High Speed 2 (Economic Affairs Committee Report)
Lord Forsyth of Drumlean Excerpts(4 years, 10 months ago)
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Lord Forsyth of Drumlean
To move that this House takes note of the Report from the Economic Affairs Committee Rethinking High Speed 2 (6th Report, Session 2017-19, HL Paper 359).
Lord Forsyth of Drumlean (Con)
My Lords, I congratulate my noble friend Lord Goldsmith on a superb maiden speech. We very much look forward to his contributions to the House in the future.
I apologise, as I am suffering from a cold; my noble friend Lord Ridley told us yesterday that Darwinian principles meant that his cold would find another host, and I fear that he has been proved correct in that respect.
Five years ago, the Economic Affairs Committee, under the excellent chairmanship of the noble Lord, Lord Hollick, raised serious questions about the cost of HS2, the methods used to appraise the project and other priorities for rail investment in its 2015 report The Economics of High Speed 2. In January 2019, the committee followed up this inquiry and published a new report in May last year. Sadly, we found that the Government were still no nearer to providing satisfactory answers. We therefore concluded that HS2 required a major rethink. Before I explain our conclusions, I thank the committee staff who produced the report: Sam Newhouse, Ben McNamee and Lucy Molloy.
I begin with the question of how urgently we need HS2 in relation to other rail investment priorities. In 2015, the committee suggested that rail infrastructure in the north of England should be the priority. We asked the Government to consider whether investment in northern rail infrastructure should be prioritised over HS2. Beyond a business case for Northern Powerhouse Rail, no such assessment of the relative merits of doing so was ever carried out. Five years on, commuter services in the north of England remain badly overcrowded, unreliable and reliant on ageing Pacer trains built on the cheap using frames from Leyland National buses.
Lord Hunt of Kings Heath (Lab)
My Lords, I am sorry to intervene on the noble Lord—I will not do it again—but I cannot understand why his committee does not seem to have looked at the West Midlands and the issues there.
Lord Forsyth of Drumlean
If the noble Lord allows me to make my speech, he will perhaps get an answer to that.
The Government’s response to our report stresses that the Northern and TransPennine Express franchises will deliver over 500 brand new vehicles and retire all the existing Pacer trains. Yet, in spite of the Government’s confidence, Pacer trains remain in widespread use today. Allow me to stress that Pacers were initially given a lifespan of 20 years when they were introduced as a stop-gap in the 1980s. Forty years later, many are still with us.
Overcrowding continues to be far more severe on commuter services than long-distance services. We heard evidence that fast long-distance services are among the least crowded trains that serve the cities on the HS2 line. For example, just 4% of passengers stand on the Virgin Trains West Coast to Manchester, whereas there has been a doubling of demand for local services into central Manchester in the last 15 years but only a 50% increase in passenger capacity. HS2 will do very little to help these long-neglected commuters travelling into cities in the north. In fact, the main beneficiaries of overcrowding relief from HS2, when it is finished, will be London commuters who use the west coast main line. Chris Stokes, an independent rail consultant, described HS2 as
“a very expensive way of dealing with the Milton Keynes-Euston commuter peak.”
Simply put, the HS2 project is a poor reflection of the UK’s rail investment needs—I hope that addresses the noble Lord’s question.
Lord Forsyth of Drumlean
There is, fortunately, a programme in place to help these commuters: Northern Powerhouse Rail would create faster and more frequent lines between Liverpool and Manchester, Manchester and Leeds, Sheffield and Manchester, Leeds and Sheffield, and Leeds and Newcastle. It would reduce journey times between northern cities substantially. To give just two examples, the journey time from Liverpool to Manchester would reduce from a maximum of 57 minutes to just 26 minutes; likewise, Newcastle to Leeds would be reduced from 95 to 58 minutes. Such improvements to journey times would increase access to a wider jobs market between northern cities that are currently very poorly connected.
Representatives from northern regions who gave evidence to our inquiry generally agreed that both HS2 and the Northern Powerhouse Rail programme were absolutely crucial to the north. Since the publication of our report, there has been fierce debate—to put it mildly—on whether both programmes are needed. First, the Government, under the previous Prime Minister, stated in their response to our report that HS2 needs to be in place first. In August, the new Government commissioned a review into the viability of HS2, chaired by Doug Oakervee. New details from a leaked version of his report—apparently delivered before Christmas but still unpublished by the Department for Transport—were revealed this week and appeared to indicate only qualified support for the project.
The recently published dissenting report from the noble Lord, Lord Berkeley, argued that HS2 is the “wrong and expensive solution” and that priority should be afforded to Northern Powerhouse Rail and Midlands Connect instead. Stakeholders from the Midlands and the north of England, however, have made clear in their response, once again, that both programmes are needed. We urge the Government to provide clarity on this matter. The noble Lord, Lord Berkeley, made it clear: if the Government have £150 billion, they can do both; if they have only £50 billion, they need to choose.
In the view of the Economic Affairs Committee, HS2 phase 2b and Northern Powerhouse Rail should be combined into a single programme to allow investment to be prioritised where it is needed most, and funding for the northern powerhouse needs to be ring-fenced and brought forward where possible, otherwise the north of England will continue to be short-changed by the Government’s plans. The Government stated in their response that they would “carefully consider this recommendation”. We hope they do so.
Our report also considered the planned costs of HS2 and examined the method by which the Department for Transport determines whether the project provides value for money. The leaked version of the Oakervee report found that more work is needed to assess the scheme’s impacts on regional growth and that it is “hard” to say what economic benefits will result from building it. Suffice it to say that providing clarity on the costs of HS2 has never been one of the Government’s strengths. The first estimates for the costs of HS2 were published in February 2011 by the department under the then Secretary of State for Transport, Philip Hammond. The estimated cost for the full network was given as £37.5 billion. Then the department, under the following Secretaries of State, Justine Greening and Patrick McLoughlin, put forward two updated economic cases in January 2012 and October 2013. The estimated cost rose first to £40.8 billion and then to £50.1 billion.
