Examination of Witness (Questions 520
WEDNESDAY 22 NOVEMBER 2000
520. If we say, for a minute, that that is possible
and it is done, the practicalities of that are that there is further
fragmentation of the industry, which is probably most of what
we have is a problem, in any event, within the industry as a total.
You think that that would improve because of the fact that senior
managers could take decisions, is that what you mean, that they
are not taking just now?
(Lord Berkeley) That is another reason for doing it,
but the main reason is that the Regulator will have real power
and real teeth to do something to them which will have a serious
effect on their, well, existence, actually. Because if one gets
taken away you have always got staff and people from the other
one to move in, in a similar way to if a passenger train operator
goes into liquidation, the SRA, British Railways Board, can move
in, pro tem, and keep the service running. So it is a very
similar example. I agree that there are problems, but I have not
thought of any other solutions yet.
521. Can I take you back almost to the beginning
of your contribution this afternoon, My Lord. You indicated that,
short term, there was a disaster waiting to happen, but one of
them that is still to happen is the Post Office delivery for Christmas.
Just exactly what are you doing, on behalf of your members, to
ensure that the delivery of mail, which as we all know increases
ten-fold as we go into the run-up to Christmas, what are you doing
on their behalf to make sure that that is not going to be a major,
major problem, because the 'planes cannot carry that mail?
(Lord Berkeley) I have had a meeting with people in
the Post Office, and Parcel Force who do much of the transport
for them. I know the SRA is also working on it very hard, and
so is EWS, and we talk regularly about this. There was a fuss
a year ago because Railtrack were going to close Wembley Yard
over Christmas, which did not seem very sensible, without talking
to their customers. While it is the problem of keeping the trains
running, and I believe that they will run but they will run more
slowly, but I do not believe the timetable has been sorted out
yet, and that is the serious problem, almost timetabling is still
a day-to-day business, as I am sure many of the Committee know.
And I believe, in fact, that freight is not doing any worse than
passengers, at the moment. I have emphasised freight because I
am here to represent freight; but I think freight will get through
and I think that they will do all they can to get the Royal Mail
through, but it will be slower, and you will get less production
out of the same number of trains. And this is the same with passengers,
that is why there is less traffic going.
522. But the Royal Mail must have had some reservations
about that, because they were seriously saying they were thinking
of bringing their dates for posting so far forward that this will
have a direct effect on the public; so I am not sure that you
are absolutely right, are you, My Lord?
(Lord Berkeley) I am saying there will be an effect.
523. Just to answer a simple question; do you
believe that the Royal Mail this year will be delivered before
(Lord Berkeley) I do not think they will be able to
keep to their schedule.
524. No, no; that is not what I asked.
(Lord Berkeley) Well it depends if you start early
525. Do you think that every item of mail, as
it normally is, is going to be put through the post-boxes of all
members of the public this Christmas; do you think that they are
going to be able to deliver that?
(Lord Berkeley) If they post at the same date they
will not, unless the Royal Mail bring in other resources, like
road. I do not think the railways will be able to cope, with the
present timetables and the way that the speed restrictions and
closures are going on.
526. So they are going to have a disaster?
(Lord Berkeley) They could do.
527. Railtrack's asset register; originally
it was hoped that that was going to be a public document. How
much of a problem is it going to give to your members if it is
not a public document?
(Lord Berkeley) In my supplementary evidence, Madam
Chairman, I gave an example of a lack of a set of drawings for
a particular tunnel, which we hoped would demonstrate that one
could increase the gauge to take piggyback, probably saving £100
million on the idea that Railtrack had. I can understand their
reticence about every person in the world being able to get access,
and somebody will quote security, etc, etc, so I have proposed,
in a submission to the Regulator, that there should be some kind
of a registration process for bona fide organisations to
get this information. It is essential that we do, for two reasons:
(a) nobody has the monopoly of good ideas; and, (b) it provides
a sort of second line of check, if you like, about some of the
things that Railtrack may be proposing and the costs that I mentioned
earlier. I am hoping it will come, but it needs further pressure.
