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


Examination of Witness (Questions 840 - 859)

WEDNESDAY 6 DECEMBER 2000

MR T WINSOR

Chairman

  840. That is a question of some confusion to which the answers might be multifarious and not necessarily non-libellous.
  (Mr Winsor) As I understand it, things said in the Committee are subject to absolute privilege but I have no intention of saying anything I should not say.

  841. I was not thinking of you, actually, but the rest of us.
  (Mr Winsor) There has been a lot of talk about restructuring the industry as a result of the Hatfield accident. The former chief executive of Railtrack set a hare running which ought to be shot now in relation to the considerable restructuring of the industry, putting everything back in the melting pot and putting an industry, which needs to get on and run the railway and grow the railway, back into the melting pot for significant restructuring over two or three years. That would be extremely unhelpful. Railtrack does need to consider its in-house maintenance issue and I believe they are looking at that matter. What matters most is how maintenance is managed and that is a matter for the chain of command. Whether it is within one company or between two companies it appears to me that the fundamental point is whether people on the ground know what they are supposed to be doing.

Mr Donohoe

  842. Can you say in specific terms whether you have heard from an individual operating company that the way forward is to have the rails maintained by the operating company and unless and until that does happen there is absolutely no possibility in a practical sense of the actual operation running smoothly? That is what I am hearing. You say you are having private meetings. You must be hearing the same.
  (Mr Winsor) EWS certainly believe that they should be given the right to maintain the infrastructure because they simply have very little confidence in Railtrack. I believe there are other companies who would like to have a much greater degree of vertical integration, at least in management if not in ownership. Nevertheless we have the structure we have and it may very well be that we are just going to have to live with it. There is a great deal Railtrack could do to improve its relationships with its dependent customers and I am pursuing an amendment to their network licence in order to achieve that.

  843. What are you going to do specifically if, in the periodic review, it is clear that Railtrack have not been able to commit themselves to what you have suggested they should?
  (Mr Winsor) The process of the periodic review is that after all the work we have done and all the documents we have published I have now finalised my conclusions. Now that the Transport Act 2000 has received Royal Assent—and these provisions come into force immediately—on Monday 4 December this year I signed the formal review notice and served it on Railtrack. Railtrack now have a period of time, approximately 60 days,[1] in which to assess these conclusions and decide whether or not they wish to accept that. If they do not, then I must refer the matter to the Competition Commission for them to determine whether or not the review should remain as I have announced it, or whether it should be changed in some way. Railtrack is placed in the same position in these matters as other network operators formerly nationalised, now privatised and subject to independent economic price regulation. Railtrack must decide whether or not to accept the review. I am not going to change the review. The review is final. If they wish to go to the Competition Commission that is their privilege. However, from the information I have from the perception of Railtrack's investors and Railtrack's lenders and the City generally, they believe that it is a fair review, not over generous and not excessively tough and that Railtrack should accept it and get on with it. I hope they do.

  844. You do not accept then that you are intimidating them and in actual fact deflecting them away from what has become a crisis as far as the railway network is concerned. You do not believe that by virtue of putting the type of pressure you are putting on them in many ways that means the continuing crisis will be maintained for longer than it should be.
  (Mr Winsor) Not through the periodic review; certainly not. The periodic review is a timetable which was set way back in 1995. Railtrack have participated constructively during the review and there are many things in the review which I believe Railtrack are happy with.

  845. When you say "not through the review", are there other areas where you have put pressure on Railtrack which may well be deflecting them away from being able to improve the situation?
  (Mr Winsor) No, I do not because the work I have been doing in relation to Railtrack's response to the Hatfield accident has been very much of the policy of keeping Railtrack under scrutiny, but not putting them under very significant public pressure; they have already been under a great deal of that.

Mr Olner

  846. Do you think the growth agenda you spoke about earlier has been damaged by the recent events on the railways?
  (Mr Winsor) It has been prejudiced. I do believe that people will return to the railways quite rapidly when normal services are resumed because people will see what may be thought by some to have been an over-reaction by Railtrack in relation to gauge corner cracking difficulties, but they will also see very significant amounts of money going into the railway in the way of new investment; investment in the network, track and signalling through the periodic review and the enhancement framework and also very significant amounts of money being invested in new rolling stock. Virgin today have taken delivery of the first of their tilting train fleet for the West Coast and Cross Country networks and that is very, very significant innovative private capital.

