Members present:

Mrs Gwyneth Dunwoody, in the Chair
Andrew Bennett

Mr Brian H Donohoe
Mrs Louise Ellman
Chris Grayling
Helen Jackson
Miss Anne McIntosh
Mr Bill O'Brien
Mr George Stevenson


Examination of Witness

RT HON STEPHEN BYERS, a Member of the House, Secretary of State for Transport, Local Government and the Regions, Department for Transport, Local Government and the Regions, examined.

Chairman: Secretary of State, we have a small piece of housekeeping to perform. Declarations of interest?

Mr Stevenson: George Stevenson, member of the Transport & General Workers' Union.

Chairman: Gwyneth Dunwoody, Rail, Maritime & Transport Union.

Mr Donohoe: Member of the Transport & General Workers' Union.

Mrs Ellman: Louise Ellman, member of the Transport & General Workers' Union.

Miss McIntosh: Anne McIntosh, interests in Railtrack, First Group, Eurotunnel, BA, BAA, and the RAC.


  1. Thank you. Secretary of State, I am going to ask you to identify yourself. Before we start the session perhaps I could make it clear that you and I had agreed that it would be more convenient for you if we switched the order of the witnesses round, just so that I can be exonerated before some of my colleagues of the fourth estate, who might think I am seeking to cause alarm. Could I ask you to identify yourself for record.
  2. (Mr Byers) I am Stephen Byers, Secretary of State for Transport, Local Government and the Regions. Can I thank you for agreeing to take my evidence at 4 o'clock. As I explained to you, I have a long-standing engagement at 6 o'clock and that will enable me to discharge that obligation as well as giving evidence before your Committee.

  3. Did you wish to make a general opening statement?
  4. (Mr Byers) If I could because I do think the 10 Year Plan is very significant as far as the Department is concerned. When it was published just over 18 months ago the 10 Year Plan for Transport was widely acknowledged as a fundamental change in the way in which we invest in transport. It is not only a major increase in funding but an end to the decades of feast and famine, an approach which had produced short-term thinking and shoddy services. The 10 Year Plan brought in a new long-term integrated planning framework. The greater certainty and the sustained extra investment the Plan embodied have been widely welcomed, including by your Committee. I am determined to maintain that approach and to hold to the objectives and the commitments contained in the Plan. That is not to say that the Plan is set in stone. Any long-term plan needs to be flexible enough to take account of new pressures and new developments, developments such as the recent events in the rail industry and the difficult changes that we have had to make. That is why the Plan has built in a provision for regular reviews and it is why the first of these will take place this summer, as was always envisaged, in conjunction with the cross-government public spending review. The review will allow us to update the Plan and to take account of new developments as well as reporting on progress made to date in delivering on the Plan itself. We have some difficult challenges ahead in delivering the transport system that we all want to see. On the railways we have to improve performance and bring in the extra private investment. I know that Richard Bowker, the Head of the Strategic Rail Authority, has confirmed to you that he is confident that this can be done. Indeed, in the last few weeks we have seen some 470 million of private investment committed through the new Chiltern franchise and the two-year extension awarded to GNER on the East Coast Mainline. Certainly the much needed changes that have been made over the last few months give me every confidence that in railways we have begun to turn things round. Some other early actions are also beginning to have an effect. The doubling of funding for local authorities' transport plans has meant that literally thousands of smaller local schemes and many major ones as well have now started across the country, and nearly a dozen new light rail schemes are now at various stages of planning. It is, of course, still very early days in the life of the Plan. Funding under the Plan started to flow in April of last year so we are still less than one year into the 10 Year Plan, but I am convinced that the 10 Year Plan continues to represent the right way forward for transport. In July I shall announce the outcome of our review and I look forward to the Committee's report to inform our thinking.

  5. All that sounds very encouraging and positive, Secretary of State but, to be honest with you, we have not found many of our witnesses who are prepared to say that you are on target. Do you think you are on target?
  6. (Mr Byers) I do believe we are - to the targets set down in the 10 Year Plan. I do believe it is still very early days but I am confident that with the measures that we are putting in place, whether in railways or in other parts of the transport system, we will be able to meet those ambitious and challenging targets that are contained within the Plan. I will be reporting in July about the progress we have made. If there are any areas where we might be slipping behind I will want to report on the action we want to take to make sure that we make up lost ground, if there is lost ground, and that we meet the targets which have been set.

  7. So we take it definitely that you would want to publish interim targets for 2005?
  8. (Mr Byers) I want to report in July on the progress we have made in the targets in the 10 Year Plan.

  9. But we need a way of assessing how far we are along in your 10 Year Plan and how successful you are keeping to some of the undertakings. We can take it that your report will not only give us targets for the next bit but will tell us where we are at the present time?
  10. (Mr Byers) The strength of what I want to do in July, if it has a strength, will be to report on progress towards the targets set out in the 10 Year Plan, so it will be an opportunity of assessing the progress that we have made, reflecting on new developments, considering any assumptions that may have been built into the Plan which a year on may not be as strong as perhaps they were when the Plan was first put together, and then saying publicly how we intend to move on as far as the Plan is concerned.

  11. Can you tell us about the traffic and pollution forecasts from mid-2000 to mid-2010? Can you assess progress over that?
  12. (Mr Byers) We will be stating the progress that we have made towards all of the targets contained within the 10 Year Plan which can then be judged accordingly. Some will be very positive. Some, as I say, may not be moving as quickly as we would like and we then need to say what steps we intend to take to achieve the targets set in the Plan.

  13. You will forgive me if I ask whether it is a flexible date? It is not one that will move backwards at any point?
  14. (Mr Byers) Which is not a flexible date?

  15. Your interim review, your July assessment?
  16. (Mr Byers) It will be July 2002.

  17. You do not mind my asking?
  18. (Mr Byers) No, it is July 2002, not July 2003.

    Chairman: How kind. Mr O'Brien?

    Mr O'Brien

  19. The question of congestion of our roads is a very important issue. It is reported that we are the most congested country in Europe. The question of congestion charging is also in the frame. What is the situation arising out of the Department's scheme for the 20 charging schemes and the fact that it will not reduce traffic but could reduce congestion by three per cent? What comments have you got on that, Secretary of State?
  20. (Mr Byers) We have very much left it to the local authorities themselves to come forward with congestion charging schemes. We know that in London the Mayor has decided to go ahead with the scheme that he wants to introduce from 17 March next year in London. We have no power to disapprove that. There is no veto over the scheme itself. With other local authorities they do have to obtain the approval of the Secretary of State before they can go ahead. I think where we are at is that many of those local authorities are standing back and waiting to see how the London scheme progresses and what difficulties the London scheme might identify. I get that feeling just in conversations I have had with those local authorities that certainly earlier indicated they would be thinking about the introduction of some congestion charging policy.

  21. It has been suggested that you assume that urban regeneration will have an impact on reducing traffic in the urban areas. Has there been any study into this and what percentage of reduction of traffic in towns and cities would contribute to the urban regeneration?
  22. (Mr Byers) I am not aware of any detailed studies which have been carried out but I am more than happy to check to see if there is detailed work on this. The important point about urban regeneration is that effective transport systems - and that will mean reducing congestion - is one of the positive contributions that can be made in terms of improving the competitive position of business. I know it is one of the complaints that I am sure members have heard- I have certainly heard it as Secretary of State - that as far as London is concerned there is a view that the level of congestion is now getting to such a pitch that it is affecting the competitive position of businesses in the City of London, which is why we do need to move ahead with the investment that we want to see. There are real issues to do with urban regeneration where the transport infrastructure is going to be a key part in improving the situation as far as those areas are concerned.

  23. It is suggested that a real "anti-motorist"policy would be to do nothing about congestion on our roads. The fact that motorways are now becoming conjested, Secretary of State - would it not be in the best interests to wait until the London scheme has been proved (which could take another two or three years) but tackle congestion in some of our urban areas and cities and the motorways?
  24. (Mr Byers) As far as the cities are concerned, I do think it is right to leave it to local authorities to come forward with their own proposals.


  25. You have of course calculated, have you not, that some of those areas will have congestion charges?
  26. (Mr Byers) There is an assumption that there will be some congestion charging schemes introduced but the assumption is that it will be in the life-time of the Plan itself, not in the next two, three, four or five years. If the London scheme starts as is proposed in March of next year, it is going to be very much the litmus test. Lots of local authorities are looking to see how that scheme operates. If it is a success I think we will see a number bringing forward their own proposals. There is an issue which is the responsibility of my Department directly, which is in relation to the motorway system in particular and the congestion we are seeing there. Part of that is a road-building programme in a sensitive way, which the Committee will be aware of, but also about managing the network far more effectively. We do not run the network. We build the roads and then we leave them and we do not manage the network. I think we can do a lot more in terms of managing the road network. We had an example a couple of weeks ago where there was a very serious accident on the M3. The consequence of that was that there was total grid-lock for about eight hours because the incident was not effectively managed and the road was not cleared as quickly as it could have been. There are lessons to be learned and we have got some pilot projects operating at the moment to see how we can manage the network far more effectively and efficiently than we do at the moment. That might be one way in which we can relieve congestion.

  27. Does that include motorway tolling? "Management" rather implies that you could take control of all sorts of things.
  28. (Mr Byers) By running the network I mean, for example, on the M25 if there is an accident, hy does it takes four hours to clear it?

  29. That was the only aspect that you were thinking of?
  30. (Mr Byers) I was not thinking beyond that in the context of what I have just been saying, Chairman.

    Mr O'Brien

  31. Can we build ourselves out of congestion on the motorways? Can we build motorways to ease congestion on other motorways?
  32. (Mr Byers) There can be targeted road improvements that will help but I do also believe that the challenge that we face is to look at how we manage the motorway network system more effectively than we do at the present time.

    Mrs Ellman

  33. Does the letter from so many investment bodies published in today's national newspapers make you doubt whether you are going to get the 34.3 billion investment in rail?
  34. (Mr Byers) No. I can understand the motives behind those that have written the letter. I have to say, and I think Richard Bowker confirmed this when he gave evidence before the Select Committee, there is no indication that the private sector is shying away from the Public-Private Partnership approach to transport projects. Most of them do make a clear distinction between the contractual relationship that the private sector has with the government in relation to a PPP partnership as opposed to the situation that is applied with Railtrack where you had a company which was quoted on the stock market in a quite different situation.