Moving forward, the department’s 2015 spending review set the funding envelope for HS2 at £55.7 billion, in 2015 prices. Adjusting for construction price inflation since 2015, this funding envelope increases to £59 billion today. The estimated costs, however, were shown to have increased to £65.2 billion. Yet fear not; in 2017 the department, now under Secretary of State Chris Grayling, published a financial case with all assumed efficiency savings calculated into the model, estimating that the full cost of HS2 would be £52.6 billion. The committee was told that spending to date on the project was £4.3 billion.
Since the publication of our report, there have been even more conflicting estimates of the costing range for the project. In August 2019 HS2 chairman Allan Cook published an official stock-take of the current status of the programme, in which the total funding range for all costs and risk was estimated at between £72.1 billion and £78.4 billion. Yet following this the Secretary of State for Transport, Grant Shapps, clarified these costs to Parliament in a Written Statement on 3 September 2019:
“Adjusting by construction cost inflation, the range set out in Allan Cook’s report is equivalent to £81 to £88 billion in 2019 prices”.—[Official Report, Commons, 3/9/19; col. 7WS.]
Now, according to the leaked Oakervee report, the cost of the project could rise to as much as £106 billion. Adding to the confusion, the noble Lord, Lord Berkeley, suggests in his dissenting report that the total cost will in fact be £115.8 billion.
This confusion absolutely tallies with what the committee heard from Sir Terry Morgan, the former chairman of HS2 Ltd, who told us that “nobody knows yet” what the actual cost of HS2 will be. Most pointedly, the noble Lord, Lord Berkeley, concluded that
“Parliament has been seriously misled”
about the costs of HS2. The committee also had serious reservations about the cost-benefit analysis used in determining whether HS2 provides value for money. The results of the latest cost-benefit analysis for HS2, published in July 2017, show net benefits of £92.2 billion and net costs to the Government of £39.8 billion. Following the familiar theme of confusion that has arisen throughout the project so far, the leaked Oakervee review suggests that the cost-benefit ratio has fallen from £2.30 to £1.50 for every pound spent. The committee did not find the methodology used credible for either the project’s costs or its benefits. The model does not account for the transformative effects on employment and population that new infra- structure can provide, because it assumes that land use in the surrounding area is fixed. The Government’s response to our critique was disappointing. They accepted the limitations relating to the treatment of land-use changes but offered no indication that they would carry out new analysis.
Our second reservation concerns the methodology and evidence used to calculate the value of travel time. These measurements have improved since their first iteration—when they forgot that people can, and quite regularly do, work on trains—but they are still questionable. They used surveys asking business rail travellers hypothetical questions about how much they would be willing to pay for quicker journeys. The committee did not believe that a few hundred interviews carried out on station platforms were a robust evidence base on which to base a calculation of the benefits that a potentially £80 billion new railway will bring.
Finally, our report shows that the estimated benefits of HS2 are highly dependent on forecast numbers of business travellers using long-distance rail. Our central concern on this point is that the evidence used to forecast the number of business travellers using HS2 is based on data that is 15 to 20 years old. Not only do the numbers not correspond to the most recent data from the national travel survey and the national passenger survey, but relying on out-of-date data is neither a robust nor rigorous basis for evidence-based policy-making. We therefore recommended that new analysis of the project is needed. This must take into account the transformative effects of new infrastructure on the benefits of the project. It should revise the assumptions behind the values of travel time, and the demand forecasts should be revised ahead of this new analysis. We recommended that this analysis be published in full alongside the business case by the end of last year. The Government have accepted that the data is out of date and stated that updating it is part of the department’s latest research priorities. We strongly urge its publication as soon as possible.
In 2015 we recommended that the Government should review the cost saving from lowering the maximum speed of the railway and terminating the line at Old Oak Common rather than Euston. Yet again, the Government failed to consider our very reasonable recommendations. Our follow-up examined the two ideas again in detail. HS2 is being built to accommodate trains that run at a maximum of 400 kilometres per hour, with trains initially expected to run at a maximum of 360 kilometres per hour. Trains that can travel at that speed do not exist. When we asked why the railway was being designed to that specification we were told it was in order to make it future-proof. We heard evidence that strongly questioned the design speed, including one piece of evidence that described the maximum speed as “an engineer’s pipe dream” and “close to ludicrous”.
Allow me to stress, on this point, that in phase 1 trains can operate at 360 kilometres per hour on a mere 68-mile stretch between Amersham and Birmingham. Reducing the maximum operating speed to 300 kilometres per hour would add an extra 10 minutes to a journey between London and Manchester, but the cost savings for the whole project could represent up to £1.25 billion once longer-term operational and energy costs are accounted for. Based on this evidence, we see no reason for HS2 to be built to operate at 400 kilometres per hour.
Once again, we are disappointed that the Government have ignored our recommendation to assess the cost saving that could be made by terminating the HS2 line at Old Oak Common rather than Euston. The Government and HS2 Ltd cite a 2011 report from Atkins as the evidence base for rejecting our proposal. Notwithstanding the fact that it was written at the start of the last decade, that report assessed only the reduction in benefits and made no estimate of the possible cost saving. The Government must consider both. We argue that what matters for the termination point is not the single point in central London, but the connections that enable passengers to quickly arrive at their destination. The evidence we saw shows that onward journey times to final destinations using the Elizabeth line from Old Oak Common appear to be comparable to, or better than, continuing from Old Oak Common on HS2 to Euston. Euston is not “central London”.
