Passenger Railway Services (Public Ownership) Bill

Lord Hendy of Richmond Hill Excerpts

Report stage
Wednesday 6th November 2024 Lords Chamber

[Lord Moylan (Con)]

My Lords, we have had lengthy discussion on this Bill in Committee, and it is not my intention today to repeat unnecessarily the arguments and the evidence adduced during those debates. The longer that we went on in Committee, the clearer it became that this is a very bad Bill that has been accompanied by a degree of arrogance. I do not say this as a personal comment on the Minister; it is on the part of the Government in general. There has been a tone, sometimes said quite explicitly, of “We won so we can do what we want”. That is an argument. It has some merit, but the merit that you would expect to find in an argument made in a playground.

Another type of arrogance has also been underlying our debates: “We want a better railway, but we are not going to tell you what it will look like. That’s all going to come in the future—don’t ask your pesky questions now. That will all be dealt with, and you have to trust us”. That is not a basis on which the House should be passing this type of legislation. The amendment in the name of the noble Lord, Lord Berkeley, goes some way to address that latter point. We all have a common desire for a better railway, but we will no doubt disagree on the details of how it is to be achieved. My noble friend Lord Grayling said that these are very complex issues. I do not think that anyone would disagree.

Therefore, on the prospect of having the Bill published in draft for pre-legislative scrutiny, I disagree with the noble Baroness, Lady Randerson. I do not think that will add materially to the time taken before legislation is enacted because it is likely to produce a better Bill when it eventually arrives in your Lordships’ House, one that can go through faster and be implemented better with better outcomes. It is the outcomes that we are interested in, not a particular timescale, although like her I will hold the Government to their undertaking that a Bill will come forward within 12 to 18 months.

It is more important to get the outcome right than to worry about a few weeks here or there, which is as much as we would be discussing in relation to the amendment tabled by the noble Lord, Lord Berkeley. I am deeply disappointed that he is not going to press it to a Division as I would be very tempted to support it if he did. However, I expect and hope that the Minister, when he stands up, can satisfy the noble Lord, Lord Berkeley, by saying that there will be some sort of pre-legislative scrutiny of the very large and complex Bill that he is expecting to bring before your Lordships’ House in the next 12 or 18 months, to use his phrase.

The amendment in the name of my noble friend Lord Lansley is very good and commends itself. Like him, I would like to hear what the Minister says in response. I note that my noble friend does not intend to press it to a Division.

Amendment 1, tabled by my noble friend Lord Gascoigne, is indispensable. A number of things are missing from this Bill. A number of important parties have been wholly excluded. One of them, for example, which we will come to later in debate, is the staff. There is no reference to the staff in this Bill. We take for granted that they will be TUPE-ed. That basic legislative cover is there and does not need to be stated. They will not lose their jobs as a result of this but will be TUPE-ed over. However, has any consultation been carried out with the staff? You would expect that normally, would you not? Do they want to change their employer? Do they want to be working for the Government? They may all say yes, but one would have thought that in an undertaking such as this the Government would have bothered to ask them. There has been no consultation with the staff.

The other glaring omission from the Bill is, of course, the passenger. It is a passenger railway services Bill, yet it says nothing at all about the passenger. My noble friend Lord Gascoigne is attempting to put this lacuna right and to put the passenger back at the head of the Bill, as the driving force of what the Government are trying to do and to require Ministers to test their actions under this Bill against the standard of whether it will improve matters for the passenger. That is why, if my noble friend intends to divide the House and seek its opinion on this matter, I recommend that we support him.

[The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)]

I thank the noble Lords, Lord Gascoigne and Lord Moylan, for Amendment 1. I absolutely support the idea that the Government should be clear about what the railway is for and what we want it to achieve. Far too many conversations in this industry are about tracks, signals and trains and how the railway works—or, in many cases, does not work so well. There needs to be much more focus on what the railway is for, but you can do that only if the organisation fundamentally works.

I am clear that when we establish Great British Railways, we should set out a clear statement of purpose, and we will set out a proposal for this statement of purpose in the consultation we will launch ahead of the substantive railways Bill. I am also very clear about the purpose of the Bill and the Government’s wider plans for the railway. Improving the performance of passenger services is clearly a big part of that purpose, but it is not and cannot be the only purpose. The Secretary of State has set out six key objectives against which she expects the railway to deliver. In summary, the railway should be reliable, affordable for passengers and taxpayers, efficient, of suitable quality, accessible and, of course, safe. She and I are reminding senior railway leaders of these objectives very clearly and very often. I expect that to carry more weight than a statement of purpose in a Bill that, if we are honest, might not be read widely by those on the front line of running the railway. Given the range of objectives that the Government wish to meet, I would not support the idea of singling out one objective, even a vital one, and placing it in this Bill.

Turning to the specific wording of the amendment, which is about performance, the easiest way to improve the performance of passenger railway services would be not to run so many of them, and to try to run fewer freight trains. It would be much easier to make trains run on time if the railway were less congested. Of course, I do not advocate that as a solution, but it illustrates the point that trying to reduce the Government’s objectives for the railway to a single purpose might be counter- productive. I hope that my remarks will have reassured the noble Lord that I am entirely on board with his underlying suggestion that the railway needs a clear statement of purpose, but I am not convinced that it needs to be enshrined in primary legislation right now, nor that it should focus exclusively on the performance of passenger services.

The noble Lord, Lord Grayling, asked me to set aside my ministerial hat and opine about the performance of the London Overground and the type of operator that operates it. I shall not set aside the hat, but I will say that one of the differences with the Overground is that it operates within a consistent and easily understood fares structure, which has enabled a significant increase in patronage over the period it has been operating. We must change the railway fares: there are far too many of them and they are deeply confusing. But one of the reasons for public ownership of the main network is to ensure that we have control of the operation and that there is enough information to be able to do that.

I will not trouble to respond to the point about arrogance and the Government acting, according to the noble Lord, Lord Moylan, as if we won the election, because it is rather self-evident that we did. I will remind him that this measure is very popular with the public, and every recent opinion poll suggests that a very large majority wish to see the railway in public ownership. We will return to the matter of the staff, but he acknowledges that the transfer of undertakings regulations will apply, and they do involve some consultation. But if you went to Waterloo station today and asked the staff there whether they want to change their employer, most of them would tell you that they have changed employer so often that some of them cannot remember who their employer is, and do not much care. The most frequent description of railway employment that I get when I speak to railway men and women—

[Lord Moylan (Con)]

Are not the staff of Waterloo station already employed by Network Rail?

