My Lords, I beg to move that this Bill be now read a second time. The Channel Tunnel Rail Link, High Speed 1, is now open, on time and within budget. Passengers can now travel the 68 miles from St Pancras to the tunnel at up to 186 mph. They can go from London to Paris in two hours and 15 minutes, and from London to Brussels in 1 hour and 51 minutes. For commuters living in Kent, journey times will be slashed from December 2009, with a new fleet of trains. The company that built the rail link, London and Continental Railways—LCR—estimates that the project will generate an additional £10 billion of private sector regeneration investment along its route. Management of construction has been a tremendous success. That, in part, is down to the structure in place: the corporate structure, the contracting structure and the roles played by all stakeholders—LCR, the Government and a range of other partners. However, managing a construction project is not the same as managing an operational railway. The Bill makes a small number of changes to support a restructuring and make sure the future structure is as effective as the existing one.
I shall digress into some of the history behind the current discussions. In 1996, London and Continental Railways won a contract to design, build and finance the Channel Tunnel Rail Link and to own and operate the UK arm of the Eurostar joint venture. LCR also acquired brownfield development land around Kings Cross and Stratford. The first part of the High Speed 1 line opened in 2003 and the second section opened, to much celebration, in November last year. The project’s original financing plan depended largely on borrowing against Eurostar revenues, but even before construction began it became clear that, with Eurostar passenger numbers falling below the earlier estimates, those plans would not give lenders sufficient security. To make sure the project was completed, the Government and LCR agreed a comprehensive restructuring exercise to secure the project’s future. Subsequently, the National Audit Office concluded that the restructuring was well thought out and helped to maintain private sector discipline over cost. The arrangements put in place have now proved their effectiveness, with the project being completed on time and within budget. The new railway is now fully open as planned, with Eurostar services successfully moving from Waterloo to St Pancras International. Work to allow domestic services to access the redundant platform 20 at Waterloo is expected to be complete by December this year.
Government support will always be needed to fund major rail projects, but given the investment made by taxpayers, we now need to get the best possible return. In 2006, the board of LCR and the Secretary of State agreed to undertake a joint programme of work to evaluate potential restructuring options. The objective of that work was to identify and implement a future structure for the company that was both affordable and maximised value for taxpayers. What is planned is a separation of LCR’s three different businesses: the infrastructure, including the track and stations; the land interests; and the UK stake in Eurostar. Ultimately, as the Secretary of State said last year, we anticipate that there will be an open, competitive process for any sale to secure best value for the taxpayer. Outside the Bill, a number of regulatory approvals must be granted, but if the timetable proceeds as we anticipate, the most significant sale—that of the rail infrastructure—is likely to take place in 2009.
The Bill itself, although short, is the first visible step in the restructuring work package. One of the key drivers for the Bill was to remove the uncertainty that existed in some quarters as to whether the Secretary of State was able to provide financial support in the operational phase of the railway. Any uncertainty over those legal and regulatory powers could jeopardise the Government's ability to get the best price. Due diligence on behalf of a potential purchaser of the railway could raise concerns about the legal or regulatory powers supporting the project's revenues and financing. That might in turn lead to a reduced bid from investors, or might deter others from bidding at all.
The Bill's first clause confirms that the Secretary of State's powers in the Railways Act 2005 to provide financial assistance can be applied in relation to High Speed 1 and the train services that run on it. The second and third clauses change existing provisions in relation to the regulation of the line. Although High Speed 1 is not subject to periodic price reviews by the Office of Rail Regulation under the Railways Act 1993, the ORR is the appellate body responsible for deciding disputes that may arise in relation to access to and charges for HS1. Clause 4 allows the Office of Rail Regulation to charge a fee for the costs it reasonably incurs in carrying out its functions in relation to HS1. The Bill also amends the statutory definition of “development agreement” in the Channel Tunnel Rail Link Act 1996 to include “operation”.
