Railways Bill

Introduction

1. Following Second Reading of the Railways Bill on 19 July 1999, the House of Commons agreed that the Bill should be referred to the Environment, Transport and Regional Affairs Committee for scrutiny. The Committees Twenty-first Report was published on 10 November (HC 827). This document is the formal Government response to the Committees report. The Committees recommendations are shown in bold throughout, with the relevant paragraph number in the Committees report in brackets.

2. A Transport Bill was presented to the House of Commons on 1 December 1999.It contains radical measures to deliver a safe, modern and high quality transport system. The centre piece of the Bill is better public transport, which will offer more choice. The Governments strategy for this integrated transport policy was set out in our White Paper A New Deal for Transport: Better for Everyone (Cm 3950).

3. The Transport Bills proposals for railways follow those published in the Railways Bill. The changes made to the railway provisions have been greatly assisted by the Committees latest report and the consultation which underpins it.

Response to the Committee's Recommendations

(a) We welcome the Railways Bill, which we believe is a practical way of addressing the problems of a restructured railway (paragraph 3).

(b) The Official Opposition is opposed to the Bill. Therefore, following the precedent of another Committee engaged in pre-legislative scrutiny, we should make it clear that no individuals membership of this Committee and participation in this inquiry should be taken to imply approval of the Bill, nor of any of its clauses (paragraph 5).

4. The Government welcomes the Committees conclusion that the Railways Bill is a practical way of addressing the problems of a restructured railway. We consider that the revised provisions in the Transport Bill are the best way of giving a clear, coherent and strategic programme for the development of the railway.

5. We are grateful to the Committee for producing a comprehensive and useful report to a demanding timescale. The Committees scrutiny has been of great help to the Government in revising the railway provisions now contained in the Transport Bill.

(c) We recommend that the relationship between the Strategic Rail Authority and the Rail Regulator be clarified by the Secretary of State, to ensure that the Authoritys ability to achieve its objectives will not be limited (paragraph 10).

6. The relationship between the SRA and the Rail Regulator is clear. The SRA will act as a player in the railway industry by forming the strategic framework for the development of the network. It will also have an implementation role, together with the industry, through the replacement of franchise agreements and will act as a funder, through both franchising and its other funding powers. The Rail Regulator will stand outside the industry, as the independent economic Regulator, using his powers in relation to access and licensing, as well as other matters, to ensure that there is fairness and stability.

7. However, we agree that it is important that the Government, the SRA and the Rail Regulator work together, within their separate statutory duties, towards the aim of a safe, growing and improving railway. That is why the Rail Regulator has a new duty under clause 199 of the Transport Bill, when balanced with his other duties, to facilitate the furtherance by the SRA of its strategies. We are also restoring a lapsed power for the Secretary of State to give general guidance to the Rail Regulator. The SRA will be subject to directions and guidance under clause 182 of the Transport Bill. The directions and the guidance to the SRA and the general guidance to the Regulator will inform the overall policy direction of the SRA and the Rail Regulator. The Government believes that the provisions in the Transport Bill provide the appropriate balance between independent economic regulation by the Rail Regulator, and the SRAs role in securing passenger services, promoting freight use, and giving the lead to the industry at the strategic level.

(d) We recommend that Clause 2(3) of the Bill be amended to ensure that at least one member of the Authority is a representative of the interests of passengers, and also that at least one member of the Authority is a representative of the users of rail freight services (paragraph 12).

8. We agree that one Member should represent the interests of passengers and have stated our wish that this member should be a member of the Central Rail Users Consultative Committee. We would also expect that at least one member would have knowledge of freight matters. We do not think that these provisions need to be on the face of the Bill. The Secretary of State should have the flexibility to appoint the best people available to the SRAs Board to carry out all its purposes. SRA members are appointed in a personal capacity rather than as representatives of particular organisations.

(e) We recommend that the Bill be amended to require the Secretary of State to make public his directions and guidance to the Strategic Rail Authority(paragraph 13).

9. We agree with the recommendation that the Secretary of State be required to make public his directions and guidance. This is achieved in clause 184 of the Transport Bill, which also requires publication of any directions and guidance from the Scottish Ministers or the Mayor of London.

(f) We recommend that Clause 6 of the Bill be amended to require the Strategic Rail Authority to lay before Parliament an Annual Report on its activities, its income and expenditure, and its existing and future strategies to achieve its objectives (paragraph 15).

10. By virtue of paragraph 45 of Schedule 15 to the Transport Bill, the SRA will inherit the Franchising Directors duty (in section 75 of the Railways Act 1993) to produce an annual report which must be laid before Parliament. This will include a statement of income and expenditure. The SRAs strategies will be published under clause 181 of the Transport Bill.

(g) We recommend that information relating to the performance of and investment by train operating companies, Railtrack, ROSCOs and others involved in the railway industry should be gathered by the Strategic Rail Authority and published frequently for example, quarterly and in its Annual Report. It should also consider how to make more detailed information available to interested parties and the public on a much more regular basis. The information published should include measurements of customer satisfaction with rail services. We also recommend that, where commercial confidentiality permits, the terms of franchise agreements should be made public in order that companies performance can be satisfactorily compared to their undertakings (paragraph 17).

11. We agree that the public have the right to a reasonable and useful level of information. Much information is already published and more will become available. Franchise agreements are already made public via the Franchising Directors public register, which will transfer to the SRA. The SRA will inherit information powers under section 80 of the Railways Act 1993, which are strengthened by paragraph 24of Schedule 24 to the Transport Bill. This will enable the SRA to gather information in connection with all of its duties from licence holders. The SRA will monitor the delivery of franchise plan commitments and investment in the industry, and will publish the results. The regime in the Freedom of Information Bill will apply to the SRA and the Rail Regulator.

12. The shadow SRA is now running the National Passenger Survey in parallel with the Train Operating Companies existing customer satisfaction surveys. The national survey will replace the individual train operators surveys in the shadow SRAs bulletin.

13. The shadow SRA is also working on an improved performance measure which will provide information about the day to day running of the railway which more closely reflects the actual experience of passengers in terms of service reliability.