528. You have not had any response yet from
(Lord Berkeley) No, Madam Chairman, we have not had
a response, but it is probably not expected for another few weeks.
529. What about compensation; there is some
talk about passengers getting compensation. Is compensation appropriate,
as far as freight is concerned?
(Lord Berkeley) If one starts off on the basis that
the railway is there to be used and the contracts with Railtrack
specified that it was to be open for traffic and routes were normally
set at certain speeds, the fact that many of the operators have
had either to do major diversions or go at very slow speeds has
had a very significant effect on their cash flow. For example,
Freightliner trains from Felixstowe to Crewe need two drivers
now, because it takes so long, because they are beyond their hours,
whereas before they did it in one shift. Freightliner do not have
lots of drivers sitting around drinking tea, so the fact is that
traffic has significantly dropped but they are using the same
number of drivers. So there are significant costs, and I know
that discussions are going on with Railtrack as to who pays them;
in my view, it is down to Railtrack, but it does depend on the
contracts that they have between them, and I do not have any details
530. You said, I think, that one of your members
claimed that it had put the freight industry back 20 years; ought
there to be some sort of compensation for that general blow to
(Lord Berkeley) Madam Chairman, that is a very interesting
question. I am not sure how one would pay compensation for future
business lost; it needs to be looked at. But I think one of the
things that could be done, the last kind of piece of the jigsaw
that has been going on all this year to help rail freight provide
this growth, is to ensure that the Regulator announces a really
good, low figure for track access charges for freight. We have
had the 44-tonne thing, we have had, effectively, 8p off the price
of diesel for lorries that we all know about; still waiting for
the SRA strategy and what they are going to do to mitigate those
effects, and we have had Hatfield, post Hatfield. The one thing
the Regulator can do is get the price of track access really low
so the business can start to pick itself up and compete, and it
531. How big a proportion of the cost of the
track being there does freight really meet; it does not meet really
a fair proportion, does it, now?
(Lord Berkeley) Madam Chairman, that is a question
one could debate for about three hours.
Chairman: I am afraid, not today, My Lord, not
532. I will settle for a very brief answer.
(Lord Berkeley) I am going to make a very brief answer.
The Regulator has decided that, basically, freight will pay its
freight-specific costs and then the marginal cost, because that
will enable it to compete with road, we are competing with road,
and we have to. So it is going to be kept low anyway, politically,
it is just a question of how low. Again, the consultant that the
Rail Regulator used for this latest broken rail thing did a similar
study for EWS in the summer, which said that Railtrack's costs
of maintaining and enhancing the network was three times the best
international practice, and I am sure you have read the details
of that. I think there is a long way to go.
533. And what about bits of track which are
freight only, well, the one in my constituency, which is really
99.something per cent freight, and has one train in one direction
once a week for passengers; ought the freight users to meet the
full cost of that piece of land?
(Lord Berkeley) They would do anyway, I think, that
is part of the deal. If it is freight only, they meet the full
cost of it; one would hope that it was only maintained to freight
standards rather than high-speed passenger standards, but I am
sure you have more details about that.
534. Lord Berkeley, your written evidence is
pretty scathing about Railtrack. I think that is fair, fairly
(Lord Berkeley) Yes.
535. Could I ask you a question about the West
Coast Main Line, because in your evidence you are critical of
the £4 billion additional funding, the grant, being made
available by the Government through the Regulator for that enhancement,
that modernisation. Why should not the Government make this money
available for the enhancement and modernisation of the West Coast
Main Line, you describe it as "baling out" Railtrack?
(Lord Berkeley) Madam Chairman, I do describe it that
way, because Railtrack is a private company, as the Committee
has already noted, and it has contractual commitments with the
Regulator and with its customers, in this case Virgin. Now it
decided that the way to get more traffic up the West Coast Main
Line, at the lowest possible price, was to bring in transmission-based
signalling; now, in my view, it is an unproven type of signalling.
