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


Examination of Witness (Questions 920 - 946)

WEDNESDAY 6 DECEMBER 2000

MR T WINSOR

Mr Donaldson

  920. Would April 2001 be a satisfactory timescale for Railtrack to complete the register?
  (Mr Winsor) April 2001 will be the date on which Railtrack and we will have established a common understanding and agreement as to the current condition of the network. I still want the asset register to be built up after that. The asset register is going to be a very comprehensive thing and it will take time for Railtrack to populate it with data of the appropriate quality. However, I am reminded that Railtrack in May 1998 signed two contracts with Virgin train operating companies, one West Coast Trains and one Cross Country Trains, undertaking to provide those companies with information in relation to their network which is not much less extensive than the information I am now seeking to a standard of completeness and accuracy in all respects. I am going to be keeping the pressure on Railtrack: you can accept that from me.

  921. Who will have access to this register? How will you ensure that all organisations which have a genuine reason for seeking access to the information about Railtrack's assets will not be denied access?
  (Mr Winsor) If we have a licence condition which requires third party access—but subject to rules which mean that enthusiasts do not clutter the company up with unnecessary or unmeritorious requests—then Railtrack will be obliged to meet all these requests, and if complaint is made to me that somebody who is entitled to see things in the register has been denied, then I can take appropriate enforcement action. There are other ways in which people can get access to the appropriate data and part of the consultation we have carried out involves the different approach, involves contracts which we can compel Railtrack to enter into, like the Virgin contracts, which will give the rolling stock manufacturers, the train operators, whoever wants the information, a direct contractual connection with Railtrack so that if they do not get the information they themselves can enforce the obligations directly. Virgin found their two contracts, which are called vehicle and route acceptance contracts because they are about the new rolling stock, to be immensely valuable. The question I put to Railtrack—and I still have not had a satisfactory answer—is that if they can do that for Virgin why can they not do it for everyone. I think they regard the Virgin contracts as an unfortunate and uncomfortable precedent, but they do set a precedent.

  Chairman: Lots of us may agree with them on that but that is not the point at issue. There are other reasons.

Mr Donaldson

  922. Moving on to another of the measures intended to improve Railtrack's accountability, are Railtrack cooperating with your plan to introduce reporters? Will these reporters be introduced in April as previously stated?
  (Mr Winsor) Yes, they are. They are being a lot more positive about the reporters and I expect that the reporters will be up and running for 1 April 2001.

  923. How closely will those reporters be able to examine the work of the infrastructure maintenance contractors and the means by which they are supervised by Railtrack?
  (Mr Winsor) They will have very extensive powers. They will have full access to Railtrack's people, books, records, assets and premises. They will have the right to take copies, carry out inspections, measurements and tests on Railtrack's assets or in relation to Railtrack's assets, including taking equipment and persons onto the premises in order to carry out these tests and they can take electronically stored information. It is quite a significant facility.

  924. Does that include the maintenance contractors?
  (Mr Winsor) They can have full access to the people who are working on or in relation to Railtrack's assets. So Railtrack must procure that; if the information is held by the maintenance contractors then the reporters have access to them as well.

Chairman

  925. Do you have some kind of general idea of a specification that you would be asking for for these people? The skills mix.
  (Mr Winsor) It will be horses for courses.

  926. But they are going to be new horses for courses. What kind of skills mix are you looking for?
  (Mr Winsor) They will be predominantly engineers, track engineers.

Mrs Gorman

  927. I am not quite clear what your role is as Regulator because in the course of your remarks you described your activities as going round looking at the rails and doing things like that. Or are you really there to monitor the financial systems and structures of Railtrack to see that a large amount of public money injected into that company is being properly used? What is your role?
  (Mr Winsor) It is a bit of both. Railtrack's accountability for its operations, its maintenance and renewal of the network and its enhancement of the network, is an accountability which it owes to the public interest under the authority of a licence granted under the authority of the Railways Act 1993 and enforceable by me. The licence deals with Railtrack's stewardship of the network and it also deals with associated matters. My jurisdiction is to monitor and enforce that licence, and to modify that licence—and there are seven additional licence conditions which I am going for. I also supervise the consumption of the capacity of railway assets. That is to say when somebody wants to run additional trains, it has a new access contract with Railtrack and I must approve that access contract. If Railtrack demands unreasonable terms or unreasonably refuses access, I can direct Railtrack to grant access. I also enforce domestic competition law under the Competition Act 1998 and a number of other things, a list perhaps too long to go into.