We have therefore recommended that the redevelopment of Euston station be removed from the scope of phase 1 of HS2 and that Old Oak Common should operate as the London terminus for phases 1 and 2a. Doing so will allow time to determine whether Old Oak Common could operate as the London terminus for the entire HS2 network, and the potential costs or savings that that would involve relative to a terminus at Euston. Our report is an appeal to the Government to conduct a major rethink of the full HS2 project. A new appraisal of the project is urgently required. The Government must act to ensure that the benefits of HS2 are not geographically uneven and do not entrench the uneven economic divide between north and south that already exists.
I was very struck, in our discussions in the committee, by the words of the former Chancellor and Transport Secretary the noble Lord, Lord Darling. He said, “These projects are all the same: they run over budget and in the end the bit at the end gets cancelled.” The bit at the end is the east-west rail structure which is so desperately needed now in the north of England. I beg to move.
Lord Greaves (LD)
My Lords, it is a privilege to follow the noble Lord, Lord Berkeley, on this. I pay tribute to him because he has at least stirred up a lot of very interesting debate about where investment in the railways—a huge amount of it—is now required.
Various noble Lords, starting with the noble Lord, Lord Forsyth of Drumlean, said that the priority is for the north of England. There are two questions there. Can you build the northern half of HS2 and not bother with the southern half, as I think the noble Lord, Lord Berkeley, suggested? All you would end up with is high-speed services from perhaps Crewe to Birmingham, or Leeds to Mansfield, with passengers then wanting to get on to the existing main lines to London, which are already full. It is nonsense.
However, I can assure the noble Lord, Lord Forsyth, that when I set off on Monday to drive to the station, I saw a train coming over the viaduct in Colne, which is at the end of the worst branch line in the north of England—that must be true because I keep saying it—and it was a Pacer. On the other hand, the Pacers are about to go. There are loads of new trains and carriages in the north of England. The problem is that the infrastructure that these new trains will run on is often inadequate and, in some cases, rubbish. Therefore, the timetables cannot make proper use of them.
Lord Forsyth of Drumlean
I am sure the noble Lord does not mean to misrepresent the report. Our report does not suggest that HS2 should be cancelled. It suggests that the cost overruns could be addressed by lowering the speed and leaving the link to Euston, and that the priority should be to ensure that the infrastructure improvements are made in the north.
Lord Greaves
I do not disagree with that at all. I am grateful to the noble Lord but there is a general undercurrent implying that if we could get rid of HS2, even at this late stage, people would be happy.
I have a confession to make: I like Euston station, and there are two reasons for that. First, it is where I go when I go back north, and therefore a nice place to go; secondly, it is efficient. The problem when Euston was built was that civic engineers and architects in this country had lost the great Victorian ability to combine efficiency and beauty, which I think we are learning again.
The people challenging the existing programme for HS2, who want it to be slowed down or stopped, or whatever, really have to answer the almost unanimous civic and economic leadership in the north of England, who all say that they want to get on with it. That means the mayors, council leaders, councils generally, businesspeople and everybody else. To say that it is only because they are businessmen and MPs who want to get to London quicker is just derisory. There is a general belief in the north of England that it is a good thing and needs to be got on with now. This is not least because if it were to be cancelled, or deferred for another three or four years for more inquiries et cetera, the idea that a lot of activity would suddenly start up in the north of England as a result, and have lots of money allocated to it, is just cloud-cuckoo-land. It is a complete pipedream. The problem is that people see defects in the system for developing infrastructure in this country, of which HS2 is a good example, then transfer that to the scheme itself. The problem is the system, not the actual scheme.
People have talked about northern powerhouse rail but I am not clear what that is or whether there is consensus on what it means. For Transport for the North, which has produced a strategic transport plan that includes the railways, northern powerhouse rail is the line between Liverpool and Hull, particularly the part between Manchester and Leeds. The Prime Minister seems to think that it is from Manchester to Leeds; that also seems to be what the Conservative manifesto said. I consider it ludicrous that priority now should be given to spending a large sum of money—I am not quite sure what this includes or where it comes from but if the figure of £39 billion is bandied about now, it will be £60 billion or £70 billion before long, as we know—when it seems to be simply a high-speed railway line between Manchester and Leeds, which stops at Bradford. Whether all the trains will stop at Bradford, I do not know. I am in favour of them stopping there, as a Bradfordian, but it does not seem a priority to me. All the towns in between—Halifax, Huddersfield, Oldham and Rochdale on the other side, and so on—will get no benefit at all. If you live in Huddersfield and want to go on this railway, you will have to get the train to Bradford, then turn around to go back over the Pennines.
This is a vanity scheme that does not mean much. If it is meant to be part of a wider network of high-speed lines in the north of England and their connecting lines, including to Liverpool, Hull and Sheffield, then it requires HS2 to be built. This is because it is intended that the northern powerhouse rail network in the north of England, apart from the section between Manchester and Leeds, will include a substantial part of the stuff built for HS2, as the noble Lord across the Chamber said. Therefore, if it is a sensible strategy to significantly increase the amount of pretty high-speed trains between the main cities in the north of England, or at least the main cities in Lancashire and Yorkshire, simply building 40 miles of fast track between Manchester and Leeds does not seem sensible. I do not think that is a priority at all. The single main rail project in the next five years of improvements will be improving the existing trans-Pennine line between Leeds, Huddersfield, Oldham and Manchester, the Standedge route over the Pennines through the Standedge tunnel. That has been downgraded. It needs electrifying throughout and to be made four-track throughout as it goes over the Pennines, opening up the old tunnels. That is the priority, because it is something that can be done in five or six years.
Building a new railway line between Leeds and Manchester to high-speed standards, requiring a parliamentary Bill and all the rest, will mean that our successors in your Lordships’ House will be discussing it in 10 years’ time and it still will not have started. I agree with the noble Lord, Lord Berkeley, that less ambitious schemes—although many are ambitious—covering the whole of the north of England should be the goal. The north of England is not like London—which has a centre, with everybody commuting in—but a constellation of cities and big, medium-sized and small towns, many of which have railway lines between them, and some of which need railway lines reinstating. We should look at the whole of the north of England, because that is what is needed.
