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These notes refer to the Railways Bill Railways Bill
EXPLANATORY NOTES
INTRODUCTION
1. These Explanatory Notes relate to the Railways Bill as introduced in the House of Commons on 7th July 1999. They have been prepared by the Department of the Environment, Transport and the Regions in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill, and have not been endorsed by Parliament.
2. The Notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.
SUMMARY
3. The Bill establishes the Strategic Rail Authority ("the Authority") and abolishes the Office of the Director of Passenger Rail Franchising ("the Franchising Director") and the British Railways Board. The functions, rights and liabilities of the Franchising Director and the residual functions, rights and liabilities of the British Railways Board (including responsibility for the British Transport Police) are transferred to the Authority. The Bill sets out the objectives and functions of the Authority. It establishes the structure and procedures of the Authority and the terms and conditions for its members.
4. The Bill transfers the Rail Regulator's responsibilities for consumer protection to the Authority, and his responsibility for railway closures to the Secretary of State. It retains the Rail Regulator as an independent regulator.
5. The Bill allows the Authority and the Rail Regulator to impose more effective sanctions on those train operating companies and network licence holders who break the terms of their franchise agreement or licence.
BACKGROUND
6. The aim of the Bill is to give effect to the Government's policy for the future of the railways, the principal features of which were set out in the White Paper A new deal for transport (Cm 3897). This was published in July 1998, along with the railways document A New Deal for the Railways (Cm 4024).
THE BILL
The Bill consists of three parts -
Part I - The Strategic Rail Authority.
Part II - Other provisions about railways.
Part III - Supplementary provisions.
COMMENTARY ON CLAUSES
PART I: THE STRATEGIC RAIL AUTHORITY
Clauses 1 to 4 and Schedule 1 : The Authority
7. Clause 1 to 4 and Schedule 1 provide for the establishment of the Authority. The Authority will be a body corporate and will have between eight and fifteen members. Members will be appointed by the Secretary of State who may, by order made by statutory instrument, substitute different figures for the minimum and maximum membership of the Authority. In making appointments the Secretary of State is to have regard to the desirability of appointing persons who have experience of, and shown capacity in, some matter relevant to the functions of the Authority. The Authority will not be a Crown body but a Non-Departmental Public Body. The Authority's staff will not be civil servants. The chairman of the Authority is to be appointed by the Secretary of State and the other members (including any deputy chairman) are to be appointed by the Secretary of State after consultation with the chairman. The Authority appoints its own chief executive, who is to be appointed a member of the Authority (but see paragraph 2 of Schedule 9 for first appointments to the Authority).
8. Schedule 1 makes provision about members and staff of the Authority and about procedural matters. Paragraph 1(4) makes standard provision for the Secretary of State to remove any member from office on the grounds of incapacity or misbehaviour. The Schedule sets out provisions as to members' interests and conduct to prevent conflicts of interest arising.
9. Schedule 1 also provides for the financing of the Authority. The Authority will be funded by the Secretary of State, and will also be entitled to borrow money - both from the Secretary of State and from other sources - with the consent of the Secretary of State and the approval of Treasury. Restrictions on borrowing and a borrowing limit are set out. The terms of any loans from the Secretary of State are set out, as are the requirements for accounts and audit. The Secretary of State is allowed to guarantee sums borrowed by the Authority, and the procedures which must be followed to facilitate this are laid down. The Schedule allows the Secretary of State to require the payment of sums to him which are received by the Authority, in particular where these are surplus.
10. The Authority is permitted to set up committees and sub-committees and to delegate functions to its members, staff, committees and sub-committees and wholly owned subsidiary companies.
Clauses 5 to 7: Purpose, strategies and exercise of functions
11. Clauses 5 to 7 set out the framework for the Authority, with a hierarchy of purposes, strategies and duties under which the Authority is to work. They set out purposes for which the Authority is established and how it should seek to achieve those purposes.
