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Lord Brabazon of Tara: Very briefly, I agree with much of what the noble Lord has said about the likely effects of the PPP. In fact, I made many of the points that have just been made by the noble Lord during my Second Reading speech on the Bill. However, we do not

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agree with the noble Lord about what may provide the solution to this particular problem. We beg to differ on that matter.

Lord Whitty: I was glad to hear the noble Lord, Lord Clement-Jones, say that he was giving the PPP a sporting chance of success. Up until that point, he was not exactly supportive of that approach. I believe that the negative comments to the approach of PPP have perhaps undermined people's confidence in it. It has not, however, undermined our determination and belief that this is the best way forward for the London Underground and our determination to define and specify the terms of the PPP that we will offer both in relation to Railtrack and the other two contracts that we intend to award.

The Deputy Prime Minister made it clear as long ago as December last that he was committed to seeing the PPP negotiations through to completion. He has never hidden the fact that this means that the process is unlikely to be completed before TfL is vested in July 2000. That means that the deadline contained in the noble Lord's amendment cannot and will not be met. We have given no commitment that it will be met. It would be damaging to the PPP negotiating and tendering process if we tried to meet it.

I understand that people may have ideological and practical objections to the PPP process, but we believe that it is the best way of mobilising not only private capital into the London Underground but also a fair amount of private sector expertise and technology. That seems a sensible way forward while maintaining the overall public sector structure.

It is a new body. TfL is a new creature. But London Underground has not worked under the straightforward public sector provisions in the past; nor does the privatisation of British Rail give us any great comfort that the alternative of the noble Lord, Lord Brabazon, would be appropriate for the London Underground.

We are pursuing the matter. We shall take the time it takes to pursue it, which will almost certainly carry us beyond 1st July 2000. The noble Lord's alternative of establishing a public interest company at that date does not seem to us to meet the requirement either. The amendment prescribes a list of bodies or persons who are holding a majority of shares in a public interest company. The company is in effect a subsidiary of TfL, with some wider public sector involvement. A public interest company, therefore, again falls into the local government finance regime. That is exactly what the noble Lord does not like.

I explained at a much earlier hour that I do not believe that to be as great a constraint as do the noble Lord and his colleagues. TfL will be able to borrow money to invest in transport because it will be a local authority for financial purposes. It will also be subject to the local authority financial regime, as also would this body, which in effect would be a subsidiary of TfL.

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I do not see that the amendment provides a better way than PPP to raise money which we could not otherwise tap into. Indeed, all it would do would be further to blur the boundaries of what TfL is doing, as distinct from the London Underground.

I believe that there is considerable scope for the PPP to work. Putting it in its kindest way, the constant sniping from various areas of the political spectrum against the PPP has not helped. But our determination to deliver it remains. We believe that it is the best way forward for London transport and for a positive contribution for London Underground to an integrated transport system. I do not expect that I have convinced the noble Lord. But I hope that at this hour of the night he will not pursue his amendment.

12.30 a.m.

Lord Clement-Jones: I thank the Minister for that considered and upbeat reply. I am not alone in my lack of faith in the PPP, as the Minister pointed out. I note that he spotted that I was not giving such a sporting chance to the PPP. On these Benches we have a fundamental difference of view about the workability of the PPP, the desirability of Treasury rules, and so on. We are only sorry that the department was unable to take a closer look at other models. I have mentioned New York. Chicago is another model where authorities are able to borrow on the market. Because of the structure and composition of their company in the public sector they are able to be more flexible about the way they operate. That is what the amendment was designed to provide. We shall continue to disagree on that. We may wish to have a further discussion at later stages of the Bill. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 168 to 176 agreed to.

Schedules 10 and 11 agreed to.

Clauses 177 to 180 agreed to.