  35. Have you made any alternative plans should the investment not arrive?
  36. (Mr Byers) We are confident that the investment that we believe will come from the 10 Year Plan as far as the private sector is concerned will still be there. As I have said, since the turn of the year in relation to two specific franchise, a renewal in relation to Chiltern and an extension in relation to GNER, the Strategic Rail Authority calculate that something like 100 million of private investment will come linked to the GNER two-year extension. I think they are projecting something like 370 million potentially of private investment on the Chiltern franchise, so there is 470 million in the last eight or nine weeks coming from private investment in just two franchises. There is no indication that the City and financial institutions are walking away from transport PPPs.

  37. Are you saying then that you are disregarding the possibility of lack of confidence from private investors?
  38. (Mr Byers) As I say, there is no sign that that is the case and that is why we are confident that the sums which have been mentioned in the 10 Year Plan will be achievable. I was concerned about some of the comments contained in the newspapers today about the view of the Strategic Rail Authority in relation to private investment, and I reminded myself that in the Strategic Plan published by the Strategic Rail Authority, page 25, states very clearly: "The total amount of private sector investment leveraged by this Plan is expected to be very similar to that envisaged in the 10 Year Plan" - and that is 34 billion. I also because of comments made from the Strategic Rail Authority spoke to Richard Bowker who made the following comment which I am allowed to quote publicly. "It is rubbish to say that I found the Secretary of State's funding estimates to be wildly optimistic. The SRA's Strategic Plan contains sufficient results to deliver the 10 Year Plan targets, subject to the clear assumptions made. Many people seem intent on talking the railway down, suggesting that the private sector is not interested in investing in the railway. Look at the facts. The private sector has invested in the Chiltern franchise and in the East Coast franchise. Private investor interest in major infrastructure upgrades is growing. I know that because I am in daily discussions with them." So it is very clear from the comments which have been made by the Strategic Rail Authority and by the Chairman Richard Bowker that there is no indication that the City is walking away from investing in the railways or indeed elsewhere in the transport system.

  39. What about the impact of the delays caused by Railtrack being in administration longer than anticipated and the delays in setting up the Special Purpose Vehicles? Have you incorporated the impact of that into your estimates?
  40. (Mr Byers) The Special Purpose Vehicles are a new entity that we want to use particularly for the upgrades that we want to see on the network, and they will be in place when we are ready to move as far as the upgrades are concerned. On the original plan we were never going to be in that situation in the period that we are now at, so there has not been a delay as far as they are concerned. It is worth reminding the Committee that Railtrack in administration is not just sitting there doing nothing. Railtrack in administration is actually in the last few months doing a far better job of running the railway network than was the case in the autumn of last year when we had management in charge - senior executives, the Chief Executive and the Chairman - who, understandably, were interested in securing shareholder value and arguing the case for shareholders. They have now moved to Railtrack Group where they can pursue that particular objective, but we have been able to move in engineers who know about railways to head up Railtrack plc. As a result of that, certainly anecdotally talking to train operating companies, there has been a dramatic improvement since the turn of the year as far as the performance of Railtrack is concerned. Railtrack in administration is not lost time. It has provided the opportunity of focusing on the day job of getting the network running effectively as well as making sure - and this is the responsibility of the Administrator - that when Railtrack comes out of administration there is a strong vehicle that will be focused on putting the interests of the travelling public first.

    Q: Could that tempt you to keep Railtrack in administration for a little longer than necessary?

    (Mr Byers) No. I think for reasons that I am sure the Committee would understand I personally would like to get Railtrack out of administration as soon as possible. However, there is a proper process that has to be completed by the administrator because the period of administration and the task of the administrator is not just to make sure that we have a strong successor to take over from Railtrack - that is the part of the administrator's responsibility - but it is also to make sure that the shareholders get the value in Railtrack to which the shareholders are entitled, and that is a clear responsibility on the administrator and he will want to make sure over the next few months that, whatever happens, he secures the best deal that he can for those shareholders. So he will want to take time to do that, although I think the administrator as well recognises that it is in everybody's interests to get Railtrack out of administration as soon as is possible, bearing this mind his legal obligations to shareholders and, also, to have a strong successor to Railtrack.


  41. Yes. He did tell us he thought 4-6 months.
  42. (Mr Byers) From when he gave evidence?

  43. Yes.
  44. (Mr Byers) He certainly indicated to myself as Secretary of State that September this year would be the time at which he would hope to be out of administration.

    Chris Grayling: Mr Byers, you just said that special purpose vehicles would be there when they were needed, and that they would be according to plan, if I understood correctly. I spoke to two senior executives in franchises this morning who told me the opposite. They told me of one specific project that is timetabled within the Strategic Rail Authority's plan that is running at least two years behind schedule --

    Chairman: Could you give us their names? If you are going to quote, I think you should make it clear who they are.


    Chris Grayling

  45. These are two of the London franchises who are directly involved with SPVs.
  46. (Mr Byers) The question I think the record will show was in relation to Railtrack being in administration being the cause for delays in the SPVs and, if they are already two years behind schedule, I do not think that could be put down to Railtrack being in administration.

  47. It is two years behind what is specifically stated in the Strategic Rail Authority plan. Can I encourage you to go back? Is it the case that in your view the SPVs are in development, ready to meet the plans as set out by yourselves and the Strategic Rail Authority, or is that not the case?
  48. (Mr Byers) As I say, I think the particular question was in relation to Railtrack being in administration and the delays to SPVs as a result of that. There is no secret, because I think this may be evidence I have given to this Committee before, that the Strategic Rail Authority was struggling to set up the concept of SPVs, and this may be a reflection of that. I think the Committee has heard from me before about the delay that there has been in establishing special purpose vehicles which is regrettable. The work is now going on but the specific question I think, if I am correct, and the record will show this, was in relation to Railtrack being in administration delaying SPVs yet further and I do not think that is the case.

    Mr Stevenson

  49. Could I follow that up? If September is the date when Railtrack comes out of administration this year, it will take, we are advised, something like six months before special purpose vehicles can be set up. If that is the case, and I think that is a reasonable assessment to make, then we could be looking at - what, three years into the plan before any private money is available for infrastructure development? Would you accept that as a possibility?
  50. (Mr Byers) I would not because it assumes that no work is being done at the moment: that somehow everything is being put on hold until Railtrack comes out of administration. I think it is worth reminding ourselves that the Strategic Rail Authority is now taking a lead role in developing the concept of SPVs to a far greater extent than perhaps they were before. So Railtrack, or its successor, will clearly have a key part to play and it will be one of the parties in a special purpose vehicle, most probably. It does not have to be the case but most probably will be, but that does not stop the detailed financial and legal work going on at the moment - and, indeed, that work is going on. As we have heard from Mr Grayling, there are quite detailed discussions going on with some of the existing franchise holders, or some groups to whom an in principle agreement has been made to award a renewed franchise, where they are talking in detail about using an SPV for the future. They may be going rather more slowly than we would like, but the work is going on.

    Chairman: But you could give us a timetable?

    Mr Stevenson

  51. I always defer to you Mrs Dunwoody, as well you know, but that was my next question. If you would not accept that albeit generalised possible timetable of September coming out of administration and it being six months later before the SPVs can be set up - which you say you do not, can you give us some indication, Secretary of State, when you do believe SPVs will kick in, assuming that Railtrack comes out of administration in September?
  52. (Mr Byers) There are discussions going on at the moment, commercial discussions, with various franchise holders about using SPVs as far as they are concerned. It is on-going, so this is happening whilst Railtrack is in administration, so we do not have to hold back until Railtrack comes out of administration. As we have heard from Mr Grayling, that is the case, so there is work going on at the present time.

  53. Finally, on that, before I move on, do you accept or not that it could be six months, something of that timescale, after Railtrack comes out of administration, before SPVs are set up?
  54. (Mr Byers) I honestly do not think it is crucial and dependent on Railtrack coming out of administration. I think it is dependent on the parties concerned (1) reaching a commercial deal that they are all satisfied with and (2) special purpose vehicles are far more difficult than people originally thought they would be --


  55. Not this Committee!
  56. (Mr Byers) Some people thought they were going to be the solution to all of the problems of investment in the railways and I think you, Chairman, will know who I have in mind when I say that. They are proving to be far more difficult in terms of the legal complexity, the financial arrangements and so on. They have to be worked through and that is what is happening at the present time. There are one or two commercial negotiations which are going on at the moment based on the SPV model; some of them are going very slowly - some of them apparently are making better progress; and I think we will have to let the commercial negotiations take their course

    Mr Stevenson

  57. According to the memorandum from your Department, something like 8.1 billion remains contractually uncommitted out of a total of public investment in the project of 18.6 billion. Do you see that as a problem and how, if that is the case, is that sum of money going to lever in the 34 billion that it is anticipated from the private sector in the Ten Year Plan?
  58. (Mr Byers) You are right to say that we have already allocated some of the unallocated provision that was contained within the Ten Year Plan. Some of that, as the Committee will be aware, has been allocated to provide additional funds for the railway network.

  59. It looks like the majority of it.
  60. (Mr Byers) Well, I think there are issues to do with railways that need to be addressed, to be honest, and I think we need to get on with the job, and I hope the Committee got a memorandum this morning showing the spend in this year, the first year of the ten year plan, showing that we are looking to spend something like half a billion pounds, 562 million pounds more than we had originally planned in the first year. That is because, if the Ten Year Plan is going to be a success, we need to frontload the spending because there are real issues that have to be tackled very quickly if we are to hit those targets in ten years' time, and that is why we need to get the money going out sooner rather than later. If that does mean making an allocation early on in the Ten Year Plan that is something we have to be prepared to do, bearing in mind that we will probably see something like another three or four spending reviews completed before the Ten Year Plan reaches its final conclusion. So there are always opportunities to revisit the assumptions, the needs and the aspirations contained within the Ten Year Plan.

