Welsh Ministers (Transfer of Functions) (Railways) Order 2018

Baroness Sugg Excerpts

Monday 16th April 2018 Lords Chamber

Moved by

[Baroness Sugg]

That the draft Order laid before the House on 28 February be approved.

[The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)]

My Lords, this order will transfer certain railway functions of the Secretary of State relating to the Wales and borders franchise to Welsh Ministers. The devolution of these powers takes forward one of the Silk commission’s recommendations and is an important part of our commitments in the St David’s Day Command Paper on a lasting devolution settlement for Wales. My noble friend Lord Bourne assured the House in November 2016 that the UK Government were committed to giving the Welsh Government greater control over their trains and that amendment to the Wales Bill was not required to ensure that a transfer of franchising functions would be taken forward. With this statutory instrument we are delivering on that commitment.

We have agreed with the Welsh Government that the draft order will transfer franchising functions to Welsh Ministers only in so far as they relate to Wales and borders services and stations wholly within Wales, and certain ancillary and related matters. Welsh Ministers’ statutory powers in Wales are to be supplemented by agency powers exercised on behalf of the Secretary of State for services in England up to the first station in Wales. These proposed arrangements will enable Welsh Ministers to procure and manage a replacement franchise that, like the current franchise, includes important cross-border services to and from English towns and cities, as well as some services entirely within England, while also providing appropriate accountability for the Secretary of State for rail services within England.

Much positive and practical work has been done by both Governments in readiness for Welsh Ministers taking on these greater responsibilities. Transport for Wales has been established by the Welsh Government to help to deliver the next Wales and borders franchise and the South Wales Metro project. My department has provided extensive support to help progress their franchising and metro proposals. The procurement process for the next franchise is already well under way. Both Governments have worked together to successfully deliver a series of procurement milestones, most recently the issuing of the invitation to tender in September.

By the time of the planned award of the new franchise later this year, both Governments intend to conclude a suite of devolution arrangements that will supplement the draft order. A series of agency agreements will set out conditions on the specification and management of the English part of the franchise. This will include a requirement for the Wales and borders franchisee to set up a separate borders business unit to manage services and stations in England and act as a focal point for liaison with relevant local authorities, subnational transport bodies and user groups.

Further agreements will set out arrangements for partnership working in respect of the management of the new franchise, the relevant funding and outputs to be provided, and the terms under which the Welsh Ministers will for the time being subcontract to the Secretary of State the exercise of the operator-of-last-resort responsibilities transferred to them by the draft order.

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[Lord Tunnicliffe (Lab)]

My Lords, I, too, thank the Minister for introducing this order. We on these Benches welcome the order, but we welcome it noting that it is fundamentally somewhat second best in the eyes of the Welsh Government in the sense that they would have liked a settlement much closer to the Scotland model than this order provides. I cannot remember which noble Lord mentioned it, but there is an implication that there is a journey and a terminus on devolution. I think that over the next few years, as this order and its effects play out, we may see renewed pressure that railways in Wales should be managed on the Scotland model.

The order is précised in paragraph 7.2 of the Explanatory Memorandum. It is:

“to devolve executive franchising functions to the Welsh Ministers so that the Welsh Government could lead the procurement of the next Wales and Borders franchise, due to commence operations on 14 October 2018. This formed part of a wider agreement that included revised arrangements to enable the progression of two proposed rail electrification schemes in South Wales”.

This is no ordinary franchise. My judgment of its importance is very much built around the admirable objectives set out in the South Wales Metro proposals. They are somewhat flatteringly modelled on the London experience and envisage a totally integrated railway system around Cardiff and Newport using the Valley Lines. Therefore, the aspiration of the franchise is much wider than any previous one. The franchisee is to be called,

“an Operator and Development Partner”,

and will undertake,

“The operation of the Wales and Borders rail franchise … The design and the management of the development and implementation of capital works to deliver a Metro style service on the Core Valleys Lines … and subsequent infrastructure management of the Core Valleys Lines … The operation of rail and related aspects of the South Wales Metro service”,

and,

“The design and development of further schemes to improve rail travel in Wales”.

