Subordinate Legislation
I welcome the Minister for Transport and her officials, who are here to discuss the Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc) Order 2001, which, along with the covering note, has been circulated to members.
We will follow the standard procedure that we have used in the past with regard to handling affirmative Scottish statutory instruments. We can allow some time for members to ask the minister and the officials questions about the instrument, for the purposes of general discussion. The minister will then move motion S1M-1632, which may then be formally debated prior to coming to a decision.
I remind all members that Executive officials may not contribute to any formal part of the debate; in other words, after the minister has moved the motion, only MSPs can take part. That will last no longer than 90 minutes, as per the usual rules. I ask the minister to make some introductory remarks.
I will make most of my remarks now, so that if members wish to raise issues, those can be put on the agenda. I will describe briefly the purpose of this type of instrument. The order is made under section 63 of the Scotland Act 1998, and comes into force after it is made in council.
Section 63 enables the Scottish ministers to exercise executive powers in areas where primary legislation continues to be a matter for Westminster. This type of order provides a mechanism for functions in reserved areas to be transferred to the Scottish ministers, so that we can exercise the powers in or as regards Scotland. That is, in essence, executive devolution. The transferred function that we are debating this morning can be exercised by the Scottish ministers concurrently with the UK minister.
The purpose of this section 63 order is to give the Scottish ministers the power to provide grants to the Strategic Rail Authority in respect of passenger rail services provided under the Scottish franchise. The order delivers another significant element of the McLeish settlement to Scotland.
The Scottish ministers currently fund those elements of the ScotRail franchise that are operated on behalf of the Strathclyde Passenger Transport Authority. When the order is made, Scottish ministers will take on responsibility for funding the entire franchise, through our payments to the SPTA and to the Strategic Rail Authority, which, in turn, pays the franchisee.
I hope that members have been able to see the note that was prepared by the Executive. It explains in detail the content of the order and shows that it transfers one of the powers that is given to the Secretary of State for the Environment, Transport and the Regions in the Transport Act 2000. That power is contained in paragraph 7 of schedule 14 to the 2000 act. That paragraph provides that the UK
"Secretary of State may make to the Authority grants of such amounts, on such terms, as he may determine."
The order lists the precise functions that can be exercised by the Scottish ministers. They are the making of grants for funding passenger rail services that start and end in Scotland and that are provided under a franchise agreement, and for services that either start or end in Scotland and are provided under a franchise agreement by a person who also provides services under a franchise agreement that starts and ends in Scotland.
That may sound complex but, in practice, it refers to the services that are currently provided under the ScotRail franchise, including the Scottish sleeper services and the small number of other cross-border services that are operated by ScotRail. Apart from the cross-border services, those are the same services for which Scottish ministers can give directions and guidance to the SRA under the terms of section 208 of the UK Transport Act 2000.
The order includes the power to fund services under that franchise, should it become necessary for the SRA to fulfil its duty under section 30 of the Railways Act 1993 to act as the operator of last resort. In the event that the franchise is terminated prematurely or comes to an end without any further franchise agreement being made, the authority will provide or secure provision of services until a new franchise agreement is made.
Members will have noted that the powers under the order will be exercised concurrently with the secretary of state, who will therefore retain the power to make payments in respect of the Scottish franchise should the need arise. That could be done through projects that are incorporated into the Scottish franchise while being funded from additional sources.
The Scottish ministers' powers to issue sole directions and guidance to the SRA in respect of the Scottish franchise, and to issue advice in relation to other operators' services that serve Scotland, will not be affected by the secretary of state's retention of the funding power.
The order is not concerned with the actual level of funding for the Scottish rail franchise, but members may want some details on that. The transfer of public expenditure provision from the DETR to the Executive has been agreed. The sum transferred and grants provided to the SRA will meet all the commitments relating to the current franchise up to the financial year 2003-04.
The contractual payments for all the current franchises are already determined, and the transfer of provision to cover the contractual payments for the Scottish franchise has been agreed between the DETR and the Scottish Executive. The payments to ScotRail for 2001-02 amount to £111 million; provision for that is included in the Budget (Scotland) (No 2) Bill. Performance regime impacts and any changes resulting from the regulator's review of Railtrack's charging framework will be addressed subsequently. My officials are making the necessary arrangements so that grants to the SRA will begin from April this year.
From 2004-05 onwards, provision from the Scottish rail franchise will be made in the context of the Executive's own future spending plans. Scotland's railways will then be funded from the Scottish assigned budget in the normal way. Today's order marks a milestone for us in the devolution of railways in the overall GB framework. Combined with the other elements of the McLeish settlement that we have already implemented, it will underpin the Executive's role in determining the future direction of passenger rail services in Scotland.