(h) We recommend that the Government should re-examine the Railways Bill as well as existing legislation to ensure that the Strategic Rail Authority has adequate powers to force train operating companies, ROSCOs, Railtrack and others involved in the railway industry to divulge information which would assist the Authority in its work (paragraph 19).

14. Under paragraph 48 of Schedule 15 to the Transport Bill, the SRA will inherit the Franchising Directors existing powers in section 80 of the Railways Act 1993 to require the provision of information. Section 80 is amended by paragraph 24 of Schedule 24 to the Transport Bill to cover the additional duties of the SRA and will, therefore, cover freight. The amended power relates to all licence holders.

(i) We recommend that Clause 27 be amended to give equal powers to the Scottish Executive and the Welsh Assembly to make both Freight Facilities Grants and Track Access Grants (paragraph 22).

15. We agree. Clause 216 of the Transport Bill gives the Scottish Ministers and the National Assembly for Wales the same powers to enter into agreements or other arrangements for services for the carriage of goods by railway and associated facilities. These powers, in Wales, are concurrent powers between the SRA and the National Assembly.

(j) We recommend that the Government ensure that discussions take place between itself, the Strategic Rail Authority, Railtrack and the devolved bodies to ensure that Railtracks relationship with the Authority and the devolved bodies be made clear to the company (paragraph 23).

16. We will encourage effective liaison between the Government, the SRA, Railtrack and the devolved bodies. We consider that where the Transport Bill refers to devolved bodies, it spells out clearly their relationship with the Secretary of State and the SRA. The Scottish Ministers will be able to give directions and guidance in relation to Scottish services, which the SRA must follow unless they conflict with the Secretary of States directions and guidance, require additional expenditure not provided from the Scottish Consolidated Fund, or adversely affect non-Scottish services(clause 183). The Scottish Executive and the Welsh Assembly may administer grants for freight but this function must be exercised in accordance with schemes which have been notified to them by the SRA (clause 216).

(k) We recommend that the Bill be amended to require that the Strategic Rail Authority be consulted by Government, local authorities and other planning bodies before they formulate policies which would have an impact on rail traffic and the development of the railways (paragraph 28).

17. The Government will consult the SRA on land use planning policies where there might be an impact on rail traffic and development. For example, the SRA will be consulted on relevant draft Planning Policy Guidance (PPG) notes, which set out planning policy. Proposed new Development Plan Regulations will no longer define statutory consultees for local plans and Unitary Development Plans (UDPs). For structure plans there is still a small core of statutory consultees. However, in the revised PPG12 we have produced a list of recommended consultees for all development plans. The SRA is, of course, one of these, and should be consulted on all matters relating to development affecting the rail network. Similarly the new draft PPG11,which sets out the Governments proposals to improve regional planning guidance, emphasises that the regional planning bodies should work closely with the SRA when formulating and implementing their regional transport strategies (which will in turn provide the strategic context for local transport plans). Such consultation arrangements are best prescribed administratively rather than on the face of the Bill, because of the need to adapt them to changing circumstances and to avoid the SRA being submerged in paper which it does not need to see.

(l) We recommend that Clause 5(a) of the Bill be amended to require the Authority to promote the use of the railway network for the carriage of passengers and, equally importantly, for the carriage of freight (paragraph 30).

18. The SRA will need to exercise its functions in order to promote the use of the railway network for the carriage of both passengers and goods. It is intended that the SRA will develop strategies which take proper account of freight. We do not think, therefore, that clause 180(3) needs amending.

(m) We trust that the Government will encourage those conducting inquiries into the accident at Ladbroke Grove to report as soon as practicable, and that it will speedily adopt and implement the measures recommended by those inquiries (paragraph 32).

19. The Government shares the Committees wish that investigations by the Health and Safety Executive (HSE), the British Transport Police (BTP) and the industrys own internal process) and the public inquiry under Lord Cullen into the Ladbroke Grove accident will be concluded as soon as practicable, so that action to improve rail safety will not be delayed. Lord Cullen will report to the Health and Safety Commission (HSC) who will advise the Secretary of State on his findings.20. A number of immediate measures have already been taken. The Government has held two Rail Safety Summits which have produced early results in areas such as driver training, a confidential reporting system, earlier installation of the train protection and warning system (TPWS), prevention of signals passed at danger(SPADs), a common standard for reporting and investigating SPADs, and the drafting by the industry of a new national safety plan. The industry has established a National Safety Task Force, which includes union representatives, to drive through safety improvements.

21. The HSC have sent a team in to Railtrack to investigate Railtracks safety practices and report urgently on any early action required. As noted below in the response to recommendation (o), the Government is considering where the main functions of Railtracks Safety and Standards Directorate may best be located.

22. The Government has asked Sir David Davies to assess train protection systems and means of preventing SPADs. His report will be available to Professor Uff, who is leading the Southall rail crash inquiry, and Lord Cullen for their joint sittings on this issue next year. HSEs Railway Inspectorate is providing the Deputy Prime Minister with weekly reports on SPADs, and monthly reports are being published.

(n) We reiterate the recommendations relating to safety we made in our previous reports on the proposed Strategic Rail Authority and on Railway Safety, and, as a matter of urgency, recommend that the Government investigate and report back to the House what progress has been made towards achieving them (paragraph 34).

23. We will write to the Select Committee with a report on their earlier recommendations.

(o) For the third time, we recommend that the Safety and Standards Directorate be removed from Railtrack. That is not to say that Railtrack will not continue to be responsible for safety: it, like all those engaged in the railway industry, must be responsible for operating safely. We seek only to remove its responsibility for safety regulation (paragraph 40).

24. Following the original recommendation by the Committee the Government asked the HSC for advice on transferring the Safety and Standards Directorate from Railtrack. That advice was received in early October this year. After consideration of the report, we announced that we were minded to move the main functions of the Safety and Standards Directorate from Railtrack. We are currently considering where these main functions may best be located. Any changes will not remove Railtracks obligations to operate safely itself.

(p) We strongly recommend that a body independent of both the Rail Regulator and the Strategic Rail Authority should take responsibility for railway safety regulation. We also recommend that the relationship between the Strategic Rail Authority, the Rail Regulator and any independent safety body be clearly defined, and it be clearly indicated which body is ultimately responsible for rail safety (paragraph 42).