We are now starting to see the full extent of the CTRL project's value to the UK taxpayer. The financial receipts from any sales are likely to be significant but the benefits of the rail link are wider than any financial transactions. LCR estimates that the new line is facilitating £10 billion in private investment for regeneration along its route. For example, Kings Cross Central is a 27-hectare former goods yard which will house new-build homes and reused warehouses, shops, offices and significant leisure facilities. Taxpayers will receive an agreed proportion of the proceeds from this development. In Stratford, a 13-million square foot development including a new station, shopping centre and accommodation for athletes will support the successful staging of the Olympic Games in 2012.
Journey times to the Continent have been cut by at least 40 minutes compared with before High Speed 1 was built, and through tickets are now available from regional stations across Britain. More than that, local people in Kent will experience significant reductions in journey times to London from 2009, with travel to Folkestone and Canterbury estimated at around an hour.
The brand new fleet of Class 395 Hitachi trains will also be used to deliver the high-speed Javelin service during the 2012 Olympics, travelling from St Pancras to Stratford in seven minutes.
The Bill sets in motion a restructuring package which will optimise value for money for taxpayers and put the railway on a firm financial footing for the future. In those terms, I commend it to the House.
Moved, That the Bill be now read a second time.—(Lord Bassam of Brighton.)
My Lords, I am grateful to speak on a Bill which, although short in length, has the potential to have far-reaching implications. The Channel Tunnel Rail Link opened in its entirety late last year amid much fanfare, with the newly refurbished St Pancras station the crowning glory of the achievement. Yet still more is expected, with 40 per cent of the rebranded High Speed 1 line reserved for commuter services between Kent and London, as the Minister just said. That alone has huge potential significantly to change the commuting lives of many into the capital from 2009.
It was the 1996 Act that permitted the construction of all that, with the regeneration potential of the line crucial to the decision-making process in the preconstruction phase. In that regard, the opening of Stratford International station is eagerly awaited to fulfil completely the promise of the line for the 2012 Olympics and beyond—again, as the Minister just said.
We are faced with a Bill that makes minor changes to the underlying legislation, with the objective of providing an optimal environment in which to restructure the rail link into three sustainable constituent businesses. The ostensible aim is to secure the best value for taxpayers when these elements are sold. Before the minutiae of the Bill are explored, it is important to mention how pertinent solid and effective legislation is to the rail link. It is evident that the end product that we can admire today is in many ways the result of the vital rescue package that was required soon after the Act was passed. The vastly over-optimistic passenger forecasts—again, as the Minister said—which were integral to London and Continental Railways’ bid, undermined the overall purpose of the 1996 Act. The House is currently considering the Crossrail project, and I hope that lessons can be learnt when we deal with grand transport projects as hybrid Bills.
Clause 1 introduces no new provisions; rather, it simply clarifies a point that could suffer from ambiguity. However, the Government think it necessary to restate,
“for the avoidance of doubt”,
as they say in the Explanatory Memorandum, that the Secretary of State may fund High Speed 1 and the trains that operate on it. We are told that this is necessary to secure the best price during bidding. I do not quite understand that. I understand that the Railways Act 2005 allows funding for any part of the rail network, including High Speed 1. I therefore see the benefits of domestic services on the line being subsidised in the same way as the rest of the network under Network Rail, but surely the 2005 Act covers that.
Moreover, from reading Hansard from another place, I understand that, aside from domestic service subsidies, the intention is not to fund the line in any regard, and to provide only short-term support for Eurostar (UK) Limited. If this is the case, why cannot the clause be tightened to reflect this intention? The answer so far has been that doing so would preclude offering historic support to Eurostar in the short term. If the ultimate aim is to make Eurostar financially sustainable in the long term, why cannot this be written into the Bill? We shall have to explore this in Committee. Perhaps a drafting that excluded the direct subsidising of non-domestic services, exempting any historical support, would suffice. An acknowledgment in the Bill that the intention is to subsidise only in the short term, during a potentially volatile period, would provide reassurance. The wording of the clause is already rather unusual, so adding this caveat would not prove to be too exceptional. As I said, I am sure that we will explore this further in Committee.