  847. You mentioned earlier a change of culture being needed at Railtrack to deliver most of these things. Is there any evidence that this culture is changing?
  (Mr Winsor) I believe that in the boardroom of Railtrack there is evidence that the culture is changing. Last week I went to a meeting of the board of Railtrack; it was an invitation to come along for just under an hour to talk about the new relationship we should like to establish between Railtrack and the ORR following the appointment of the new chief executive and the other management changes that they have been making. I believe that they are perhaps for the first time taking sufficiently seriously the customer focused agenda. It is an enormous company and it is a significant management challenge for the senior management of Railtrack to ensure that cultural change permeates right down through the organisation so that the people who have to deal with Railtrack at all levels are getting that better attitude. That is a harder thing for them to achieve.

  848. Do you think that your requirement that Railtrack reduces its costs by 17 per cent over the next five years could adversely affect the safety and performance of the rail network?
  (Mr Winsor) No, because I am not requiring them to reduce their costs by 17 per cent, I am requiring them to improve their efficiency by 17 per cent. In fact the amount of money Railtrack is getting is going up by approximately £1 billion. In the first control period 1995-2001 they were getting in the region of £2 billion a year for maintenance and renewal. Under the periodic review from 2001-06 they are going to get in the region of £3 billion. Their costs are not going down but what we are requiring is better efficiency. We are requiring the pound notes to stretch further. There are many areas in which Railtrack can improve its efficiency.

  849. I have to say some of us who come from the world of industry know what efficiency targets are, having been on the sharp end of one or two efficiency targets ourselves. Do you think Railtrack will be able to achieve this efficiency target when much of the savings will have to come from their suppliers and they would say they are working on unsustainably low margins now?
  (Mr Winsor) Yes, I do. I believe that there is substantial scope for improved efficiency. We have done a very significant amount of work with our consultants in relation to Railtrack's prospects for efficiency improvements. We have looked at the performance of other privatised network industries, what is called the top-down analysis looking at other industries and seeing how well they performed in the years immediately after privatisation.

Chairman

  850. Such as what? What is comparable to Railtrack in this country?
  (Mr Winsor) There are significant differences but there are also significant opportunities. This is a very general judgement to be made.

  851. I think Railtrack has had a lot of general judgements.
  (Mr Winsor) We can assess the efficiency improvements as a percentage of their costs in the electricity industry, in the gas industry, where they had an old style public sector culture, a lot of difficulty in terms of asset knowledge, communication of instructions, labour practices and so on, things of that kind. That is not the only way we assess it. We also assess it bottom up. We look in great detail at the assets they have to maintain, how well they do it, their contracting strategy and so on. We make those assessments and we put the two together and come to a judgement. There are examples I could give you of where they could improve their efficiencies: in their project management, in their contracting strategy, better forms of contract, better management of the supply chain, improvements in technology, spreading best practice, improved knowledge of their asset condition. Goodness knows, if they had had good asset knowledge the network would not be in the condition and the operating state it is today.

Mr Olner

  852. But it might be.
  (Mr Winsor) Railtrack is finding poor quality assets in a number of places in the network.

  853. But these assets were only replaced 12 months ago.
  (Mr Winsor) Some were. Gauge corner cracking is not a new phenomenon but Railtrack's understanding of gauge corner cracking is improving by the day.

Chairman

  854. You really should volunteer for a job in the Clerk's department: you have a way of using the English language which obfuscates practically everything.
  (Mr Winsor) I am not trying to obscure things.

  855. I am sorry, I did not mean that: none of our Clerks ever obfuscates anything. May I point out that you mentioned the contractors but the relationship between Railtrack and their contractors is precisely what we have taken evidence about, about their constant desire to drive the overheads down. Now you are saying to us that they should be looking for efficiency savings. I have to tell you that is the phrase which was always used in the Health Service when you were going to cut a few million off the budget. Really when you are talking about things like the relationship with their contractors, what the passengers are looking for are contractors who do the job to the standard and the safety level that means they do not have to wonder what is going to happen to them when they get on a train and are not even sure whether it is going to arrive. Do you take that into account when you are talking about efficiency savings in relation to contractors?
  (Mr Winsor) Yes. There is no question that Railtrack's performance must meet necessary standards and of course safety must never be compromised. There are things which Railtrack's contractors can do which can significantly improve their own efficiency. I make it a policy to go out as much as possible on the network to visit Railtrack zones, train operators as well and also Railtrack's contractors.

  856. Forgive me, but you do not have an engineering degree, do you?
  (Mr Winsor) No.

  857. Your knowledge is of the legal system.
  (Mr Winsor) That is true.

  858. Which is why you were appointed in the first place.
  (Mr Winsor) Not the only reason I think.

  859. No, I am sure. This is my day for making friends and influencing people. However, the reality is that I frequently go out on the tracks but I still rely on railwaymen to tell me what I am looking at.
  (Mr Winsor) Yes, I make it a policy to take my specialist engineering advisers with me so that they can tell me.



1   Note by Witness: 42 days. Back


 
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