My Lords, this is obviously a very wide and long group of amendments, which cover quite a range of issues. I do not want to put words in noble Lords’ mouths. but I think that we have progressed to the point at which at least we have a common goal in terms of setting up a structure that will ensure certainty of funding for highways in the way that we have managed to enjoy, and benefited from, with the railways.
Clause 1 allows the Secretary of State to appoint a strategic highways company, thereby conferring duties and functions on it to operate as a highway authority. If we were to drop this clause—there is a stand part debate in this group of amendments—it would be a fundamental change to the model and we would lose many of the key benefits of certainty over funding and plans which, as we have heard today, has been widely supported.
Our aim is to create a different model to deliver road infrastructure. Crucial to this is having a legal body separate from government responsible for our strategic road network and delivering a road investment strategy in the most cost-effective way. We consider the most effective model is a company created under the Companies Act 2006. Let me explain the rationale. We have decades of experience of the fact that the current arrangements—I point this out to the noble Lord, Lord Davies, who will remember the history of the department—have not encouraged a long-term approach to planning infrastructure or provided secure funding. Stop-start has indeed been a definition of a large part of their history and has come with high costs in terms of the efficiency and quality of our infrastructure. For long-term funding certainty and planning, it is crucial for the Secretary of State to be able to have a transparent and binding relationship
with a separate legal entity. If the delivery body were to remain the Highways Agency and remain within the DfT, inevitably it would be easy to change funding and plans.
Setting up a strategic highways company as a new company operating under company law with a well established governance and financial framework will reinforce the clarity and robustness of the relationship. We have seen from international experience, for example in the Netherlands and Sweden, that where road delivery bodies have been given long-term funding certainty and a more independent relationship setting out requirements, large efficiency savings have been possible. A company would be constrained to one that is limited by shares and wholly owned by the Secretary of State, ensuring that any company is 100% owned by the Government and remains in the public sector. We have not only no intent but no interest in turning this into a privatisation. That is not part of our agenda and does not achieve the goals that we want.
Let me again take this opportunity to explain that we have no plans to appoint more than one company. We have already made clear that the Highways Agency, in its new legal status as a Government-owned company, will be the only company appointed. The use of plural “companies” in legislation was to allow flexibility for further companies in the future, including how companies would work together: and that is what Amendment 11 seeks to remove. Subsequent provisions in the Bill which refer to a company could therefore refer only to the strategic highways company or to each such company.
We are doing this in part because we recognise that future Governments may want flexibility to create more companies: for example, to give more accountability, to allow a company to look after a specific cluster of roads or area of roads or to promote comparisons and efficiency. Those are not our goals, but they might be those of a future Government. Reference to more than one company would prevent future Governments making change as needed. However, it is not something that we are seeking, so if noble Lords feel strongly on this issue and do not want to give that flexibility to future Governments—even though it is standard in virtually every piece of legislation that this House has seen referring to “companies” and “company” because, as I explained, in law the singular is the plural and the plural is the singular—I could offer a compromise that might reassure noble Lords.
I would be very happy to return at Third Reading with an amendment that would require any Government to seek parliamentary approval to establish additional companies beyond the initial one. I wonder whether this would satisfy noble Lords. It would certainly meet our intent. We see no future Government related to us who would wish to run this in a different way, and this would allow Parliament to have the voice that perhaps noble Lords are seeking.
Turning to the requirement for a licensing regime, we have been and are clear that we do not want to privatise the strategic highway network. Therefore, given that licensing regimes in the traditional sense, which is reflected in quite a number of these amendments, apply to commercial operators, we have been trying to avoid precisely that kind of licence. I find it strange
that your Lordships are now pressing for amendments that follow that commercial model. Since we do not intend to privatise, the commercial model is not relevant to our proposals for this company.
In sectors such as rail, aviation, energy and water, the licence is a means of access to an economic activity where there are potentially multiple operators in a commercial market that may seek to apply. Our strategic highways company is funded by government, with no option for a separate revenue income. All its powers and duties to operate as a highways authority already exist in legislation and it is by virtue of their appointment that these powers are switched on.
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Of course, we have always wanted a model that seeks to emulate the best practice we see in other commercial sectors. We have therefore been using the term “licence”, though it is only on one document: the draft licence. The noble Lord, Lord Whitty, is right when he says that the Bill returns to the broader title which he will see on the draft licence: Draft Licence, Secretary of State for Transport Statutory Directions and Guidance to the Strategic Highways Company. So, for clarity, we have ensured that in the Bill we refer to, “statutory directions and guidance”. I hope that we can clarify what is slightly confusing, but I know that the noble Lord, Lord Whitty, is sharp enough to work his way through these complexities.
We have used the term “licence” to convey the sense that the Secretary of State’s statutory directions have a legal impact on how the company delivers its obligations, while leaving the company to get on with its daily operations and decision-making. We think that this is an easier way to communicate to stakeholders and the public the model that we are introducing—it is closer to plain English—and the statutory directions are a legal requirement. However, I recognise that this has given rise to some confusion over the legal underpinning. We did not intend the confusion; we actually thought that we were making sure that we were issuing statutory directions and guidance, avoiding a commercial licence but conveying to the public many of the strengths that are embedded in the range of documents.