[Lord Hendy of Richmond Hill (Lab)]

I was referring to the people who drive and operate the trains. There are more of them on Waterloo station than there are employees of Network Rail.

To finish what I was saying, most people on the railway refer to their employer and their work as “the railway”, which tells you something about the way in which the franchise system has dealt with loyalty to employment.

I thank the noble Lord, Lord Lansley, for Amendment 14 and the discussion we had in the last few days. He is right that Regulation 17 requires the publication of a specified list of information within one year, following the direct award of a contract, where that information has not already been published. However, we expect the majority of the information included in Regulation 17 to have already been published well before one year has expired. That is because Regulation 23, which covers post-award publication, requires a competent authority to publish a similar set of information within two months of contract award. The information which must be published is set out in Schedule 2. Regulation 23 also allows interested parties to request the reasons for a direct award within one month of the post-award publication. I agree that a year would be a very long time to wait before the information is published. However, I do not believe that the noble Lord’s amendment is needed because similar and, in many respects, more detailed publication requirements are already provided for in Regulation 23. I urge him to withdraw the amendment, and I note that he does not intend to press it.

I note that Amendment 16, from my noble friend Lord Berkeley, is somewhat novel constitutionally, as it would constrain parliamentary sovereignty by imposing limitations on when primary legislation relating to the railways could be introduced. I am very happy to confirm to my noble friend, to the noble Baroness, Lady Randerson, and to others who mentioned it that the Government intend to set out their key proposal for the railways Bill in a consultation document that I very much hope will be published before the end of this calendar year. This will give all interested parties, including Members of your Lordships’ House, the chance to review and scrutinise it and to feed in their views before the Bill is introduced later in this parliamentary Session. The Government do not intend to publish a draft of the Bill before it is introduced, as I would expect that to delay progress in implementing the Government’s planned reforms.

It is now more than six years since the previous Government declared that the structure of the railways is

“no longer fit to meet today’s challenges”

and appointed Keith Williams to lead his review. Passengers, freight and everyone on and who uses the railway have waited too far long already to see meaningful change. I have to say that my own experience is that the previous Government went through pre-legislative scrutiny in a desultory manner, and frankly, we all concluded that they did not intend to bring a Bill before either House any time soon.

While the Government are keen to hear the widest possible range of views on their proposals, including the noble Lord’s, I do not on this occasion support the idea of publishing a draft Bill. It also does not seem necessary, given that noble Lords can submit their views during the consultation I have committed to and will be able to debate the Bill once it is before the House. I am of course happy to meet with my noble friend Lord Berkeley and other noble Lords at the time of the consultation launch to seek their views, as we have done during the course of the Bill before us, if that would help persuade him to withdraw his amendment.

[Lord Gascoigne (Con)]

My Lords, I am grateful to the Minister for his response, to all those who spoke in this relatively short debate, and to those who supported my Amendment 1. I am pleased to see that the Government Chief Whip is on the Front Bench, and I am conscious that many people have sat through days of Committee and we are about to head into recess, so I will not detain noble Lords for long.

As I said in Committee and earlier, I want to make the case for why this amendment is not against the spirit of the Bill. It does not stop it, and I want to ensure that everyone knows that these changes are not being done through ideology and that they are focused on the passengers. Effectively, it forces the department, Ministers, civil servants and everyone to deliver this mission and this mission alone. Otherwise, we will enter into what President Ronald Reagan called “trust me” government.

Without boring on for too long, and to repeat the point I made, Labour has used this language repeatedly, in opposition and in government, so I am still not sure why the amendment cannot be included, especially given that the Minister, who I respect greatly, warmed to the sentiment behind it and understands it. As I said, we risk entering into the world of having to trust the Government that that is the intention. Despite those words of reassurance, the Bill still needs something on the face of it—Ronseal, like I said. With that, I would like to test the opinion of the House.

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[Lord Hendy of Richmond Hill (Lab)]

I thank the noble Lord, Lord Moylan, and the noble Baronesses, Lady Randerson and Lady Scott of Needham Market, for their amendments in this group—Amendment 2 and Amendment 10 respectively. The amendments seek to test the Government’s approach of transferring services as existing contracts expire. I also thank my noble friend Lord Liddle for saying that the intention is to get rid of franchises and for explaining why. He is right. I should also say that I and the Government do not believe that we should either pay compensation for termination or keep paying fees to owning groups of train operating companies when we do not need to.

I am happy to begin with a reassurance about the Government’s position. We will not hesitate to take decisive action if Avanti, CrossCountry or any other operator’s poor performance means that the contractual conditions that allow for early termination are met. The contracts we have inherited from the previous Government make it far too hard to get rid of an underperforming operator, but if we have the opportunity to put passengers out of their misery by ending a failing operator’s contract early and bringing their services into public ownership, we will do just that. In those circumstances, we will not wait for those contracts to expire.

The noble Baroness, Lady Randerson, and the noble Lord, Lord Young, asked whether the public sector operator will have the capacity to take in services from a failing operator whose contract has been terminated early, at the same time as other planned transfers. I reassure them that current contracts allow sufficient flexibility to accommodate this. All but two of the current contracts with private operators give the Secretary of State significant discretion to select an expiry date within a range of possible dates specified in each contract. The Secretary of State simply has to give the outgoing operator a minimum of 12 weeks’ notice of expiry. This means that if a contract can be terminated early for poor performance—be it by Avanti, CrossCountry or any other operator—the Secretary of State will be able to adjust the planned expiry dates of other contracts if necessary to ensure that the failing operator’s services can be transferred as quickly as possible without overwhelming the public sector operator. Of course, we also need a programme of return that is reassuringly steady for the good management of the operations as they come back into public ownership. I hope those observations will be sufficient to persuade the noble Baronesses not to press their Amendment 10.