25. The Health and Safety Commission/Executive is the single safety regulator for the rail industry. Railtrack has primary responsibility for ensuring the safe operation of the rail network, and each part of the railway industry has a legal responsibility to ensure that it operates safely, but the Government looks to HSC/E to use their wide-ranging powers to ensure that safety standards are maintained, and improved where necessary. As well as examining the causes of the Ladbroke Grove accident, Lord Cullens inquiry will also look at wider issues of safety culture and management, including whether the safety structure for the privatised industry is the right one.

26. We also agree that the establishment of the SRA, and any revised safety structure, must not blur safety responsibilities. Under clause 182 of the Transport Bill, the SRA will have a duty to have regard to the need to protect all persons from dangers arising from the operation of railways including, in particular, by taking into account any advice given by HSE. The Rail Regulator already has a similar duty under Section 4of the Railways Act 1993. The Rail Regulator and HSE also have a Memorandum of Understanding to ensure that matters of common interest can be addressed in an efficient and timely manner.

(q) We recommend the establishment of a new transport safety regulator which is independent of Government and of the industries it seeks to regulate and investigate. It should be properly funded, possibly by means of a levy on its users, and it should be given robust powers to set safety standards, to examine whether or not they are being met, to punish companies, organisations or individuals when standards are breached, and to investigate accidents when they occur. It should take over most of the responsibilities of the Safety and Standards Directorate of Railtrack, Her Majestys Railway Inspectorate, and the Safety Regulation Group of the Civil Aviation Authority, as well as the surveying and other safety duties previously carried out by the Marine Safety Agency. We believe that it should take in the Air Accident Investigation Branch and the Marine Accident Investigation Branch, as well as many of the functions of the British Transport Police. It also should take responsibility for road safety. Appropriate primary legislation should be introduced by the Government without delay (paragraph 46).

27. The review of transport safety arrangements which the Government initiated in response to the Committees earlier recommendations is nearing completion. It is addressing, amongst other things, the case for unified, independent arrangements for safety regulation and accident investigation. It is useful to have this indication of the activities which the Committee would wish to see falling to a new authority. The Government will respond substantively to the Committee once it has received and considered the results of the review.

(r) Although we regret the delay between our recommendations that CIRAS be extended nationwide and the recent announcement that such a step would be taken, we welcome the introduction of a national independent confidential incident reporting and analysis system. We repeat our recommendation that it be extended to all staff, including employees of infrastructure maintenance companies. We further recommend that it be introduced without delay(paragraph 49).

28. The rail industrys National Safety Task Force has endorsed the extension of an independent, confidential reporting system which will build on the CIRAS(Confidential Incident Reporting and Analysis System) capability. There will be a core national system and national standards supported by regional centres. Staff briefing will start from March 2000 and the system will be fully operative by the end of 2000. The system will cover all railway industry staff, including employees of Railtracks contractors.

(s) We recommend that Clause 6(4) be amended to provide a more definite commitment to provide Eurostar and international freight services from the regions to a clear and rigid timetable (paragraph 53).

29. The Government agrees that people and businesses beyond London should have convenient and effective access to Channel Tunnel rail services, but considers it appropriate that the SRA should determine what is the best way of meeting regional needs, and the timetable for delivering its strategy. An independent review into Eurostar regional services, carried out by Arthur D. Little Ltd at the request of the Government, will be published shortly. The review will no doubt inform the development of the SRAs strategy.

(t) We recommend that Clause 6 be amended to require the Strategic Rail Authority to formulate a strategy to promote the use of the railway by freight. In particular, we recommend that the question of capacity for freight be kept under review, and that access to freight grants for smaller operators should be encouraged (paragraph 54).

30. One of the purposes of the SRA is to promote the use of the network for the carriage of goods; the need for strategies to take proper account of freight and for freight capacity to be kept under review will flow from that purpose without being further specified on the face of the Bill. We do not, therefore, think that clause 181of the Transport Bill needs amending. We agree that access to freight grants should be encouraged. The SRA will be in a good position to encourage operators to apply for grants and it will have the power to give grants for a wider range of freight purposes than the current freight facilities and track access grants (clause 186 of the Transport Bill).

(u) Although we believe that Railtrack should for the time being continue to produce the national timetable, we recommend that the Strategic Rail Authority be given powers to assume responsibility for formulating the timetable, and for publishing it, and to take over management of the National Rail Enquiry Service if that is, or becomes, the most efficient way for it to meet the conditions of Clause 7(2)(d) (paragraph 61).

31. The SRA will continue to set the Passenger Service Requirement (PSR) which operators must meet in the timetable and will monitor the quality and effectiveness of the National Rail Enquiry Service (NRES). The SRA will be a strategic body with sufficient powers to meet its duty under clause 182 of the Transport Bill to promote measures designed to facilitate through journeys (including, in particular, through ticketing). The SRA, with its responsibility for franchising, will have a major influence on the timetable. Passenger franchisees must deliver a timetable that incorporates the agreed PSRs, including connections where these are conditions of franchise operation. It would not be appropriate for the SRA to assume responsibility for actually formulating and publishing the timetable. This level of detail is for the industry to undertake, within the appropriate regulatory and contractual framework.32. Similarly, the SRA will have the ability to control NRES without needing to take over the management of this facility. Franchise agreements provide for participation in NRES, and the SRA will also be responsible for consumer protection provisions in licences. These twin levers provide sufficient control over NRES.

(v) If the Strategic Rail Authority is properly to protect the interests of passengers, we believe that it is appropriate that it should be able to set conditions about fares. We therefore support the provisions of paragraph 3of Schedule 4 of the Railways Bill. However, we trust that the Authority will only use its powers to limit fares in order to prevent abuses by train operating companies (paragraph 64).

33. The provisions of paragraph 3 of Schedule 4 to the Railways Bill now appear as paragraph 3 of Schedule 16 to the Transport Bill. Under the new section 7A(7) of the Railways Act 1993, the SRA will be under exactly the same duties in exercising consumer protection functions as the Rail Regulator is at present under section 4 of the Railways Act 1993. The Regulators duties in respect of fares (section 4(2)(a) of the Railways Act 1993) do not cover franchised services so these will continue to be covered by franchise agreements and will not be subject to licence amendments by the SRA.

