Examination of Witnesses (Questions 947
TUESDAY 12 DECEMBER 2000
CBE, AND MR
947. Good afternoon, my Lord. Thank you for
joining us today. We know you are very busy, even though you do
not think there is a lot going on! Would you be kind enough to
(Lord Macdonald of Tradeston) Madam Chairman, my name
is Gus Macdonald and I am Minister for Transport at DETR.
(Mr Linnard) I am Bob Linnard, Director
of Railways at DETR.
948. Thank you very much. My Lord, did you want
to say anything to begin with?
(Lord Macdonald of Tradeston) Just perhaps to clarify
your quip there. I do think there is a great deal going on. In
reply to a journalistic question last week I said "I think
there is a crisis in the railways that has to be managed."
Unfortunately that was not reported. I then went on to suggest
that it was indeed a multiple crisis. Be in no doubt, we believe
it is a crisis and we are trying to deal with it by the day.
949. Thank very much. Has Railtrack over-reacted
to the Hatfield accident?
(Lord Macdonald of Tradeston) There is a concern (which
we share) that people perhaps feared that not knowing the extent
of gauge corner cracking or the dangers involved in it, they took
their speed limits back to 20 miles per hour, which has been the
traditional fall back position there, and it was done on such
a scale because of the nervousness that was involved that it did
perhaps have a disproportionate effect, but it was an understandable
reaction and we have tried to deal with that.
950. It was understandable if you did not know
what state the railway system was in. Is that right?
(Lord Macdonald of Tradeston) Understandable since
they were unaware of what the phenomenon of gauge corner cracking
951. Why was that since it had been well-known
for some years, not only in this country but elsewhere?
(Lord Macdonald of Tradeston) I have not had the impression
from the railway industry that it was well-known to them just
what forms that might take. They certainly knew of its existence
but it seems to have come through in a new form, particularly
in what they call the "rate of propagation" and they
have certainly got many experts working on it now to see what
the comparative experience has been between countries such as
the UK, Germany, France and Japan and so on. I think Sir Alistair
Morton has said that he felt that there was an over-reactionhis
wordand that people are thinking they had been spooked
a bit by it. We have tried to counter this by ensuring that the
industry can get round the table on a regular basis. Indeed, we
started off on a daily basis with our Rail Recovery Action Group
and that was simply to try and help the Railtrack management with
responses coming from all quarters, from HSE, from regulators,
from government, from passengers.
952. I do not want to stop you because we all
support the idea of having this Committee which is excellent,
but are you not implying that Railtrack were not doing the job
properly because otherwise they would not only have known there
were problems but they could have been seeking to deal with them
in a balanced and programmed way and they would not need to have
been panicked in the way they have been?
(Lord Macdonald of Tradeston) Indeed, I think Railtrack
have said that their relationship with their maintenance sub-contractors
953. What does that mean? Who is responsible
for a legal relationship with a contractor except the person directing
the contract in the first place, that is to say Railtrack?
(Lord Macdonald of Tradeston) Indeed, and I think
they concede that they have a management responsibility there
and that the practices in the past have been inadequate. Certainly
it is for the people on the ground to be under quite clear command
from above and that does not seem to have always been the case.
That is a matter that Railtrack tell us they are investigating
with some urgency and, clearly, it is one of the reasons why people
on the ground may have perhaps over-reacted.
954. How are you going to ensure that this sort
of thing does not happen again because there are literally hundreds
of thousands of people out there who are unable to get to work
in the normal time, unable to get home, unable to get about their
normal business. The total cost of this chaos to the economy of
the United Kingdom must be absolutely astronomical. How are you
going to ensure it does not happen again?
(Lord Macdonald of Tradeston) In two ways. By ensuring
that we encourage Railtrack to be better managed inside a more
supportive architecture for the industry with more involved regulators
and with the Strategic Rail Authority in place and with considerably
larger sums of government money being invested in the railway.
955. Why should large sums of money be invested
in somebody who patently cannot do the job.
(Lord Macdonald of Tradeston) We believe Railtrack
can do the job if it is better managed and that is the emphasis
we have had to put on this because we are where we are.
956. You are satisfied that the recent changes
have ensured it is so well managed that there will not be a problem?
(Lord Macdonald of Tradeston) No, we are not yet satisfied.
We have to see the evidence of the effectiveness of the new management.
From what we have seen in recent weeks, they are trying very hard
and they seem to have made a good start. We know that further
board changes are in prospect with the Chairman intending to stand
down and we have heard, too, about the belief that they must strengthen
the non-executive side of their board.
Chairman: I think Mr Stevenson wants to come
back on various aspects of this.
957. Lord Macdonald, why has the Government
rejected the notion that in return for the massive amount of public
grants and money that have been made available to Railtrack in
the medium and long term that an equity shareholding should be
acquired in Railtrack in return for those massive amounts of public
(Lord Macdonald of Tradeston) In the belief that in
a public limited company having a minority stake would not buy
influence over policy. The board members of a PLC are under a
fiduciary duty to ensure that they serve the interests of all
shareholders and therefore a minority shareholder is not able
to go into the board of a PLC and try and pursue their own interests.
958. Are you awareI am sure you arethat
in evidence to this Committee in July the then Chief Executive,
Mr Corbett, gave evidence to the fact that in his view (backed
up by Mr Marshall, the then Finance Director) the SRA on behalf
of the Government taking a preferential share option in Railtrack
was "the best possible option for levering in private money"?
Are you aware of that?
(Lord Macdonald of Tradeston) I am indeed. I can see
the attractions from Railtrack's point of view where you would
get government money in there but, as I say, the government even
with board members would have no authority over a board of a PLC
by putting that money in. However, it would in a sense make the
Government complicit with the decisions made by the management
of the company and I do not think that would be desirable given
our relationship with the regulators.
959. It may be interpreted as making government
complicit but could it not also be interpreted that it would allow
government to be influential?
(Lord Macdonald of Tradeston) I do not believe inside
the structure of company law that a minority shareholder could
have the influence that you ask for. It just would not be allowed.