European Rail Market: EUC Report

Lord Berkeley Excerpts

Thursday 14th June 2012 Lords Chamber

[Lord Berkeley]

My Lords, first, I declare an interest as chairman of the Rail Freight Group and a board member of the European Rail Freight Association. I spent 15 years in my comparative youth building the Channel Tunnel, and I recall having many debates with the noble Lord, Lord Freeman, who was one of the best Transport Ministers I can remember. We dealt with a lot of local problems and, sometimes, national problems. It was a pleasure to work with him and is great to see him in his place today, because he started many of the things that we have today.

I am sorry that I was not involved with the forecasting, which many noble Lords have criticised, or negotiating the contracts, which I am about to criticise, but there we are. We have had one of the best informed debates I can remember. There is remarkable expertise in this House and remarkable unanimity of view, which we can probably sum up as saying: it is time that the Government got moving on this to make the changes that this excellent report has recommended. I support everything that is in it. Of course, I gave evidence as well.

I have just one issue on capacity before I get into structure, which is my main subject. The noble Lord, Lord Freeman, will remember lots of debate about capacity through the tunnel, but capacity in a line such as this depends on all the trains going at the same speed. The original capacity design was 24 paths an hour in each direction which, if the signalling was upgraded, could be increased to 30. You could not run 30 trains, but you could run with a few spaces. The noble Lord will probably remember that Eurotunnel announced a few weeks ago that it will speed up the shuttle trains to keep up to the same speed as the Eurostar to get more trains through the tunnel during the Olympics. There is plenty of capacity there and I agree with the noble Baroness, Lady O'Cathain, that very little of it is being used for the through services.

Another issue is immigration. I shall not speak about that for very long, because I said quite a lot about that during the Second Reading debate on the Crime and Courts Bill, and the noble Lord, Lord Henley, has agreed to meet me before Committee on Part 3. I sense that other noble Lords may wish to participate in such a meeting, and I shall be in touch, because I agree that the current situation is absolute chaos and, frankly, an insult to visitors coming to this country.

The report rightly states that the Channel Tunnel should be seen as part of the European rail infrastructure. As many noble Lords have said, it is good for economic and cost reasons that the tunnel should not be seen as a barrier to traffic and trade. There is a long way to go before that is achieved both in the tunnel and across Europe. The noble Baroness, Lady O'Cathain, rightly talked about fragmentation.

I shall speak primarily about the structure, which I think is blocking change at the moment. The first railway package, completed in 2001, set a structure and regulatory changes to make the European railways more competitive, cost-effective and interoperable. Thirteen member states are currently being infracted against by the Commission for non-compliance with legislation that they agreed to in 2001, which is incredible. They include the big ones: Germany, France—my noble friend Lord Faulkner referred to the problems in France; he is absolutely right—and Italy.

I was interested in the evidence to the committee from the Italian railways, who said with one breath that the freight in Italy has been liberalised and everything is fine and that the next thing will be international passenger transport, but in fact—this is happening in France as well—they are complaining bitterly about what is happening in other countries but making very sure that no competition can happen in theirs. As just one example, the Italian Government and the incumbent railway, FS, are trying to prevent other operators getting access to tracks and terminals. It is encouraging its Government to introduce rules saying that all operators must provide mobile rescue cranes every 500 miles—not one set of cranes around the country but each operator having to have his own set of cranes. This is of course because the incumbent has a lot of old cranes and nobody else has. Every train will have to have two drivers, because the FS ones have two, but nobody else needs them—the passenger ones do not— while no leased wagons may be used. They introduced this legislation at zero notice, so in theory if the independent operators were running a train on the main line with leased wagons, they would have had to put the brakes on, stop and block everything. This has been going on for the past two years, while the Italian authorities and the chairman of Italian railways go around Europe saying, “We are fully liberalised”. They are not.

Where does the Channel Tunnel come into all this and does it comply with the first railway package? The committee thought not but the government response said that it does. In paragraph 135 of the response to the report, the Government say:

“The UK complies with the First Railway Package in full”—

in full—

“both in respect of the domestic network and the Channel Tunnel”.