The Government do not consider the detail in the proposed amendments to be necessary, since the duties included are not appropriate to the company model I explained above, refer to existing powers and responsibilities of the Secretary of State for Transport, or are already sufficiently provided for elsewhere in the Bill or in other parts of the governance framework for the new company. As the noble Lord, Lord Whitty, will recall from our discussions in Committee, he intended that his amendment, which would require the House to debate Part 1 of the Bill again before it comes into force, should apply to the road investment strategy. However, his Amendment 51 still refers to Part 1, so it does not meet his intent.
On the issue of parliamentary approval of the road investment strategy, to which the noble Lord refers in Amendment 1, Ministers, rather than Parliament, have traditionally made decisions on infrastructure funding. As is the case for rail investment, this would not prevent Parliament holding the Government and the
company to account, but it would be unprecedented for the Government to require formal approval of a funding and investment plan such as the road investment strategy. This would also add bureaucracy and slow down the delivery of much-needed infrastructure because, as we have said, certainty of funding is exactly what is required.
Section 4 already enables the Secretary of State to issue directions and guidance to the company. The intention to do this was clearly signalled in the draft statutory directions and guidance for the company. Including a legal duty for this is therefore unnecessary. I agree that the Secretary of State should also be able to issue guidance to the monitor, as the noble Lord proposes. The Government have already proposed this under Amendment 48, which we will come to later, which includes broader requirements than those proposed by the noble Lord, including for this guidance to be published by the Secretary of State and for the Office of Rail Regulation to have regard to this guidance. So not only is that point covered, it is beyond covered.
The Secretary of State will of course continue to be responsible, and accountable to Parliament, for setting strategic direction and policy for the road network, and for ensuring that it is well managed. As sole shareholder of the company, the Secretary of State will also be accountable to Parliament for the company’s activities and performance. That may help some noble Lords who raised questions about Parliament’s ability to challenge, but I will try to get back to them in more detail. I just want to be absolutely sure of the mechanisms that would allow that to be done.
Amendment 2 seeks to guide the way in which both the Secretary of State and the ORR exercise functions under the Bill. We have already recognised the importance of this issue as regards the ORR and government Amendment 43, which we will consider later, provides a set of general duties covering performance and efficiency as well as, significantly, important issues such as safety, the environment and support for the economy, which will govern how it exercises its new road functions.
As regards the Secretary of State, we do not agree that such provisions in legislation are necessary or appropriate. The functions that the Secretary of State is exercising are to ensure that the company, which he owns, operates in accordance with a strategy that he sets. The Secretary of State does not need to exercise his functions within an inflexible legislative set of constraints; he is responsible for the Government’s policy on transport matters such as this and always accountable to Parliament for the decisions he takes. That is not to say that the Secretary of State will not be concerned by these matters and it is right that the role of monitoring these issues is delegated to the Office of Rail Regulation by the Secretary of State without ambiguity. They will be considered when setting the road investment strategy, which is rightly the purview of the Secretary of State, and the performance benchmark on which the company will be judged by the Office of Rail Regulation.
As for the amendment concerning Section 48 of the Health and Safety at Work etc. Act 1974 and the question asked by the noble Lord, Lord Berkeley, this will not apply to the company in any case because, in
accordance with Cabinet Office guidance on setting up new public bodies, the strategic highways company will not be a Crown body. That issue is already dealt with and there is therefore no need for an explicit exemption for the company which would be somewhat confusing.
I shall pick up on some of the other issues that have been raised. The Government have no intention of considering or initiating road pricing and therefore the Bill does not address that issue. There were questions about the way in which safety is captured within the Bill and the name of the ORR. I ask the indulgence of the House to deal with those issues in the later groupings that cover them in significantly more detail.
The noble Lord, Lord Davies, referred to the powers of the Secretary of State to vary the RIS. However, consultation is required. One of the things that your Lordships have remarked on when looking at this whole package is that it is actually tough for a Secretary of State to vary pricing. It certainly has to be done transparently and with proper consultation. It is not an easy process. That is just as important in making sure that we achieve the goal, which is pretty universally supported around this House, that we avoid the stop/start pattern that we have seen historically.
The noble Lord, Lord Whitty, said that we have deleted a clause about the use of fines by the Secretary of State. However, that is being replaced by the capacity of the monitor to fine. We will go into that in more detail in later groups. There has been a significant strengthening, not weakening, of enforcement. I would hate to leave that misapprehension at this point in our discussion.
The noble Lord, Lord Jenkin, asked about having enough time to absorb various documents. I recognise the frustration of the House. I will pray in aid officials, who have gone so far to try to be responsive, for two reasons. One is that many positive suggestions and ideas for improving the Bill have come from this House and we have sought to capture them. There have also been instances where we have clearly not achieved clarity and we have sought to respond to that. The consequence of this is that there is sometimes a weight of amendment and redrafting of documents which does not come quite as quickly as we would all wish, particularly when we want to have meetings with Peers to discuss some issues to make sure we are addressing the real point. I apologise for that but hope noble Lords will understand that its motivation has been good.
The noble Lord, Lord Davies, said there was confusion over the VAT position of this company. I can confirm to him that HMT has confirmed that the SHC—the strategic highways company—will not be subject to VAT. We have absolute confirmation of that and I can give the noble Lord that reassurance.
I have tried to capture the issues which have been raised and hope very much that your Lordships will feel much more comfortable with the content of the Bill and the way we have attempted to amend it in order to respond to the points raised in Committee.