In response to the noble Lord, Lord Moylan, my previous comments address the first part of his Amendment 2. The Government will not hesitate to exercise its contractual rights if an operator’s poor performance means that the conditions for early termination are met. The Secretary of State, my noble friend Lady Blake of Leeds and I have all made the Government’s position on the matter very clear and on the record. There is no need for a statutory obligation to cover this point.

The noble Lord knows very well that I cannot accept the remainder of his amendment because it would substantially delay the programme of transfers to public sector operation. As the noble Baroness, Lady Randerson, said, thanks to decisions taken by the previous Government, the two most poorly performing operators currently have the longest contracts, with terms that make it very difficult to terminate them early for poor performance. I cannot say quite what the cost is, but I will write to my noble friend Lord Snape to tell him the rough quantum. In fact, the amendment from the noble Lord, Lord Moylan, would mean it would be impossible for the Secretary of State to exercise any contractual break clause, as defined in his amendment, until after the worst-performing operator’s contract had ended. That could be as late as October 2027, so it is difficult to see this as anything other than a wrecking amendment. I hope the noble Lord will prove me wrong by withdrawing it.

[Lord Young of Cookham (Con)]

Before the Minister sits down, can he just clarify something that he said? Is it the case that under new Section 30A inserted by Clause 2(3) he has the flexibility already to renew two of the franchises mentioned by the noble Lord, Lord Snape, by using that particular paragraph in the Bill—namely, that he

“is satisfied that it will not be reasonably practicable to provide”

the services in any other way?

[Lord Hendy of Richmond Hill (Lab)]

Is that the two worst-performing franchises or two others?

[Lord Young of Cookham (Con)]

Any franchises. Can he use that section to renew the satisfactory franchises, because it would “not be reasonably practicable” to do so otherwise, and take them in-house?

[Lord Hendy of Richmond Hill (Lab)]

I thank the noble Lord, Lord Young, for his intervention. I think he is right, but he will forgive me if I consider it further and write to him.

[Lord Moylan (Con)]

My Lords, with the leave of your Lordships’ House, I may speak for slightly longer than would be normal because I would like to address a comment made by the noble Baroness, Lady Randerson, about my Amendment 2. She said that it was the same as Amendment 1 tabled by the Liberal Democrats in Committee. In fact, that is only superficially the case. While proposed new Sections 25B(1) and (4) are the same as in the amendment tabled in Committee— I think, by the noble Baroness, Lady Scott of Needham Market—the meat in the sandwich, so to speak, has changed. There would be no additional cost in early termination fees as a result of this amendment as drafted because the franchises would be terminated not as they fell in but in order of worst first, even though that might take a little longer.

I listened very carefully to what the Minister said. Although the Minister found it helpful, the intervention from the noble Lord, Lord Liddle, was, to this side of the House, slightly infuriating. Throughout the debate in Committee there was a constant jumping between asking us to please focus on this narrow, technical Bill to then, when we wanted to talk about the narrow, technical Bill, being told that we should be talking about the great, big, wonderful Bill that will be coming in 18 months, because that is really what this is all about. But we cannot talk about that Bill because we have not seen it—indeed, we are not even going to get to see it in pre-legislative form. So although the Minister found it helpful, it illustrated the constant problem we have had in dealing with the Government on this measure.

For that reason, I am afraid I am not sufficiently satisfied with the Minister’s comments in respect of my Amendment 2 and I would like to test the opinion of the House.

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[Baroness Randerson (LD)]

My Lords, these three amendments deal with crucial aspects of the running of the railways and they are issues that we on these Benches probed in Committee. I certainly anticipate that, when we get the full Bill next year, there will be long and vigorous debate and discussion about them and I have serious reservations about the possible plans. However, we on these Benches accept that, however concerned we are about freight or open access or competition, the Government have chosen to write a very tightly drafted Bill and to separate ownership from operational organisation in that Bill and it is not appropriate to try to write, in a rather haphazard way, the big, final Bill on Report in this House at this time.

[Lord Hendy of Richmond Hill (Lab)]

I thank noble Lords for their amendments in this group. In response to Amendment 3, from the noble Lord, Lord Lansley—and I thank him for our discussion a few days ago— I will highlight two important ways in which this Bill promotes competition.

First, there will continue to be huge opportunities for competition between businesses in the supply chain which publicly owned operators and Network Rail will continue to depend on. I was speaking this morning at the Railway Industry Association’s conference and it welcomed clarity about the Government’s intentions with enthusiasm, because it knows as well as we do that the railway, after six years of being promised reform, needs to understand what reform might look like in order for its businesses to prosper. Public ownership and our plans for GBR to provide long-term strategic direction for the whole railway will give greater clarity and certainty to businesses in the supply chain and so will support healthy competition.

Secondly, in relation to competition between train operators, the Bill preserves the existing arrangements for open-access operators. Open-access services are the only source of meaningful competition between operators on today’s railway, and this Bill makes no changes to the way in which open-access applications are treated by either Network Rail or the independent regulator, the Office of Rail and Road.

Having set out how the Government’s approach is consistent with a duty to promote competition, I also note for completeness, referring to the propositions of the noble Lord, Lord Lansley, that the Section 4 duty applies to the Secretary of State only when she is exercising certain functions under the 1993 Act. It does not apply to the exercise of her functions under Sections 23 to 31, which are the franchising functions that are amended by the Bill. As such, there can be no question of this Bill impairing the Secretary of State’s ability to comply with the Section 4 competition duty.

Turning to Amendment 17, tabled by the noble Lord, Lord Moylan, open-access operators are a valuable part of the system and will remain so following this short Bill. Looking ahead to the wider railways Bill, we see a continuing role for open-access services where they add value and capacity to the network. I will say more in a moment about how their interests will be protected. In the meantime, I reiterate that the current short Bill has no impact on open-access operators, the services they provide or the process by which they can secure rights to operate on the rail network. For this reason, the report required by this amendment would serve absolutely no purpose; the Bill plainly has no impact.

Requiring this report—not just once but every single year in perpetuity—would simply place an additional reporting burden on Network Rail and the Office of Rail and Road, and potentially also on open-access operators themselves if they were each required to provide information about their services to inform each report.

Finally in this group, Amendment 13 deals with freight. My noble friend Lord Berkeley is a staunch advocate of the rail freight sector and I hope that I can reassure him and the noble Lord, Lord Moylan, about the Government’s intentions. The Government hugely value the rail freight sector and recognise the importance of its contribution in reducing congestion on our roads and in helping our transport system move towards net zero.

