing costs to the taxpayer wherever possible. However, the word “minimise” is important here, because a natural reading would be to bring that cost to a minimum.
Each Government have recognised that there is a balance to be struck between the charges raised against the taxpayer, fare payers and other users of the railway. We heard evidence from Richard Bowker, the former chief executive of the Strategic Rail Authority, who has contributed what is sometimes known as Bowker’s law—there are only two sources of income to a railways: passengers and taxpayers.
I fear that if these amendments were incorporated into the Bill, the natural outcome would be that fares would rise, as indeed may charges levied upon freight users of the railway. For that reason, I hope they are not supported.
Keir Mather
Schedule 2 will establish a new funding process for GBR that takes what we have learned from the successes of the periodic review process and applies them to the new GBR world. The new funding period review will provide GBR with five years of funding to carry out its job in operating and maintaining the railway network, and will create a structure through which GBR will develop and own integrated business plans across track and train that reflect its role as the directing mind for the railways.
The schedule retains the role of the ORR in testing and scrutinising the plans, ensuring they are ambitious but deliverable, and providing confidence to the Government. The new funding process, with the five years of certainty it provides, will help to result in the best price for Government and the taxpayer, and generate consistent, longer-term work for private partners in the rail supply chain—keeping good, well-paying, specialist jobs alive and thriving in the United Kingdom.
The schedule will also give greater representation to devolved Governments and mayoral strategic authorities, providing them with a real opportunity to advocate for the countries and places they serve at the national level. The funding period review will provide GBR with the structure it needs to set out how it will make our railways reliable, offer better value and be more accessible. I therefore commend schedule 2 to the Committee.
Edward Argar
I will not detain the Committee for long. As ever, I am grateful to the Minister for his succinct explanation. However, I have two concerns; while he may be able to reassure me on these, I certainly think they need an airing. First, how does he propose to ensure that the funding period is properly aligned with a spending review period? I have seen the challenges faced in government when there is a misalignment, or where one period overlaps the other.
I was only very briefly Chief Secretary to the Treasury, but I have also been a Minister in a spending Department, and I have seen the challenges that occur when there is a misalignment, because the Treasury is very clear about non-commitment beyond an existing comprehensive spending review period. How will the Minister ensure alignment and certainty? Without alignment, although there is the impression of certainty, we all know the all-powerful hand of the Treasury if one, as a spending Minister, cuts across its bow on such matters.
The other challenge has been raised by my hon. Friend the shadow Minister a number of times in various contexts. Although I take the point about the five-year period—and the Minister referenced seeking to bring greater certainty to investment decisions with that—I am still not quite clear. I may have missed it, but I do not think I have heard a clear explanation of what steps are being taken to iron out the peaks and troughs that my hon. Friend the shadow Minister mentioned, because it is still a five-year period.
Unless the budget is set for the next five-year period in, say, year two or year three, well ahead of its coming into force—I would posit that the Treasury would be highly unlikely to agree to that—it still does not get around the problem: year one is scaling up, we might see spending in years two and three, and possibly in a bit of year four, but then that spending will drop off again due to a lack of certainty about what is coming in the next year one. I would be grateful if the Minister could clarify how what he sets out in the schedule will help to address the peaks and troughs that my hon. Friend the shadow Minister so ably highlighted to the Committee previously.
Keir Mather
I thank the right hon. Member for Melton and Syston for his contribution. He is right to note that the five-year funding process has a different period from that of the spending review. It is tested in the sense that the funding process for Network Rail works similarly now. As was acknowledged in the oral evidence from the ORR, there is not in reality a cliff edge through the five-year funding settlement, as funding always tends to roll over the five-year boundary, but five years is the envelope through which those decisions take place.
That is my assessment of how the process works; if I have failed to answer any of the right hon. Gentleman’s questions, perhaps he will illuminate me on what they are and I can provide him with a more fulsome response later on.
Question put and agreed to.
Schedule 2 accordingly agreed to.
