Railways: British Rail

Baroness Kramer Excerpts

Tuesday 12th November 2013 Lords Chamber

[Lord Mawhinney (Con)]

My Lords, at the express request of my noble friend Lord Spicer and on his behalf, I beg leave to ask the Question standing in his name on the Order Paper.

[The Minister of State, Department for Transport (Baroness Kramer) (LD)]

My Lords, the Government have no plans to do so but note that a recent European Commission rail comparison study found that since the 1990s Britain’s railway is the most improved in all European Union countries.

[Lord Mawhinney]

My Lords, does my noble friend recall that when privatisation was proceeding and being implemented, the Government made two strong and clear commitments: first, that privatisation would reverse 40 years of decline in the use of railways, which has manifestly been the case; and, secondly, that there would be a huge input in private investment over and above anything that the taxpayer could contribute, which has also obviously taken place? Will my noble friend confirm that both those things have been the product of the privatisation of the railways?

[Baroness Kramer]

I can certainly confirm those comments from the noble Lord, Lord Mawhinney. He is absolutely right that at the time of privatisation— 5 November 1993, which I assume is the date to be commemorated in the Question in the name of the noble Lord, Lord Spicer—the railway essentially was expected to fall into decline, having had a long history of underinvestment and of stop-and-start annual budgets. Since then, the UK has seen a doubling of passenger journeys to the highest level since the 1920s; 4,000 more services a day than in the mid-1990s; a 60% increase in rail freight; and the fastest growth of European railways. The UK railway now carries nearly 20% of the EU’s passenger journeys.

[Lord Faulkner of Worcester (Lab)]

My Lords, has any assessment been made of the sort of railway that we would be enjoying today had the British Railways Board received the same levels of support and investment —much of which has come from the taxpayer, despite what the noble Lord, Lord Mawhinney, said, but has been made available to privatised industry—and had the railway not been subject to the negative influences of decline and contraction, to which the Minister rightly referred, largely at the behest of Her Majesty’s Treasury?

[Baroness Kramer]

The noble Lord, Lord Faulkner, gets to the heart of the problem. Under a system in which this was a Government-run industry, an essential feature was the constant stop-start and underinvestment. It is by putting in place a structure with the ability to set up arrangements that force the Government into long-term decision-making and long-term commitment that we have been able to rebuild the infrastructure.

[Lord Grocott (Lab)]

Did not the privatisation of the railways simply follow the pattern of previous privatisations, which was that priceless national assets acquired by the great Labour Government of 1945 were sold off at knockdown prices by a Tory Government to a small number of investors, who made huge sums of money overnight? Does the Minister share my near despair that precisely the same pattern has been followed with the sale of Royal Mail, which was grossly undersold against the wishes of its previous owners—that is, me and everyone else in the country? Incidentally, as my assets have been sold off against my will, at the very least I ought to receive a cheque for the value of the assets sold.

[Baroness Kramer]

My Lords, I will resist the temptation to go into the territory of Royal Mail. The privatisation of the railways may not have been perfect; we certainly had Railtrack going into administration in 2002, and there have been other issues. The question is: do we have a system that has delivered a significantly better railway for customers and freight in this country? I would argue that we very evidently have. Does this give a basis for moving forward and providing yet further improvement? I think that argument is also made.

[Baroness Wilcox (Con)]

While I am delighted to travel by rail most of the time, all the way down to the West Country, I am very sorry to see, after all these years since 5 November 1993, that raw sewage is still going out on to the lines. Before we rush forward to HS2—to which I am looking forward enormously—I urge our new Minister to think about the men working on the lines and in the stations who have to deal with this excrement.

[Baroness Kramer]

The comments of my noble friend totally resonate. It is utterly disgusting. It speaks to the fact that customer service has not always been at the centre of the railways, because I think customers are very concerned about this issue. Beginning in 2017, the current InterCity 125 trains will all be replaced by the new Class 800/801 intercity express trains from Hitachi, which will solve that problem on the intercity lines. It is a tougher issue on the local diesel trains, which are gradually going out of service, and we could use some help from the industry in tackling that problem.

[Lord Davies of Oldham (Lab)]

The Question was whether the Government would mark the passage of the legislation. Is this the legislation that, within 10 years, saw the bankruptcy of Railtrack? Is this the legislation that saw the franchise fiasco on the line from Paddington to south Wales a short while ago? Is this the legislation that insists that a publicly operated company, which produces £47 million of profit to invest in the railway and hands £800 million back to the Treasury as extra profit, is disbarred from competing for the franchise against German and French state railways?

[Baroness Kramer]

My Lords, Network Rail plans to invest £38 billion into the system between 2014 and 2019, which will shortly bring into the system Crossrail, the upgraded Thameslink, a northern hub cross-Manchester link that will provide electrification linking the core centres of the economy in the north, the West and East Midlands and Yorkshire. Today, the south of England has 75% of passenger miles on electric trains. I assume that the noble Lord was talking about the east coast main line franchise and, as he knows, it was always intended by the noble Lord, Lord Adonis, that this would be in public control only temporarily. He said:

“I do not believe that it would be in the public interest for us to have a nationalised train operating company indefinitely”.—[Official Report, 1/7/09; col. 232.]

The public sector—DOR—has done an excellent job of stabilising the system, but now returns it to a period of investment, which requires private sector engagement.

Motor Vehicles (International Circulation) (Amendment) Order 2013

Baroness Kramer Excerpts

Tuesday 12th November 2013 Grand Committee

Moved by

[Baroness Kramer]

That the Grand Committee do report to the House that it has considered the Motor Vehicles (International Circulation) (Amendment) Order 2013.

Relevant document: 12th Report from the Joint Committee on Statutory Instruments.

[The Minister of State, Department for Transport (Baroness Kramer) (LD)]

My Lords, the order will allow car transporters to carry out unlimited cabotage operations in Great Britain during the peak registration periods. Road haulage cabotage is domestic goods operations carried out on a temporary basis by haulage operators registered in another EU member state.

EU Regulation 1072/2009 revised the previous EU rules governing road haulage cabotage with the intention of clarifying the minimum extent to which carrying out cabotage in another member state is allowed. Translated into domestic law, this results in non-UK goods vehicles being limited to carrying out no more than three cabotage operations in the seven-day period following the last delivery on the incoming international journey. Once the limit has been reached the vehicle must leave and re-enter with a new international load in order to undertake further cabotage.

Generally, the clarity provided by the 2009 EU rules has been welcomed by industry in place of less certain application of the former rules on “temporary use”. However, the explicitness of the new rules has had an appreciable and restrictive impact on the ability to move sufficient motor vehicles in the new car registration peak periods each March and September in Great Britain.

Car-transporting vehicles are highly specialised and are not suitable for general haulage. Whereas the core demand outside the peak periods is satisfactorily met by UK vehicles operating domestically, at times of peak demand vehicles from other member states have traditionally been used to supplement the UK fleet. Regulation 1072/2009 has the effect of restricting the amount of work that non-UK hauliers can legally undertake on each visit. When there is a shortage of haulage capacity to move cars and vans, they accumulate at factories and ports during these peak periods. This lack of capacity in the supply chain becomes a bottleneck for UK manufacturers distributing vehicles for domestic consumption and export.

My department considered various options to address this problem and concluded that relaxing the cabotage rules at the peak periods via secondary legislation was the most viable option. We consulted on these proposals and the majority of responses, especially those from motor manufactures and retailers, were very supportive. This order, together with the related Goods Vehicles (Licensing of Operators) (Amendment) Regulations 2013, makes regulatory changes to allow vehicles, essentially car transporters, to carry out unlimited cabotage operations moving cars and vans during the peak registration periods.

This order amends Article 5 of the Motor Vehicles (International Circulation) Order 1975, which exempts from excise duty certain vehicles brought temporarily into the UK. Relief from excise duty is already available to vehicles used for cabotage operations in the UK in accordance with the limits of EU Regulation 1072/2009. This order additionally exempts vehicles which are being used only for or in connection with the carriage of motor vehicles in Great Britain from excise duty when carrying out unlimited cabotage operations during the permitted peak periods.

I should also draw attention to a minor slip in Article 2(4) of the order. The Committee should have a correction slip for this which makes clear that the additional definitions are inserted after the definition of the “date of importation” and not in the middle of it. It is simply a typo.

This is quite separate from the new HGV levy charge. From April 2014, these operators will be liable to pay the new HGV levy charge for the period they are in the UK, paying up to £10 per day and £1,000 per year. The related Goods Vehicles (Licensing of Operators) (Amendment) Regulations 2013 created an additional exemption from the need for the user of a goods vehicle to have an operator’s licence under the Goods Vehicles (Licensing of Operators) Act 1995. This came into force on 15 August 2013.

These changes are intended to assist UK car manufacturers and retailers by allowing unlimited cabotage operations by car transporters at the peak periods. I commend the order to the Committee.