  928. You realise that the Government have stated clearly that they expect the major part of Railtrack's funding requirement to be met from capital markets. Do you think it makes sense for a company which is neither fish nor fowl, neither a proper private company nor yet a proper public service company, to be able in these circumstances to fulfil that requirement, given the fact that the vituperative criticism which is constantly heaped on it, not least by you and us and the Department and the media, has a great effect on its ability to raise funds? Is it sensible, does it make sense that the Government should be expecting to achieve one and at the same time be dishing out the other?
  (Mr Winsor) I think Railtrack is a proper private company. It is a company registered under the Companies Act 1985 whose shares are listed on the Stock Exchange. It is a company carrying out an essential public service. Accordingly Parliament has decided that this service will be provided only on conditions. Railtrack's shareholders and their investors knew what those conditions were when they bought the company; it was all explained in the prospectus. Railtrack is in the same position as a regulated private monopoly, accountable to the public interest through an independent economic regulator as well as health and safety and the other matters I mentioned, just like a water company, electricity, gas and telecommunications. British Telecom is regulated by Oftel, yet they are able to raise significant amounts of money. Railtrack is able to raise significant amounts of money and I am confident will demonstrate that. I wonder about your remark about vituperative criticism. It seems to me that the criticism they have had is certainly not motivated by malice, it is motivated by concern for the protection of the public interest. The company may complain about the criticism, but it has brought it on itself. It may be of interest to the Committee to know that for every form of enforcement action or other pressure I have placed on Railtrack, in fact the reaction of the stock market is to put the price up.

  929. Do you agree you catch more flies with honey than vinegar? I believe it is true that the safety record of Railtrack is very, very good, that the number of serious accidents, sad as they are, have been extremely few and far between since Railtrack took over, that compared with almost any other type of transport its safety record would come out near the top. For that reason, do you think it ought to get more carrots than the stick we are giving it? How can we complain about the management and running of this service if we are judging it by a false set of criteria?
  (Mr Winsor) I do not think we are judging it by a false set of criteria. The public rightly expects rail transport to be the safest form of land transport around. There has been a very significant degree of politicisation of railways, stoked up by the media. It is a matter of regret to the railway industry that that has been so. If Railtrack's performance had been far better, then it would have been getting plaudits rather than brickbats. The safety record of Railtrack, the Southall, Ladbroke Grove and Hatfield accidents aside, has been good, but those were very serious accidents and the causes of the Ladbroke Grove accident are not yet established; Lord Cullen's inquiry will report shortly. Railtrack has admitted responsibility for Hatfield because it was a broken rail. It is unfortunate that there is such an intensity of pressure on the company from the media, but I believe that is virtually inescapable as things stand. The company's best policy is to improve its performance.

  930. Are you aware that the Rail Users' Council Chairman, Sir Stephen Francis, has stated that the cracking which caused the Hatfield accident is probably a unique event and that the rails which have been examined, many hundreds of miles of them, have shown no other examples of this. You talk about these phenomena being known in other parts of the world, but surely the significance is how common or uncommon they are. Do you think we have a responsibility, you, us, the rest of us, to try to put a clear picture and a true picture of what is going on in the railways? It is easy to sit here and rubbish them, as we do regularly, but should we not take these factors into consideration? Or do you dispute what the Rail Users' Council say about the safety of the railway lines?
  (Mr Winsor) I dispute what their Chairman says in relation to the incidence of gauge corner cracking. I think he is reliant perhaps on the former Chief Executive of Railtrack who said there was no other rail in the condition of Hatfield. Tracks have been discovered in very poor condition since Hatfield and that is a matter of concern. These are isolated incidents and Railtrack is taking early and urgent action to tackle them. In my opinion it is not the case that Railtrack has faced undue criticism or public pressure from my organisation or the Strategic Rail Authority or the other regulatory authorities since the Hatfield accident. What we are trying to do is to enable the company to raise itself from its knees, get on with the national recovery plan, improve its asset knowledge and therefore restore the confidence of the public in the operation of the national railway network. A beaten and humbled Railtrack is not in anyone's interests.

  931. Is it in anyone's interests for us to create such a hoo-ha that people like Mr Corbett are driven out of office and relatively inexperienced new people come in all of the time? That is actually what happens when you have one of these crashes. We look for a scapegoat rather than accepting that there is risk in all forms of travel.
  (Mr Winsor) The circumstances of Mr Corbett's departure from Railtrack are not publicly known. It is my belief—I was not there—that the board of Railtrack decided that it would be best if Mr Corbett were to leave the company. That is the way that public companies operate, that the management of the company should be determined by the company and not by outsiders. I think that is what happened.