12. First, clause 5 sets out the primary, high level, purposes of the Authority: what might be called its "objectives" or "mission". These purposes are:
13. Next come the strategies (clause 6) which the Authority must develop to carry out its purposes. One strategy must relate to services from various parts of Great Britain in relation to the Channel Tunnel.
14. The Authority must consult the Rail Regulator before formulating a strategy and as part of keeping its strategies under review. The Secretary of State has the power to give directions and guidance to the Authority as to, for example, the issues to be covered by the strategies.
15. The Authority will need to exercise its functions (that is all the powers and duties which it has in clauses 8 to 16, both those inherited from the Franchising Director, the British Railways Board, the Rail Regulator and the Secretary of State, and those freshly conferred by the Bill) with a view to furthering its purposes in accordance with its strategies. However, the Authority will not be required in every case to give effect to its purposes and strategies regardless of all other considerations. Rather, it will be required to exercise its functions in a manner best calculated to achieve the considerations set out in clause 7(2)(a) to (f) and to have regard to the considerations in clause 7(3). Some of these considerations could contradict each other, so the Authority must undertake a balancing exercise in each case.
16. The term "users" in clause 7(2)(a) includes passengers, freight customers, train service operators and, where appropriate, railway facility providers. "Railway services" is defined in section 82 of the Railways Act 1993 and covers passenger, freight, light maintenance, station and network services.
17. The Authority must ensure that any payments made by it are such as it reasonably considers will further its purposes economically and efficiently. This duty refers to all payments made by the Authority, whether by way of grant, under a franchise agreement, or under any other agreements made to secure the provision, improvement etc. of services. This provision is based on the similar duty laid on the Franchising Director in section 5 of the Railways Act 1993 (which will be repealed) and is often referred to as the "value for money" duty.
18. The Secretary of State may give directions and guidance to the Authority as to what it should do to achieve its purposes in a way best calculated to balance the various clause 7 considerations. The Secretary of State may also direct the Authority not to exercise a function (e.g. the next round of franchising) without first consulting him or obtaining his consent. However, the Authority's duty to obtain value for money duty in any payments which it makes cannot be overridden by directions and guidance.
Clauses 8 to 16 and Schedules 2 to 7: Functions of the Authority
19. Clauses 8 to 14 describe the main functions of the Authority, including functions transferred from the Franchising Director, the Rail Regulator, the Secretary of State and the British Railways Board.
20. Under clause 8 the Authority has power to give grants, loans, or guarantees for any purpose relating to any railway or railway services. It may also enter into agreements for the purpose of securing the provision, improvement, or development of any railway services or railway assets (clause 8).
21. In this clause, "railway" means a railway, tramway or transport system which uses another mode of guided transport but which is not a trolley vehicle system. This is what is meant by railway in "its wider meaning" (see subsection (5) of the clause and section 81(2) of the Railways Act 1993). The expressions "railway", "tramway" and "transport system" have, in turn, their meaning under section 67(1) of the Transport and Works Act 1992.
22. Clause 8 would enable the Authority, for example, to:
23. Grants to Passenger Transport Authorities would provide a substitute for the special grant which the Secretary of State makes to them each year, under the general power in section 88B of the Local Government Act 1988.
24. The power in clause 8 relates to anything connected with railways as a mode of transport. It relates, for example, to anything connected with the type of railway services which are provided (such as networks, carriages and stations), the types of railway assets involved (such as the network and trains) and facilities connected with railway travel (such as parking outside stations).
25. Schedule 2 imposes some limits on the powers to make payments. These ensure that the system for payment for franchised services is preserved and that freight facilities, grants and track access grants are transferred from the Secretary of State to the Authority with the same framework as in the Railways Act 1993. The Schedule provides a transfer scheme from the Secretary of State to the Authority for the administration of these grants.
26. Clauses 9 and 10 govern the Authority's powers to secure or provide railway services, otherwise than through franchising. The clauses reflect the commitment in A New Deal for Transport (paragraph 4.19) to retain the capability for the public sector to take over franchises "as a last resort" (for example, if a franchise was terminated or there were no acceptable private sector bids).
