Cross-Government Cost Cutting

Lord Berkeley Excerpts

Tuesday 6th December 2022 Lords Chamber

[Baroness Penn (Con)]

I do not believe that it is within my responsibilities to carry out an audit of special advisers, but I will take the noble Lord’s point back to the department. I should probably declare an interest as a former special adviser myself; I would not be best placed to undertake such work.

[Lord Berkeley (Lab)]

My Lords, perhaps I could be helpful to the Minister and give her some advice. If she wants to save £150 billion, she could cancel HS2.

[Baroness Penn (Con)]

I always welcome helpful advice. However, I am not sure that I can take it up in this case.

Queen’s Speech

Lord Berkeley Excerpts

Wednesday 25th May 2016 Lords Chamber

[Lord Berkeley (Lab)]

My Lords, I also welcome the Queen’s Speech with its interesting number of transport-related Bills. The Minister spoke about the need for investment in infrastructure and about the northern powerhouse, which several other noble Lords have mentioned. He is absolutely right. However, as my noble friend Lady Jones said, there is still a terrible mismatch between spend per unit of population in the south-east and that in the northern powerhouse—I think it is about 10:1.

The noble Earl, Lord Caithness, challenged the Opposition to say where the money would come from. I can offer two suggestions that may interest Ministers. The first is to cut the specification of HS2, without stopping it or building longer tunnels, or anything else that the noble Lord, Lord Framlingham, might have wanted. I think that £10 billion could be saved with no additional provisions, just by reducing the specification. You do not need to go 400 kilometres per hour to save 20 minutes in getting to Birmingham, to then have to walk for 20 minutes from the new Birmingham station to the old one. A lot of money could be saved there.

Another interesting suggestion is to save money by cancelling the Thames tideway tunnel. I am sure Ministers will say that that is impossible. However, the capital cost is about £4.2 billion and the London Infrastructure Plan 2050 quotes Professor Colin Green, professor of water economics at Middlesex University, as saying that if you implemented the integrated water resource management as an alternative you could save £36 billion—and yes, I have got the figure right. That sounds rather a lot, but of course it is over 30 years. Quite a lot of savings could be made there, and maybe that will help redress the balance and bring a little common sense to these big projects.

I turn now from large to smaller projects and the buses Bill. I am not going to go into it in detail now because we will have plenty of opportunity for that. There are some very interesting and welcome governance arrangements in the Bill, particularly for franchising, which are very similar to passenger rail. A local agency, a council or a not-for-profit organisation specifies the timetable, fares and other customer needs and puts it out to tender, awards contracts and monitors performance. They can run alongside open access or commercial services, just like on the railways. Of course, they are all designed to provide an environmentally friendly, economically available and affordable service. I think we could say that that is a sort of powerhouse for all, particularly in the north.

However, I live in Cornwall, which is—I am very grateful—included in the franchise option. Change is needed—the bus services are pretty bad and integration with the trains is sometimes bad—but it does not always happen. There is one place, even further away, that is completely left out: the Isles of Scilly. My partner lives in the Isles of Scilly, so I go there quite often. It does not appear that anything is happening there to move the economy forward. There is of course great tourism, but the transport is pretty awful. The income values are as low as in Cornwall, which receives money from the EU structural fund, as we know, and things will get worse if we follow the line of all the Tory MPs in Cornwall who, with one voice, want to leave the EU. Most of the money for Cornwall and the Scilly Isles comes from the EU. However, that is an aside. In Scilly, there are no council-specified transport projects and no specification on price, timetable, quality or frequency—it does not exist. There is no ferry in the winter. Air services are often disrupted by fog and sometime the islands are cut off for days, with over 2,000 people living there. The charges are also shooting up. Last week, a single journey on the ferry cost £55 and was £82 by air. If you want to take your partner and a couple of kids—the family—there and back it does not half cost a lot of money. Freight costs are 40% higher and the dear old “Scillonian” is 40 years old. It is probably the oldest passenger ferry in Europe unless there are a few limping around the Greek islands that are a little older, but we do not want that. The real challenge for me is that there is one monopoly supplier that, sadly, ignores complaints large and small and fails to engage.

I welcomed what was in the Bill for buses and thought that maybe there could be an amendment to include ferries. I am not sure that the Minister would like that and it would probably not be appropriate. But could one have a kind of franchise for a community-led service specifying quality, fares, frequency, services and affordability rather like what has been done in the Scottish islands, because tourists are honestly put off by the charges. That is the solution. The current monopoly supplier will not consider any outside interference in services, new craft or support or even an interest in a winter service. There is no evidence of a replacement for the “Scillonian”, and it is unlikely unless the fares go up even more. Unfortunately, as happens in so many small islands, there is an unwillingness to speak out so it is something that needs to be considered.

I do not expect the Minister to respond tonight. Perhaps he would like to write to me—I expect he has a few letters to write. Something along the lines of the bus franchising Bill would be a real shot in the arm for the Isles of Scilly. We have gone beyond the stage when Ministers can say that there is a viable service operating at the moment. It may be viable for the shareholders, but not for the people of the Scillies and their visitors.

Small Business, Enterprise and Employment Bill

Lord Berkeley Excerpts

Wednesday 28th January 2015 Grand Committee

[Lord Berkeley (Lab)]

My Lords, I am grateful to the Minister for that introduction. I have two amendments in this group and I am certainly not happy that they are in a group of 66 amendments. This must be about a record for Committee stage. It is interesting that amendments in this group have been put down by a number of different noble Lords, but there are five separate groups further on for amendments tabled by the noble Lord, Lord Hodgson. I am sure that he deserves such special treatment but I wonder why. I do not know whether any other noble Lord was consulted about this grouping—I certainly was not. I give notice that I would like to debate Amendment 90A separately. I do not know whether any other noble Lords will have a similar view, but I hope that that is acceptable.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I also have a number of amendments in this group. I think the answer to the noble Lord’s question is that these amendments are all about Clause 42 and the subsequent groups are about subsequent clauses. What we are doing here is debating the whole of Clause 42, rightly or wrongly. It may be too big a group but that, I think, is the background. I think other amendments to subsequent clauses form other groups.

The Government have said that they will accept the spirit of the amendments passed in the other place, but I am afraid that despite the Minister’s assurance—

[Lord Whitty (Lab)]

My Lords, before the noble Lord, Lord Hodgson, proceeds, the point made by my noble friend Lord Berkeley indicates a more serious procedural problem. It is not that these amendments are not serious, but they are specific. I also have some amendments in this group, but if I degroup them, a decision would have been taken on the Minister’s amendments before we reached the appropriate point in the text of the Bill.

We have a very new clause, inserted at the final stage in the Commons. The Minister quite rightly said that there has been limited chance for consultation on that. We have a huge amendment from the Government deleting an entire clause and replacing it. The noble Lords, Lord Berkeley and Lord Hodgson, and I, all have amendments to the original amendments. My noble friends Lord Mendelsohn and Lord Stevenson have amendments to the Government’s amendments. So, there is not only a large number of amendments, but it is going to be a very confusing debate.

That is not to say that we should not have the debate today. However, the way that this has been dealt with, and the fact that consultation since the Commons decisions until now has not allowed consultation with the bodies that represent tied landlords, has not allowed for significant debate with those in the Commons who pushed this amendment. We have a few weeks between now and Report stage for proper consultation to take place. I am very happy to have the discussion today because that will inform the Government, but at the end of that discussion it will behove all of us to withdraw our amendments and move them for a proper discussion on Report, which could have been preceded by some effective consultation between the Government and the various parties involved, both politically and industrially.

Although we can degroup this group, there is a rather more profound problem here. If all noble Lords agree to withdraw their amendments at the end of the debate, there is no great problem and we can have a sensible discussion over the next three weeks. However, if we proceed, we proceed as per normal. It would be sensible, even from the Government’s point of view, if we allowed ourselves a bit of a breathing space to have those discussions.

[Lord Berkeley]

Is my noble friend suggesting that the Minister should withdraw her amendments as well?

[Lord Whitty]

Yes, my Lords.

[Lord Berkeley]

Good.

[Lord Snape (Lab)]

Before the Minister replies, I endorse and agree with the remarks made by my noble friends. On Second Reading, I intervened on the Minister’s opening remarks. I said:

“I am sure that the House will recognise how far the Government have moved on this”—

that is, the principle of consultation—

“and will welcome that movement. However, can she assure us that any future discussions will involve representatives of the tenants and will not be dominated by the pubcos?”.

The Minister replied as follows:

“My Lords, I can assure the noble Lord that we are always discussing these issues”—

I emphasise the word “always”—

“and changes with tenants—that is extremely important when you are making changes of any kind—and, indeed, they have helped us to get to the position that we are now in”.—[Official Report, 2/12/14; col. 1243.]

That is not the view of the tenants who I have spoken to. Indeed, most of them take the view that the position we are now in is thanks to the noble Lord, Lord Hodgson, and some of the pubcos.

Although we are grateful to the Minister for the sympathetic way in which she pointed out that there was a difficulty with some of the amendments in the group, we should return to the question of consultation. I hope that she will spend some time explaining to us exactly what consultation has taken place and with whom. Is it true, for example, that, despite the Minister’s promise on Second Reading, the consultation with the representatives of tenants consisted of an hour or so in the department? What consultation has taken place with the pubcos in the department and elsewhere?

I have a feeling, looking around at the Room, that a considerable amount of entertaining—if I can put it that way—has gone on over lunch. Perhaps the views of the pubcos have played a major role not only in the grouping of the amendments—about which we rightly complain—but the sentiments that the Minister expressed and, I fear, will express, about the postponement of proper legislation that was voted on in the House of Commons but seems to us by the amendment and the grouping to be being flouted by the Government.