Lord Forsyth of Drumlean
My Lords, we have had a very good debate. On the subject of Victorian pioneers, my noble friend might recall that when Prince Albert set up a commission for the Great Exhibition, he insisted that no one should be charged more than a penny, that it should make a profit and that it should be completed on time—and indeed it was. And not only did it make a profit but the surplus was used to build the Victoria and Albert Museum and the Science Museum, and there was money left over that is still providing bursaries to art students. So it is a bit unfair to present the Victorians as being unable to carry out great projects and bring them in within time and within budget.
We have had an extremely good debate, which mirrored what went on in the committee. The key issues are: is it really necessary at this stage to make the link to Euston, and what are we going to do if the costs overrun? Several noble Lords talked about costs: the noble Lords, Lord Hollick, Lord Rodgers, Lord Fairfax, Lord Turnbull and Lord Truscott, as well as my noble friend Lord Howard, who told us about salaries—which tended to suggest that there was a gravy train as well as a fast train—and the noble Lord, Lord Mair, who told us about the opportunities to use technology on costs. All those noble Lords emphasised the importance of costs. The committee, when we looked at this continuing escalation of costs, was concerned—as the noble Lord, Lord Collins, and the noble Baroness, Lady Kramer, said—that it is not “either/or”. Our concern, as has happened so many times, was that, if the costs get out of control, the Treasury will cut the project. Almost every speech has been in support of infrastructure in the north. My noble friend Lord Astor, and the noble Lords, Lord Berkeley and Lord Shipley, all emphasised how important it is that this work in the north should be carried out.
Many speeches pointed to the environment. My noble friend Lord Randall, the noble Baroness, Lady Young, and the noble Lord, Lord Faulkner, all emphasised its importance. This is where cost and the environment come together. If we reduce the speed of this thing, as the noble Baroness, Lady Young, pointed out, there is then wobble room to enable important environmental assets to be saved, because it is not necessary to travel in a straight line.
Baroness Young of Old Scone
I thank the noble Lord for giving way. I would hate for him to call it “wobble room” on a train. I think I said “wiggle room”. One must get these technical terms right.
Lord Forsyth of Drumlean
One person’s wiggle is another’s wobble. I am not sure that either is a technical term but we got the gist of what the noble Baroness meant. She and my noble friends Lady Neville-Rolfe and Lord Howell made this point about the importance of avoiding straight lines, which comes with a reduction in speed.
What was really interesting about the response from my noble friend the Minister is that she gave an absolute assurance that we will get a decision from the Government in February. So, within five weeks we will be told what is happening; whatever is happening, that will end the uncertainty and we can get on with whatever they have decided—and her speech left ample opportunity for them to decide almost anything at all.
The noble Lord, Lord Adonis, in a very powerful speech, argued strongly that we should not seek to challenge decisions taken in 2016—I wish he had taken that view on other decisions taken in 2016—which was a view shared by the noble Lords, Lord Shipley and Lord Kerslake. The noble Baroness, Lady Kramer, made the important point, echoed by my noble friend Lord Framlingham, that one of the problems with this project has been the breakdown in trust and the lack of transparency. Whatever the Government decide next month, I hope we will have a much more open dialogue about the progress of this project. It seems to me that the opportunities are to tackle the question of speed, to defer the link to Euston and, most importantly —something the Minister’s reply did not deal with, but as recommended by the committee—to ring-fence the expenditure in the north; it should be absolutely clear that it is part of this project that is not open to being sacrificed.
Having listened to the debate, I believe that there is a consensus in this House not to cancel the project but to get a grip on the costs and the environmental damage that has been done, and to deliver with certainty the infrastructure that is needed east, west, in the north of England and, indeed, in the Midlands. Of course, I regard the north as the deep south, as I come from Scotland. I have avoided the temptation to talk about the links to Glasgow or Edinburgh, where the ability to wiggle or wobble around the mountains of the Lake District and elsewhere is distinctly limited. I am most grateful to everyone who participated in the debate. I am sorry that I have not had time to mention everyone. I am most grateful to colleagues for staying so late on a Thursday evening.
HS2: Cost
Lord Forsyth of Drumlean Excerpts(5 years, 4 months ago)
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Lord Forsyth of Drumlean (Con)
My Lords, given that the previous chairman of HS2 said in his evidence to the Economic Affairs Committee inquiry that no one knew what the costs of HS2 would be, and that his successor has now said that there will be a considerable increase in the cost, can my noble friend guarantee that, should the section from London to Birmingham overrun its costs, the proposals for the north of England will remain ring-fenced and that the additional routes in the north will not be cancelled because of the overrun on stage 1?
Baroness Vere of Norbiton
As I have already tried to explain, the costs are still under review and being finalised. I am certainly not able to give the assurance that my noble friend is after as to the routes in the north because complex rail developments such as these are interrelated and the true benefits—the true value for money for the taxpayer—is achieved only when they are built as one system.
Railways: Newcastle and Edinburgh
Lord Forsyth of Drumlean Excerpts(5 years, 5 months ago)
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Baroness Vere of Norbiton
We do not know what the Williams review is going to say on that or indeed any other point, but it will be a root-and-branch review of the entire system so that we can create a railway system fit for the 21st century and build up a blueprint of how our future on the railway will look. The review will look at reforms to the structure of the industry as well as to the commercial model within which it operates. Some 600 responses have been made to the call for evidence, so noble Lords will understand that it will take quite a while to go through them all. As regards the new services on the east coast main line, that was an open process conducted between 2014 and 2015. The operator has been granted track access rights from 2021 to operate those services.