Well, they do on the domestic network but the Commission does not think that they are on the Channel Tunnel, because it started infraction proceedings against the UK and France in February 2011. It is odd that the government response did not mention this. When the Commission is infracting a member state, surely it is relevant to the Government’s response to a report. I have all the papers; I could have had a few more, except that they rejected my freedom of information requests, but I have quite a few. The first concerns the subjects of the infraction. I shall summarise them because they are rather long but they are important.

The first concern is on the “independence of essential functions”, which means that the infrastructure manager is not owned by the same company as the train operator because that operator otherwise gets preferential treatment, as happened in Italy. The second is that there should be separate accounts for infrastructure managers and operations and that has not happened, according to the Commission. The third is on rail access charges, which a number of noble Lords have mentioned and to which I shall come back because they are very high. The fourth is on an independent regulatory body. Until about now, it has not been independent because the regulator has been part of the Department for Transport, which owns parts of Eurostar. Our Government need to be congratulated because they are now moving the whole of the UK side of the intergovernmental commission to the Office of Rail Regulation—but of course the French Government have not done that yet. Finally, there is the issue of “capacity allocation”, which is again not independent. The Commission’s paper is called an EU pilot and it is digging very hard into the detail. I would be very interested to know from the Minister whether the Government are resisting any requests for information from the Commission or are being proactive in response. Similarly, do the Government accept that the first railway package applies in full to the Channel Tunnel?

Turning to the access charges which other noble Lords have mentioned, article 8 of directive 2001/14 is the relevant one. I was a little disappointed with the committee’s response. It seemed to think that because Eurotunnel is in the private sector it should be able to,

“set access charges at a market rate subject to their obligations under EU law”.

That is right; it should be able to set its charges under those obligations, which I will come to, but I would submit that its being in the private sector is not particularly relevant. In their response on Eurotunnel, however, the Government say in paragraph 140:

“EU legal requirements have been fully implemented”.

I would challenge that.

Other noble Lords have spoken about the charges, but there is more to it than that. If we look at the five issues the Commission has put in the pilot, Eurotunnel has not demonstrated that its infrastructure management is sufficiently separate from its freight operation, its passenger operation or from the freight and passenger shuttles. The shuttles are exempt from the legislation, but they have to be looked at separately. There is no separation of accounts. There is some progress in the network statement, but not enough. I have mentioned the regulatory body and that the access charges are too high, so basically the UK gets one out of five and France gets nought out of five, which is a pretty poor record 11 years after the first railway package came into effect.

I do not accept the committee’s view that access charges should come down in the medium term. There is much more to it than that. Several noble Lords quoted the charges. I shall quote some in a slightly different way. The charge per train kilometre for a Eurostar is £36 on HS1, £13 on the high-speed line in France and £225 on the Channel Tunnel. In the tunnel, it averages about 10 times the charge on the other side. For freight, the evidence that MDS Transmodal submitted to the committee was that the charge is about £3,000 a train—it varies quite a lot. It argued that it should be £1,000 to attract significantly more traffic, bearing in mind that there are about five freight trains a day going through at the moment. If you stand on the M20 at Ashford and count the number of trucks, you could fill 200 trains a day. I suggest that there is something wrong there.

How is the charge arrived at? This is the problem. There is a rail usage contract that dates back 1985. The noble Lord, Lord Freeman, may even remember it. It was designed to give a government guarantee to Eurotunnel from the two railways: British Rail and SNCF. The charges were based on full cost recovery—fine—fixed costs and variable costs plus a mark up. The problem is that the two companies that signed, which are now DB Schenker and Eurostar, pay the charges on the basis of the rail usage contract, which has now been turned into a network statement. If anybody else comes along, like Deutsche Bahn, it will be paying the same amount, but will also be paying a charge that reflects the fixed costs of the tunnel. Something in me says that Eurotunnel is going to get the fixed costs paid twice. That does not seem right. The whole thing is a complete mess and it needs completely restructuring on the lines of Article 8 of Directive 2001/14. There is a marginal cost, a fixed cost and an allowance for financing with a calculation of how much the market can bear, all supervised by the regulator, which is a joint regulator independent of government. I can go on about fixed costs and fire suppression, but I think that, in interests of time, I had better not.