(w) We recommend that the Strategic Rail Authority should ensure that fares are given proper publicity, both at stations, in published documents and by the National Rail Enquiry Service (paragraph 64).

34. We agree that the provision of readily accessible information about fares, which is both accurate and impartial, is of great importance to existing and potential passengers. Industry agreements and licences will continue to require fares information to be made available. Stations at which rail products are offered for sale are regulated through the Ticketing and Settlement Agreement (TSA). This includes regulation of retail obligations and standards, and staffed hours. There is also an obligation to give impartial advice, both at points of sale (other than clearly marked dedicated points of sale) and through any information or information facility (such as NRES). These sections of the TSA may not be changed without the consent of the Franchising Director and the Rail Regulator. In addition, the Rail Regulator enforces impartiality through licence conditions.

35. Where the protection of consumers is secured through a licence, under the Transport Bill the SRA will be responsible for the content of the licence as it relates to consumer protection and for the enforcement and modification of consumer protection provisions (if the Rail Regulator also approves). However, when exercising this responsibility the SRA will be under the same duties and will need to have regard to the same considerations as the Rail Regulator.

(x) We recommend that, to enable forward planning by the industry, once the Strategic Rail Authority has been established the Secretary of State and the Authority should make clear their objectives for the railway, and the methods they intend to use to achieve those ends (paragraph 68).

36. We agree that the industry requires certainty for forward planning. The Secretary of State will publish his directions and guidance to the SRA, and the SRA will publish its strategies. This will ensure the transparency which the industry need to plan their businesses.

(y) Clause 7(2)(f) is intended to protect the ability of the railway industry to raise capital. We do not therefore recommend that the Bill is amended at this stage. Nevertheless, we expect the Strategic Rail Authority and the Government to monitor future investments in the industry, and to take any necessary steps to ensure that rail companies continue to be able to raise money to improve the railway (paragraph 70).

37. We have made it clear that the Government and the SRA are prepared to work in partnership with the industry to deliver increased investment. The industry has its role to play, and we look to the SRA and the Rail Regulator to work closely together to ensure that investment is delivered. We have considered the industrys concerns that some aspects of the Railways Bill would increase risk and affect its ability to raise capital; see response to recommendation (pp) below.

(z) We are concerned about the wording of Clause 7(3)(c). In its decision-making about new rail services, the Strategic Rail Authority must balance the impact that new rail services might have on their immediate surroundings with the effect that alternative modes of transport, such as roads, would have both on the local area and on the wider environment. We recommend that Clause 7(3)(c) be amended to reflect wider environmental concerns(paragraph 73).

38. We agree that the SRA should balance the impact which new rail services might have on their immediate surroundings with the effect that alternative modes of transport would have both on the local area and on the wider environment. When considering the effect on the environment in clause 182 of the Transport Bill the wider socio-economic effects can be taken into account if they have an impact on the environment.

39. When assessing the environmental impacts of a new rail schemes the SRA will draw on the planning criteria, published by the shadow SRA in May 1999 and called A guide to the appraisal of support for passenger rail services. The planning criteria assess new rail schemes against five criteria which are environment, safety, economy, accessibility and integration. The planning criteria not only take account of the impacts of the rail scheme, but also of any indirect effects arising from modal shift. These effects could be in opposite directions and would be balanced against each other in the overall assessment.

(aa) We recommend that the Government makes clear that Clauses 9 and 10 of the Bill provide that the Strategic Rail Authority may only operate passenger rail services in the event that no satisfactory bid for a franchise has been received, or that a service has failed. The Bill should also establish the principle that the Authority may only directly operate services under conditions of service equivalent to those that apply to private sector rail companies, and that it should do so through a subsidiary company which has accounts separate to those of the Authority (paragraph 78).

(bb) We recommend that the Government makes clear that Clauses 9 and 10 of the Bill provide that the Strategic Rail Authority may only operate rail freight services in the event that a service has failed, or an operator has withdrawn from the industry. The Bill should also establish the principle that the Authority may only directly operate freight services under conditions of service equivalent to those that apply to private sector rail companies, and that it should do so through a subsidiary company which has accounts separate to those of the Authority (paragraph 80).

(cc) We recommend that Clause 9(1) be amended specifically to make clear that the Strategic Rail Authority has powers to operate international passenger and freight rail services (paragraph 81).

40. We have revised the provisions formerly in the Railways Bill to ensure that it is beyond doubt that the SRAs train operating powers are for use in a last resort situation only. Clause 187 of the Transport Bill sets out the procedures which the SRA will need to follow before it can act as an operator for franchised services. The SRA is not in competition with other potential or actual operators unless tenders are not considered adequate, and then the Secretary of State must agree that the services should be secured otherwise than by a franchise.

41. The duty to run a service falls on the SRA when a franchise or other service fails, or where the Secretary of State determines, after the tender process, that a service eligible for franchise should be run by the SRA, or when it has an obligation inherited from the British Railways Board (BRB) to run any services.

42. The SRA will have to go through a tendering process where a service designated for franchising comes to an end at the end of its term, or because of a failure of a franchise (in which case the SRA may temporarily be running the service).

43. Where there are no tenders, the Secretary of State may either direct that a new invitation to tender is issued, or that the SRA can procure the service itself. Where tenders are received, but the SRA considers that it can run the service more efficiently or economically otherwise than through a franchise, then the Secretary of State may direct either that one of the tenders is accepted, or that further tenders are invited. At this stage, where there are tenders, the Secretary of State cannot direct the SRA to procure the service. If the further exercise results in no tenders, or the SRA remains of the view that it could procure the services more economically or efficiently, then the Secretary of State may, at this stage, direct the SRA to procure the service.

44. We accept that the operator of last resort powers need to differentiate between franchised services and freight. The SRA may only run freight services (or non franchised passenger services), where it has an obligation inherited from the BRB to provide them, or where they have ceased.

45. Where the SRA is procuring services it will be under many of the same statutory obligations as a private sector operator. For example, the subsidiary or agent of the SRA which runs the service will require a licence from the Rail Regulator, access agreements, and a railway safety case.

46. There is no territorial restriction for either last resort power and the SRA can run international passenger and freight rail services.