Lord Forsyth of Drumlean (Con)
My Lords, my noble friend has answered a series of Written Questions from me about services from Edinburgh to London by air. Does she think it is reasonable for British Airways to charge economy-class fares of more than £600 for a return journey to Edinburgh on planes that are absolutely full—so full, in fact, that the Convenor was not able to get here today?
Baroness Vere of Norbiton
I thank my noble friend for his Questions on this issue. As I have said to him previously, air travel in this country is subject to a competitive market and certain services will necessarily cost more than others. Where there is not a sufficient service, the Government will step in and provide support, but that is obviously not the case on the Edinburgh route.
Brexit: European Union’s No-deal Continuity Arrangements
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Baroness Vere of Norbiton
Unfortunately, I do not recall the Government’s response to the noble Lord of 6 February. Discussions of tariffs are slightly beyond the original scope of the Question, but we expect the EU’s most favoured nation tariff regime to apply to the UK if the UK leaves the EU without a deal. Noble Lords are also aware that this will result in the introduction of tariffs on 60% of current UK exports to the EU.
Lord Forsyth of Drumlean (Con)
My Lords, given that all the leading contenders for the leadership of the Conservative Party have made clear that it is important the European Union understands that we are prepared to leave without a deal if we cannot get a sensible agreement, would it not be sensible for the Government to publish, for each department, what plans are in place, how they need to operate and what future additions will be required?
Electric Vehicles: Charging Points
Lord Forsyth of Drumlean Excerpts(5 years, 6 months ago)
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Baroness Vere of Norbiton
I thank the noble Baroness for a number of questions there. I disagree with her that growth is not rapid. We are the second-largest market for electric vehicles in Europe. I believe that the rollout to date has been very successful. For example, within the last 30 days 1,000 charge points have been introduced. The noble Baroness spoke about local authorities and we support the work they are doing. There is no more funding available but we are encouraging the private sector to step up and, with £400 million in the charging infrastructure investment fund, we believe that it will.
Lord Forsyth of Drumlean (Con)
My Lords, would it not be a good idea for Parliament to give an example to the rest of the country? We have 487 parking spaces between this House and the other place, and I am told there are two charging points in the House of Commons and three more promised for Royal Court. How can we expect the country to take us seriously if we cannot put our own house in order?
Baroness Vere of Norbiton
I completely agree with my noble friend that we need more charging points within the House. I certainly used to drive but I do so no longer. I use public transport and I encourage all noble Lords to do the same.
Brexit: No-deal Ferry Contracts
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Baroness Vere of Norbiton
I would like to focus on the first of those questions: what exactly was the benefit to the taxpayer? The benefit was that the taxpayer had an insurance policy. Like many organisations, the Government are able to take out insurance policies, and these contracts were precisely that. The benefit to the taxpayer is that the Government were able to ensure the continued movement of absolutely critical goods—what we call “class 1 goods”—into this country in the event of no deal. I am fairly sure that the noble Lord would have been the first to criticise the Government had these goods not got through.
Lord Forsyth of Drumlean (Con)
Following my noble friend’s analogy, can she explain why we have given up the insurance policy before we have the certainty of knowing that we will not have no deal? Can she also tell us what the total cost to the taxpayer has been of our failure to leave on 29 March?
Baroness Vere of Norbiton
The noble Lord is right that this particular insurance policy falls away because these were six-month contracts, and now that we have the extension to 31 October the contracts are obviously not needed. These contracts are very visible, but they are actually an extremely small proportion of our no-deal planning. A total of £4 billion has been put in place as an insurance package to make sure that, in the event of no deal, which remains the legal default, we will be able to protect our citizens.
Queen’s Speech
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Lord Forsyth of Drumlean
That an humble Address be presented to Her Majesty as follows:
“Most Gracious Sovereign—We, Your Majesty’s most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament”.
The Parliamentary Under-Secretary of State, Department for Transport (Lord Callanan) (Con)
My Lords, it is a privilege and pleasure to open the second day of debate on Her Majesty’s most gracious Speech. I am honoured to be standing before noble Lords just three weeks after taking up my role in the new Government as a Transport Minister. This is always one of the most interesting and wide-ranging debates in the Lords calendar, so I very much look forward to the valuable and informed contributions that I know that many noble Lords will make. On behalf of the whole Chamber, I particularly extend a warm welcome to the noble Lords, Lord Colgrain and Lord Mountevans, who will be giving their maiden speeches today. I also thank my noble friend Lord Prior, who will be winding up the session this evening.
This Queen’s Speech was all about building a stronger, more successful and more resilient Britain: a country with its sights firmly set on the future and on what we can achieve as we build closer links with friends and trading partners around the world; as we deliver a Brexit deal that works for all parts of the United Kingdom; and as we grow and rebalance our economy, working to meet the aspirations of the whole nation. These themes will crop up regularly in our Queen’s Speech debate today, as we debate the Government’s agenda on economic affairs, transport, business, energy, the environment and agriculture.
Let me start with the economy. The fundamentals of the economy are strong. We have a record number of people—almost 32 million—in employment. We have reduced the deficit by almost three-quarters since 2010. After our economy grew 1.8% last year—the second highest in the G7—the Office for Budget Responsibility expects it to grow a further 2% this year.
Our economic success over the past few years has been widely documented, but what perhaps is less well appreciated is how it is benefiting the whole of our country. As the Chancellor made clear in his Mansion House speech last week, inequality is at its lowest in 30 years. The poorest households here have seen their incomes rise by more since 2010 than any other G7 country. That is partly thanks to the introduction of the national living wage, adding £1,400 to the annual income of those in full-time work on minimum salary. It will continue as we increase the national living wage, so that people on the lowest pay see their wages rise as the economy strengthens.
We have been clear that we want to keep taxes as low as possible for ordinary working people. Although we live in changing times, one thing will never change: this Government will always put economic stability first. That is why we are investing £23 billion through the national productivity investment fund in key growth areas, such as research and development and housing. It is why we are helping young people to get the training and development they need to do the high-skilled, high-paid jobs of the future. It is why we are determined to get the best possible Brexit deal for households and for UK companies.
