Infrastructure: Expenditure

Lord Berkeley Excerpts

Monday 25th March 2013 Lords Chamber

[Lord Deighton]

My noble friend is precisely right that the restoration to capital expenditure which this Government have made through the 2010 spending round, the two Autumn Statements and the recent Budget, has restored capital expenditure levels to considerably above the previous Government’s plan.

[Lord Berkeley]

My Lords, can the Minister clarify how much of the amount he quoted in his original Answer is in respect of Network Rail and how much is capital expenditure, whether it is considered to be in the private or public sector, and whether or not it was financed by government guarantee?

[Lord Deighton]

The plan for Network Rail is included under the high-level output specification, which is a £9 billion plan from 2014 to 2019. Of that £9.4 billion, approximately £4.2 billion has been added during the tenure of this Government.

Infrastructure (Financial Assistance) Bill

Lord Berkeley Excerpts

Tuesday 23rd October 2012 Lords Chamber

[Lord Berkeley]

My Lords, I thank Ministers for briefing some of us about the Bill last night. It was a very interesting introduction to it.

First, I should like to spend a few minutes examining the wider problems, beyond the financing, associated with getting projects off the ground, such as the approval process, planning and, of course, the appraisal criteria. I think it was two years ago that Infrastructure UK published a report comparing the civil engineering costs of big projects in the UK and Germany. The costs of construction were remarkably similar, but what was different was the enormously greater cost of getting projects off the ground in this country. It was very interesting that in his introduction the Minister said that one of the criteria for financing was that you had to get the project off the ground within 12 months of obtaining the finance. That is quite a challenge. First, presumably one has to get through compliance with the Treasury Green Book, which is an incredibly complicated document. You need lots of consultants’ reports to support your case, which costs time and money, and sometimes the results are such that you wonder whether the exercise is worth while. A similar document is required for transport projects and, again, it is incredibly complex. It goes down to fractions of a second, timing millions of cars, and that decides whether you build a motorway, a road or something else. Again, that costs an enormous amount of money. What will the criteria be for allowing these projects to be financed in this way? At the same time, does the Minister agree that it is about time that the Green Book and the equivalent transport document were reviewed to make them cheaper and simpler?

The next issue is planning, alluded to by my noble friend Lord Adonis. Planning delays are getting longer and longer. I declare an interest as chairman of the Rail Freight Group. Some rail freight terminals in the south-east have gone through two planning inquiries. The Minister lost the last judicial review on one of them, so he is now thinking of a reason for having another planning inquiry. One might suggest that, in considering these things, Ministers should obey the law and look at these things objectively, as I am sure their legal advisers will have asked them to do. However, it all adds up to an enormous cost for developers and enormous time delays. Getting planning permission for some of these projects can cost £10 million or even £20 million because of all the consultants involved. Therefore, while I welcome the finance in the Bill, I am not sure how much it is going to help things to go ahead.

Secondly, I want to cover briefly what the Minister said about this Bill having minimum impact on the public sector finances. I would say that I have not been speaking for 10 minutes yet; that may be wishful thinking on someone’s part. There are so many here who are experts on finance that I deign to tread there, but if we have a £50 billion fund for investments or guarantees, does that not affect the PSBR somehow, if it still exists? A couple of years ago I asked the Secretary of State for Transport—it was Philip Hammond, who was two Secretaries of State ago—whether he had any views on whether Network Rail’s debts should be on the government books. He said that he was agnostic about it; I do not know whether that still applies. There is also said to be a debt liability of £1 billion on the Channel Tunnel going back 25 years, so I do not know how all this works. However, I cannot believe that a £50 billion fund or guarantee from the Government has no effect on government finances. I am sure that the Minister will be able to put me right on that.

While everyone is encouraging projects to go ahead with a kick-start, I find one in particular a bit odd. This is the second Bill this year that would authorise government funding for the Thames tunnel. The previous one was the Water Industry (Financial Assistance) Act 2012. Why is there this enthusiasm for pouring public money into a Chinese-owned so-called public-private sector utility? Are the Government not aware that on 18 October the European Court of Justice, in its judgment C-301/10, found that the UK had not complied with directive 91/271 in respect of the Thames and another river somewhere up north, but that in seeking to comply the Government should look at the best known technology that does not impose excessive costs? I think that £4.2 billion—the equivalent of £80 every year for 30 years on every water payer within the Thames Water catchment area, which goes as far as Oxford and beyond—is probably excessive if there is an alternative. Paragraph 64 of the relevant judgment says:

“The concept of BTKNEEC”—

that is what it is called—

“thus enables compliance with the obligations of Directive 91/271 to be secured without imposing upon the Member States unachievable obligations which they might not be able to fulfil, or only at disproportionate cost”.

