Rail Services (South-East England)

John Denham Excerpts

Wednesday 12th February 2014 Westminster Hall

[Mr John Denham (Southampton, Itchen) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Roger, and I congratulate the hon. Member for Dartford (Gareth Johnson) on securing such an important debate. I want to look at some of the fundamental issues relating to the financing of rail and commuter services. Governments of any party face major challenges in trying to bring a fair and just approach to rail fare financing in the south-east. As I am sure the shadow Minister, my hon. Friend the Member for Nottingham South (Lilian Greenwood), will set out, until the Chancellor was forced to act last summer, commuters faced a series of above-inflation fare increases.

It is worth looking at some of the figures. I have looked at the increases in train fares—season ticket prices—highlighted by Passenger Focus on a number of south-eastern routes. Sadly, my constituency is not included, but a number of others are. The increases in fares are compared with the increase in wages of the people living in the relevant areas. For example, in Gillingham in Kent—not too far from the hon. Member for Dartford—in the year from January 2010 to January 2011, the cost of a season ticket rose by 8.3% and wages by 2.1%. The following year, season tickets rose by 6% and wages by just 1.2%. In the next year, season tickets went up by 4.2% and wages by just 0.2%. In the year up to January 2014, season tickets went up by 3.1% while wages went up by just 0.7%.

A similar pattern is repeated across the south-east. In Portsmouth, from January 2010 to January 2011, fares went up by 7.2% and wages by just 2.1%. Fares went up the following year by 6.1%, but wages by just 1.2%. In 2012-13, season tickets went up by 4.2% and wages by 0.2%. In the past year, fares have gone up by 2.7% and wages by just 0.7%. Right across the south-east, year after year, we have had increases in season ticket prices that massively outstrip the real increases in wages earned by our constituents and many others in the region.

The annual season ticket from my constituency in Southampton is now more than £5,200, and commuters have faced many additional costs. I have not checked it on any websites, but I use the station and, as I recall, the parking charge at Southampton airport parkway has gone up from £10 to £14 a day in just the past three years. That is, of course, outside the regulated system; costs are being piled on to commuters wherever we choose to look.

It is easy just to list statistics and say that there is a problem, but we must look at some of the railway financing fundamentals that are driving the increases. We have a good opportunity to do that this morning. I take an unashamedly south and south-eastern view of the problem. The system operates in ways that are particularly unfair for our constituents in the south-east, and we must be prepared to face up to and challenge that.

What are the essential financing issues? We must look at two flows of money. The first is the money paid by the train operating companies—that is, the passengers who travel on their trains—to the Treasury. Some companies, almost all clustered in the south-east, are paying substantial amounts of money out of their fares in payment to the Government. In other parts of the country, it is the other way around: a subsidy goes from the Government to the train operating companies and their passengers. The second flow of money is the grant that train operating companies receive from Network Rail to train companies.

We must look at each flow in turn, and when we do we see an extraordinary situation. As I said, my constituents in Southampton pay £5,200 a year for a season ticket. For every mile they travel—every single mile from Southampton to London and from London back to Southampton—they are paying 8.7p to the Treasury. That is the highest rate in the country, but they are by no means the only set of passengers paying substantial amounts to the Treasury—not towards the cost of their rail service—for every mile that they travel.

These figures are from 2012-13, because this debate came up suddenly and I did not have a chance to see whether Passenger Focus has updated its analysis. The following figures were accurate in December. Passengers on Southern were paying 7.9p per mile to the Treasury; First Capital Connect passengers, 8.2p per mile; c2c passengers, 2.7p per mile; and for Greater Anglia, feeding into London from the other side, passengers were paying 5.5p per mile to the Treasury. Those train operating companies, clustered around the south-eastern commuter services, are between them paying more than £1 billion to the Treasury through such contributions. South West Trains paid £314 million, Southern paid £215 million, First Capital Connect paid £187 million, c2c paid £176 million, and Greater Anglia paid £139 million, all in the last year for which figures were available.

By contrast, in other parts of the country the payments went in the other direction—I will come on to the extent to which such payments are justified or not. Northern Rail received a subsidy from the Treasury of £152 million, Arriva Trains Wales received £140 million, First Trans- Pennine Express received £41 million and CrossCountry received £21 million. The only London commuter services that attracted a significant subsidy were Southeastern, which received £82 million, and Chiltern, which received £21 million.

I am probably the only person who has done so, but I have dubbed these payments a “commuter train tax” that our constituents—including yours, Sir Roger—pay to get to work in London. Of course, people say, “That is not the full picture,” because train operating companies receive a payment from the Government through Network Rail that must also be taken into account. However, if we do that, we discover an interesting pattern. The lowest subsidy per mile through Network Rail is for First Capital Connect, at just 5.3p per mile. Southern gets 7.3p per mile, c2c gets 7.1p, and South West Trains gets 7.6p.

If we look at other parts of the country, the Network Rail grant is worth 29.1p per mile to Northern Rail, 13.9p for East Midlands Trains, and 12.3p for First TransPennine Express. In other words, the same broad pattern is shown: not only are our constituents paying more per mile to the Treasury in one direction, but they are receiving less back per mile through the Network Rail grant. That is a major problem.

I must acknowledge that the architecture of the current system was introduced by the previous Labour Government. We are looking, therefore, not at some fundamental change that has been introduced in the past three years, but at the implications of simply rolling forward an approach that was put in place a number of years ago. I would argue that for my constituents the system is getting completely out of hand and completely unfair.

In the last year for which figures are available, the south-east commuter train companies were collectively paying more than £1 billion to the Treasury—or rather, their passengers were. That has quadrupled under the current Government—it was just £230 million in 2009. One might argue that, as part of a general shift towards putting greater pressure on passengers to pay for the rail services—my party, Labour, did that in government, and it has continued—some move in that direction was fair. However, we must now ask whether putting such a big weight on the pockets of commuters in the south-east is really fair.