Clause 2 removes further the power of the Office of Rail Regulation to approve access contracts for High Speed 1. The 1996 Act provided for domestic train operating companies on the line to be immune to the normal procedure in the Railways Act 1993. Instead, the development agreement requires the Secretary of State to oversee access contracts. This is the case for all the line, except, importantly, where High Speed 1 crosses any part of the national rail network and where the ORR still oversees access contracts. The Bill removes these exceptions and any potential duplication between the two regulatory regimes. I certainly see the benefit of avoiding dual regulation. I understand that High Speed 1 is a new asset and is therefore not subject to the economic regulation and the reviewed access charges of the rest of the national network, but are there any other advantages in creating a regulatory exception for this line? One possible advantage is that international services could be required to make full use of the High Speed 1 asset.
There has been much discussion in another place of imposing terms on operators to stop at the new Stratford International station, which will be very well connected to different parts of the national rail network. I live in the east of England, and I very much support that.
I understand that international operators are on open-access contracts. Having looked at the consultation documents regarding the charging framework, it seems that the charging regime will be priced so as to not discourage the use of intermediate stations. Can the Government do anything else to help ensure that the full potential of the asset is realised? As the Minister said, the regeneration potential of the line was key to the routing, which I hope will continue to be borne in mind when thinking about international lines.
On Clause 3, the 1996 Act gives an “overriding duty” to the ORR,
“to exercise his regulatory functions in such a manner as not to impede the performance of any development agreement”.
The Bill proposes to remove the sections of this clause which pertain to the construction of High Speed 1, which are now irrelevant, but seeks to retain the development agreement as the rail regulator’s overriding consideration. The example used in another place of why this is still necessary is to prevent train operators running to the Channel Tunnel on the domestic network and undermining the purpose of High Speed 1 as a result. Is that likely? Are there any other convincing reasons why this clause should be retained and priority of attention given to High Speed 1 over other parts of the rail network? I understand that the line is rather different from the rest of the rail network, but are there commercial benefits to treating it in a different manner?
The final substantive clause allows the Office of Rail Regulation to charge fees for its duties. As mentioned, the ORR’s duties are much less than those that it holds over the national network. The clause is in place if and when the need for the ORR to get involved becomes apparent. I understand that an example of such a scenario could be during a dispute between a rail operator and the line owners. The ORR also has health and safety duties. Would it be possible to make a charge for these, or are they excluded along with the competition aspects of the regulation? I was pleased to see that this clause was modified sensibly in another place to ensure that any charges represent costs reasonably incurred, which provides a degree of objectivity to any charge imposed.
This is a very complicated, technical Bill and I have tried to highlight some of the questions about which we are concerned. But there are several other issues which, although are not explicitly covered in this amending Bill, relate directly to the Channel Tunnel Rail Link. Waterloo International station ceased to operate Eurostar services when St Pancras took over and has five platforms vacant as a result. I understand and have read all the arguments against facilitating their usage in the short term. However, there was plenty of time in the interim period for the Government to address, or at least acknowledge, some of those issues. Instead, we are now faced with the prospect of major works on the crossover at Clapham Junction and on the heavily congested throat of Waterloo station, and for South West Trains to acquire further rolling stock before any benefits can be realised. The cost of mothballing the platforms is not insignificant at £500,000 a year.
Of course, the original intention was for international services to run from Waterloo and St. Pancras stations, a decision which was overturned rather late in the process. Why were the reasons against this not thought through in the first instance? Perhaps we would be in a more optimistic position than being able to offer only platform 20 for conversion in the near future. Given that the Waterloo situation is a direct result of the Eurostar legacy, would it be possible to use some of the money raised from the sale of High Speed 1 to address the issues at Waterloo and make one of the busiest stations in the country more useable?
International services on High Speed 1 are subject to open-access contracts, and I would very much like to see a degree of competition on the line. Will the Minister be able to comment on the likelihood and feasibility of competing services being launched, and on whether on the French side of the Channel Tunnel there is sufficient free capacity? It is all very well describing contracts as “open-access” but is a degree of competition possible in reality?
In High Speed 1, we finally have an asset we can be proud of, with the benefits for passengers and regeneration potential enormous. We need to ensure that this Bill is sufficiently well drafted for High Speed 1 to continue in this vein. As I have said, this is a very technical Bill and I have tried to put forward some of the problems. For those reasons I look forward to being involved as the Bill progresses through the House.