As we leave the EU and adjust to our new position in the world, the resilience, flexibility and dynamism of our economy will be key. New Bills in the Queen’s Speech on trade and customs will help to give us an independent trade policy and a world-leading customs service. As Her Majesty’s most gracious Speech made clear, we will help British businesses sell their products and services abroad and boost exports.
Achieving our economic objectives depends on co-ordinated action across government, and I am proud that transport is playing a much bigger role today in stimulating growth. Transport used to be among the first departments to suffer whenever Governments of the day had to tighten their fiscal belts. While our competitors invested in major infrastructure projects, here in the UK, transport upgrades often fell victim to short-term political concerns. Because we have failed to invest in the long-term fabric of our nation, we have watched as our roads have grown more congested and our railways more overcrowded. But that is changing. No more is Britain seen as short-termist or infrastructure-averse. Since 2010, we have overhauled transport policy, and today we are delivering the capacity and links that we need to grow as we leave the European Union—connecting British companies with fast-growing global markets, creating the highly skilled jobs we need to modernise transport in this country and making the necessary investments to improve journeys for all working people.
Her Majesty’s most gracious Speech also showed how we are taking full advantage of the unique opportunities that new technologies provide. For example, the automated and electric vehicles Bill will help make Britain a global leader in developing and owning self-driving and electric cars. Self-driving vehicles might sound like science fiction, but they are already science fact and will revolutionise the way we travel. They will make roads safer by cutting the risk of human error and reducing insurance premiums. They will change the lives of disabled people with reduced mobility and reduce congestion by making better use of scarce road space. That is why, through this Bill, we are positioning ourselves as one of the first countries to benefit from the development and growth of self-driving vehicles.
It will also help us retain our leadership in electric vehicles. We are already one of the biggest markets for plug-in cars in Europe. So far this year, sales of pure electric cars are up by 36%, with a total of more than 100,000 ultra-low-emission vehicles now on our roads in this country. That is a ringing endorsement of the Government’s funding commitments of more than £2 billion since 2011 to increase ultra-low-emission vehicle uptake and support greener transport.
Our charging infrastructure is one of the most comprehensive in Europe, with more than 11,000 publicly accessible charging points, now including 900 rapid chargers. As the market evolves, however, this number will need to increase. The new Bill will give drivers confidence that there will be somewhere to charge their cars at motorway service areas and large fuel stations right across the country. Common standards will make them easy to use, and ensure that drivers have a wide choice of charging points. One of the main reasons the sales of electric cars are increasing is that buyers can see the charging infrastructure taking shape around them. This Bill will speed up the development of that network.
There is also a revolution happening on the railway. We are making excellent progress with HS2, Britain’s new high-speed rail network. HS2 will be the backbone of the national rail system, connecting our major cities, transforming capacity across the railway, and freeing up space for new commuter services on existing lines. HS2 is not just a new railway; it is an investment in our economic prosperity for the next half century and more. It will be a powerful catalyst for rebalancing our economy, spreading growth that for far too long has been concentrated in London and the south-east.
The new Bill announced last week will give us the powers to build and operate the next stage of the line from the West Midlands to Crewe. It is a crucial section of the project. Not only will it reduce journey times from London to Manchester and Crewe, it will speed up journeys to places such as Liverpool, Preston and Glasgow. With cross-party support and a programme that remains on time and on budget, construction of phase 1 will begin soon. We expect to deposit the new Bill covering the West Midlands to Crewe route in Parliament by the end of this year.
High-speed rail may be the biggest transport scheme of this generation. However, an even bigger revolution is taking place above us—in space. In the new economic space race, Britain is a strong competitor. The space industry Bill announced by Her Majesty last week has a clear purpose: to make Britain the most attractive place in Europe for commercial spaceflight; to put British business, engineering and science at the forefront of space technology; and to offer our world-leading, small satellite companies low-cost, reliable access to space. It will also generate opportunities for tourism.
While I am sure that most noble Lords would probably prefer two weeks on a cruise ship to floating in sub-orbital weightlessness for half an hour, there is in fact lots of demand for space tourism. The UK space industry is already worth £13.7 billion to our economy, and employs more than 38,000 people. This Bill will help us to achieve our goal to grow our share of the global space market to 10% by 2030. We want to be the first country to establish commercial spaceport operations in Europe. However, we need to move quickly to achieve our objectives. That is why this Bill is so important and we expect its First Reading to take place shortly. It will help provide the legislation required for launches and flights from UK spaceports, giving us new powers to license a wide range of commercial craft, including vertically launched rockets, space planes and satellites. Any site that meets the regulatory requirements will be able to apply to become a spaceport. We have already had strong interest from regions across Britain wanting to benefit from this exciting new market.
Finally, my department will also deliver a Bill to improve protection for holidaymakers. This will update the ATOL scheme so that it can keep pace with changes in the online travel market and UK-established companies can sell more easily across EU borders.
Her Majesty’s most gracious Speech also featured a number of important Bills and measures that the Department for Business, Energy and Industrial Strategy will be taking forward. The nuclear safeguards Bill will enable us to implement a domestic safeguards regime when we leave the EU Euratom treaty. This will allow us to meet our international obligations. We are bringing forward proposals to ensure that critical national infrastructure remains protected, so that foreign infrastructure ownership does not undermine our security or essential services.
We will strike the right balance between protecting national security and remaining a global champion of free trade. The Government also want to ensure fairer markets for consumers, so we will publish a Green Paper that will closely examine markets that are not working in the interests of consumers.
