European Rail Market: EUC Report

Baroness Scott of Needham Market Excerpts

Thursday 14th June 2012 Lords Chamber

[Baroness Scott of Needham Market]

I thank the noble Baroness, Lady O’Cathain, for so ably introducing today’s debate, and should like to say how much I look forward to being a member of EU Sub-Committee B as a refugee from my spiritual home of Sub-Committee G.

For much of its long history the Channel Tunnel was primarily thought of as an Anglo-French or Franco-English enterprise, and its construction pretty much entirely predates European Union rail policy. The report highlights very well how utterly that context has changed, and how poorly the single rail market functions across Europe because of what I would charitably describe as patchy compliance with the liberalisation agenda. It is interesting to speculate on whether the tunnel’s current operation itself is a hindrance to growth or a victim of the conformity of much of the rest of Europe to liberalisation.

Personally, although I have a scintilla of sympathy with the view of the Office of the Rail Regulator—which cautioned against revising the treaty of Canterbury on the understandable grounds that the protracted nature of the process would divert attention away from more immediate issues facing the railway—I believe that so much has changed in the quarter century since it was signed that a review is inevitable. The sub-committee has done a great service in highlighting some areas where the governance is working against passenger interests and those of freight. Of course an adverse EU ruling on the tunnel’s arrangements and whether they conform to rail legislation might force the matter, so perhaps I may gently suggest to the Government that they look at jumping before they are pushed.

The stated objective of the EU and, indeed, of the UK Government is to see a transfer from short-haul flights to rail. That is certainly understandable from a climate change point of view. However, setting that aside, it makes sense to make better use of the very limited capacity at our busy airports. Whatever we think about an extra runway at Heathrow or increasing capacity elsewhere—or even “Boris Island”—it will take years to get that sort of extra capacity. Therefore, making better use of rail is a sensible part of aviation strategy. The enthusiasm of Deutsche Bahn to develop routes between Amsterdam, Frankfurt and London is a good example. I hope that progress can be made on the scheme, which is currently mired in what look suspiciously like restrictive practices.

I was compelled by evidence given to the committee by The Man in Seat Sixty-One. It chimed with my personal experience that reducing carbon emissions is not a major incentive for people to switch to rail; they are deterred by the stress and time involved in airport checks, the delays to air travel and the extra charges that are often well hidden until you are a long way into the process. To that, I would add the time and expense of travelling to and from major airports. Heathrow Express is a lovely service but—my goodness—at £34 for a standard return fare, it is very expensive. The Man in Seat Sixty-One estimates that these factors account for 80% of the incentive to switch to rail, and climate change only 20%. What I conclude from that is that the desired modal shift will not just happen because people will have an attack of green consciousness but because it will be easier for them. We will have to work on that.

The good news is that clearly there is capacity in the tunnel. I was struck by that two years ago when the volcanic ash cloud halted air travel all over Europe. The Channel Tunnel provided a much needed and very valued way to move passengers at a difficult time. However, it was only able to do so because it was so underused. The initial forecasts of 17 million to 20 million passengers a year proved wildly optimistic, with today’s figure being in the region of 9 million to 10 million. As we have heard, the evidence is that less than 50% of passenger capacity is being used, and 10% of freight capacity. I am not aware of any capacity issues on the road network on either side of the tunnel that would prevent growth in usage, nor on the High Speed 1 side—although, as the noble Lord, Lord Faulkner, said, there are issues in northern France. I hope that the Minister will say whether the Government are addressing these with the French Government.

Competition is undoubtedly the best way to get a good deal for passengers, and I share many concerns expressed in the report about the potential for the current arrangements utterly to distort competition. Access charges are high, and make freight travel in particular simply not competitive with travel by sea—or even, as we have heard, with travel through the tunnel. The access charge alone for a passenger on Eurostar is £32. That will severely restrict its competitiveness against air travel

The decision-making process is riddled with conflicts of interest. One is the involvement of the UK and French Governments through the IGC. The bureaucratic nature of decision-making makes change very difficult. The report is right to call for a more transparent system to determine whether high access charges can be justified, taking into account the fact that Eurotunnel is solely reliant on access charges for its income, and to deal with its historic debt. Of course, it gets no public subsidy. A more transparent system would give clarity about how charges are allocated between users, which is crucial given Eurotunnel’s role as both an infrastructure provider and operator. It may be that independent regulation is the answer.

Yesterday’s press carried reports of the ruling by a French commercial tribunal that approved Eurotunnel’s purchase of three ferries from the liquidated Sea France ferry company. Eurotunnel will continue to employ the 560 former workers and run the services. This may be welcome for the workers, but it adds another layer of complexity to the nature of the charging and competition regime. I would not be surprised if the EU competition authorities did not take an interest.

Like the noble Baroness, I am very concerned about the insistence that the tunnel maintain its own safety standards rather than the EU-wide TSIs. This is being used as a barrier to new entrants to the market, and I would like to see more evidence that after all this time the tunnel requires bespoke standards. The comparison with tunnels elsewhere is valid. My noble friend Lord Fearn recently received a Written Answer that stated that there were 64 accidents in the Channel Tunnel last year. Will the Minister say how this compares with tunnels elsewhere, and what it says about the operation of separate standards?

I was persuaded by the evidence that the so-called juxtaposed border controls should be looked at again in terms of the time and cost of operating them to both passengers and rail operators. The feasibility of on-board passenger and passport checks is an advantage that rail has over air which ought not to be lost. I am pleased to see that the Home Office, at least, looks open to it.

I have looked at this issue from the point of view of modal shift—there are many dimensions to it— and I look forward to the contributions of other noble Lords, although I can see that this will be one of those debates in which there is a huge amount of agreement.