I hope that the Minister can reassure us at this early stage, because if she cannot, I can assure her of a fairly long and drawn out Committee sitting here today, and that a considerable number of amendments will be tabled at Report on behalf of those who feel that they have a raw deal under the existing arrangements and cannot see it getting any better under the Government’s proposals.

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[Lord Hodgson of Astley Abbotts]

I was about to say that in the 25,000 or so examples of tied tenancies, I do not doubt that there are examples of egregious behaviour by pub owners. Those need to be addressed swiftly and promptly. But I do argue, and I will provide at least two specific examples when we come to Amendment 82 on significant investment—I remember the noble Lord, Lord Snape, chiding me at Second Reading and asking me to produce them—that the tie can work well for all parties and can provide a cheap and effective way of creating a satisfactory, profitable small business. I do not want to see the creation of a regulatory structure that strangles the possible advantages that the tie can offer.

To compete for people’s leisure time and their leisure pound, pubs have to offer an experience that is valued by the chosen target market. The target market may be younger males with sport, TV and pub games; younger females want more of a wine bar; families want play areas for children; and cheaper meals attract the retired. But noble Lords will quickly recognise that setting out first to choose a target market and then to develop it successfully takes experience and knowledge. That back-up and support is what in good circumstances a pubco can provide.

Whatever type of pub you are running, running a successful pub is very hard work: long, anti-social hours; periods of the year when external events such as the weather dramatically reduce your level of trade—this evening, if the weather continues as it is, pubs all over the country will be empty; and a readiness to deal with, humour and enjoy the company of the great British public in all their diversity. By no means do we all possess the multifaceted set of skills required to be a successful Mein Host.

[Lord Berkeley]

Looking at the list of groupings, it appears that the first amendment in the name of the noble Lord, Lord Hodgson, is Amendment 69, which seeks to leave out Clause 41(6), which says:

“The Pubs Code may require large pub-owning businesses to provide parallel rent assessments”.

Is that what he has been speaking to for the past few minutes?

[Lord Hodgson of Astley Abbotts]

I hope I made it clear to the Committee that I was trying to give a bit of a tour d’horizon of how these amendments fitted into the future. I was trying to explain that the adverse tides, which I have just been talking about, are not part of the tie but are part of other, bigger issues. In a couple of minutes I will come to each of the amendments, of which Amendment 69 is the first.

I explained that running a pub was exceptionally hard work and many people coming into it, often as a second career, find that it is not as easy as it looks. Like all of us, they are inclined not to blame themselves but to look for somebody else to blame. In such circumstances, the owner of the tied pub can be a first, and relatively easy, target. A complaint sells itself well in the community and the local MP’s surgery. This does not just apply to pubcos; I have had correspondence since Second Reading from people with free-of-tie pubs which have fallen on difficult times. When they tried to close them they were prevented from doing so by them being listed as assets of community value, so they were left with a bit of a pub they could not sell and a pub which they did not want to buy.

Finally on this opening section, I draw the Government’s attention to what I call the nuclear option. This is not available to the integrated companies because, as I explained, they need the pub estate to sell their beer, but it is available to pubcos. The pure pubcos could react to this parliamentary focus on rent only by becoming property companies. They could cut their overheads drastically by removing all the pub support, such as business development managers. This would boost their profitability in the short term; in the longer term, they would sell the better performing parts of the estate to other companies while closing and seeking alternative uses for the rest. This nuclear option—and I have no idea how likely it is—could dramatically increase the rate of pub closures. The amendments in my name—the focus of the intervention by the noble Lord, Lord Berkeley, a minute ago—are designed, as a whole, to avoid a dogma-driven solution and instead create, with the MRO option, a balanced and flexible structure which affords the best chance of keeping pubs open in as many places as possible.

After that very long introduction, I will whip through the amendments in my name. Amendment 69 seeks to delete Clause 41(6). As my noble friend said, this proposes a system of parallel rent assessments. These might have been of value before the House of Commons amendment introducing the MRO and associated provisions. Given that change, parallel rent assessments are essentially duplicates of what is proposed elsewhere. I am not sure whether they are needed anywhere, but they are certainly not needed in connection with the MRO option. I hope that my noble friend will explain why they are still there and how they are supposed to operate within the confines of the Government’s proposed new clause to replace Clause 42.

The remainder of the amendments in my name are all concerned with Clause 42—which, as my noble friend has explained, it is proposed to remove. The proposed new clause definitely answers some of them, definitely does not answer others, and the impact in the remaining cases is unclear. I would be grateful for my noble friend’s help in bringing clarity to these points. Amendments 70 and 71 are covered because they are about tied and managed pubs and my noble friend has made it clear that managed pubs form no part of the new regime. Amendments 72, 73 and 74 are important because they concern integrated businesses that brew beer and sell it through their own estate. It must be logical for the Pubs Code to permit such businesses to require their tenants to stock their own brands of beer and cider. If, under the code, a new MRO tenant could immediately turn round to the pub owner and say: “I am not going to stock your beer any more: I am going to stock the beer of your bitter rival”, this would have a disastrous effect on pub ownership.

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[Lord Berkeley]

Has the noble Lord thought about what the word “unfair” means? For the pubco, it is probably different to what it means for the tenant. It seems to me to be rather more wishy-washy than “significant”.

[Lord Hodgson of Astley Abbotts]

I am delighted that the noble Lord, Lord Berkeley, said that. I am about to come to the definition of “unfair” in about one second. I am talking about the importance of the definition of “significant” as important and notable. The price of beer might rise sharply because of: the cost of raw materials, such as hops; governmental action on alcohol taxation following medical advice; or increased delivery costs following price rises or road tax changes. It is surely not right to potentially penalise the pub owners alone as a result of such events, which have equal impact on all parties.

By contrast, coming to the point made by the noble Lord, Lord Berkeley, the Oxford English Dictionary definition of “unfair” is: not equitable; “unjust”; not according to the rules; partial. In my view, this precisely matches the concept behind the Pubs Code. It is intended to deal with situations that are inequitable—that is to say unfair—between the two parties: the pub owner and the tenant. I hope that the Government will think again about this wording before Report.

I turn to Amendment 80, which concerns the other events that could trigger the requirement to offer an MRO option. This formed part of my noble friend’s introductory remarks. Clause 42(6)(c) requires an MRO offer on the sale of a pub. This would be quite unfair to pub-owning companies. Pubs, whether singly or in blocks, can be sold for perfectly legitimate reasons. So long as the tenant’s position is protected, as it would be, the identity of the owner really makes no difference to the tenant. If this paragraph were to remain in the Bill it would freeze up the market for pubs and so discourage investment.

The amendment also seeks to remove another trigger point at Clause 42(6)(d): that, if a pubco goes into administration, an MRO offer must follow to the tenants. I think that my noble friend addressed this point in her opening remarks. The same objections apply to this: provided that the tenant’s position is protected, he has no interest in the affairs of the pub owner. If this paragraph were to remain, it would have serious consequences for the industry. First, pubcos would find it much harder to borrow. From a bank or lender’s point of view, the fact that, on administration, the relationship of the pub owner could change with every one of its tied pubs would make lending significantly more risky and, therefore, less attractive, thereby reducing the flow of investment to the sector. Secondly, if administration was to occur, the position of the creditors would be significantly worsened as value could be destroyed by the uncertainties that would result from an MRO option. I understand that the Government are proposing to withdraw those paragraphs. I would like my noble friend to give that commitment.

Amendment 81 is also concerned with a trigger point: Clause 42(6)(e), which appears to form part of the proposed new clause at subsection (6)(d) and subsection (9). This also covers the emergence of trigger events. In the proposed new clause, the definition of a trigger event is drafted very widely and is likely to lead to a good deal of uncertainty in its application and interpretation. That is surely not to the advantage of any party in these circumstances.

We have the well established procedure that has been used to determine appeals against rateable value; that is, whether there is deterioration in the circumstances of a property. Paragraph 2(7) of Schedule 6 to the Local Government Act 1988 lays out the matters to be taken into account. They include,

“matters affecting the physical state or physical enjoyment of the hereditament … the mode or category of occupation of the hereditament … matters affecting the physical state of the locality in which the hereditament is situated or which, though not affecting the physical state of the locality, are nonetheless physically manifest there, and … the use or occupation of other premises situated in the locality”.

This definition sets out the criteria for when a change happens to a business and a rating reduction can be allowed. It is a well used and well understood definition that could, with advantage, be used to define when an MRO option could be triggered. I hope my noble friend will reflect further on this before Report.

I come now to Amendment 82 and the points made by the noble Lord, Lord Snape. This is an important amendment and I do not think it has been addressed in new Clause 42. The amendment inserts into the Pubs Code:

“The Pubs Code shall offer an exemption from the Market Rent Only Option for a mutually agreed period in return for a significant investment by a large pub-owning business in that tenant’s pub”.

This would mean that if a pub-owning business spends a significant sum improving a pub, the Pubs Code would permit an agreement with the tenant for a period during which there would be an exemption from the MRO option.

Those who successfully proposed the amendment to Part 4 of the Bill in the House of Commons see the tie as universally malign—the point that the noble Lord, Lord Snape, and I discussed a few minutes ago—an arrangement without merit and having no benefit. But this is not true. I was challenged by the noble Lord, Lord Snape, at Second Reading to produce evidence to support the continuation of the tie in any form, and this I will now do, with a couple of examples.

