Examination of Witnesses (Questions 440
WEDNESDAY 15 NOVEMBER 2000
440. Can I ask how close we are to achieving
through ticketing for one journey involving more than one train
(Mr Ludeman) It depends on which part of the network
you look at. There are a number of instances, for example, the
South East and the London commuter network. The travel card allows
you to effectively travel from a lot of different points for one
ticket. Throughout the rest of the country there are plenty of
examples in PTE areas. If you are referring to inter-availability
between train operating companies, there are some examples of
that, but we accept we need to do more work on that.
441. Do you have a view as to whether the provision
of maintenance of the track by Railtrack is best performed in-house
or by outside consultants?
(Mr Ludeman) Again, it is early days. I am not a civil
engineer and I am not really the best judgeI am not trying
to avoid the question, but I do not feel competent enough to answer
that question. Clearly, Railtrack will have a view on the best
way forward and we will work with Railtrack to develop that solution.
442. Have you expressed any view to Railtrack
about the level of maintenance that they have provided for your
(Mr Brown) Yes, we have, Madam Chairman, and we have
said that we are concerned about that level of maintenance and
particularly the rate of renewals of the track, and we will be
looking for that to increase. That does provide a basis for that
443. Did you point out that the fact that so
much had to be renewed all in one go, which has caused you such
major difficulty, might indicate to those who are not very sophisticated
that Railtrack had not been maintaining the rails at the level
to which you would have expected it to do?
(Mr Brown) I do not think one could possibly argue
444. I am not asking you to argue with me, Mr
Brown. If you want to argue with me we can do that any time you
like, I am very good at it, but have you expressed this view to
(Mr Brown) Yes, we have.
(Mr Ludeman) We have a great deal of opportunities
to meet with Railtrack. I have worked out that with one of my
train companies we have met them every week on safety related
issues. One of the problems is data and the amount of data we
get from Railtrack that is specific to our company. What we tend
to get is zonal information that gives us a global position on
issues like broken rails, but we are not afforded the opportunity
we would like to talk about risk mitigation in dealing with that
broken rail programme. What we are asking for in the future is
more information from Railtrack about the condition of the network.
445. You are asking for greater fragmentation
of the database?
(Mr Ludeman) We are certainly asking for more company-related
information, which, in the main, we do not get at the moment.
446. Is not the point of what has gone on in
the last few weeks the compensation that you get? What is the
split on that, what goes on to the public and what do you keep?
(Mr Brown) There are several mechanisms. First of
all, we get compensation from Railtrack under the track access
contracts that we have with them. A significant proportion of
that is effectively passed straight through to the SRA under the
franchise agreements, penalties and incentives, if you like, for
train companies to deliver punctuality. A further significant
percentage goes to passenger compensation.
447. So what percentage is it?
(Mr Brown) I cannot give you percentages, because
it varies enormously from one company to another and one situation
448. In the past that compensation has been
paid out on reducing people's season tickets, it has not been
a direct compensation itself, has it?
(Mr Brown) What has become the practice in a lot of
companies is that they effectively declare what is called "a
void day" if the travel on that route has been so disrupted
that passengers have not enjoyed anything like the service that
they should have done. That effectively allows passengers either
to extend their season ticket by a day when it would otherwise
come up for renewal, orI think most companies, but I could
not categorically say all companies yetgive cash back to
those passengers for the lost day. So passengers are increasingly
being given the choice.
449. Is the trigger of compensation to you the
same as the trigger of compensation to the passenger?
(Mr Brown) The trigger of compensation to passengers
is the level of service delivered for passengers, whether it is
the train company's fault, if you like, to determine what caused
the poor service, was it a series of train breakdowns, or was
it Railtrack who were at fault? It is not determined by whether
we are compensating for Railtrack.
450. Would the trigger be the same if it were
(Mr Brown) The trigger is the same.
451. Is it not a little earner for the train
(Mr Brown) No, because that trigger effectively passes
that compensation directly through to passengers.
452. If I can turn to another matter, does the
Government's 10 year plan strike the right balance between public
and private sector investment?
(Mr Brown) We do believe it does when put together
with the re-franchising process. We have asked for longer franchises.
There are now extensive discussions going on and progress being
made with negotiating longer franchises. The fact that the Government
is so clearly prepared to put public investment into the railway
system thorough the 10 year transport plan, we are quite sure
provides the platform so the private sector can then come in with
a very substantial investment against the 20 year franchises.
I think the two do need to be,and will go forward, hand in hand.
453. When the private sector put money into
an investment, they get a return on their money. What does the
public sector get?
