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When I was working for Eurotunnel we virtually managed to get a sleeper service going through the tunnel using mark 3 sleepers, which are the ones that go to Edinburgh and Penzance today. The safety authority said, “All you have to do is put stronger springs on the doors”. We also tried to encourage the regional Eurostar service to use them by day and to get the Gatwick-Lille service, a Thameslink train with very little change in terms of safety. That is how you get more traffic and more competition through. The rules currently say that if you want to have extra or new types of locomotives they must be very special. This is when the rest of Europe is trying to standardise locomotives, signalling, traction power and everything else, so if anybody wants to get a train through this tunnel they can.
I remind noble Lords that the Swiss are building two tunnels under the Alps about the same length—two, not one, at the same time—and there is none of this rubbish. All trains that will be allowed to run on the Swiss track will be able to go through these tunnels. The first, the Lotschberg, opens this coming autumn. Maybe our rail group should visit it next year. But we make life difficult for ourselves with all these petty regulations which do not seem to have much benefit.
When the tunnel opened, the forecast was that 6 million to 8 million tonnes of freight a year would pass with 40 trains. Since then, we have had the illegal immigrants, who trashed the containers and the trains. When trains arrived at the terminal, staff found people with knives coming out at them. For two years, the two Governments refused to increase security on the trains and at the terminals in France and said that that was a problem for the railways. Since when have railway personnel been frontier police? I have said that in the House before. It is a bit as if the German railways were asked to police the Berlin Wall, when it was in existence. The German railways are very good, but their staff are not trained as frontier police.
So customers got very angry and fed up. That is why traffic has reduced from between 15 and 20 trains a day to about three or four at the moment, when UK domestic rail freight has risen by 60 per cent. It is four times down on the Channel Tunnel and 60 per cent up in the UK.
Eurotunnel has published a network statement, which is the document that is supposed to comply with the open access regulations mentioned by my noble friend. The regulations cover access rights, charges and so on. The real problem is the charges. The charges for a train vary between €6,300 and €17,000 a train. The low figure is not bad; the high one is just impossible. The low rate applies to trains that travel at 140 kilometres an hour—none exist in the world except in Europe—and to trains running at night, when the tunnel will be closed for servicing, so that does not work. Call it €12,000 as an average. Eurotunnel does not justify the wide variation in charges, which are supposed to be there only if the infrastructure is congested. It has not been declared congested; it is not and will not be, the way that Eurotunnel is going on.
Eurotunnel should be complying with the Channel Tunnel (International Arrangements) Order 2005. In Article 11, it basically says that, with freight, you should start with the marginal cost. Projects which cost a lot of money can increase the charge, but you must take into account performance, the possibility of reservation charges and so on. Eurotunnel is way out of line with the article. It is not good enough for people to shrug their shoulders and say, “There is nothing we can do about it because these people are in the private sector”. The requirement is quite clear that if there is a higher charge, it must be,
I do not know whether the Minister can tell me whether that applies, or whether we just go on as we are. If the charges remain as they are, there will be no rail freight by the end of the year. I have been trying to tell people in Eurotunnel that under first-form economics, in a market economy, if you put the prices up you are not necessarily going to get the revenue up. You might actually have no revenue. If you put the prices down—for example, if you halve the charges, as it has at the moment—you will probably get three times the traffic, so the overall revenue will be greater. Until we can get it to agree to that basic philosophy, it will be quite difficult.
The other way to get more rail freight through the tunnel is competition, to which my noble friend alluded. The Government did well in sending a letter in December, basically saying that the capacity through the tunnel should be shared with other operators and must be ring-fenced and that locomotives must be made available. That was a good letter. It is available in the public domain, so I will not bother to read it out. But that is not enough.
As other noble Lords have said, the trucks trundling up the M20 could fill 200 trains a day, and probably half that number from the trucks on the M1 and M6, which would mean that the motorways were a great deal more pleasant to drive on. There would be a great deal less pollution, noise and everything else. There is plenty of capacity on the lines—on the Channel Tunnel rail link and on existing lines in this country. Even if there were only 100 trains a day, compared with four at the moment, that would save quite a lot.
For that to happen, two things need to be achieved. One is lower prices through the Channel Tunnel, for which Eurotunnel needs to comply with the regulations. The other is competition between operators. The Government can and must assist on both those issues. The intergovernmental commission, which is half UK Government and half French Government, could take action against Eurotunnel for non-compliance. As in all these things, the first thing is to threaten action. If a company has any sense, it will start talking, and I hope that Eurotunnel would. Legal action would take a long time and be expensive for everyone, but the threat must start.