My Lords, we understand why it is necessary to confirm that the Secretary of State is empowered to fund the continuing operation of the Channel Tunnel Rail Link so that trains may run after construction and to remove any confusion which may exist, and to which the Minister referred, as to whether the state has the power to finance domestic operations as well as international trains. I believe it has been suggested that lawyers have found issues to raise which may be expensive to resolve without this legislation.
As we understand it, there are four separate businesses: the property business, with which we need not concern ourselves; the high-speed link itself, which is an infrastructure business; Eurostar, which is an unincorporated business owned by the three Governments; and the domestic trains, where the Secretary of State has already purchased 40 per cent of their capacity and which are due to commence operations shortly. High Speed 1 will own the infrastructure, so my first question is who might that be? That is, who will the Government sell it to? It could be sold to Network Rail, which could raise the money by selling bonds, enjoying as it does the advantage of those bonds being backed by the Government and probably able to borrow money more cheaply than anybody else. It could be bought by Eurotunnel, which has the incentive to tackle both its own costs and those on the high-speed line itself, which are too high. It could be bought by SNCF because we know that certain continental operators have a taste, shall we say, for British assets. That was reflected recently in the acquisition of both Cheltenham Rail and EWS by Deutsche Bahn. And of course it could be acquired by a body such as Macquarie or Ferrovial. They would probably require higher returns and might or might not pay more. Will the Minister confirm whether my interpretation that these bodies form the target market is correct?
At present, the charges for using the Channel Tunnel Rail Link are something over £2,000 per train, and I believe that that is somewhere close to the market price, the point at which you get more people using the service and therefore more revenue. If you charge more, fewer people will use it and there will be less revenue. Are these charges likely to be increased, and who would give consent to any increases that might be introduced? Alternatively, will there be no cap, and will there be a right of appeal about the charges being levied? If there is an appeal, who will it be made to?
I turn to freight and open access passenger operators. What charges will they be subject to, and will they be open to appeal? At the moment on British Rail, an open access freight operator pays only marginal costs, and the same is true for an open access passenger operator. Who would hear an appeal against the level of charges, and would the charges be subject to European law?
Is it the intention to sell the debt attached to the high-speed line with the assets themselves, or would the removal of the guarantee by the Government, which has been given to the operator of High Speed 1, offer it more freedom? If the Government were to offer some sort of cover for the debt, would it make the operator more or less free? What effect do the Government think this will have on the price realised from the sale? What underlies this Bill is the fact that the Government want as much money as they can get. The words are slightly more elegant than that, but basically they are out to get the biggest bang for their buck that they can.
Will the Government commit themselves to a review of the restrictions imposed by the Intergovernmental Commission on the Channel Tunnel? Why are these restrictions drawn in such an onerous fashion? For example, the latest intercity express of German railways can go through tunnels in the Alps which are much longer than the Channel Tunnel but it cannot come through the Channel Tunnel itself. These restrictions, I believe, originate in a treaty, but treaties may be rescinded by the consent of both parties. How close is the intergovernmental commission to being a restraint on trade? If the Swiss can allow trains to go through their tunnels, or the Danes and the Swedes can allow trains to go over their bridges, is this intergovernmental commission a restraint on trade? If so, is it bordering on the illegal? How do the present financial arrangements fit in with the review of state aid for infrastructure which I understand the European Union is currently considering?
There are many more questions but the basic one is whether it is the intention of government to see that the Channel Tunnel Rail Link is used to the maximum extent possible so that more people benefit and carbon dioxide emissions from aircraft are reduced to the minimum. This is an asset which the taxpayers of this country have purchased and I think that given a vote—which I suppose they are every five years—the taxpayers would say, “The most important thing is that more of us are able to afford to go on these trains and to use them—and, by the way, to reduce the carbon footprint”.
Does this desirable aim—which I believe most people would think is good—conflict with the Government’s obvious desire to secure the highest sale price? Is this the basic reason for paragraph 11 of the Explanatory Notes—which I recognise are not part of the Bill—which states that the purpose of Clause 2,
“is to ensure that all access contracts in relation to the CTRL should be outside regulation by the ORR under the 1993 Act”?