(Mr Brown) What the public sector gets is an expanding
railway compared with one which has been relatively static in
size for many, many years in terms of passengers carried, and
improving the railway in the longer-run so that the hope and the
intention is a better financed railway, better able to finance
its investment and its own costs within the railway system. But
as we all know, railway investment is very long-term and there
needs to be a kick start, if you like, to get the sort of investment
that I think everybody believes is necessary for going forward.
454. What if there is a down-turn in the economy,
is that investment in the private sector going to take place?
(Mr Ludeman) The private sector takes a return on
its investment, because the way in which the franchises are being
structured is to try and mitigate risk. If we take the instance
of the down-turn in the economy, the private sector in this instance
will take the risk on the revenue reduction, and it might be we
lose money. The principle of the PFI deal, which is what a lot
of these new franchises are, is that the risk is placed where
the individual or the management is seen as best able to manage
that risk. So in the instance of, for example, revenue, the argument
is that the train operating company is best able to try and mitigate
the risk of a down-turn in the economy, whereas the Government,
who is not running the company, is not best placed. The deal,
if you like, is that we take the return, but we carry the risk.
I can assure you, the way in which Sir Alistair Morton has negotiated
these franchises, he has achieved some extremely good deals for
the Government in those franchises, and there is a lot of risk
transfer from Government to the private sector.
455. When one of these companies that are taking
this risk goes belly up, what then?
(Mr Ludeman) The way in which the SRA try and mitigate
that risk to you, the customer, is to ensure that there are enough
contracts put in place so that in the event that a train operating
company fails, they step in and they go and find another train
operating company to take over that job.
456. What is your opinion of the public investment
programme being maintained over the 10 year period?
(Mr Ludeman) I think, as was said earlier, the mere
fact that the public sector is putting so much money into the
railwayswe very much welcome thatprovides a sign
to the private sector that there is the confidence in this Government
in the railways, and they are very happy to match and, indeed,
better the amount of money that the Government put in. The mere
fact that the 10 year plan is there, in our view, is a massive
achievement by those who have put it together. It has given the
private sector the confidence to invest in the railways, and we
believe that 10 year plan is deliverable. You will see through
the re-franchising process, money come into the railway industry
to match that that has been provided by the public sector.
457. It is a bit ironic, is it not, if you took
over all these assets in the first place on the assumption that
private industry would be able to raise enough finance to rebuild
the railway system, but when it actually comes down to it the
taxpayer is still continuing to put very large amounts of money
(Mr Ludeman) In fact, the first time round we put
very little money into the franchises.
Chairman: We had noticed. That had crossed our
458. Do you think there is sufficient money
being put into the whole question of rail safety over the next
(Mr Ludeman) Through the various inquiries there will
be recommendations for what we suspect to be massive restructuring
of the railway safety environment, and the industry is committed
to delivering whatever Lord Cullen recommends from those inquiries.
Railtrack, the train operating companies, and the ROSCOs, who
own the trains, are already investing considerable sums in TPWS
and there are some companies that already have that fitted to
all of their trains, and in some cases, to all of the track. There
has been a lot of accelerated investment in safety since the Ladbroke
Grove accident, and a lot of work behind the scenes and investment
in driver training and simulators and in other initiatives. I
do not see that slackening off, I see that increasing very substantially
over the years ahead, because all of us in all of our businesses
always place safety first. If you do not run a safe business you
have no customers.
459. My last question is in connection with
the delivery of new trains, which, by virtue of what you are saying,
is going to start to happen, although there has been a promise
for some time now that we were going to get new trains in my patch
and we have been waiting two years. One of the reasons for that
is that there does not seem to be the investment in getting the
train from the manufacturer to running on rails. Do you as an
organisation have any concept of how that can be improved, because
there is certainly something fundamentally wrong as far as that
aspect is concerned?
(Mr Brown) There clearly is something very wrong with
the current position, where substantial numbers of new trains
have been ordered, a fair number have been built, but relatively
few are yet in reliable service. It is something where there is
another working group set up by the Strategic Rail Authority,
which we are participating in. I think there will need to be a
lot of changes in the way train companies let contracts to train
manufacturers, giving them longer to test their trains before
they bring them into service, making sure they are more thoroughly
tested away from the passenger environment so that we are not
testing them in active passenger service, as is frankly happening
in a number of areas.
Mr Donohoe: What is the timescale for this working
group, because working groups have this dreadful habit of demanding
a long time? I think we really need to take action and there needs
to be action now, because there is the investment and I have been
told 14 times by Richard Branson that there are new trains coming
on the West Coast Mainline. The fact is that we are getting to
the point where we do see that there is the investment that is
going to bring on to the tracks new trains, yet we have them all
sitting in sidings. A working party in itself is not going to
change that, is it? What is ATOC doing to make the necessary representations
to make sure that the investment is in place, that these trains
go straight from the manufacturer on to the tracks and start delivering?