Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence


Examination of Witnesses (Questions 1 - 19)

WEDNESDAY 5 JULY 2000

MR GERALD CORBETT, MR RICHARD MIDDLETON AND MR JOHN SMITH

Chairman

  1. I apologise to our witnesses for keeping you waiting, I am afraid affairs of state detained us, as they say. May I welcome you this afternoon and ask you, firstly, to identify yourselves for the record.
  (Mr Corbett) I am Gerald Corbett, Chief Executive of Railtrack. On my left I have John Smith, our Director of Public Affairs and Regulation, and on my right, Richard Middleton, our Commercial Director.

  2. Thank you very much, Mr Corbett. Do you have some general remarks that you would like to make?

  (Mr Corbett) Yes, a couple of general points. This is what we call a summer of opportunity for the railways. We have the ten year transport plan which is coming up in the next couple of weeks, the Comprehensive Spending Review, we have our regulatory review and we have the Strategic Rail Authority's Strategic Plan. We are basically pretty confident that the investment that the railways have been screaming out for for the past 20 years is going to materialise and there is going to be good news. That is particularly important for us, obviously, as the infrastructure owner and provider because, as you will see from our submission, the fantastic growth that we have seen on the railways in the last four years has been funded mainly by Railtrack. The common perception is that we have under-invested in the network but the factual reality is that we have spent a great deal of money. Last year our programme was £2 billion, this year our programme is £2.5 billion, that is more than twice anything ever done by British Railways. The reason the programme is at that level is because there are 25 per cent more trains on the network than there were four years ago. When we were set up five years ago we were funded basically to deliver a flat railway and the incentives and the structure that was put in place was a structure designed to maximise the proceeds to the Treasury, not a structure designed to deliver a bigger, better railway. In the last four years, although there is still a hell of a lot to do and a lot more work to be done, we have factually delivered a bigger, better railway. There are 25 per cent more trains, we have doubled the level of investment, the infrastructure delays are down by almost 50 per cent, we have delivered output way ahead of what we were set up to deliver and way ahead of what we were funded to deliver. That is why this year's regulatory review is particularly important for us because in the last five years we have spent £2 billion more than we were set up to do on renewing the network, largely because of the growth that we have seen that no-one had foresaw. In the next couple of months we look forward very much to resolving the issues with the Regulator and getting a funding regime in place with the appropriate incentives and the appropriate amount of money so that we can continue to deliver the bigger, better railway that everybody wants.

  3. Thank you for that. I am glad that you have mentioned your record because I want to ask you do you think you were justified in accepting a £25 million performance bonus in 1998-99 when you were responsible for one-third of the total time that passenger and freight services were delayed in that year?
  (Mr Corbett) Yes. The level of bonus from the performance regime is linked to the delays that were caused by the infrastructure which we are responsible for. It is linked to those delays relative to a benchmark that was set back in 1994-95. Over that time period there has been a reduction in delays of around 40 per cent; it is around 50 per cent now. It is because of that reduction in delays that profits from the performance regime came in.

  4. Yes, but 70 per cent of the delays were attributed to Railtrack in 1998-99, were they not?
  (Mr Corbett) No, they were not.

  5. Maintenance and renewal problems were the source of 70 per cent of the delays.
  (Mr Corbett) I hate to correct you but factually in 1998-99 around 50 per cent of the delays were caused by the infrastructure.

  6. Seventy per cent of those delays were maintenance and renewal.
  (Mr Corbett) Yes.

  7. So what target do you have for reducing that?
  (Mr Corbett) In that year around half the delays were due to Railtrack. Of Railtrack's half of delays, you are quite right, Chairman, 70 per cent was due to our maintenance contractors. I think that is where the 70 per cent number comes from.

  8. So you intend to reduce that figure presumably. What target do you intend to reduce it to?
  (Mr Corbett) Our share of delays for the year just past was down to 42 per cent. We achieved a performance improvement of 10 per cent last year. Our plan for this year is a performance improvement of 5 per cent. Every 1 per cent increase in passenger train miles, every 1 per cent growth on the railway, does typically translate through to a 2.5 per cent increase in delays, it is the congestion effect. It is like cars on the M25 in the rush hour, if you add 10 per cent of the number of cars in the rush hour you get a disproportionate increase in delays.