Clause 13
Charging and terms and conditions
Jerome Mayhew
I beg to move amendment 22, in clause 13, page 7, line 22, leave out “as it thinks fit” and insert “as are reasonable”.
This amendment would ensure Great British Railways only charges what is reasonable for provision of services in circumstances where it is a monopoly supplier.
Rebecca Smith
I want to briefly speak to the proposed new subsection added by amendment 23, which would offer anybody given conditions by GBR the opportunity to appeal that decision to the Office of Rail and Road. The issue of accountability and the unequal playing field faced by those on the outside compared with those on the inside came up in the Transport Committee’s evidence sessions and last week. Having heard a lot of that evidence, the amendment appeals to what I think is the right way to do things. We must ensure that organisations engaging with the railway, or offering services to the railway—even if they are being paid separately for them—have the opportunity to appeal a decision that affects or impacts them. I feel that not having such an opportunity is particularly onerous. I support amendment 23 and concur with everything that the shadow Minister has said.
Keir Mather
I thank the shadow Minister for tabling amendments 22 and 23 and the hon. Member for South West Devon for speaking in their support. Amendment 22 seeks to require GBR to set reasonable charges for the delivery of its functions, and amendment 23 seeks to require the ORR to provide an appeals role for anyone who considers the charges set by GBR to be unfair.
On amendment 22, we clearly agree that GBR must act reasonably when setting charges and there is no suggestion that it will not do so. In fact, safeguards to ensure that GBR cannot levy unreasonable charges already exist in the Bill. Clause 18 requires GBR to act in the public interest and to ensure that railway service providers, such as devolved operators, freight operators and open access operators, can plan, invest and make decisions about their own businesses. When setting charges, GBR must therefore do so in a manner consistent with those duties, and it must not set charges that undermine operators’ ability to run viable and successful businesses.
Jerome Mayhew
The Minister refers to clause 18(2)(e), which states:
“They must exercise the functions… in the manner best calculated to be in the public interest”.
Can the Minister not see that GBR’s assessment of what is in the public interest could very well be what it considers to be in its own interest, because it is a public body? The provision would allow GBR to prioritise its own interests, such as the increased receipt of revenue from third-party operators, at the expense of the competition. That is not the safeguard that the Minister says it is, is it?
Keir Mather
I disagree with the shadow Minister’s interpretation of how the duties function in this regard. GBR cannot take a wholly self-interested, cynical interpretation of what constitutes “best use” under clause 60, which we will turn to in due course. GBR has to make a best-use decision that takes into account the needs of open access and freight. Also, under GBR’s duties, it must take account of promoting the interests of users and potential users of the railway, some of whom—even though open access constitutes a small proportion of the railway network usage overall—will be people using open access operators. Further, the duty in clause 18(2)(d) says,
“so as to enable persons providing railway services to plan the future of their businesses with a reasonable degree of assurance”.
Such persons would not be able to do so if they were being levied unreasonable charges.
There are supplementary safeguards that I will turn to. Existing competition legislation will also require GBR to ensure that the charges it sets are fair, non-discriminatory and not anti-competitive. The ORR will retain its enforcement role in consumer and competition law, concurrent with the Competition and Markets Authority, so it will be able to ensure that GBR is treating the private sector fairly. It is also important that, as a public body, GBR must be able to recover appropriate costs from those who benefit from the services that it provides. If it were prevented from doing so, the burden would ultimately fall on taxpayers and passengers. The Government’s ambition is to have a successful rail industry that attracts investment and can support its own costs, rather than unnecessarily relying on the taxpayer.
Amendment 23 would introduce an appeals role for the ORR on these charges. Again, we fully support the principles of fairness and transparency that underpin the amendment. For significant charges, such as charges for access and the use of infrastructure, the Bill already provides an appeals route to the ORR. However, an appeals route to the ORR for every possible charge that GBR may levy in relation to its statutory functions is clearly disproportionate. The amendment would require an appeals route to be provided even when those charges may be small, such as contributions to cover a railcard cost.