[Lord Rosser (Lab)]

First, I thank the Minister for her explanations of the order we are discussing. I have a number of points and queries.

The impact assessment refers to policy options under consideration, but it does not include the option, or the feasibility, of removing the cause of the trouble, which is the GB system of having new registration numbers every six months, and with it the quite dramatic peaks in car registrations in March and September compared to the rest of the year. The impact assessment dismisses this point, when it says on page 3 that:

“The peak registration periods themselves are nothing to do with any regulations”.

Frankly, I would have thought the peak registration system had everything to do with this order. Will the Minister tell us whether the peak registration system is in the interests of growth, since growth is obviously an important issue for the Department for Transport? This order supports the growth agenda, as the Explanatory Memorandum itself states, without answering the question as to whether the arrangement it is seeking to prop up is also in the interests of growth. Would the car industry, including car transporter firms, be better off with a much more even flow of cars being produced and sold each month than is the case at present?

Figure 4 on page 5 of the impact assessment indicates that, apart from some 10 weeks of the year around March and September, capacity in the haulage fleet comfortably exceeds—in some weeks far exceeds—demand for moving new and export cars. I hope the Minister will give us the facts and figures to show that the GB system of having new registration numbers every six months, and its cost consequences, are justified by the additional cars sold compared to what the position would be with a much more even number of car registrations and sales through the year. Frankly, if this cannot be shown, why are we introducing this order?

The impact assessment also dismisses the registration peaks issue on page 8, on the grounds that any changes to the system would be too complicated to implement. However, should we not be trying to do something about peak periods for the longer term, if that is what is causing problems for UK transporter firms, rather than getting in extra UK haulage capacity at peak times, possibly at greater cost? Can the Minister say whether other vehicle manufacturing countries—such as France, Germany and Italy—have the same problem as us over car transporter capacity because of their own systems of registration numbers?

The impact assessment refers to the effect of this order in allowing Ministers to relax selectively the application of EU cabotage rules in Great Britain. What is the maximum number of weeks in the year that we are allowed to do this? The Explanatory Memorandum states that the Association of European Vehicle Logistics and the Ford Motor Company both suggested that any relaxation period should start two weeks before the peak months; that is, it should be the last two weeks in February and August. The Government do not appear to have agreed to that suggestion, since the relaxation periods will begin on 22 February and 25 August respectively. The department agrees that it is sensible to allow the relaxation periods to commence before the start of the two peak months, but does not indicate in the Explanatory Memorandum why it would be inappropriate to agree to the last two weeks in February and August, which was what was being sought. Can the Minister say why not? I note that even the Government’s proposals will put additional heavy vehicles on our roads at a peak holiday time, around a bank holiday weekend at the end of August. Perhaps the Minister can comment on the wisdom, from a safety point of view, of doing that.

We are told that there were three negative responses. They were not exactly from lightweight sources. The traffic commissioners pointed out that foreign goods vehicles were generally more likely to be non-compliant than domestic vehicles. They said there was a risk to road safety and fair competition from the proposal. The commissioners referred to random fleet compliance surveys conducted by VOSA, which show that domestic hauliers attract a prohibition rate from mechanical defects of 10.4%, whereas the average for all foreign hauliers is more than double that, at 21.8%. The impact assessment goes on to say:

“Nevertheless, the Department is not convinced that this is likely to be a significant issue. Car transporters are highly specialised and costly pieces of equipment and we believe they are less likely to be non-compliant with routine roadworthiness requirements than the average HGV”.

That is really not a satisfactory response when rejecting the concerns of the traffic commissioners. The “we believe” school of policy-making is not on a very firm footing compared to policy-making based on evidence and facts. I ask the Minister to provide the non-compliance rates with routine roadworthiness requirements of, first, domestic car transporters and, secondly, foreign hauliers’ vehicles covered by this order, which would provide a factual basis for the department’s statement that it is not convinced that this is likely to be a significant issue.

Although the impact assessment appears a little imprecise on this point, I am assuming that the effect of the order is that more non-UK transporters will be in this country in the peak periods than are currently. That is because the impact assessment talks about the order removing bottlenecks and about exports no longer being delayed or factories put at risk because end-of-line compounds become choked. One of the negative responses came from a UK-based car transportation company which said that it would have to reduce the size of its fleet if transport operators from other member states were able to operate in Great Britain without restriction for two months of the year. Bearing in mind that outside these two months capacity exceeds demand, it seems likely that the months in question are ones when car transportation companies have more business—and more income coming in—than at any other time of the year. How can the department be so sure that non-UK hauliers being able to operate without restriction during those two peak months for business for UK car transporter firms, as a result of this government order, will not have an adverse impact on the UK firms?

The impact assessment states that the cost of non-UK hauliers would be greater. What is the difference in costs between hiring non-UK transporters and hiring their domestic equivalents, both now and under the revised temporary arrangements provided for in this order? How sure is the department that the statement in the Explanatory Memorandum that non-UK transporters will be,

“used by the sector only when the domestic supply is exhausted”,

is correct? On page 8, the impact assessment states:

“DfT Legal could aim to draft the new Regulations in a way that would make it easier to capture further categories of vehicle at a later date by simple secondary legislation”.

Is that actually what the Government intend to do, and if so, why? What other sectors have reported problems with the present arrangements, and would such a step have a detrimental effect on UK hauliers? I would be grateful if the Minister could confirm what I believe she said—that there is no link-up between the thrust or implications of this order and the issue and consultation on the road user levy.

On its first page, the impact assessment states that the review date for the policy change will be April 2018. Why is four and a half years from now considered the appropriate date for a review? Subject to the Minister’s response, we are not particularly enthusiastic about this order, but we will not seek to oppose it.

[Baroness Kramer]

I very much thank the noble Lord, Lord Rosser, for a series of entirely pertinent questions. Let me try to take them roughly in the order in which he presented them. His primary question was about whether it is possible to level out or do away with these peaks of registration. As he will be aware, until 2000 there was just one registration date, which was each August, and the peak period was even more pronounced than it is today. Indeed, it was in response to pressure from the motor industry that the DVLA consulted on the registration periods. Subsequent to that consultation, it introduced a system of registrations each March and September. It spread the peaks over two periods. The general assessment of the industry is that the system has worked well and there has been no pressure from the industry to change the system in recent years.

I am sure that the noble Lord will agree that it is to every advantage to have a system that is effective for the UK’s very robust car manufacturing and retail industry. Were there to be any review, it would probably be a BIS-driven review, because it would be to ensure that that is working effectively both for the manufacturing and retail industries and for customers. The department’s job is to minimise transport problems related to the system.

[Lord Rosser]

I take the noble Baroness’s point that that may have more to do with BIS than the Department for Transport. I asked whether in fact having the peak in car registrations in two months of the year was conducive to encouraging growth. I repeat one part of my question in this context which I think is a matter for the Department for Transport: do other car-producing countries in Europe—Germany, Italy, France—have the same problems as we do because of the registration number system?

[Baroness Kramer]

As the noble Lord will know, Ireland does that on a once a year basis, so it has something closer to our older form of a single peak. Otherwise, that is not the pattern in continental Europe, but then buying patterns are very different in various countries within the EU. I am sure that the noble Lord would not recommend that we change our system in order to follow continental buying patterns which may not fit buying patterns in the UK. I suspect that he would also agree that this has to be an industry-led consideration, because the goal is to ensure that it works well for the British manufacturing and retail industry and for customers.

The noble Lord talked about an adverse impact on the economy. He will appreciate that if we were to have a generally higher fleet at all times, there might be an associated economic cost. There are both winners and losers for the road haulage industry as well in changing the peak.

The noble Lord asked whether there is a maximum time for which the relaxations can apply. Exactly as he said, the relaxations are over two fixed periods, from 22 February to 31 March and from 25 August to 30 September each year. However, there is flexibility, because the normal EU cabotage rules permit non-UK car transporters to carry out up to three cabotage operations in the seven days prior to the relaxation period coming into force. In effect, it allows for up to six weeks of cabotage operations without having to leave the UK. I think that that responds to the issue raised by the industry when it asked for an extra week, because there is that normal process in the period prior to the actual start of the specific exemption. That provides the coverage that meets the requirements of the car manufacturers.

[Lord Rosser]

I think that I have understood the noble Baroness’s point, but is she saying that the earlier week before the provision comes into force is covered by the existing arrangement that you can do three trips within seven days, and that you can then switch straight to the relaxation—that that vehicle will not then have to go back to its own country, load up again and come back to the UK?

[Baroness Kramer]

The noble Lord is exactly correct. That is why providing an additional week, as originally requested by the industry, was unnecessary because it is covered by that element. If we added two weeks on, as he asked, we would have yet another week added on, and I do not think that that would be either necessary to the industry or particularly desirable for the system as a whole.

The noble Lord asked about the impact assessment. There is no review date in the SI itself, but the department will be putting in place arrangements to review the impact of the regulatory changes, and I will ask that he is kept informed as that process goes ahead.

