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


Memorandum by English Welsh and Scottish Railway Limited (RI 09)

EXECUTIVE SUMMARY

  The development of freight on rail has been a success. £1 billion of investment by operators and terminal providers has contributed to a growth of 41 per cent in five years. Net tonne kilometres are at their highest level for over 20 years.

  Maintaining this growth will require high-quality, low-cost infrastructure. Research commissioned by EWS has identified a number of international practices that could be adopted in the UK. These practices, together with productivity plans already in place, will allow the achievement of efficiency reductions in excess of the Regulator's proposed range of 3 to 5 per cent per annum.

  Lower track access charges are fundamental to the competitiveness of freight on rail. They are needed to correct the imbalances created by recent government announcements on 44 tonne lorries, Vehicle Excise Duty and fuel duty escalator. They are justified by Railtrack's efficiency potential within infrastructure provision and by ensuring that freight traffic covers only Railtrack's genuinely avoidable freight costs adjusted for international best practice efficiency.

  The growth of rail freight by 8 per cent a year will create between £10 billion and £12 billion of external benefits over the next 10 years. The rail network will need additional capacity and capability for longer, higher, wider and heavier trains. EWS has developed a £5 billion 10 year network investment plan that identifies the necessary capacity and capability. This expenditure should be incorporated into the Government's Ten Year Transport Strategy and Comprehensive Spending Review. It should also be included in the Strategic Rail Authority's freight strategy and overall strategy.

  EWS has made a number of recommendations that the sub-committee may wish to review with the organisations concerned.

SUMMARY OF RECOMMENDATIONS

  EWS recommends that the Rail Regulator should undertake a detailed review of the benefits of using high quality infrastructure components on the UK rail network.

  EWS supports the Regulator's proposals for asset monitoring in the next control period.

  EWS believes that the monitoring of freight assets and freight routes should receive specific attention.

  EWS believes that the Regulator should review the freight commitments within the 2000 NMS.

  The Rail Regulator must research all the issues relating to freight track access charges given the long-term impact of his eventual conclusions.

  The Regulator should employ independent engineering advisers to review the research undertaken to date and to identify the best international practices and efficiency available to Railtrack. Higher efficiency targets and lower Railtrack's costs will benefit both passenger and freight.

  The Regulator should ensure there is a widespread understanding of the genuinely avoidable costs of freight operation. These findings should then be incorporated in Railtrack's efficiency targets. For passenger lower track access charges will mean lower subsidy and the ability to reallocate subsidy to investment.

  EWS recommends that the Strategic Rail Authority should review the impact of Railtrack's efficiency potential on track access charges and subsidy.

  EWS recommends that the external benefits of existing traffic should be included in the assessment of the network investment plan.

  EWS recommends that the £5 billion network investment plan should be incorporated in the Government's Ten Year transport strategy and that early commitments should be in the comprehensive spending review.

  EWS also recommends that the network investment plan should be incorporated in to the Strategic Rail Authority's freight strategy and overall strategy.

  EWS recommends that that Strategic Rail Authority should undertake a joint study with the Rail Regulator on freight investment funding. EWS believes that the proposal to introduce third-party investment in infrastructure should be give serious consideration.

  The Strategic Rail Authority must protect freight interests during the refranchising process otherwise freight growth opportunities will be extremely limited.

INTRODUCTION

English Welsh & Scottish Railway

  English Welsh & Scottish Railway (EWS) is the largest rail freight haulier in Great Britain. It was formed in 1996 following the outright purchase of the majority of British Rail's freight operating units. In 1997 it purchased British Rail's international freight business.

  A grouping of overseas and UK investors own EWS. This consortium has also invested in rail freight operations in the United States, Canada, New Zealand, Australia and Jordan. This overseas experience has proved extremely helpful in benchmarking the performance of the national rail network against best international practice.

Rail freight growth

  EWS is part of a rail freight industry that has grown by 41 per cent since 1994-95. Figures published by the Department of the Environment, Transport & The Regions show that 18.4 billion net tonne kilometres (bntkm) of rail freight were moved in 1999-2000. This is the highest figure since 1979-80 and an increase of 5.4 bntkm since the low point in 1994-95. The DETR statistics show that 1.6 bntkm of this growth came from coal traffic whilst 3.8 bntkm came from other traffic.