What we have here is a wasted asset for passengers and freight that is, after all, the mode of transport supported by the Commission, the UK Government and, no doubt, the French Government. The committee recommended root and branch restructuring of the Channel Tunnel. The noble Baroness, Lady O’Cathain, referred to that. The noble Baroness, Lady Scott, talked about competition. She is absolutely right. We all believe in fair and transparent competition. This is what Sir Roy McNulty is saying about the UK, and it is no different. If you want growth, you need competition, but any competition to make it work must be fair and transparent. I hope that the Government will set an example to all the other member states that are failing and take this forward, take on the recommendations of the committee and let us see some urgent change.

[Lord Walpole]

Oh dear. All I can say is: how do I follow that? That is the expert. I will try. My family were Members of Parliament for Kings Lynn on and off since about 1350 until the end of the 19th century. I wondered what they felt about the possibility of a Channel tunnel, and indeed I know perfectly well what they thought: they preferred to use the Hanseatic League and did not want somewhere for the French to be able to march over to Dover.

The report and the Government’s response to it are an invaluable record of the position on 8 December 2011. That is my birthday. It is also the day of the Immaculate Conception. I do not know whether noble Lords ought to draw a line between the two. The noble Lord, Lord Berkeley, did not mention immaculate conception, did he? No.

[Lord Berkeley]

I did not draw a line, either.

[Lord Walpole]

Over certain distances, there is no doubt that the train should be better than the air. It should be cheaper, should be better for the environment, should be better for time and should be more comfortable, though whether or not that is true, I do not know. The report in front of your Lordships contains, in box 2, the treaty of Canterbury. Whatever anyone has said so far, after 25 years that treaty is out of date and should be looked at very carefully. I think that someone has already drawn attention to the fact that on page 28 there are unimpressive figures for passengers and freight; certainly those for freight are totally unimpressive.

On page 35 there is the core network map of what the railway is going to look like in 2030. Once again, there is no route to East Anglia or the West Country, nor any route to Scotland north of Edinburgh. Has anyone heard of Swindon, Bristol, Truro, Harwich or Felixstowe? None of those will be on decent railway lines. The present capacity, shown in paragraph 74 on page 29, of less than 50% of the amount of passengers that could be taken and less than 10% of the freight, is quite extraordinary. Perhaps it is too expensive per train per kilometre.

In our village at home, there is a gentleman, now retired, who owns his own articulated lorry and spent his life going all over Europe picking up trailers and bringing them back. He said that without doubt he would rather go on the ferry than through the tunnel. Why? Because it was easier to get on the ferry—not that there is any difficulty getting on to the train, but you then go and sit in some nasty little carriage up at the front, and a few moments later you arrive in France. If you go on a ferry you can have a nice little relax, you can fill your—you know what I mean.

[Lord Berkeley]

Flask.

[Lord Walpole]

Yes. You can get everything right. I like railways and I like the tunnel, but if you go from Norwich to Liverpool Street, you go to a place called Stratford. You cannot change at Stratford on to anything else; you have to get a train either to Ebbsfleet or to St Pancras. That is extraordinary. I should think that I have used the tunnel about four to five times a year—in other words, eight to 10 journeys a year—ever since it started, both by car and by Eurostar, and I must say that I have always enjoyed it because one has got the hang of how to enjoy it.

Through ticketing simply must be introduced. When my ancestor was 200 and I was 60 in the same year on the same day, we decided that we would go to The Hague. How many tickets did we need for that? Well, you work it out. We started on Eurostar and ended up on some Dutch train, which was superb—but, yes, we will not go into that.