I entirely agree that the Government’s plans for reform under the railways Bill must ensure that Great British Railways promotes growth in the freight sector and must provide suitable protections for freight operators. We will set out our detailed plans in the consultation I have already referred to as soon as we are able to.

In the meantime, I am very happy to reassure noble Lords on three fronts. First, our proposals for the railways Bill will include a statutory duty on Great British Railways. I have reflected carefully on the remarks of the noble Baroness, Lady Randerson, in Committee, and the remarks just made by my noble friend Lord Snape, and as a result I now confirm that this duty will be not merely to enable the growth of rail freight but to promote it. My noble friend Lord Snape referred to variable access charges. I very much agree that we would seek more of that in the future to encourage more freight traffic.

Secondly, the Secretary of State will set a specific freight growth target for Great British Railways. I cannot confirm today the specific detail of what that target will be, but we will set out our plans for that in due course.

Thirdly, I thank my noble friend Lord Berkeley in particular for his comments on the importance of a fair system for the allocation of access. As discussed with my noble friend last week, I have confirmed today that there will be consultation on the Government’s reform proposals, and that the consultation will set out the proposed role for the Office of Rail and Road in the access decision-making process. Any changes will then be set out in the railways Bill itself, so noble Lords will have ample chance to debate these matters before changes are implemented.

I also reassure noble Lords that our proposals for allocating capacity and granting access to the network will include safeguards to ensure that both freight and open-access operators continue to be treated fairly. As I have already said, I would be delighted to meet with my noble friend and other noble Lords with an interest once the consultation has been published, so that we can discuss the details and continue the very helpful conversations we have started here.

Turning to the specifics of the noble Lords’ Amendment 13, the statement required by this amendment would be very short and sweet. There is no need to wait six months after Royal Assent for me to provide this statement; I can give it to the noble Lords now. The Bill is narrow in scope. Its purpose is simply to allow the Government to transfer the operation of franchised passenger services to the public sector. It does not make any changes to the arrangements under which freight services operate. This means that the Bill will not, and cannot, have any adverse impacts on the freight sector or on freight growth.

I have clarified the impacts of the Bill on competition, open access and freight, I have confirmed that we will soon publish a consultation document setting out our proposals for the railways Bill, and I have reaffirmed that these proposals will consider appropriate protections for freight and open-access operators. In light of what I have said, I hope that noble Lords will agree that there is no need to pursue their amendments further today.

[Lord Lansley (Con)]

My Lords, I am very grateful to all noble Lords who have taken part in this short debate. It has raised a number of important issues, and I am grateful to the Minister for the clarity that he brought to the subject—partly from my own point of view, in understanding how the legislative provisions work, which is always helpful. I have to confess that I know much less about railways than the noble Lord, but I try to find out how legislation works, since that is part of our job, and what he said was very helpful.

What he had to say about there being no changes to the legislative provisions and the arrangements in relation to open access was important and I will come back to that in a minute.

I do not think there is any merit in pressing the amendment now, because when we come to look at the role of Great British Railways in the major Bill to follow, we will look at issues such as the one my noble friend raised—the relationship between Great British Railways and the control of train paths. That is exactly the problem that occurred in France, and I think my noble friend Lord Moylan also discussed the abuse of a dominant position. We will need to look at how that kind of scrutiny and competition can be sustained, notwithstanding the monopoly aspects of Great British Railways. However, in light of all those helpful points, I beg leave to withdraw Amendment 3.

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[Lord Liddle (Lab)]

My Lords, I will speak briefly, as the noble Baroness, Lady Randerson, mentioned what I said in Committee.

It is right to raise these questions here, but they are questions for the future and for the big Bill that we will get next year. Personally, I do not want to see the re-creation of British Rail. My dad used to work for it, and to my mind it did not have great success as a monopoly nationalised industry. Therefore, it is right that, in the debate about the Bill setting up GBR when it comes around, we should explore the models of ownership that might work on these concessions. I would not rule out co-operative models, or heritage railways, running part of the national network.

My main concern is that we do not get stuck on the idea that this has to be a public sector monopoly. After all, the main thrust of Labour policy, the manifesto on which we won the election and the Budget put forward by Rachel Reeves is that we should use public investment to generate private investment, which will multiply the effects on economic growth. I do not see why the railways should somehow be different from that general principle. I discussed this with the Minister, and he explained how one thing being looked at is using the private development of Network Rail-owned land to improve investment in services. That strikes me as a very good idea and something that we should look at. Noble Lords are right to raise this question, but I hope we are going to have an open-minded debate about it in the coming year.

[Lord Hendy of Richmond Hill (Lab)]

I thank the noble Lords, Lord Lansley and Lord Moylan, for their amendments in this group. I will speak first to Amendment 4. Following enactment of the Bill, there would be just two routes by which the Secretary of State could secure the operation of passenger services. The first option, and this is the option we plan to use, would be to make a direct award to a public sector company under the amended Section 30 of the Railways Act 1993 and in accordance with the Public Service Obligations in Transport Regulations 2023.

The second option, which is a very limited option, would be to use the power to continue an existing private sector franchise temporarily under new Section 30A. This power is deliberately limited only to circumstances where the Secretary of State is satisfied that a transfer to a public sector company is not reasonably practicable. This means the Government would expect to use it only as a last resort, for a short period, to avoid a transfer causing disruption to passengers or staff. Apart from this very limited power in new Section 30A, the Bill leaves no other route by which the Secretary of State could contract with a private sector operator to run either existing services or new ones. This is entirely consistent with the Government’s very clear policy in favour of public ownership of services that form part of the national railway network.

On the point from the noble Lord, Lord Lansley, about DfT OLR Holdings Ltd, I confirm that award to it is securing the provision. All services currently designated under Section 27 will be provided under Section 30 by a public sector operator as existing contracts expire. The noble Lord also asked about the Secretary of State’s power to secure the provision of new services through a public sector company if those services had never been provided under a franchise agreement. Regulation 21 of the Public Service Obligations in Transport Regulations 2023 allows the Secretary of State to vary the terms of a public service contract to include additional services, and so would provide the necessary statutory basis for her to secure the provision of new services from a public sector operator.