There are a number of reasons for saying that we are producing real injustice, as regards the extent of the burden that passengers are expected to bear. We can look at two measures. The first is season ticket price as a percentage of salary. A season ticket on a medium-length journey is about 20% of the income of an operative who commutes to London, according to the Hay Group. For a professional, it is about 12%. That is twice the proportion of income paid by people commuting to Bristol, Cardiff, Birmingham, Manchester, Leeds, Glasgow or Edinburgh. In other words, commuters from our constituencies are paying a much higher proportion of their incomes to get to work than commuters do in comparable cities around the country. There is a similar pattern—not quite as marked—for people making long journeys to London from our constituencies, compared with those in other parts of the country. That is one indication of unfairness.

[Heidi Alexander (Lewisham East) (Lab)]

Is my right hon. Friend aware of the figures from the Campaign for Better Transport, which show that for a couple with two children in London, rail fares and child care costs can amount to 40% of their income? Does he agree that it is the cumulative impact of such outgoings—fares, child care, rent—that have such a devastating impact on many families in the south-east?

[Mr Denham]

My hon. Friend is right to raise that point; there is a cumulative impact. Another recent study, published a couple of weeks ago—I forget what it was called—showed that the increase in rail fares in various towns and cities in the south-east has now offset the apparent benefits of living outside London, where there are lower house prices. Fares have risen so much that, despite the disparity between London prices and those in other places, the costs are extremely high.

The other indicator of unfairness in the system is the fact that customer satisfaction with value for money, as measured by Passenger Focus, is lowest on the London commuter services. The hon. Member for Dartford talked about Southeastern, where only 31% of customers believe that they get value for money. On First Capital Connect, it is 32%; on South West Trains, 33%; on Southern, 36%. Perhaps we are not surprised that the more highly subsidised services, like Northern Rail, get a customer satisfaction rating of 54% on value for money, and Arriva Trains Wales 54%.

Westminster Hall debates are meant to raise issues, rather than to say there are simple answers to problems. The architecture of the subsidy and cross-subsidy system has been in place for some time, but it is now getting out of hand. It is perhaps comparable in some ways to measures such as the fuel duty escalator, which was originally introduced with cross-party support. It is sometimes amusingly referred to as Labour’s fuel duty escalator, even though it was introduced by a Conservative Government. Although there was cross-party support when it was introduced, the point came, as has been recognised by all parties, where simply rolling ahead with it became politically and financially untenable for many of our constituents. Those of us who are speaking up for the south-east must say that we cannot simply roll forward the current way of doing things without questioning it.

The Campaign for Better Transport recently published a consultant’s report, which said that even with fares capped, as the Chancellor has just done, by 2018 the Government will be making a profit out of running a rail system. In other words, passenger revenues paid to the Treasury will exceed the money paid out. That means that our constituents—commuters in the south-east whom we represent—will be paying the entire cost of subsidising railways in other parts of the country, and making a profit for the Government to boot. That is not tenable; we have to do something.

There are no easy answers. There is clearly no pot of public money sitting there that can be sloshed into a greater subsidy. I am not familiar with all the railways serving London, but there are lines where the quality of the rolling stock and track in the south-east is significantly better than in other parts of the country. A backlog of investment needs to be addressed in some areas, so it is not a matter of simply saying, “Let us tilt the balance in another direction”. However, looking forward, we have to try to set out a long-term strategy—hopefully one that can be agreed by all parties—for getting some basic fairness and justice back into the system, and for putting a cap on what our constituents are expected to pay, not only for their journeys to work, but for the cost of funding the rail system as a whole.

--- Later in debate ---

[Mr Goodwill]

The hon. Lady is right. The situation has not just developed in the past four years; there has been a backlog in investment in our rail, particularly in rolling stock. Northern Rail has some very old rolling stock. Indeed, a couple of weeks ago, we had a debate in which my hon. Friend the Member for Stevenage (Stephen McPartland) suggested that the rolling stock on his line is older than he is. There is a lot to be done, but that is no reason for not continuing with the investment that we have announced and with the projects that we are continuing to deliver. I often hear the criticism that we are spending far too much in London, when other parts of the country are being neglected.

[Mr Denham]

I am familiar with that north-south argument that suggests that all the investment is going to the south-east. Does the Minister accept my concern that my constituents, who are paying so much over the odds for their rail journeys, are no keener than constituents in the north of England to subsidise a railway in another part of the south-east? We have a situation in which we are asking a relatively small part of the country to pay the bill for all the railway investment that is taking place, whether in the north or the south.

[Mr Goodwill]

I suppose that my constituents would counter that by saying that the east coast main line is the line that contributes to the Government’s coffers, whether through a franchise operation or its current nationalised express, as I think someone called it the other day. A lot of investment is going into London and the south-east because that is where we see the most congestion and overcrowding. The £6.5 billion investment in Thameslink will link Kent, Sussex and Surrey, through central London, with Hertfordshire, Bedfordshire and Cambridgeshire. The Thameslink programme will deliver up to 1,140 carriages of high-capacity, next-generation rolling stock, in addition to some 600 new carriages that are being provided as part of the Crossrail project, which is a significant enhancement of the rail network’s capacity. I do not need to mention that Crossrail is the biggest engineering project in Europe. I was down there yesterday morning to see how work is progressing, and it is expected to be delivered on time.