The noble Lord asked about language within the impact assessment that might suggest that the DfT is looking at extending the arrangement beyond car transporters. It is not. I agree that the language was somewhat confusing, so I asked questions about it myself. If the noble Lord looks at the SI, he will see that the way in which it is written means that if there were need to look at an exemption in another area, it would be quite easy to do a mirror SI, simply changing the description of the problem and the vehicle. The issue before us is the only one being addressed. Any further exemption would still be required to go through exactly the same parliamentary procedure as this exemption. There is no change in parliamentary procedure but a reduction in the time that legal counsel would have to sit down and work on the written language. That seems a sensible step when we are constantly trying to cut down costs within government. That is all that is implied.

[Lord Rosser]

I thank the Minister for that explanation, but are there other sectors raising queries over the existing arrangements, or is this the only sector?

[Baroness Kramer]

This is the only sector.

On safety concerns raised by the Freight Transport Association, the noble Lord will be aware that minimum vehicle road-worthiness requirements exist across all EU member states, and the Commission is looking to harmonise standards in the future. The Vehicle and Operator Services Agency, or VOSA, carries out regular spot checks of foreign and UK vehicles to ensure that they are roadworthy and can take enforcement action, including issuing immediate or delaying prohibitions, and in the most serious cases can impound vehicles.

The issue of safety is partly addressed by that, but the noble Lord picked up on the point discussed in the impact statement; namely, that vehicles able to access the UK because of this exemption will be car transporters. As he knows and reaffirmed, those are highly specialised, very costly pieces of kit. I do not think that anyone has done the work for the UK domestic market or for non-UK resident hauliers to compare their accident rates versus other forms of haulage. VOSA will keep a sharp eye out and monitor car transporters more closely, and that applies to both domestic and overseas vehicles; but it is generally expected that these highly sophisticated pieces of kit will be less involved in collisions and raise many fewer safety issues than the haulage industry at large. VOSA is on to that and will keep an eye on it. There is no experience that suggests that we should have any particular alarm related to the exemption being provided for under this statutory instrument.

Perhaps I may ask the noble Lord, Lord Rosser, whether there is anything that I have missed in the questions that he raised, just to make sure that I cover them.

[Lord Rosser]

There are one or two, but I am not pushing the Minister to give a reply today. One argument advanced by one of the car transporter firms is that it might have to reduce the size of its fleet. I think that the Department for Transport’s answer to that is, “No, you won’t, because the costs of the non-UK hauliers will be greater”. What is the difference in cost for non-UK transporters in hiring domestic equipment under the present arrangements and under the proposed arrangements? Presumably, the argument will be that it may cost less than it does now to hire a non-UK transporter.

[Baroness Kramer]

The noble Lord, Lord Rosser, is exceedingly helpful; I thank him for triggering my memory on both this and another question. Only one UK road haulier raised this issue. It is expensive, quite frankly, for the UK industry to have to carry the additional equipment—it is expensive equipment, as we said earlier—to meet peak. From an economic perspective, therefore, I think that most road hauliers regard it as an advantage to know that the peak can be met from elsewhere without a requirement that they carry equipment which would have to sit redundant for much of the rest of the year. As the noble Lord will see, the argument works both ways on this issue.

[Lord Rosser]

The argument is that if you had the flow of registrations more evenly across the year, the industry would not be faced with the problem of having enough vehicles for capacity in the peaks.

I am not from the industry, but as I understand it, the other argument that has been put forward is that those two peak months are probably the time when companies take in most of their income. What guarantee is there that at the busiest and most profitable—or at least, highest income—time, companies will not find non-UK hauliers over here taking away some of that business, on which their finances for the whole year may depend?

[Baroness Kramer]

Again, I confirm the point that the noble Lord made himself, which is that, because heavy and highly specialised equipment has to come from overseas—you cannot just throw something together to bring over to provide a service to a motor manufacturer—the costs make overseas hauliers more expensive.

[Lord Rosser]

The comparative cost is one of the questions I asked. I should have thought that it would have been in this information, because it is part of the DfT argument that the cost of bringing in vehicles from abroad will be higher. Presumably, under the new arrangements, the costs may well be less than they are now for the reasons that we have been discussing.

[Baroness Kramer]

Yes, under the system that we had in place before we had the new European legislation, but we can look at that. I will ask the department to write to the noble Lord with more detail. Again, much of the evidence has come from the industry itself, rather than merely being put together by the DfT, so that may give him some measure of comfort.

The noble Lord raised another question that I want to answer, which is: what would happen if we did not permit those vehicles, so that every three trips within the seven days they would have to go back to the continent and come back over? That is an exceedingly expensive strategy. That is the situation as it would be today without the exemption order. Unfortunately, the cost of that would get passed on to car purchasers within the UK and to UK manufacturing industry. So the noble Lord will see that there is an attraction in avoiding additional cost. He also raised the issue of peaks on the road in August. Sending all those transporters back on the ferry and then bringing them back again, gives a far worse traffic result than keeping them here and having them service that peak domestic need.

I hope that that covers the issues. I understand that the noble Lord has questions; I have said that we will write to him on those which he feels were not satisfactorily answered by my comments; but I am glad that he has given his support to the statutory instrument.

Motion agreed.

Railways: Passenger Demand

Baroness Kramer Excerpts

Thursday 31st October 2013 Lords Chamber

[Lord Faulkner of Worcester]

To ask Her Majesty’s Government what estimates they have made of the cost of upgrading the West Coast and East Coast main railway lines to bring them up to the standard likely to be required to meet passenger demand after 2020.

[The Minister of State, Department for Transport (Baroness Kramer) (LD)]

My Lords, the only viable option for solving problems on the west and east coast main lines beyond 2020 is HS2. The Government have looked at alternatives, including upgrading these routes. The lead alternative looks to enhance all three existing north-south main lines at a cost of £19.2 billion, £2.5 billion of which is required for the west coast and £11.5 billion for the east coast. None of these alternatives delivers the scale of benefits of HS2.

[Lord Faulkner of Worcester (Lab)]

My Lords, I welcome the Minister to the Dispatch Box for her first Oral Question and warmly congratulate her on that Answer. With the number of people travelling by train now higher than at any time in the history of Britain’s railways, with growth over the past five years running at 5%, does she agree with Network Rail’s assessment that a make-do-and-mend approach to the main lines built by our Victorian ancestors would require 2,770 weekend closures, endless bus substitutions and increased journey times over 14 years, and do little for economic growth for our great cities outside London?

--- Later in debate ---

[Baroness Kramer]

My Lords, I could not agree more with the noble Lord. I would also say that the benefit-cost ratio for HS2 assumes a growth in rail demand of 2.2% while, as he has said, the actual growth in demand over recent years has been much closer to 5%, which would significantly increase that cost-benefit case. Capacity is the issue; the alternatives just do not offer the scale. For example, HS2 will deliver over 13,000 peak hour seats to west coast destinations compared to just 3,000 for the alternatives.

[Lord Berkeley (Lab)]

My Lords, how many years of closure at weekends or at other times of the three main lines going north from London would be required to meet the demand of passengers and freight—and freight will double in the next 20 years—if that was to be a substitute for HS2? I declare an interest as chairman of the Rail Freight Group.

[Baroness Kramer]

My Lords, we would be looking at something like 14 years of weekend closures, which is extraordinary disruption. That assumes a very aggressive construction schedule of two simultaneous schemes on each route at any one time. If it was done in a more usual pattern, there would be even more weekends of closures. The question of freight is a serious one, because the alternatives would not add a single additional freight path on the southern section of the west coast main line, whereas, by transferring long distance passengers to HS2, there is a possibility of up to 20 additional freight paths on that same congested set of lines.

[Lord Palmer (CB)]

Could the Minister explain why the Government are so keen to denationalise the east coast main line when it is performing so well and contributing so generously to Treasury funds? I declare an interest as a frequent traveller on that line.

[Baroness Kramer]

My Lords, I shall reply only briefly, because this wanders away from the topic of the Question. The important issue is that we need significant investment in the east coast main line. The Government and DOR have done an excellent job of stabilising the service; we look to the future and to investment and growth. That is why the Government are making the decision to move ahead with the franchise, to provide a far better and improved service in future.

[Lord Bradshaw (LD)]

Did the Minister see the report in the Evening Standard yesterday that the noble Lord, Lord Sugar, has spent £24 million in acquiring a property the value of which is expected to rise when Crossrail is opened? The HS2 route will see significant rises in value but these are neither credited to the scheme in the economic assessment nor captured by the public purse. Is any work going on to secure some credit for such effects of these large infrastructure schemes?