The noble Lord asked whether the Bill will leave an option for the Secretary of State to procure East West Rail services from a new private sector operator, and the simple answer is that it will not. The Government have no plans for long-term private sector operation of the new East West Rail services, which will commence operation next year, nor any other services that the Secretary of State is responsible for procuring.

There are—and, after this Bill, there will remain—two ways in which other parties might operate or secure the provision of services on the rail network. One possibility is that a third party might operate them as an open access operator, as is the case with Hull Trains, for example. Another possibility is that a mayoral or combined authority or other local authority might secure the operation of services either by running them itself or by procuring a third party to do so. As I will explain in relation to the next group of amendments, the Secretary of State can facilitate this by granting an exemption under Section 24 of the 1993 Act, which takes the relevant services out of the scope of the surrounding provisions of that Act.

I noted with interest that my noble friend Lord Liddle remarked about involvement of developers, for example. I echo his sentiment that there will be ways of getting private capital in, particularly through development, that have not really been explored so far.

I hope that my explanation reassures the noble Lord, Lord Lansley, that the Government have carefully considered the implications of the Bill and the options it will and will not leave open, and I hope he will feel able to withdraw this amendment.

Amendments 5 and 6 from the noble Lord, Lord Moylan, deal with competed concession contracts. As I set out to the noble Lord in Committee, these amendments would remove the opportunity to deliver the benefits of public ownership, which a clear majority of the public support and which was a specific commitment in the manifesto on which this Government were elected. For the following reasons, I cannot agree to the amendments.

First, a concession model would mean the taxpayer continuing to fund substantial profits for private sector operators. A concession model along the lines of Transport for London’s contracts would expose operators to more financial risk than today’s contracts, where government bears virtually all the financial risk. Under such a model, train operators would price their bids to generate even more profit than the £110 million to £150 million per annum that they can earn under the current contracts. Our plans for public ownership will eliminate those fees and profits entirely—in the Government’s view, continuing to line the pockets of private shareholders is not a good use of taxpayers’ money.

Secondly, TfL concessions are a relatively inflexible form of contract which is not well suited to the needs of the national railway network. For a concession contract, the procuring authority has to define the service levels and standards at the start of the procurement process, and those levels and standards then endure for the life- time of the contract. Changes to the service specification can be achieved only through costly negotiation and agreement with the operator which already holds the contract.

That is very different from the London bus market, for example, which we discussed in Committee, where the concession model is much more suitable because there is a large number of small individual contracts. For the London Overground, much of which is heavily constrained by the geography of the railway network and the other services that run on it, it might be satisfactory, but the whole of the national railway network requires greater flexibility to adapt to changing patterns of demand. Finally, and most importantly, a concession model would not resolve the fragmentation of the current system, nor would it deliver on the Government’s commitment that rail services should be run by and for the public.

The noble Baroness, Lady Randerson, referred to devolved Administrations and local mayoral authorities. We will come to devolution further in the next amendments.

I urge noble Lords not to press their amendments.

[Lord Lansley (Con)]

My Lords, I am very grateful to all noble Lords who participated in this shortish debate, particularly to the Minister for the additional clarity sought by my Amendment 4.

My noble friend raised the issue of concessions, which I suspect we will come back to. It is one of those occasions where one looks at the interesting examples of what is happening in the French railway system, which is using concessions to a greater extent and is perhaps not encountering the objections that the Minister cited in relation to TfL’s concessions. That is a comparison that I am not qualified to make, but I know my noble friend on the Front Bench might pursue it.

I thoroughly agree with the point made by the noble Baroness, Lady Randerson, about the desirability of maintaining devolution models or perhaps extending them. The use of the exemptions under Section 24 should be considered. The Minister said that, in addition to the two routes the Secretary of State might use for securing the provision of services, that is the additional route, as it were, alongside open access, which we discussed in the previous group.

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[Lord Hendy of Richmond Hill (Lab)]

My Lords, I would like to clarify a point for the noble Lord, Lord Moylan, on Amendment 13. If I inadvertently implied that the Government would somehow reduce the present freight target of 75% growth by 2050, I did not mean to. We intend that target to remain.

I will speak first to Amendment 7, proposed by the noble Baronesses, Lady Pidgeon and Lady Randerson, and I recognise the passion with which the noble Baroness, Lady Pidgeon, spoke on this. In responding to this group of amendments, let me start by saying very clearly that this Government are absolutely committed to strengthening the role of local leaders and local communities in shaping the provision of rail services in their areas. We are a pro-devolution Government. A stronger local voice is absolutely essential if the railway is to play its full part in this Government’s missions of kick-starting economic growth, breaking down barriers to opportunity and accelerating towards net zero. Our plans for reform in the substantive railways Bill will provide that stronger local voice. I can reaffirm to your Lordships’ House that the railways Bill will include a statutory role for devolved governments and mayoral combined authorities. They will be involved in governing, managing, planning and developing the railways.

Linked to this, we expect GBR to closely collaborate with areas through partnership agreements, which will build on progress made through existing arrangements the department has with the West Midlands Rail Executive and Transport for the North. We are already working with leaders in areas such as Greater Manchester, the West Midlands, the north-east and Liverpool City Region to discuss how these relationships could work, with governance supporting these discussions established. While final agreement of these partnerships will need to wait until GBR is formally established, the Government are committed to working with mayors to explore opportunities for progress ahead of GBR operation.

We are clear that together the statutory role and partnerships must allow genuine and meaningful opportunity to influence service levels and standards, and to drive forward the integration of local rail services with other modes as part of a genuinely joined-up local transport offer to passengers. It must allow for things like common branding, integrated timetabling, integration of fares and ticketing in the manner that Londoners, and people who live and work in London, completely understand. By getting this right in the wider railways Bill, we can offer local leaders the much greater level of influence that they are seeking. Existing options for local authorities to directly procure or operate their own services will remain in place, subject to the Secretary of State’s approval, as is currently the case. Alongside our proposed statutory role, our plans for the design of Great British Railways will make it easier for local leaders to engage with and influence what happens on the railway. I am so pleased that the noble Baroness, Lady Randerson, raised her dislike of a one-size-fits-all approach, and I agree with her.