My hon. Friend the Member for Dartford referred specifically to the service provided by Southeastern. As one would expect, the Department closely monitors rail performance, and I will spend a moment providing a little more detail on some of the recent performance trends. The key headline indicator for rail performance is the public performance measure, which measures the percentage of services that arrive between one minute early and five minutes late of their timetabled time.

The most recent period data available, from April 2013 to 1 February 2014, show a total average PPM score for the Southeastern network of 89.8%, which is 2.4 percentage points below the target agreed between the operator and Network Rail. Southeastern’s PPM score positions it in the lower mid-table when compared with all other train operating companies. Compared with similar operators in the region, Southeastern has a higher PPM score than Southern Railway, which is at 86.8%, and a slightly lower PPM score than South West Trains at 90.2%.

Southeastern’s franchise agreement, in keeping with all franchise agreements, includes operator performance benchmarks for delay minutes, cancellations and train capacity. Those benchmarks are a contractual requirement, which, if breached, can result in actions against the operator, such as additional passenger benefits at no cost to the Department or, in the case of extreme poor performance, franchise termination. Southeastern is currently performing within its contractual benchmarks and has been doing so for the duration of its franchise. My officials assure me that swift action will be taken if performance benchmarks are breached.

Cruise Market (Competition)

John Denham Excerpts

Wednesday 4th July 2012 Westminster Hall

[Caroline Nokes]

I thank my hon. Friend for making that point, and for standing up for the cruise business in Dover. He makes an interesting point, which I will move on to later.

I have an unashamed loyalty to my home port of Southampton, the second-largest cruise port in Europe and the embarkation point of a cruise voyage for 720,000 passengers a year. Southampton is not a port that is afraid of competition. It is not afraid to invest private money to provide the facilities required for a thriving and expanding cruise business. As port director Doug Morrison, who has taken the time to be here today, has said on more than one occasion:

“We believe in fair competition. We do not fear Liverpool and competition, but it is simply not right.”

Of course, that is what our debate is about: ensuring that competition in the cruise industry is on an equal footing, and that a leg-up to one port is not an iceberg to another.

European competition rules on state aid are clear. The European Commission website devotes a considerable number of words to explaining them. Why does that come as no surprise? The Commission seems to be very good at devoting a considerable number of words to many things, but perhaps less good at applying those ideals when it comes to the crunch. I will quote those words to the Minister:

“Sometimes Government authorities spend public money supporting local industries or individual companies. This gives them an unfair advantage over similar sectors in other EU countries. In other words, it damages competition and distorts trade...It is the Commission’s job to prevent this,”

which seems a fairly unequivocal statement to me. It does not say that the Commission’s job is to sit back and allow market distortion. No—it is the Commission’s specific job to prevent it. However, first it must apparently ask some questions. That is fair enough, and I would like to take hon. Members and the Minister through those questions and ask whether they have been rigorously asked and responded to in relation to the UK cruise market.

Have state authorities given support, for example, in the form of grants, interest and tax relief, guarantees, holdings in companies, or goods and services provided on preferential terms? The answer strikes me as a big yes in the case of the port of Liverpool, which has received £19 million in grant and been asked to pay back only somewhere between £8.8 million and £12.6 million. Has such aid been available to other port operators in the UK, or has investment and expansion in their cruise facilities been without such support and advantage?

Is the support likely to affect trade between EU countries? Arguably, yes again. Barcelona and Venice are two of the leading ports in southern Europe, and a significant proportion of the UK cruise market heads directly to the Mediterranean. Clearly, therefore, there is potential for an impact. Of course, it is not only ports on the Mediterranean, but other European ports, too. For the past two years, the port of Copenhagen, primarily hosting departures to the Norwegian fjords and the Baltic, has been rated as Europe’s leading cruise port at the world travel awards. In Southampton, we might have a view on that, but it would come as no surprise to learn that cruises from Liverpool might reasonably be expected to head in that direction as well.

Southampton has been shortlisted at the world travel awards for the past four years, and I am pleased to see that it is nominated again for 2012. I have no doubt that the other ports shortlisted this year, which range from Las Palmas in Gran Canaria to Stockholm in Sweden, are all extremely concerned about the state aid to the Liverpool cruise terminal, which could have a very detrimental effect on the business they have worked so hard to attract. It is a market that continues to expand, as one in every eight British package holidays sold is a cruise.

[Mr John Denham (Southampton, Itchen) (Lab)]

I congratulate the hon. Lady on securing the debate. She has made a compelling case about the importance of EU rules in this case. I am sure that she will be aware of the recent statement by Commissioner Almunia, who said that he has reminded the British Government

“of their obligation to comply with EU state aid rules.”

Does the hon. Lady agree that this is not a matter where the Minister can simply say that it is down to the European Commission in Brussels? He has a personal responsibility to ensure compliance with the rules, which means taking action to prevent Liverpool from breaking them.

[Caroline Nokes]

I thank the right hon. Gentleman for that comment. When I conclude, I will ask the Minister to work with his colleagues in the Department for Communities and Local Government on that very subject.

Is the support selective? Does it confer an advantage on specific companies, parts of industries, or on companies in specific regions? Yes, again. No other port operator, whether ABP, Hutchison or the port of Tyne, has received that sort of assistance for their cruise facilities. They have had to invest in their facilities themselves using private capital, just as they should in a free and fair market.

Has competition been distorted or might it be in future? We can fairly safely respond to that one. In requiring Liverpool city council to get state aid clearance from the European Commission prior to commencing turnaround cruises, the Government appear to endorse that view. However, what has happened in Liverpool? It has started anyway. The European Commission states that if that has happened, the Commission must disallow the support unless it is shown to be compatible with the common market.

--- Later in debate ---

[Mr Denham]

Will the Minister give way?

[Mike Penning]

If the right hon. Gentleman could bear with me, I will give way in a moment.