My understanding is that that will mean that the ownership of the infrastructure, as referred to by the noble Lord, Lord Wigley, will transfer from Network Rail to either the Welsh Government or their agency, Transport for Wales. Essentially, there will be a change of ownership and responsibility. Could the Minister explain where the powers to make this transfer lie? In which particular Act are they, and who is exercising what powers under it? I remind the House that Network Rail was probably the most undramatic nationalisation in history, brought about by the Office for National Statistics, which said, “It’s yours, Government, and you’d better run it”. Perhaps the Minister would like to reflect on the joys of running a railway.

Has the transfer has taken place and, if it has, what are the details? A number of noble Lords have asked detailed questions about it, but the key issue in the transfer is what the associated financial arrangements are. I think the Minister referred to them in her speech, but I would be grateful if she could spell them out at a bit more length. Do the UK Government have any ongoing responsibility for revenue support, particularly to the railways in the South Wales Metro and the Wales and borders franchise in general? Do they have any responsibility for supporting the capital programme in any way?

The aspect that frightens one when one looks at the aspirations of the South Wales Metro is that it involves some electrification. I have personal experience of exceeding my budget: if I remember correctly, I spent about £1.4 billion more than I was supposed to, but that was only 70% over budget. Network Rail, in its electrification of the Great Western main line, managed to drive the budget up from £2.6 billion to £5.7 billion, which is pretty heroic—about 120% again. Surely one of the problems of taking ownership of these lines, which by implication are not in great shape now, is that the Welsh Government will be exposed to possible significant increases in the project.

In a sense, my final question is: who will be responsible for these overruns? These sums of money are not insignificant for the UK Government but could be crippling for the Welsh Government.

[Baroness Sugg]

My Lords, I thank all noble Lords for their comments. I recognise the significant experience of the noble Lords, Lord Bradshaw, Lord Wigley and Lord Anderson, and many others in this area over many years. I will aim to address the questions that have been raised, but if I fail to do so I will follow up in writing.

The noble Lords, Lord Tunnicliffe and Lord Wigley, raised the issue of the wider devolution of infrastructure funding. The Government believe it is not desirable to reopen general discussion on Silk recommendations around which there is no consensus, so we do not intend to revisit the question of devolving Network Rail funding. As part of Network Rail’s devolution arrangements, the Welsh Government will be represented on the Wales route supervisory board, and the board will work in partnership to drive improvements for customers in the Wales and borders area and hold the industry to account.

The noble Lord, Lord Wigley, raised the issue of the delay in this order. I acknowledge that delay but reassure him that the delay in transferring the rail powers to Welsh Ministers has not adversely affected the procurement process for the next franchise. The formal transfer of powers has required the resolution of a number of detailed policy and practical considerations around cross-border services, which has taken longer than anticipated. However, we have been working closely with the Welsh Government to ensure that they can proceed in a timely manner with the franchise procurement. The ongoing procurement of the next franchise is being facilitated through agency agreements, enabling Welsh Ministers to exercise the Secretary of State’s relevant functions in advance of the order being made.

The noble Lord, Lord Bradshaw, asked about wider government spending in Wales. The department will continue to liaise closely with the Welsh Government on the specification funding of Network Rail’s operations in England and Wales for each of the five-year railway control periods to ensure that the requirements for Wales for increased capacity on the network are reflected. We are investing a record amount in Wales infrastructure and our spending goes where it is most needed, where it delivers the greatest value for money and we make decisions for both England and Wales based on a rigorous and fair appraisal process that ensures that.

The noble Lord, Lord Tunnicliffe, and others mentioned the Cardiff Valley Lines, and I will go into some detail on that. As part of the procurement, the Government are leading on the development of proposals for the creation of the South Wales Metro and, alongside refranchising Wales and borders services, the Welsh Government seek to take ownership of the core Valley Lines infrastructure from Network Rail. They then intend to vertically integrate the core Valley Lines by contracting a supplier to run trains and manage the infrastructure.