Skip to main content

Draft Welsh Ministers (Transfer Of Functions) (Railways) Order 2018

Debated on Monday 23 April 2018

The Committee consisted of the following Members:

Chair: Philip Davies

† Burghart, Alex (Brentwood and Ongar) (Con)

† Churchill, Jo (Bury St Edmunds) (Con)

† Davies, Glyn (Montgomeryshire) (Con)

† Edwards, Jonathan (Carmarthen East and Dinefwr) (PC)

Flynn, Paul (Newport West) (Lab)

† Ford, Vicky (Chelmsford) (Con)

† Foxcroft, Vicky (Lewisham, Deptford) (Lab)

† George, Ruth (High Peak) (Lab)

† Hair, Kirstene (Angus) (Con)

† Heappey, James (Wells) (Con)

† Johnson, Joseph (Minister of State, Department for Transport)

† Maskell, Rachael (York Central) (Lab/Co-op)

† Penrose, John (Weston-super-Mare) (Con)

† Rimmer, Ms Marie (St Helens South and Whiston) (Lab)

Smith, Angela (Penistone and Stocksbridge) (Lab)

† Swire, Sir Hugo (East Devon) (Con)

† Yasin, Mohammad (Bedford) (Lab)

Sarah Rees, Committee Clerk

† attended the Committee

The following also attended (Standing Order No. 118(2)):

Rees, Christina (Neath) (Lab/Co-op)

Third Delegated Legislation Committee

Monday 23 April 2018

[Philip Davies in the Chair]

Draft Welsh Ministers (Transfer of Functions) (Railways) Order 2018

I beg to move,

That the Committee has considered the draft Welsh Ministers (Transfer of Functions) (Railways) Order 2018.

The draft order, laid before the House on 28 February, will transfer certain railway functions of the Secretary of State in relation to the Wales and Borders franchise to Welsh Ministers. The devolution of these powers takes forward one of the Silk commission’s recommendations and is an important part of our commitments in the St David’s Day Command Paper on a lasting devolution settlement for Wales. This debate is the culmination of the parliamentary phase for the draft order, but it will not surprise hon. Members to learn that a lot of hard work has brought us to this day, and I would like to recognise the efforts of both the Welsh and the UK Governments in that.

We have agreed with the Welsh Government that the order will transfer franchising functions to Welsh Ministers only in so far as they relate to Wales and Borders services and stations wholly within Wales, and to certain ancillary and related matters. Welsh Ministers’ statutory powers within Wales are to be supplemented by agency powers exercised on behalf of the Secretary of State for services in England up to the first station in Wales.

These proposed arrangements will enable Welsh Ministers to procure and manage a replacement franchise that, like the current franchise, includes important cross-border services to and from English towns and cities, as well as some services entirely within England, while providing appropriate accountability for the Secretary of State for rail services within England.

Both Governments intend, over the next couple of months, to conclude a suite of devolution agreements that will supplement the order. A series of agency agreements will set out conditions on the specification and management of the English part of the franchise. That will include a requirement for the Wales and Borders franchisee to set up a separate borders business unit to manage services and stations within England and act as a focal point for liaison with relevant local authorities, sub-national transport bodies and user groups. Further agreements will set out arrangements for partnership working in respect of the management of the new franchise, the relevant funding and outputs to be provided and the terms under which Welsh Ministers will, for the time being, subcontract to the Secretary of State the exercise of the operator-of-last-resort responsibilities transferred to them by the draft order.

Following careful consideration of the representations from hon. Members, I can guarantee that English residents and those who use the parts of the Wales and Borders franchise that are solely within England will continue to have a mechanism to make their views known to their elected representatives following devolution.

I wish to restate my Department’s commitment to the spirit and the terms of the devolution agreement secured with the Welsh Government in 2014. We have agreed in principle that the present franchise funding levels and arrangements between the Department and the Welsh Government are to continue.

Much positive and practical work has been done by both Governments in readiness for Welsh Ministers taking on greater responsibilities. Transport for Wales has been established by the Welsh Government to help to deliver the next Wales and Borders franchise and the South Wales Metro project, and my Department has provided extensive support to help to progress their franchising and metro proposals.