The Government can also encourage competition. They must make sure that there is a market. They must reduce the barriers to entry, remove all the safety requirements for locomotives, as for the Swiss tunnels, and everything else. Do we need all the security that we have at the moment? The security in the Channel Tunnel is much more stringent than for the trucks going across on ferries. I was going to ask: do we need an intergovernmental commission at all? We probably need it just for the treaty between the two countries, but do we need all the subgroups that sit around having lots of meetings and costing us all a great deal of money? What are they achieving in safety, security or anything else that could not be achieved in the normal run of things?
The Government have the power and opportunity to set the framework for traffic to grow. In the next few weeks or months, we must see whether they will do that and grow traffic at a rate to catch up with the Swiss tunnels, which will be full almost from the day that they open, or whether they will let it die. It is a government issue, not just one for the private sector.
2.07 pm
Lord Bradshaw: My Lords, like the noble Lord, Lord Dykes, whom I congratulate on obtaining this debate, I am a small shareholder in Eurotunnel, but I do not anticipate that I shall be partaking of the champagne; I do not own that many shares.
In 1993, it was forecast that between 6 million and 8 million tonnes of freight would pass through the Channel Tunnel. In 2007, 14 years later, a mere three or four trains are passing in each direction—probably carrying well under a million tonnes. Even recently, the numbers have been further reduced because there has been a 24 per cent increase in charges on all freight passing through Europe and the Channel Tunnel, which is far too great a rise for businesses to succeed. Unilog, one of the companies running trains through the tunnel until recently, has gone out of business.
There is provision for 40 trains a day in each direction. The noble Lord, Lord Berkeley, referred to estimates that there is potential for 200 trains a day, given the traffic that is passing by the ferries and the shuttle services. There is supposed to be open access across Europe for freight, and track access is supposed to be on a marginal basis, except where expensive infrastructure is involved, where the infrastructure manager may add a premium. But he must not add more than the market sector can bear and he must demonstrate what additional costs are imposed by, in this case, the freight traffic.
My first question for the Minister—I hope that we shall get some answers today, rather than the letters that we were promised in the previous debate—is: do the Government accept the European Union open access directive for freight passing through the Channel Tunnel? The UK is, I believe, a party to the directive, but do the Government really accept it and will they enforce it? Does the rail user contract within Eurotunnel take precedence over it? If so, how do Her Majesty’s Government justify that? In my view, open access legislation has precedence in this case. The rail user contract and Eurotunnel’s pricing mechanism should not over-ride the undoubted environmental benefits that spring from increased rail usage, to which the noble Lord, Lord Harrison, drew attention.
I shall tax the Minister with this theme in many questions that I ask now and in the future. Every line of government expenditure and every decision that the Government make should be underlined by an environmental theme. What enforcement action will the intergovernmental commission take against Eurotunnel? Probably very little, I think, as it is a somewhat toothless body.
The Channel Tunnel has capacity for 20 standard train paths every hour, which, with some investment, could be increased to 24. However, well under 50 per cent of this capacity is used, despite the fact that the tunnel has been open for 14 years. That must be an indictment of the policies pursued by the French and British Governments. The Channel Tunnel is an underused asset. Although it is privately owned in theory, the taxpayer, both in France and in this country, subvents it, and it should be operated in the public interest and not in private interests.
The noble Lord, Lord Berkeley, referred to haulage. Of the locomotives that are suitable for use in the Channel Tunnel, EWS—English Welsh & Scottish Railway—has the lion’s share, which it must make available at “commercial rates”. I am puzzled about what that actually means. SNCF has a few locomotives and I believe that Eurotunnel also has some, although I do not think that it uses them. Do the Government have solid plans to open this market to competition? If so, what are they?
Competition in locomotive supply seems quite possible. Reference has been made to the tunnels in Switzerland and to the tunnel between Austria and Italy. The locomotives that go through those long tunnels are subject to the same precautions against fire and accident as locomotives that go through the Channel Tunnel are, so there seems no good reason why those locomotives should not go through the Channel Tunnel, too—they use the same electricity voltage. If those locomotives were made available, that would loosen up the market and perhaps attract some of the potential freight traffic to the Channel Tunnel. Will EWS be required to publish the commercial terms on which the locomotives will be made available? Who will judge whether these terms are reasonable—the Government, the intergovernmental commission, the Rail Regulator or the European Commission?
Since December 2006, the Government have been paying Eurotunnel £6.1 million per annum. How long are we going to pay? The noble Lord, Lord Berkeley, mentioned the year 2051. What are we actually paying for? Is it so that freight can use the Channel Tunnel? In my view, we are paying a lot of money for the three or four trains each way that go through the tunnel. Apparently, the money is to compensate Eurotunnel for its operational costs, which I believe must be precious few. If hardly any trains run, what is the money for? What of the charges levied by SNCF and EWS at each end of the tunnel for so-called safety checks? What do these entail? Is a simple walk round a train worth the £1,000 that I believe is charged for it? I hesitate to think so.
