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Lord Berkeley: I am grateful to my noble friend for his usual comprehensive response, particularly his observations on Amendment No. 300. As to Amendment No. 340, I am sorry that I went over the top and tried to propose stronger measures than those possessed by the body concerned with passengers. My noble friend said that there was a strong incentive for operators to listen to their customers. That is true of passenger operators. Some Members of the Committee have said that that does not always happen. I believe that that is why there is a rail passengers' council. The same applies to freight. As we have heard in other debates, there are a large number of small operators out there. There are some large and small train operators. However, the small customers need a voice.

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I shall read my noble friend's response carefully. I may well return to this matter at a later stage with a slightly different amendment. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 210 agreed to.

Schedule 15 agreed to.

Clause 211 [Securing of services by franchising]:

The Principal Deputy Chairman of Committees: In calling Amendment No. 301, I should point out that, if Amendment No. 303 is agreed to, I cannot call Amendment No. 304.

Earl Attlee moved Amendment No. 301:


    Page 123, line 36, at end insert--


("(2C) The Authority shall not exercise its powers under subsections (2A) and (2B) unless necessary for the purpose of its existing powers under section 30."").

The noble Earl said: In moving Amendment No. 301, it may be convenient to speak to Amendments Nos. 302 to 306. We are concerned that Clause 211 gives the SRA stronger powers to run trains. It goes further than the provisions of the Railways Act 1993 and appears to provide for more state interference in the running of the railway. The amendment would ensure that the SRA would have such powers only as a truly last resort.

Amendment No. 302 deals with subsection (2), which enables the authority to vary or revoke the designation of services as eligible for franchises. It provides that such power may be used only for the purposes of enabling the authority to provide or secure the provision of services in the circumstances set out in subsection (5). The authority should not have carte blanche to remove sectors of the railways system from the franchising process. Such power should be used only in circumstances where the authority is permitted by the Bill to provide services direct or to secure provision of them.

I turn to Amendment No. 303. Section 26(1) of the Railways Act 1993 allows the Secretary of State, when the authority selects the franchise, to direct otherwise. The amendment removes that power. The Secretary of State should not be able to substitute his choice of franchisee for that of the authority. That would expose him to all kinds of difficulty, especially as under subsection (3) he also takes power to direct how the appointment is to be made so that the proper tendering process can be bypassed. This provision has not proved to be necessary and, given that it is open to abuse, it should be removed.

If the amendment is not agreed, perhaps my Amendment No. 304 may be helpful to the Committee. New subsection (3) gives the Secretary of State wide powers not only to substitute his choice of franchisee for that of the authority but also to detect the method of selection of the franchisee. Amendment No. 304 limits the powers of the Secretary of State to prohibit the authority's choice of franchisee to where he has evidence that the person selected is not suitable to be a franchisee. In that case, the authority must give the franchise to another tenderer or retender.

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If the Government insist on keeping the right to direct the authority not to grant a franchise to the person of its choice, the right should be exercisable only where there is firm evidence that the person chosen is not suitable to be a franchisee. Nor should the Government then set about selecting a franchisee themselves or dictating how one should be selected. It should be left to the authority to appoint one from the other tenderers or to retender.

My final amendments in the group are Amendments Nos. 305 and 306. New Clause 26(1)(b) allows the authority to provide services direct where a franchise comes to an end and no new franchise agreement has been entered into. This gives the authority the power to provide all services direct by not renewing franchise agreements when they expire. The amendment limits these powers to an interim period before a new franchise is granted.

Assurances from the Minister that there is no intention to renationalise the rail network ring hollow when such wide powers are included in the Bill. The circumstances in which they can be exercised should be spelt out. I beg to move.

Lord Whitty: I detect a serious note of paranoia behind the noble Earl's intervention in the debate. He believes that the powers in the clauses are designed for renationalisation of the network. As he has already cast suspicion on previous assurances, I do not suppose that any further assurance from me would convince him.

However, if he reads the clause he will see that we are genuinely talking about the SRA operating services of last resort when all else has failed. We are not talking about backdoor renationalisation.

