asked Her Majesty’s Government:

What plans they have for the development of rail freight through the Channel Tunnel.

My Lords, to support the development of rail freight through the Channel Tunnel, we will encourage the introduction of robust commercial arrangements between the parties, coupled with the liberalisation of access to the wider European rail freight market and an increase in competition both within Europe and through the Channel Tunnel.

My Lords, I thank the Minister for that reply. Bearing in mind the forecasted freight traffic when the Channel Tunnel opened—we all know why those levels went down with illegal immigrants—does he foresee the growth of traffic to reach again the forecast levels?

My Lords, the whole House will be pleased at the growth in freight traffic in the United Kingdom, by 55 per cent in the past eight years. There is a particular difficulty with the level of charges for going through the Channel Tunnel, and we have been in substantial discussions with Eurotunnel to guarantee that the present freight services can continue and, in due course, expand. We are pleased to note that the difficulties have been overcome, and that EWSI is to continue its Channel Tunnel freight services.

My Lords, given the cost and disruption that this would involve, and the shambles over the original Channel Tunnel created by the then Government, of whom I was a member, what real benefit would flow from such a massive disruption?

My Lords, the problem is that the capital costs of the tunnel hang like a huge, dead weight on its viability. It is therefore prone to put very heavy tolls on current users, with the result that EWSI, the British company solely operating freight services from this country through the Channel Tunnel, is running at a loss and will continue to do so for the immediate future. We are concerned as a Government to give what support we can. State aid ended on 30 November this year, in line with European agreements, but we are giving environmental support to the tune of £6.5 million a year, which demonstrates how much rail use saves in environmental terms compared with the use of lorries and ships to cross to the continent. The noble Lord is right; there are very real difficulties in the operation of Eurotunnel.

My Lords, I declare an interest as secretary of the All-Party Group on Rail. I thank the Minister for his answers and congratulate the Government on participating in keeping the service going. Does the noble Lord agree that the current charges for using Channel Tunnel rail freight are probably illegal under the EU rules, which were designed to encourage rail freight? What action could the Government take to ensure compliance for this very important rail link?

My Lords, my noble friend is very knowledgeable on these issues and therefore will know that EWSI is to appeal against the charges, on which I cannot directly comment. Suffice it to say that the French state railways complain as vociferously as EWSI about the cost of running trains through the tunnel.

My Lords, the Minister sounded a little equivocal in his previous answer. Will he confirm that, because it literally has to, the Channel Tunnel will remain viable and open, and that the scheme with the bankers will succeed because it must? After all, it should have been a public-sector scheme in the first place.

My Lords, it might well have been a public-sector scheme but that does not mean we countenance a loss-making operation. The problem is that the tunnel is sustaining very significant losses. The solution is certainly not to reduce usage of the tunnel. We and the French are at one. We want to see expanded usage of the tunnel—both by passengers and for freight—which is why, when EWSI threatened to withdraw freight services through the tunnel, the Government did their best to ensure that that threat was withdrawn, which it has been.

My Lords, we all want to get more freight on to rail, particularly through the Channel Tunnel. Why have the Government cut in half the grant to encourage that over the past three years? Is the Minister also telling us that because of European regulations we cannot use grants to encourage more freight through the Channel Tunnel?

My Lords, we are inhibited in the degree of state aid that we can offer. We gave state aid for 12 years; it was worth £26 million last year. Under European rules, that must come to an end. I thought that the party opposite was in favour of organisations being run without state subsidy. The position is clear: we want negotiations to arrive at a position whereby the tunnel is viable and freight traffic, in particular, expanded. That would reduce lorry loads on our overcrowded roads and all the environmental difficulties associated with that. That is why we made strenuous efforts to ensure that EWSI could continue its services, but it is running at a loss, therefore the problems remain. That is why we are in vigorous discussions on these matters.

My Lords, some of us who were around at the time consistently voted for this to be a public-sector project, unlike some who have recently come to that point of view.

Shame.

It might be a shame but it is true. Does the Minister agree that this somewhat bizarre charging regime has almost halved the amount of freight through the Channel Tunnel since the project was completed? Bearing in mind that every cancelled freight train means about another 30 heavy goods vehicles on Britain’s roads, as well as those of northern France, how does such a policy equate with the Government’s concern about global warming?

My Lords, the Government agree with the point that my noble friend is making, not for the first time. They are in favour of sustaining freight flows through the Channel Tunnel because of environmental considerations, but we are limited in the financial support we both ought to and can contribute.