The Channel Tunnel rail link is a public asset into which the Government have put considerable funds. What provision for freight has been made on this line? I believe that there are some loop facilities on the line, but, as the noble Lord, Lord Berkeley, said, apparently no paths will be available during the day for freight. Why not? This line is not so different from the west coast main line. I admit that the Eurostar trains go fast, but there are not many of them and there are big gaps in between. The purpose of loops is to enable you to use the line and I believe that it should be used. The Minister should bear in mind the fact that this is the only way in which continental-gauge rolling stock can reach the terminal at Barking. He could refer to the fact that freight trains could trundle around through Kent by various circuitous routes, but the rolling stock would not be able to follow—in fact, the locomotive would not get there, either, because the gauge is not suitable.
When the Government handed over the £6.1 million to Eurotunnel and put lots of money into the Channel Tunnel rail link, were they a knowledgeable buyer? Did they know what they were buying, or were they spending taxpayers’ money without realising what was being purchased? Have the needs of freight as well as passengers been fully considered? Have the needs of the market and users been fully taken into account?
On the subject of passengers, I wonder whether the Government have considered giving a directive to Ministers and officials to follow the example of the noble Lord, Lord Harrison, and his committee, so that, when they are travelling to Paris, Brussels and other near European destinations, the train will be their mode of travel except in the most exceptional circumstances. The Government need to give a lead. It is all very well pontificating about climate change, but we want to see a bit of action.
We on these Benches want the Channel Tunnel to be fully exploited, opened to competitive operation and used to keep our roads and airports clearer. The asset exists. The maintenance and operating costs of the tunnel are very low. Unlike the noble Lord, Lord Berkeley, I am not a civil engineer, but I think that as a civil engineer he would say that, now that the tunnel has been built and equipped, it is very cheap to maintain because very little goes wrong with it. We could, as he said, lower costs by undertaking a thorough examination of all the commissions and their sub-committees and working groups that exist to regulate and police the activity. As far as I can tell, the Swiss do not seem to need all those bodies to regulate their tunnels.
We want a link like the Oresund link over the narrow entrance to the Baltic between Denmark and Sweden. It is easy to use and not too expensive for the market—and it is the market that dictates the price that people will pay. We could set whatever rates we liked and say that we will charge a huge price, but in fact it is the market that sets the rates. In Scandinavia, the link is recognised as a showpiece. When you go to either side of the Oresund, to Malmö or Copenhagen, you can see the positive effects of the link on the economy on both sides of the water.
The use that is currently being made of the Channel Tunnel is an awful indictment of the Government. I fear that the Government are locked into worrying about the financial effect on the banks, rather than thinking about the effect on the British public.
2.19 pm
Baroness Hanham: My Lords, first, I apologise to the House for the absence of my noble friend Lord Hanningfield, who has been stuck in the snow—I hope not on a train. I am extremely grateful to the House for allowing me to stand in for him. I also thank the noble Lord, Lord Dykes, for generating this debate. I feel like a great amateur among the professionals. There was a short spell in my life—I have been struggling to remember exactly when it was; I think it was in the early 1990s—when I spent a remarkable amount of my time discussing rail freight and the tunnel, when Eurostar was first formed. I long to ask the noble Lord, Lord Berkeley—he may be able to tell me afterwards—whatever happened to the piggyback trains. We were very engaged by the fact that trucks were going to be able to drive straight on to bogies and go straight through the tunnel, thereby ensuring that a great deal of freight went through the tunnel from all parts of the country. Perhaps that happens a little now. It would be quite nice to know whether it does; it would take me back a great many years.
As a frequent traveller on Eurostar, mainly to Brussels but occasionally to Paris—I have no other monetary involvement in this process—I am a committed advocate of the value of this service and the great advantage which this country in particular has gained from the vision that saw the tunnel constructed. I thought that the noble Lord, Lord Dykes, was just a little churlish about the role that my noble friend Lady Thatcher played in bringing the tunnel into being, and I was very glad that his points were somewhat redeemed by the noble Lords, Lord Harrison and Lord Berkeley, who at the very least recognised that it would not have happened without her.
The movement of people and goods, although obviously not as great as originally anticipated—I have to say that whenever I travel on Eurostar, it seems to be packed to the gills—is significant. The journeys are convenient and comfortable, and the timing is always excellent. As has been said, Eurostar is a more than adequate alternative to having to battle at the airport. So it is a shame that the financial position of the Channel Tunnel is, and has been, so perilous. This has always been a flagship project with the potential to boost our national prestige, and one that is valuable to our relationships with Europe. But it has been marred by repeatedly flawed forecasting and a perceived lack of prudence on many occasions by the various management teams. The Government’s involvement has been erratic due to inaccurate passenger number forecasts, which, when coupled with an ambivalent attitude to the potential benefits for the public, has resulted in poor returns on the capital employed. However, in light of record passenger numbers in 2006, I hope that there is light at the end of the tunnel and that Eurotunnel now has a prosperous future. I agree, however, that the under-use of the freight capacity remains a concern, as freight would generate considerable revenue.