  61. Yes. The Ten Year Plan in terms of its aspirations envisaged that a number of schemes such as Crossrail and the Great Western Line up-grading would be completed within the budget. We now know that the SRA's strategic plan pushes these schemes post the Ten Year Plan. How, therefore, Secretary of State, is it possible to conclude that the same amount of private sector money will be levered in the Ten Year Plan with less schemes within that plan?
  62. (Mr Byers) We are confident, as I said, that the 34 billion we are talking about for railways from the private sector will be secured. We calculate that something like 3 billion of public sector investment will be needed to underpin that private sector commitment, and that is one of the reasons why we net off 3 billion from a total figure so there is not a double count as far as 3 billion is concerned. We are confident that, with that level of public sector investment, we will be able to secure the 34 billion. On the specific issue of the projects mentioned in the Ten Year Plan, they are contained on page 47 of the Ten Year Plan. There is only one of those projects which, in fact, is not committed within the Strategic Rail Authority's strategic plan and, even then, they do talk about the up-grading of the Great Western Main Line possibly being brought within the Ten Year Plan - if at all possible. So the difficulty that perhaps Mr Stevenson is referring to is not as great as some commentators have perhaps stated.

  63. But you do accept that the SRA's strategic plan indicates very clearly that the Great Western Main Line up-grade, Crossrail, West Midlands capacity enhancements, Greater Manchester capacity enhancements and multi modal study schemes are proposed to be post Ten Year Plan?
  64. Some of them we can bring within. I think the Great Western one is the one I have most concern about. On the multi modal studies, particularly in the West Midlands and the Greater Manchester areas, we will be talking to the SRA about progress that can be made; we are waiting for the reports; and I think we really should consider the reports when they come. A lot of work is going on to Crossrail at the moment, with some interesting ideas about how it can be funded. It may well be the case that, if progress can be made quickly, then it can come within the Ten Year Plan.
  65. Finally, moving on to the comparisons between road and rail, the Highways Agency informs us that, in the Ten Year Plan, they are looking to lever in between 15 and 25 per cent of private sector investment, and much of that is accounted for by the Birmingham northern relief road. Yet when we compare that to rail the figure for rail is something like 65 per cent of the total investment. How do you square those two? Is that not a massive difference - well, it is, obviously.
  66. (Mr Byers) It is looking at the risk that is attached and at the levels of investment that might be achieved from the private sector; it is looking at the extent to which public sector provision will underpin and lever in that additional private sector investment. Do not just hear it from me but hear it from Richard Bowker who is dealing with these issues every day and talking to people who will have to make these investment decisions, and his view is that, as far as railways is concerned, that level of private investment - 34 billion - will be achieved.


  67. Do you want to tell us how much front loading you have in mind?
  68. (Mr Byers) Within the Ten Year Plan?

  69. Yes. You now talk today about front loading and you have talked about bringing a couple of schemes back into the Plan that looked as though they were going to be pushed back. How much money are you talking about?
  70. (Mr Byers) We have done some work on the profile of the Ten Year Plan and it might be helpful if I could send the Committee a note.

  71. That would be very helpful. You are also going to tell us about the SPVs and the timetable, and you are also going to tell us what phasing you have got for your front loading, I think.
  72. (Mr Byers) It will be a long letter, Chairman!

    Chairman: I like getting letters from you, Secretary of State.

    Mr Donohoe

  73. Can I take you back to what you said about the length of the franchise, particularly on the East Coast, GNER? What effect was it to have that as a two-year extension against awarding, say, a ten year franchise in terms of attraction of private money? What effect would there be if you were to award all of those that were due longer terms, in terms of bringing in more private money?
  74. (Mr Byers) I think it varies on the franchise itself. We have looked very carefully at the whole franchising regime, and the Committee will know I made some comments last summer about changes to the franchising regime which were slightly misinterpreted. The point I was trying to make - and the policy is I hope now one which people understand - is that it is really looking at the nature of each franchise, whether there needs to be a major up-grade in the line concerned, whether there needs to be changes to rolling stock and to reliability and so on, and on the basis of that deciding what would be the most appropriate period. The Strategic Rail Authority under Richard Bowker have given some very detailed consideration to the period of franchises to be awarded, and they are minded to go for a model which is basically a 15-year franchise but broken up into three sections of five years each, to be renewed after each five-year period. Now that has the benefit of having the security of a longer term, 15 years, but not tying the hands of the Strategic Rail Authority so they do not have any control during that 15-year period, because there will be the renewal periods after five and ten years, and I have to say that that is a model that, to me, looks very attractive and has the potential of both securing the longer term investment with rights and guarantees and so on, and also delivering gains very quickly. As far as the East Coast Main Line is concerned, the attraction I think of the two-year extension is we will see some quick gains as far as the East Coast Main Line is concerned, particularly an increased frequency to Leeds, and that will also take pressure off the line going through Newcastle up to Scotland, because there will be people at the moment who use that line to change at York or Doncaster to go elsewhere in Yorkshire who will go straight through to Leeds because of the increased frequency of the service, so there will be improvements in terms of capacity on the other part of the East Coast Main Line as well. But the real benefit of a two-year extension to the franchise is that will allow us to work out in detail the up-grade that will be needed on the East Coast Main Line. That had not been done before we had to decide whether or not to award the franchise last summer. That work is now going on: decisions will be taken about the nature of the up-grade over the next few years during the lifetime of the new franchise when it is awarded; and that will form an important part of the franchise negotiations, because what we would like is for the new franchise holder to be involved financially in the up-grade of the East Coast Main Line.

  75. Is it going to bring about more investment from the private sector to have that type of arrangement as against the present situation?
  76. (Mr Byers) I have no doubts and I think the issue will be whether we use SPVs to support a big up-grade like the East Coast Main Line or a more traditional form of funding, but I do believe - and this is in conversations I have had with the train operating companies - that they recognise that they have a financial and commercial interest in putting their own money behind an up-grade in the line for which they have the franchise and I think, increasingly, we will see train operating companies and people who want to take over the franchise being very interested in being involved in investing in the improvements --

  77. So what you are saying is that there is potential for vertical integration, is that right?
  78. (Mr Byers) No. I think vertical integration is a different issue and, as I think the Committee will be aware, the Strategic Rail Authority is now looking and talking to the industry about the benefits or otherwise of vertical integration. The difficulty we have when we talk about vertical integration is that it means different things to different people. For some people it does mean controlling wheel and track: for others it just means taking a financial interest in the track rather than controlling it themselves and there is a whole variety of different types of vertical integration which are around. What has to happen, and this is why we welcome very much the initiative taken by the Strategic Rail Authority, is we have to find out exactly what people mean by vertical integration and then try and identify the benefits, if any, that can come from such an approach. It may well be that a pilot project somewhere with one franchise might be an interesting way forward. The Chairman may not agree!

    Chairman: Mr Donohoe will want to know which one.

    Mr Donohoe

  79. I think I know which one it could be, but can I move on. The effects of Paddington and Hatfield were enormous on the railway structure, and the way that the railways were organised beyond that. Statistically it is now overdue that there is a major accident on the railways. What effect would that have if there were to be, and it is overdue on the Ten Year Plan?
  80. (Mr Byers) To be honest I think it would depend on the nature of any accident that might occur and the circumstances or the reasons for the accident occurring, so I think it would not be helpful and would be scaremongering to try and respond in a definite way to that question. It would depend on the nature of any accident that might happen.

  81. Can I move you away from railways, if I may, to the highways? There are proposals afoot from the Highways Agency that they put out to tender not only the maintenance and repair but the management of the motorways system and the highways system in England and Wales. That has already happened in Scotland and been quite disastrous. What is your view on that?
  82. (Mr Byers) I saw these reports and I think they do not accurately reflect the situation. What the Highways Agency is looking at at the moment is the idea of effectively almost parcelling together a number of road improvements within a geographical area and asking a contractor to tender for that work, so rather than have individual roads going out to tender, one might do it on a more geographical basis so that you get better co-ordination, you get work being done at different times on different roads so you do not have some of the problems we have witnessed over the last few years where one contractor begins work at the same time as someone else begins on a road that you would normally take to get round the problem which is being caused by the works being carried out --

  83. That is not what is happening in Scotland, with respect, where two major contractors have taken on the responsibility for the day-to-day maintenance as well as year-to-year maintenance, and everything within that. Is there any proposal you know of south of the border that would mirror that?
  84. (Mr Byers) At the moment, the plan that the Highways Agency has got - and this is not going to start until 2004 - will be to co-ordinate the work more effectively. It is not a question of the Highways Agency somehow privatising the road system, which was a headline I saw in a newspaper two weeks ago. That is not the proposal that the Highways Agency has got. It is better management, ensuring better co-ordination, and also getting better value for money for the taxpayer by dealing with it in a co-ordinated manner.

  85. So you do not believe the system in Scotland is right for England and Wales?
  86. (Mr Byers) I think the system we are developing with the Highways Agency is one that I am perfectly relaxed and happy about.


  87. That means you are not happy with the one they have in Scotland!
  88. (Mr Byers) I did not say that --

  89. I know what you said; I am trying to get at what you mean.
  90. (Mr Byers) That is far more difficult!

  91. Are you saying you have looked at the Scots scheme, seen the disadvantages, and you are recommending something different south of the border?
  92. (Mr Byers) I think we are developing, and the Highways Agency is developing, an approach which I think is one which will bring benefits to motorists because it will reduce disruption and also to the taxpayer because it will achieve better value for money.

    Mr Donohoe

  93. That, with the greatest respect, is not answering the point because all of that was argument that was presented when they introduced the system in Scotland. Again I have to ask you and press you, if you can, to give me some indication as to whether or not there is any potential for a similar system to that which has been introduced in Scotland being introduced in any part of the remainder of the UK?
  94. (Mr Byers) We always look at programmes and initiatives that take place elsewhere within the UK and see if we can learn from them. I am sure in relation to what has been happening in Scotland we will learn from that, and it will inform any decisions that we take as far as England and Wales are concerned.

  95. It is possible you will learn from some of the bad elements of the Scottish experience and go along with them?
  96. (Mr Byers) I think we will learn from the Scottish experience, from the benefits and disadvantages that might be there.

    Dr Pugh

  97. The Ten Year Plan is a project I think you would agree could not be allowed to fail really. It would be disastrous, would it not?
  98. (Mr Byers) It certainly would not be helpful.

  99. Following on from that, it depends to some extent on a combination of public finance with the expensive public partnership arrangements. Given that, would you not be a happier person if you can persuade the Treasury to embrace continental styles of public finance and ordinary public sector borrowing arrangements as the main elements for achieving the local transport plan, rather than more exotic vehicles like the SPVs?
  100. (Mr Byers) Specifically on the local transport plan, we have put in significant additional resources, much of it coming from the public sector, to really boost the amount of money going into our very important local initiatives, and I do not think there is a particular problem as far as the local transport plans are concerned where we have seen a big injection of public money going in.