If I may, I will take the Committee to the Black Bull in Mansfield. I should make it clear that the tenant, Janice Shaw, has given permission for me to use it as an example. When Janice Shaw took the pub on, it was trading at about £7,000 a week as a result of a lack of catering facilities, which resulted in strict food service times and a rather poor food offering. The brewery invested £100,000 in the pub. It addressed kitchen standards and capacity, doubling the size of the kitchen by extending it into the car park. In addition, the pub was redecorated, with new signage and fixtures and fittings. The result is that the turnover is up to £10,000 a week—an increase of £3,000 a week or £150,000 a year. The brewery has increased the rent by £5,200, from £32,800 to £38,000, and is making, as it wished me to remind the Committee, £6,000 more from increased sales of beer. So from Janice Shaw’s point of view, she has £150,000 of extra revenue while the landlord has £11,200 of extra profit. It is doubtful whether a bank would have funded this. It is a messy lend, being part construction work, part purchase of fixtures and fittings, and part redecoration. Of course, a bank would not have had the same vision and confidence as to the likely success post-investment.

My second example is the Crown Hotel in Southwell, Nottinghamshire. Anna Guise is the current tenant. She took on the Crown in 2005. Although pretty well run, the site had become tired, resulting in the consumer often becoming confused; little food was being sold; the reliance on the town centre drinking circuit was evident; and there was a need to change to a more balanced offer in order to appeal to wider consumer groups. Anna Guise tried to invest in the site but could not afford the necessary capital and the pub remained in decline. To support the operation, the brewery reduced the rent and Anna’s father supported her with regular cash injections.

The brewery invested £84,000 in November 2013 without requesting any rental uplift. The cap ex addressed both internal and external standards, modernising throughout. It developed the back bar to include coffee, wine and a more rounded offer. A new menu was introduced and food was served all day. The evening drinking remained but the message to the consumer was that the feel of the building had been improved and fresh signage was introduced. Post investment, decline has been reversed and there is now 39% growth. That has enabled her to plan for a brighter future for her pub.

The basic point is that integrated pubcos that wish to sell will not invest £100,000, or even £84,000, if there is no guarantee that they will be able to sell their beer and if, after the money has been accepted and an investment has transformed the pub, the tenant will be able to say that they want to change the basis of the contract. The amendment would permit—not require—a situation in which if significant investment has taken place, of the sort that I have just described, the two sides could agree a period during which the MRO option would not be available. Without this, pubco investment will be significantly reduced, and I hope that my noble friend can give some reassurance on that point.

Amendments 84, 85 and 87 are drafting amendments to Clause 42(8). Subsection (8) is concerned with the 90-day assessment period during which an independent assessor reaches a judgment on the terms of the no-tie agreement. It is important to be clear what happens during that 90-day interregnum. It must be made clear that the tenant must comply with the existing contract until the new MRO contract comes into effect.

Finally—no doubt much to the relief of the Committee—Amendment 89 is paralleled in large measure by Amendment 83A in the name of my noble friend Lord Borwick, concerning the rather unattractively named SCORFA—special commercial or financial advantages. I will leave my noble friend to address that and how it will fit into the MRO world post the break of the tie.

I recognise that I have thrown a lot at my noble friend in the last few minutes, although I hope that her officials were already aware of my direction of travel. It is important that all parties to the debate get clarity on the Government’s position. I am talking not about clarity on the broad principle—we all understand the MRO option—but rather on the more granular aspects of how the policy is intended to operate and what the consequences are likely to be.

[Lord Berkeley]

In this grouping, my Amendment 69A is the next one that is not a government amendment, so if it is convenient for the Committee I will speak to that and try not to delay the Committee too long with comments on the amendments from the noble Lord, Lord Hodgson. If I then have comments after the Minister has spoken, I am sure she will be willing to accept them.

I want to put on record that it is great shame that the Government have somewhat changed what was agreed in the House of Commons. I see the government amendments, and those of the noble Lord, Lord Hodgson, as putting the whole issue into the long grass, which is very sad. Rather than having the MRO option in primary legislation, which I thought was excellent—although obviously there is detail that we need to talk about—we could be left for many years with people opposing any secondary legislation that comes in and then debating it at that stage. Who knows what will happen then?

Amendment 69A is a probing amendment about why the Government, or the House of Commons, chose a maximum of 100 pubs rather than 500 pubs. I have had some useful discussions with St Austell brewery in Cornwall, which comes somewhere in-between. I have also talked to many of its tenants and others, and many who I talked to would be pleased to be able to renegotiate under the MRO. The family brewers, including St Austell, believe that they provide a much better and friendlier quality of ownership than the very big ones. I suspect that they are right in that.

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[Lord Hodgson of Astley Abbotts]

On Amendment 80, if it were a retail outlet such as a high street store, there would be no reason why a company should not sell its retail store to someone else. Why should a brewery be any different?

[Lord Berkeley]

It is a question of what would constitute selling and what would be transferring it to a company in which the brewery had 100% or 99% of the shares. It is a grey area. The noble Lord may be right but I do not see that as a reason for having his Amendment 80 or any of the others. We can go on debating this.

I still think that Amendment 82, in the name of the noble Lord, Lord Hodgson, is trying to say that once the tenant has started the negotiation he has to finish it. That is very unfair on the tenant because, while he may have said that he wanted to start it, if he is not happy with the outcome it is surely reasonable that he would not have to conclude an agreement. The short answer is that he will not stay there long and will suffer severe financial hardship.

I could go on for a long, long time, but I have one last comment on Amendments 73 and 74. I did not really understand the noble Lord’s explanation to my noble friend Lord Snape. If his amendment would enable the tenant to buy his beer and other drinks at whatever price he chose from whomever he chose, why are we going through all the rigmarole of all these different adjudications? Just let him do it now. I am sure that I have it wrong, but it would be nice if at some stage the noble Lord could explain the amendment in words of one syllable.

[Baroness Wheatcroft (Con)]

My Lords, I speak in favour of my noble friend Lord Hodgson of Astley Abbots. First, given the in-depth knowledge that he has shown on the subject, I hope that he is a member of our Catering Committee because he would be an asset there. I shall speak briefly because this is complicated and there is a lot more to go. We need to spell out that if a tenant opts for a market rent only deal, there should be a completely new agreement between the tenant and the landlord, and that should take in everything, from investment to the length of lease—it is a new lease, effectively. We should spell out that there is freedom to renegotiate there.

On Amendment 80, I completely concur that, for the ongoing good of the business, it is important that an MRO should not be triggered simply by a sale or an administration. The Minister indicated that she saw things the same way, and I hope that we will hear that confirmed.

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[Viscount Younger of Leckie]

I note the noble Lord’s point. I would like to illustrate some of the amounts that these pub companies invest. I mentioned earlier that they invest £200 million across the sector each year. One of the larger pub companies has estimated that, had the MRO been in place without an effective opt-out, the £30 million of capital investment which has taken place in the last 18 months would not have happened.

To illustrate how this investment affects individual businesses, another pub company recently invested £245,000 in one of their pubs in Nantwich in Cheshire. This investment created 10 jobs and took the turnover from £145,000 per annum to £330,000. A similar sum was invested in a pub in Wigan, which again boosted turnover from £250,000 to £345,000 and doubled the number of jobs. These are just two examples to add to the ones given earlier by my noble friend Lord Hodgson, of how tied pub companies invest in their estates every year to the benefit of both parties through the tied contract.

I conclude by saying that I hope the Minister has listened carefully to what I have said about the investment angle for pub companies, while not forgetting that we are talking about the livelihoods of tied tenants as well. That is just as important in terms of being fair.

[Lord Berkeley]

The noble Viscount, Lord Younger, has given two more examples to add those of the noble Lord, Lord Hodgson, of the happy tenants who have lots of money. He cited one company as investing £30 million in pubs which would not have invested if the MRO had existed. What assumptions is he making about the fair rent that would result from an adjudication under those circumstances? Is he assuming that the rent would stay the same or that it would go up to compensate for the profit that the breweries would no longer be making when they sell beer or soft drinks? The figure of £30 million is pretty meaningless without knowing on what assumptions it is based.

[Viscount Younger of Leckie]

I take the noble Lord’s point, but I spoke in support of my noble friend Lord Hodgson’s amendments on the grounds that there would be an exemption from the MRO.

[Lord Hodgson of Astley Abbotts]

The issue is that every company has a target return on capital. If it is to make an investment, it wants to make a return on capital and the company will set a target. The problem is that if you are going to invest your £30 million, you want to know what your return on capital will be. One issue that relates to return on capital is what will be the contractual relationship. Therefore, before you make your investment, you want to know what the end play will be, because that means that you can be assured—if it all goes well; it does not always go well—that you will get that rate of return on capital. That is the background to the figure that my noble friend is giving. Companies want to be certain that they have targets for the return on capital which they need to meet.

[Lord Berkeley]

With respect, “They would say that, wouldn’t they?”. I am glad that the cavalry has been brought in to help the noble Viscount, Lord Younger. The noble Viscount says that that £30 million would not be invested. “They would say that, wouldn’t they?”. We could do with some figures.

[Lord Hodgson of Astley Abbotts]

The truth of the matter is that every time an argument is produced to point out how pubcos operate as commercial enterprises, the noble Lord says, “They would say that, wouldn’t they?”. Capital investment budgets are set to be achieved, with certain target rates of return required to justify them. Otherwise the value of the stock—or the value of the company, if it is a private company—falls. If you do not have a rate of return on your investment higher than the cost of capital, the value of your business is falling.

You need to know what you are getting into, what your contractual relationships are and how long they will last. You cannot be certain, because, with the best will in the world—taking the example of pubs—some pubs do not do as well as one hopes. It does not work because the location is not right, the tenant is not right or the arrangements are not right. The idea is to hit the target. With the greatest respect to the noble Lord, he must understand that unless your rate of return on capital is higher than your cost of capital, you are destroying the value of your business.

[Lord Berkeley]

I am sorry, my Lords, but I will try just one last time. The rate of return could just as easily be calculated on the basis of the rent that the tenant will be paying once he has been through the process, because that will be fixed and the company will know it. That is the rate of return, whether the company likes it or not.