Looking at the situation from my point of view, have we been open and completely honest about what we did and the process? I believe we have. Is Liverpool doing what I asked it to do? No, because it has not paid the money back and we do not yet have state aid clearance. Do I have the power to stop Liverpool? The answer is no. Would I really want to? If the European Commission declares the payment to be incorrectly done state aid—my legal advice is that it is not—Liverpool would have to pay the moneys back. Liverpool, however, has indicated that it will pay the money back. The words of the then leader of Liverpool city council, now the mayor, were, in effect: “We will pay back what you ask us to pay back.”

--- Later in debate ---

[Mike Penning]

My hon. Friend is leading me down a path that I am probably quite happy to be led down. I understand from my legal advice that the Commission has never asked for any such funding back in other, similar cases. Looking around Europe at subsidies, the Commission would probably rather not open such a Pandora’s box.

[Mr Denham]

The Minister says that he has no power to act, but infraction proceedings would be taken against the British Government in the first instance, not Liverpool. Ministers have always had the ability to prevent the misuse of European regional development fund money, if they thought the misuse would leave the Government liable to action by the Commission. There must be legal powers for him to take to guard against the risk of infraction proceedings by the European Commission.

Port of Southampton

John Denham Excerpts

Wednesday 18th January 2012 Westminster Hall

[Mr John Denham (Southampton, Itchen) (Lab)]

I am grateful to Mr Speaker for granting this debate quickly, which, as will become clear, is appropriate. There are pressing issues facing the future of the port of Southampton that have to be resolved literally in the next few months if the full future of the port is to be secured. I am grateful for the strong and cross-party support here today from hon. Members from across Hampshire and the Isle of Wight.

May I say briefly that there is another issue about the future of the port of Southampton, which relates to investment in the cruise terminal and an application by Liverpool for a cruise terminal? That is not the subject of my remarks today. The arguments are well rehearsed, we believe in fair competition and the Minister is due to make an announcement on this in the fairly near future.

I want to concentrate on a different issue that is of equal importance to the future of Southampton and, in this case, critical to the future of the container terminal there. The debate has huge local, but also national, significance. Frankly, it presents a rare opportunity in the current economic climate, because a private sector company, Associated British Ports, is offering—indeed, is desperate—to invest £150 million of purely private money in infrastructure in the coming year. That investment is not just important for Southampton; it is vital for the infrastructure of UK plc. A study for Marine South East estimated that the contribution of the port of Southampton to the UK’s economy was £1.75 billion a year. Southampton is the fourth largest port in the UK, and the container terminal, operated by DP World, employs approximately 1,000 people. It is estimated that four jobs in the wider local economy are dependent on each of those jobs in the terminal.

Currently, most investment in UK infrastructure depends on public money for pump-priming, partnership and initial investment. However, ABP’s planned investment in Southampton is entirely private—it does not depend at all on matching investment. That is such good news that one might wonder why we need to have a debate in Westminster Hall. The problem is that over several years the project has suffered from entirely avoidable delay—mainly, it has to be said, at the hands of Government agencies, and partly due to the action of rival port operators who have exploited mistakes made by the Government machine to mount a legal challenge that is not in the public interest, but is purely to pursue their own commercial, competitive advantage.

Hon. Members from Hampshire and the Isle of Wight have come together today to urge the Minister to do everything he can, with his colleagues across Government, to ensure that there are no further delays. I am grateful for the briefing I have received from ABP, DP World and Unite, the union. All have exactly the same position on what needs to be done. Even in the days since requesting the debate, there has been some progress, but the project is so time-critical that any further slips, delays or mishaps—anyone taking their eye off the ball—could do immense damage.

Let me set the scene and the history. As I have said, the port is immensely successful. Productivity is high and Southampton is in the right geographical location for China and other south and east Asian trade, but the container business is changing. Some 13 years ago, the typical vessel was 4,000 TEUs—twenty-foot equivalent unit, which is the standard measure. Recently commissioned ships already in service are typically 9,000 to 10,000 TEUs, but in the next two years, ships as large as 16,000 TEUs will come into service. This is happening right across the industry with all the major carriers, and it certainly applies to Southampton’s major customers: the CMA CGM organisation and the G6, an alliance of Hapag Lloyd, OOCL, NYK, APL, MOL and Hyundai Merchant Marine. They have come together precisely to optimise the deployment of new and larger vessels.

Southampton can accommodate the larger, super-sized container ships if—but only if—it can reconstruct its existing container berths, known as 201 and 202, and carry out more extensive dredging both nearer the berth and the wider channel. That is what gives rise to the £150 million investment at the heart of the debate. Those ships are coming into service now and in the next two years, so the investment is time-critical. The risk is obvious—if there is any further delay and Southampton cannot offer its customers the capacity they want, business will be lost.

[Steve Brine (Winchester) (Con)]

I congratulate the right hon. Gentleman on securing the debate, which is as important to my constituents as it is to his and to those of other hon. Members here today. He rightly says that any further delay could be fatal. Will he confirm that the September 2012 to March 2013 “piling window”, as it is known, is the critical date window that we are tied to here? Any further delay would result in an additional 12-month delay in doing the work that is needed out in the channel.

[Mr Denham]

The hon. Gentleman is absolutely right, and I will explain the reason why that September to March period is so critical. For entirely legitimate environmental reasons, that activity cannot take place all year round, so we could miss that deadline. As I will say in a moment, contracts need to be let ahead of September if work is going to be started in September—that is critical. If it is not done by next year, the port clearly will be unable to offer the capacity it would like to for the latter part of 2012 and, in particular, 2013.