The procurement process for the next franchise is already well under way. Both Governments have worked together to deliver successfully a series of procurement milestones—most recently, the invitation to tender in September.

We have worked closely with the Welsh Government to ensure that the interests of passengers in England and Wales are protected following devolution. This approach will deliver appropriate accountability for both the UK and the Welsh Governments for rail services solely in their territories, while ensuring that the experience of passengers in terms of connectivity and quality of services will be maintained and improved. The Welsh Ministers have formally approved the draft order. I ask the Committee also to give its support.

It is a pleasure to serve under your chairmanship, Mr Davies. Today’s statutory instrument is an important step in the devolution plan for our railways, as we see powers and responsibilities shift from Westminster to Wales. The Welsh Labour Government are already undertaking plans to design and let the new Wales and Borders rail franchise from this October, as well as to develop ambitious plans for the metro. Although devolution will feature heavily in Labour’s future plans for our rail service, we are absolutely clear that we will also bring rail operations back under public ownership and integrate them with wider infrastructure, improving efficiencies and the effectiveness of our major transport network. We will ensure that rail is run co-operatively and collaboratively alongside devolution, to enable the best of localism, while ensuring a consistent approach across the rail network, and that all revenue returns to the state, not the bank accounts of shareholders.

This statutory instrument, therefore, paves the way for the Welsh Government to build a world-class transport system in Wales for the people of Wales—one that is focused on regrowing the Welsh economy and serving Welsh communities. With 32 million journeys undertaken currently, growth until 2030 is forecast to be 74%, so this next phase highlights how important it is that rail policy is designed in a fully integrated way, with spatial and economic planning, and is fully integrated into the wider transport system in Wales.

Wales will embed the values and ethos of public service in the next iteration of its rail system. It will ensure that high standards improve services to passengers, and it will focus on reinvestment into the service rather than private profit. However, there are issues that we want the Minister to address. It is of huge frustration that he, in Whitehall, will not provide the real powers that Wales has called for, but instead has hidden behind the Railways Act 1993 to disallow Wales from having a public sector provider to run its rail service and to restrict it to tendering the service to private operators.

Whitehall’s continual grip on decisions of this nature does not demonstrate a Government wanting to support the ambitions of the people of Wales, nor does it enable the Welsh Government to run their rail service in the most efficient and effective way. It binds them to the failed philosophy that results in private companies continuing to derive profit out of passengers, while passengers pay more for their services.

The Welsh Labour Government have lobbied the UK Government for greater devolution of transport powers—for instance, to deliver a change to legislation to allow public sector bodies to act as franchisees and to place us on a similar footing to Scotland. The UK Government have continued to oppose that and other legal restrictions, meaning that the Welsh Government cannot bar for-profit operators from coming forward to run some elements, at a time when Labour Wales wants to show more ambition for the people it represents.

The restraints are not stopping the Welsh Labour Government acting creatively. Transport for Wales has been created as a not-for-profit company initially tasked with supporting the Welsh Government to design and let the next franchise and metro. Once the franchise has been let, it is expected that Transport for Wales will oversee the management and joining up of services, including items such as marketing and integrated ticketing.

One of the questions I am hoping to ask the Minister is whether he is confident that having only two franchise bidders will mean that there will be a competitive process. As the Member representing the Labour party in this Committee, is the hon. Lady confident that the Welsh Government can proceed with this franchise bidding process with only two bidders?

The hon. Gentleman is right to be sceptical about the process. Not only has it been limited to the private sector to bid for these franchises, but, as he has highlighted, only two companies are in place. This Government have directly awarded so many contracts of late, and we are concerned about the way the market is continuing to fail the people who use the service.

What is to say that the Labour party in Wales will not run the railways as badly as it currently runs the NHS?

The point is irrelevant; not only is the NHS performing incredibly well in Wales—of course, it was founded by Bevan, who was from Wales, and we are incredibly proud of that—but the Welsh Government want to realise the ambition of the people of Wales and to have the opportunity to move the railway system forward as an integrated form of transport. We really look forward to the progress that a Labour Government will make—if this Government do not provide the powers necessary to do so.