[Viscount Younger of Leckie]

Having been listening to my debate, I should conclude. I should answer the question appropriately. The clause is intended to provide an exemption which would allow an unspecified time for agreement to be drawn up because of the perceived investment to be given by the pub company.

--- Later in debate ---

[Lord Berkeley]

Before we get to that, could the Minister please clarify what she said, quite a long time ago in a very interesting speech, about the timing of the introduction of the MRO? That has been changed in her amendments; the Bill says a maximum of one year. What is the actual timing? That is one of our big worries—that this could get kicked into the long grass.

[Baroness Neville-Rolfe]

I thank the noble Lord for raising that point. The confusion may arise because it is within 12 months of Royal Assent.

[Lord Berkeley]

If it will help the Minister to deal with this, I could speak for a little longer. I thank her for her comments generally in her necessarily long speech. She gave me a lot of comfort that what the Government are trying to do is the right thing. She prayed in aid the will of the Commons a number of times, and that is right. Of course, timing is one of those issues. I will be very pleased to hear what she has to say.

[Baroness Neville-Rolfe]

Before the noble Lord sits down and the noble Lord, Lord Whitty, takes the Floor, the answer is 12 months—but that is 12 months after the Bill comes into force. Apparently it will take two months for the Bill to go through to Royal Assent, so the maximum is 14 months. However, the message that I was trying to impart to the Committee is that we are determined to get on with this, push ahead and find workable solutions in that time.

--- Later in debate ---

Moved by

[Lord Berkeley]

68T: Clause 41, page 38, line 19, at end insert—
“( ) require pub-owning businesses to publish wholesale prices charged to their tied pub tenants.”

[Lord Berkeley]

I hope we can deal with this group of amendments a bit more quickly than the previous group because there are only two of them: Amendments 68T and 68U. I think they are quite important.

Amendment 68T comes from the Federation of Small Businesses research which found that 27% of licensees believed when they signed their agreement that the price they would be paying for beer and probably other drinks was going to be lower than the price they would have to pay in the open market. They claim that they were not given adequate pricing information as prospective tenants. CAMRA analysed the prices that licensees paid in 2013 and found that pub companies’ prices were 50% to 70% higher than wholesale prices. That is pretty incredible, and certainly reflects some of the comments I have heard from tenants—that they are lucky if they can cover their costs on beer, and they have to work 24 hours a day to make any return on food.

CAMRA hosted a round-table session for pubcos and licensees and I have a couple of quotes here. The first is from the tenant of a pubco-tied pub in Burnham—I do not know which Burnham; it does not say—who says:

“Price wise the difference is absolutely crazy. John Smiths is £133, but you can get it for £82 wholesale. Kronenbourg is £170, you can get it for £100. It’s not little amounts—it’s lots”.

The licensee of a pubco-tied pub in Berkshire said:

“If they’d said to me, ‘You do realise that you can drive to Rebellion brewery and buy your beer at £70 for 72 pints but we’re going to charge you £150’, then how many people would say, ‘Hang on a minute, that’s not right, is it?’”.

Those are two unhappy tenants. We have heard about a lot of happy tenants today from the noble Lord, Lord Hodgson, and a few other people. I think it would be a very useful thing if the pubcos were required to publish the prices that they charge tenants. That is Amendment 68T.

Amendment 68U is about guest beers. I agree with CAMRA that it would be very useful to see all tied pubs of any description have the right to have a guest beer. It should be defined as a beer that is either cask-conditioned or bottle-conditioned in order to ensure access to the smaller companies, and improve consumer choice. It would allow the tied tenants to stock a single cask from anywhere in the world at a freely negotiated price.

There has been a growth in small brewers in pubs. They obviously make enough money, otherwise they would not be doing it. I think that it would be a really good idea to have the ability to have one guest beer in every pub. If the tenants were allowed to buy that beer from whomever they wanted and at whatever price, it might also demonstrate to the pubcos that charging 70% extra for their beer was not the way to make friends either with their tenants or their customers. I beg to move.

[Lord Hodgson of Astley Abbotts]

In the situation envisaged under Amendment 68U, could the guest beer be provided by the brewery that owns the pub?

[Lord Berkeley]

I am sorry, I did not quite hear.

[Lord Hodgson of Astley Abbotts]

Under Amendment 68U, can the guest beer be provided by the brewery that owns the pub?

[Lord Berkeley]

Of course it could, but to some extent that defeats the object, because if it is a tied pub, the brewery is already supplying the beer. It would be for the tenant to decide; that is the point. If the tenant decided to do that and to have a monopoly with one brewery, that would be fine.

[Lord Snape]

I do not object, and I do not think my noble friend does either, to pubcos insisting that their tenants sell their own beer. His amendment states that they can buy that beer from any source, rather than from the pubco through the tie. I think I am correct. I do not know whether the examples he gave of the excessive price difference that tenants have to pay—the 50% to 70% that CAMRA revealed—are common, but I do not think even the noble Lord, Lord Hodgson, could defend that sort of gap. Could the noble Lord emphasise that this is not about preventing pubcos from insisting that the tenants sell their beer but about the source of that beer and the price that the tenants pay?

[Lord Berkeley]

My noble friend raises an interesting issue. It is quite reasonable that a pubco that has a tied pub with tenants requires the tenants to buy the beer from them. That is the reason we are going through this—so that tenants can get out of it if they do not like it. While they are in it, the fact that they are buying beer at a certain premium—50% to 70%—provides part of the profit to the pubco, along with the rent. We can debate which. It has always been my understanding that if the tenants choose to go down the route of getting away from being tied, then presumably the calculation of the rent—we talked about this earlier—will in part take into account the loss of profit to the pubco in no longer being able to sell the beer at this inflated price to the pub.

There is a balance to be struck here. The amendment would allow the tenant to buy another beer from somebody else at whatever price and it would not necessarily affect the relationship with the pubco. It could do, but that is for negotiation. I hope I have clarified that.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord, Lord Berkeley, for these amendments. In the spirit of collaboration, perhaps I can explain why we see them as problematic and see whether he agrees.

Amendment 68T would require pub-owning companies to publish wholesale prices. Even if that requirement was limited to alcoholic drinks, it would make public the details of a commercial financial arrangement between two parties to the world at large—including the pub owner’s customers, if I have understood the amendment correctly. It is important to stress that in this Part of the Bill we are regulating the relationship between tied tenants and their pub companies. At no point in our consultations has the need to publish wholesale prices emerged as a requirement to address unfairness. To do so would be an additional piece of regulation for the sector on top of the regulation we are introducing. In a few cases, pub-owning companies that we expect to be covered by the code already publish their wholesale drink prices online. Others publish those prices on a site with access restricted to their own tenants. Others do not publish them at all. On beer prices, tied tenants will tend to pay higher prices for their beer than from an outside wholesaler. That is integral to the tied deal. We recognise that transparency is important, and the Pubs Code already provides that transparency where it is needed—in the relationship between the tenant and the pub-owning company. As I said, the Pubs Code will require the wholesale prices to be provided to the tenant, as well as the current and relevant price lists.

Turning to Amendment 68U on guest beer, when the Government consulted on the issues and evidence that preceded the drafting of these clauses, we included questions about guest beer. The reasons for rejecting that option were clearly set out in our response to the consultation. Some will remember that I come from an all-male family of very keen beer drinkers, so I sympathise with the point, but while there was considerable support for the right to stock a guest beer, there were concerns about the potential for this to undermine the tied model by reducing the alignment of interests between the tenant and the pub company. This was because many tenants would select a draught lager as guest beer, which would typically be the biggest-selling beer. The proposal in the noble Lord’s amendment seeks to address this concern by stipulating that the guest beer should be limited to a brand of cask-conditioned or bottle-conditioned beer. I understand that. Unfortunately, this raises potential competition law issues. We are advised that restricting the guest beer to a particular type is likely to be contrary to EU competition law.

I hope that that background shows that the Government have considered the noble Lord’s proposition seriously and that, in the circumstances, he will agree to withdraw the amendment.

[Lord Berkeley]

I am grateful to the Minister and to my noble friends for their responses. On Amendment 68T, I think that putting the price of beer charged to a tenant in the public domain may be going a little bit over the top, but if it is published on a website and available to the tenant that is fair enough. However, this comes to the imbalance between a small business—and tenants are, after all, very small businesses—and the pubco. The fact that these people did not understand that the price of beer may not have been what they thought shows something about the unbalanced and bad relationships that some of these pubcos clearly have with some of their tenants. I am not blaming anybody but they are small businesses. Maybe we could have a think about that and have a meeting to discuss it before Report.

Amendment 68U deals with guest beer. I spent the morning at DG Comp in Brussels today. I cannot say I was talking about beer but I know the people there well and I can always check on that. There are important issues here but perhaps we could have a discussion about this too. I would like to see guest beers in some of the tied pubs and I think many others would too. What beers they are would depend on what kind of beer you like drinking. That is enough of that, at this time of the night. I am grateful for the Minister’s response and look forward to further discussions. I beg leave to withdraw the amendment.

Amendment 68T withdrawn.

--- Later in debate ---

Moved by

[Lord Berkeley]

90A: After Clause 43, insert the following new Clause—
“Definition of market rent
The market rent shall be determined on the basis of the likely turnover and profit of the business of the pub, and shall not take into account any value to the pub owner of a change of use of the pub.”

[Lord Berkeley]

My Lords, this amendment concerns how the adjudicator takes into account the various financial factors relating to a pub when considering what its market rent should be. We have a lot of pubs where I live in Cornwall, some of them very lovely ones on the waterfront. I do not know how much money they make but there is a feeling that if they were sold for desirable waterside residences, of which there are already an enormous number, they could probably fetch a much larger amount of money than they earn for the owners at the moment as pubs.