  Particularly encouraging is the growth in the final quarter of the 1999-2000 financial year compared with the final quarter a year previously. Coal Tonne kilometres grew by 21.4 per cent, other traffic grew by 9.3 per cent giving overall growth of 12.5 per cent. Tonnage, whilst not as strong an indicator of transport demand as tonne kilometres, also grew 7.1 per cent in the final quarter of 1999-2000 compared with the same quarter in the previous year.

  Whilst rail freight has grown by 41.5 per cent, road freight has grown by only 9 per cent.

  As a result, rail freight has increased its market share of the road and rail market from 8.3 per cent in 1994-95 to 10.7 per cent in 1999-2000.

  Part of this increase has been due to the restructuring of the railway industry, bringing a sharpened focus to the train operators such as EWS. There have also been structural changes in some of rail's traditional markets such as the coal industry where significant flows of long-distance imported coal have replaced indigenous production. The freight operators have won new traffic to rail and recaptured traffic lost in earlier years. New and recaptured traffic flows include:

    —  additional mail traffic and new express parcels business at 110 mph;

    —  parcel traffic using road/rail "piggyback" technology;

    —  consumer and industrial products to Germany;

    —  supermarket traffic including secondary distribution movements to stores;

    —  forest products;

    —  car bodies and components;

    —  bulk and bagged cement;

    —  containerised domestic waste.

EWS investment

  At the heart of the growth of freight on rail has been investment by the freight operators and by the end customers. This investment has allowed the industry to attract new markets and to reduce costs. The investment has been across a wide range of areas. For EWS the key investments are:

FIGURE 1

EWS Capital Expenditure
£m
250 Class 66 heavy haul locomotives299
30 Class 67 high speed locomotives44
Operational control system30
400 60' flat wagons for standard gauge containers 22
300 flat wagons for high gauge containers 17
280 bogie coal hopper wagons17
260 steel coil carrying wagons16
300 box wagons for bulk materials16
100 well wagons for 9'6" gauge containers 8
Customer Service Delivery Centre9
390 box wagon conversions for bulk materials 6
400 low sided box wagon conversions for spoil traffic 5
80 "piggy-back" wagons4
50 steel bar carrying wagons3

Source: EWS internal

  These investments are part of a £700m programme that has allowed EWS to expand its business and enter new markets. Beyond this other operators and terminal developers have also invested heavily in freight by rail.

The need for further investment

  The investment committed so far has provided the bedrock for future growth but the operators' investments cannot produce this growth alone. Having made significant investments we now look to others to match our confidence in the industry. The key to growth is the investment in infrastructure—the most up-to-date rolling stock will contribute little if there are insufficient facilities to load and unload traffic, if there is inadequate space on the network and if the network cannot permit full exploitation of the innate benefits of rail. The benefits generated by the specific characteristics of rail include:

    —  fast journey times, significantly in excess of both the average and legal speed on the road network

    —  the ability to move high volumes efficiently and economically

    —  an alternative to increasingly congested roads

    —  environmental benefits such as reduced emissions per freight tonne mile.

FIGURE 2
Index
EmissionRoad Rail
Carbon dioxide10025
Nitrous oxide10033
Volatile organic compounds100 50
Carbon monoxide10065

Source: J. S. Dodgson, Liverpool University

RAILTRACK'S PAST PERFORMANCE

  Railtrack's past performance in renewing, maintaining and developing the national rail network and the likely impact on its plans for the future

  EWS has commissioned extensive research into the way in which the network is maintained and renewed when compared with international best practice. EWS has identified a number of initiatives which, if implemented, would improve network efficiency, reduce costs and improve quality.

Track components

Rail

  The rail used in the UK is lighter than best practice, is not hardened and is not maintained in the same manner as overseas. This reduces the resistance to flexure and wear, increases the number of surface cracks, and facilitates the spread of defects. As a result best practice rail lasts between three and six times longer than UK rail and requires fewer repairs.