This debate should not be necessary. The need for investment was identified in a scoping study submitted by ABP to the Marine and Fisheries Agency, the predecessor of today’s Marine Management Organisation, in 2007—in what most people regard as perfectly good time to get the necessary approvals and to get the work under way. In January 2008, following consultation with various bodies, the MMO issued a formal scoping opinion that advised ABP of the scope and content of the required environmental impact assessment. That point is crucial, because not for the last time in this process, ABP was advised and directed to take a particular course of action, and it complied fully. ABP submitted its application on 15 December 2008. The applications were advertised using a form of words directed by the MMO. In February 2009, issues were raised in consultation by Natural England, the Environment Agency and the Royal Society for the Protection of Birds and, I understand, successfully resolved. However, in December 2009, nearly two years after the MMO’s original scoping opinion, the MMO then decided that the public notice it had supplied was incorrectly worded. ABP was asked to place further public notices, using replacement wording supplied by the MMO. That mistake delayed the process by a full 10 months. It is worth noting that Hutchison Ports, the operators of Felixstowe, did not raise any objections during the original consultation. However, following the re-advertisement and during the second consultation, it then did, arguing that the original environmental impact assessment, which was drawn up to the MMO’s specification, had not considered operational impact issues.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

Will the right hon. Gentleman explain why Network Rail and the Highways Agency were not included in the original consultation?

[Mr Denham]

The point about this procedure is twofold. Throughout this process, ABP took guidance from the MMO as to what requirements it needed to fulfil. It was reasonable for ABP to do that. It is because it was not well advised—indeed, it was advised to do other things—that we have ended up in this position.

In April 2010, following the re-advertisement and the intervention from Hutchison, which has no local interest at all in this matter—it is purely a commercial rival issue—and having raised those issues, the chief executive of the MMO wrote to ABP, stating:

“Please be assured that the MMO is working pro-actively with ABP to resolve these cases swiftly.”

However, it was not until February 2011, more than three years after the original application, that the MMO finally issued consent, in good time to get this work under way.

[Mr Dave Watts (St Helens North) (Lab)]

Obviously, hon. Members from Merseyside oppose the proposed blocking of the cruise terminal at Liverpool. However, on this issue we fully support my right hon. Friend. Does he agree that this scheme demonstrates how out of date our planning process is? Is not the economy suffering because we cannot make quick decisions? I hope the Minister will consider speeding the whole process up, so that we can get such schemes introduced much more quickly.

[Mr Denham]

I want to concentrate on getting this scheme approved. However, when the dust has settled it will be clear that the scope for getting things wrong and for commercial challenges by people who have no interest in environmental issues in the Southampton area is so great that it can lead to huge delays. If our collective attempts to get investment in the UK infrastructure are bogged down in legal challenges between rival commercial companies, enormous damage will be done to the chances of getting infrastructure investment under way and rebuilding the economy. There has to be a point where every major company is prepared to consider what is in the UK national interest, not a narrow view of what is in their own local commercial interest.

[Mr George Howarth (Knowsley) (Lab)]

May I thank my right hon. Friend for the reasonable way he has dealt with the conflict between Southampton and Liverpool? He is aware, though, that there are still problems between Liverpool city council and the local authority in Southampton. Liverpool city council has asked for talks with Southampton to see whether common ground can be found. That is a good idea. Does he agree that those local authorities should get together and find common ground, so that it is not either/or, but possibly both?

[Mr Denham]

We are perfectly clear that Liverpool is utterly entitled to have a cruise terminal. The question is whether, given that the one operating successfully in Southampton has been developed entirely with private sector finance, the one in Liverpool should not operate according to the same principles of fair competition. We are more than happy to have that discussion, but I do not want to spend my time this morning getting too far into that issue, because we are in the last critical weeks that will determine whether this investment in Southampton takes place in the autumn. I want to focus on that.

[Jack Dromey (Birmingham, Erdington) (Lab)]

I declare an interest. As deputy general secretary of Unite, I worked with ABP, the local authority and the work force, who are members of Unite, in seeking to drive this project forward. The common ground is the need to rebalance and grow our economy, although we may disagree on how to do that.

Does my right hon. Friend agree that infrastructure is key if we are to grow the economy? This development is in the national interest and the interests of growing the economy. Any further delay will damage not only the interests of Southampton but the prospects of economic recovery.

[Mr Denham]

My hon. Friend is right. The involvement of Felixstowe’s owners in this matter gives a UK angle to the competition, but the blunt truth is that there is no reason to believe that the container work lost from Southampton will end up anywhere in the UK. If the effect is that ships go to Rotterdam and their cargo is broken down for trans-shipment, there is a huge loss to the entire UK economy. That is why a view of what is in the interests of the whole UK is crucial. We can have local fights, but we will look pretty ridiculous if we end up damaging the whole UK economy and sending the business elsewhere.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

I congratulate the right hon. Gentleman on obtaining this debate. I support the burden of his remarks. The planning system has become obstructive, although it is understandable that Hutchison Ports, for example, should insist that rules that are being made to apply to it and stifling its investment programme should be applied evenly throughout the industry. That was the burden of its complaint.

Does the right hon. Gentleman agree—and support the Government on this point—that we need to renegotiate the habitats directive, because that is being used, as much as anything, to stymie and bog down important infrastructure projects for bogus, spurious technical and legal reasons, rather than genuine environmental reasons?

[Mr Denham]

I have some sympathy with the hon. Gentleman’s final point. If the objections were coming from Natural England, the Environment Agency, the RSPB and local environment organisations in Hampshire—even if they were using the habitats directive—I would understand their legitimacy. What people in Southampton cannot understand is that, essentially, technical and legal mistakes are being exploited to damage investment.