  101. There is certainty about that, but there is uncertainty about the private element, is there not?
  102. (Mr Byers) In relation to local transport plans, what we have said to local authorities is that they should look at involving the private sector to see if they can get better value for money in so doing, but there is no compulsion on them to do so. It really is a simple value-for-money test. If a local authority, as part of their local transport plan, decides they will not get a better return or better value for money by involving the private sector, there is no requirement for them to do so.

  103. Can I ask you about restraint in people's travelling behaviour? You were asked by this Committee whether you thought choice was the best way to change people's travelling behaviour and so alleviate congestion and you answered, "I do actually." - that was your answer, that you thought choice was the way through. However, clearly there is a necessity for some circumscribing of choice according to statistics - rail fares have gone up; bus fares have gone up by 13 per cent, and road transport costs are likely to fall by 20 per cent. Surely it is fairly obvious that people will continue to use cars?
  104. (Mr Byers) I think it depends on how we move forward within the 10 Year Plan. The Committee will be aware that the Strategic Rail Authority is conducting a review of fares on the railways at the present time, at the structures and pricing, to see what outcome they will bring forward there. We are looking very closely as a Department at the bus network in particular; I am very concerned that we are putting more money into buses but I do not think we are seeing the improvements many of us would want, and I think that is something we need to be concerned about. I am conscious that in London the Mayor has adopted a policy of effectively not seeing real terms increases as far as fares on buses are concerned, and we have seen a big increase in ridership --

  105. Just to stop you there, the point is that the Mayor is embracing a policy of driver restraint. The Department seems reluctant to embrace that policy and, in a sense, is passing the buck to local authorities. Is that not a lack of realism?
  106. (Mr Byers) We have not passed the buck to local authorities. I think we are saying to local authorities that this is a power they have if they feel it is appropriate in their own areas, and that is quite different. I was going to make the point that we are looking at the whole costs of rail travel through the SRA review of fares; at the whole question of the level of charges as far as buses are concerned; but what I am not prepared to do is somehow artificially put a burden on motorists to try and put them in a situation where they are paying more so you force people to use the bus or railways. I do not think that is appropriate. One of the things we have been able to do in government is to see the cost of motoring go down in the 10 Year Plan for two principal reasons: (1) there will be further improvements as far as fuel efficiency is concerned - something which, for environmental reasons I would hope the hon. gentleman would welcome but they will reduce costs - and (2) we will continue to see the price of new vehicles going down quite dramatically. The price of new cars has gone down by about 12 per cent over the last 15 months - that has made a big difference. If the European Commission move on their block exemption then we will see even further cuts in the price of new vehicles in the United Kingdom.

  107. But to go back to the London transport situation, the Mayor has said consistently that when it comes to congestion charges there is no other option. If you are talking about reducing the price of cars that does not seem to be a solution - it is compounding the problem. If there is another option, what does the Department of Transport think it is?
  108. (Mr Byers) The other option, as I think I said when I gave evidence before the Committee before, is to take the steps that we are talking now to lay the foundations for improving the public transport system, and whether it is in terms of rail or bus network we have to take those steps and we are doing that. That is one of the reasons why I want to see the 10 Year Plan, the money spent in a way which sees more money coming upfront, so that during the course of the 10 Year Plan we can see those improvements coming in to the public transport system so that motorists will have a genuine choice as to whether or not they drive their car, get the bus or the train.

    Miss Mcintosh

  109. Your targets, you say, are an 80 per cent increase in rail freight and a 50 per cent increase in rail passenger quantities. Have you fallen considerably behind that rail freight target because of the EWS difficulties, and the French security problems since November last year?
  110. (Mr Byers) There is no doubt that what has been happening in relation to freight coming in from France has distorted the figures considerably and, if that was to continue, then it would have a severely detrimental effect on achieving that target.

  111. So what pressure are you putting on the French authorities to stop the situation to make sure that, rather than it just being between 9 at night and 3 in the morning, there are provisions to enable the rail freight to continue?
  112. (Mr Byers) We are pointing out to the French authorities that they have a real responsibility to secure the boundaries to allow freight to go through in a way which is compatible with their obligations, and also to ensure that we do not see people using it as a way of illegally entering our country. The French have given certain commitments about the steps they will take; we have to hold them to that and we have to make sure that, when a fence is constructed it is constructed in such a way that it is strong and cannot be pulled down, but by a few - 50 or so - people, and it has to be properly policed.


  113. The CRS are not known for their diplomatic approach to policing and, if they decide to clear an area, they do it with some efficacy - I put it no higher.
  114. (Mr Byers) They do, yes.

  115. Why is it we are still hanging on waiting for the French government to take some real action? It is no use putting people along the track if they do not operate against the people climbing the fences and bringing them down. This is putting British drivers at risk, and the actual would-be travellers themselves at risk.
  116. (Mr Byers) I share the frustration of the Committee about the failure of the French authorities to address this in an effective way. They have the means: they have the ability to deal with it: for whatever reason they have failed to treat this as seriously as they should --

  117. But there are firms in my constituency going bankrupt because of the inability of the French to take action.
  118. (Mr Byers) And there are firms up and down the country facing those difficulties so we need to make sure the French authorities recognise their responsibility. This will be raised - and is being raised - at the highest levels to make sure that the French take this seriously, and we will continue to do that. I share the frustration of the Committee and this has taken a lot of my time, and it has taken some of the Prime Minister's time, to get the French authorities to look at this seriously, and they have a responsibility and I think most of us --

  119. But how long has that process taken?
  120. (Mr Byers) It has taken too long, to be very frank, but we will continue to make representations to the French authorities so that they will see that they have to act and take this matter seriously.

    Miss Mcintosh

  121. The point is that you are treating this as a Home Office security matter and, as the Chairman has rightly said, I have potters in my own constituency and their business is being destroyed by this. I personally have written to the Commissioner in Brussels, but this has been going on since November and the implications for your transport plan are inescapably obvious.
  122. (Mr Byers) I understand and I am agreeing with Miss McIntosh about the problems that we have. We are making representations to the French authorities, pointing out the obligations that they have and the need for action to be taken quickly to address this particular issue.

    Andrew Bennett

  123. Is the truth not really that a French company would like to do the freight operations through the Channel, and that is what it is all about?
  124. (Mr Byers) There is a factually accurate statement in the fact that there is a French company who would like this business. Whether the conclusion then to draw is that the French authorities are reluctant to act because they want to secure the position for the French authorities is clearly the view that Mr Bennett has expressed, but we are clearly aware --

  125. I was actually asking you for a comment on that.
  126. (Mr Byers) I am not sure there is conclusive proof that that is the motive behind the way the French have responded to this, but I think we are all aware of the French interests in freight coming through the tunnel into the UK.


  127. With respect, supposing the situation was reversed? Supposing that what we were seeing - and it is a ridiculous thought, of course - was vast numbers of people trying to flood into France and the British police, the Dover police and the entrance to the tunnel at Folkestone was being policed in such a way that nothing was stopping people fighting their way on to these trains. What would be the attitude of the French government, and what action would they be expecting you to take?
  128. (Mr Byers) I think the difference is we would ensure that the security around the entrance is maintained.

  129. But how long are we going to go on talking to the French authorities without getting some kind of movement? With the greatest of respect, in the French system thanks to the Code Napoleon, we can go on for a very long time talking without any real movement.
  130. (Mr Byers) We shall continue to make representations to the French authorities to get them to discharge their responsibilities.

    Miss Mcintosh

  131. You mentioned the East Coast Main Line and the trains to Leeds. Are you aware there will be two trains less to York each day because of the increased service to Leeds, so there are some imbalances there? You also mentioned that you are quietly confident that the investment in the rolling stock will increase. The conversations I have had with GNER are that they will stick to their already declared programme for the investment for the two-year extension but they are not going to make major investment decisions for a period of franchise which has not yet been decided, so it has delayed the long-term investment in the East Coast Line.
  132. (Mr Byers) It depends which sort of particular investment you are referring to. There is 100 million of additional private investment going in as a result of the two-year extension. You are right to say, in terms of the up-grade of the East Coast Main Line, that is not possible until we get a clear specification of the improvements that we want to see. One of the great weaknesses, and this was the impossibility of having to award a franchise last summer, was we were not comparing like with like. What we had was a proposal from Virgin and a proposal from GNER to operate the new franchise but because they were basically given a blank sheet of paper and were told to put in whatever they liked in terms of what they could offer, it was legally very difficult to award a franchise. If we had awarded a franchise for the period that was originally proposed, whoever was unsuccessful would almost certainly have legally challenged that decision because there was no rational basis on which you could award one against the other. When we come up to the franchise being awarded for the East Coast Main Line, which probably will be in line with the model the SRA are now developing, the 15 year franchise, which I think will be welcomed by most of the interested parties, there will be the opportunity of securing focused improvements as far as the East Coast Main Line is concerned without constraining people. There does need to be a degree of flexibility - if there are ideas about innovation and different ways of doing it then a franchise bidder should be able to express those - but there has to be a core delivered through any franchise, and that is what we need to be working out and, also, within the context of the specific improvements of the up-grades that we want to see delivered on the East Coast Main Line during the period of the new franchise which is likely to be awarded.

  133. We heard from the Prime Minister today that the Government's credit rating is so poor it is going to cost an extra 1 billion to raise the money. Where is this money going to come from? Is it going to be taken out of the rail forecast of the investment from the transport plan?
  134. (Mr Byers) I did not hear the Prime Minister say that. The issue will be that in every negotiation that takes place there will obviously be a desire on the part of the financial institution to lower the risk and to raise the level of return that they get - that is the nature of the negotiations that will take place. What we have to make sure of in the discussions we have is that we secure the best possible deal for the taxpayer - both in terms of the financial arrangements but also in terms of the benefits we can deliver to the travelling public. As I have said, there is no indication, and I think the words from Richard Bowker are very clear on this, that post the decision we took in relation to Railtrack there has been a view in the private sector that they do not want to be involved in transport projects. Most of them make a very clear distinction between the arrangements that apply to a body like Railtrack which was quoted on the stock market as opposed to Public-Private Partnerships. It was very interesting - I heard an interview on the radio at lunchtime with one of those who had signed the letter that was in The Times this morning, and he made the following comment: "Don't forget this was an investment" - talking about the investment in Railtrack's shares - "where private investors and pension funds and all other category investor felt they had a contract with the Government". The important thing to remember about Railtrack is it was not a contract with the government: it was buying shares which were quoted on the stock market. So this is not a Public-Private Partnership. Railtrack was a private company quoted on the stock market so there was no contract with the government. Buying shares in a private company is not making a contract with the government, which is why the government said - and the Committee has heard me say this before - on 2 April last year, when we entered into the agreement with Railtrack, and we made it very clear: "The Government stands behind the rail system but not behind individual rail companies and their shareholders who need to be fully aware of the projected liabilities of the companies in which they invest and the performance risks they face". Nothing could be clearer than that, so I think for some people to argue that by buying shares in Railtrack they had a contract with the government is fundamentally misunderstanding the nature of the relationship.