That may or may not matter, but there is an issue here of what the role of the pub is in a small community. It acts as a kind of community centre. It may be where people congregate at different times of the day. It keeps village life going. It would be a great shame if the value of a pub on the open market, for retail or as a house, made it in the interests of the landlords to sell it and try to change its use.

There was another example in the Guardian last Saturday, in a nice article on pubs generally, given by someone who works for a company called Paramount Investments:

“In north London if I am selling a pub as a development opportunity I might be able to ask £700,000-£1m for something that as a pub I would only be able to get £350,000-£450,000 for”.

It gives other examples in Marylebone and other places where property values are very high, as they are in London. The problem is wider than London and Cornwall; it could be in many places where the property value is high. In this amendment, which obviously is a probing amendment so the wording might not be quite right, I am trying to propose that in assessing the rent no allowance should be made for a change in value due to a change of use that could be achieved if the pub were no longer a pub. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord for his amendment and I am looking forward to visiting some of his local pubs in Cornwall before long. To be brief, subsection (10) of the proposed new clause in government Amendment 89A makes it clear that a market rent is,

“the rent which the premises might reasonably be expected to fetch at that time in the open market”,

on the assumption that the sale of alcohol for consumption on the premises remains the main activity or one of the main activities of the premises. It is clear that the market rent is for the premises as a pub. I hope this reassures the noble Lord.

[Lord Berkeley]

I am very grateful to the Minister. The amendment came through after I went through all this. I am very grateful for her explanation and beg leave to withdraw the amendment.

Amendment 90A withdrawn.

--- Later in debate ---

[Lord Berkeley]

My Lords, in this group is my motion that Clause 68 stand part of the Bill. This is an interesting clause, because it is called “Power to grant exemptions from Pubs Code”. If this is read one way, one could assume that every pubco will seek exemption by being specified. This is the usual business of what “specified” means. The word is mentioned eight or nine times in this short clause and then, at the end, it says:

“In this section ‘specified’ means specified in regulations”.

We have not seen the regulations, which is, I am afraid, quite normal in this House and has been for many years. What does “specified” mean? There are various exemptions, such as,

“the dealings of a specified pub-owning business …with their tied pub tenants… of a specified description”.

Does it mean that if they sell fish and chips rather than food they are going to be exempt? Does it mean that if they invite too many Members of your Lordships’ House out to lunch they are going to be exempt? Henry VIII would be proud of this clause and I am sure the Minister is equally proud of it. However, before we get much further we ought to have some explanation of what it means. Who would be exempt and under what circumstances? Why should there be any exemptions? I am sure the Minister will be able to give me some good explanations about why it is very important to have this clause in the Bill.

--- Later in debate ---

[Lord Hodgson of Astley Abbotts]

My Lords, this amendment is concerned with the franchise of pub operations. I have remarked repeatedly during the past few hours that the point of weakness of the tie is where the interests of the two parties—the pub owner and the tenant—diverge.

That tension occurs in two places in particular. The first is the rent being charged for the tied premises. The belief or allegation is that landlords are insufficiently deterred from increasing the rent charged. I would emphasise that pubcos have an interest in avoiding pubs closing, particularly those that have an integrated model because they need the outlet for their beer, but undoubtedly the tension exists and, as I said, I do not doubt that some bad cases have occurred. The second point of tension is in the pricing of the goods that the tied tenant is obliged to sell. Again, the allegation is that the pub owner will push the sale price as high as possible. Again, there are arguments why this is not in the pub owner’s interests. Again, let me recognise that the conflict of interest exists.

Some pubcos, particularly integrated pubcos, have sought to address these twin challenges. They have done so by creating a business model based on revenue-sharing. Under such a model, both parties have an interest in maximising turnover. This business model is exactly like a franchise for McDonald’s, Pizza Express or Costa Coffee. Indeed, the agreements have been accredited by the British Franchise Association.

How does it work? The franchisee receives the property, fixtures and fittings, capital investment, and repair and replacement of the fixtures and fittings of the building. All his bills are paid, including rates and utilities. The only bills not paid are council tax and staff wages. He also has services such as training, marketing and business support—the SCORFA arrangement we talked about earlier—and he has products to sell. For this, the franchisee—the operator of the pub—takes a share of the income at the cost of a business fee of about £5,000, compared to the £250,000 that you have to pay for a McDonald’s franchise, for example.

The cost of the products to the franchisee is irrelevant because they are paid a percentage of the revenue of the pub. The goods are delivered to the site and the franchisee holds them on behalf of the franchisor—the brewer. The products are held on the sale-or-return basis. At no time does any cash change hands in respect of payment for the products. The franchisee and franchisor take an agreed share of the total income. The franchisee has the ability to set the retail sales price for the beer in the pub being operated. The pubco effectively supplies everything, with the franchisee then dictating the price to sell it at. The pubco shares the income and, on top of this, the franchisee also receives a profit share. Under the agreement, the percentages and shares of the profit are set out in the contract and cannot be altered.

It appears that this revenue-sharing franchise-type arrangement will still fall within the provisions of the proposed code, so Amendment 96 seeks to insert a new subsection into Clause 67, which is concerned with the definition of tenancy. It proposes that:

“The definition of ‘tenancy’ in subsection (2) excludes franchise agreements whereby no rent is paid by the franchisee and their share of the profit is unaffected by the price paid for tied products”.

This approach in the wording ensures a community of interest between the franchisor and the pubco. If the Government do not accept this amendment, or one like it, they will be singling out the pub trade for very discriminatory treatment. If the argument is that the franchisee has to sell a certain type of product, that is true—but if you hold a McDonald’s franchise, you have to stock Pepsi and are forbidden to sell Coke. Members of the Committee might liken it to walking into a Costa Coffee and asking, “Please can I have a Starbucks?”.

This revenue-sharing arrangement ends the possibility of divergence of interest between pub owner and tenant. It provides a useful model for future pub developments and I trust that the Government will either be able to reassure me tonight that it is not intended to include these or make the necessary changes on Report. I beg to move.

[Lord Berkeley]

I really cannot imagine how anyone would want to take a franchise like this. It is a variation on the old zero-hours contract, which we talk about. It could be a franchise with zero income and the hours being 24/7. Why should anybody want this contract? I will be interested to hear what the Minister says, but the pubcos must love it.

[Baroness Neville-Rolfe]

My Lords, I thank my noble friend Lord Hodgson for this amendment on franchises and the noble Lord, Lord Berkeley, for his intervention. Pub franchises are of course covered by these measures because they fall within the definition of a tied pub in Clause 65. I understand my noble friend’s argument that a pub franchise agreement based on a share of turnover, rather than a tied rent, can lead to a better alignment of interests between a pub company and a tenant.

However, there are other aspects of the pub company and tenant relationship that can lead to unfairness, in the same way as for more traditional tied pubs. The Pubs Code includes transparency protections for tied tenants to ensure that they are clear as to what they are signing up to. We believe that these protections and others in the code should be available for all tied pub tenants, including those with a pub franchise agreement. I can, however, provide some reassurance to my noble friend. If, as he says, price increases make no impact on the tenant in a franchise agreement, the MRO-only trigger for pricing will never apply to a franchise agreement. Should a franchisee exercise the MRO option the pub company will still be able to benefit from the stocking requirement, so the tenant could still be required to stock its beer and/or its cider. The pubs company’s obligation to provide services as part of the franchise agreement would of course fall away.

I am, however, afraid that we believe that to exempt franchises would leave a loophole in the legislation. Tied pubs could be converted to franchise pubs to gain exemption from the code. If pub franchise agreements seek to reduce some of the risks of the tied model for tenants by revenue-sharing, as my noble friend Lord Hodgson explained, we would welcome that. One would expect such agreements to be less likely to fall foul of the Pubs Code. In turn, one would expect those tenants to be more satisfied and less likely to request the MRO option. This is not a reason, however, for removing franchise agreements from the scope of the legislation where we remain uneasy about opening up a loophole. I appreciate my noble friend’s amendment but I hope that he will feel able to withdraw it.

National Infrastructure

Lord Berkeley Excerpts

Thursday 22nd January 2015 Lords Chamber

[Lord Berkeley (Lab)]

I very much support and congratulate my noble friend Lord Adonis on this debate. I would definitely support the national infrastructure commission proposed in the excellent report produced by Sir John Armitt. I follow HS2 with a certain amount of interest. When my noble friend was Minister of Transport, and subsequently Secretary of State, he put a vision into the railways and quite a lot of discipline as well. He started the idea of HS2. The noble Lord, Lord Marland, and my noble friend Lord McFall suggested that everything was too London-centric. I remember suggesting to my noble friend Lord Adonis at the time that it might have been better to start in the Manchester and Leeds areas and work south. It would be easier to get across the Chilterns when there was nothing else to do but join them together. Nevertheless, it went well while he was in charge. I am sad that, in the period from then until the present Secretary of State, Patrick McLoughlin, took office—he is taking a great interest in it and doing very well—I detected a slight rudderlessness in the way HS2 was taken forward at the political level.