The hon. Gentleman properly represents his part of the country and his constituents. I hope that he will take back the message that Hutchinson’s may feel that it has made its point, but to continue to pursue this matter now would do enormous damage to the UK economy and to the port of Southampton.

[Mr Jenkin]

But the planning rules are the problem.

[Mr Denham]

Planning rules may be a problem, but they do not always necessarily need to be exploited to damage an investment.

In 2011, three years after the original application, the MMO issued consent. Two months later, Hutchison commenced judicial review proceedings in the High Court, alleging that the environmental impact assessment was defective. In June 2011, without discussion with ABP, the MMO, having listened to that objection, withdrew its consent. The critical issue is, as I understand it, that the judicial review application by Hutchison did not raise any issues that had not previously been raised in 2010 and that the MMO had every opportunity to consider. What actually happened is that the MMO had the chance to consider those objections and decided not to act on them, or decided that they did not have a substantial basis in fact, and issued the consent, but then, faced with a High Court challenge, changed its mind. It is another case where the MMO’s handing of the matter has badly let down everybody involved in the port of Southampton.

Since then, there has been further delay. ABP responded to further requests for analysis that it said it would deliver by 30 September 2011. Just three days before that date, the MMO asked ABP to produce additional information, which caused a further delay. Then—without going through all the twists and turns—there was a further lengthy delay before the MMO finally commenced the consultation on 11 January 2012.

I have gone over the history not to rake up old issues but to stress, for the benefit of the Minister with responsibility for shipping and ports, that the port of Southampton has been on the receiving end of particularly poor treatment by Government agencies, not just under this Government, but in the past. As a result, this major investment has yet to start. I will not hold the Minister or his predecessor, who will be contributing from the Opposition Front Bench, personally responsible for these errors. We know that these things happen deep in the depths of agencies far away, in normal circumstances, from ministerial decisions, but there are times when Ministers need to act.

I wrote to the Secretary of State for Environment, Food and Rural Affairs about this matter in August and again in September. I have to say that, although I am sure that the letters that I received were legally correct, there was no sense of urgency coming from the Department for Environment, Food and Rural Affairs on how the MMO would handle this matter. I was told that, since June, the MMO had maintained a single point of contact with ABP in Southampton and that, in July, it assigned a case team to the application. However, as I have said, that did not prevent further and later requests from the MMO to ABP for additional analysis and information that further delayed the project.

I wrote to the Prime Minister on 24 November. I hope that I am not unduly pompous as an ex-Minister, but there was a time when former Secretaries of State and Privy Counsellors who wrote to Prime Ministers would get a reply a from the Prime Minister or a Secretary of State. I am afraid that it took two months for the Prime Minister to get a junior Minister in DEFRA to send me back pretty much the same letter that I had got from the Secretary of State. There is no sense that the Downing street machine has grasped that it could play a role in making sure that this happens.

We are now at a critical point. The consultation is under way again—that is important—but the consultation period is six weeks. Objections must then be properly considered, because that is the legal process. The MMO must therefore consider objectively any issue raised so that, should it give approval, its decision cannot be challenged. The potential for delay is significant, and it is essential for the MMO to have sufficient resources and access to sufficient expertise to give the decision proper consideration. That is what I am asking the Minister to take away today and to take to his colleagues in DEFRA. We cannot have a situation in which either the MMO does not have the resources or expertise to consider the consultation responses properly or mistakes are made, thus laying the process open to further legal challenge.

I ask the Minister to consider one other factor. It is not for him or the House to constrain the courts, but in truth the move for judicial review came not from a statutory or voluntary environmental organisation, nor from any group that might be affected by the environmental impact of the port, but from a commercial operator, and it seems pretty clear that the motives were to inflict commercial damage on a rival. That raises a massive challenge to the Government’s plans to encourage infrastructure investment in the UK.

[Steve Rotheram (Liverpool, Walton) (Lab)]

Before my right hon. Friend concludes, I absolutely support the aim expressed in his earlier comments that we should work in the greater interest of the whole UK economy. Will he therefore agree to broker a meeting between the Southampton and Liverpool authorities, so that we can put to bed the animosity between the two and move forward on what is in the interest of both Liverpool and the UK, to grow the economy in Merseyside?

[Mr Denham]

Our two great port cities have a lot in common, in history and in the future, and I hope that Southampton and Liverpool will work together in the future. The Minister’s decision on the issue is imminent, and we will all want to consider it carefully. We are very consistent in Southampton: we are not saying that Liverpool should not have a cruise terminal; we are merely saying that competition should be fair and on the same basis of cruise terminal capacity development. We are not out to say, “You have no right to have cruise ships. You have no right to have this industry,” but the competition must be fair, so if meetings will improve understanding, they would be helpful.

The vast majority of ports in this country are privately operated, but they all depend on either the actions of Government agencies or, sometimes, public investment. The Government’s infrastructure plan, for example, included proposals to improve roads that would help, among other things, to support the port of Felixstowe. We will get into a terrible position, however, if urgent investment in the UK economy routinely becomes the matter of legal challenge by different commercial companies picking up technicalities and details of arguments rather than pursuing the UK national interest. I do not expect the Minister to say much or, probably, if he is prudent, anything at all on that point—I am sure that he will be measured—but Ministers need to have that serious discussion with major companies in this country, to ensure that the interests of UK plc always come first, particularly in such difficult times.

--- Later in debate ---

[Dr Coffey]

I understand that perspective entirely, and I will address it briefly.

My hon. Friend the Member for New Forest East (Dr Lewis) has been inconsistent in his argument. He was very generous to Hutchison, especially regarding its advice on Dibden bay, which I remember well because I lived in Hampshire at the time. Again, the argument is about consistency, and ABP and Hutchison are united in saying that nobody objects to Liverpool’s having a cruise terminal, but it should be on equal terms. Both port operators share that position. I do not, therefore, accept that we are talking about different things, although the joy of being a politician is that our greatest competence has to be dealing with paradox.