[Baroness Kramer]

My noble friend Lord Bradshaw is right that the economic case is looked at within fairly tightly defined contours. There are many additional benefits. My noble friend Lord Deighton is working on making sure that the growth potential of HS2 is absolutely maximised. My noble friend made the point that there is an uplift in value. My goodness, we have seen that around places like King’s Cross/St Pancras, at the stations on the Jubilee line and in the benefits to Canary Wharf. That economic uplift has not traditionally been captured to help fund infrastructure. We will look closely at ways to do that in future.

[Lord Snape (Lab)]

My Lords, does the Minister accept that the problems on the east coast main line are due to the shoddy way in which electrification took place in the 1980s, a fact that Ministers at the time boasted about? Electrification masts were more widely spaced, and the catenary of lightweight construction means that it blows down in anything above a summer breeze. These matters have nothing to do with the train-operating companies. The Minister’s welcome response about the future of HS2 today ought to be answered by those in my own party, some of whom appear to be more interested in playing politics than worrying about the future of our railway industry.

[Baroness Kramer]

Again, I am afraid that the noble Lord, Lord Snape, wanders away from the subject of today, but it is crucial to understand that when HS2 goes forward, it does not mean we are stopping other transport investment on crucial lines. As he will know, in the next Parliament £73 billion has been committed to transport improvements and only £17 billion of that goes on HS2. Definite improvements are scheduled for the east coast. Since that is away from the topic, I will not pursue those today—and I cannot find them under my tab. I will write to the noble Lord in detail.

[Lord Cormack (Con)]

Is my noble friend aware that many do not share her enthusiasm for HS2, and believe that the points made by the noble Lord, Lord Mandelson, deserve real consideration and that the environmental cost that this nation will have to pay is really disproportionate to the benefits that might be achieved? We hope very much, even at this late stage, that common sense will prevail.

[Baroness Kramer]

My Lords, the Government—and I—regard HS2 as a vital project. As I said, the underlying rationale is capacity. We are out of capacity on critical lines going north out of London and those are essential for the economy. We must also continue to build the economy of the north of England rather than just constantly focus on the south. I believe that the project has found a good balance between the environmental challenges—of course, they are many—and value for money. This is an absolutely essential project and most of those in this House who specialise and focus on transport and rail will confirm the view I have just expressed.

[Lord Davies of Oldham (Lab)]

My Lords, why is the public operation of the east coast main line not allowed to continue or bid for the franchise when bids from the German and French state railways appear to be welcome?

[Baroness Kramer]

My Lords, I am delighted to find that HS2 has now become so uncontroversial that questions on other topics enter into this brief exchange. I just repeat what I said on the future of the east coast main line. It has gone through a period of being stabilised by the Government. That has meant that new investment has not come in on the scale that passengers on that route require. We wish to see a strong future for the east coast main line.

High Speed 2

Baroness Kramer Excerpts

Thursday 24th October 2013 Lords Chamber

[The Minister of State, Department for Transport (Baroness Kramer) (LD)]

My Lords, I join noble Lords in thanking my noble friend Lord Greaves for obtaining this important and timely debate. However, before I begin, I pay particular tribute to the noble Earl, Lord Attlee, who is suddenly in his place—he did not know that I would say this. He managed transport business in this House with great knowledge and skill and I know that your Lordships will wish me to express our respect and our thanks.

[Noble Lords]

Hear, hear.

[Baroness Kramer]

I feel rather redundant. The case for HS2 has been made so powerfully by the noble Lords, Lord Greaves, Lord Faulkner—whose book, Holding the Line, which he modestly did not advertise, sits on my desk as a bible—Lord Bradshaw, Lord Grocott, Lord Rooker, Lord Lea of Crondall, Lord Snape, Lord Berkeley, the noble Earl, Lord Glasgow—what a list. Every one of them is an expert, respected by this House, and I know that this House will listen to them. I welcome the words of the noble Lord, Lord Davies of Oldham, who reaffirmed from the opposition Front Bench his party’s commitment to this project. He is right that this issue must stretch across the politics of these Houses—it concerns the long-term infrastructure of this country—and I thank him for his words. I will touch on three key issues and will then respond to some of the remaining challenges raised in this debate.

When I joined the board of Transport for London in 2000, London was running out of transport capacity. “Make do and mend” was no longer sufficient, and we had to commit to Crossrail. As I came to the department, therefore, it was with a sense of déjà vu that I saw that we face the same problem but on a national scale. Without HS2, key rail routes connecting London, the Midlands and the north will soon be overwhelmed. Demand for long-distance rail travel has doubled in the past 15 years to 125 million journeys a year. By the mid-2020s the west coast main line will be full. As any user of the line knows, the pressures are obvious now, as they are on the east coast main line.

We cannot simply run more trains. Each new service has to be planned around what runs already. It is nearly impossible to find new train paths, and there simply is not scope for future demand, even if we use the very modest forecast of 2.2% growth in demand every year. Already, in my first two weeks in the department I have had to take note of two turn-downs by the Office of the Rail Regulator, for routes from Shrewsbury to London and Blackpool to London, because it is simply not possible to find an adequate train path for those services. However, HS2 gives us the capacity we need. It doubles the number of seats between London and Birmingham; it is capable of carrying a number of passengers equivalent to the population of Nottingham every day; and it will run 18 trains an hour when we finish phase 2, each of which carries 1,100 passengers.

I will leave your Lordships with one set of numbers to remember. If we look at all the proposals for enhancing the existing rail network as an alternative to HS2, the most we can squeeze out of those enhancements is 53% new capacity from London to Birmingham—and as the noble Lord, Lord Snape, and other noble Lords have said, that is despite years of disruption to the routes on which that work will have to be done. We would gain 53% that way, but if we build HS2 we will add 143% more capacity, and that is the transformation we have to achieve.

Transferring long-distance passengers to HS2 frees up the west coast and east coast main lines to develop significant additional regional and commuter rail services. We very much need those for the future, but we could even use many of them now. Very importantly, as the noble Lords, Lord Berkeley and Lord Rooker, have underscored, it leaves room to move far more freight onto rail. The west coast main line is especially crucial as we anticipate growing freight demand as the economy expands. Frankly, the road network simply cannot cope so rail has to take its share and only with that transfer of long-distance passengers and the ability to use those main lines can we achieve it.

HS2 will be an engine for economic growth and jobs. The current estimates are that HS2 will contribute £60 billion to the economy. That is actually quite a narrow calculation and the wider effect could be much greater as we link key northern cities to each other and to the south. Incidentally, those who referred to the KPMG report must have misread some of the lines. It shows benefits to far more areas than those which suffer a relative disadvantage. It will help to rebuild our economy. The noble Lord, Lord Greaves, used that key phrase, “closing the regional divide”, because although London gains, the big winners are the northern cities like Sheffield, Wigan, York and Wakefield. I understand the demands to look at the case of Scotland. Scotland will benefit from phase 1 of HS2 and even more from phase 2, but there are ongoing discussions and we have all undertaken to examine this area.

HS2 will also be a catalyst for city-centre regeneration. We have seen that with Crossrail and Kings Cross. The HS2 growth taskforce led by the noble Lord, Lord Deighton, who I know is so widely respected in this House, is now working to make sure that we maximise all of those opportunities. Frankly, if the noble Lord, Lord Mandelson, doubts that the north is going to benefit, I recommend that he have a conversation with the leaders of Manchester, Birmingham and Leeds. They want this line sooner because they recognise the benefits that are coming. Of course the line does not serve every city and region and the boost is naturally greatest in the places it serves directly. That is the character of infrastructure. We were right to build Crossrail even though the main winner was London and not elsewhere.

HS2 is only one part of a much bigger investment programme which includes the electrification of the East Midlands, the west of England and Wales. There will be a £1 billion electrification of the Great Western main line to Cardiff and Swansea with intercity express trains from 2017. There will be a dualling of major road links in Cornwall and East Anglia. The noble Lord, Lord Alton, asked about the north. I have such a long list, I will read only some of it. We are electrifying the line between Liverpool, Manchester, Preston and Blackpool. We are also electrifying the trans-Pennine route from Manchester to York via Leeds. We are introducing electric trains between Manchester airport and Scotland. It is crucial that this House understands that the overall investment in transport infrastructure in the next Parliament is £73 billion and that of that, HS2 is only £17 billion. I can confirm that in response to a question from the noble Lord, Lord Bradshaw.

Lastly, let me make a couple of comments on actual delivery. The upper limit of the cost is £42.6 billion. As others have said, that includes a very considerable contingency of £14.4 billion, so we have genuine scope to bear down on that number. The cost of £7.5 billion for rolling stock also includes a contingency. Let me assure the noble Lords, Lord Watson and Lord Truscott, that we are much better today at understanding how to work out cost and how to manage and build, which is essential to the HS2 project.

