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Earl Attlee: I am grateful for the Minister's explanation. Perhaps I can just tempt him to give me an example of where the power would be used. The noble Lord, Lord Berkeley, appears to have got closer, but I cannot picture a situation where the power would be necessary.

Lord Macdonald of Tradeston: Again I do not want at this time of night to indulge in trying to invent

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speculative cases. I rest on the assurances that I have given to the noble Earl. I ask him to withdraw his objection to Clause 222 standing part of the Bill.

Clause 222 agreed to.

[Amendment No. 330 not moved.]

Clause 223 [Amendment of objectives]:

[Amendments Nos. 331 and 332 not moved.]

Clause 223 agreed to.

Clause 224 [Penalties]:

Earl Attlee moved Amendment No. 333:


    Page 138, line 22, at end insert ("; and


(d) the desirability of providing a financial incentive for the owners of the railway network to run more trains and for a fair division of responsibility for train delays,
but no policies may be adopted that will have the effect of imposing disproportionate penalties or materially altering the parameters within which an existing franchise was granted").

The noble Earl said: In moving Amendment No. 333 I shall speak also to Amendments Nos. 334 to 337 and 371.

This amendment is designed to allow us to explore the new provisions for the imposition of fines and penalties. We all accept that as a last resort there needs to be a penalty regime to punish breaches of obligations. However, these powers are wide-ranging and it is in the interests of both the railway operators and the travelling public that policies on enforcement are clear and issued in advance.

In particular, there needs to be guidance on the proportionality of any such fines. There has been concern about the provision for unlimited fines contained in the Utilities Bill. It appears that similar powers are contained in the Bill and there is no indication of the scale of any such penalties. We seek the assurance of the Minister that any fines and penalties will be reasonable, proportionate and based on clarity over the breach of obligations.

There is a clear risk that, if such clarity is not forthcoming, the provisions in the Bill would allow a maverick regulator to pursue an unreasonable course, which would then be challenged in the courts, wasting the resources of the railway company and that of the regulator, to the detriment of the travelling public.

It is important that there is sufficient time for representations in relation to penalties to be made. The timescales in the Bill are short and Amendments Nos. 334, 335 and 336 bring the timescale into line with the time for representations in relation to orders under Section 56 of the Railways Act 1993.

Subsection (1) gives the appropriate authority two years in which to serve a penalty notice. Amendment No. 337 reduces this period to one year. One year should give the appropriate authority time enough to impose a penalty notice. Any authority that takes longer than one year, which is in any event more than adequate, to deal with a contravention is not doing its job properly and the Bill should not encourage such slacking by allowing such an over-generous time for imposition of penalties.

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Under new Section 57B the authority and the regulator are to publish policies in relation to penalties. That paragraph stipulates that failure to publish such policies does not invalidate any penalty imposed. Amendment No. 371 allows for adjustment of any penalty imposed before publication if it is excessive by reference to such policy.

If a penalty is imposed before the relevant policy has been formulated, it may turn out in the light of any such policy to be wildly excessive. That could lead to vastly differing penalties imposed for the same default. It is rightly Parliament's intention that penalties should be governed by published policies and that anyone who suffers as a result of a delay in publication of those policies should have a remedy. I beg to move.

Lord Macdonald of Tradeston: These amendments all impact on the enforcement regime which the Bill enhances from the provisions in the Railways Act 1993, specifically because past regulators have complained that they did not have sufficient tools to ensure that problems are put right both effectively and speedily. I agree that it must be fair to train operating companies and facility owners, but it must also be fair to the users of the railway.

Noble Lords will also have in mind that enforcement is the end of the process. It means that an operator or facility owner has already failed to meet its contractual or licence obligations. The regulator and the SRA propose to improve the positive incentives to drive performance, whether by replacement franchises or as a result of the periodic review of the access charges for Railtrack. The enforcement regime is the other side of the equation.

Amendments Nos. 334, 335 and 336 all impact upon the timetables laid down for various parts of the enforcement regime and extend the timescales. There is a balance to be struck here. Yes, we must allow for reasonable periods but, equally, the enforcement regime must have the teeth to be effective. Our intention has been to speed up the enforcement in appropriate cases. We consider that the timescale for notice requirements for any modification of a proposal to impose a penalty is open to expedition because a modification could be more than trivial, but nevertheless easily and quickly dealt with. For example, the regulator or the SRA may wish to draw attention to some additional facts which justify the imposition of a penalty which they consider to be beyond dispute.

But we are not casting the framework in stone. The periods which we have specified are minima which the authority or the regulator would need to extend where this would be appropriate. It would normally be appropriate to extend the timetable if the operator were being required to respond to a substantial series of new proposals to impose a penalty. If the regulator or the SRA imposes an unreasonable timetable on the facts of the case it will be open to challenge. But we want the process to be flexible. As regards the 14 days for paying penalties, of course operators will

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have the opportunity to apply for an extension under Section 55(8) and an unreasonable refusal can be challenged. That benefit was not in the Railways Act.