I will return to the main issue. Labour would ensure that Transport for Wales is at the heart of rail operations, not just to lead in Wales but to secure its voice at the table when it comes to integration of the rest of the rail network across the UK.

The Welsh Government have already made it clear that those services that can be run directly through a not-for-profit model will be run that way, with many more services, such as ticketing, marketing, station management and car parking, operating in new and innovative ways under that new approach.

Labour has been planning to increase capacity, improve efficiency, upgrade rolling stock and integrate rail with other public transport modes, as well as to change the culture, improve access for disabled people, consider how rail can further the wider economy and invest in the workforce, not least in the area of skills.

In November 2016, bidders for the new franchise submitted their outline solutions, in accordance with criteria set by the Welsh Government. Since January 2017, detailed work has been undertaken with the two bidders to deliver for passengers, and that process continues.

In November 2014, agreement was reached between the Welsh and UK Governments to devolve executive franchising functions to Welsh Ministers, so that they could lead the procurement of the next Wales and Borders franchise, which is due to commence on 14 October 2018. Today’s order will achieve this, and through the affirmative resolution procedure in both Houses, it will result in changes to the Railways Act 1993 and the Railways Act 2005.

While mainly in line with those powers devolved to Scottish Ministers, there are some differences in the scope of cross-border rail operations into England and in the fact that responsibilities in respect of the rail network are not being devolved to Wales. Today’s statutory instrument will enable Welsh Ministers to be the sole designating and franchising authority in respect of Wales-only services, and enable Welsh Ministers to designate and franchise the Welsh component of Welsh services—those parts of cross-border services to and from England within Wales—that are contained within the same franchise as Wales-only services. This scope has been agreed in recognition of the extensive nature of cross-border services, and services wholly within England, provided by the Wales and Borders franchise, and the need for appropriate accountability for rail operators on each side of the border.

Since all the relevant references to the “National Assembly of Wales” are replaced by references to “Welsh Ministers”, on the basis of agency arrangements established under section 83 of the Government of Wales Act 2006, it is possible for Welsh Ministers to act as the agent of the Secretary of State. Thus, they can procure and manage the entirety of the Wales and Borders franchise, which includes services that continue to and from, and that operate within, England.

Given that this order makes it possible for the Welsh Government to lead the procurement and management of cross-border services, in the light of the Great Western, West Coast and Cross Country franchise processes, will the UK Government work with the Welsh Government to consider how they can lead the delivery of more cross-border services, so that they can work for the economy and people of Wales? I look forward to hearing the Minister’s response.

The Welsh Government’s ability to operate additional services to destinations already served by the Wales and Borders franchise, and to additional destinations in England, is being heavily constrained under these arrangements. These restrictions will suppress both the rail service offer and the financial potential of the franchise in Wales, not least by the allocation of rail paths. Will the UK Government work with the Welsh Government to address that issue?

The agency agreement setting out the arrangements under which Welsh Ministers can operate services in England is very restrictive. Scottish Ministers are able to operate services into England without such restrictions. Will the Minister therefore agree to review these arrangements, with a view to relaxing them, so that Welsh Ministers can act more freely as a franchising authority, not least in enabling rail operations to move into public hands?

We have been informed that a co-operation and collaboration agreement with Welsh Ministers is being developed. The agreement will need to set out arrangements for how Welsh Ministers will be actively involved in the procurement and management of the cross-border services that continue to be included in the Secretary of State’s franchise. Will the Minister provide an assurance that Welsh Ministers will be significantly and meaningfully involved?

The Commission on Devolution in Wales recommended devolution of funding for Network Rail, but in the four years that have passed since the publication of the part 2 report, the UK Government have not been prepared to open discussions with the Welsh Government. Will the Minister commit to open discussions, not least in the light of the Government’s ambition to join rail operations with infrastructure, as set out in “Connecting people: a strategic vision for rail”, which was published in November? Not to do so seems contrary to that paper.

Network Rail’s annual reports and accounts illustrate that, since its Wales route was established in 2011, just over 1% of spending on enhancement schemes across England and Wales has been directed to the area, yet the Wales route contains 11% of England and Wales’ rail network. A firm commitment to provide a fair level of investment is urgently needed to improve access to employment opportunities and to enable Wales to compete as a location for inward investment in a post-HS2 era. Will the Minister give a commitment to ensure that the options provided for by a new Crewe hub allow for full and unimpaired access to the north Wales main line?