Let me be clear: we are firm believers in the market economy. It is the private sector, operating through a competitive market economy, that has delivered much of the growth that we have seen since 2010, but it is our job to make sure the system is working for the benefit of consumers. In particular, while progress has been made in recent years to improve competition in the energy retail market, it is clear that industry needs to do more. We expect energy suppliers to treat their customers in the same way as other competitive service sectors, so we will act where necessary. This will include bringing forward measures to help tackle unfair practices in the energy market so that energy bills can come down. A smart meters Bill will also help us complete the rollout of smart meters, protecting consumers and leading to £5.7 billion of net benefits to Britain. Smart meters will not just put consumers in control of their energy use, helping them to avoid wasting energy and money, they will end estimated billing and help customers to use smart pre-payment.
As I mentioned, the Queen’s Speech also confirmed the Government’s commitment to increasing the national living wage—specifically, increasing it to 60% of median earnings by 2020, then maintaining it in line with median earnings until the end of this Parliament. The Queen’s Speech also set out the Government’s intention to enhance rights and protections in the modern workplace, informed by Matthew Taylor’s review of modern employment practices.
I turn to the environment and agriculture. Agriculture contributes £8.6 billion to our economy and employs 1.5% of the workforce, so it is important that we support the industry and provide a strong foundation for future growth. The EU’s common agricultural policy, under which we have been operating for the past 44 years, has been an expensive failure. It is a system that provides financial support to millions of farmers across Europe to boost productivity, which accounts for around 40% of the total EU budget at €58 billion a year, and has been widely criticised for creating artificially high food prices throughout the European Union. Leaving the EU presents us with a great opportunity to renew our agriculture policy so that it supports farmers in a targeted and more effective way, while also achieving better value for money for hard-working taxpayers. Our vision is for a productive and competitive UK agriculture sector, supplying products of the highest standard to the domestic market and increasing exports abroad. At the same time, we will improve our environment, so that we can leave a better environment to the next generation than the one we inherited. The agriculture Bill will provide stability and certainty for the farming industry. It will enable the Government to support farmers to produce and sell more great British food, and in a more sustainable way. It will also help us deliver the same cash total fund for farm support until the end of the Parliament.
A fisheries Bill will be introduced to allow us to regain control of the UK’s exclusive economic zone and set UK fishing quotas once we have left the EU. This will provide a basis for us to secure a fairer share of the market, and greater economic benefit from our fish stocks. It will help a new generation of fishermen, as well as preserving and increasing our stocks, and it will support our coastal communities while securing the best possible deal for the UK fishing industry. We will no longer be bound by the common fisheries policy and will become an independent coastal state. But we will, of course, still meet our international obligations and co-operate with other coastal states in the management of our waters.
The gracious Speech sets out a clear direction for the future of Britain: a fairer, more prosperous and self-determining future as we leave the European Union, but also a more global future—one in which we build new relationships and trade agreements around the world, and where the talents and innovation of our own people and businesses can shine. I have set out how our legislative programme will help us meet those ambitions, and now I look forward to hearing contributions from all around your Lordships’ House.
Rail Devolution: London
Lord Forsyth of Drumlean Excerpts(7 years, 11 months ago)
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Lord Ahmad of Wimbledon
I believe that the noble Lord is referring to a separate franchise—that of Southern. I have already spoken on that matter, where we are moving forward in practical terms in trying to address some of the issues. As noble Lords know all too well, the point remains that the structural issues on the Southern network cannot be addressed as long as we see this level of unprecedented and, in my view, unnecessary strikes currently taking place.
Lord Forsyth of Drumlean (Con)
My Lords, does my noble friend not think it extraordinary that, at a time when the travelling public are disrupted by strike action and when union leaders talk about trying to bring down the Government by making people’s journeys at Christmas impossible, all the Opposition can talk about is the administrative arrangements for London transport?
Lord Ahmad of Wimbledon
What my noble friend said will strike a chord with the travelling public. I have said much the same at this Dispatch Box on what we are seeing in terms of strike action. Let us be absolutely clear: my right honourable friend the Secretary of State not only met with one of the unions specifically but also wrote to the unions asking them to come to the arbitration service. The level of meetings that took place was based on that initiative my right honourable friend took. I agree with my noble friend that it is about time that the unions got back to the table and resolved the dispute so that we can challenge the wider infrastructure issues on the network.
Railways: East Coast Rail Franchise
Lord Forsyth of Drumlean Excerpts(10 years ago)
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Baroness Kramer
My Lords, it is certainly true that other countries have chosen to invest and own companies across a wide range of industries. This is a particularly difficult industry in which to do that. Its fixed costs are extremely high. It costs something like £7 million to £10 million to put in a bid, with no assurance of winning. It is certainly a high-risk industry and the margins, as the noble Lord will know, even for an effective and profitable company, are quite fine. It is an entirely valid decision not to enter into actually running companies when there are private options that have delivered very successfully up and down the country.
Lord Forsyth of Drumlean (Con)
Surely my noble friend would recognise that the whole point of competitive tendering is to get the best value and the best deal for the taxpayer. If she is right that the state-owned company would not be able to compete, why is that a reason to exclude it from the process?
Baroness Kramer
Again we can see the complexities of a state-owned company being involved in this. Would we give it preferential financing or would it go out on the market? Let me make this point: do we want to set up a company and pay its senior management very high fees for the possibility that, with bids ranging from £7 million to £10 million apiece, it might eventually achieve a franchise? We have a long history and I have to suggest that the history of companies run over the long term by the UK Government has not been one of outstanding success. We know that we have very successful franchises across the country, so let us take advantage of them to make sure that we get the best opportunities for the many passengers using these services.