Apart from the noble Earl's general concern, Amendments Nos. 301 and 302 reflect a misunderstanding. They seek to tie the provisions for the designation of services eligible for franchising to the process through which the authority must travel before it becomes the operator of last resort. In fact, the two issues are rather separate.

It is a prerequisite of eligibility for franchising that a service is designated for franchising. We want designation to go further than the requirement so as to indicate not only that a service is eligible for franchising but that it should be performed as a franchised service. That is because of the benefits of franchising over open access as a mechanism for consistent service delivery. Therefore, we are amending Section 23(1) to provide that a designated service should be performed as a franchised service.

However, the current franchising map should not be set in stone. That is why the SRA needs the powers in Clause 211(2) to de-designate and re-designate services. It is that developing situation that the SRA must operate. There is no connection with the SRA's powers to operate those services under Section 30 as a matter of last resort. That section can come into play only when a designated service goes through the franchise process and that process fails to throw up an

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acceptable proposal or when an existing franchise operation fails. Therefore, the connection that the noble Earl makes does not really exist.

Amendments Nos. 303 and 304 would revoke the existing power of the Secretary of State to relax the strict requirement that franchisees must be selected from those who submit tenders. Alternatively, Amendment No. 304 restricts the Secretary of State's power to make such direction to circumstances where a franchisee is not suitable for the job.

This is a complex process. Before letting a replacement franchise, the franchise director proposes to obtain a direction from the Secretary of State which will allow him to award the replacement franchise without being at risk that an unsuccessful tenderer will argue that the process is not compliant with Section 26. Amendments Nos. 303 and 304 would remove the flexibility which Parliament considered necessary in 1993 and would be a significant hindrance on the SRA's ability to continue the franchising replacement programme. I do not believe that that is what the noble Earl intended but that is the effect of his amendments.

Amendments Nos. 305 and 306 seek to qualify the duty of the authority to provide services in the absence of a franchise where a franchise process is under way or proposed.

The authority's Section 30 duties, which are adapted more or less directly from the Railways Act, are there so that, should the private sector fail in its ability to provide services or fail to deliver value for money, the public sector may step in. After all, we must ensure that the trains continue to run and that there is good value for public money. It must be right that the SRA can refuse tenders where they represent poor value for money. In any negotiation it must be possible to walk away and simply say no. Without that possibility, in effect the train operating companies could make any demands that they saw fit. However, it is only possible to say no if there is an alternative public sector capacity.

The previous government accepted that in 1993 by continuing to allow the British Railways Board not only to pick up failed services but to submit a public sector bid to perform a franchised service. We intend to wind up the BRB. Therefore, there must be an alternative structure for last resort operations. That is what we provide in Clause 212(4) and (5).

With regard to Amendment No. 306, the duty in the amended Section 30(1)(b) of the Railways Act is the same as the franchise director's current duty to secure a failed service until it can be performed again under franchise. It is not necessary to spell out that the SRA has a mind to re-tender because that is implied. Unless there is a direction from the Secretary of State that the SRA must not seek to re-franchise the service, the SRA will need to look continuously to the opportunity to re-tender because the designation that the service should be performed by franchise will remain. If the SRA were to exercise its duties under this section in a manner which suggests that it rules out a re-franchising process, it would be acting unlawfully.

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The duty in the amended Section 30(1)(a) will apply where a franchise competition has taken place but has proved unsuccessful, either because there were no tenders or because the tenders represented poor value. In the latter case, there will already have been two franchise competitions, because the Secretary of State cannot intervene to reject tenders at the first attempt.

The market would have been tested exhaustively and failed. At that point, the Secretary of State can be asked to revoke an SRA direction. It would be unlawful for him to be motivated by any prospect other than the fact that the franchising situation had failed. He could not be motivated simply by an overriding desire to place or keep the service in the public sector.

I hope that I have met the noble Earl's underlying suspicions. They are not appropriate. The clauses provide the SRA and the Secretary of State with a way of delivering a service when the tendering process has failed to produce an effective service.


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