First, I expect GBR will adopt a route and regional structure, with—importantly—a single leader responsible for train operations, rolling stock, staff and infrastructure within a given geographical area. This is material to the reason for public ownership and will create revenue growth and efficiencies and improve performance. A regional and route approach will ensure that GBR is close enough to local communities to understand and respond to their needs, while also being clear that they are part of a national system that needs to work coherently as a whole. It will also mean that local leaders will need to engage with just one organisation—GBR—rather than an infrastructure owner and, potentially, several different train operators.

Secondly, where local leaders wish to promote service improvements, having track and train under unified leadership will mean GBR can take a whole-system approach to identify the most cost-effective solutions. In the past, Network Rail has been much too quick—because it is an infrastructure provider—to opt for the most expensive solution, which is infrastructure change. A whole-system approach would begin by asking whether a service enhancement can be delivered with additional staff, while making better use of the existing train fleet on the existing railway infrastructure. If the answer is no, the next question should be whether the improvement can be delivered solely through changes to the rolling stock fleet. If, and only if, the answer to that question is also no, it might then be sensible to look at infrastructure change, which is usually the most expensive option and certainly takes the longest time.

The crucial point is that one organisation, GBR, on a route or regional basis, will be able to take a view across all those options with local leaders. I would encourage local leaders who think they might want to take over responsibility for operating or procuring services in their areas to keep an open mind until they have seen our full proposals for wider reform. I also reassure noble Lords that, where local leaders conclude that they wish to take over that responsibility, the current Bill does not stand in the way.

Existing legislation in Section 24 of the Railways Act 1993 allows local authorities and others to apply to the Secretary of State for specific services to be exempted from the franchising regime. Where the Secretary of State grants such an exemption, the exempted services are no longer caught in the surrounding provisions of the 1993 Act. So long as adequate alternatives are being made available, this means that the Secretary of State is no longer obliged to secure the operation of these services and they are not subject to the restriction that says they can be provided only by means of a public sector company. The relevant local authority can then operate or procure the services to its own specification, using its existing powers under other legislation, which, in the case of Transport for London, are conferred by Section 173 of the Greater London Authority Act 1999.

This is the mechanism by which services have been devolved in London and in the Liverpool City Region. The current Bill does not make any changes to the way this mechanism works. Following enactment of this Bill, the railways legislation will still provide the same opportunity as today for the Secretary of State to devolve services where she considers it appropriate and where it supports a well-functioning national service, and if we receive any such requests for the devolution of services, we will consider them openly, fairly and carefully, taking proper account of local, regional and national interests. I hope this reassures the noble Baronesses.

On Amendment 12, from the noble Lord, Lord Moylan, I thank the noble Lord for this amendment, which would require the Secretary of State to publish a report on the proposed communications framework between Great British Railways and local transport authorities across the UK. I can reassure the noble Lord that communicating effectively with local authorities is of critical importance to the Government. I have already explained that the Government are keen to ensure that local communities can influence the design and delivery of passenger rail services in their areas. We expect that GBR will engage with local transport authorities regularly on this and on key strategic matters, such as housing and economic growth.

I have also already mentioned the proposed statutory role, which will enable partnership agreements between mayoral combined authorities and GBR. The Government are already engaging with mayoral authorities to develop a framework for these partnership agreements and the intention is that the framework will enable varying degrees of influence, depending on the ambitions and institutional capability of partners. This will include close collaboration on the delivery of rail elements of local transport plans and greater opportunities for local partners to directly invest in the railway and to influence service provision.

Due to devolved infrastructure funding arrangements, my department currently has a memorandum of understanding with the Scottish Government which outlines interactions regarding the governance of Network Rail. The devolved operator, ScotRail, also has an alliance agreement with Network Rail which sees both organisations working closely together to better integrate the railway. For devolved services in Wales, there are a number of supporting devolution agreements between the department and the Welsh Government which set out the existing relationship. Under GBR, these devolved accountabilities will remain in place. We will therefore work with the devolved Governments to update existing arrangements and ensure that the benefits of establishing GBR are felt across Great Britain.

In conclusion, the report proposed by Amendment 12 is not necessary, given that the Government will be setting out their plans in a consultation which will be published shortly. This will provide not only detail on our proposals but also the opportunity for local authorities, mayoral combined authorities and noble Lords to input their views on these proposals. I hope my explanations in response to these amendments will be sufficient to persuade noble Lords not to press their amendments.

[Baroness Pidgeon (LD)]

One thing that has united this House in our discussions is support for further devolution and acknowledgment of the success of devolved lines in London and elsewhere in the country. I thank the Minister for his detailed response and serious consideration of the points we raised in Committee. I was really pleased to hear the words, “This is a pro-devolution Government”, because we have not heard that in the debates to date. I was also pleased to hear that the Minister will ensure that in the next legislation, the role of local authorities will be strengthened, and that he will include that statutory role to ensure their involvement in the governance, management and provision of rail services.

Transport for Greater Manchester, which my noble friend Lady Randerson met with recently, will be reassured to hear that, ahead of Great British Railways being established and on the statute book, there are opportunities for it to develop its ambitious plans for the Bee Network. What was said today about branding and being consistent in these metro areas was really reassuring, given that we want to drive a modal shift and get more people using public transport.

I was really pleased to hear the Minister say that the Secretary of State will still be allowed to exempt lines—that if local leaders want to take over a line, their request will be seriously considered and an exemption granted where appropriate to allow lines to be run across the country, as we have seen in London and Liverpool. On the basis of what the Minister has said, I beg leave to withdraw Amendment 7.

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[Lord Moylan (Con)]

My Lords, I rise with some humility to make a few comments on Amendment 8, which, of course, is one where the noble Baronesses, Lady Brinton and Lady Grey-Thompson, bring an experience that cannot be gainsaid in your Lordships’ House. I said in Committee that I fully acknowledge—from my own personal knowledge—that the Minister is personally committed to seeing improvements in regard to accessibility. I know that it is a matter of importance to him, but none the less, fine words and parsnips come to mind. Action is needed and we need to see real progress. If Great British Railways offers something in that regard that has not been offered before, that would be greatly to its credit.