Clause 181 [The PPP arbiter]:

Baroness Farrington of Ribbleton moved Amendment No. 280A:

Page 97, line 5, leave out ("Act") and insert ("Chapter")

These amendments make minor technical changes to the existing provisions for a statutory arbiter. Amendments Nos. 280A and 283C provide a definition of the PPP arbiter in the chapter. Amendments Nos. 283A and 283B relate to the requirement to provide information to the PPP arbiter. Amendment No. 283A adds a definition of a related third party agreement, to make clear that parties to such agreements are covered by the requirements to provide information. Amendment No. 283B adds a reference that a person may refuse to answer any question as well as to provide any information which he would be entitled to refuse to provide for the purposes of court proceedings. I beg to move.

On Question, amendment agreed to.

[Amendment No. 281 had been withdrawn from the Marshalled List.]

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Lord Brabazon of Tara moved Amendment No. 281A:

Page 97, line 8, at end insert--
("( ) For the avoidance of doubt, in discharging those functions the PPP arbiter shall be acting as an expert and not as an arbitrator under the Arbitration Acts.")

The noble Lord said: In moving Amendment No. 281A, I wish to speak at the same time to Amendments Nos. 282 and 283. We now begin the final furlong by moving onto the PPP arbiter. It is quite correct that the Bill as drafted requires a PPP arbiter to act as a third party referee on any disputes. Most significant construction contracts in the commercial world would have some form of expert umpire to resolve disputes. For the same reasons, the Bill should follow the precedent of normal commercial agreements. The procedure under the Bill is onerous and frequently excluded by commercial agreement in the private sector. PPP agreement should follow the same line. This amendment attempts to cure a lapse from normal business practice.

Turning to Amendment No. 282, it is quite correct that the Bill as drafted requires the PPP arbiter to act as a third party referee in any disputes. As I said, most significant construction contracts in the contract world would have some form of expert umpire to resolve disputes.

It is, furthermore, extremely helpful that the Bill sets out the principles on which the PPP arbiter is to act, so that everyone has some idea of where he stands. However, as drafted, the principles allow an escape clause should any relevant body--that is, LRT or TfL or any of their subsidiaries--mismanage its resources to the extent that it can no longer perform its side of any PPP agreement, as the PPP arbiter is to "have regard to the resources available to any relevant body" without specifying when they are to be available. While it is right that TfL should not be taken to have contracted to deliver something which is beyond its means, private sector operators need the security of knowing that, if TfL contracts to provide something, it will be held to it and not allowed to wriggle out of its agreements if it subsequently mismanages its funds.

Turning to the last amendment, Amendment No. 283, again it is quite correct that the Bill as drafted requires a PPP arbiter to act as a third party referee in any disputes. It is, furthermore, extremely helpful that the Bill sets out the principles on which the PPP arbiter is to act, so that everyone has some idea of where they stand. However, as drafted, the Bill is unclear as to what should happen in the event that these principles clash.

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This places the PPP arbiter in an invidious position. The amendment cures a defect in the Bill by stating which principle takes priority. I beg to move.

Baroness Farrington of Ribbleton: Amendment No. 281A purports to clarify the role of the arbiter. The definition is set out in the Arbitration Act. The Government have made it clear that the arbiter will not just be an expert who will give technical judgments, nor will he arbitrate in disputes between the parties. He will determine questions and issues put to him while having regard to his statutory duties. We believe that the provisions in Clauses 181 to 187 adequately define this role. As the noble Lord will be aware, the reference to the relevant body in this clause refers to the public sector body--that is, TfL--rather than the PPP contractors.

Amendment No. 282 would require the arbiter to disregard the level of resources available to TfL and so have the effect of placing restrictions on the way in which TfL allocates its budget, which is not acceptable or desirable. The performance levels required under PPP agreements need to be set against what TfL can afford.

Amendment No. 283 seeks to require the arbiter to make efficiency and economy his key priority when making a direction or issuing guidance. Subsections (2) to (5) of the clause clearly define the objectives set out to the arbiter of which subsection (3) deals specifically with efficiency and economy. We are of the view that there are no substantial benefits to be had from the objectives being ranked in a predefined order of importance. All parties will be best served by the objectives having equal considerations. I therefore ask the noble Lord to withdraw the amendment.

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