The noble Lord, Lord Bradshaw, raised the question of using property uplift values as part of the way to pay for that. That is very interesting and we will look at that going forward. There is going to be a significant private-sector contribution because the stations, other than the operating part of the stations, undoubtedly can be provided by the private sector. We have seen the capacity to do that in places like Kings Cross. And after HS1 was completed, although it is a 100-year railway, a 30-year concession for that line was sold which paid for at least a third of the actual cost of construction. We have mechanisms in place to make sure that the cost is controlled and that we can turn to the private sector for significant parts of the financing. I intend to become very much more involved and look intensively at that issue.

The Government are also committed to fair compensation for those along the route who are impacted. I say to the noble Baroness, Lady Mallalieu, and the noble Lord, Lord Stevenson of Balmacara, that the consultation is under way now and that they should contribute to it, as it is crucially important that they do. The package—and the Government are committed to this—will go above and beyond what is required by law. This will be a fair and generous package. We are looking at issues, and part of that consultation includes things such as property bonds, voluntary purchase and rural support zones. I recommend that the noble Lord encourage his neighbours and others interested to participate, because we need that dialogue.

HS2 will also be built to the highest environmental standards, with, for example, some 70% of the surface lines between London and the West Midlands insulated by cuttings, landscaping and fencing. I say that again partly in response to questions raised by the noble Baroness, Lady Mallalieu, and the noble Lord, Lord Stevenson. I accept that when one builds a piece of infrastructure, there is an impact. It is impossible to do it without an impact, and it is difficult if it impacts on an area that you either live in or know and love. This project has made a real effort to minimise the impacts, but it must pay attention to costs, and the balance that we have struck is, frankly, the right one.

The noble Lord, Lord Low, brought up the issue of Maglev technology. In China, Maglev goes between Shanghai airport and the city of Shanghai. For the kind of long-distance services that we are looking at with HS2, the Chinese are using very similar technology to that which we are proposing. We are choosing it because it is safe and proven. I think that we would all think that that was an appropriate approach to take for that size of infrastructure project.

There are opportunities to build British capacity for business and to build jobs around this project. It is by far the largest infrastructure project in Europe. One focus that I and others in this Government will have is to look at how we can build the British supply chain to make sure that we reap benefits in gathering expertise and experience in business and then put those businesses in a position where we can export that kind of expertise to other projects across the globe. With all that come jobs for young people and highly skilled jobs; this is a fantastic job opportunity. To look back over the kinds of numbers that we have seen, the Core Cities Group alone predicts that HS2 will underpin the delivery of 400,000 jobs. Construction jobs, at their peak, will be in their thousands—50,000 at peak and probably 19,000 over the average of the project.

HS2 is simply the most significant transformation of our infrastructure in a generation. It will link eight of the 10 largest British cities, serving one in five of the UK population; two-thirds of the population of northern England will be within two hours of London. As others have said, there will be interconnectedness between those communities as an additional base for stimulus within the north itself. This is a time for ambition; make do and mend will not serve this country.

The noble Lord, Lord Mandelson, may have viewed the decision on HS2 as a vanity project, but he does not do justice to his colleagues when he says that. We have heard discussed again and again the requirement for capacity, and it is simply incontrovertible. We have to be able to move people in the modern era, and to move freight. To have a project that focuses on bringing prosperity to the north of England, so often forgotten in previous schemes, is critical and important. So although it is all right that the debate should continue, this Government remain—and I assure those who have asked—committed to this transformational project. I thank the noble Lord, Lord Greaves, and others for having this debate today.

Railways: East Anglia Network

Baroness Kramer Excerpts

Thursday 10th October 2013 Grand Committee

[The Minister of State, Department for Transport (Baroness Kramer) (LD)]

Thank you, my Lords. I have learned enough between debate one and debate two to realise that I have a lectern available to me, so we are definitely making progress. My heart obviously sank as this debate progressed, when I realised that so many Members of your Lordships’ House suffer regularly from this line. I can tell your Lordships that as we went through it, my empathy increased with each additional speech. I, too, thank the noble Baroness for securing this debate because the East Anglia rail network is clearly a topic of real concern to any of us who are involved in the world of transport.

Investment in these services is vital for economic health in the east of England. It unlocks the potential of important regional centres such as Norwich and Ipswich, to which a number of speakers have referred, including the noble Baronesses, Lady Jenkin and Lady Scott, and maintains links between rural communities. It supports the position of Cambridge as one of the leading centres of high-technology in the UK.

I shall try to address questions that have been raised in this debate. If I miss anything, we will definitely follow up with a written response, so I hope that noble Lords will bear with me.

As the noble Baroness, Lady Jenkin, said, there has been an ongoing dialogue between the department and the key stakeholders in East Anglia on many of these issues. I wish to commend the work that went into Once in a generation—A rail prospectus for East Anglia, and the way in which so many different stakeholders came together to support a united vision around that document. It is now being updated, and I hope that it can be an important mechanism for raising some of the capacity issues that we talked about today. It will be the basis for continuing engagement between the department and stakeholders in East Anglia. The noble Lord, Lord Bradshaw, brought up issues around the quality of service and, more specifically, around rolling stock; I am not sure to what degree it will look at rolling stock in quite that technical sense, but quality of service should be very much embedded in that discussion. As others have said, the Secretary of State has been to Ipswich and been very engaged in this process.

I understand the concerns that investment in rail in East Anglia has been delayed because of the pause in the rail franchising programme last year. The important result is that the Government have a full timetable covering all rail franchises for the next eight years, and it will let us get that programme back on track. To allow the programme to be robustly delivered, and following the recommendations of the Brown review, the timetable contains a number of direct awards that let us stagger the start of the new franchise competitions. The Greater Anglia franchise will receive one of those direct awards. It will be important as we look in the short term and the long term and have those discussions with the rail network to determine whether an economic case can be made for infrastructure improvements to expand capacity. The Greater Anglia direct award goes from the current contract in July 2014 to the start of the next competed franchise in October 2016. We do not yet have the term for the long-term franchise; that is still under discussion. We are concerned that the direct awards do not become a rationale for delay in the long-term franchise. That will be an underpinning issue; it is not expected that the direct award would be required to extend beyond October 2016.

Any improvements will be assessed for affordability and the level of value-for-money that they provide. They must also lay a suitable groundwork that will support the terms of the competition for the next franchise. It is key that the franchise competition remains free from preset obligations so that it can achieve the best possible long-term deal for both the passenger and the taxpayer. But I take on board the comments made about rolling stock; the Government are not necessarily the party to make rolling stock decisions, and I will feed that back into the franchise discussions, although I am not the Minister directly responsible for those. But the need for short-term improvements in rolling stock has been expressed very clearly in this conversation. I want to confirm that we are actively working with the operator, Abellio, to see what improvements can be made to the rolling stock during the short-term direct award period. I do not think that anyone can make any promises; it is certainly unlikely that initiatives will provide the level of improvement that everybody would like to see. But we may be able to get some meaningful and positive changes that generally improve the passenger environment as a whole. I know well that there clearly are issues in the prospectus that was put forward such as power points on the trains, which have been underscored as being very critical to the passenger experience, and we have tried to take those kinds of issues on board.

I will move on to the issue of freight, which has been raised by many people, primarily by the noble Lord, Lord Berkeley, who is one of the great experts on this in the House. The growth of Felixstowe and Thamesport places renewed pressure on rail freight services, so that is a good reflection of growth in the economy. I know that he is appreciative of the changes that mean that freight can now move from Felixstowe through to Peterborough rather than coming down and going through London. As a Londoner who lives fairly close to the North London line I can see the benefits of that. I also say to the noble Lord, Lord Davies, that preventing freight coming down into London increases passenger capacity in many ways, so it is one of the mechanisms that provides something of an answer. Electrification clearly has to be considered for this part of the route. It will be part of CP6—it will be considered as part of that—but obviously, as we are only beginning that process and the consultation I cannot comment on what the conclusions will be. However, I want to assure noble Lords that that is being recognised and is definitely one of the issues that we will look at carefully.

I have to admit that my knowledge on the issue of Sizewell C is very limited, particularly compared to the knowledge of the noble Lord, Lord Berkeley, so I will write to him on that issue. I am struck by the canny approach that he suggested, which sounded like a win-win, both for the community, for the rail services, and in the end for Sizewell C, so we will take a look at that. I will have to write back to those noble Lords who raised the issue of an east-west rail link and also on community rail partnerships, which are areas that I am less familiar with.

The issue of disability is such a serious one, and I want to spend significant amounts of time looking at disability issues. Again, I am very conscious, from my background in London, that attitude is extremely important in the culture of the organisation. It affects the kind of services that people have. As we go forward into the franchising process it is critical that the issue of disability is at the forefront of people’s minds. By planning around the needs of people who have disabilities and recognising how important their mobility is, we deliver a better system rather than constantly retrofitting, which has been one of the pains and suffering of much of the rail system here in the UK. The noble Baroness will be aware that rolling stock must be compliant with persons with reduced mobility—that is a regulation that comes into effect by 2020—so that will definitely help drive the improvements on the trains. The department is committed to trying to deliver accessibility both on trains and in stations. She might be interested to know that the department is working with Network Rail on the delivery of specific schemes under the Access for All programme. It will not answer all problems but it could try perhaps to deal with issues such as ramps, which she pointed out are absolutely key in this process.