  135. I do not wish to go down that path. I remind the Secretary of State on 2 April last year the Government promised Railtrack, that RenewCo, the new rail company, would come into being and on 4 October it could not because it had public sector borrowing requirements. May I repeat, if it is going to cost the government 1 million more to raise this money, where is the government going to get that money from?
  136. (Mr Byers) I would pray in aid the words from Richard Bowker on the 34 billion we believe we can secure for private sector investment in the railway network - there is no reason to think that because of the actions we have taken in relation to Railtrack we are not going to secure that level of investment. If I can, on this point about RenewCo, the April agreement is very clear that it would be best endeavours to be used as far as RenewCo is concerned.

    Chris Grayling

  137. Can I talk to you about the structure of the 33.5 billion of public finance that is heading for rail under the terms of the 10 Year Plan? My understanding is when you strip out resource spending, according to the figures that your Department has come up with, 18.6 billion of the 33.5 billion is investment money. Of that 18.6 billion, 10.1 billion has already been allocated to the Channel Tunnel Rail Link and Railtrack's network grant, so there is about 8 billion left of spare public cash for the railways. You have said that effectively that money - and I think the figure is 7.5 billion rather than 8 billion - is there to leverage in private sector finance, the 34 billion you need to raise from the private sector, and I have been trying to understand what you mean by "leverage in". If we use a mortgage analysis, are we talking about effectively the deposit on the Government's mortgage? Is that the money that pays 25 per cent and the banks or the private sector comes up with the other 75 per cent, or is that 7.5 billion to pay the interest costs on the mortgage? Is it going to be spent as part of the investment in bricks and mortar, or is it just a financing budget?
  138. (Mr Byers) It will depend on the nature of the deals which are entered into, and there will be a variety of different arrangements that can be secured. What we do believe is that something like 3 billion of that will be direct public sector support for private investment, which is why we net off 3 billion from the overall figure, because if we were to add 33.5 billion of public money and the 34.3 of private money that we expect to secure - it is actually a little over both - we would with rounding up come to 67.9 billion, and some people have made the mistake of just bringing those two figures together saying there is then 67.9 billion of investment, public and private, in the railways. That is not accurate because there is a double count there of 3 billion so we have to net off 3 billion which is this public sector support for private investment. So it is 3 billion that we expect to use for that particular purpose.

  139. So would it, therefore, be fair to say that there is only in reality about 4.5 billion worth of uncommitted, uncontracted finance coming from the public sector to invest in rail improvement projects over the next ten years - that is to pay the infrastructure costs to share in the bricks and mortar effectively?
  140. (Mr Byers) I think that would not be an accurate way of putting it because that is not looking at both public and private funding that would go into the railway network, and I do not think the travelling public worries too much about whether it is public or private - they want to see levels of investment. I think what is important is that over the period of the 10 Year plan we will secure this 64.9 billion of extra investment going into rail. That is the important objective.

  141. But how much is the Government itself spending directly on infrastructure projects under the 10 Year Plan then that has not already been committed?
  142. (Mr Byers) It will vary during the course of the 10 Year Plan because it is a flexible document.

  143. But what is the total amount? If I am wrong and it is not 4.5 billion - well, let us be clear on the sums. 18.6 billion is what your Department says is the infrastructure investment budget from the public sector.
  144. (Mr Byers) Yes.

  145. Of that, your Department has said 10 billion has already been contracted in network grants to Railtrack and the Channel tunnel Rail Link project, which leaves 8 billion yet to be spent. What you are saying is that 3 billion of that money is going to be spent on interest, so there is between 4 and 5 billion left available for the public sector to spend on infrastructure projects during the period of the 10 Year Plan, and the rest is entirely dependent on the private sector.
  146. (Mr Byers) As we sit here today that is a statement of where we are at. However, one of the reasons why we have reviews of the 10 Year Plan is to make sure we are working and going to achieve the objectives we have stated, so there will be no difficulty in reordering our priorities if we felt that was right. We still have 8 billion or so of unallocated provision within the 10 Year Plan, so there are possibilities within it to secure additional resources if that is what we want, and it may be in the context of the spending review that the Chancellor may think that a priority should be attached to railways.

    (Mr Byers) But, with all respect to Mr Bowker, on the day when The Times has published a letter from a large number of city institutions calling into question the commitments that the private sector is willing to put into the rail infrastructure in the current situation, what you are saying is that the improvements in the 10 Year Plan for the rail industry depend almost entirely - and we are talking about almost 90 per cent of the finance available to spend on infrastructure projects - on the private sector?

    (Mr Byers) That is not quite right because you are discounting the full 18.5 billion we will be putting in. Some of that will secure private investment. The Channel Tunnel Rail Link is a very good example of a very high level of private sector investment which will be achieved as a result of some of the 18.5 billion we are putting in --

  147. Because we have a list of projects - the ThamesLink, the Suburban Line upgrade, the East Coast Main Line, et cetera - in the Strategic Rail Authority plan which are all due to start during the next ten years and due to be finished during the next ten years, but the reality is that virtually all of the funding for those is going to have to come from the private sector, and the actual cash available to spend on hiring contractors for those services from the public sector is only 4-5 billion.
  148. (Mr Byers) It is important to remember the benefits we get from the franchising regime. What we have seen is that a franchising regime which is effectively operated will secure levels of investment from the private sector. I think Mr Grayling is right to point out that, within the 10 Year Plan, there is a fixed amount of money coming from the public purse - it is 33.5 billion in total of public money. I believe we will secure the 34 billion or so of private sector involvement as a result of that, and part of it will not just be the under-pinning that comes from the public provision but also deals done as part of the franchising operation. One of the key criteria laid down in the new franchising approach is the level of investment we will get from the private sector. What we have seen with just two franchises - the two-year extension on GNER and the Chiltern franchise - is nearly half a billion pounds coming as a result of those two franchises, so the franchising process will be another vehicle by which we will secure major private sector investment. So I think it would be a mistake to look at the public money under-pinning and levering in private sector provision; we also have to look at other initiatives like the new approach to franchising and the difference that will make.

  149. The administrator told us that his target date for bringing Railtrack out of administration to go back to the courts is the end of September. Are you absolutely confident and can you assure the Committee that the bid team working to create a company limited by guarantee will be ready to put a bid to the administrator by the end of September?
  150. (Mr Byers) It is a matter for the bid team. I have nothing to do with the bid team, so it would be wrong of me to comment on that. They will make a bid --

    Chairman: I want to move on because I am very anxious to get to the PPP.

    Chris Grayling

  151. Just quickly, what happens if the CLG bid team is not ready to put forward a bid by the end of September?
  152. (Mr Byers) As I say, that will be a matter for the bid team. I am sure they will be aware, as we all are, of the timescale that the administrator is working to.

    Andrew Bennett

  153. Moving to social inclusion or social exclusion, the 10 Year Plan does nothing for that, does it?
  154. (Mr Byers) It should do and I am very keen, when we look particularly at the bus network, that we look very carefully at how we can use that in a far more positive way than we have so far.

  155. As far as motorists are concerned, however, there could be a 20 per cent cutting of costs over the period. As far as rail users are concerned, you are hoping to get keep the increase in fares very moderate, but for bus users, over the last few years it has gone up by about 13 per cent and the evidence is that bus fares are just going to go on and on going up, so those people who have to rely on buses are getting a pretty raw deal from this, are they not?
  156. (Mr Byers) I think I indicated earlier that I was not terribly happy with the way the bus network has been handled, and I want to look at new ways of perhaps focusing on that and using some of the powers we have under the Transport Act 2000 in a positive way. I also think we need to be looking very carefully when we do the review at this whole issue of social exclusion - or social inclusion is a more positive way of putting it. Without giving away too many secrets about what might be in the review when we announce it in July.

  157. So you are looking at it, and there is some hope there.
  158. (Mr Byers) Yes.

  159. What about for walking and cyclists? Is there any hope there?
  160. (Mr Byers) On both of those areas there is work going on in the Department and, as I may have indicated to the Select Committee last time I gave evidence, there is an indication that the trend, for example, for children being driven to school may well have peaked and we do seem to have more children who are now walking or cycling to school. That is obviously a very beneficial change and we need to see that continue and develop in the years ahead.

  161. On choice and restraint: last week Professor Begg told us that really, if you get into giving good bus priority in places like Brighton, Oxford and Edinburgh, you can wean a lot of motorists away from their cars. Do you agree?
  162. (Mr Byers) I think that is true. What has been interesting from some of the figures I have is that, although we talk very much about bus ridership developing very quickly in London and we are all aware of that, it is worth noting that in Greater Manchester last year there was a 3 per cent increase in bus ridership and in West Yorkshire there was a 5 per cent increase, so it is not just Londoners beginning to see an increase.

  163. And that is in spite, in those areas, of big fare increases. So if you could do something to hold the fares down, might you get even better improvements?
  164. (Mr Byers) I am sure you would, because that is, I think, the lesson of what has happened in London. There has not been an increase in real terms and people are more inclined to go to the --


  165. Are they connected with constraints on cars?
  166. (Mr Byers) Not necessarily, I do not believe

    Andrew Bennett

  167. Finally, could you kick the bus operators into finding a way in which people do not have to pay the fare every time they get on the bus but have some Smart card or device like in the European cities to speed up bus travel time which would make it more attractive to people?
  168. (Mr Byers) I think you are right in pointing out that new technology does not seem to have really hit many of the bus operators, and they are still using the old style of collecting cash and issuing a ticket. There must be better ways of doing it and, in discussions we have with the bus operators, we will draw their attention to that proposal.