  932. I have no shares or other kind of fiscal interest or pecuniary interest. Will you give rail the credit for being the safest form of land travel, safer than cars, safer than buses, safer than lorries? I do not know what you can compare it with in terms of safety but I think it is significant and important that we in organisations, groups, meetings like this, do not continue to give the public the impression that what they are being offered in the railways is not safe. After all the amount of use of railways has gone up phenomenally. The task they took on in meeting that demand has been phenomenal and I do not know whether you think they should not be given any credit for the way the railways have been developing under privatisation, but I do.
  (Mr Winsor) It is in the nature of railways that they are safer than other forms of land transport. The accidents aside, the railways' safety record is an extremely good one and it is very, very important that the public understand that. I believe that they do understand it because it is the truth.

Mr Bennett

  933. You put a lot of emphasis in your review on performance. Are you sure you have this right? Certainly the train operators are suggesting that you are more interested in pushing for performance to be spot on rather than necessarily encouraging extra services on the line.
  (Mr Winsor) I am encouraging both.

  934. Which is more important, to have six trains an hour with a few late or two trains an hour always spot on for time?
  (Mr Winsor) We must have the mix of performance and density of traffic which is the most appropriate for the needs of the travelling public. The services must be established so as to meet the needs of their users. If we only had two trains an hour, then the trains would be significantly overcrowded or people would be driven away to the roads. In determining whether or not there should be six trains an hour or two trains an hour, I must take into account a number of factors, including the economics of the proposition.

  935. But the Strategic Rail Authority also has a view. Are you happy that there is no conflict between yourself and the Strategic Rail Authority?
  (Mr Winsor) Our jurisdictions are quite different.

  936. The Strategic Rail Authority would very firmly be wanting to increase the frequency of services on a lot of routes.
  (Mr Winsor) Yes.

  937. You are very keen on performance. Do you not think there is a conflict between the two?
  (Mr Winsor) No, I do not. The performance of the increased density of traffic can be protected through the good management of the network. We are trying through the enhancement framework and the additional funding for the railway to increase significantly the capacity of the railway so that we can get improvements in performance and improvements in the volume of traffic, both freight and passenger, which is carried.

  938. Railtrack has been regenerating some of its stations—you might say tarting them up. Do you think that was good value for money or was an awful lot of money spent on the project management rather than actually doing anything on the stations?
  (Mr Winsor) Railtrack did spent a lot of money on stations. They have not done so particularly efficiently and we have corrected this in the periodic review by defining much more closely what they have to do for the money. They have not, for example, completed the station regeneration programme which they were financed to do in the first control period, 1995-2001. They will have to complete that programme, but they will not be paid any additional money for doing so because they have already been paid it. We are not going to pay them twice.

  939. How do you force them to do it then?
  (Mr Winsor) Because condition 7 of their network licence requires them to enhance and develop the network in accordance with the reasonable requirements of their customers. If their customers have paid for these outputs, then they have to be delivered.

  940. You referred earlier to the land register which they have and your concern about perhaps vetoing some developments on that land. In a constituency like mine there are many brownfield sites which are basically old railway sidings. There have been great difficulties in getting some of that back into productive use. Obviously the Government is keen to see brownfield sites developed. Are you confident that you are not going to be yet another veto which simply makes a morass of bureaucracy and neither really protects the land nor encourages development?
  (Mr Winsor) Yes, I am completely confident that we are not going to get in the way of proper development. If there is no reasonable prospect for railway use of these sites then Railtrack will be free to dispose of those sites for whatever redevelopment value they can get for them and indeed under the property allowance scheme, which is established as part of the periodic review, part of those profits from that redevelopment will come back to the taxpayer. I would not wish to be misunderstood. The licence condition in relation to restraining Railtrack's freedom to dispose of its assets is not going to be a veto on every disposal, far from it. It is going to be a veto used sparingly when Railtrack is trying to dispose of something which ought not to be disposed of. If it is disposing of something which really does not have a reasonable prospect for railway use, then not only are they free to do so and I will not get in the way, but they will be encouraged to do so, because they will make more money out of it.

  941. Are you aware of something like Central Railways' proposals for the freight line from Liverpool through Manchester and Sheffield?
  (Mr Winsor) Yes.