Last night I was pleased to be in Brussels with my noble friend Lord Adonis to see him being awarded a very important prize by the European rail supply industry for the vision that he showed in this country when he was Secretary of State. He went round many high-speed lines that were being developed across Europe in Germany, Spain, France and Italy to see how they did it. It was quite clear that in all those places they manage to build these lines much more quickly than we do. When it comes to operating their trains they are nothing like as good as we are, but they do the building very well. I suspect that this is something to do with us being a mature democracy—I am not saying that they are not—and listening to people’s complaints a bit more. I remember when I was starting off the Channel Tunnel, my French colleagues used to say to me: “Why is it taking so long to get permission to build this thing? We got permission in six weeks”. In the UK, we took three years. I asked them how they did it and they said: “If you want to drain the swamp, you do not consult the frogs.” That is an interesting way of putting it but it is quite true. One thing they did was related to arguments about compensation for people who owned property or whose businesses might be affected. There is a system in France where it is normal to pay a good 10% over the assessed market value of the business or the house. I hope we take up some of these big projects and wonder whether we should look at that when we do so. I am sure that if people felt they had been given a little bit extra, in addition to their moving and relocation costs, it would help a lot.

We also need to discuss how to get these permissions. The Bill for HS2 is grinding through the Commons. I do not know whether it is going to take three, four or five years. In many ways, it is no more contentious than the Bill for High Speed 1 was, but is that the right process? If it is, what about having a Joint Committee of both Houses to do it? Do we really need to offer people the opportunity to petition on the same subject—and it can be in exactly the same format—to both Houses? I suggested this a few years ago for HS2 but it has not been taken up. Or should we abandon the hybrid Bill process completely and go for the new regime within the Planning Inspectorate? This, of course, is the way the Thames tideway tunnel is being done. I happen to object to that project, but the process is probably going quite well. We need to have this debate; we need to reflect that, being a mature democracy, we have to take a bit longer. We have a long way to go but I welcome my noble friend’s debate today and hope we can take it forward.

Infrastructure Bill [HL]

Lord Berkeley Excerpts

Monday 10th November 2014 Lords Chamber

[Lord Berkeley (Lab)]

My Lords, I am very pleased to support the noble Lord, Lord Jenkin of Roding, on the amendment. My noble friend Lord Whitty apologises; he had to leave. Presumably he thought this would come up a little earlier in the proceedings. The noble Lord, Lord Jenkin, told the House a number of very useful and interesting ideas about how this issue is going to be taken forward. I shall be very interested to hear the response of the noble Lord, Lord Deighton. First, obviously, I welcome the Government’s commitment to so much new infrastructure. It is not before time. Most of it is sensible and should be good value for money. However, as the amendment seeks to point out, we need to know the effect on consumers, not just this year and next year but in the long term; some of these projects take a long time to construct. If there has been some kind of financial arrangement in the private sector to finance them, we need to know the long-term effect.

It is worth pointing out that many of the sectors mentioned in the amendment are by definition monopolies: railway infrastructure is a monopoly; water services are generally monopolies; and gas and electricity are not generally monopolies, but some of them are. I think it is true to say that all regulators have a duty to protect the interests of consumers while also ensuring that the companies they regulate are financially sound and capable of investing and delivering for the future needs of their customers.

I will take one or two examples. We have to ask how successful these industries and the regulators have been in protecting the customer’s interests. We have had much debate this year over electricity prices, resilience of supplies—are all the lights going to go out?—and people complaining that Hinkley Point EDF may be a deal that has screwed the Government. I do not know whether that is true: I am not an expert on it. Then, of course, there is the latest investigation by the Competition and Markets Authority into the big six electricity suppliers in terms of vertical integration. Where the customers come in all this is quite difficult to understand for the average payer of electricity and gas. That is something that could very usefully come as a result of discussions on the amendment.

On the railways, to take another example, the Office of Rail Regulation’s role is not directly to help the customer—it does, because the charges relating to Network Rail’s costs have come down—but it is relevant because it is regulating a monopoly. Everybody said at the beginning that Network Rail was pretty efficient but it could probably do with a tweak here or there. However, the regulator over the last 10 years has succeeded in reducing Network Rail’s costs, or efficiencies, by something like 40%. If it was 40% over what it should have been as an efficient operator, that is quite an achievement for a monopoly. Now the regulator is expecting another 20% from it in the next five years, and many people say that there is more to come. I do not think that other infrastructure managers of monopolies are probably much different, which is quite worrying. We have very efficient regulators across the sector and they have achieved a lot, but how much more is there to achieve? I just do not know.

The water industry is a different issue. We have had many debates here, some of which I have instituted, about whether the regulator has regulated Thames Water in order to ensure that it had enough assets to provide the investment it believes is necessary for its long-term operation—personally I do not believe it is necessary, but that is not the point—and whether the regulator was doing its job properly in ensuring that there was not a load of asset stripping, which appears to have gone on. More importantly, when is the regulator going to come up with some credible estimate of the effect that the Thames tideway tunnel and the other changes to the industry are going to have on the customers? There has been lots of talk about this; it would be interesting to know, but I suspect that that might require a bit of pressure.

Several newspapers today say that the Prime Minister is apparently going to announce 300 new roads. Whether they are all Highways Agency or strategic road company roads, I do not know—I suspect that the noble Baroness will tell us one day—but that is not the point, really; he is going to announce them, although I do not know how they are going to be financed. Under the Bill, which some of us think is being set up for them eventually to be privatised, the roads will probably be turned into toll roads, although the Minister has strongly denied that at every opportunity. There is still a question of how these new roads will be paid for, though, so should there not actually be some toll roads? However, we are not going to go any further on that today.

The amendment is therefore very important. Having some consistent statistics and data across all these different sectors regarding how much the consumer is going to have to pay, and over what period, would be very useful. It might also put pressure on the regulators to come up with a bit more consistency than they have shown up to now. The UK regulators network is a good idea and I think it is making progress; I have also been involved in some suggestions that there should be a European rail regulator, or an association of European rail regulators, across 26 member states, though at the moment that seems to be a step too far. Still, the concept of regulation is developing, and the question we have to ask ourselves is: is it sufficient that the regulators apply self-regulation to themselves? I have my doubts and would prefer the Treasury to do that to start with, but maybe the Minister will be able to persuade us that they are capable of doing it themselves, with a good deal of Treasury supervision. It will be interesting to see what happens. Again I thank the noble Lord, Lord Jenkin, for bringing this to our attention on Report.

[Lord Davies of Oldham]

My Lords, this gives me the chance to congratulate the noble Lord, Lord Jenkin, on the assiduous way in which he has pursued this topic and the way in which he has clarified many of the issues. He did so to our great advantage in Committee and has been a great strength today, so the noble Lord, Lord Deighton, knows the nature of the opposition to which he needs to respond.

We regard the noble Lord, Lord Jenkin, as entirely right to raise the key question of the costs to consumers; he is certainly right to repeat the call of the Public Accounts Committee, which argued that departments should consider very carefully the costs to consumers of the policies that they pursue on infrastructure. He is also right, of course, to raise the fundamental issue of ensuring that costs are not unfairly passed on to consumers. If we had more time, we would dwell on the number of occasions where we consider that to have been the case. It is clear that in many sectors costs to consumers have risen very significantly: one in eight households says that their water bills are unaffordable, while around one-quarter of households and 64% of the poorest households spend more than 3% of their disposable income on water bills. Those bills are 40% higher in real terms than they were in 1989. Obviously the licence agreements set a maximum price, but whether Ofwat has quite the powers that it needs to alter those agreements is still unclear. Likewise, the rise in energy bills has been very well documented. The House will of course recognise the extent to which we have been concerned about electricity bills, to the point of indicating that under the next Labour Government there will be a period of time when bills are frozen.

There is an apparent lack of connection between wholesale prices and the retail prices that hit the consumer. It seems pretty obvious to us that the consumer is often getting a bad deal. None of us underestimates the extent to which infrastructure needs to be improved. I am sure that the noble Lord, Lord Deighton, will dwell on that point. However, we need to ensure that increased infrastructure investment does not fall on the consumer, mainly because currently we are very badly in need of better infrastructure delivery. It is absolutely clear that, given that output has fallen by over 19% since May 2010, less than a third of the projects in the Government’s infrastructure pipeline are classed as in construction. Therefore there is a great deal to be done. The Government are rather better at indicating promise and intent than at acting in reality. The imperative is clear. We need to ensure that our infrastructure output increases; likewise, we need to ensure that the costs are not unfairly passed on to consumers, as they have been in some areas in the recent past. I hope that, just as the noble Lord, Lord Jenkin, indicated, the presence of the noble Lord, Lord Deighton, will guarantee that we are pointing in the right direction towards achieving the right balance and a better one than has obtained in recent years.

Queen’s Speech

Lord Berkeley Excerpts

Monday 13th May 2013 Lords Chamber

[Lord Berkeley]

I welcome two parts of the Queen’s speech. The first is:

“My Government will continue to invest in infrastructure to deliver jobs and growth for the economy”.

The second is:

“My Government will continue with legislation to update energy infrastructure and to improve the water industry”.

I shall speak to these two issues with two examples, one large and one small.

The large one is the Thames tunnel, the £4.3 billion tunnel to remove the inflow of sewage-flavoured rainwater into the Thames when it floods. I believe that it is the wrong project, that the wrong company is doing it and, equally bad, that the regulator does not appear to be regulating. That is to the detriment of customers and the environment. There is no point in the Government investing in infrastructure if the private sector can or should do it or if there is a cheaper or better alternative, especially if that will create more and local jobs, as I believe this one will.

The tunnel has been discussed for many years and Thames Water is now starting the process of obtaining planning permissions. However, in the past five years, there has been increasing evidence from around the world that the scheme is out of date. The best example is probably in Pittsburgh in the US, where it has been demonstrated that preventing the volume of storm water entering the sewage system in the first place is a much more effective solution. It is easier to achieve, there is much less risk than building a big tunnel, it will use lower-skilled and therefore local labour and it will start the clean-up of the river much sooner, which could mitigate the effects of the potential fine from the European Commission of up to about £1 billion because the Government have failed to clean up the Thames. The problem is that neither the Government nor Thames Water have examined this new option properly. I wrote to Ministers about a month ago, asking them to set up an independent inquiry to look at the alternatives; I have not had an answer yet.