27. Clause 9 gives the Authority an express power to provide services for the carriage of passengers and goods by railway. This reflects the fact that the Authority's capacity to operate train services "in the last resort" is not to be restricted to the context of franchising. For example, if a service of a class which is not designated for franchising or is exempt from franchising by an order of the Secretary of State under section 23(1) of the Railways Act 1993 ceased, with no alternative provider immediately available, the Authority would have power under this clause to operate that service (with the consent of the Secretary of State).
28. Clause 10 makes provision for franchising. Clause 10(1) makes a technical amendment to the Railways Act 1993 to facilitate subsequent rounds of franchising. The amendment requires the Authority to designate passenger services which ought to be secured by franchise unless they are exempt services and not merely to designate services which may be eligible for franchising.
29. Clause 10(2) inserts a new section 26A into the Railways Act 1993. Under the existing provisions of that Act, it is not clear what powers the Franchising Director has when, after the termination or expiry of an existing franchise, he invites tenders for a new franchise but no tenders are received or the tenders received are inadequate. The new section makes it clear that the Authority may, in some circumstances, secure the provision of the service otherwise than by franchising.
30. Where, after inviting tenders for a second round of franchising, the Authority receives no tenders, or considers that the services could be provided more economically and efficiently otherwise than pursuant to any of the tenders received, it may notify the Secretary of State, who may then give a direction. In cases where there were no tenders, the Secretary of State's direction could be either not to seek to secure the provision of a service under a franchise agreement or to issue new invitations to tender under a franchise agreement. In cases where there was at least one tender, the direction could be either of the two directions above, or a direction to reconsider the tender or tenders with a view to selecting a franchise. Before giving directions the Secretary of State is to consider any representations made by persons who submitted tenders.
31. If the Secretary of State gives a direction, he is to give notice of it to the person or persons who submitted the tender or tenders. A decision to give a direction is capable of challenge only by such a person (within 42 days from the notice).
32. The Secretary of State must keep a direction to dispense with franchising under review and it may be revoked if, for example, it is thought that circumstances have changed sufficiently to expect a new franchise competition to succeed.
33. Clause 11 and Schedule 3 transfer to the Authority all the functions, property, rights, and liabilities of the Franchising Director (including any rights and liabilities relating to staff appointed by the Franchising Director). Once this transfer is effected the office of the Franchising Director will be abolished and the Schedule makes the necessary amendments to the Railways Act 1993 and other enactments.
34. Clause 12 and Schedule 4 It has been a criticism of the current regulatory system that there is no clear division between the respective roles of the Rail Regulator and the Franchising Director in relation to the consumer. The Bill will, therefore, transfer responsibilities for consumer protection to the Authority as the successor to the Franchising Director. The types of matters which are considered to constitute consumer protection include telephone enquiries, through ticketing, security, the protection of the interests of disabled people and penalty fares.
35. Where the protection of consumers is secured through a licence the Authority will be responsible for the content of the licence as its relates to consumer protection (through being able to refuse the grant of a licence which does not make adequate provision for the protection of consumers), for the enforcement and modification of consumer protection provisions in a licence and for the revocation of a licence where the licensee is in persistent contravention of these provisions. However, when it is exercising this responsibility the Authority will be under the same duties and will need to have regard to the same considerations as the Rail Regulator.
36. For existing licences the Secretary of State may make a scheme which has the effect of separating out those parts of the licence which relate to consumer protection and enabling them to be enforced by the Authority. The Secretary of State is the arbiter of what type a condition is in cases of doubt. For new licences the split will be made in the licence when it is granted.
37. Schedule 4 also transfers the administrative responsibility for the Rail Users' Consultative Committees and the Central Rail Users' Consultative Committee to the Authority. The Authority will inherit the Rail Regulator's code of practice for protecting the interests of disabled railway users and the duty to revise it from time to time and encourage its adoption and implementation. The Authority will inherit the Regulator's power to make rules for penalty fares.