47. The Government will ensure, through directions and guidance to the SRA if necessary, that the SRA will set up subsidiary companies to operate any train services. In such a case, the accounts of the company would be separately identified.

(dd) We recommend that the Government re-examine and, if necessary, amend Clause 9 to ensure that in the event that the Strategic Rail Authority takes over a franchise it is able to continue to operate existing rail-link bus services, and to extend them where appropriate. We also recommend that the Clause be redrafted to make clear that the Authority will generally discourage the replacement of rail services with buses (paragraph 82).

48. The SRAs statutory role is to secure the provision of rail services. In some cases existing franchise agreements include commercial commitments from franchisees to secure rail-link bus services and, where that it is the case, it would be for the SRA to judge how best to secure the provision of those services in the event of the franchise being taken over by the SRA.

49. The Bill clarifies the SRAs powers in relation to the procurement of replacement bus services, which only apply in circumstances where rail services are temporarily disrupted or discontinued (clause 189). This provision is separate from the SRAs duty to secure continuation of rail services in the event of the take over of a franchise.

50. As regards the potential replacement of rail services by bus services, franchise agreements already require train operators to maintain the minimum service levels set down in the PSR. PSRs can be changed only by agreement with the Franchising Director (in future, the SRA). The Instructions and Guidance which we issued to the Franchising Director in September 1999 require him to secure that minimum levels of service remain at least broadly comparable to those specified in the current PSRs. This statutory instruction makes Government policy clear.

(ee) We recommend that Clause 16(3) be omitted from the Bill (paragraph 83).

51. We agree. Clause 196 of the Transport Bill gives the SRA the power to promote and oppose private Bills in Parliament. As a result of this provision, the SRA will have the power to apply for or object to orders under the Transport and Works Act 1992,due to section 20 of the Transport and Works Act 1992 (which gives such powers to those with power to promote or oppose Bills).

(ff) We recommend that the Government clarify the financial arrangements of the Strategic Rail Authority and, in particular, sets out in each of the Authority Annual Reports its planned budget for the next five years. If it does not do so, we are concerned that the Authority will not be able properly to plan its future commitments. We also recommend that the Government ensure that the existence of the Strategic Rail Authority does not lead to an expectation that it will fund all projects to improve rail infrastructure, and that the grants which might otherwise have been made in support of such projects are not jeopardised (paragraph 90).

52. The SRAs 3-year budgets will be set, along with 3-year budgets for other DETR spending programmes, in future public spending rounds. The SRAs spending plans will be published, along with other DETR plans, in the Departments annual reports. This will put the SRA in a good position to plan future commitments just as, within the 3-year plans set in recent public spending rounds, the Office of Passenger Rail Franchising has planned substantial commitments over the next ten years.

53. The shadow SRA is currently engaged in a review of potential financing options. We will clarify the financial arrangements for the SRA in the light of the outcome of that review.

54. The SRA will have a duty under clause 182(4) of the Transport Bill (often referred to as a value for money duty) to ensure that all its payments, including grant payments, are such as it reasonably considers will further its purposes economically and efficiently.

(gg) We welcome the Governments decision that fines or penalties levied against train operating companies or other companies in the railway industry will be retained for re-investment in the railway. We reiterate our recommendation that such funds should be transferred to the Strategic Rail Authority(paragraph 92).

55. Clause 200 provides for penalty income paid to the SRA and the Rail Regulator to be forwarded to and retained by the SRA rather than paid into the Consolidated Fund.

(hh) We trust that the Strategic Rail Authority will always act in an imaginative way to support innovative projects which will bring benefits to passengers, or which will help to develop the railway network (paragraph 93).

56. We agree that the SRA should act in an imaginative way and support innovative projects. For example, the SRA will administer the Rail Passenger Partnership Fund which is designed to encourage and support innovative proposals for rail passenger services at a local and a regional level, to promote modal shift and integration with other forms of transport.

(ii) We are concerned about the decision that the Strategic Rail Authority should take over responsibility for grants to the Passenger Transport Authorities. Whilst it is important that the Authority is able to provide a national strategy for the development of the railway, it is equally important that the independence of the Passenger Transport Authorities is maintained, and we are particularly concerned about light rapid transit systems, which we discuss later in this report. We therefore recommend that the powers of the Strategic Rail Authority in funding Passenger Transport Authorities in future should be clarified, and we recommend that the Government do so immediately, to make sure that local integrated transport plans are not jeopardised (paragraph 95).

57. We acknowledge the Committees concern that the SRA will be responsible for the payment of grant to the Passenger Transport Authorities, and that the independence of the PTAs should be maintained, particularly in respect of light rapid transit systems. It is not the Governments intention that the SRA should fund PTAs except principally in relation to their heavy rail responsibilities. Clause 134 enables the Secretary of State to make grants to PTAs. However, the Government believes that it is logical for a strategic rail body to be responsible for funding all rail services. Subject to the outcome of franchise renegotiations, present franchises will result in PTE funding accounting for nearly one third of all subsidy for heavy rail services by2003. The SRA would be less able to discharge its responsibilities for the Great Britain railway effectively if it controlled only two-thirds of its public funding.

58. The Government would not favour this change in funding arrangements if it believed that it would hinder PTAs/PTEs fulfilling their role in integrated local transport, including planning all public transport services. The ability to specify services under section 34 of the Railways Act 1993, supplemented by the power of the Secretary of State to resolve disputes between a PTE and the SRA and to direct the SRA, means that PTAs/PTEs will continue to have a unique and prominent role in franchising.

59. For the SRA to fulfil its strategic role, its powers will need to extend to light rail systems. An example would be where an opportunity arose for the SRA to develop a light rail operation where this represented a greater value for money solution than continuing with heavy rail. In such cases the SRA would need the power to make grants, loans or give guarantees for light rail systems. However, it should be noted that such powers are intended to complement the existing arrangements, and not replace them. The Department (DETR), rather than the SRA, will continue to be the principal source of public funds for light rail schemes.

(jj) We accept that the Strategic Rail Authority should be able to support the carriage of freight by rail other than through the existing Track Access and Freight Facilities Grant regimes. We therefore trust that the wide powers given to the Authority by Clause 8(1) will apply in the case of freight. If they do not, we recommend that the Bill be amended to permit the Authority to make grants or loans, or give guarantees for any purpose which will promote the carriage of freight by rail (paragraph 98).