Noble Lords have made various comments about the station at Chelmsford. That is an area on which I will choose to write to a number of noble Lords as I have to confess a lack of familiarity with it. I was going to say to the noble Baroness, Lady Brinton, who talked about disability, that perhaps she might be willing to meet with me to talk more extensively about this issue, and perhaps we might even take a trip or two together so that I could see the situation first-hand with someone who goes through some of these awful experiences and find out what could be done, particularly in this arena.

The Brown review into franchising recognised the benefits of setting clear franchise specification outputs and giving franchisees flexibility in how they are achieved. That picks up a lot of the points that the noble Lord, Lord Bradshaw, made, so I want to give him that reassurance. We must take into account the views of stakeholders—I am glad that the stakeholders have been so articulate—although I would perhaps have wished to have been more knowledgeable about the system before I had to face them in debate. That has been very good and salutary for me. When we consult on the new franchises in late 2014 I hope very much that those voices will make sure that they are heard, and we will make sure that they are listened to. We want to ensure that the passenger is at the heart of rail services in the east of England; that has to be right in terms of the community, economic growth and the success of our increasingly improving and very important rail system. I think I am being told that I am out of time.

Transport: Bus Services

Baroness Kramer Excerpts

Thursday 10th October 2013 Grand Committee

[The Minister of State, Department for Transport (Baroness Kramer) (LD)]

My Lords, I thank your Lordships for the debate so far. It is an extraordinary privilege for me to be here today. I could not open in any other way than to thank the noble Earl, Lord Attlee, who so stalwartly responded to questions, many of them from people present at today’s debate. He may not have a large shoe size, but his are nevertheless large shoes to fill; I feel that as I stand here.

I also had a joke to open with. However, the noble Lord, Lord Rosser, has taken advantage of me and talked about my facing two debates today already. Instead, I will make just one statement, because I want it to be absolutely clear: this Government have no plans to withdraw concessionary fares for older and disabled people. They are enshrined in law and that remains the position. I want to make that clear before we discuss any other issues.

We can all agree that buses play a vital role in our economy: 4.6 million bus journeys were made on local buses in England in 2011-12. They are essential for people to get to work and to education. They are a lifeline for many people, enabling them to socialise. Over half of those outside London who rely on the bus do not have access to a car. Studies such as those from the University of Leeds have reinforced the importance of buses to a healthy and growing economy, and that is surely something we all support.

While there has been some suggestion, particularly from Lord Rosser, that the situation is bleak, I suggest that there is evidence to the contrary. Customer satisfaction with bus journeys is high: 84% of passengers are satisfied with their service. We all want to see that figure improved, but let us not deny that that is a mark of success, particularly compared to the past. Under-21s make up a third of bus passengers; as a group they are often fascinated by the car, yet they are accepting the bus as a way to travel. Use among the over-60s is also increasing, especially as a result of the national concessionary pass.

Moreover, the Government remain committed to improving bus services, and expenditure on buses reflects that. This year the Government spent £1 billion on the concessionary travel entitlement and £340 million on direct subsidies to bus operators in England. We have allocated over £300 million to major bus projects in the last year, and we have provided £70 million, through the Better Bus Area fund, for improvements in 24 local authority areas.

Let me pick up the issue of demand-responsive transport, raised by my noble friend Lady Scott of Needham Market. We have allocated £20 million to support community transport. This is an area of real interest and challenge because it is going to take an intelligent and innovative approach to work out how to provide transport to areas where demand is irregular and sporadic. It means that local authorities will have to bring together the community, so that many others in the community—the voluntary services and stakeholders—can try to look for answers to this. It is one of the reasons why the Government have said that the answers have to be found in the local community, which understands the local problems, rather than imposed constantly from Whitehall. She also raised the home-to-school transport issue. I need to understand that better, and I promise to try to do so.

The Government have provided £600 million for the Local Sustainable Transport Fund and £95 million for four rounds of the Green Bus fund, but we can still do better. The Government’s Green Light for Better Buses sets out our plans for buses. The proposals include reforming bus subsidy, improving competition, improving local authority capability in tendering—and let us not underestimate the difference that can make—incentivising partnership working and multi-operator ticketing, which is a particular interest of mine, and making access to bus information and ticketing easier for all. Perhaps some of that is a result of my London experience.

There is no doubt that we are operating in challenging economic times. The Government must ensure that the bus market is still attractive to all operators, large and small—precisely the point raised by my noble friend Lord Bradshaw. They must find ways to allocate funds fairly, while keeping in mind the best value for money for taxpayers. There is a balance and it is not necessarily an easy set of answers.

The bus service operators grant, paid to bus operators, has historically been provided in a blunt, untargeted way, related to fuel consumption. But from January 2014, the bus subsidy previously claimed by operators of non-commercial services will be devolved to local authorities. I hope that that will drive forward that kind of innovation and new thinking. That money will be ring-fenced until 2017 to ensure stability and will allow local authorities to make the best local-level decisions about the provision of non-commercial bus services.

As several noble Lords around this table have said, some local authorities have argued that they can make the bus subsidy deliver better value for money by working in partnership with their bus operators to grow the bus market. We can all agree that Reading and Nottingham are fine examples of the sort of excellent bus service that can be achieved through that kind of partnership. The noble Lord, Lord Rosser, acknowledged that. It is precisely what the four new Better Bus Areas, which I announced today in a Written Ministerial Statement, are intended to test; I thank my noble friend Lord Bradshaw for his kind comments on that. The policy relies strongly on partnership with commercial bus operators, rather than contractual relationships. That is a significant element of a more positive approach.

As the noble Lord, Lord Rosser, has said, Better Bus Areas are quite distinct from quality contract schemes, where, in effect, the local authority follows something much closer to a London model. I feel very strongly that local authorities and local communities should be making the decision about which way they should go on this. If I understood the noble Lord, Lord Rosser, he took that position as well. Some will go one way and some will go another, but I believe that it is absolutely vital that Whitehall does not try to pretend that it understands the needs of each local community. Providing that flexibility to go in two directions seems to be something that we should see as a strength, not as a weakness.

I also want to stress that the Government are committed to protecting the national bus travel concession. I talked about that and made a very clear statement. I love my freedom pass; I suppose I should declare that I have one in case that could be considered a conflict of interest. I know that it changes people’s lives.

A number of people, including the noble Lord, Lord Rosser, recognise that there is a serious issue of young people’s travel, and it is a complex area. While there is no statutory obligation to provide discounted travel to young people, many commercial and publicly funded reductions are available. I make it clear that this is an area that I want to explore. I think that we could do a lot more work in this area and see what possibilities there are, because I take on board many of the issues that have been raised here. I congratulate those local authorities—I think that Brighton is one example—which have provided discounted fares to young people. We therefore have a beginning point for seeing what the impact is and for putting a great deal more thought into this.

Let me try in the minutes that I have left to make sure that I have covered some of the issues that were raised—where I have not, I will of course write to noble Lords. My brain is not yet trained to grasp every point in the way that it should be and, I hope, eventually will be.

On the reimbursement of concessionary fares, the underlying principle, as the noble Lord, Lord Bradshaw, said is: no better off and no worse off. It is an EU regulation and there is plenty of guidance around all this. I am very happy to meet those who think that it is not working effectively, but I should point out that, at the end of a process, bus operators can appeal to the Secretary of State on this issue—indeed, during the past two years, the number of those appeals has fallen, so this may be less of a problem than we might initially fear. I agree, however, that getting that sorted is very helpful if we are going to start thinking through the issue of concessions for young people.

On traffic commissioners and their role in competition, I am sure that I was handed a note and, if I was, I cannot find it. However, I shall pick that up; I am not yet familiar with the issue of traffic commissioners and what they do. Obviously, because they are regional, they can have an impact in a way that I should be aware of, so I will come back and answer that question.

The noble Lord, Lord Berkeley, talked about bus lane enforcement. In London, on TfL roads, that is obviously a matter for the mayor; otherwise, it is a matter for local authorities. From personal experience, I think that most people seem to regard enforcement as ruthless rather than soft. There are certainly successful examples, such as in York, which has employed enforcement officers. This is another area where we must look to local communities to work out how it can be done within their own community. I would be hesitant about Whitehall trying to suggest that there is one way to carry out enforcement, but I take the point that the noble Lord makes.

I again apologise if I have missed any points that noble Lords may have made. I will cover them in letters—we will go back through Hansard and make sure. I assure the Committee that the Government believe in buses. Our vision is for a better bus service with more of what passengers want. We want punctual, interconnected services; we want them greener; it is essential that they become fully wheelchair-accessible; and we need widely available smart ticketing. I know from the experience of London what an impact some of those “soft issues” can have on the effectiveness, the attractiveness and the success of a bus service. A more attractive, more competitive and greener bus network will encourage more passengers, cut carbon and create growth. I believe that those are grounds on which we can all agree.