In relation to Amendment 11, from the noble Baroness, Lady Randerson, this is another example of what the Government could be doing now. It is already the Government’s policy to have a passenger standards authority; they have set that out in the document Getting Britain Moving. Like so many other things, it is wrapped up in a Bill that we are told we might see in 12 or 18 months. I have expressed in Committee a degree of doubt and scepticism as to whether the Government will meet that target. I hope they will, but these are very complex issues, and it could take even longer than that before we see the Bill. Then, of course, it has to be passed and enacted, and then, as I keep pointing out, it has to be implemented. Change on that scale does not happen overnight; it will take several years for it to be implemented. Where in that timeframe is the passenger standards authority going to stand? Will we see it coming to life at the beginning of the process or at the end? Could it be four or five years away before it comes into existence? We have no idea.

The amendment from the noble Baroness, Lady Randerson, would at least say, “This is one thing you can get started on now. You can get it up and running very quickly and it could be something that passengers could benefit from at a really early stage”. I really do not understand why the Government cannot accept, if it turns out that is the case, what the noble Baroness is proposing.

I have no comment on Amendment 15 in the name of the Government except to say that it is, of course, entirely unobjectionable from our point of view.

[Lord Hendy of Richmond Hill (Lab)]

My Lords, I will speak first to Amendment 8, which was tabled by the noble Baroness, Lady Brinton, and is supported by the noble Baroness, Lady Grey-Thompson, the noble Lord, Lord Holmes, and my noble friend Lord Blunkett, and to Amendment 15 which is tabled in my name. I thank the noble Baronesses for their amendment and for the productive discussion we had last week. As I said in Committee, I feel personally ashamed of the industry that I am so familiar with as so many deficiencies come out of the way that it treats passengers, particularly those in need of some assistance. Many of those deficiencies are a result of the fragmented structure of the privatised railway.

The noble Baroness, Lady Grey-Thompson, has shown me and described to me the plethora of apps that you need to buy tickets, the differences in how they work, what they do and whether they enable you to book a seat, a wheelchair space or a ticket for the whole of your journey. I am shocked by it, and I cannot bear for her to show me much more, because all she would do is show me more apps that work differently from those that she has already shown me. We cannot and should not tolerate that. The lack of consistency in train design has been highlighted today, as has the lack of reliable, accurate information about whether crucial facilities such as lifts and accessible toilets are working, and there are other issues.

Looking ahead to the wider railways Bill, establishing Great British Railways will provide the opportunity, for the first time in three decades, to begin to take a coherent approach to these matters. Some of them can be done quickly, some of them we can start now and some of them will, by virtue of the longevity of rolling stock and structures, take a long time, but if we do not start, we will never achieve them. However, I also agree that the noble Baronesses and the many disabled passengers on whose behalf they speak should not have to wait for Great British Railways to come along before we start to improve things, so, as I discussed with the noble Baronesses last week, the Government have tabled an amendment and we also have a number of verbal commitments that I shall place on record in the House today.

First, the Government will work with the disabled community to develop and publish an accessibility road map that will explain the actions we intend to take to improve things for disabled people or others requiring assistance in advance of GBR being set up. We are not waiting for it to do that. The road map will suggest how the Government can work with the industry to prevent situations like those we have heard about in this House so far. As discussed, it will cover important matters that the noble Baronesses have raised with me. They include measuring and reporting on lift reliability and maintenance, providing confirmation and clarity about the legal obligation of operators to provide every disabled person with assistance when travelling whether or not a pre-booking has been made, and improving consistency in the service provided to disabled people across the board. We will engage with the disabled community on the development of the road map to ensure that when it is finished, it works for them.

Secondly, I commit before the House that this Government will provide the funding to develop phase 5 of the passenger assist app. As the noble Baroness, Lady Grey-Thompson, knows from our previous discussions, I have made it clear and will continue to make it clear to those involved that the development of this next phase of the programme must be done in consultation with the noble Baronesses and representatives of disabled people to ensure that it delivers the assistance that people deserve and addresses their needs.

Finally, we have tabled Amendment 15, which is before the House today. It amends the Equality Act 2010 to make it clear that publicly owned train companies are subject to the public sector equality duty. Although it is the Government’s view that the public sector equality duty already applies to publicly owned train operating companies, we are concerned that that is currently not as clear as it needs to be. By adding them to the list of public authorities in the Act, we will ensure that there can be no mistake. Network Rail and Transport for London are already named in the Act, but train operating companies previously were not, which is something that, if this amendment is agreed, we will remedy.

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[Lord Hendy of Richmond Hill (Lab)]

I thank the noble Lord, Lord Young, for tabling Amendment 9 and for our productive meeting the other day. I recognise that there is a question of whether public ownership will lead to certain liabilities moving on to the public sector balance sheet and therefore counting towards the public sector net debt. I cannot speculate about future balance sheet treatments and impacts as those will always depend on classification decisions that are a matter for the independent Office for National Statistics.

What I can say is that four train companies are already owned by DOHL, including LNER for six years and Northern for four, and the position has not changed so far. The Office for National Statistics recently considered the classification of TransPennine and concluded that it should remain classified as a public non-financial corporation. The mixed economy that we already have is relevant to the question asked by the noble Baroness, Lady Randerson, about the categorisation of a mixed economy. We are going to be there over the next several years as the train operations come back one by one.

It has been suggested in debate that, if liabilities move on to the public sector balance sheet, that would affect public sector net debt and unduly constrain future investment. The noble Lord, Lord Young, referred to events at Network Rail after it was reclassified, many of which I witnessed when I went there in 2015. In fact, a large number of the things that happened were really good. The organisation was not on the public balance sheet. It had spent an enormous amount of money: when I turned up in July 2015, it had debt of £54 billion, roughly equivalent to the whole of New Zealand’s national debt. With the last chief executive and the present one, we have put it into great order and reduced its expenditure. It has reduced capital expenditure too, which I think was also wise. The list of enhancements that it was proposing to carry out were beyond its capability then, and beyond the funding of even the unlimited amounts of debt that it could call on.

Nevertheless, the existing publicly owned train operators are the driving force behind the current multibillion-pound pipeline of new rolling stock orders. Network Rail is still investing in the railway infrastructure, and it shows that public ownership need not be a barrier to investment.