Queen’s Speech
Lord Forsyth of Drumlean Excerpts(10 years, 5 months ago)
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Baroness Noakes (Con)
My Lords, four years ago, the Government inherited an economy on its knees. We had emerged from the most severe recession in post-war history. We had a big structural deficit. Government debt was more than 60% of GDP and rising. The previous Government had no plans to deal with this. They left an uncompetitive economy and tax system with a corporation tax rate of 28% and a top personal rate of 50%. It has been a long haul over the past four years to restore the economy to something that resembles health. The job is far from over, but there is a lot to rejoice about. The economy really is growing again—and at the fastest rate in the developed world. Unemployment is falling rapidly and real disposable incomes are starting to rise again. I am sure that the Benches opposite will join me in rejoicing that manufacturing industry, which suffered so much under the previous Government, is now firmly on an upward trajectory. My right honourable friend the Chancellor was wise to reduce the deficit largely through expenditure reductions rather than taxation, and he was wise to ignore the Keynesian sirens calling for more spending and more borrowing.
On the downside, the deficit remains stubbornly high and it is not a cause of celebration that the debt to GDP ratio will peak at nearly 80%. There is still an absolute necessity to continue to bear down on government spending. The Government have played a difficult hand very well, but there are of course some things that they could have done better. Our energy policy is still a mess. We have the self-inflicted wounds of environmental policies that load costs onto British businesses and on to vulnerable consumers. We need some common sense on how much this country is prepared to pay for green luxuries. I endorse everything that my noble friend Lord MacGregor of Pulham Market said about the potential for shale to transform our economy, but dealing with underground access to shale resources in the Infrastructure Bill is but a small part of what the Government need to do to get this moving. Like my noble friend, I look forward to the government response to the report of the House of Lords Economic Affairs Committee on this.
There is also much work still to do on reducing regulatory burdens. There is only so much that we can do in the UK, so we will have to take the fight to Europe—and the sooner we get into serious negotiations over our membership of the EU and its terms the better.
However, my main topic today is taxation. It was wonderful to hear in the gracious Speech that the Government would continue to cut taxes. My right honourable friend the Chancellor has done much good work already. I will single out two things in particular: the path to the lowest rate of corporation tax in the developed world and the reduction in the top rate of income tax. However, the Government get few points for tax simplification. The Office of Tax Simplification was a great idea and has done excellent work, but its recommendations have not all been heeded, and more than 2,000 pages of complex tax legislation will have been added to our tax code by the end of this Parliament.
The Chancellor has shown his capacity for radical thinking with his excellent pension reforms, announced in this year’s Budget. I look forward to the pensions tax Bill delivering those reforms. What the country now needs is a similar reforming mindset applied to the tax system. I draw noble Lords’ attention to a substantial report on a single income tax, produced two years ago by the 2020 Tax Commission, which was sponsored by the TaxPayers’ Alliance and the Institute of Directors. It echoes the conclusions of work done by my noble friend Lord Forsyth of Drumlean’s Tax Reform Commission over eight years ago. The report recommended that most taxes should be abolished and replaced with a new single tax on income. This major simplification would replace the existing income tax, national insurance, corporation tax and various capital taxes including inheritance tax. For good measure, it would get rid of the detested air passenger duty.
The commission recommended a single 30% tax rate on income plus a total restraint on taxes as a percentage of national income of around one-third. The essential argument for a low-tax regime is that high taxes act as a drag on the potential of the economy. The 2020 Tax Commission estimates that its proposals would add over 9% to GDP over 15 years. Importantly, the annual growth rate would permanently be increased by around 0.4%. These potential prizes are too great to ignore.
The Tax Commission’s analysis included dynamic modelling carried out for it by the Centre for Economics and Business Research. This is the key. Many of us were delighted that the Chancellor used dynamic modelling to underpin the reductions in corporation tax last year and the recent cut in fuel duty—so far, so good. What we really need the Treasury to do is move towards using dynamic modelling as a way of life. It is good to use dynamic modelling for specific taxes but the Treasury should be using it to understand how to drive the tax system to support the whole economy. Traditional modelling methods will inevitably produce incremental rather than radical approaches to policy. If the analysis of the 2020 Tax Commission of a single low rate of tax is even half-true, the Treasury simply has to embrace it.
Of course, analysing the impact of a radical tax change is one thing and implementing it is another. It is not easy in an advanced economy such as ours to re-engineer the tax system in a short period of time. There have to be transitions to avoid destabilising the economy and harming individuals. There is the underlying paradox that if you take a long time over transition and overprotect the status quo, you will not see the benefits of higher growth, which is the aim. So there is a case for boldness.
I can see why the Government might shy away from wholesale restructuring, as proposed by the 2020 Tax Commission. It does seem pretty scary. But I do not understand why the Government are not pressing ahead with one key element of the tax commission changes: namely, merging national insurance with income tax. This has a growing body of support. The Office of Tax Simplification proposed it in its review of small business taxation; the Institute for Fiscal Studies supports it; and surveys of businesses show strong support.
Informed commentators know that national insurance is a tax in all but name, but the one thing that has managed to keep it alive is that it is the ultimate stealth tax. Gordon Brown knew that when he raised the extra 1%, allegedly for the NHS—and it seems that Mr Miliband is thinking about trying the same wheeze if he gets a shot at running the country. I find it extraordinary that the Exchequer Secretary has used the Beveridge notion of the contributing principle as the rationale for keeping them separate. Expecting citizens to contribute in return for qualifying for benefits is fine, but you do not need the fiction of a separate national insurance fund to achieve that. The time has come to be honest about national insurance. No one pretends that merging the two systems is a walk in the park. There are many legal and administrative hurdles to overcome. But the prize is great if we want a simpler tax system.
Lord Forsyth of Drumlean (Con)
What would my noble friend do about the problem of pension income, which is not subject to national insurance?
Baroness Noakes
I was about to say that the TaxPayers’ Alliance produced a very thoughtful report, which showed how a transition could be made within five years and could also protect the expectations of pensioners at the same time. There is a way of doing it. All I would say to my noble friend and to noble Lords generally is that it can be done—it just needs a Government with the will to do it.