Another reason for such an inquiry is Thames Water itself and whether it is a fit and proper company to undertake such a project, especially when it has reduced its asset base over the years to the extent that it says that it cannot fund the tunnel—it needs government help, which the Government have kindly given it through legislation last year—but still suggests that this project will add £80 to the bills of every Thames Water drainage customer for the next 125 years. Thames Water customers go well past Reading to Oxford and places such as that—that is a lot of customers.

Since the Minister said in his opening remarks that the Government intend to tackle all forms of tax avoidance, and the Treasury indicated a few weeks ago that the Government intend to stop companies bidding for major contracts if they have used aggressive tax structures in recent years, perhaps this particular company and project should be looked at. Other examples include Wales & West Utilities, which was recently sold to Cheung Kong Infrastructure Holdings, where the shareholder equity was largely represented by a shareholder loan at 15% to 21%—not bad for a boring utility—and Arqiva, where the equity is represented by shareholder loans at 13% and no corporation tax has been paid from 2007 to 2011. It is difficult to find much information about Thames Water. One thinks that Macquarie Bank is involved, but it is almost certain that it has followed the same route, which is the kind of route that many of these utilities have followed.

It is surprising that the regulator, Ofwat, has not investigated whether Thames Water complies with condition P of its licence, which is that Ofwat has to,

“be satisfied, in each particular case, that the prospective owner has the probity and the operational and financial capacity to assume that role”.

The CEO of Thames Water, Mr Baggs, said in a letter of 8 March that shareholders should not be required to pay for enhancements of the network. That seems to contravene the duties of the regulator to,

“secure that the functions of each undertaker”—

in this case Thames Water—

“are properly carried out and that they are able to finance their functions”.

It appears that the Government are already asleep in failing to apply their Treasury ruling that those companies applying aggressive financial structures should not be involved in constructing government-funded infrastructure projects. Ofwat is also in a long-term sleep, failing not only to apply the probity test on Thames Water but to ensure that the company has the financial resources and capability to pay for enhancements.

The noble Lord, Lord Shipley, mentioned these water issues. I have not read the proposed water industry Bill that was mentioned in the gracious Speech. I certainly hope that it will put right some of the wrongs that I have outlined. In the mean time, I ask the Minister whether the Government will agree to an independent inquiry into this Thames tunnel project before any more taxpayers’ money is wasted.

My second issue is much smaller and a long way away: the Isles of Scilly transport. It should fit in with this statement in the Queen’s Speech:

“My Government will continue to invest in infrastructure to deliver jobs and growth for the economy”.

This is where it is needed. It is a small project in an outlying part of the UK, which is just as deserving of better infrastructure and services. If the island community of 2,000 is to survive, its economy, now based largely on tourism, needs to be maintained and to prosper. At present, the decline in visitor numbers is more rapid than that in mainland Cornwall, which can only be due to the high cost of travel there. Islanders need a year-round service, tourists in the summer need a range of services and all need to receive these at affordable prices.

Noble Lords will know that the helicopter service stopped on 1 November last year, probably for good. There remains a fixed-wing air service of eight-seater or 19-seater planes, which operate all year round but are frequently delayed or cancelled by wind, fog or waterlogged runways at Land’s End. These planes—as anybody who is an expert in them, which I am not, will tell you—are much more vulnerable to bad weather than helicopters. The “Scillonian” operates March to October and has just had a good refit for a five-year life extension. As noble Lords will know, the original build of the ferry was funded with support from Harold Wilson when he was Prime Minister. However, that was some time ago and one ought to be looking forward to a replacement.

The loss of the helicopter has brought into focus the dire service that remains. Between November and March, Land’s End was closed due to waterlogging for more than half the days. Immediately before Christmas, 177 people were queueing, unable to travel between the islands and the mainland for over three days; they finally got there on Christmas Eve. Some islanders have in desperation travelled in a RIB, a high-speed motor boat, from the Scillies across 20 or 30 miles of very rough sea, costing 12 people £1,200. That shows the desperation; it is not as if there are a lot of rich people there.

What can be done? A year ago, the Council of the Isles of Scilly produced a report comparing the transport available there to that for the Scottish islands: charges, frequencies and the lifeline service concept, which ensures an affordable service to all islands—some provided privately, some subsidised, but guaranteeing a service so that people can go for work, business, pleasure or hospital appointments at a cost that approximates to that of using an equivalent road distance. In the case of the Scillies, it would be £20 to £30 return, compared with the current fare of £84 on the ship and £160 by air. The islanders get a concession on the ship but not in the air, as the noble Earl, Lord Attlee, pointed out to me some time ago.

These are the kind of journeys that everyone else takes for granted, so there is general support for short-term measures for the airport and harbour improvements to be expedited. I ask the Minister whether the Government are planning to accept the applications from Cornwall Council and the Council of the Isles of Scilly for the ERDF-funded harbour improvements, because time is running out for some of these grants.

The affordability and reliability of a year-round service needs attention. The answer for next winter would be a trial winter sea service, which the Isles of Scilly Steamship Company is prepared to operate; it operates the air service as well. However, it will not say how much subsidy it would need, because it fears that the service will be tendered out. I have written to the Minister responsible, Norman Baker MP, asking whether the department would consider this. We have to reflect that there are very few other places, however remote and vulnerable they are to snowdrifts, floods, gales and so on, that have only one unreliable means of travel throughout the winter. It is not as if people can walk or cycle if it is difficult—it is a bit wet and you cannot do it.

I am very pleased that the new Cornwall and Isles of Scilly Local Enterprise Partnership, which the Minister also referred to, is keen to help and follow up the recommendations of the Scottish report, by offering to lead a detailed economic transport study to identify the best means of providing for the long-term needs of the islanders and visitors. Sadly, however, the Council of the Isles of Scilly has indicated that it is not interested in taking part. I find that very depressing. However, I hope that the new councils in the Isles of Scilly and Cornwall will be able to work much more closely together to further the interests of the islanders and visitors. I hope that they will start a joint campaign to persuade the Government that the Scillies need a trial winter service for next winter and to agree to a policy of developing a public service obligation with a new ship to give these islanders the long-term comfort that they need to enable their economy to grow on a firm basis. I hope that they will support the LEP in accepting its offer.

In summary, my questions for the Government are: what is the status of the application for the funding for harbour improvements that I mentioned and will the Government consider a trial subsidy for a ferry next winter? With that ferry and the air service, there would be a very good chance that at least one of them would get you to and from the mainland, when you want to go, without having to spend too many nights in hotels in Penzance.

Infrastructure: Expenditure

Lord Berkeley Excerpts

Monday 25th March 2013 Lords Chamber

[Lord Deighton]

My noble friend is precisely right that the restoration to capital expenditure which this Government have made through the 2010 spending round, the two Autumn Statements and the recent Budget, has restored capital expenditure levels to considerably above the previous Government’s plan.

[Lord Berkeley]

My Lords, can the Minister clarify how much of the amount he quoted in his original Answer is in respect of Network Rail and how much is capital expenditure, whether it is considered to be in the private or public sector, and whether or not it was financed by government guarantee?

[Lord Deighton]

The plan for Network Rail is included under the high-level output specification, which is a £9 billion plan from 2014 to 2019. Of that £9.4 billion, approximately £4.2 billion has been added during the tenure of this Government.

Infrastructure (Financial Assistance) Bill

Lord Berkeley Excerpts

Tuesday 23rd October 2012 Lords Chamber

[Lord Berkeley]

My Lords, I thank Ministers for briefing some of us about the Bill last night. It was a very interesting introduction to it.

First, I should like to spend a few minutes examining the wider problems, beyond the financing, associated with getting projects off the ground, such as the approval process, planning and, of course, the appraisal criteria. I think it was two years ago that Infrastructure UK published a report comparing the civil engineering costs of big projects in the UK and Germany. The costs of construction were remarkably similar, but what was different was the enormously greater cost of getting projects off the ground in this country. It was very interesting that in his introduction the Minister said that one of the criteria for financing was that you had to get the project off the ground within 12 months of obtaining the finance. That is quite a challenge. First, presumably one has to get through compliance with the Treasury Green Book, which is an incredibly complicated document. You need lots of consultants’ reports to support your case, which costs time and money, and sometimes the results are such that you wonder whether the exercise is worth while. A similar document is required for transport projects and, again, it is incredibly complex. It goes down to fractions of a second, timing millions of cars, and that decides whether you build a motorway, a road or something else. Again, that costs an enormous amount of money. What will the criteria be for allowing these projects to be financed in this way? At the same time, does the Minister agree that it is about time that the Green Book and the equivalent transport document were reviewed to make them cheaper and simpler?

The next issue is planning, alluded to by my noble friend Lord Adonis. Planning delays are getting longer and longer. I declare an interest as chairman of the Rail Freight Group. Some rail freight terminals in the south-east have gone through two planning inquiries. The Minister lost the last judicial review on one of them, so he is now thinking of a reason for having another planning inquiry. One might suggest that, in considering these things, Ministers should obey the law and look at these things objectively, as I am sure their legal advisers will have asked them to do. However, it all adds up to an enormous cost for developers and enormous time delays. Getting planning permission for some of these projects can cost £10 million or even £20 million because of all the consultants involved. Therefore, while I welcome the finance in the Bill, I am not sure how much it is going to help things to go ahead.