[Mr Denham]

I realise that time is short, but the point about the legal challenge is that no one is suggesting that Hutchison has suffered massive commercial damage because the MMO got its procedures wrong. If the port of Felixstowe faced closure because of bungling by the MMO, I would understand the hon. Lady’s point. However, she is justifying doing enormous commercial damage to the port of Southampton and the United Kingdom because something has been found not to have been done properly, and the action is totally out of proportion to any damage that Felixstowe has suffered. That is really the objection of Members from Hampshire on both sides of the Chamber.

[Dr Coffey]

I understand that perspective entirely. I am not suggesting that I would encourage Hutchison to continue to apply for judicial review after judicial review.

I have no objection to Southampton being able to accommodate the largest boats, just as Felixstowe can now, but it is critical to encourage the MMO to act swiftly and properly. At the end of the day, it is about ensuring that our civil service agencies can tackle things, and as was said earlier there is the question of making sure that there are resources. It is about focusing on what matters for the UK economy. If the agency had pulled its finger out and made sure that ABP had done its assessment properly in the first place, we might not be in this mess. I would encourage the agency to devote its resources to the issue in question, rather than devoting any further resources to marine conservation zones; that would have an impact on ports around the country, including Southampton and Felixstowe. It should make sure it is business-friendly, pull its finger out and ensure that the law is applied consistently.

--- Later in debate ---

[Mike Penning]

I do not know how Hansard is going to get the word “cock-up” in, but there it is again.

The MMO is a quango with almost no ministerial control whatever. Many of the civil servants in the previous incarnation did not transfer to the new organisation because it was reincarnated in Newcastle. Much of the personal knowledge about this particular case was not transferred. Once we have got through this—I must ensure that I do not interfere with any judicial process—we will be looking very closely at the matter. Remember this is a Department for Environment, Food and Rural Affairs and Department for Transport issue. Do not get me wrong, the Minister would never have seen this; it would never have got to him. This was below the radar level. None the less, it is quite simple to say, “You looked at these ports and you asked for this, this and this. When you came to this port, you didn’t ask for something that you have asked for at nearly every other port that I have looked at.” We will address this matter.

I want to look at how the MMO works. As the Minister standing before the Chamber, listening to colleagues and going on visits, it is enormously frustrating having very little control over things such as the harbour revision order. Even if the whole local community and the MP is against that order, all I can do is advise the MMO; I cannot actually instruct it.

[Mr Denham]

I am sure that there are many bigger issues to do with the MMO that need to be dealt with; the Minister is right. None the less, in five weeks’ time, the consultation will end. The MMO has to deal properly with that consultation so that it is free of legal challenge, but it must do it in an extremely timely manner. One of the reasons for having the debate with this Minister and this Department is that it is this Department that understands how important the issue is. I am not convinced that DEFRA Ministers do, and I am not sure that the MMO does. What we are asking the Minister today is for him and his Secretary of State to say to DEFRA, “In five weeks’ time, if you don’t have the right people in place with the right expertise, you will not be able to handle this in a satisfactory and timely manner.”

[Mike Penning]

I thank the right hon. Gentleman and he has probably taken the first point that I was going to make. I can do three things today. First, I can speak to my counterparts in DEFRA and tell them how seriously we consider this matter. If the MMO does not have the expertise, capacity and confidence to make a watertight decision, we will offer it the officials to help it to do that. It is independent of the Department for Transport, but I am sure that we can provide secondments if we need to.

The second thing we can do, which was mentioned by my hon. Friend the Member for Suffolk Coastal (Dr Coffey), is to say to Hutchison, “You have made your point.” There is no benefit in delaying this matter with a further challenge. As long as Associated British Ports does what it is asked to do with regards to the MMO and it supports the MMO decision, then that should be it. I cannot make it do that, but I am a constructive friend. I am sure that there are people who will be listening carefully to what the Minister has said about this delay. I am a friend of all the ports. I want competition, but this is not looking particularly good any more with regard to Hutchison. I fully understand its position. The law was not adhered to and maladministration took place, which is why the judicial review was minded to go down such an avenue. For lots of reasons, not least those relating to UK plc, jobs, infrastructure and the people of the Southampton area, we need to move on. Capacity ports need to be available. When outside investment considers UK plc, they may say, “We would like to invest there”. However, their Google alert or some other agency may then say, “Hold up a second, if you try to get consent down there, these are the sorts of problems you will get.”

I want Bristol to go ahead with its decisions. I want Liverpool, separate from the cruise business, to be able to go ahead with the deepwater port. I want Tees to go ahead as well. The Tyne is another one that should go ahead despite the issues relating to contamination. I was there only the other day. If all those ports go ahead, it will create the capacity that we need to get freight off the roads. As our economy grows, and it will grow, we need to ensure that we can be in the marketplace. We need to be a hub for these huge containers. Let us not underestimate the sheer size of the task that we are talking about. I stood at Felixstowe on the deck of one of the larger Maersk ships and looked down on the cranes that were trying to load her. Those cranes have now been replaced by even larger ones, which the Secretary of State must have seen when she was there the other day.

We need to be in-step with a market that is world led. We have been world leaders in this field for years and years. We stepped back when previous Governments did not take ports and shipping seriously. I do take them seriously and I hope that this plan goes ahead for Southampton.

National Policy Statements

John Denham Excerpts

Tuesday 29th November 2011 Commons Chamber

[Norman Baker]

I do not believe that the change in arrangements makes that more likely, but obviously every application is considered on its merits and according to the circumstances that apply at the time.