60. We agree that the SRA should be able to encourage the growth of rail freight in a broader way than through the current freight facilities grants and track access grants. We have, therefore, removed the constraints which were in Schedule 2 to the Railways Bill and left the SRA with a broad power under clause 186 of the Transport Bill.

61. In order to comply with our European obligations, the schemes currently outlined in sections 137 and 139 of the Railways Act 1993 will need to be replaced initially by similar rules. But removing the restriction in Schedule 2 of the Railways Bill will enable modern and flexible schemes to be developed which will meet the needs of the rail freight industry.

(kk) We recommend that the Bill be redrafted to permit the Strategic Rail Authority to dispose of property only when it has consulted all interested parties through an established procedure, and is satisfied that it no longer has any potential for railway-related development. In particular it should consider whether the land might be used for the development of rail freight or integrated transport facilities such as a car park or a bus station. In any event the Authority should offer a first option to purchase such property, at a market valuation to be determined independently, to those involved in the railway industry, including heritage railway groups. Any revenue raised by the Authority through the disposal of property should be retained by it for reinvestment in the railway. We repeat our recommendation that the Authority should enjoy a first option to buy any land which Railtrack wishes to sell, at a market valuation to be determined independently, where the Strategic Rail Authority believed that the land may be needed for future operational railway purposes. Nonetheless, it is important that a mechanism should be established for doing so without the necessity for undue delay or bureaucracy (paragraph 103).

62. In July 1998 the Government announced a suspension of sales of British Rail property pending a review by the BRB. We made it clear that the purpose was to ensure that henceforth Railtrack, the rail businesses, and local authorities would have ample opportunity to bid for those sites still in the BRB portfolio which had a realistic prospect of transport use in the foreseeable future. These would be sold at open market value.

63. In the light of the review, the Government has agreed with the Chairman of the BRB new marketing procedures which will give priority to transport use. The arrangements (and the end of the suspension) were announced on 14 September 1999.BRB have circulated to interested parties (transport operators and local authorities)the detailed marketing process. Under these arrangements the rail industry, local authorities, and other transport interests, are being informed of all the properties which BRB have available, not just those judged to be of future transport potential. They will also be given prior notification of the intention to market all sites as they come up for sale and have the opportunity to seek a delay in order to work up a bid.

64. The Boards review, which included consultation with a large number of rail industry, local authority, and other interested parties, identified some 1400 sites within its portfolio with some 200 as having future transport potential. In identifying sites with transport potential the Board decided to identify all sites which in their opinion had supply-side transport characteristics, rather than try to anticipate whether there would be actual transport demand for a given site.

65. The Board concluded that the remainder of the properties were small, disparate sites or had development problems such as poor access or land contamination. Nevertheless the new marketing process provides for anyone to claim that any site within the portfolio has transport potential and to seek an extension of time to develop a bid. If the BRB refuses such an extension there is the opportunity for appeal to the Department.

66. All sites are to be sold at open market value in order to protect the taxpayers interest and to ensure transparency. The Government is not attracted to the option of retaining property in case it is needed for a future, as yet unidentified, transport use. Receipts from sales represent a substantial element of BRB/shadow SRAs funding arrangements without which any shortfall would need to be found from elsewhere within its spending programme. The creation of a land bank by the SRA would therefore impose a cost on the public sector without any guarantee that private sector operators would bring forward any scheme at all. It would also leave land derelict which might serve a useful alternative purpose and/or meet important local planning objectives. The same applies to land being disposed of by Railtrack. It should be remembered that Railtrack cannot simply dispose of operational land essentially land used for railway purposes in the last five years without first going through the statutory closure process, which would involve widespread consultation, including with the SRA and the Secretary of State.

(ll) We recommend that Clause 17 and Clause 23 of the Bill be amended so that, with the exception of lines which are used predominantly as a means of public transport, heritage railways are excluded from their provisions, although we recognise that to do so raises problems of defining correctly the lines involved (paragraph 107).

67. Clauses 198 and 203 of the Transport Bill provide for the Secretary of State, after consultation, to grant exemptions. The Government intends to lay orders exempting heritage railways from these provisions relating to powers of direction and to consumer representation. We will discuss an appropriate statutory definition with representatives of the heritage railways.

(mm) We recommend that the Government re-examine the Bill to ensure that the remit of the Rail Users Consultative Committees is extended to light rail systems (paragraph 109).

68. We have noted the Committees recommendation that the remit of the Rail Users Consultative Committees be extended to light rail systems. Passengers using the Manchester Metrolink, the Tyne and Wear Metro, and the Docklands Light Railway are already represented by the relevant Rail Users Consultative Committee, and so will be passengers using the Croydon Tramlink, when it opens. We will consider further and discuss with interested parties the proposal to extend the remit of Rail Users Consultative Committees to include all light rail systems, and will do so in time to reach a view before the Bill is enacted.

(nn) We accept that there is an argument for bringing together responsibility for light rail schemes and for heavy rail schemes and that this could lead to better integration between them. There is also a case for retaining the status quo in the funding of the Passenger Transport Authorities and of light rail schemes, which could ensure better integration of local transport and the protection of light rail projects. We look forward to the Government clarifying and expanding on their case for giving to the Strategic Rail Authority the responsibility for funding light rail, and we will return to the matter during our inquiry into light rapid transit systems in the New Year (paragraph 110).

69. Please see above response to recommendation (ii).

(oo) We recommend that the Government re-assess whether Eurotunnel plc should be included within the terms of the Bill (paragraph 111).

70. The Government has concluded that it would not be appropriate for Eurotunnel to be brought within the scope of the Transport Bill, as its functions are overseen by an Intergovernmental Commission established by international treaty and representing the Governments of the UK and France. These arrangements cannot be varied by the UK Government acting unilaterally.

(pp) We accept that the Strategic Rail Authority should not be able to make amendments to the licences of train operating companies where such changes would be properly dealt with through a franchise agreement. We therefore recommend that the Government re-examine Schedule 4 of the Bill with a view to offering some assurance to the train operating companies about this matter (paragraph 115).

