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Earl Attlee: My Lords, I am grateful to the Minister for that explanation. I shall read it most carefully in Hansard and meanwhile I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 265 not moved.]

[Amendment No. 266 not moved.]

30 Oct 2000 : Column 769

Clause 224 [Penalties]:

Lord McIntosh of Haringey moved Amendment No. 267:

    Page 137, line 43, at end insert--

("(2A) The amount of a penalty imposed on a relevant operator may not exceed 10 per cent. of his turnover determined in accordance with an order made by the Secretary of State; and an order under this subsection shall not be made unless a draft of the statutory instrument containing it has been laid before and approved by a resolution of each House of Parliament.").

The noble Lord said: My Lords, government Amendments Nos. 267, 268, 270 to 276, 292 and 294 address the enforcement of railway operators' obligations under their licences or franchise agreement. Firstly, they provide an upper limit on penalties. Secondly, they provide a protection against the danger of penalties being imposed under both the Competition Act and the Railways Act in respect of the same event. Thirdly, they improve the provisions in the Bill, giving operators the right to appeal against the regulator's or the SRA's decisions on enforcement to the High Court.

Amendments Nos. 267, 268 and 276 meet our commitment in Committee to amend the Bill to introduce some of the protective provisions accepted during the passage of the Utilities Bill.

Amendments Nos. 267 and 276 impose an upper limit on any financial penalty or sum payable by an operator for breaching an enforcement order. The upper limit is 10 per cent of the turnover of the relevant operator, with detailed provisions set out in an order made by the Secretary of State.

Amendment No. 267 imposes a duty on the Secretary of State to make detailed provisions in relation to the definition of turnover, by order made by affirmative resolution.

Amendment No. 294 will preserve the current position for the time that it will take to get the turnover regulations prepared and approved by Parliament.

Amendment No. 268 provides the same degree of protection against what has been called "double jeopardy" with regard to financial penalties as for other aspects of enforcement action. It does this by requiring that the rail regulator should not impose a penalty where he is satisfied that the most appropriate way of proceeding is under his Competition Act powers. It also requires the SRA, before imposing a financial penalty relating to the contravention of a consumer protection provision in a licence, to ensure that the regulator does not propose to take simultaneous action under the Competition Act.

Amendments Nos. 270 to 275 and 292 improve the drafting of the provisions in the Bill which specify the remedies available to a court where it upholds an operator's appeal.

I shall not now speak to the Opposition's amendments in the group but shall listen carefully to what noble Lords have to say. I beg to move.

Earl Attlee: My Lords, my Amendment No. 269 is in this group. It is self-explanatory and is designed to improve the new provisions relating to the imposition

30 Oct 2000 : Column 770

of fines, corrections or penalties. As I said in Committee, we accept that as a last resort there needs to be a penalty regime to deal with breaches of obligations. However, these powers are wide-ranging and it is in the interests of both the railway operators and the railway customers that policy and enforcement are clear and issued in advance.

In Committee, the Minister objected on the ground that the provision would bite only on Railtrack, which does not run trains. In a way, the Minister was right; it was a Railtrack-type amendment. However, it was not designed to be anti-Railtrack. The prime target is the current problem of the lack of incentive--indeed, disincentive--for Railtrack to allow more trains on the track because of the increased need it creates for rail repairs and the delays which they may cause. This is at a time when the number of passengers is growing. To an extent, the industry is a victim of its own success. We have no objection to adding other operators and honing the wording, but the Minister also claimed that the regulator and the SRA would deal with the problem through positive incentives. Fine, but that is jam tomorrow, and anyway sticks are useful and are sometimes a necessary complement to carrots.

The safety concerns highlighted by the Hatfield crash have also made the issue more pressing. The penalty system must be structured so that it does not create or exacerbate a conflict between safety and service. Railtrack must not feel that it is being unfairly penalised for carrying out the extra safety work made necessary by additional use of the track.

Lord Berkeley: My Lords, I was not going to intervene, but I must point out to the noble Earl, Lord Attlee, that there is considerable debate about whether the accident at Hatfield was caused by excessive use of the track or inadequate maintenance. It would be rash to legislate for more or different penalties so soon after an accident the causes of which have not yet been identified. I have some concerns about the noble Earl's amendment.

Lord McIntosh of Haringey: My Lords, I agree with the noble Lord, Lord Berkeley. After Hatfield, the public wants to be satisfied that the rail industry is working together and doing everything possible to address the safety issues. We must not prejudge the results of the Health and Safety Executive's investigation into the causes of the accident or the recommendations arising from the Cullen inquiry into the culture, management and regulation of safety.