    RT HON PAUL BOATENG, a Member of the House, Financial Secretary, HM Treasury, and MR CLIVE MAXWELL, Head of the Environment and Transport Taxes, Saving Incentives Team, HM Treasury, examined.


  169. Good afternoon, Minister. May I ask you to identify yourself for the record?
  170. (Mr Boateng) Good afternoon, Mrs Dunwoody. I am Paul Boateng, Financial Secretary for the Treasury, and I am accompanied by Mr Clive Maxwell who is Head of the Environment and Transport Taxes Team in the Treasury.

  171. The Committee are deeply honoured with the arrival of any Treasury Minister, so perhaps I should ask you if you have something you wish to say.
  172. (Mr Boateng) Only how glad I am, Mrs Dunwoody, to have this opportunity to give evidence before the Committee on my specific responsibilities in the Treasury for tax.

  173. How very interesting. You say that tax cannot affect the affordability of road transport, particularly in relation to lower-income households. If affordability for lower-income households is important, would it not be better to hold motoring costs constant and subsidise public transport like buses?
  174. (Mr Boateng) My responsibility, Mrs Dunwoody, is to ensure that in terms of the taxation of transport and the use of transport, the various issues around the environment, around social inclusion, revenue raising - all those - are balanced, in order that a judgement can be arrived at as to how best to secure a policy objective. In relation to the Transport Plan, environmental considerations, considerations of social inclusion, considerations of revenue raising, all influence and impact on the successful implementation of the Plan.

  175. Good. So you know that the 10 Year Plan makes it very clear that the more you travel, the more tax you are going to pay, so do you not think that possibly the Plan has produced a rather odd outcome?
  176. (Mr Boateng) No, because what the Transport Plan envisages is a situation in which there is a degree of investment in the transport system, considerable investment, public investment in excess of 140 billion, which is designed to address certain objectives.

  177. Yes, it makes it very clear the further you travel the more you will pay.
  178. (Mr Boateng) Those objectives relate to congestion, those objectives relate to the environment, those objectives also relate to social inclusion. So if you take, for instance, the issue of road haulage, which is a specific responsibility that I have and the consultation document that we have put forward in relation to that, that is designed to address issues of congestion, it is designed to address issues of fairness in terms of revenue-raising, so that external road haulage companies from outside the United Kingdom have to operate on a level playing field with our own road haulage companies, and it is also designed to address environmental considerations. The concern that Government has is to make sure we arrive at an outcome in relation to that consultation that balances those various interests.

    Mr Donohoe

  179. The Commission for Integrated Transport has shown that overall our motor taxes are about average for the European Union. Do you agree with that?
  180. (Mr Boateng) Mr Donohoe, at the moment in terms of the levels of taxation we are I think eighth in the European Union, so we are about in the middle. What we have to be concerned to do in relation to taxation is to make sure that we achieve a balance of the objectives I have sought to outline for the Committee. It is the achievement of that balance rather than a particular position in a league table which has to be the objective.

  181. Why was it that we had the fuel protests in September 2000?
  182. (Mr Boateng) The fuel protests in September 2000 arose from a perception on the part of a section of industry that we had got that balance wrong. What we sought to do, and what we have always sought to do, is to get the balance right. The response from the industry subsequently, and also the impact of the price of oil, has in fact shown that that balance currently is about right.


  183. So it was not a lot to do with you actually, it was the drop in the price of fuel?
  184. (Mr Boateng) It is a combination of a variety of factors and undoubtedly the price of oil is one of them.

    Mr Donohoe

  185. If we have average motoring costs, which you are suggesting we have, what is the rationale for the DTLR assuming that they will fall in real terms by 20 per cent over the next ten years?
  186. (Mr Boateng) That is an assumption that is made taking into account the level of the price of oil and also taking into account the concerns that we have to have about competitiveness and productivity in relation to the industry and industry as a whole, and the impact of a variety of measures we have taken in relation to the taxation of vehicles which are designed to achieve environmental objectives, which are designed to ensure that we seek wherever possible to tax the bad and promote the good in terms of objectives. So you want to have a tax system which encourages people to use more fuel-efficient cars; you want to have a tax system which incentivises green fuel, and we make certain assumptions on the basis of the impact of those policies on the price of fuel.

    Mr Donohoe: Do you not think then if you, as you are saying, want to be on the side of the motorist, it would be better to hypothecate the tax raised ----

    Chairman: I am sorry, Minister, I must adjourn the Committee automatically when a division is called.

    The Committee suspended from 6.11 pm to 6.20 pm for a division in the House

    Chairman: Minister, thank you very much indeed. Mr Donohoe?

    Mr Donohoe

  187. If you are trying to bring the public on board, Minister, would it not be better to have hypothecation as far as taxes on car owners are concerned? The Treasury seem to move away from that all the time.
  188. (Mr Boateng) I am not sure that is fair, Mr Donohoe, because my understanding is that an announcement was made in 1999 that any future real terms increases in fuel duties would go into a ring-fenced fund to be spent on modernising the road network and improving public transport. That is the understanding that was shared at that stage. Indeed, the Government has announced that revenue from local congestion charges and work-place parking will in fact be ploughed back into local transport schemes in order to increase desirable behavioural outcomes and encourage local authorities to make their contribution to the sort of transport objectives which we would all share as being desirable ones. So I do not think it is a blanket opposition to hypothecation. Indeed, if you look at the way environmental taxation has developed generally across the piece, for instance in relation to the climate change levy, it is revenue-neutral and the money is ploughed back in ways which are designed to promote the achievement of the Kyoto Protocol targets.

  189. The history is not all that good, is it, with the Treasury?
  190. (Mr Boateng) That is something that you would say, I would not ----


  191. But you could not possibly comment!
  192. (Mr Boateng) I can comment but I would not necessarily share that view, but then we come at this from different perspectives obviously, I as a Treasury Minister, you as an inquisitor on this Committee.

    Mr Donohoe

  193. Correct me if I am wrong, but when road tax was introduced, I think in 1923, it was hypothecated, it was all to be put into roads. It was not a great tax. What we are now finding is that that has been lost somewhere.
  194. (Mr Boateng) I think it is fair to say that post-1920s there was a move away from hypothecation. What I can share with you in terms of our approach to environmental and transport taxation today, on the basis of what I share with you in terms of the 1999 announcement and in terms of the way we have approached environmental taxation generally, is that the line as it were against hypothecation in the way you have described is not as hard as it was before. I think that is fair.

    Chairman: Minister, I think we are going to have to ask you for briefer answers. We love you dearly but I do not think you want to stay with us for the rest of the evening.

    Mr O'Brien

  195. On the question of fuel prices, does the European Commission have any influence on our fuel prices?
  196. (Mr Boateng) As a matter of principle it is for the Chancellor to set the levels of fuel taxation in accordance with the judgment he makes of the economic interest of the United Kingdom. So by definition the European Union and the Commission have only a limited role in that respect, although obviously an interest traditionally in minima as opposed to maxima.

  197. Do the neighbouring communities then have an influence? The activities and behaviour and what is happening across the Channel? Does that have an influence on our fuel prices?
  198. (Mr Boateng) Our concern has to be that balance that the Chancellor is required to make in terms of his judgment of the levels of taxation. Those judgments go to revenue, those judgments also go in this field to those wider objectives around the environment, around social inclusion, and around congestion ----

    Chairman: Yes, I think we have got the general idea; you have told us several times.

    Mr O'Brien

  199. We have looked at the European Commission Transport White Paper. The suggestion there is for fuel taxes to be harmonised across the Union.
  200. (Mr Boateng) That is a suggestion that we would refute.

  201. You would refute that?
  202. (Mr Boateng) Yes.

  203. Apart from the question of whether this is a legitimate role, is this actually a good idea in its own merits, do you think?
  204. (Mr Boateng) Our position is very clear, Mr O'Brien. We believe - and I hesitate to incur Mrs Dunwoody's wrath -----


  205. You should, you really should!
  206. (Mr Boateng) I know, based on experience, Mrs Dunwoody! I would reiterate the points that I have made before about the Chancellor's judgement and his need to make his decisions in the light of the national interest as he sees it.

    Mrs Ellman

  207. The money required to upgrade the London Underground is not included in the 10 Year Plan, is it?
  208. (Mr Boateng) The money required to upgrade -----?

  209. Is the money which is required to upgrade the London Underground, the PPP, outside the 10 Year Plan?
  210. (Mr Boateng) I am afraid I am not able to assist you on matters that properly belong in the province of the Secretary of State and, indeed, in relation to spending priorities and the Comprehensive Spending Review, of the Chief Secretary. My concern and my ability to assist relate specifically to issues of taxation. So I am quite happy to get the Chief Secretary to drop you a memo if there are particular issues that fall to him on the Comprehensive Spending Review, but I am unable to assist.


  211. Mr Maxwell is looking very uncomfortable.
  212. (Mr Maxwell) As the Financial Secretary explained, I am the Head of the Environment and Transport Taxes Team in the Treasury.

    Chairman: I see.

    Mr Stevenson: I wonder if I could ask this: is the Minister prepared to assist us in getting his colleague to come to the Committee?


  213. Would you like to do that?
  214. (Mr Boateng) Mrs Dunwoody, I am sure you and your Clerk will address any appropriate invitation to my colleagues in the Department.

    Chairman: We as a Committee are so fond of the Treasury that we send you almost weekly invitations, and you all say no. I cannot think why, since you interfere so much in transport!

    Mrs Ellman

  215. Issues in relation to the Treasury are material to our consideration of the PPP, so would you give us a commitment that you will deliver that message to the appropriate person?
  216. (Mr Boateng) I have no doubt that the Chief Secretary will pay very careful regard to all matters that emanate from this Committee.

  217. Including that one?
  218. (Mr Boateng) To all matters, Mrs Ellman.

  219. The 10 Year Plan assumes that 20 major local charging schemes will be implemented, and many authorities have said that they cannot do this until they have an approved public transport system. Would you agree that the local authorities should borrow money on the strength of future revenue schemes?
  220. (Mr Boateng) It is undoubtedly the case that it will be for local authorities to make the decision, and the power that they were given was an enabling rather than a prescriptive one, as to whether or not they will wish to go down the route of congestion charges. The advantages for them are clear, because it makes available to them additional resources for their own transport purposes, but they would need to make the judgement.