It is a difficult area to understand, but you did a good job of explaining it.
I understand the issue about transfer of the powers to be able to provide the grants to the SRA—that is important. I want to tease out what the transfer of provisions means. I am aware, from your answer to my parliamentary question with regard to the rail modernisation fund—which is about £7 billion—that none of the fund is finding its way into the Scottish assigned budget via the Barnett formula. In those circumstances, how will the Scottish franchise best benefit from that £7 billion rail modernisation fund? How will the franchisees and the SRA get hold of the money if it cannot come through you?
We will bid into the funds at a UK level. If we think that there are projects in the ScotRail franchise that should be supported by those funds, we will discuss that with UK ministers. Do you want to add anything, Adam?
Adam Rennie (Scottish Executive Development Department):
The significance of the UK minister retaining the concurrent powers is precisely to enable the sort of transaction to take place in which the central GB funding ultimately finishes up as part of a franchise. Central GB funding does not always have to come into Scotland through that route, but it might on occasion do so. The way that the order is drafted enables either avenue to be taken. The Scottish ministers will have transferred to them, to take effect from 1 April, the entire amount that is necessary to pay for the current ScotRail franchise up to its termination in 2004.
In regard to the existing contract, I understand that the money will be in the assigned budget and will be dealt with in the normal way. Do I hear it correctly that the Executive will be able to bid directly into the rail modernisation fund at a UK level, if required?
We work through the Strategic Rail Authority. There are a variety of funds, and the SRA may set up different funds in future. The rail modernisation fund and the rail passenger partnership scheme are the funds that we are thinking of in the context of the ScotRail franchise.
But the specific fund that I am talking about is the rail modernisation fund, which was a £7 billion fund held by the DETR.
The point that I am making is that all those funds are distributed on a UK basis. We have to put in projects that meet the overall criteria, which is why we are in discussion with the SRA about its criteria and what we think the priorities are in Scotland.
Returning to the transfer of functions order, I want to ask the minister about the issue of exercising functions concurrently with the Secretary of State. As I understand it from what you have said, minister, the size of the payment is already agreed between your department and the DETR until 2003-04. What happens after that? Does the determination of the annual payment to the franchisee become a matter for the discretion of the Scottish Executive within its assigned budget, or is it still necessary thereafter for the sum to be agreed concurrently with the DETR?
Given that, over a potential franchise period of 15 to 20 years, many changes might be made to the levels of service and financial input, how will variations to the level of specification be dealt with? Will decisions about variations fall within the discretion of the Scottish Executive, or will they have to be negotiated with the DETR? Will those allocations take place on the basis of concurrent use of power?
We envisage that the franchises will be paid out of the assigned budget, and therefore our responsibility will be to set the instructions and guidance for the SRA. We will have to work out what we can pay for the ScotRail franchise. I was asked previously about other funds that might come into play, and it is at that point that they may become relevant.
However, through the Scottish assigned budget, we will be responsible for paying for the franchise and, given the fact that the time frame is long, we will have to determine the pattern of investment over that lengthy period. We will also have to determine the extent to which we believe that other parts of the UK rail fund come into the picture.
In theory, if the Scottish Executive were to decide to make a radical change to its pattern of payments—perhaps to support more rural services or whatever—would it be entirely for the Executive to determine how to use the resources from within its own budget? I presume that there would be no necessity to negotiate or operate concurrently with the DETR on any aspect of that budget.
This is about our priorities.
Can the minister give us an idea of the kind of projects that the Executive could bid for from the UK fund, as opposed to what is done by ScotRail through the SRA?
We have two fairly recent examples, the first of which was the SRA's decision to help fund the reopening of Beauly station. The second example is the crossrail project in Edinburgh. The Executive is putting substantial amounts of money into the public transport fund and the SRA is also making a contribution, which means that there is a partnership package to fund that development. Those are practical examples of investment that has come through to Scotland.
As there are no further questions, we move to the formal part of our agenda. I thank the minister and her officials for their comments and invite the minister to move the motion.
Motion moved,
That the Transport and the Environment Committee recommends that the draft Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) Order 2001 be approved.—[Sarah Boyack.]
The question is, that motion S1M-1632, in the name of Sarah Boyack, be agreed to.
Motion agreed to.
I thank the minister for attending today. The committee must report on the order by 12 March and will agree a short report to the Parliament setting out our recommendation.