We on these Benches remain suspicious of any legislation which gives a regulatory oversight to the Secretary of State. That is not independent oversight but regulatory oversight—in this case to the vendor of the assets. We remember the recent history of the railways and wish to see nothing enacted which could lead to assets which have been largely financed by the state being placed in other hands. This could lead to a rundown in the condition of the assets—as occurred with Railtrack, with its slack standards and maintenance holidays—and a lading of the system with an immense amount of gearing in the form of debt raised against the optimistic hope of future revenue streams.
I turn now to the issue of the extension of the high-speed line to many other parts. The noble Lord, Lord Hanningfield, mentioned the platforms at Waterloo; I cast my eyes somewhere above that and think of all the people in the north of England who paid the taxes to build this line and do not have any access to it. I realise that “hypothecation” is not a word that is accepted by the Government, but they could do a great deal to satisfy many people in this country if they could find it in themselves to announce at the same time that they are at least going to plan an extension of the high-speed line to go elsewhere.
Will the Government say what attitude they would adopt towards open-access operators seeking to enter the domestic market? They were obviously very dismayed, as was GNER and indeed was I, by the entry of Grand Central on to the east coast main line. But if they wish to exclude the possibility of an open- access operator coming into the domestic market, would it not be more honest to put a clause in the Bill that precluded it, rather than relying on some arm-twisting of the Rail Regulator in the form of a lunchtime directive passed by the Secretary of State or some shenanigans behind the arras while nothing appears in writing, which chairmen and chief officers of nationalised industries have often been subject to?
We want to know the Government’s real intentions in presenting the Bill, and why the overriding duty of the Rail Regulator to exercise his functions should differ from those that apply to Network Rail as a whole.
My Lords, at two pages, the Bill looks very innocuous and—with the help of the Explanatory Notes—simple, straightforward and an aid to the sale of the Channel Tunnel Rail Link, or High Speed 1. There is the restriction on the removal of obstructions to the high-price sale, as well as several clarifications about future conditions on the lines and the role of the Office of Rail Regulation.
Ultimately, I need to ask if the Bill will lead to the best sale possible. I suspect that that does not mean the highest price but the best use of the railway in the future and the greatest advance in rail-for-air substitution. I hope the Minister will confirm that the aim of the sale is to ensure that High Speed 1—and, by implication, the Channel Tunnel—is used by a dramatic increase in all types of trains; that is, Eurostar, the Kent high-speed Hitachi Javelin commuter trains, other open access operators, freight trains and other international train operators, including Deutsche Bahn. The track access charge must be lower and the financial gearing must therefore not be too high, thereby diverting track access money to repay interest charges and thus not keeping the infrastructure in tip-top order.
I suspect that the decision to keep High Speed 1 out of the Network Rail network is correct, to enable more European trains to use it. Buried on page 2 of the Explanatory Notes is the use of High Speed 1 as the new name for the Channel Tunnel Rail Link. That implies more than one high-speed line; to have called it “the high-speed line” would not have done so. The new high-speed network must be announced soon to give hope to those who live in the north, Scotland, Wales and the west who have contributed taxes towards it, a point that has been well made before. I am pleased that National Express East Coast, among others, is now offering through fares to Lille, Paris and Brussels; for example, Edinburgh to Paris costs £89. However, passengers still have to hump their bags over to St Pancras from Kings Cross. I ask the Government to announce the commitment to develop such a high-speed network very soon.
In his remarks, the Minister reminded us that this railway was built on time and on budget. That is very good, and it contrasts rather well with the railway at the foot of my garden that proved to have rather more historic and uncharted mine workings underneath it than had been previously expected. That had a substantial effect on the budget of the Stirling-Alloa-Kincardine railway.
I was interested to hear that the rail sale is likely to be in 2009. The question is the definition of best value.
The noble Lord, Lord Hanningfield, also saw how important it is to maximise the use of the line, stressing the need for Stratford International station. He also raised an interesting query about the opportunity for services from the ordinary Network Rail network to access the Channel Tunnel. I look forward to an answer to that, because services from other parts of Kent in particular might find that convenient.