  221. If the authorities need to invest heavily in public transport improvements prior to trying out charging schemes, would you make available to them additional funds or the ability to borrow to put those improvements in place?
  222. (Mr Boateng) Decisions for the next Spending Review are a matter for the Chief Secretary. That applies both in relation to transport and matters that you were subjecting the Secretary of State to questioning on, and in relation to the Local Government Finance Settlement, but these are clearly matters that he would wish to consider and no doubt will consider in terms of the operation of the Comprehensive Spending Review in 2002.

  223. Would you confirm that revenue coming from charging schemes would be truly additional?
  224. (Mr Boateng) The proposal always was - the understanding was - that this was additional revenue, and that is the attraction to the local authority concerned. I cannot stress sufficiently, this is something on which local authorities themselves have to arrive at a judgement. The legislation is there. They have the power to levy such charges, and clearly they will consider that in terms of their own proposals.

  225. But in the Government's wider proposals for changes in local government it is proposed that only those authorities who are identified as high performers by the Audit Commission will in fact be given more freedoms to borrow. Would you make an exception in terms of transport schemes?
  226. (Mr Boateng) That is very much a matter for the Secretary of State and, indeed, for the Minister for Local Government, it is not a matter for the Treasury.

  227. Would the Treasury agree to local authorities being able to borrow in anticipation of future revenues raised?
  228. (Mr Boateng) That is really, Mrs Ellman, something that I am not able to assist the Committee on. That is a matter for the Chief Secretary and, indeed, for the Chancellor.

    Dr Pugh

  229. Is the funding to be provided for Transport for London going to fit within the cycle of Spending Reviews, or is it a 30-year one-off?
  230. (Mr Boateng) I think that what has been made clear, and what is clear, from the 10 Year Plan is that there is envisaged a level of public investment which is enumerated here. That investment is delivered within the context of successive Comprehensive Spending Reviews.

  231. It is not within the Spending Review?
  232. (Mr Boateng) The level of spending and the level of investment is quite clearly laid out and, indeed, it is considerable, because if you look at the Plan -----


  233. Yes, luckily we have read the Plan, thank you, Minister.
  234. (Mr Boateng) Indeed. I was merely directing the Committee's attention to the enhanced level of investment that is anticipated. That is a real commitment.

    Dr Pugh

  235. Are you aware, though, that in the PPP there is no public termination clause? Are you aware of that?
  236. (Mr Boateng) Dr Pugh, I am not going to go down this particular line. It is extremely tempting, but I am not going to do it.

  237. No, I am going to ask you a specific Treasury question.
  238. (Mr Boateng) I hear what you say.

  239. I have been told and have been informed that not to have a public termination clause is against basic tax law guidance. You are a Treasury Minister. Can you confirm that that is so?
  240. (Mr Boateng) I am not going to go down that road.

  241. I am asking you specifically about questions to do with the Treasury and about the advice the Treasury does or does not offer.
  242. (Mr Boateng) Dr Pugh, with the utmost respect, I am not going to go down that road. I was invited before the Committee, and happily accepted, to talk about taxation. That is my responsibility.

  243. Can I put the question the other way around, then? Is it Treasury standard form of guidance to have a public termination clause or not?
  244. (Mr Boateng) Dr Pugh, can I just finish. I am not going to be able to assist the Committee in relation to PPPs. If the Committee has any specific issues which it wishes to raise on PPPs with the Treasury, it knows how to go about doing that, and it will make the necessary queries and issue the necessary invitations. It will then be for the Chief Secretary to respond as he sees fit.


  245. Let me be quite clear about this, Minister. You are a Treasury Minister?
  246. (Mr Boateng) Quite so.

  247. You know that the Treasury issues guidelines?
  248. (Mr Boateng) Mrs Dunwoody -----

  249. Yes or no will do.
  250. (Mr Boateng) I am sure it would, and I can answer yes, but what I am not going to do is to go on from that and to discuss with you the contents of those guidelines.

  251. So you are not prepared to talk about the Treasury's responsibilities, although you are a Treasury Minister?
  252. (Mr Boateng) Because, Mrs Dunwoody, as you well know, that is a matter for the Chief Secretary, it is not a matter for me.

  253. I see. So nobody at your level worries about other Treasury guidelines?
  254. (Mr Boateng) It is not a matter for the Financial Secretary, but I am very happy to answer questions that you have on taxation issues. That is what I am here to do. That is the basis upon which we accepted your kind invitation.

  255. With the greatest respect, you are in danger of underestimating the seriousness of the Select Committee, Mr Boateng. You are a Treasury Minister. You have been asked a perfectly straightforward question which is a factual question, Minister, which says quite straightforwardly, are you aware of what is in the Treasury guidelines? I would not have thought that was a complex question, even for a Treasury Minister.
  256. (Mr Boateng) It is not a complex question, it is a very clear question, and my response to you must be of course I am aware there are guidelines issued by the Treasury on a range of issues. If the Committee wishes to explore issues in relation to the PPP and London Underground, then they must do that through the appropriate ministerial channel, which is the Chief Secretary and not myself.

  257. I am not asking you about the PPP, with respect, I am asking you about Treasury guidelines. I shall ask you a very simple question and, since you have already assured me you know the responsibilities of the Chief Secretary, I am sure you will go back and convey the message to him in plain straightforward and uncomplicated English. Will you please ask the Chief Secretary if he is aware of any public contracts where there is not a termination clause included and if he is aware of his own Treasury guidelines? Perhaps you would be kind enough to convey that in writing to this Select Committee.
  258. (Mr Boateng) I will make sure that the Chief Secretary is aware of these proceedings and the questions you have raised with me.

    Chairman: Thank you very much indeed.

    Dr Pugh

  259. Can I try a further question and see if I can get any further.
  260. (Mr Boateng) I suspect you will not, Dr Pugh.

  261. I am going to try anyway even if it embarrasses you.
  262. (Mr Boateng) I am not in the slightest bit embarrassed.

  263. That is very clear. PFIs are normally assessed against Treasury guidance without taking into account social costs and congestion, the London Underground project does. Can I invite you to comment on that?
  264. (Mr Boateng) You can invite me and I will decline, for exactly the same reason as I declined to answer the last question.

  265. This is definitely a transport question which impinges on the Treasury's responsibility: did the Treasury advise Mr Byers in any way on the administration order for Railtrack? If so, what was the character of that advice?
  266. (Mr Boateng) I am afraid, Mrs Dunwoody, I am not going to be able to assist the Committee in that regard because that is a matter which, quite frankly, does not fall within my area of responsibility within the Treasury.


  267. Forgive me, Minister ----
  268. (Mr Boateng) If I can finish ---

  269. --- your Ministers decided which of you should come. The Select Committee, even though they are fully advised of the brilliance of your abilities and the fluency of your speech, did not specifically - and I know this was a want of something on our part - ask for you to appear. We asked for a Treasury Minister to give evidence and, with respect, that is not what you are giving.
  270. (Mr Boateng) Mrs Dunwoody, what you asked and what I am afraid you have got is a minister who is only too happy to talk to you about taxation issues but is unable to assist you in relation to PFI and PPP. It is as simple as that. I understand, with the utmost respect, the Committee's concerns and I will convey them to the Chief Secretary but it is only fair to point out that you asked us to talk to you about ----

  271. --- about the 10 Year Plan.
  272. (Mr Boateng) ---- the Transport Plan and taxation. That is the basis upon which we accepted your invitation.

  273. What is what we are endeavouring to ask you about, Minister, with singular lack of success.
  274. (Mr Boateng) I fear so.

    Chairman: Mr Grayling, do you want to have a go?

    Chris Grayling

  275. Let me try and get the Minister into an area of considerable interest at the moment, which is charges for long distance travel. What is the Treasury actually pressing for? What does the Treasury want to see in terms of charging for inter-urban travel?
  276. (Mr Boateng) What we have embarked upon is a consultation on road user charging in relation to road haulage. We have issued a consultation paper, it contains a number of options both in relation to distance and in relation to time, the industry have responded, we will reflect on that and we will come forward with a specific proposal. I should stress that this is related specifically to road haulage, it is not a general proposition, we are aware of the debate obviously about general vehicle charges and I think the position has been made clear that that is an area where there is a need for further research, that research is being undertaken, and in due course obviously it will be a matter that Government and indeed the Committee will want to consider.

  277. Do you rule out, shall we say in the lifetime of this Parliament, the Treasury becoming involved with other departments in either consultation over or policy documents in the direction of the introduction of charging on a more general basis to all road users?
  278. (Mr Boateng) The Government's position on inter-urban road charging is set out in the Transport 10 Year Plan. We highlighted the fact that further research was needed before any such inter-urban road user charge could be proposed. The Commission's recent report is a useful addition to that. It itself recognised there was a need for more work in the area, we think it is important that that work should continue in order that a fully informed decision can be made on what is required to deliver the better transport system that we all seek. But that is not going to happen in the short-term in terms of any such proposal. The 10 Year Plan does not envisage it occurring, and the assumptions are not there it will occur in the lifetime of that Plan, but clearly there is a debate, the Commission's contribution to it has been important, this Committee's contribution to it is going to be important, and we are going to need to do more work on it and we are happy to do that.

  279. So you are not expecting any scheme to be proposed within the lifetime of this Plan?
  280. (Mr Boateng) I did not say that. I do not know. I said that it is very clear from the Plan, and you will have sensed and read that that is the case, there is not an assumption that such road user charging will be introduced in the lifetime of the Plan. But the work is of value, the research is taking place. There will be undoubtedly - and this Committee will make a contribution to it, as will others - a national debate about the role that such a proposal might play in the delivery of a better transport system for all.

    Mr Stevenson

  281. Two quick questions, I hope, about taxation. The first is, do you accept the principle that the price mechanism can play a part in changing people's travel habits?
  282. (Mr Boateng) Undoubtedly it can.

  283. It can. Is that a policy that your Department pursues?
  284. (Mr Boateng) Our policy is to recognise the role that fiscal policy can play in changing behaviour for the good, to seek to utilise fiscal policy, to support the good and to drive out the bad, but to recognise that there is a real balance to be struck between, for instance, issues around the environment, issues around congestion and issues around social inclusion. If you take rural areas, for instance, a car there will be very important in terms of social inclusion and therefore we would not want to use a crude price mechanism to drive people out of their cars. But, undoubtedly, pricing plays a part.