  942. That involves quite a lot of old railway lines possibly being brought back in. Will you be protecting Central Railways' wayleaves, or their proposed wayleaves?
  (Mr Winsor) This licence condition will only apply to Railtrack. If Central Railways wish to acquire land from Railtrack in order to build the new line, then because it is for railway purposes my licence condition is not going to get in the way. Railway purposes are widely defined. It does not mean to say it is only Railtrack's railway purposes, it is anybody's railway purposes.

  943. You are in the process of renegotiating on freight but we heard some pretty sad stories about the state of freight as a result of present difficulties. Is there anything you can say to us about what you are going to do to make it more viable for freight?
  (Mr Winsor) We are looking very carefully at the economics of the rail freight market which are very different from the passenger market. There is no public subsidy for freight other than through the freight grants system which is now to be administered by the Strategic Rail Authority. We believe that freight charging should be more transparent, that there should be greater certainty and confidence, that when freight operators want to know what it is going to cost to run an additional train or do a new freight flow they will know in advance and with a much greater certainty and stability what it will cost to run the freight. It is also important that Railtrack, one way or another, is paid the full costs of operating the network in the interests of freight. It is a mixed traffic railway. We are discussing with the Strategic Rail Authority how Railtrack should be paid for freight traffic, whether it should be entirely through freight charges which the freight operating company is paying or some form of Government support. It could be a direct payment from the Strategic Rail Authority or it could be that the charges to passenger operators will be increased and therefore the SRA will pay more through higher subsidies to passenger operators, effectively cross-subsidising freight from the passenger business. This is a choice for the Government and we are in close consultation with them.

  944. How are you going to apply penalties for what has happened over the last month? On the basis of the timetable which was published originally or on the basis of the revised timetables?
  (Mr Winsor) I do not apply the penalties. I have not taken enforcement action against Railtrack and only if I do can I apply financial penalties. I am not yet persuaded that is the right thing to do. What we want to do is get Railtrack to get on with the recovery plan. My senior staff are over with Railtrack right now and after leaving this Committee I am going to Railtrack House for a meeting with the Chief Executive in order to get the latest and fullest version of the national rail recovery plan to examine with our experts. The financial penalties which Railtrack are taking as a result of the post-Hatfield chaos are a function of the liquidated damages regimes under the track access contracts. Railtrack have an automatic obligation to pay this money to the train operators, either on the basis of the emergency timetable or on the pre-Hatfield timetable and the train operators have said to a number of people, including the press, that the amount of money Railtrack is offering them is not enough. There is a potential for a contractual but not a regulatory dispute to arise, but I believe that everybody concerned is most interested in the recovery of normal operation first and sorting out the money later.

Chairman

  945. You are always an extremely interesting witness for us and you give us a lot to think about, though the reality is that in your last encounter with Railtrack you actually gave them more money than your original intention. Do you just talk tough and actually act soft?
  (Mr Winsor) No, but nor do I penalise them inappropriately. My job is to make sure that they are entitled to earn and given the opportunity to earn a sufficient amount of money in order to operate, maintain and renew the network for the next five years. There was a difference between my July conclusions, my draft conclusions, and my October final conclusions. That was mainly because we recognised additional evidence which Railtrack provided to us of constraints in the supply market. Railtrack is facing an enormous growth agenda. The prices which Railtrack will have to pay for the carrying out of this mainly construction agenda are going to be a lot tighter, a lot higher as a result of the increased activity, not only in the rail market—and there will be more because of the growth programme—but also in road building and in other spheres of activity. Therefore we decided that it was appropriate to allow Railtrack additional funds in order to cope with that. It does not help anyone to handicap Railtrack in carrying out the growth.

  946. Nobody has suggested that should happen, but the reality is that you have told us Railtrack have not done what they were supposed to do in the first place. You have told us that you have a series of economic restrictions which you can impose on them and you told us that you can claw the money back. Are you really convinced that those are sufficient sanctions to use against a company which is not performing properly in the sense that it is protecting the interests of the public?
  (Mr Winsor) I am satisfied that the powers available to me in conjunction with the Strategic Rail Authority and their jurisdiction are sufficient to ensure the proper protection of the public interest, to make sure the money is spent wisely and well on the right things and at the right times.

  Chairman: On that note I not only wish you a jolly evening with Railtrack but may I say that we shall continue to take a great interest not only in Railtrack's doing but also yours. Thank you for coming.





 
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