My noble friend Lord Bradshaw asked how wide the range of purchasers might be, whether the track access charge will remain at around £2,000 per train, who would regulate it and within which jurisdiction. Answering that may be quite difficult.
We on these Benches and, I suspect, elsewhere will watch with interest whether the outcome of the legislation will be a high-speed railway that is very well used or one which it is very expensive to operate. If it proves to be the latter, it will be a grave mistake from the perspective of both the public and the environment. People need to travel and to trade. The less of the earth’s resources that are used up in doing so, so much the better. I look forward to Grand Committee.
My Lords, I predicted that this would be a slightly lonely debate and that there would not be too many of us involved in it. Despite that, I have enjoyed the contributions of noble Lords opposite, who have asked a range of interesting questions and made some valuable points as part of our continued discussion and debate about our nation’s rail network. I suppose that hidden among those questions and comments was a broad welcome for the Bill—at least that is how I interpreted them until I heard the noble Lord, Lord Bradshaw, say that he was a little suspicious. Suspicion was probably the general tenor of the comments and questions. I do not anticipate a lengthy Committee stage, but I am certain that noble Lords will seek to flesh out some of the issues to which they have referred during today’s short discussion and debate.
I shall in due course deal with as many of the questions that have been raised as I can. I certainly agree with the noble Lord, Lord Hanningfield, that we have an asset of which we can proud. He prefaced that by saying “finally”, but, in general, our railway network is an asset of which we should be proud—and we should be proud of this rail link in particular. Although it went through a slightly difficult phase after the passing of the 1996 Act, our Government when they came to power put together a very successful rescue package which has underpinned the development of High Speed 1 and enabled us to reach today’s position of being able to look forward to a well managed package of sales and ensure a successful future for, and running of, the Channel Tunnel Rail Link.
As I observed at the outset, and other noble Lords have since reflected, the Bill has only five clauses. It does not trigger the restructuring of LCR, and its provisions, I think we can all agree, are technical and limited in scope. The Bill confirms that the Secretary of State can continue to provide financial support to the rail link, and the train services that run on it. This is not a new power; it simply clarifies what was already the Government’s interpretation of existing legislation. As the noble Lord, Lord Bradshaw, said, we are tidying it up for the benefit of removing doubt.
The Bill tidies up existing provisions in relation to the regulation of the railway. It also gives the Office of Rail Regulation the ability to make a reasonable charge for any new functions that it may carry out in relation to High Speed 1. It changes the definition of “development agreement” in the Channel Tunnel Rail Link Act 1996 to make it more relevant to the context of an operational railway today. As I have already reflected, the Bill is only a first step in the process of restructuring the Channel Tunnel Rail Link project. The link has already delivered reductions in journey times for international services with similar cuts in local travelling times secured. As I have said on several occasions previously, the project is driving regeneration in priority areas across a wide stretch of the country. Noble Lords anticipated that in some of the points that they made.
I shall try to work through as many of the points as I can that were raised by noble Lords, as that will help to clear the ground for Committee. The noble Lord, Lord Hanningfield, raised the issue about the legal uncertainty in Clause 1, which I have dealt with in part. A fuller answer is perhaps due. We take the view that when two pieces of legislation potentially speak to the same issue, there can be confusion as to what Parliament intended. The Department for Transport and LCR have identified that it is not clear from a literal reading of the CTRL Act whether the Secretary of State’s ability to provide financial support to the High Speed 1 railway applies in the operational phase, when, for example, he or she would wish to provide financial support to a domestic service franchisee. The impact of any uncertainty over the legal and regulatory powers could be binary, in that due diligence on behalf of the purchaser or financer of the railway could identify a flaw in legal or regulatory powers supporting the project’s revenues and financing. That might lead to a position in which reduced bids from some potential investors in HS1 could deter others from bidding at all. Of course, we would not want that situation to arise because that could compromise securing best value for money.