I thank the hon. Lady for making that important point, but she seems to be announcing a change in Labour party policy. She is right to say that the Silk commission noted that those powers should be devolved to Wales, but my recollection of events during the St David’s Day process—the hon. Member for Montgomeryshire might have something to say on this point—was that the then Secretary of State for Wales, the right hon. Member for Preseli Pembrokeshire (Stephen Crabb), and the then shadow Secretary of State for Wales, the hon. Member for Pontypridd (Owen Smith), made an agreement to take those provisions from the Silk commission out of the Wales Bill.

Labour is absolutely clear that we will do nothing to impede the Welsh economy from growing. That is the focus of our vision and that of Welsh Ministers in the Welsh Assembly and of those in this place.

The recent decision to cancel electrification to Swansea, especially in the light of the revelations in the National Audit Office report, highlights that the Secretary of State knew that bi-mode trains would not provide equivalence to electrification. In fact, no such trains exist that could deliver to the timetable. The Secretary of State acted against the advice that he was given on the matter. That has resulted in the poor execution of Network Rail’s electrification works in south Wales, and the Secretary of State has failed to apologise to the House in the light of those revelations. Perhaps the Minister will offer an apology today, which would be a start.

The decision has caused great disappointment and disruption across the region. Will the Minister commit to long-term investment in the south Wales main line and reinforce the importance of achieving all the remaining electrification ambition through to Cardiff, including on the relief lines? When can we expect to hear an update on that, not least about how electrification will be extended to Swansea?

In the Secretary of State’s written statement of 20 July 2017, which cancelled electrification to Swansea, it was proposed that a new pipeline process be established for rail enhancement schemes. However, further detail about that process, as well as the mechanisms for developing and delivering those schemes, is yet to emerge and no Welsh scheme has yet entered the pipeline. Given the recent cancellation of major investments in Wales, will the Government outline what they are doing to ensure that Welsh rail projects are given the priority and funding they need through the new process?

The Minister will be aware of the importance of the trans-European transport network in Wales. Under regulations, the routes to Milford Haven and to Holyhead need to be upgraded by 2030, which includes full electrification. Does the Minister agree that as we leave the EU, those arterial routes become more important, not least since important examples of TEN-T routes run through non-EU countries such as Switzerland? Will the Government publish a plan for how the upgrade to the TEN-T requirements will be delivered in that time framework?

In conclusion, Labour does not believe that the draft order goes anywhere near the ambition needed to enable Wales to take control of its own destiny. It is becoming increasingly clear to everyone that only a Labour Government can deliver the necessary controls to provide not only the rail service that the people of Wales demand, but the vital infrastructure needed to deliver an economy that works for everyone. Labour will not block the regulations before us, because we want to ensure that Welsh Ministers can increase their role in the running of the rail service at the earliest opportunity. However, we put on the record our concerns that the Government have seriously limited the opportunities for the Welsh Government and the people of Wales.

Diolch yn fawr iawn, Mr Davies. It is a pleasure to serve under your chairmanship and to take part in the final stage of what has been a tortuous and long process of devolving these powers to Wales. Under the original timetable, we should probably have been meeting in Committee at the beginning of 2017, or even in 2016. According to major reports, the delay has incurred significant costs to Welsh taxpayers—about £3.5 million was the latest figure, I understand—so I ask the Minister: what is the latest calculation of the costs incurred as a result of the delay, and who will be footing the bill?

My second question to the Minister is based on the intervention I made earlier on the Labour party representative, the hon. Member for York Central. We know that the process has been a long one, and a number of bidders have fallen out of it. We are down to two franchise bidders, which is one fewer than provided for by the Department for Transport guidelines for a competitive tender, as I understand them. Is the Minister satisfied that two operators bidding for this franchise—important to the commissioning of rail services in Wales—is sufficient?