[The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)]

I am afraid that I shall have to ask noble Lords to contain their impatience until 4 pm. The rules of the Grand Committee do not allow the next debate to start before the appointed time, even though I look around and see that every speaker is here. I am afraid that I have no discretion on that.

Airports: Capacity

Baroness Kramer Excerpts

Tuesday 8th January 2013 Lords Chamber

[Earl Attlee]

The noble Lord makes a strong point. The Airports Commission will report with its initial findings by the end of the year. I would be delighted to talk to the noble Lord privately when we get that initial report. But it takes time to do the job properly.

[Baroness Kramer]

My Lords, I wonder if the Minister might remind the House that capacity at Heathrow is for 90 million passengers per year. Currently it has only 70 million passengers a year, because airlines are using small aircraft in order to keep their slots alive and are developing most of their flights within the UK and near continent, not for the long distance routes. Will he explain to the House that capacity is far more complex and that there is a great deal of capacity with the potential for much better utilisation already in London?

[Earl Attlee]

I agree with my noble friend that if you use bigger aircraft you can get more passengers through Heathrow for the same number of flights.

Local Government Finance Bill

Baroness Kramer Excerpts

Thursday 5th July 2012 Grand Committee

Moved by

[Baroness Kramer]

50: Schedule 1, page 42, line 21, at beginning insert “The Secretary of State may provide for the designation of areas in which certain non-domestic revenues shall be ring fenced to support infrastructure investment financed using tax increment finance and other mechanisms, and in order to do so”

[Baroness Kramer]

In moving this amendment, I shall speak also to Amendments 51, 52 and 53. The amendment is in my name and that of my noble friend Lord Tope, but I hope that there is broad sentiment around many of the issues that these amendments contain.

The amendments address tax increment financing. For anyone who remains in doubt, and I know that most here are well aware, tax increment financing is simply a mechanism for using future increases in business rates generated by a project, such as new infrastructure, to finance that project in the first place. In other words, it allows a local authority to trade in future taxation income for the present benefit that will create that taxation stream.

As many noble Lords are aware, this is a mechanism commonly used in the United States, where it has provided extensively for the regeneration of communities, but it dates back to Victorian times in our own country and similar kinds of mechanisms effectively created many of our great cities. It is very British at its core. We are all delighted to see this come back into the framework of local government thinking, but we would also like to see it come into the real economy in an effective way—in fact as well as in framework and description. That is why I tabled these amendments.

Amendment 50 is relatively straightforward and effectively puts tax increment financing into the Bill. It is beyond most of us to understand why it is not there in the first place, particularly when the Chancellor in his Budget referred to TIF, its acronym, frequently and in virtually every debate uses the phrase “tax increment financing”. For the sake of clarity, for goodness’ sake let us deal with that and make sure it is in the Bill itself.

Amendment 51 goes to more substantial issues. Many of us who are concerned about local government and about the broader economy have been looking to TIF as a way to finance much needed infrastructure, particularly in the cities that are the engines of the economy. This comes at a time when the nation needs growth above all things. We are also aware—and anyone can look at today’s Financial Times—that the Government have found it exceedingly difficult to package together infrastructure financing. All of that makes TIF more important.

It is of great concern that the Chancellor has, in effect, capped large projects or TIF 2—I was not going to address TIF 1 very much—at £160 million. Indeed, the Minister will be far better aware than I am of the many applications from the core cities. She will know if there are good quality infrastructure projects that could and should be funded by TIF that exceed that £160 million figure. I do not have any insider knowledge, but I would be stunned if that were not true. A PwC study not that long ago showed that something like double that could be put in train in one year although it would take many years to work its way through. The demand and need are clearly there.

In addition, volume matters in order to create a market. I return to the point that the FT makes about the difficulty of accessing the financial markets for infrastructure finance. Numbers such as £160 million are frankly not worth the candle as far as the financial markets are concerned. To develop the expertise, achieve the understanding, get mastery over the rules and legislation and then go out and build the investor base that will buy, there is a need for a steady stream of substantial projects, not just in year one but going on year after year, to create and build up a market.

We know that the financial markets can absorb this kind of financing because they do it for the US. British banks as well as American banks do it for US cities. Continental banks are doing it for the US and the continent. In other words, there are many players, but they will not do the work, engage themselves in the process and deliver the financing if they are only going to get a trickle. They need a proper volume. On the one hand, we have projects that are positive for the economy and on the other hand we have a mechanism that can fund them and the goal of these amendments is to help the Government to bring these two together.

We recognise that behind much of the Treasury’s resistance to allowing projects beyond a cost of £160 million is the notion that TIF funding will have to be added to the numbers for the deficit. I think that that is highly questionable and many others would consider it to be so. If PFI funding was off books, then, my goodness, this funding is far more off books because you are generating a project whose cash flow returns paid for the project in the first place. It is an absolutely classic example of off-balance-sheet financing. Indeed, it is far less risky than something such as PFI, which included all kinds of variants and complications, whereas, almost by definition, TIF draws together the immediate focus of the initial investment and the tax revenue generated over the life of a project. That link is immediate and direct, whereas it was much more obtuse and diffused with PFI.

As I look at the accounting standards, I wonder whether enterprise zones are being treated differently, even though their financing mechanism is essentially identical. This is something that I do not know the answer to; we asked, but have not received an answer. Are they getting different accounting treatment? If they are, that simply underscores the point.

The amendment provides,

“that any indebtedness incurred against such amount shall not be treated as a liability of the public sector through adjustments to the Accounts and Audit Regulations made under section 27 of the Audit Commission Act 1998”.

When the Minister was kind enough to invite Members from all sides to have discussions with the Bill team about a range of issues in the Bill, I asked whether some justification could be provided for this accounting approach versus forms of accounting used for PFI and enterprise zones. I do not know whether it has been possible to develop that. I also asked whether the Government have talked to the financial markets to understand what needs to be put in place for these to run as live, rather than theoretical, projects. Going back to the FT article, we have a real problem with the gap between theory and practice, but we have an opportunity to close it in this Bill.

The other two amendments follow on quite closely. With regard to Amendment 52, perhaps someone can explain to me why we have to have a specific date on which designation takes place—the first day of a year, or whatever it is. That is completely beyond me. I think that Amendment 52 is just a bit of good sense.

Amendment 53 is another way of approaching this issue. It essentially says to the Treasury that the way to make a decision about whether to do TIF financing is to look at the individual project proposed, decide whether it is a damned good project that needs to be done and can be paid for in the way proposed, and, if it passes the various tests and criteria, authorise it. It takes away the need to set a fixed ceiling and allows the Treasury to make intelligent decisions about the projects that come before it, judging them on their individual merit. At the same time, the Treasury is in a position to look at the overall economy and public finances. That would allow an intelligent, customised approach to these kinds of projects. None of this tackles TIF 1—an area I wish the Government would look at again. However, we talked about that at Second Reading. I beg to move.

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[Baroness Kramer]

I will just add a word because the points that the noble Earl, Lord Lytton, makes are important. One reason why we framed Amendment 53 as we did is so that the Treasury can take a look at projects. In the United States no federal approval takes place—essentially, it is the state that decides off its own bat. In the UK, we are saying to the Treasury, “We are not going to just say to local authorities, ‘Do as you will’”. The Treasury has the opportunity to come in and take a serious look and will give permission, but on a project-by-project basis.

I was on the board of Transport for London after the Jubilee line was completed. The point the noble Earl makes is the reverse one, and the Jubilee line is an ideal example. Even with overruns, the Government put in something like £3.5 billion to build it and developers walked off with something in excess of £30 billion in profit because of the increased values around the various stations, extra rents, land prices and whatever else. At least now, with the opportunity to capture increased business rates, we can get some of that money in to create the project in the first place.

In effect, what happened in London was that the money did not circulate back and the whole Jubilee line project was delayed for years until the Government thought that they could find capacity within the public accounts. It would have happened immediately, and been of great benefit to this country, if people had been looking at TIF financing structures. That is one of the reasons why they are so valuable.

[The Earl of Lytton]

My Lords, that was what I was trying to say in terms of the Jubilee line, so I am sorry if I gave a false impression. These things are vitally important to leverage in that sort of level of finance. My only concerns are the times we live in. If one is dealing with a development appraisal in conventional valuation terms, the process contains a high number of price-sensitive variables, so much so that my professional body, the Royal Institution of Chartered Surveyors, does not really advise using that sort of development appraisal, or residual valuation, approach for producing what it calls a regulated purpose valuation because of the inherent number of price-sensitive variables. I do not want to pour cold water on things—I simply wanted to point out that TIF is a tremendously good idea but we must make sure that the circumstances are ones in which it can robustly survive.