These arguments hold true for all these amendments. I repeat, the periods are minima. But if there is a serious ongoing breach, for example, we want the regulator and the SRA to be able to drive enforcement action at the most appropriate speed with regard to the nature of the breach, the complexity of the facts and the nature of any modifications.

Amendment No. 337 would reduce the time limitation period beyond which a breach of a franchise or licence may not be penalised from two years to one year. On the face of it that seems perfectly reasonable as it would bring the limitation period into line with that provided for other utilities in the Utilities Bill. However, this is one of those occasions when we have had to look at the different circumstances of the railways industry. We consider that in this case the longer two-year period is more appropriate.

Railway projects are different because they can be very large infrastructure projects which can have very long lead in times. For example, capacity improvements on the east coast main line which are currently under discussion will be a long-term project. It could be a year before it becomes apparent that a breach has even occurred. Once the rail regulator or the SRA is aware of a breach it needs to investigate it so that it is content that a contravention truly has occurred. That will take time. On balance, we think that a two-year limitation period is fair. It will mean that companies cannot be penalised for actions long in the past and it will therefore allow them to plan their business with certainty. But it will also allow time for a breach to become apparent and be investigated, so that even the big projects have an effective means of enforcement.

Amendment No. 371 addresses the transitional provisions in the Bill and would require that, where a penalty is imposed before the SRA or the rail regulator has published its statement of policy towards penalties, any penalty should be repaid, if, and to the extent that, it would have been materially lower under the policy. While I can understand the concern behind the amendment, I do think that it is unnecessary. The firm intention is that both the SRA and the regulator will have policies in place from the time of commencement, and the rail regulator is preparing such a draft policy in concert with his review of access charges. But policies will be illustrative and not determinative of the amount of the penalty. What determines the penalty is that it must be of a reasonable amount and that will be the case whether or not a penalty policy has been published. When our provisions are commenced the regulator and the authority will be under a duty to prepare a policy statement within a reasonable time. What this transitional provision says is that if, while a penalty policy is being prepared, an incident occurs which must be penalised, and that penalty is in every respect

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reasonable, it cannot be impugned on the technicality that the regulator's or the authority's policies have not been formally published.

Both the requirement for a penalty to be reasonable, which includes the idea of proportionality, and the requirement for a policy to be formulated are additional protections for railway operators in the Bill. There are no such requirements under the Railways Act.

Amendment No. 371 also misunderstands the nature of the policies. These will not comprise a firm tariff of penalties but rather constitute guidelines, at a fairly high level, of what the regulator and the authority will take into account in deciding whether to impose a penalty and what will go into the calculation of that penalty. The policies will not be so specific that a penalty imposed before publication could be reopened immediately after publication in the manner suggested by the amendment.

Amendment No. 333 would affect the statement of policy made by the rail regulator and SRA towards penalties and require them to include the need for a financial incentive for owners to run more trains and for a fair division of responsibility for train delays. It would also require that policies must not impose disproportionate penalties or materially alter the parameters within which a franchise was granted. Setting aside that train operating companies are not owners--and so this would bite only on Railtrack and other facility owners and therefore be ineffective--I think that the Committee will agree that the general aims are perfectly good ones for a penalty policy. However, we consider that the amendments are unnecessary and do not address the issue in the most helpful form to achieve the aims of a better and more efficient railway. As I have said, we are increasing positive incentives to improve the railway through such things as franchise replacement, which must be the most appropriate way to tackle these aims.

Before I complete my remarks, I should like to take this opportunity to inform noble Lords of two related matters on which we propose to table amendments on Report. They both arise from developments on the Utilities Bill which we propose to follow. First, we propose to amend the Bill to provide that no penalty imposed by the regulator or the SRA may exceed 10 per cent of turnover of the licence holder, licensee or franchise operator. Turnover will be determined in accordance with an order made by the Secretary of State, subject to an affirmative instrument.

Secondly, we propose to amend the Bill to ensure that the regulator or the SRA does not impose a licence penalty on the licence holder until it is satisfied that the most appropriate way of proceeding is by the regulator under the Competition Act. This will deal with the issue of double jeopardy.

I hope that noble Lords will welcome this announcement and that, with my earlier explanations and reassurances, the noble Earl will feel able to withdraw his amendment.

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2 a.m.

Earl Attlee: I am a little disappointed that the Minister thinks that my amendments are unhelpful. All of my amendments are designed to be helpful. I thank the Minister for his explanation of why my amendments appear not to be perfectly drafted and I thank him also for giving advance warning of the amendments that he intends to table at a later stage of the Bill. In the meantime, subject to the usual caveats, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 334 to 337 not moved.]

Clause 224 agreed to.

Clauses 225 and 226 agreed to.

Schedule 22 agreed to.

Clause 227 [Freight assistance by Scottish Ministers and Welsh Assembly]:

[Amendments Nos. 337 to 339 not moved.]

Clause 227 agreed to.

Clause 228 agreed to.

[Amendments Nos. 340 and 341 not moved.]

Schedule 23 [Finances and procedures of rail users' consultative committees]:

[Amendments Nos. 342 and 343 not moved.]

Schedule 23 agreed to.

Clauses 229 and 230 agreed to.


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