Thirdly, a letter sent in August 2017 by the Secretary of State for Transport to his counterpart in the Welsh Government outlined the reasons why he was refusing to pass the order at that time. The letter covered a raft of issues, including a row about £1 billion of funding derived from track access charges. We have received no update as to how that and the other issues listed in the letter have been resolved. I will be very grateful if the Minister can outline what agreements were made between the Governments on those unresolved issues that have enabled the draft order to be brought forward at this stage.

Fourthly, I touch on an issue raised by the hon. Member for York Central. The draft order represents only a limited devolution of powers over the railway infrastructure. The legislation covers only the valleys lines in my country. We know that Wales is desperately underfunded in infrastructure investment—in Wales, we have about 11% of the Wales and England rail network, but we receive only about 1.5% of the money invested by the British Government in rail infrastructure. If the Westminster Government are not willing to invest in our network, as we have seen historically in that terribly bad level of investment over the years, or to devolve powers over the infrastructure, which would enable the Barnett consequentials to kick in, will the Minister use this opportunity to explain how he expects the Welsh network to develop into one fit for the people of Wales in this new century?

Lastly, on the transfer of functions, we are talking only about a situation whereby the Secretary of State will retain a veto over the franchise and the powers being devolved—it is not even devolution, but only part devolution. Will the Minister explain his reasoning behind that? The powers have been devolved fully in Northern Ireland and Scotland. Why should Wales be treated as a second-class nation?

I thank all hon. Members for the points made. I will try to address as many of them as I can. I will happily write to Committee members afterwards about those I do not address now.

The Government are delivering on our commitment to give the Welsh Government greater control over Wales and Borders services. The devolution of these rail powers is an example of effective co-operation between the UK and Welsh Governments. An example of that effective co-operation is the cross-border working that is now under way. The UK and Welsh Governments are finalising a co-operation and collaboration agreement that will set out arrangements for partnership working in respect of the management of the next Wales and Borders franchise and the operation and procurement of passenger rail services operating in Wales by other franchises. That will include an enhanced consultation role for Welsh Ministers.

A number of questions were asked about the bidding process and the state of bids for the next franchise. The withdrawal of Arriva and Abellio from the bidding process is a matter for the Welsh Government, as they are now responsible for it. It is not uncommon for bidders for major projects to withdraw during tender processes. With final tenders due later this year, two bids remain in the running—MTR and KeolisAmey—which is sufficient to have a competitive process. The shadow Minister asked about the nature of the bidders allowed to participate in the process. The Railways Acts that she referred to do not prevent not-for-profit organisations from bidding for rail franchises. The Welsh Government were able to encourage bids from not-for-profit organisations for the current Wales and Borders franchise procurement.

The hon. Member for Carmarthen East and Dinefwr asked a number of questions about the devolution settlement and rail. The Government believe that it would be undesirable to reopen discussions on Silk recommendations on which there has not been a clear consensus. We do not intend to revisit the question of devolving Network Rail funding given the discussions on the issue during the St David’s Day process. The Department for Transport continues to liaise closely with the Welsh Government on the specification and funding of Network Rail’s operations in England and Wales for each five-year railway control period to ensure that Welsh requirements for increased capacity on the network are reflected. As part of Network Rail’s devolution arrangements, the Welsh Government will be represented on the Wales route supervisory board within Network Rail, and the board will work in partnership to drive improvements for customers in the Wales and Borders area and to hold industry to account.

The hon. Gentleman also asked about delays to the devolution process and the amount of time it has taken to get us to this place. The delay in transferring rail powers to Welsh Ministers has not adversely affected the procurement process for the next franchise. The formal transfer of powers has required the resolution of a number of detailed policy and practical considerations on cross-border services that has taken longer than anticipated. However, as I hope we have illustrated, we have been working closely with the Welsh Government throughout to ensure that they can proceed in a timely manner with the franchise procurement. The ongoing procurement of the next franchise, as I said in my opening remarks, is being facilitated through agency agreements enabling Welsh Ministers to exercise the Secretary of State’s relevant functions in advance of the draft order being made.

