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

Examination of Witness (Questions 254 - 259)




  254. May I warmly welcome you this afternoon? Would you like to identify yourself? You have been having an exciting time with us over a couple of weeks.
  (Mr Winsor) I am Tom Winsor. I am the Rail Regulator.

  255. Did you want to say anything in an opening gambit?

  (Mr Winsor) Thank you; very briefly. I have been in this job now for exactly one year and, if I may say so, I think this inquiry into rail investment is very timely. However, because I am at a critical stage in determining the structure and level of Railtrack's access charges—that is to say the process known as the periodic review—I understand that I shall be called before this Committee again in the autumn. I believe that the Committee is mindful of the sensitivity of my position only weeks away from publishing conclusions on the periodic review and has therefore accepted that I cannot answer specific questions on the review in advance of my conclusions at the end of this month, and I am grateful to the Committee for that understanding. However, I should like to make some general points about the periodic review which the Committee may find helpful. The present financial framework for the industry is deficient. It was ill thought through at the time. It was done in a rush. There was no specification of what Railtrack had to do for the access charges which it receives and very little was done at that time to encourage the making of investment. As well as setting Railtrack's charges for the next five years, I am completely rewriting the entire financial framework of the industry to define the outputs, the things Railtrack have to deliver, and also to promote investment in the railways. That is what I should like to say on the periodic review. I have one or two other opening remarks, if I may. I should also like to say that I very much welcome the Transport Bill. I welcome the clarification and simplification of the relative roles of the Regulator and the SRA in the Bill. I welcome the Government's public commitment to independent regulation. Railway investment requires a public/private partnership and the SRA is a key player in that partnership, the public partner of the private railway companies. The SRA is also a major funder of the railway and it is the Regulator's role to ensure fairness in that partnership. I do this by setting the charges and the SRA then makes the decision as to what they want to use taxpayers' money to buy at those prices. These checks and balances in the system are highly important for investor confidence. It is for me as Regulator to ensure that Railtrack delivers on the commitments which it has made. Condition 7 of Railtrack's network licence is a very powerful tool in my armoury. I have used it twice already. It was added to the original licence, which was very weak and remains in all other respects very weak. There is much strength therefore in that area in relation to investment, maintenance, enhancement, development of the network. In other respects, the network licence which Railtrack holds is not fit for purpose for a private sector company. I am going to put that right by amending Railtrack's licence—I hope with the company's agreement, but if not, then I shall use other means—to establish new conditions requiring reporting in relation to the maintenance and enhancement of the network, an establishment of a reliable and comprehensive register, a database of Railtrack's assets, their capability and their condition, controls on the disposal of assets by Railtrack, including land assets which may be needed for the development of the industry—for example for freight terminals, station carparks and so on—a ringfencing of Railtrack's regulated activities and improving the company's dealings with its dependent customers which in past years I know from personal experience have been lamentable. My policy as Regulator is fair and proportionate, proactive and vigilant regulation in the public interest, to facilitate the achievement of the legitimate objectives of the railway industry, to meet and promote the public interest. I want the railway companies to be successful. I said that when I appeared before this Committee on 23 June 1999 and I have said it in every public statement I have made ever since. I want them to invest. I want them to invest strongly and to invest competently, to expand the capacity of the railway and to improve the services which they provide to passengers and freight customers.

  256. You have pushed a few buttons which we all agree with there. We quite understand the restraints upon you. I am going to ask you about your job as the Chief Legal Adviser and General Counsel to the Regulator when the framework was being put in place. You have been a bit brutal about it today. Can you tell us what role you had in the drawing up of the first round of access contracts?
  (Mr Winsor) Yes. I was Chief Legal Adviser to the first Rail Regulator and latterly General Counsel from July 1993 to July 1995. In that capacity I had a fairly significant role in the establishment of the templates for the access contracts between Railtrack and its customers. Why do I criticise the quality of the contracts when my own hands and fingerprints are on them?

  257. We are always interested when poachers turn gamekeeper what they have to say for themselves.
  (Mr Winsor) I became a gamekeeper, then a poacher, now a gamekeeper again.

  258. Even more interesting.
  (Mr Winsor) It is a revolving door. I did not win every battle that I fought within the Office of the Rail Regulator. It is as simple as that. I believed that those access contracts needed to be far more specific, to contain far stronger obligations on Railtrack and the train operators one to another so as to be much clearer as to what Railtrack and the train operators—mainly Railtrack—had to deliver for the access charges and what would happen if things went wrong. I lost internal battles. There are some aspects of that contractual matrix of which I am very pleased and very proud, but there are other aspects where I believe the decisions taken at the time were very poor. Why did I not press my case? I pressed it as hard as I possibly could, but I was an adviser, I was not a maker of decisions.

Miss McIntosh

  259. It is always interesting when the advisers become the responsible people. May I refer you to some evidence we took from Railtrack at our meeting on Wednesday, 5 July? May I repeat very briefly what Mr Corbett said? It is paragraph 45 where I referred to Railtrack's memorandum and the £2 billion more than was allowed in the current track charges and their statement that to carry on with the level of investment to maintain the serviceability of the existing network with higher expected traffic volumes and delivering improved outputs they would require a substantial increase in track access charges. I asked whether it had been agreed. Mr Corbett's reply was, "No, that has not yet been agreed. When we were set up the Regulator made an assessment of how much we would need to spend on renewing the network. Because of the growth in the network we have, in fact, spent £2 billion more than that assessment. The Regulator is in the process of setting the track access charges for the next five years. We hope that he will take into account the actual costs that we have incurred in the last five years in renewing the network and then, of course, he will take into account the further increase in renewals that there will have to be as the network continues to grow. The bottom line of all of that does mean there will have to be a substantial increase". Are you able to help us as to what the level of increase might be?
  (Mr Winsor) No, because I shall be announcing my final conclusions on that matter in a very short time. I can give you some general remarks, if you wish. The matter has not been agreed because it is part of the periodic review. The timetable for the periodic review was set in 1995 and I cannot change it. There are some things I should love to change about the matrix in the railway and which I am already changing and in some respects have already changed. I cannot change the structure and level of access charges until 1 April 2001; but I shall do it then. I shall be announcing in a very short time my draft conclusions, to be confirmed in September.

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