The Government have set demanding targets for the consideration of what could be complex cases, but applicants and their consultees must contribute by thinking well ahead and ensuring that applications are fit for purpose. The Department recommends that ports should start in this spirit by consulting on port master plans. These are neither statutory documents, nor part of the formal Planning Act regime, but nevertheless they could help enormously to promote local understanding of what a port is trying to achieve and how best to avoid or mitigate adverse impacts. Master plans are not confined to large ports. Newhaven in my constituency is an excellent example of a port engaging thoroughly with its community in that way.

[Mr John Denham (Southampton, Itchen) (Lab)]

Paragraph 4.4.1 of the national policy statement states:

“Ports in England and Wales operate on commercial lines, without public subsidy and with investment from their own operating profits or from the private sector investors.”

Will the Minister assure me that the Government will uphold that policy rigorously and fairly, particularly given the desire of the port of Liverpool to use a publicly funded cruise terminal to compete with the privately funded cruise terminals in Southampton, which breaches the principle of fair competition?

[Norman Baker]

I am sure that it is Government policy to uphold all policies fairly, and I imagine that that is what my hon. Friend the shipping Minister and others will seek to do.

Where we have made a change is in the intention to abolish the Infrastructure Planning Commission so that, from next April, major project applications will revert to the Secretary of State for decision following consideration by the major infrastructure planning unit, which is to be set up within the Planning Inspectorate. That reinstates an important element of democratic oversight in the process, although I should make it clear that the Secretary of State intends to consider applications on the facts, on the advice of the major infrastructure planning unit, and in accordance with the national policy statement.

Another aspect of the Planning Act that we have retained is the principle that applications should not succeed if their adverse impacts outweigh their benefits. I do not believe that many applications will fail that test if they are thoroughly prepared in accordance with the national policy statement, but none the less this represents a robust safety net in case we fail to foresee any significant adverse impacts. The Infrastructure Planning Commission, and the major infrastructure planning unit that will succeed it, will not be a completely one-stop shop, but it nevertheless reduces the separate applications potentially required. Marine licensing, as set up under the Marine and Coastal Access Act 2009, streamlines previous licence and consent requirements, and associated development can now be fully integrated with the main application.

The purpose of national policy statements more generally is to provide a framework for preparing, considering and deciding planning applications. Therefore, this national policy statement does not purport to be a complete statement of Government policy as it relates to each and every aspect of ports. In essence, it is a planning document.

The UK is of course a trading nation, and well over 90% of our international trade by weight arrives or leaves by sea—the lion’s share of a total traffic of around 500 million tonnes a year. Ports are under-appreciated. They ply much of their trade behind high security fences, and even large ships can be surprisingly inconspicuous to those living in the port’s hinterland. We need port capacity to carry that trade and provide for coastal traffic, which can help to take lorries off our roads and reduce the incidence of pollution and congestion.

--- Later in debate ---

[Mr Denham]

The Minister could unlock £150 million of totally private investment in Southampton’s container port next September if only he and his colleague’s officials cut through the red tape holding up that investment and the dredging of the River Test, which is necessary for large container ships. I am sure that he will not have been briefed on the issue, but I urge him to take it away and see what can be done to resolve it.

[Norman Baker]

I will happily take that issue away. It is important that we unlock private investment, that we help our ports and, at this particular time, as the Chancellor said today, bring forward investment where possible, so I will look at the problems that exist in the area and see whether they can be overcome. It may be that they cannot, but it is perfectly proper to raise the issue in the Chamber.

Ports are diverse. They cater for liquid-bulks, dry-bulks and break-bulks, ro-ro, including trade vehicles, and of course containers, and they play host to many kinds of warehousing, distribution and process activities. Their markets can be lively and volatile, and they need to be nimble in the short term to react to changing market conditions and patterns of demand, yet they must also plan for the long term. Port infrastructure is long-lived, lasting 20, perhaps 30, years and more, so it is important that such decisions are taken carefully, with full regard to all their significant consequences.

In the short term, the ports industry is well placed to respond to economic recovery. The first phase of Hutchison’s Felixstowe South project is already open, and that will help to secure the nation’s ability to accommodate the largest container vessels; we have seen the announcement by Dubai Ports World that it plans to complete the first phase of the London Gateway container terminal by the end of 2013; ABP Southampton, to which the right hon. Gentleman perhaps alluded, is pressing ahead with its own expansion plans; and other ports, including Bristol, Teesport and Mersey, already have consent for development.

We cannot afford to be complacent, however. Investors in ports need to be able to plan development for every type of traffic, and to do so in a planning context that is stable and well understood. Equally, ports’ neighbours need to know how their essential interests will be protected through the planning system.

The national policy statement brings together established policy for ports and established policy for mitigating their adverse impact. The fundamental policy that we set out in the ports national policy statement is market-led, building on the success of the industry since it was freed from the constraints of state ownership and the national dock labour scheme. Port operators are best placed to decide the type of facilities they need, so this is a non-location directive national policy statement, and I make no apology for that.

At the same time, development must be in sympathy with the environment, including the marine environment —to pick up the point that my hon. Friend the Member for Truro and Falmouth made. The national policy statement sets out in some detail how that translates into requirements for planning applications and their accompanying environmental statements. Unless there is provision for sufficient capacity, disruption at major ports has the potential to translate very quickly into serious disruption to people’s everyday lives.

The national policy statement expresses confidence that the ports industry, with each owner/operator taking its own commercial view, will deliver the resilience that the country needs against disruption, and the national policy statement is very clear that the planning system should give weight to delivering that important resilience.

Finally, in completing the national policy statement, we have been fully conscious of the fact that ports are nodes in a network, and that connecting infrastructure is essential to their success.