Now, finally, I say thank you very much to the noble Baroness, Lady O’Cathain, for being a very good chairman, bullying us all, making us speak, and helping us very much indeed. I also say thanks to our clerk and to Elaine Morgan, who were 100% behind the committee. We could not have acted without them.

[Lord Brooke of Alverthorpe]

My Lords, I commence by thanking the noble Baroness, Lady O’Cathain, for keeping us on the rails all the way through this exercise, and keeping us pointed in the right direction in a non-bullying way. I thank, too, our clerks, who gave us such great assistance during the course of the committee, and I particularly thank colleagues who have left the committee since we concluded the report, as well as the new ones who have joined us. I also express my gratitude to all the people who provided evidence to us, both orally and in writing, which was very useful indeed.

It is some months, of course, since we concluded the exercise, the report appeared and we got the Government’s response. It is quite interesting to see what has happened in the mean time. I have gone back and reread our report and the Government’s response, and I have also picked up on one or two things on the internet that have happened. I see, first, that there has been quite a major breakdown—a health and safety issue in April in the tunnel. Secondly, immigration, a topic which we touched on, has moved up the agenda significantly since we addressed the issue last year. I think we found that, in retrospect, the Minister’s response at that time was somewhat complacent. She said that we will have sorted it out by the time that we get round to Deutsche Bahn extending the run through to Amsterdam and into Cologne; whereas the reality is that, as has now been indentified, many people have been using the existing train system under current arrangements to come into the country illegally. This needs to be addressed with urgency from a variety of standpoints, as we have already heard.

[Lord Berkeley]

Is the noble Lord aware that Deutsche Bahn has said that it is not going to go ahead with its service until the immigration situation is sorted out?

[Lord Brooke of Alverthorpe]

I was not aware of that, my Lords, but it is a very important and significant point indeed. This will presumably be quite an obstacle to making progress and introducing the new extended lines for which many noble Lords have been calling.

More recently, and thirdly, we have seen the announcement—the noble Baroness, Lady Scott, mentioned it, and I think that my noble friend Lord Berkley may have said more on it—about allowing Eurotunnel to take over SeaFrance’s cross-channel vessels. This takeover occurred within a matter of days and raises, as the Financial Times says, significant implications for competition and, in turn, charges, which I will come back to in a moment. My major point is about the charges.

Fourthly—and this is good news—I see that the number of foot passengers travelling through the tunnel over the past few weeks has increased significantly, largely because of people wanting to come and participate in the Jubilee celebrations. All those of us who want this to be a successful venture will hope that that will continue into the Olympics and beyond. Those are the changes that have occurred since we concluded our report.

In two years, a major celebration will take place. In 2014 we will celebrate 20 years since the Channel Tunnel first opened and all the worthy work that my noble friend Lord Berkeley did on its construction. It was a truly amazing event when the tunnel opened. It was a great venture, a great vision and the fulfilment of the marvellous technical expertise that went into it. However, regrettably, as others have said, as yet we have failed completely to deliver the fulfilment of that vision. This came from the evidence of the people who came before the committee. They were almost unanimous in saying that the tunnel has not delivered all that was hoped of it and that there is still a long way to go, even though it is such an amazing piece of infrastructure that is capable of delivering such public good, not just for the UK and France but over a much wider front throughout Europe.

The witnesses—even those from Eurotunnel, with their projections—were also unanimous in saying that we still do not have enough foot passengers travelling on the train and we are well short of how much rail freight there should be. The figures are very low indeed in comparison with the original projections. Indeed, as my noble friend Lord Haskel pointed out, they have been falling off in recent years, which is of great concern. Interestingly, our witnesses all felt that this was not good enough. They all felt that we should be trying harder and going for growth. I was very pleased that the noble Baroness, Lady O’Cathain, introduced the debate by pointing to the importance of growth in this context, both for this country and for Europe.