  9. I think we understand that trains run on rails, yes.
  (Mr Corbett) That is why our plan this year is 5 per cent.

  10. The HSE are very concerned about the number of broken rails and so am I when I come home and get turned off at Watford Junction. These are very worrying figures and, although you seem to be astonishingly confident about what you are actually doing, can I ask you what is happening in relation to things like broken rails? If the HSE says it is a significant cause for concern, are you satisfied that you are giving sufficient priority to it?
  (Mr Corbett) Yes. Broken rails is a huge issue and it is extremely important and is one of the top priorities. In the year 1998-99 the number of broken rails went up to just over 950, which was not acceptable. The main reason for the increase in broken rails was the extra number of trains running on the network. We put in place a special recovery programme last May of just over £100 million which involved additional maintenance, ultrasonic testing, a whole raft of measures. By the end of the year we had got on top of it and the reduction over the whole year was 4 per cent, which is not a lot but we had turned the corner. In the first three months of this year the reduction in broken rails on the network was running at over 20 per cent.

  11. You think it is only just extra trains that are causing the broken rails, is that what you are saying?
  (Mr Corbett) Yes, we believe that is the main cause.

  12. You really think you are doing enough to improve that beyond your 4 per cent?
  (Mr Corbett) We have the recovery programme I just alluded to, we have the results for the last quarter which is a 20 per cent plus improvement. The proof of the pudding will really be—

  13. Twenty per cent on what?
  (Mr Corbett) In the first three months of this financial year, that is April, May June, the number of broken rails was over 20 per cent less than the number of broken rails for the same months the previous year. Broken rails is a seasonal thing, in the winter you always get more broken rails because of the cold weather. It will not be until we have got through the winter that we will really be able to put our hands on our hearts and say yes we have cracked it and got on top of it. We have got programmes in place. The initial signs are positive. It is terribly important and that is the current status of where we are at.[1]

Mr Stevenson

  14. Could I ask you a couple of quick questions first for clarification, Mr Corbett. On investment you say that next year £2.5 billion—
  (Mr Corbett) This year.

  15. 2000-01. Just looking at the chart in your evidence, most of that seems to be £500 or £600 million for the CTRL, rather than other areas of your investment. Would you accept that?
  (Mr Corbett) If you take out the Channel Tunnel Rail Link, the investment in the core network is just over £2 billion which compares with 1.69 which we did last year. So the increase in investment on the core network is about £300 million.

  16. My next question of clarification concerns the subsidy in your chart here. You take us back to 1997. Would you care to advise the Committee what the subsidy levels were in the two years prior to privatisation?
  (Mr Corbett) I believe in the two years before privatisation the subsidy was quite a bit lower.

  17. Could you be more specific?
  (Mr Corbett) I think it was between £1 billion and £1.5 billion.

  18. Could I now ask a couple of questions again for clarification. In your evidence on page 8 you urge the Regulator to take a balanced view on the cost of the West Coast route modernisation project. What do you mean by "balanced view"?
  (Mr Corbett) 80 per cent of the costs of the West Cost project is renewals. The initial plan for renewing the West Coast, which was conceived when Railtrack was in the public sector 1994-95, was to base the renewal on what is called moving box signalling which was a brand new idea being put into the Jubilee Line. In theory moving block signalling is great and cheap because it is a computer in every train communicating with one centre and you do not need line side signals. In practice, as we all know, it is almost impossible to do. It was problems happening in the Jubilee Line in 1998 which were the main reason that forced us to re-think the strategy because the last thing you wanted to do was to launch forth on renewing the West Coast Main Line on a signalling system that might look good in a textbook but was not going to work in practice. That is why we came up with the revised proposal which does cost more but is basically traditional technology that we can get to work.

  19. In your evidence again you say: "There are many rail projects which do not have a clear commercial case but which would bring considerable social and environmental benefits." You say: "We have shared with government the work we have done on this area to help prioritise schemes." Is that information available to the Committee? Could you give us today any assessment of where that split may be, 50/50, 60/40, 70/30?
  (Mr Corbett) Yes. In our network management statement which we published in March, which was a 450-page document outlining all the options as we saw it for the railway, we did go into some detail on the major projects and for those major projects we have done the social benefit analysis and the commercial analysis. We have a ranking of them and we have shared that ranking with the Strategic Rail Authority and with the Department and we would be happy to share it with the Committee.



1   Note by Witness: Detailed information on the number of broken rails across the network in the first quarter of 2000-01 was not known at the time of Railtrack's appearance before the Sub-committee on 5 July. It was subsequently announced by the company on 13 July that the number of broken rails in this period had reduced by 37 per cent from the first quarter in 1999-2000. Back


 
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