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[Baroness Hanham]

My Lords, this has been, as I thought it would be, a very interesting debate. I am not necessarily going to be able to give noble Lords all the enthusiastic encouragement that they look for but there is no doubt that this is something that will generate more discussion, and I accept that.

I know from the noble Baroness’s Amendment 51 that there has been a search for the words “TIF” and “enterprise zones” to be spelt out in the Bill. They are not specifically identified but I assure the Committee that the provisions under paragraph 37 of new Schedule 7B deliver both TIF 2 and enterprise zones. An amendment that names TIF in the Bill is therefore unnecessary.

Before turning to the substance of the amendments, I want to say that it has been interesting that the whole discussion has been on the basis of TIF 2 and none of it on TIF 1. I need to point out that the measures in the Bill relate to TIF 1, TIF 2 and enterprise zones. For the benefit of the record, I think that at some stage we need to spell out what TIF amounts to.

However, we want to clarify the position and remove misunderstandings about what is possible or not possible within the policy. I think it would be fair to say that noble Lords have not really acknowledged that, as a result of the Bill, all local authorities will have unfettered access to a share of business rate growth to increase their potential borrowing. As things stand at the moment, under TIF 1 it will be possible for local authorities to undertake developments unfettered. They can do so with their normal prudential borrowing.

TIF 1 rests wholly within the business rate retention scheme and the core feature of the rates retention system, including the levy and reset. Beyond that, the Government will not impose any further constraints, and local authorities will be able to get on with it. I know that the criticism has been—

[Baroness Kramer]

We did not raise TIF 1 here because it is more of a reset issue, but will the Minister acknowledge that, with the way the reset works, the capacity to do TIF 1 will be exceedingly limited because the whole project has to go from conception to completion and complete repayment within a very narrow reset period? The consequence is that certainly by year two or year three it will be absolutely impossible to raise the financing because nobody will have any certainty that there will be a flow of business rates beyond the end of the reset date to complete the payment cycle. Perhaps the Minister will acknowledge that it is a de minimis amendment. The language may not be de minimis but the effect of the way in which the reset period works makes it de minimis.

[Baroness Hanham]

I will persist with my view that there is an advantage here for local authorities in that they will have the opportunity with tax increment financing within the reset period of seven years, and then, with the longer reset period, 10 years, to help with those projects. In addition, the Government will guarantee long-term certainty over revenues and enterprise zones—as mentioned by the noble Lord, Lord Beecham —meaning that local enterprise partnerships, with which the revenue will sit, will be free to undertake long-term borrowing without any central government controls. Those are the two areas which do not come under TIF 2.

Finally, the Government stated, and made clear, in the 2011 Budget that they will support a limited number of TIF 2 schemes in the core cities, to which the noble Lord, Lord Shipley, referred. The Secretary of State may specify, in regulations made under paragraph 37 of new Schedule 7B, that business rates uplifts, from a very clearly defined area, will be disregarded from the levy and reset calculations for a specified period. The amendments specifically concern this measure.

The Government are fully committed to supporting growth. I noted carefully what the noble Lord, Lord Best, said about housing and about housing construction stimulating the economy. We will continue to have that debate, but the measures to do that are currently in place and are not related to TIF. There have also been a lot of questions about the £150 million in support from TIF for what will amount to a limited number of core cities. Some of those core cities have been announced today and are currently putting forward substantial and interesting proposal bids for this money. I have no doubt that it will work its way through the system.

Amendment 51 seeks a way to get TIF 2 reclassified as non-public sector debt, to which I say, “Oh dear”. Business rates are a tax, and taxes are uniquely established by the tax-raising power of government. Therefore, TIF 2 must be recorded as government borrowing. There is absolutely no choice to be made about how TIF 2 is accounted for—it is not the Treasury sitting on our shoulders here, it is the Office for Budget Responsibility that has made that decision. It is an independent body and has made very clear how this will score.

Furthermore, core cities that are successful in the TIF 2 competition will be undertaking additional borrowing that has not already been reflected in the Government’s local authority self-financed expenditure forecasts. The Government have been clear that we will need to limit the amount of TIF 2 that occurs so that the Government remain within the wider deficit reduction plans.

In respect of balance sheet issues concerning enterprise zones, the policy to allow rates to be retained within the zones will lead to an increase in the local authority self-financed expenditure forecasts and will be scored as public expenditure. As the business rates retention system does not start until April 2013, no costs have yet been accrued. The Government are working with local enterprise partnerships on forecasting these costs and will be discussing the detail with the Office for Budget Responsibility ahead of the Autumn Statement. That may give some substance for the noble Lord, Lord Beecham, who says I have not answered any of his questions. Given this, it is not possible to take TIF 2 schemes off the balance sheet, as the amendment seeks.

Amendments 52 and 53 would not only remove important controls from the system—I have already explained the importance of maintaining the Government’s fiscal deficit policy—but would add further layers of complexity to the operation of the scheme. That would potentially impact on all the calculations of central shares and precepting authorities, removing the certainty that precepting authorities would have about the income they were to receive in that year. Noble Lords will not be surprised when I say that I cannot accept their amendments. I will not be surprised if they say they are going to return to this at a later stage.

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[Baroness Hanham]

Sorry, I have to keep looking over my shoulder for. It would be better for me to quit looking over my shoulder and say that I will answer with detail in writing.

[Baroness Kramer]

My Lords, I am absolutely fascinated by the comments on the Office for Budget Responsibility. It is incumbent on the Government to provide us with the analysis or the statement that it made that requires this from its perspective to be on books because it would be very interesting and beneficial to everybody to get the comments of the accounting community and some of the various international standards boards. It would mean that we could have a fully constructive discussion. I cannot think that any of that could possibly be confidential. In fact it would be perfectly odd if it was confidential to explain why one made a decision that something needed to be allocated to one particular set of accounts or another. That would be exceedingly helpful.

It would also provide us with the criteria, because obviously there are many different ways to structure TIF projects. If various poor cities are bringing forward their proposals in such a way that they have inadvertently set them up so that they fall on books when, with some further thought and different structuring, they could be off books, that would be extremely sensible for everyone to know. That surely must be in the public arena, so I look forward to that.

Having heard the tone of this meeting, the Minister is exactly right to understand that this is an area that we would wish to pursue. I so much appreciate all of the various speeches and analysis that have happened from the noble Lords, Lord Jenkin and Lord Best, and others. It underscores the importance to local authorities up and down the country who are trying to drive forward economic growth in their communities and see TIF as a very significant tool with which to be able to achieve it.

I thank the Minister for her explanation, but she is exactly right: we will continue to push and I hope that she will take the issues back.

Amendment 50 withdrawn.

Airports: Heathrow

Baroness Kramer Excerpts

Monday 28th May 2012 Lords Chamber

Asked By

[Baroness Kramer]

To ask Her Majesty’s Government what assessment they have made of night flights at Heathrow.

[Earl Attlee]

My Lords, the Government are aware that night noise continues to be a concern for residents around Heathrow. We have extended the current night-time flying regime at Heathrow for two years until October 2014 and will begin a review later this year on its replacement. In considering a new regime, it is important that we take care to strike a balance between noise disturbance and the economic benefits of night flights.

[Baroness Kramer]

My Lords, local residents are woken from 4 am onwards not because of capacity issues at Heathrow but because of limits on departure schedules at other airports. If the Government will not commit to eliminating night flights, will they at least undertake to negotiate with the relevant countries for a timetable that is gentler for residents under the flight path in this country? Will they also negotiate with the airlines to get them to commit to put the latest, quietest aircraft on these routes? I understand that none has yet committed to doing so for early landings.

[Earl Attlee]

My Lords, my noble friend makes a number of points. She referred to aircraft coming from distant countries. It is important to remember that if we insist on a later arrival time in the UK, a plane may have to leave the Far East later at night and that may cause a problem there. My noble friend talked about quieter and noisier aircraft. A quota system takes into account the noisiest aircraft, which cannot fly until later in the day.

Roads: Traffic Lights

Baroness Kramer Excerpts

Monday 27th February 2012 Lords Chamber

[Earl Attlee]

My Lords, noble Lords behind me are saying, “No way”, and I think they are right. There are already ways of giving cyclists priority over other traffic and improving their safety at junctions—for example, by introducing advance stop lines and cycle bypasses, and providing dedicated traffic signals for cyclists if required.

[Baroness Kramer]

My Lords, I am sure the Minister will be aware that New York City does not permit the right turn on red precisely because its layout is so similar to the kind that we see in cities and towns across the UK. Having spent many years driving in the United States, in places that permit a right turn on red, I can say that the problem is not traffic. You can see clearly whether traffic is in the way ahead and to the left, but it is virtually impossible to see whether pedestrians are crossing ahead and to the right. Therefore, in support of all those Members who have said that the difference is that we live in a pedestrian’s world, the United States regards pedestrians pretty much as aliens.

[Earl Attlee]

My noble friend is absolutely right in all respects.