Secondly, I want to cover briefly what the Minister said about this Bill having minimum impact on the public sector finances. I would say that I have not been speaking for 10 minutes yet; that may be wishful thinking on someone’s part. There are so many here who are experts on finance that I deign to tread there, but if we have a £50 billion fund for investments or guarantees, does that not affect the PSBR somehow, if it still exists? A couple of years ago I asked the Secretary of State for Transport—it was Philip Hammond, who was two Secretaries of State ago—whether he had any views on whether Network Rail’s debts should be on the government books. He said that he was agnostic about it; I do not know whether that still applies. There is also said to be a debt liability of £1 billion on the Channel Tunnel going back 25 years, so I do not know how all this works. However, I cannot believe that a £50 billion fund or guarantee from the Government has no effect on government finances. I am sure that the Minister will be able to put me right on that.

While everyone is encouraging projects to go ahead with a kick-start, I find one in particular a bit odd. This is the second Bill this year that would authorise government funding for the Thames tunnel. The previous one was the Water Industry (Financial Assistance) Act 2012. Why is there this enthusiasm for pouring public money into a Chinese-owned so-called public-private sector utility? Are the Government not aware that on 18 October the European Court of Justice, in its judgment C-301/10, found that the UK had not complied with directive 91/271 in respect of the Thames and another river somewhere up north, but that in seeking to comply the Government should look at the best known technology that does not impose excessive costs? I think that £4.2 billion—the equivalent of £80 every year for 30 years on every water payer within the Thames Water catchment area, which goes as far as Oxford and beyond—is probably excessive if there is an alternative. Paragraph 64 of the relevant judgment says:

“The concept of BTKNEEC”—

that is what it is called—

“thus enables compliance with the obligations of Directive 91/271 to be secured without imposing upon the Member States unachievable obligations which they might not be able to fulfil, or only at disproportionate cost”.

Even without this government money, then, the Thames tunnel will put all that money on. It may or may not comply but the judgment requires the Government to look at this again and at alternatives, which I believe exist. The noble Baroness, Lady Gardner, said that money should be put to good use and spent wisely. This is an example where, if it goes ahead, it certainly will not be. I hope that the Minister will impress upon his colleagues in Defra the need now for an independent review of the different options for complying with the ECJ ruling and for mitigating the fine which, at its worst, I am told could reach £1.5 billion. There is big money at stake here and a lot of it could be saved by looking at different options a little creatively. I will be meeting the Minister in a couple of weeks’ time to discuss this, when I shall expand on it further.

--- Later in debate ---

[Lord Newby]

I am afraid that I do not have those figures to hand but I will write to the noble Lord.

The noble Baroness, Lady Wheatcroft, raised concerns about continuing the old system of PFI. Many people share her concerns about the way that PFI has worked, and in any future schemes I know that the Government will seek to avoid the problems of the past in that respect.

The noble Lord, Lord Berkeley, asked several questions, one of which concerned the criteria were for which projects come forward. As I said in my opening remarks, the five principle criteria are that the schemes be nationally or economically significant, financially credible, good value for money for the taxpayer, not solely dependent on a guarantee to proceed, and ready to start construction in 12 months. He asked whether the £50 billion affects the PSBR. The answer is that it affects the PSBR only if guarantees are called upon. My understanding is that if it is a contingent liability, this does not affect what I still think of as the PSBR.

The noble Lord, Lord Berkeley, also asked about the Thames tunnel and whether we might have an independent review. Living as I do on the Thames and being subject to many public meetings about the Thames tunnel, it seems to me that the current programme of proposals on the tunnel involves a huge amount of consultation and much discussion of alternatives. Having got this far on what seems to be an unavoidable necessity, I certainly would be extremely loath to think that we had to go back to the drawing board and start again with an independent inquiry.

[Lord Berkeley]

Could the Minister answer my question about whether there will be a review or abolition of the Green Book?

[Lord Newby]

It will not be abolished. I will pass on the noble Lord’s concerns to my colleagues in the Treasury, who I am sure are already aware of them.

This is an important and much needed Bill. It will allow critical infrastructure projects that are being held back by adverse credit conditions to proceed and will support much needed investment in the rented housing sector. It contains measures that will support growth, jobs and families, all at minimal cost to the taxpayer. It will help to unlock the investment that the UK urgently requires to make it one of the predominant places in the world to do business, and to support sustainable growth that is balanced across sectors and regions. I request that the Bill be given a Second Reading.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.

Comprehensive Spending Review

Lord Berkeley Excerpts

Monday 1st November 2010 Lords Chamber

[Lord Berkeley]

My Lords, I congratulate the noble Lord, Lord Allan of Hallam, on his speech. He managed to be non-contentious, as is required, but I can see that his independence of ideas on matters technological will enable him occasionally to challenge the coalition’s thinking. I look forward to hearing him often in this House. I was also interested in the comments of the noble Lord, Lord Bates, about what a great job the regional development agency for the north-east has done. He will be aware that, in Schedule 1 to the Public Bodies Bill, it is down for abolition. I am assuming that he will oppose its inclusion in the Bill and I look forward to joining him in doing so, as I think that the agency has done a fabulous job in the past.

I am going to speak about transport, which features strongly in the CSR documentation. The coalition policy document sets the scene by stating:

“We will support sustainable growth and enterprise balanced across all regions and industries … giving new incentives for green growth”.

In the same document, in the transport section, there is an interesting mix of projects large and small, capital and revenue-related, long and short term, including a new system of HGV road user charging, no more funding for fixed speed cameras, a new dual carriageway in Norfolk, support for sustainable travel initiatives and the establishment of a high speed rail network,

“as part of our ambitions for creating a low carbon economy”.

Finally, there is an emphasis on the “green economy”. That seems to be a sustainable green policy across government. It needs to be, as the Stockholm Environment Institute, which is associated with the University of York, published a report in August saying:

“Transport is a major source of greenhouse gasses, and it is increasing emissions faster than any other sector of the economy. Growing levels of car use, road freight and flying have created difficulties in reducing transport’s greenhouse gas emissions”.

Perhaps we should examine what the Government are going to do about it.

What is good in the CSR is that the funding for many capital projects has largely been retained. We can read about rail projects: the Midland main line and the east coast main line are going to improve, but there is still no news about the Great Western main line electrification or the Thameslink upgrade and new rolling stock. It is interesting that the Chancellor, in his Statement, announced electrification between Manchester, Liverpool, Preston and Blackpool, but the Department for Transport is still failing to confirm that. Perhaps Mr Osborne is going to be the new Secretary of State for Transport as well.

Elsewhere it is cuts, cuts and increasing fares on public transport, while, frankly, the road sector is getting off pretty scot free. The bus subsidy has been drastically reduced, by something like £200 million. Therefore, there will be fewer services, costing more, particularly in country areas, which I would have thought Conservative and Liberal Democrat MPs would oppose. The consequence will be that more people will use their cars. Train fares are due to rocket, with regulated fares to increase by 25 per cent over the next four years and, I think, about 33 per cent over five years. What I find interesting is that, less than two years ago, the current Minister for Railways, Theresa Villiers, who was then shadow Transport Secretary, stated that a fare increase of 3 per cent above inflation would price people off the railways. Norman Baker, who was then the Liberal Democrat transport spokesman, said the same thing:

“We will cut rail fares, changing the rules in contracts with Train Operating Companies so that regulated fares fall behind inflation by 1 per cent each year”.

They both agreed, even before the coalition was formed, that fares were going to be too high, but they have now done a massive joint U-turn. It means that fewer people will travel by rail because they cannot afford it; they will use their cars more. As my noble friend Lord Foulkes said, the housing benefit changes will force people out of London and other major cities, which will mean that they have to pay even higher rail fares to get into the cities. There is not much alternative to getting into London. Perhaps I can offer the Mayor of London, Boris Johnson, another phrase: transport is getting like Kosovo, too.

Roads are going to become a free-for-all in places where there are no traffic jams; there is no more funding for speed cameras, so more motorists will be speeding. There will be £37 million of cuts in the road safety grants and operating expenditure this year. More people will get killed or injured. There is always the option of increasing charges for road use to match the increases for using bus and rail. There may be road user charges for foreign lorries, if the Department for Transport can find a way of doing that legally, but we have heard of no constraints or charges for cars. The Mayor of London is even scrapping the Kensington congestion charge scheme because motorists do not like it. Well, they wouldn’t, would they? However, it would bring up the charges to balance the increase in rail and bus fares. This is the policy of a potential Prime Minister and it epitomises the coalition, which, to me, appears to be allowing motorists to do what they like, with less and less fear of being fined, pricing people off public transport and on to roads and, after less than six months, dumping any policy associated with green initiatives and lower-carbon transport.

Clearly, the coalition accepted in its programme for government that a sustainable growth policy was necessary across all government departments, and transport is one of the worst offenders. However, on the basis of numerous independent reports, as well as evidence in the UK and parts of Europe, we will actually have higher carbon emissions. It is rather depressing that the Liberal Democrats in coalition are not diluting the worst excesses of the Tories in their love of motor cars and belief in the divine right of drivers to do exactly what they like, where and when they like. The Government could have raised revenue from the highest polluters—cars and lorries—which would have reduced emissions, because road transport’s emissions are about five times more polluting than rail’s per passenger mile or freight mile. It is possible to change behaviour and reduce carbon emissions at the same time, but that needs a consistency of policy that has so far and so quickly eluded the Government.

One project that the Government are praying in aid as important is High Speed 2—the new line that Ministers have been announcing for some time—but the problem is that many in the industry feel that the Government are not really serious about it. Members of Parliament along the whole route are campaigning against it and making the most outrageous statements about high-speed lines. All that they need to do is to go and look at HS1 in Kent to realise that it is a good scheme. The Government need to do a lot more to promote HS2, otherwise they will be just saying that they are doing it and it is not going to happen.

Returning to the coalition document, I believe that on present evidence the Government are not supporting sustainable growth across all regions and industries and are not giving incentives for green growth. They are doing exactly the opposite, taking us back to some of the Tory policies of yesteryear.