Even without this government money, then, the Thames tunnel will put all that money on. It may or may not comply but the judgment requires the Government to look at this again and at alternatives, which I believe exist. The noble Baroness, Lady Gardner, said that money should be put to good use and spent wisely. This is an example where, if it goes ahead, it certainly will not be. I hope that the Minister will impress upon his colleagues in Defra the need now for an independent review of the different options for complying with the ECJ ruling and for mitigating the fine which, at its worst, I am told could reach £1.5 billion. There is big money at stake here and a lot of it could be saved by looking at different options a little creatively. I will be meeting the Minister in a couple of weeks’ time to discuss this, when I shall expand on it further.

--- Later in debate ---

[Lord Newby]

I am afraid that I do not have those figures to hand but I will write to the noble Lord.

The noble Baroness, Lady Wheatcroft, raised concerns about continuing the old system of PFI. Many people share her concerns about the way that PFI has worked, and in any future schemes I know that the Government will seek to avoid the problems of the past in that respect.

The noble Lord, Lord Berkeley, asked several questions, one of which concerned the criteria were for which projects come forward. As I said in my opening remarks, the five principle criteria are that the schemes be nationally or economically significant, financially credible, good value for money for the taxpayer, not solely dependent on a guarantee to proceed, and ready to start construction in 12 months. He asked whether the £50 billion affects the PSBR. The answer is that it affects the PSBR only if guarantees are called upon. My understanding is that if it is a contingent liability, this does not affect what I still think of as the PSBR.

The noble Lord, Lord Berkeley, also asked about the Thames tunnel and whether we might have an independent review. Living as I do on the Thames and being subject to many public meetings about the Thames tunnel, it seems to me that the current programme of proposals on the tunnel involves a huge amount of consultation and much discussion of alternatives. Having got this far on what seems to be an unavoidable necessity, I certainly would be extremely loath to think that we had to go back to the drawing board and start again with an independent inquiry.

[Lord Berkeley]

Could the Minister answer my question about whether there will be a review or abolition of the Green Book?

[Lord Newby]

It will not be abolished. I will pass on the noble Lord’s concerns to my colleagues in the Treasury, who I am sure are already aware of them.

This is an important and much needed Bill. It will allow critical infrastructure projects that are being held back by adverse credit conditions to proceed and will support much needed investment in the rented housing sector. It contains measures that will support growth, jobs and families, all at minimal cost to the taxpayer. It will help to unlock the investment that the UK urgently requires to make it one of the predominant places in the world to do business, and to support sustainable growth that is balanced across sectors and regions. I request that the Bill be given a Second Reading.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.

Comprehensive Spending Review

Lord Berkeley Excerpts

Monday 1st November 2010 Lords Chamber

[Lord Berkeley]

My Lords, I congratulate the noble Lord, Lord Allan of Hallam, on his speech. He managed to be non-contentious, as is required, but I can see that his independence of ideas on matters technological will enable him occasionally to challenge the coalition’s thinking. I look forward to hearing him often in this House. I was also interested in the comments of the noble Lord, Lord Bates, about what a great job the regional development agency for the north-east has done. He will be aware that, in Schedule 1 to the Public Bodies Bill, it is down for abolition. I am assuming that he will oppose its inclusion in the Bill and I look forward to joining him in doing so, as I think that the agency has done a fabulous job in the past.

I am going to speak about transport, which features strongly in the CSR documentation. The coalition policy document sets the scene by stating:

“We will support sustainable growth and enterprise balanced across all regions and industries … giving new incentives for green growth”.

In the same document, in the transport section, there is an interesting mix of projects large and small, capital and revenue-related, long and short term, including a new system of HGV road user charging, no more funding for fixed speed cameras, a new dual carriageway in Norfolk, support for sustainable travel initiatives and the establishment of a high speed rail network,

“as part of our ambitions for creating a low carbon economy”.