38. The final part of Schedule 4 allows the Secretary of State to make schemes to transfer property, rights and liabilities from the Rail Regulator to the Authority (including any rights and liabilities relating to staff appointed by the Regulator). This will provide the administrative support for the Authority to take on these previous functions of the Regulator.
39. Clause 13 and Schedule 5 transfer to the Authority functions of the British Railways Board relating to the British Transport Police, together with associated property, rights, and liabilities. Provisions for the transfer of staff are made. Clause 7 is disapplied in relation to the functions the Authority acquires under clause 13 because the provisions of clause 7 are not appropriate to police functions. Instead, the Authority has a general duty relating to efficiency and effectiveness.
40. Clause 14 and Schedule 6 transfer all the other property, rights and liabilities of the British Railways Board to the Authority. Those which are not required by the Authority are to be disposed of and the Authority is permitted to maintain and manage property or to develop it for sale. Provision is made for the transfer of staff.
41. Clause 15 and Schedule 7 give the Authority powers to transfer any of its property, rights, liabilities and staff to a wholly owned company, the Secretary of State, or a franchise company. This power extends to the transfer of franchise assets after a franchise comes to an end.
42. Clause 16 gives the Authority incidental powers including entering into agreements, acquiring and disposing of property, investing money, and promoting publicity. The Authority is prohibited from promoting private bills or orders under the Transport and Works Act 1992.
PART II: OTHER PROVISIONS ABOUT RAILWAYS
Clauses 17 and 18
43. Clause 17 gives power to the Rail Regulator, on the application of the Authority, to direct the owner of railway facilities (such as tracks or stations) to improve them or to provide new facilities. The Regulator may only give a direction if he is satisfied that the facility owner will be adequately rewarded for these improvements and facilities. The facility owner must do all that he reasonably can to comply with the direction made by the Regulator. This does not affect the facility owner's existing obligations (eg licence conditions).
44. Clause 18 amends the Railways Act 1993 so as to require the Rail Regulator to facilitate the furtherance by the Authority of its strategies and to contribute to integrated transport and sustainable development. His duty to promote competition is redefined to be for the benefit of railway users. The clause also amends the duties of the Secretary of State to reflect the fact that he is no longer exercising privatisation functions under the 1993 Act. The Regulator has a new duty to have regard to general guidance from the Secretary of State about railway services or other matters relating to railways.
Clauses 19 and 20 : Enforcement
45. Clauses 19 and 20 modify the enforcement regime under the Railways Act 1993.
46. Monetary penalties will be payable for contraventions of licence conditions, franchise requirements and the provisions of orders made to secure compliance with an operating licence or passenger service franchise. In contrast to the 1993 Act, these will cover past breaches as well as those which are continuing.
47. There is no limit on the penalty which may be imposed but it must be of a reasonable amount. In calculating a penalty the appropriate authority (the Rail Regulator or the Authority) may take into account, among other things, the need to secure compliance, the consequences of the breach and deterrence of other breaches. A rail operator may apply to pay in instalments.
48. There are requirements as to the procedure for the imposition of penalties, including the giving of notices with prescribed information.
49. The operator may make an application to the court to question the validity of a penalty order on prescribed grounds. The requirement to pay a penalty is suspended until the case is determined. The court may cancel or reduce the penalty or extend the timescale to pay. It may also require interest to be paid on a reduced penalty.
50. The Railways Act 1993 is amended to allow the appropriate authority, if it thinks fit, to refrain from taking action requiring compliance with a relevant licence condition or franchise requirement where an operator is taking appropriate steps to comply or where a breach would not adversely affect railway users or lead to an increase in public expenditure.
51. Clause 20 reduces the period for a rail operator to make representations or objections to enforcement action from not less than 28 to not less than 21 days; it reduces the period on modifications to a compliance order from not less than 28 to not less than 7 days; and on revocation of a compliance order from not less than 28 to not less than 21 days.