Our report endeavours to be constructive, to identify the areas in which performance has been falling down and to suggest a significant number of solutions to the problems. I regret that the Government’s response was not as positive as it might have been. I rather sensed that our chairman felt the same. Their response did not have the enthusiasm and energy that the committee showed in addressing the topic. This came through both in the public performance of Ministers and their supporters when they came before us and in the written document. No doubt the noble Earl, Lord Attlee, may put me right on that when he responds in his usual way.

I found it quite surprising that, when we took evidence from the Minister, she encouraged us by saying that our report would provide a push in the right direction. That hardly indicates a strong commitment. I hope that we will get some movement on this over the next two years, so that when we get to 2014 we will have seen some substantial changes.

In fairness to the Government, perhaps in retrospect we should have invited the Mayor of London to give evidence. He would have talked about growth, London and the importance of getting jobs for London. We would have pointed out to him that the Channel Tunnel has an important part to play in such growth. Had we persuaded him that it was an issue on which he should campaign, we might have made more progress with the Government, given the unusual way in which he can bring pressure to bear on them. Maybe that is something for us to bear in mind in future.

I come back to the importance of the report. The Government have made some progress in addressing the governance of the IGC. This has been slow but at least the introduction of representatives from the Office of Rail Regulation, and the enhanced role that is envisaged for them in future, is a step in the right direction and very positive. I was certainly very impressed by the evidence that we heard from those representatives who are now on the IGC. They identified areas in which questions were raised about the performance of Eurotunnel. Mr Kogan, in particular, asked whether Eurotunnel’s charges were justifiably high or inexcusably high. I believe that that is at the heart of the whole issue of whether we move forward with the tunnel. He also raised questions about the absence of a performance regime for Eurotunnel. In the UK, any company of that size that did not have a performance regime in place would be severely criticised. Again, this is an area where Eurotunnel needs to move forward and ensure that it is open and clean about where it is going. Mr Kogan told us that the IGC had been working on some of these issues for two years. As he appeared before the committee last October, now it is close to three years.

I have looked at the latest reports on the internet. The last report that the IGC produced related only to 2010 and did not appear until September 2011. We are still waiting for the report on 2011. In particular, I will leave the Minister with a question which he might not be able to answer today. The Government’s response to paragraph 141 states:

“The IGC is currently investigating the level and appropriateness of Eurotunnel's charges and its Joint Economic Committee published a report on the first phase of its work in October 2011. Further work is underway but will take some time because of the complexity of Eurotunnel’s accounting structures and financial flows. Until those investigations are concluded, and on the basis of the evidence currently available, we would recommend caution in assessing whether the level of the charges is appropriate”.

I have looked at the website but can find nothing about what is happening on that front. I have done some research elsewhere to find out what is happening. It is now close to three years since this work was first put in place. If the Minister cannot reply today, will he please reply to the committee in writing and tell us when we can expect that research to be concluded so that we can see it? On that basis, I believe that we will have a foundation on which we can move forward profitably.

--- Later in debate ---

[Earl Attlee]

My Lords, I start by congratulating the committee, which was so ably chaired by my noble friend Lady O’Cathain. The Government welcome the sub-committee’s thorough report on the European rail market and the role of the Channel Tunnel and have provided a full response. As ever, I am on a strict timetable.

We believe that a truly open, fair and liberalised market would increase competition in international passenger services across the EU. We support the Commission’s overall aim of clarifying and strengthening the regulatory framework for rail access through the first railway package recast. In particular, we endorse the need to ensure that there are adequately resourced and properly independent regulatory bodies in order to facilitate market entry and competition.

The Government recognise that the Channel Tunnel is a unique piece of international transport infrastructure and that it is in the country’s interests that it remains in operation. By virtue of the 1986 treaty of Canterbury and the ensuing concession agreement, the Government are directly concerned with the Channel Tunnel.

The UK strongly supports the growth of cross-Channel rail services. The provision of international services and their service patterns is a commercial matter for operators. In order for a train to transit the Channel Tunnel, the operator needs to comply with the relevant European, national and Channel Tunnel-specific requirements.