The noble Lord also asked whether Clause 1 allowed for Eurostar services in the UK to be subsidised and how that might affect the access charge loan and the guaranteed rolling stock leases. Clause 1 gives the Secretary of State the same commercial flexibility to support HS1 as she has for the national rail network, including flexibility to subsidise international operators in the same way as we currently support domestic franchise operators. It would also allow the Secretary of State to support Eurostar through the access charge loan or by continuing to guarantee rolling stock leases if the Secretary of State chose to go down that route. However, it is the Government’s objective to reduce international operators’ reliance on public support, so we do not intend to subsidise international services through a franchise or any similar arrangement.
The noble Lord, Lord Hanningfield, understandably made a plea for services to stop at Stratford. I would expect that of him, given his keen advocacy of all things Essex. No doubt he sees Stratford as the gateway to Essex—and I might be with him on that particular point. I certainly understand what the noble Lord said about the access charging regime in that context. Ultimately, it is an issue for Eurostar as to whether it sees a value in services stopping in Stratford. Domestic services will call at Stratford from December 2009 and Eurostar expects to call there as soon as high quality road and public transport links are in place for all customers. There is no planning requirement to prevent Eurostar trains stopping at Stratford but there is a planning requirement that the international station cannot open until the travelator is operational. It is expected that the planning authority will accept the new DLR extension and new access from the eastern side of Stratford International station to the regional station instead. Eurostar will want to take full account of those issues and points and weigh up the issues surrounding the commercial benefit to it.
The noble Lord also made some observations about the appropriateness of the Secretary of State to maintain some regulatory powers over High Speed 1 and the Office of Rail Regulation in relation to access. He asked what the respective roles were for the ORR and the Secretary of State on High Speed 1. It is important that there is clarity over commercial points before any sale process starts. Issues such as the level of access charges will remain with the Government as they affect the value that the Government will recoup on their investment in HS1.
Under the development agreement, the Secretary of State oversees access contracts between the HS1 infrastructure operator and train operating companies for HS1 track and stations. Under the Railways Infrastructure (Access and Management) Regulations 2005, the Secretary of State is also responsible for setting a framework for HS1 access charges and ensuring that the charges comply with the requirements of those regulations.
The Office of Rail Regulation is the appeal body under the 2005 regulations in relation to disputes over HS1 access or charges, a point also raised by the noble Lord, Lord Bradshaw. I was also asked about the Office of Rail Regulation's overriding duty and whether it would impact on the development agreement. That raises the question of whether the Office of Rail Regulation should give precedence to the development agreement. As we see it, the overriding duty of the Office of Rail Regulation is not to impede the development agreement and that is obviously an existing one.
The circumstances in which one might expect the ORR to take this overriding duty into account would be, for example, if a train operator wanted to start running competing international services to those on HS1 using the main domestic rail network. Another example might be if HS1 were blocked because of engineering works or some other disruption on the line and HS1 services needed to use the domestic rail network—or vice versa, if domestic rail lines were blocked and HS1’s were needed. The overarching duty gives any potential purchaser of HS1 comfort that its interest will be taken into account when the Office of Rail Regulation is taking regulatory decisions in relation to the national rail network which could affect the operation of HS1. In overall terms, it should protect value.
The noble Lord, Lord Hanningfield, also asked about how the Office of Rail Regulation's safety functions will be funded. The ORR’s safety functions are funded through the safety levy payable by all train operators, and that levy is made under health and safety regulations.
The noble Lord also raised the issue of the planned use of Waterloo and St Pancras and asked why that was dropped. This is obviously a complex issue, but after the revision of revenue forecasts was made in 1998, Eurostar reviewed whether it should operate one or two terminals in London. Eurostar concluded that operating from two terminals would require the operation of two international stations, two depots and two sets of station staff, engineers, security personnel and so forth. It would require the development of a timetable for two sets of journey times into London. Eurostar thought that that was confusing, especially for continental travellers faced with trains to and from two stations. The cost of operating two terminals was financially prohibitive against the marginal revenue benefits and, in November 2004, Eurostar announced that it would move its London operations in their entirety to St Pancras and cease services from Waterloo.
The noble Lord also asked about the likelihood of competition on the line. That is obviously a matter for commercial operators to agree with the owners of the railway. The Secretary of State will put in place a framework to ensure that all access charges allow for open access and fair competition.