71. The Department has discussed train operators concerns with the Association of Train Operating Companies and other interested parties. The Railways Bill provided safeguards in the form of placing the SRA under the same duties as the Rail Regulator(in the consumer protection role), and enabling licence changes to be referred to the Competition Commission if not agreed.

72. In the light of train operators concerns and the Committees views, we have now provided an additional safeguard to prevent the SRA from exploiting its dual position as contractual partner and licensing body for consumer protection matters. Schedule 16 to the Transport Bill in effect provides that the SRA cannot modify licences (with or without the agreement of the licence holder) unless the independent Rail Regulator also agrees. Therefore the final decision on whether a licence should be modified with the agreement of the licence holder or a reference made to the Competition Commission will be made, as presently, by the Rail Regulator. The Government considers that this change meets the concerns raised about the ability of the SRA to impose costs on operators without an effective check.

(qq) Although we accept that the rolling stock leasing market has become more competitive, and we note that the Rail Regulator believes that he has adequate powers under the Competition Act 1998 to deal with any abuse of their dominant market position by the rolling stock leasing companies, we recommend that the Bill be amended to include reserve powers to regulate the ROSCOs should such regulations prove necessary (paragraph 118).

73. Clause 217 of the Transport Bill puts beyond doubt that the Rail Regulator has concurrent powers with the Director General of Fair Trading to enforce the Competition Act in relation to the provision or maintenance of rolling stock. That Act prohibits abuse of a dominant market position and contains provision for penalties. There is therefore no need for reserve powers in the Transport Bill.

74. The former Rail Regulator negotiated, with the rolling stock leasing companies, voluntary codes of practice. The Franchising Director has also negotiated a contractual safeguard against the excessive pricing of former British Rail stock. This can be used to require the rolling stock leasing companies to re-lease this stock to new franchisees on the same terms and conditions as the current lease for up to three years after franchises expire. The Competition Act regime plus the voluntary and contractual safeguards constitute an effective package of competition and regulation.

(rr) We welcome the provisions of Clause 17, and we specifically recommend that this Clause of the Bill should not be amended. We do, however, believe that the Rail Regulator should publish the basis on which he intends to establish what is an adequate reward for an alteration to rail infrastructure(paragraph 120).

75. The Government agrees that it is right that the SRA should give a unified direction to the railway, and therefore be able to prevent applications to the Rail Regulator which are not consistent with the overall strategic direction. But the Government has concluded that there is no strategic advantage in requiring the SRA to administer all applications for investment directions, acting as no more than an agent for train operators or other public sector funders who seek the benefit of a direction.

76. Clause 198 of the Transport Bill therefore now provides that the power to apply to the Regulator to issue directions is available to the SRA or to any person who has obtained the consent of the SRA for his proposal. We believe that this amended provision continues to meet the Committees concern, because the SRA will decide which requests should be considered by the Rail Regulator and consent will be refused if proposals do not meet the railways strategic needs.

77. The Government accepts the principle that the basis of charging for infrastructure provision should be as transparent as possible. In his forthcoming perodic review of access charges, the Rail Regulator intends to set out much clearer criteria for remunerating investment in enhanced facilities by Railtrack. These criteria would be applicable to voluntarily agreed investment as well as to cases where the Regulator issues directions under clause 198 of the Transport Bill. These principles will also be applicable to remunerating investment by other facility owners undertaken in accordance with directions issued by the Regulator.

(ss) We recommend that Clause 18 be amended to reflect concerns about cherry-picking of profitable routes by open access passenger operators. We repeat that responsibility for dealing with applications for open access rights for passenger services should pass to the Strategic Rail Authority. At the very least the Rail Regulator should be required to consult the Authority before approving an open access licence (paragraph 123).

78. The Government shares the Select Committees concern that destructive competition should not be allowed to undermine the provision of a GB network of passenger services secured by the SRA under franchise agreements. The Transport Bill deals with this issue in a number of ways.

79. The Governments preferred approach to the issues raised by the Committee has been to change the framework within which the SRA and the Rail Regulator act. The consideration of proposed access rights must be a matter for the Regulator, since this is about refereeing new contractual arrangements. Under the Railways Act 1993the Regulator has a duty to have regard to the financial position of the Franchising Director. This already makes it hard for the Regulator to allow cherry-picking, because cherry-picking could undermine the economics of franchising. The duty has been enough to ensure that even under the 1993 regime, the Regulator has never approved access rights for a new passenger service unless the service had the support of the Franchising Director. The Government expects that to continue to be the case.

80. However, the Transport Bill (like the Railways Bill) strengthens the Regulators duties to reject cherry-picking proposals. The current duty in the Railways Act1993 to promote competition is amended by clause 199 to give the Regulator a duty to promote competition for the benefit of users of railway services. The Regulator will also be under a new duty to facilitate the furtherance by the SRA of any of its strategies. These strategies may include a strategy in respect of the provision of a national franchised passenger railway in Great Britain. Thirdly, the Regulator will be under anew duty to have regard to any general guidance given to him by the Secretary of State on railway matters. This guidance will, among other things, set out the type of railway that the Government wishes to see, and the Governments preferred balance between franchised and any non-franchised services. Finally, the provisions of the Railways Act 1993 which deal with access are amended by clause 187 to make it absolutely clear that the Rail Regulator is able to refuse open access if it would impede the provision of services under a franchise.

81. The Government is clear that this framework will be sufficient to guard against any destructive competition.

82. On the specific point about licensing, the Rail Regulator is already obliged to consult on the issue of new licences.

(tt) We welcome the provisions of Clause 19 of the Railways Bill. We recommend, however, that the Rail Regulator publish the basis on which he intends to calculate fines, in order to make the arrangements transparent(paragraph 128).

83. We agree that the Rail Regulator and the SRA should ensure that the basis on which penalties are imposed is transparent. Clause 200 of the Transport Bill provides that they must both prepare and publish a statement of policy with respect to the imposition of penalties and the determination of their amount.

(uu) We recommend that Clause 19 of the Bill be amended to require the Strategic Rail Authority to consult with the Passenger Transport Executive if it intends to enforce a franchise to which the Executive is a party, and to take enforcement action against any breach of a franchise to which a Passenger Transport Executive is a party if the Executive makes a reasonable request that it should do so (paragraph 130).