My noble friend Lady O’Cathain and other noble Lords talked about the proposed Deutsche Bahn service. DB applied to the intergovernmental commission in October 2011 to amend its Part B safety certificate, which covers management of safety issues, to include operation of passenger services through the tunnel. Since the intergovernmental commission has been unable to reach a decision, the application has now been referred to the British and French Governments for consideration. That process is ongoing. Deutsche Bahn will also need to obtain an interoperability authorisation to place its new trains into service in the tunnel. Although IGC officials from the UK and France have been working positively with Deutsche Bahn and Siemens to help them prepare the necessary dossier, as yet no formal submission for authorisation of new rolling stock has been made to the IGC by either Deutsche Bahn or Siemens.

The noble Lord, Lord Brooke of Alverthorpe, and, I think, another noble Lord asked me about the purchase of SeaFrance Ferries. It is a matter for the competition authorities, either DG Competition at the EU or the Office of Fair Trading, to determine whether any change in market dominance raises competition issues. The noble Lord, Lord Brooke, also asked about the 2011 report of the IGC. I do not expect inspiration to arrive and therefore I will have to write to the noble Lord.

My noble friend Lady Scott of Needham Market talked about modal shift for passenger and freight. We recognise that modal shift from air and road to rail can generate important environmental and congestion benefits. However, rather than trying to force people away from car or air travel, we are working to support sustainable travel choices. A number of barriers can prevent behaviour change, including powerful ones such as habit.

Studies have indeed indicated that the Channel Tunnel has spare capacity to accommodate growth. Although there have been indications that the rail freight share of the cross-Channel market would be higher if rates were lower, pricing judgments are inevitably subjective and it is always difficult to make accurate volume and revenue forecasts. However, in partial answer to the question from my noble friend Lord Freeman, there is spare capacity for growth, as about 50% of capacity is being used at the moment.

The noble Lord, Lord Faulkner of Worcester, suggested that access charges for Eurotunnel are too high, and other noble Lords said as much. We have no clear evidence that Eurotunnel’s charges are inappropriate. However, the IGC is currently investigating the level and appropriateness of Eurotunnel’s charges, and its joint economic committee published a report on the first phase of its work in October 2011. Further work is under way but will take some time. Until those investigations are concluded, and on the basis of the evidence currently available, we would recommend caution in assessing whether the level of charges is appropriate.

In answer to another question from the noble Lord, Lord Faulkner of Worcester, the Government support long-distance high-speed rail. At present, services on HS1 and the Channel Tunnel are relatively inaccessible for those outside London and the south-east. By providing direct access to the wider European network for services from Manchester, Birmingham and other cities, a link between a national high-speed rail network and the current HS1 could address this. In January this year, the Government announced that phase 1 of the HS2 network will include a direct link to the continent via the HS1 line to the Channel Tunnel. The Government’s view is that the strategic case for a direct link between the proposed high-speed rail network and the HS1 line to the Channel Tunnel is strong.

My noble friend Lord Freeman asked about the Waterloo International terminal. I had been briefed on this but, sadly, some time ago. My noble friend will recall that the connection to HS1 was slow, and there are also technical issues regarding bringing the platforms into domestic service.

I should like to say a few words about the role of the Channel Tunnel Intergovernmental Commission and the IGC legal framework and governance. The governance structure for the Channel Tunnel has been sufficiently flexible to accommodate subsequent developments in European, UK and French law and regulation, and it is expected to continue to be so. The Channel Tunnel Intergovernmental Commission and the Channel Tunnel Safety Authority are currently seen as providing an effective structure for regulating the Channel Tunnel in line with the European framework. If a need is identified to improve the effectiveness of the IGC or to adjust the powers available to it as regulator, the Government will promote any necessary legislative changes.

The speed of IGC decision-making is conditioned in part by EU regulatory processes and requirements and by the processes and responses of the concessionaires and other stakeholders. The IGC process with regard to the authorisation of proposed new services through the tunnel cannot start until the relevant documents have been submitted.