The noble Lord, Lord Bradshaw, asked about appeal rights and I have already dealt with that. The noble Lord also raised the prospect of potential buyers and gave us a menu from which we might wish to choose including Railtrack, Eurotunnel, SNCF, Deutsche Bahn, Macquarie and others. It was a fair list and I do not want to comment on the relative merits of each because it would be quite wrong of me to do so. HS1 is a valuable new asset. There are many potential purchasers. The noble Lord gave us a list. We want to see an open and transparent competitive process. The new line will not be sold automatically to Network Rail although it is a potential bidder, as was speculated. As I said, we want to ensure an open and competitive bidding process. Network Rail will be able to bid on the same basis as anyone else.
My Lords, the noble Lord talks about an open and competitive bidding process as is the case with franchises let for domestic services in this country. However, it does not take account of the wider benefits and seems to many of us to be driven by who bids the highest price, not by who promises the best service and pleases the customers. Price is not the only criterion that I should like to see taken into account.
My Lords, the noble Lord sells the argument a bit short. I do not want to open up a bigger discussion about franchising generally but in short the franchising process has to meet certain specifications. That is one of the plus points of competitive bidding. Clearly, we want to see a high threshold in standards of service and I am sure that will be secured through that process.
The noble Earl, Lord Mar and Kellie, said this should not be just about money. Of course, it should not be just about money but we as a Government have to secure best value. By securing best value we secure in the longer term a better level of investment in the rail network as a whole. I think that is well understood by noble Lords.
I ought to set out the Government’s view on whether we should develop High Speed 2 because all speakers referred to that. Last summer’s White Paper set out our immediate priority for the future of the main line network; namely, to increase capacity by somewhere in excess of 20 per cent. Our view was that this could be met through a range of options, including road or rail. A high-speed line is, of course, one of the options available. It is far too early to talk about firm plans but we will need to look at this along with other issues in our next plan for the railways in 2012. Therefore, we do not rule it in and we do not rule it out. I certainly understand the case that has been made but we have to prioritise and the present priority is to ensure that we have adequate capacity across the whole of the network. The delivery of High Speed 2 may well be part of that. Of course, we have to consider cost and the potential benefits to passengers of having another high-speed line and these things have to be balanced. The White Paper estimates that the cost of such a scheme could be between £10 and £30 billion. That money might not then be available for other key critical improvements to the network as a whole. The case is obviously one for the future.
The noble Lord, Lord Bradshaw, asked an interesting question about a domestic open access operator. The access and management regulations give main operators a right of access. Therefore, the Government cannot stop domestic open access operators seeking access to HS1, nor would we want to because it may well have benefits. The noble Earl, Lord Mar and Kellie, suggested using access charging to encourage use of the line. What was proposed when LCR’s subsidiaries consulted on access charges would have seen a significant reduction in charges for international services. The Government believe that they should be set at a level that will allow new operators to run services in the future.
I think I have covered most of the main points on which noble Lords sought clarification. I shall have a careful look at Hansard to judge whether I have missed anything. If I have I shall write to noble Lords and circulate that letter to the three noble Lords who contributed to this short debate. I look forward to a constructive Committee stage, and I hope that the Bill will find full favour with your Lordships’ House.
We have a high-speed rail link of which, as the noble Lord, Lord Hanningfield, said, we should be proud. It is a train service that links this country to Europe at a speed of 186 mph at its best. St Pancras has been transformed, and with the introduction of through ticketing it is now possible to travel from the north of England to the Continent without negotiating the rigours of the Underground. That means, in my terms, taxpayers benefiting across the nation. We have a regeneration investment estimated at £10 billion, which will be used to improve priority areas in the south-east. On top of all those benefits, we also have the opportunity to gain a tangible financial return on the taxpayers’ investment. That is a political menu to which we should all be able to sign up.
Through restructuring, we will secure the long-term future of the Channel Tunnel Rail Link project, which has delivered and will continue to deliver real benefits for the country. In those terms, I commend the Channel Tunnel Rail Link (Supplementary Provisions) Bill to your Lordships’ House.
On Question, Bill read a second time, and committed to a Grand Committee.