84. It is a requirement of the existing Instructions and Guidance issued to the Franchising Director that he maintains effective working relations with PTAs/PTEs in respect of franchise agreements of which they are co-signatories. It is intended that similar requirements be made of the SRA under clause 182(5) of the Transport Bill. There are agreements in place between the Franchising Director and the PTEs which are signatories to franchise agreements, which bind both parties to consult and co-operate in general terms as well as specifically on, amongst other things, enforcement matters. The Government would therefore expect the SRA to consult PTEs as a normal part of their working procedures, including where enforcement action is proposed. This is why we have concluded that there is no need to incorporate provisions for consultation in the Bill. The Governments view is that the best way to ensure that consistent standards are applied would be for enforcement powers to be left solely with the SRA, as the body responsible for standards of performance and enforcement in Great Britain.

(vv) We recommend that the Bill be amended so that the Secretary of State be required to consult representatives of passengers, rail freight users and the railway industry prior to allowing a line closure, particularly a major closure under Clause 21. We also recommend that the land on which a closed line runs should be safeguarded for future railway development (paragraph 132).

85. The Railways Act 1993 currently provides for comprehensive consultation with the Rail Users Consultative Committees and the railway industry before any major closure decision is made. This ensures that passenger and, where relevant, freight interests are properly considered before any services are withdrawn or facilities altered. The full closure procedure (usually involving a complete service withdrawal) provides for objections to be registered and hardship to be considered by the Rail Users Consultative Committee before a decision whether to close is made. In appropriate cases, the Regulator may categorise a closure as minor and issue a certificate allowing it to go ahead without recourse to the full procedure. The consultation procedures set out in the Railways Act will continue in force, but the Transport Bill transfers responsibility for conducting them from the Rail Regulator to the Secretary of State(clause 208) and transfers decisions on minor closures from the Regulator to the SRA(paragraph 25 of Schedule 16).

86. In the recent consultation draft of PPG 13 on Transport (October 1999), the Government set out a number of policies to encourage local planning authorities to protect land with the potential for developing rail infrastructure. Paragraph 80 reads:

In preparing their development plans and in determining planning applications, local authorities should:

• identify and where appropriate protect sites and routes, both existing and potential, which could be critical in developing infrastructure to widen choices for both freight and passengers...and ensure such disused transport sites and routes are not unnecessarily severed by new buildings and non-transport land uses;
• on disused transport sites consider uses related to sustainable transport first, before other uses.

(ww) We recommend that the Government as a matter of urgency clarify with the administrative staff employed by London Transport who provide support to the British Transport Police what their employment position will be once the Strategic Rail Authority is established. We also recommend that the Government should make appropriate arrangements for all British Transport Police staff if, as we recommend, responsibility for them is transferred to an independent transport safety authority (paragraph 133).

87. The Transport Bill will transfer responsibility for the BTP from the BRB to the SRA. This is an interim measure, as the Government announced on 31 July 1998(Official Report, column 637) its intention to establish, when a suitable legislative opportunity arises, an independent national police authority for the BTP. This policy has the support of the BTP, the BTP Committee, the shadow SRA and the BTP staff associations.

88. When the BTP becomes the responsibility of the SRA, those London Underground (LUL) civilian staff on existing LUL contracts who support the BTP will continue to be employed by LUL on LUL contracts. All new staff will be recruited by the SRA. It is the present intention that once the independent police authority is created all of its staff (police officers and civilians, whether working on the national railway or the London Underground) will be employed by the new authority.

89. The LUL staff working on BTP matters will not be directly affected by the Public Private Partnership for London Underground as they will remain within the public sector organisation.

90. LUL civilian staff have been briefed on their position. If later any LUL staff are to transfer when a new police authority is created, those affected will be fully consulted.

(xx) We recommend that the operation of, and current rules applying to, the British Railways Superannuation Fund and other pension schemes previously the responsibility of the British Railways Board are not affected by the provisions of the Railways Bill (paragraph 134).

The Bill will not alter the pensions arrangements under the British Railways Superannuation Fund or other pension schemes, save to ensure that pensions provisions are preserved unchanged in the new structure, even once the BRB is dissolved. All employer powers and responsibilities under these schemes will be vested in the SRA.

(yy) We reiterate our belief that significant changes must be made if the Rail Users Consultative Committees are to become influential and effective representatives of the interests of rail passengers. Their names must be changed in order to raise their profile, they must be adequately funded, and they must become able more freely to regulate their own affairs. We recommend that the Government re-examine the Bill to ensure that the Committees will be able to achieve these objectives. We further recommend that the Government ensures that the Consultative Committees are able to operate sufficiently independently of the Strategic Rail Authority, and reviews the relationship between the two bodies after an appropriate interval (paragraph 139).

92. The Government shares the Committees wish to see effective rail consumer bodies championing passengers interests. The Transport Bill now includes:

• the renaming of the Central Rail Users Consultative Committee as the Rail Passengers Council, and the Rail Users Consultative Committees as the Rail Passengers Committees (Clause 202);
• new duties to review matters affecting the interests of the public, to make representations, and to cooperate with other bodies representing public transport users (clause 203);
• power for the SRA to remunerate all Council/Committee members, not just the Chairmen as at present (paragraphs 2 and 3 of Schedule 22);
• repeal of restrictive provisions governing the procedures of the Council/Committees (paragraphs 8 and 9 of Schedule 22).

93. We wish the re-launched Council and Committees to be at the heart of decision making on consumer issues, but recognise the importance of these bodies remaining independent. We will review the relationship between the SRA and the consumer bodies after an appropriate interval.

(zz) As we have said, we welcome the provisions of the Railways Bill. We believe that it offers the chance to bring greater clarity and direction to the railway industry, and that its provisions are therefore vital. Nevertheless, we have recommended a number of amendments to the Bill, and suggested that various matters should be clarified. These are listed below. The Bill should not make further progress, whether it is reintroduced as a single Bill in the new Session of Parliament or as a wider Transport Bill, until these matters are resolved (paragraph 140).

94. The Government believes that this document, including the changes incorporated in the Transport Bill so far, constitutes a detailed response to the Committees valuable report.

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