I am not a signalling engineer but a civil engineer, but it was
imprudent to sign such a large and high profile contract based
only on a technology which was unproven. When they eventually
found it was unproven, then the costs go up by £2 million.
Now, if that had been a private company, unregulated, they would
have had to find the money or suffer the consequences.
536. Would you just clarify a point for me,
and that is, is it not the reality of the situation that unless
that money was provided in a direct grant form by the Government
the modernisation would simply not go ahead?
(Lord Berkeley) That is absolutely correct. I am not
saying it should not go ahead; but what I am saying is, we are
getting quickly to a situation where, as I say, 75 per cent of
Railtrack's revenue comes from the Government and we are almost
in a cost-plus situation, as one does not like one's own builders
to do. If the Government is happy with that, that is fine. I would
say it is not very good value for money. But I am not saying it
should not happen, I just think it is worth pointing out.
537. On that very point, as I recall the figures
that we were given during successive evidence sessions on this
issue, the original estimated cost of the West Coast Main Line
upgrade was about £2.3 billion; because of the changes that
you have referred to, I understand the new estimate is something
like £5.8 billion. If the Government provides a £4 billion
grant, that leaves something like £1.8 billion for Railtrack
to find. If we compare that with the original £2.3 billion,
without any Government grant, it occurs to me that, with the Government
grant, Railtrack are going to have to find less than they would
have had to find in the first place. Would you agree with that,
or do you think it is just nonsense?
(Lord Berkeley) I would entirely agree with that.
538. Can I then go on to your proposals in the
paper to create zonal mini-Railtracks, so to speak. The Association
of Train Operating Companies have told this Committee in evidence
that what is necessary now, vitally necessary, is stability in
the industry, not more change. What do you say to ATOC?
(Lord Berkeley) I understand them, and I sympathise,
and I want the minimum change myself. I am struggling with the
fact that I do not think we are in a stable situation at the moment.
We may feel we are recovering from Hatfield, and let us hope we
are, but there is going to be another one because there always
is another one. And I want the railways to be in a situation where
they can cope with another accident, large or small, and get the
network open, and get it maintained so the risk of this happening
is reduced to a minimum; and nothing I have seen at the moment
indicates that this is going to happen, unless some change is
made. Now if they do not want change, then why does not the Regulator
take away their network licence; that is all he has got to do,
if they do not perform: he cannot.
539. My last question is relating to one of
the options in your document about, I suppose I can describe it
as, protecting the public interest, or recognising the public
interest, that Government, through SRA or directly, should take
preferential shares in equity in Railtrack. Are you aware, and
I ask you this question because you put that specifically in your
document, that on 5 July the previous Chief Executive of Railtrack,
giving evidence to this Committee, said, in answer to a question,
which I asked, and the question was: "For clarification,
is it a fact that Railtrack proposed to the SRA that they should
invest in preference shares in Railtrack as the most efficient
way to lever public money into Railtrack?" Mr Corbett: "That
is a fact." I do not suggest there is any collusion between
you and the previous Chief Executive of Railtrack, but why do
you think that Railtrack made that proposal to the SRA?
(Lord Berkeley) I was aware of that proposal. I certainly
have not talked to the previous Chief Executive about it, because
I suspect that our proposals were being made from different ends
of the spectrum, but they met together in the middle. I suspect
that he genuinely did believe it might lever in further private
funds. I have put it in my paper as an option but it certainly
was not a recommendation, because I see some problems about it,
because, apart from the contingent liabilities, and things like
that, it leaves Railtrack really being controlled by Government
in a way which Government might find difficult. I think it is
something that should be explored along with some of the other
options. But if that is to be done then Railtrack no longer is
a private company, effectively, it will need to act as if it is
more closely wedded to the state, and transparency, audits, and
everything, will have to come in very quickly.