I do not expect to be able to emulate the analysis given by the noble Lord, Lord Dykes, of the whole process of Eurotunnel’s financial difficulties, but it is a sad fact that Eurotunnel’s management of the whole project from the outset has been mired in difficulty. This has culminated in the Paris Commercial Court’s backing for the re-structuring of the company’s colossal £6 billion debt. That this debt was accumulated in the first place signifies the firm’s woeful performance in bringing in and regulating the investment required for the tunnel. The court’s move is about the only feasible one for digging the firm out of bankruptcy. Despite this, the solution appears to be sensible, and the need for further public money has been avoided, which is a considerable plus. As the noble Lord, Lord Dykes, has said, unanimous approval for the restructuring seems to be unachievable, but it is obvious that this is a suitable plan and that the condition of gaining approval from 80 per cent of shareholders is sufficient in the circumstances. If successful, this restructuring of the debt will pave the way for an assured future, which, given that Eurotunnel has a concession to operate the tunnel for the next eight decades, will be welcome relief for investors, shareholders and partners alike, as well as for both private and commercial users.
What is the reason for the spiralling costs and the unsustainable debt that has induced government intervention to contain the losses? Why has Eurotunnel been unable to pay back the loans and had to resort to government grants time and time again? Several speeches today have gone into at least some of the reasons, but the fundamental problem that has stanched repayments and financial sustainability has been the grossly inaccurate forecasting of the likely revenue to be obtained from both passengers and freight, and the under-use of the tunnel’s capacity. The forecasts were optimistic in the extreme. The predictions have often exceeded the actual demand by as much as 300 per cent. Yet lessons do not appear to have been learnt during subsequent planning stages. My predominant concerns relate to the now as yet incomplete Channel Tunnel rail link, which has soaked up government grants of a far higher value than was anticipated. It is imperative that this forecasting is more accurate and that there is much better scrutiny of this project as well as of the Eurotunnel.
The Channel Tunnel rail link is indicative of the difficulty of delivering large-scale engineering projects. The Department for Transport is committed to providing over £1.8 billion of funding, which accounts for over a third of the total cost of the project and is far higher than that originally granted to the private sector consortium that won the contract to build the railway. This sum, although immense, would be acceptable if the value of that investment to the taxpayer exceeded the initial cost. However, the Public Accounts Committee report argued that the cost of the link could not be justified on the basis of passenger numbers alone. The committee suggested that significant regeneration benefits were essential to justify the outlay.
Noble Lords will be aware that the rail link was divided into two sections. The first section was opened in 2003 and is linked to Ashford International station, where the regenerational impact has boosted the town’s economy, as well as that of the whole of Kent. The Government’s laudable objective to redevelop Ashford was significantly enhanced by integrating the station so prominently into the Channel Tunnel service. That was a sensible and considered move that provides a wider context to justify the investment into the first CTRL section.
Why, therefore, are the Government acting so complacently over the decision to reduce Ashford’s role in the future operations of the CTRL? The second section will be opened in October, and there will be a subsequent cut in Eurostar services offered from Ashford, which could undo the good that the station has brought to the area since 2003. The Government have thus far denied that this will have a significant impact on the town, stating that 80 per cent of current demand for the station will be retained. Surely this cut of roughly a fifth of demand will be detrimental to the town. Furthermore, judging by the forecasting that has soured the rest of the project, I suspect that the damage could be far greater.
Lord Berkeley: My Lords, the noble Baroness says that she travels to Brussels very often. Does she agree that, if she lived in east Kent, the fact that the plan is that there will be no through services between Ashford and Brussels would be to be deplored?
Baroness Hanham: My Lords, that was what I was saying. The service from Ashford is to be cut by a fifth. I was very much deploring that, because clearly a great number of people get on and off at Ashford. It is a very valuable intersection. However it came out, I meant that there will be a reduction in the service, which will be of detriment to Ashford itself, which has been the subject of much regeneration as a result. I join my honourable friend in the other place, Damian Green, MP for Ashford, in urging the Government to persuade Eurostar to review that reorganisation of services to ensure that the links with Ashford are maintained as they are now.
The CTRL has mirrored the financial black hole of the entire Channel Tunnel project. There appear to be significant deficiencies in managing not just rail but any large-scale construction project. Almost without exception, such projects are not delivered within the intended timescale and cost far more than originally projected. One wonders what the ramifications are for other projects, such as Crossrail, Thameslink 2000, the Thames Gateway, widening the M25 and, of course, the Olympics. The track record of financial stumbling blocks and botched project management does not bode well for future large-scale projects. It is imperative that improvements are made in their delivery and management.
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