Clauses 21 and 22 : Closures
52. Clauses 21 and 22 amend provisions relating to the closure of railway services, network, stations etc in the Railways Act 1993 to make them simpler. In particular, the Rail Regulator's functions are transferred to the Secretary of State, so that when major closures are proposed these will be determined by the Secretary of State. In addition, clause 22 widens the definition of minor closures (where less stringent procedures are required to be followed), so that it covers the track associated with a minor closure.
Clauses 23 to 26: Miscellaneous
53. Clause 23 extends the scope of matters which the Rail Users' Consultative Committees and the Central Rail Users' Consultative Committee may investigate so as to cover "open access" passenger services as well as passenger franchise services.
54. Clause 24 provides for the winding down and the abolition of the British Railways Board. Abolition will be effected when all its residual liabilities, properties and rights have been transferred to the Authority.
55. Clause 25 enables the Authority to give certain guarantees to trustees of an occupational pension scheme.
PART III: SUPPLEMENTARY AND GENERAL
Clauses 27 and 28 : Devolution.
56. These clauses make provision for the devolution of some executive functions to the Welsh Assembly and to the Scottish Ministers. Freight facilities grant is to be administered by the Welsh Assembly in Wales within criteria in relation to the whole of Great Britain. Scottish Ministers will administer freight facilities grants and track access grants in Scotland, again within these criteria. The Scottish Ministers may give directions and guidance to the Authority for services which start and end in Scotland. The Authority must implement these provided that they do not conflict with the Secretary of State's directions and guidance. The Scottish Ministers may also give directions and guidance on Scottish sleeper services, which the Authority must implement provided that they do not conflict with the Secretary of State's directions and guidance and provided that they do not impact on other services or the on the non-Scottish budget.
Clauses 29 to 34 and Schedules 8 to 10
57. Clause 29 gives power to the Secretary of State to amend other legislation in consequence of the Bill, subject to the approval of Parliament. Schedule 8 makes consequential amendments to various Acts and Schedule 9 gives the Secretary of State the power to make any necessary transitional provisions and savings. The Schedule also makes specific provisions for first appointments to the Authority. Schedule 10 makes consequential repeals to various Acts.
FINANCIAL AND MANPOWER EFFECTS OF THE BILL
58. It is not expected that the creation of the Authority will create any significant requirements for public expenditure. It will combine the current posts in the Office of Passenger Rail Franchising, the British Railways Board, and some posts from the Office of the Rail Regulator and the Department of the Environment, Transport and the Regions. There may be some additional staff costs in supporting the strategic role of the Authority and in setting up the Authority. In total this is calculated to be around £5m per annum for 1999/2000, 2000/2001 and 2001/2002. This has been accounted for in the DETR's Comprehensive Spending Review settlement.
SUMMARY OF THE REGULATORY APPRAISAL
59. The regulatory impact assessment has shown that there will be no significant costs to business. The proposals to establish the Authority and to set up a more effective and accountable regulatory framework for the development and operation of railways build upon powers already granted by the Railways Act 1993. The bill increases the powers available to the regulatory authorities (the Authority and the Rail Regulator) to require network licence holders and franchisees to comply with the conditions in their existing contracts and licences.
60. It is not possible to quantify in financial terms the effect of the new regulatory framework as it will depend entirely on how the industry reacts to the new regime. Both the Authority and the Rail Regulator will be required to act in a manner which enables the providers of rail services to plan the future of their businesses with a reasonable degree of assurance.
61. A copy of the regulatory impact assessment may be obtained from DETR Free Literature, PO Box No 236, Wetherby L23 7NB (telephone 08701226 236).
COMMENCEMENT
62. The Bill will come into force on a day or days appointed by commencement order.
EUROPEAN CONVENTION ON HUMAN RIGHTS
63. Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement before second reading about the compatibility of the provisions of the Bill with the Convention rights (as defined in section 1 of that Act). On 7th July 1999 the Rt Hon John Prescott, Deputy Prime Minister and Secretary of State for the Environment, Transport and the Regions, made the following statement:
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| © Parliamentary copyright 1999 | Prepared: 7 July 1999 |