Clause 13, in its sum, simply ensures that GBR can recover the costs of managing and delivering services, such as back-office retailing services, by charging those who use GBR services, such as non-GBR operators or retailers. It is essential that GBR should have a clear statutory right to recover costs from users of its services. That supports the sustainability and efficiency of GBR’s operations, and ensures that taxpayers and GBR customers are not subsidising the operations of others. Importantly, it replicates how those cross-industry functions are paid for today. The Bill and existing competition law already provide adequate protections for third parties and a route of redress, should that be required. I urge the hon. Member for Broadland and Fakenham to withdraw his amendment and commend clause 13 to the Committee.
Jerome Mayhew
The Government’s defence is pretty extraordinary. What they are saying is that GBR should be free to charge unreasonable amounts—otherwise there would be no objection to the wording of the amendment, which simply seeks to put the word “reasonable” into the requirement. The Government say that even though this monopoly provider can charge as it thinks fit, there should be no specific right of appeal and that the other operators should rely on the CMA taking an interest or on wider competition law—in other words, after-the-event litigation.
We all know that in a business environment we can argue about the chaos at the end, but a business can already have been destroyed by a decision from a monopoly provider—on which there is no right of appeal and which could not be held back until an appeal has been heard. This is an absolute charter for GBR to run roughshod over independent retail operators, open access operators and even rail freight. It is with no hesitation at all that I seek to push for a vote on both the amendments.
Question put, That the amendment be made.
Keir Mather
In today’s system, the ORR can require Network Rail to pay a fee to cover some of the costs of the ORR’s railway activities; that is done via Network Rail’s licence. The clause will ensure that, in the future system, the ORR will continue to have the independent funding it needs, by allowing it to require a similar fee from GBR. That ensures that the ORR will continue to operate in an impartial and independent way—a crucial part of enabling it to provide high-quality advice to railway funders and to conduct its role as the access appeals body fairly. I commend clause 14 to the Committee.
Jerome Mayhew
So here we are: this is the eminently sensible approach to providing funding for the ORR to continue its operations as a safety regulator. Clause 14 allows the Office of Rail and Road to require GBR to pay a levy to the ORR for performing its non-safety railway functions. That provides the ORR with a legally guaranteed funding source independent of the Secretary of State or Government. The provision aims to provide the ORR with a stable and predictable funding stream that will enable it to plan and carry out its activities. Those were remarkably similar words to the ones used by the Minister—I wonder why!
What I have described replaces the current system under which the ORR requires Network Rail to pay a fee for it to perform its non-safety functions via the process set out in the Network Rail licence. The ORR, as we all know, is an independent regulator, so decisions on its funding should be kept separate from organisations that have a vested interest in its decisions, which is why GBR, despite paying the levy, will not determine the amount. The amount is agreed between the ORR and the Treasury and then provided by GBR through this levy.
This is one of the few clauses through which the Bill is not actively diminishing the role of the ORR. Instead, it provides the ORR with a legally guaranteed funding source, independent of the Secretary of State or Government—save, obviously, for its negotiations with the Treasury. The aim of that is to provide the ORR with a stable and predictable funding stream that will allow it to plan and carry out its duties successfully. That duty already exists in the Network Rail obligation, as I have already mentioned.
I am glad to see from the Government’s explanatory notes on the clause that GBR will not determine the amount of the levy, which will be agreed between the Treasury and the ORR. It seems that the Government do understand the concept of partiality and bias, but are prepared to admit that only when it comes to certain clauses in the Bill.
Keir Mather
I thank the shadow Minister for his support—slightly barbed support, but support nevertheless. I have nothing further to add. I commend the clause to the Committee.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Clause 15
Rail strategy
Olly Glover
I beg to move amendment 134, in clause 15, page 8, line 18, at end insert
“for the next 30 years for”.
This amendment would ensure that the rail strategy set out in Clause 15 must cover a 30-year period.