The noble Earl, Lord Attlee, spoke only to Amendment No. 269, which would affect the statement of policy made by the rail regulator and the SRA towards penalties. The amendment's general aims are perfectly good--to provide financial incentives to run more trains, to provide a fair division of responsibility for train delays, to prevent disproportionate penalties and to protect the franchise parameters.

30 Oct 2000 : Column 771

The provision of incentives is not the primary responsibility of a penalty regime. The issue is better tackled through contractual and regulatory arrangements, such as franchises and access agreements. The point about proportional penalties is unnecessary as penalties may not be unreasonable. One that was disproportionate or affected the basis of a franchise contract would not be reasonable.

Penalties do not come at the end of the incentive regime. They are imposed when the operator or facility owner has already failed to meet their contractual or licence obligations. The prospect of penalties can be an effective stick and an incentive to ensure that trains are run to a contractual level, but once a standard has been contravened, a penalty is not connected with a specific level of future performance. For performance to be driven up, it needs to be worth while to invest for the long term and to maintain an improved service in the short term. That is why the SRA will negotiate replacement long-term franchises to give operators a greater stake. As part of those franchise incentive payments, rewards and penalties--carrots and sticks--will double.

Railtrack also needs an inducement to invest. One of the purposes of the rail regulator's periodic review of access charges is to ensure that Railtrack shares in growth and is therefore willing to contribute.

The noble Earl's aims are being met, but in the positive, not the negative sense. I hope that he will not press Amendment No. 269.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 268:

    Page 138, line 4, at end insert--

("( ) The Authority shall not impose a penalty on a licence holder or person under closure restrictions unless--
(a) it has given notice to the Regulator specifying a period within which he may give notice to it if he considers that the most appropriate way of proceeding is under the Competition Act 1998;
(b) that period has expired; and
(c) the Regulator has not given notice to the Authority within that period that he so considers (or, if he has, he has withdrawn it).
( ) The Regulator shall not impose a penalty if he is satisfied that the most appropriate way of proceeding is under the Competition Act 1998.").

On Question, amendment agreed to.

Earl Attlee moved Amendment No. 269:

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

(d) the desirability of providing a financial incentive for relevant operators to run or allow the running of more trains and for a fair division of responsibility for train delays,
but no policies will 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: My Lords, I wish to test the opinion of the House.

30 Oct 2000 : Column 772

10 p.m.

On Question, Whether the said amendment (No. 269) shall be agreed to?

Their Lordships divided: Contents, 21; Not-Contents, 49.

Division No. 2


Attlee, E.
Blatch, B.
Brabazon of Tara, L.
Brougham and Vaux, L.
Byford, B.
Chalker of Wallasey, B.
Cope of Berkeley, L.
Craigavon, V.
Dixon-Smith, L.
Freeman, L.
Geddes, L.
Hanham, B. [Teller]
Henley, L. [Teller]
Hodgson of Astley Abbotts, L.
Luke, L.
Lyell, L.
Mackay of Ardbrecknish, L.
Northbrook, L.
Northesk, E.
Rotherwick, L.
Vivian, L.


Acton, L.
Addington, L.
Amos, B.
Archer of Sandwell, L.
Bach, L.
Berkeley, L.
Blackstone, B.
Brennan, L.
Brett, L.
Burlison, L.
Carter, L. [Teller]
Cohen of Pimlico, B.
Davies of Coity, L.
Davies of Oldham, L.
Desai, L.
Dubs, L.
Eatwell, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Filkin, L.
Gibson of Market Rasen, B.
Gilbert, L.
Goldsmith, L.
Goudie, B.
Gould of Potternewton, B.
Hamwee, B.
Hardy of Wath, L.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Hughes of Woodside, L.
Hunt of Chesterton, L.
Hunt of Kings Heath, L.
Macdonald of Tradeston, L.
McIntosh of Haringey, L. [Teller]
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Ramsay of Cartvale, B.
Sainsbury of Turville, L.
Sawyer, L.
Scott of Needham Market, B.
Sewel, L.
Simon, V.
Stone of Blackheath, L.
Symons of Vernham Dean, B.
Thomas of Walliswood, B.
Wallace of Saltaire, L.
Warwick of Undercliffe, B.
Whitty, L.
Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.

30 Oct 2000 : Column 772

10.10 p.m.

Lord McIntosh of Haringey moved Amendments Nos. 270 to 276:

    Page 141, line 41, leave out from ("On") to ("a") in line 45 and insert ("an application under this section on the ground mentioned in subsection (1)(a) or (b) above the court, if satisfied that the ground is established, may quash the penalty or (instead of quashing it) make provision under either or both of paragraphs (a) and (b) of subsection (4A) below.

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