Looking more broadly across the public services, noble Lords may have seen that, alongside the Budget, the Chancellor announced changes to the fiscal rules to measure government debt in a way that recognises the need to better support capital investment. This Government recognise the pressing need to rebuild our economy and invest in our public services after years of underinvestment.

It might be helpful to provide the noble Lord, Lord Young, with some specific reassurance, and I can reassure him that we are not seeking to close the door on private investment. Where there are genuine opportunities for private investment—which, for example, might well be, and in the future should be, in relation to property development around stations or car park investment—we would expect Great British Railways to work with relevant local authorities and the private sector to promote these opportunities. I reassure the noble Lord that securing appropriate private investment will be an absolute priority for this Government. I hope that provides him with enough reassurance to withdraw the amendment.

Next, I will address Amendments 18 and 19 in turn. I thank the noble Lord, Lord Moylan, for these amendments. Amendment 18 would require the Secretary of State to lay a Statement before Parliament within three months of the Bill’s enactment. The Statement would need to set out the Government’s intentions concerning the terms, conditions and pay rates of staff of existing train operating companies as they transfer to become employees of public sector companies.

At that stage, it would be a very simple Statement. The Government fully expect that the TUPE regulations will apply, preserving employees’ existing contractual terms and conditions as they transfer from private operators to subsidiaries of directly operated holdings, in the same way as they have done in previous transfers. I can also confirm that the Secretary of State’s contracts with public sector companies would ensure that staff could continue to be members of the railways pension scheme. That being the case, there is no need for a further Statement of the kind mandated by the amendment.

The noble Lord asked what the Government intend should happen to pay, terms and conditions in the period after employees have transferred to a public sector operator. Although this is beyond the scope of the amendment the noble Lord has tabled, I am happy to address the question by saying three things.

First, public ownership under this Bill does not give rise to any imperative to harmonise or otherwise amend staff terms and conditions. Decisions about any such changes are for the future. In contrast to the previous Government’s approach, we would expect to discuss these matters openly and constructively with the workforce and their representatives before settling on any specific proposals. If the noble Lord was serious in his proposal, he would be able to tell me, for example, that the previous Government consulted the staff of LNER when it was transferred into the public sector. I think he will find that they did not. I am not going to speculate about the outcome of any such future discussions.

Secondly, resolving the long-standing disputes with the rail unions, as we have done and are doing, clears the way for vital workforce reform to modernise our railways and do away with outdated working practices. We do not need to wait for Great British Railways to start this essential work—although we have needed to clear up a number of disputes, including one so long-standing that it has been a dispute since 2015—and we will do this by working with the workforce, not against them.

Thirdly, looking further ahead to Great British Railways, the overall structure for GBR and the mechanics of how staff will transfer into it are still to be decided. We will want to make sure that GBR retains and treats fairly the committed and talented staff who are essential to keep the railway running for its customers. We will have more to say about this when we publish our proposals for the railways Bill.

Amendment 19 would require another report, this time on the impact of national insurance employer contributions on the operational costs of public sector companies. I am sure that the noble Lord will recognise that employer national insurance contributions are just one relatively small component of train operators’ overall costs—less than 2.5% of total costs in this financial year. Furthermore, other significant costs, such as diesel and electricity, are volatile. It would therefore take significant resource to routinely report on all these different costs, which are subject to change all the time.

This reporting would add little value, particularly when any national insurance costs incurred by a DfT-contracted operator are simply paid to another part of government. Public ownership will make no difference to the net cost to government of the relevant train operators’ employer national insurance contributions; the Government are already both the funder and the recipient of these.

Having said that, I will be pleased to provide an estimate of any impact as soon as I am able to. At that point, I will happily write to the noble Lord and place a copy of the letter in the House Library. In the light of this, I urge the noble Lord, Lord Moylan, not to press his amendments.

[Lord Young of Cookham (Con)]

My Lords, as this is the last debate and possibly the last speech on Report, I commend the Minister for the patient way he has dealt with the proceedings on Report, drawing on his unique knowledge of the industry we are debating. It has been a pleasure to watch the contrasting debating styles of him and the more flamboyant style of my noble friend Lord Moylan.

I welcome what the Minister said about private investment, but I have to point out that the Bill specifically precludes the sort of investment we saw with the franchise. For example, Chiltern widened single track into double track and built new railway stations. That sort of investment by a train operating company is specifically precluded by the Bill.

On the substance of my concern, he said right at the beginning that there is a question about how the liabilities will be classified. He then sheltered behind the well-known phrase that he “could not speculate” about what the ONS will do. I think there is a distinction between the present position with LNER within the department, with relatively short-term liabilities for rolling stock, and the position with a 20-year liability and GBR. I remind the Minister that, in order to avoid Network Rail being reclassified as public sector body, Treasury Ministers specifically asked—this is under the Labour Government—other Ministers not to criticise the salaries of Network Rail for fear that the ONS would classify it as a public body.

Having said that, the Minister has gone as far as I could have expected him to. He does not have in his breast pocket a letter from the Treasury giving him a guarantee against the consequences of reclassification, but against the good-natured reply he gave me, I seek leave to withdraw my amendment.

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[Lord Moylan (Con)]

My Lords, this amendment deals with devolution and requires the Government to start work on that in the next few months and explain how they are going to do it. One thing that is new today, as far as I am aware and I have listened fairly carefully to all parts of this debate, is that the Minister has said that he intends to issue his consultation document before the end of this calendar year. Did my ears hear that correctly?

[Lord Hendy of Richmond Hill (Lab)]

I said I hoped to.

[Lord Moylan (Con)]

On the basis of that “hope”, which I imagine the Minister will expect to be held to—and which I will be holding him to—I am prepared not to move this amendment, because it will simply be timed out by that consultation document which would replace it, so to speak.

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Moved by

[Lord Hendy of Richmond Hill]

15: After Clause 2, insert the following new Clause—
“Application of public sector equality dutyIn Part 1 of Schedule 19 to the Equality Act 2010 (authorities subject to public sector equality duty), at the appropriate place under the heading “Transport”, insert—“A public sector company providing services for the carriage of passengers by railway under a public service contract awarded under section 30 of the Railways Act 1993 (public sector provision of services).””Member’s explanatory statement
This amendment provides for public sector companies providing train services under section 30 to be subject to the public sector equality duty.