Members also asked about Government spending on the railways in Wales overall. The Department for Transport continues to liaise closely with the Welsh Government on the specification and funding of Network Rail’s operations in England and Wales for each five-year railway control period to ensure that requirements in Wales for increased capacity on that bit of the network are reflected. We are investing a record amount in Wales’s rail infrastructure. Network Rail’s proposed budget for control period 6, which runs from 2019 to 2024, is more than £1.3 billion. As Members know, we do not allocate transport funding in England and Wales on a per-head-of-population basis, and the Wales route is not being short-changed. Our spending goes where it is most needed and where it delivers the greatest value for money. We make decisions based on rigorous and fair appraisal processes that ensure just that.

The hon. Member for York Central asked about electrification and Cardiff and Swansea in particular. We remain committed to delivering the right outcomes for rail transport in Wales. As Ministers have said before, however, we will only commit to electrifying lines where it will genuinely provide a real benefit to passengers. A recent reappraisal of electrification between Cardiff and Swansea found it to be poor value for money, with a benefit-to-cost ratio of just 0.3. The introduction of the bi-mode intercity express trains means that we no longer need to electrify the Great Western route between Cardiff and Swansea. We are improving journeys for passengers in south Wales sooner than expected, without the need to carry out disruptive electrification works along the Great Western route between Cardiff and Swansea.

I will not be drawn on the procurement decisions for HS2 at this point. The point I wanted to make, and made, was that the bi-mode trains on this stretch of the network will deliver substantially the same benefits for passengers that electrification would, at considerably better value for money.

I am grateful to the Minister for that answer, but does he agree that it will not provide equivalence to electrification on that part of the network?

Clearly it will not be the same as electrification, because it will not require the disruptive works overhead, the gantries and so on, which would have affected passenger journeys. The introduction of the new bi-mode trains will, however, deliver substantially the same passenger benefits and, as I said in response to the hon. Member for Carmarthen East and Dinefwr, at considerably better value for taxpayers.

I travel on that line every week to come down to London. The busiest section both ways in terms of passenger numbers is the journey between Swansea and Cardiff, the two major cities in Wales. The journey time now with the new trains is longer than it was with the old trains, because the new trains are far larger and take more time to slow down when entering stations such as Port Talbot and Bridgend before they enter Cardiff.

There is no escaping the fact that the benefit-to-cost ratio on electrification between Cardiff and Swansea was just 0.3. No Government can reasonably be expected to finance a project with that kind of value for money for taxpayers. It would be irresponsible to do so.

Can I reassure the Minister that, for those of us whose constituencies are on branch lines going south from Bristol, which could have been severely disrupted by a half-and-half fleet of fully electric and bi-mode trains—because whenever anything broke down it would not be possible to substitute one for the other—the advent of a completely bi-mode fleet is substantially better, in terms of resilience of service, for everybody surrounding Bristol?

My hon. Friend is exactly right. Once the whole of the new fleet is introduced and electrification to Cardiff is complete, passengers will benefit from a 40% increase in the number of seats in the morning peak and significantly better journey times between Swansea, London and other stations along the route, which will be about 15 minutes shorter than they currently are.

TEN-T was mentioned. It recognises strategic transport routes in the EU. It is not clear at this point how TEN-T will be treated post Brexit, but that will become clearer in coming weeks. As I said, the devolution of these rail powers is an example of close and effective co-operation between the UK and Welsh Governments.

I am grateful to the Minister for giving way one more time. Will he acknowledge that the devolution deal in place here is less than the deal with Scotland? Can he explain why it is that the Welsh Government will not have full power over the future of its economy as well as serving the passengers of Wales?

We are committed to devolution, and to the devolution process, but we do not want to go, in one small bit of secondary legislation, beyond the consensus that was agreed during the St David’s Day process. That needs to be considered as part of a coherent look at devolution settlements in the future.

Like hon. Members, I want to see improved rail services for passengers in England and Wales. I hope that hon. Members will agree that the devolution approach we have chosen recognises the inherently joint nature of a significant proportion of the Wales and Borders franchise, and ensures that the current extensive cross-border links can be maintained and developed for the benefit of passengers and the Welsh and English border economies. We will continue to support the Welsh Government to enable them to achieve the successful procurement of the next franchise. I commend the draft order to the Committee.

Question put and agreed to.


That the Committee has considered the draft Welsh Ministers (Transfer of Functions) (Railways) Order 2018.

Committee rose.