Finally, there is an emphasis on the “green economy”. That seems to be a sustainable green policy across government. It needs to be, as the Stockholm Environment Institute, which is associated with the University of York, published a report in August saying:

“Transport is a major source of greenhouse gasses, and it is increasing emissions faster than any other sector of the economy. Growing levels of car use, road freight and flying have created difficulties in reducing transport’s greenhouse gas emissions”.

Perhaps we should examine what the Government are going to do about it.

What is good in the CSR is that the funding for many capital projects has largely been retained. We can read about rail projects: the Midland main line and the east coast main line are going to improve, but there is still no news about the Great Western main line electrification or the Thameslink upgrade and new rolling stock. It is interesting that the Chancellor, in his Statement, announced electrification between Manchester, Liverpool, Preston and Blackpool, but the Department for Transport is still failing to confirm that. Perhaps Mr Osborne is going to be the new Secretary of State for Transport as well.

Elsewhere it is cuts, cuts and increasing fares on public transport, while, frankly, the road sector is getting off pretty scot free. The bus subsidy has been drastically reduced, by something like £200 million. Therefore, there will be fewer services, costing more, particularly in country areas, which I would have thought Conservative and Liberal Democrat MPs would oppose. The consequence will be that more people will use their cars. Train fares are due to rocket, with regulated fares to increase by 25 per cent over the next four years and, I think, about 33 per cent over five years. What I find interesting is that, less than two years ago, the current Minister for Railways, Theresa Villiers, who was then shadow Transport Secretary, stated that a fare increase of 3 per cent above inflation would price people off the railways. Norman Baker, who was then the Liberal Democrat transport spokesman, said the same thing:

“We will cut rail fares, changing the rules in contracts with Train Operating Companies so that regulated fares fall behind inflation by 1 per cent each year”.

They both agreed, even before the coalition was formed, that fares were going to be too high, but they have now done a massive joint U-turn. It means that fewer people will travel by rail because they cannot afford it; they will use their cars more. As my noble friend Lord Foulkes said, the housing benefit changes will force people out of London and other major cities, which will mean that they have to pay even higher rail fares to get into the cities. There is not much alternative to getting into London. Perhaps I can offer the Mayor of London, Boris Johnson, another phrase: transport is getting like Kosovo, too.

Roads are going to become a free-for-all in places where there are no traffic jams; there is no more funding for speed cameras, so more motorists will be speeding. There will be £37 million of cuts in the road safety grants and operating expenditure this year. More people will get killed or injured. There is always the option of increasing charges for road use to match the increases for using bus and rail. There may be road user charges for foreign lorries, if the Department for Transport can find a way of doing that legally, but we have heard of no constraints or charges for cars. The Mayor of London is even scrapping the Kensington congestion charge scheme because motorists do not like it. Well, they wouldn’t, would they? However, it would bring up the charges to balance the increase in rail and bus fares. This is the policy of a potential Prime Minister and it epitomises the coalition, which, to me, appears to be allowing motorists to do what they like, with less and less fear of being fined, pricing people off public transport and on to roads and, after less than six months, dumping any policy associated with green initiatives and lower-carbon transport.

Clearly, the coalition accepted in its programme for government that a sustainable growth policy was necessary across all government departments, and transport is one of the worst offenders. However, on the basis of numerous independent reports, as well as evidence in the UK and parts of Europe, we will actually have higher carbon emissions. It is rather depressing that the Liberal Democrats in coalition are not diluting the worst excesses of the Tories in their love of motor cars and belief in the divine right of drivers to do exactly what they like, where and when they like. The Government could have raised revenue from the highest polluters—cars and lorries—which would have reduced emissions, because road transport’s emissions are about five times more polluting than rail’s per passenger mile or freight mile. It is possible to change behaviour and reduce carbon emissions at the same time, but that needs a consistency of policy that has so far and so quickly eluded the Government.

One project that the Government are praying in aid as important is High Speed 2—the new line that Ministers have been announcing for some time—but the problem is that many in the industry feel that the Government are not really serious about it. Members of Parliament along the whole route are campaigning against it and making the most outrageous statements about high-speed lines. All that they need to do is to go and look at HS1 in Kent to realise that it is a good scheme. The Government need to do a lot more to promote HS2, otherwise they will be just saying that they are doing it and it is not going to happen.

Returning to the coalition document, I believe that on present evidence the Government are not supporting sustainable growth across all regions and industries and are not giving incentives for green growth. They are doing exactly the opposite, taking us back to some of the Tory policies of yesteryear.