I think that I will have to part company with my noble friend Lady O’Cathain and the rest of the committee at Canterbury. The Channel Tunnel is a binational infrastructure and therefore needs some form of binational governance. This is necessary regardless of which authorities have, in law, the regulatory functions. Even when the IGC is exercising legal powers in its own name, its decisions are, in practice, informed by discussions between the French and British national authorities. In this connection, we are working with our French colleagues to conclude as soon as possible transposition of the revised railway safety and recast railway interoperability directives for the Channel Tunnel. We see no need to renegotiate the treaty, and I suspect that the French have no appetite to do so either, as observed by my noble friend Lady O’Cathain. The noble Lord, Lord Davies of Oldham, referred to the treaty and to direct governance of the tunnel but I do not think I heard him say what the policy of Her Majesty’s Opposition is.

I turn to the tunnel-specific safety rules for passengers and freight. The IGC has made significant progress in reviewing its rules to check that all the safety requirements currently in place continue to be justifiable on safety grounds and to remove those which are not. The IGC will continue to hold this view unless the evidence demonstrates otherwise.

The tunnel authorities and Eurotunnel are working together to address the consequences for the tunnel’s rules of the opening of the European rail market. This includes a programme of work to address the European Rail Agency technical opinion, which has already led to a number of requirements being removed. The UK Government accept the principle that the IGC must justify, by robust risk analysis, any requirements that are additional to the European harmonised technical specifications for interoperability.

The safety concerns that underpin the tunnel’s safety requirements reflect the difficulties of getting firefighters in and other people out of a 54-kilometre undersea tunnel in the event of a fire. My noble friend Lady O’Cathain asked when the work on the TSIs will be completed and whether the TSI requirements will be rescinded. The Safety in Railway Tunnels TSI is expected to be revised in mid-2013. Some specific requirements in the Channel Tunnel rules have been removed—for example, the 30-minute running time for freight locomotives. Other remaining tunnel rules are expected to finish in September 2012.

I turn to economic regulation of the Channel Tunnel. The UK considers that the Channel Tunnel’s regulator’s independence from any railway undertaking is properly preserved as regards the UK. No one in the UK IGC delegation or working at the Office of Rail Regulation in support of the IGC has any responsibility for Eurostar. Within the Department for Transport, policy responsibility for Eurostar is vested in a separate command that has no locus in or responsibility for the IGC.

My noble friend Lady O’Cathain, the noble Lord, Lord Davies, and many other noble Lords talked about border and immigration controls. Rail liberalisation presents a number of border control challenges which the Home Office and the border force are seeking to resolve with colleagues from across government, the police, rail operators and the Governments of other European countries. It is occurring against a background of rapid changes in border control technology, which will help to meet some of those challenges. But these challenges will only become more significant with the increase in international services. That is recognised in respect of HS2.

[Lord Berkeley]

Will the noble Lord explain what border controls are planned for HS2? That seems a bit odd as I thought it was within the UK.

[Earl Attlee]

My Lords, I think the hope is that passengers will get on HS2 on an international journey further up the country, maybe from Birmingham.

The noble Lord, Lord Faulkner, asked about Schengen. The position of the UK outside Schengen means that exit checks also need to be completed for all passengers leaving the zone prior to immigration arrival controls in the UK. The noble Lord, Lord Berkeley, raised the UK’s possible infraction for non-compliance with the first railway package in respect of the Channel Tunnel. I am unable to discuss the infraction procedures with respect to the first railway package and the Channel Tunnel but we consider that the railway usage contract does not breach the requirements of directive 2001/14—the first railway package—for the duration of a framework contract, and complies with Articles 17.5 and 17.5a in that it relates to a uniquely large-scale and long-term investment which is covered by contractual commitments. The noble Lord, Lord Haskel, also asked about the Commission taking further action against member states for non-compliance of the first railway package. The European Commission is currently taking infraction action against those member states that have not correctly implemented the first railway package.

I am grateful for your Lordships’ comments and, where appropriate, I will certainly draw them to the attention of my right honourable friend the Rail Minister, Theresa Villiers.