  285. Can you confirm that that strategy as you have qualified it is accepted by the DTLR?
  286. (Mr Boateng) It is a given, and I would be very surprised if the role of pricing was not accepted by that Department. Indeed, there is every indication it is.

  287. My last question is a more specific one and it relates to the fuel duty rebate for stage-carriage services for buses. Bearing in mind what you have just said, it is a very important element in helping to control costs and hopefully make it more attractive for people to use road public transport. My understanding is that the level of the fuel duty rebate has not been increased for a number of years and therefore has decreased in real terms, (a) can you confirm that (b) what do you think about it and (c) are you prepared to consider looking at that important element of the cost of road passenger transport sympathetically?
  288. (Mr Boateng) I have no doubt in terms of arriving at a balanced interest in relation to public spending and the various desirable outcomes that you have outlined, that is a factor that the Chief Secretary and the Chancellor will take into account in terms of the up-coming Spending Review.

  289. Forgive me for interrupting, Minister, but you have told us at some length that you are here to talk about taxation.
  290. (Mr Boateng) Yes, indeed.

  291. This is specifically taxation.
  292. (Mr Boateng) It is a rebate and therefore part of a public spending scheme. It has implications for public spending. As I indicated earlier on, there are a number of issues which have to be balanced, one of them is revenue, another is the environment, congestion, and the important point you have raised, and which I accept, around social inclusion. How that balance is struck is obviously one of those matters that both the Chief Secretary and the Chancellor take into account both in relation to public spending decisions and in relation to decisions they have to make in terms of the Budget. But I hear what you say and undoubtedly that is a factor which will be taken into account.


  293. Minister, with the greatest respect, if you could not hear what he was saying there would not be a lot of point in your being here.
  294. (Mr Boateng) That is true.

    Chairman: We shall try, because we are by nature optimistic, to continue with the questions.

    Andrew Bennett

  295. Would it not be a good idea to give tax incentives to cyclists and walkers who use that means of transport to get to work?
  296. (Mr Boateng) Yes. Indeed, if you look at the Transport Plan and the steps that have been taken in terms of encouraging good practice by employers in that regard, the role of that sort of incentive is recognised - for instance, in relation to the specific concessions in relation to bike-to-work days and tax concessions around those days. So undoubtedly in terms of the judgements that have to be made in the budget-making process, that is one of them. There are some good examples, in terms of the travel plans and the fiscal policies that underpin them, of that happening.

  297. How much is it worth?
  298. (Mr Boateng) It is a modest sum. To give an example -----

  299. No, I just want to know what it really costs.
  300. (Mr Boateng) I will send you a memo with the exact figures.

  301. In terms of making the urban renaissance actually happen, which would encourage people to live closer to their work, those sorts of things, which of your tax policies is going to make an impact on the urban renaissance and make a contribution to the 10 Year Plan?
  302. (Mr Boateng) I think that certainly in relation to the work that is being done to underpin with fiscal incentives travel plans, that has the potential to make a contribution. I think too in relation to the cost of using a vehicle in relation to VED, for instance, and rural areas, that can make a contribution, and similarly in terms of the tax on fuel. All of those have a potential. If the question is, should we be doing more, then what I think I would want to say is that there may well be other things that we can do by way of fiscal incentives to encourage that sort of desirable objective. Certainly in terms of what we are doing to reduce pollution and the changes that we have made in relation to fuel duty, the green fuel challenge and the like, all of those have a capacity to improve the urban environment and the quality of life.

  303. Any prospects of any changes to VAT in terms of new build, old build and where it is?
  304. (Mr Boateng) That is an issue over and above the specific issue of transport.

  305. No, it is very fundamental to transport, is it not?
  306. (Mr Boateng) Yes.

  307. Because if you can reduce the amount of travel, then it actually reduces congestion, which is a fundamental part of the 10 Year Plan.
  308. (Mr Boateng) Sure, and I think it is undoubtedly the case that amongst the range of options to be considered in relation to -----

  309. I did not ask you for a range of options. Has there been any progress?
  310. (Mr Boateng) I think there has been some progress, but I do think that again - and I know it may well not be what the Committee wants to hear, but I do think it is the truth - a balanced judgement has to be made, and it takes into account -----

  311. It is not a question of a balanced judgement, it is finding out what the judgement is.
  312. (Mr Boateng) No, I am afraid it is. It is a question of a judgement.


  313. What is the judgement of the Treasury in relation to the question that is being put to you, Minister?
  314. (Mr Boateng) I think what I would say is this. All decisions around changes in levels of taxation require a balanced judgement. That is something -----

    Andrew Bennett

  315. All right, I accept it is a balanced judgement. But if you are making a balance, you have something on one side of the scales and you have something on the other side. All we would like to know as a Committee is what is on both sides of the scales? Is a change in VAT going to make a significant contribution to the 10 Year Plan? And I might as well add, since I am not sure I am going to get an answer, stamp duty. Do changes in stamp duty make a contribution to encourage people to live closer to their work - in other words, part of the Government's urban renaissance?
  316. (Mr Boateng) The changes proposed and being implemented in relation to stamp duty and to deprived areas, the changes proposed and being implemented in response to Lord Rodger's recommendations, all of those have the potential to contribute to the wider objectives outlined in this 10 Year Plan.

  317. How much?
  318. (Mr Boateng) I will certainly write to the Committee to give the figures. They will indicate that some progress has been made. No doubt there is more progress which could be made. The scale of that progress and its rapidity will depend on the balance judgment to which I have referred the Committee.

  319. On a different topic, motoring costs, if they are coming down over the next ten year period significantly what is your estimate of the impact that will have on carbon dioxide emissions, congestion and traffic?
  320. (Mr Boateng) We are on target to meet our Kyoto obligations.

  321. That is not the question I asked you.
  322. (Mr Boateng) It is the answer I am giving. We are on target to meet our Kyoto obligations. I do believe that you will find in relation to any audit, and it is early days yet, of the steps we have taken in relation to the green fuel challenge, the steps we are taking in order to address issues of congestion and the environment, that in all those areas there will be some progress made. If your question is, is there more we can do, my answer is yes.

  323. I would have thought it would have been reasonable for you as a minister to have a set of graphs which showed you the impact of each of these policy decisions, so you could see what the implications would be of motoring costs staying constant, motoring costs going up. Are those figures available?
  324. (Mr Boateng) I am not sure I can give you a set of graphs but Mr Maxwell can refer you to a table.

    (Mr Maxwell) Table 7.2 of the PBR for November 2001, but also previous Budget and PBR documents, sets out the environmental impact of different tax measures. The point that is useful is that it is not just the level of the tax, it is often the structure of it. Take company car tax or vehicle excise duty, for example, it is possible to restructure those taxes to create extra incentives for more efficient vehicles which would have CO2 benefits and also benefit local areas.


  325. And you can demonstrate those in your table?
  326. (Mr Maxwell) Table 7.2 gives a list of measures introduced most recently.

    Chairman: Thank you, Mr Maxwell, that was almost a constructive answer.

    Helen Jackson

  327. This is simple as well. How much overall by vehicle-related tax do you collect in a year?
  328. (Mr Boateng) I can give you these figures. For the last year, 2001-02, on fuel duties, 22.5 billion; on vehicle excise duty, 4.5 billion; on company cars and the revenue we raised from that, 2.36 billion. That compares, going back to 1998-99, to 21.6 billion, 4.7 billion and 2.18 billion respectively.

  329. So you take in tax a substantially greater amount of income than you invest in public transport or the transport infrastructure?
  330. (Mr Boateng) It certainly is not revenue-neutral. There is not any direct read-across and there never has been any pretence that there was.

  331. What I am wondering, you see, is that the 10 Year Transport Plan is based on significant investment, but significant investment which will not necessarily all be at the beginning of that spending programme but will be across the whole timescale. Can you tell us that the investment plans are absolutely secure even though the tax-raising powers may vary?
  332. (Mr Boateng) The commitment is absolutely clear.

  333. I can see you writing us little notes on this!
  334. (Mr Boateng) The commitment is absolutely clear. The commitment is for that level of public investment over that period. If you ask me to anticipate the read-across between that and what we raise in revenue from those duties that I have just outlined to you, there is not any direct read-across, because it is not dependent on that. There is a clear public spending commitment contained in this 10 Year Plan that is not dependent on the levels of those revenues, but as you yourself have appreciated, it does in fact need to be, because those are not hypothecated revenues.


  335. The Secretary of State did tell us today that many of the new costs would be front-loaded. Are you aware of that?
  336. (Mr Boateng) I am not going to -----

  337. ----- discuss money, no, no, no.
  338. (Mr Boateng) I am not going to seek to provide a commentary on the Secretary of State's evidence.

    Helen Jackson

  339. No, but if there is a shortfall in the investment required, which needs to be raised from the Treasury, how prepared are you? What linkage might there be with the tax-raising powers you have?
  340. (Mr Boateng) If there is a shortfall, that will be a matter that will need to be picked up in successive Comprehensive Spending Reviews. It is not linked to the amount of revenue that is raised with fuel duty, vehicle excise duty and company cars.

  341. Yes, but you are not denying that there is a clear link between the proposals in the spending plan which relate to the degree to which motoring increases, which might mean that more people buy cars, etcetera, and the tax assumptions you are making?
  342. (Mr Boateng) Yes, but the one is not dependent upon the other.

    Helen Jackson: I think they are.


  343. I think, Secretary ----- No, Financial Minister.
  344. (Mr Boateng) Financial Secretary.

  345. We find you so interestingly explicit about everything that we sometimes forget who you are!
  346. (Mr Boateng) I do not think you ever do that, Mrs Dunwoody, any more than I forget who you are!

  347. Good. If you do, Mr Boateng, I will remind you!
  348. (Mr Boateng) I am sure you will.

  349. Can I say that we have found this session most -----
  350. (Mr Boateng) "Entertaining" is the word you want!

  351. Yes, not instructive, but entertaining. With all respect to you, I think it will be helpful if we send you a series of questions which we would like you to reply to in writing, because that is the function of Select Committees - to gather information.
  352. (Mr Boateng) Quite so, Mrs Dunwoody.

  353. I am so glad you came.

(Mr Boateng) Thank you very much.

Chairman: The Committee stands adjourned.