  EWS's research has shown that, under British traffic conditions, the use of the rail best suited to the UK network (an average head hardened US rail) would reduce the defects which lead to broken rails by 93 per cent. Alternatively Railtrack could improve the cost effectiveness of their existing section by adopting different maintenance techniques. Rail maintenance consists chiefly of lubrication (applying a grease based solution to minimise friction) and grinding (wearing away early life surface defects before they become serious). Research has shown that lubrication and grinding would reduce the defects which lead to broken rails by 77 per cent.

Ballast

  Ballast is the largest cost driver on the UK infrastructure but is relatively insignificant on best practice railways. Research has shown that deeper, harder and better drained ballast will last 25 per cent longer than Railtrack's current specification. Failure to drain by ditching and to replace partially by shoulder cleaning (rather than totally by cleaning) leads to frequent renewal of ballast. Best practice railways rarely need to replace ballast.

  UK practices also increase the load on ballast unnecessarily by spacing sleepers at 26-30 inches. High density and best practice railways specify a minimum spacing of 24 inches and often lay sleepers at 19 inch intervals.

  EWS's work has concluded that, at fully-absorbed current unit costs, use of high integrity track components could halve the real long run infrastructure costs to Railtrack of EWS's business. Such premium components would prove equally relevant and cost-effective for passenger services.

  Different track components wear out at different rates depending upon usage, line density and track curvature. UK practice is to renew all simultaneously. This means that many components are discarded with 30-50 per cent of life remaining. Under previous practice such components were cascaded to low density lines and could provide another twenty or thirty years of use.

Asset knowledge

  Railtrack acknowledges that its past performance on maintaining and renewing the rail network is inadequate. At a recent hearing held by the Regulator into the proposals to upgrade the West Coast Main Line Railtrack explained that one of the reasons for the significant escalation of costs was that Railtrack only now understood the condition of its assets. This raises questions about its knowledge of its assets on the rest of the network and the adequacy of its maintenance and renewal performance. The Regulator's own consultants Booz Allen & Hamilton examined this issue in their March 1999 report that covered, inter alia, network performance, the network asset base, efficiency and stewardship. Their wide-ranging report covers many of the issues being reviewed by the Committee. On the subject of asset knowledge, Booz Allen & Hamilton said "The quality of inherited data concerning asset information was poor but improving data quality has not received great focus in the control period to date" (para 7.38, pp 7-6).

Condition and retention of freight infrastructure

  EWS is concerned that the condition of Railtrack's freight infrastructure is deteriorating. The evidence is an increasing number of speed and weight restrictions, both of which have a significant effect on the efficiency and performance of freight. Initial research has indicated that the cost of speed restrictions affecting EWS's services could be as high as £8 million per annum. We have asked Railtrack to provide separate information on its freight assets and restrictions so we can monitor its stewardship role in this respect. We have given our support to the Regulator's intention to introduce a range of measures which monitor the serviceability and condition of Railtrack's network assets and the threat of enforcement action if these reveal a significant deterioration.

Settle & Carlisle

  The Settle & Carlisle line is a key Anglo-Scottish freight route which has rapidly deteriorated as the maintenance and renewal regime did not match the advertised capability of the route. This has led to severe disruption to EWS's trains using the line as Railtrack have imposed ongoing speed restrictions over the majority of the 90 mile route limiting freight trains to just 30/40 mph rather than the normal speed of 60 mph. In addition Railtrack have taken month-long blockades of the line where no traffic can operate at all in order to halt the deterioration and return the line back to normal. The first blockade was in November 1999 and a second is planned for November this year. These blockades cause major disruption to our services affecting performance, customer confidence, lead to increases in costs and decreases in revenue.

Bedford to Bletchley

  The route is 16 miles long with a normal line speed of 60 mph. Restrictions are currently in place over the whole route limiting freight trains to 20 mph and passenger trains to 40 mph.

Glasgow to Edinburgh

  Speed restrictions over shorter stretches of line than those examples highlighted above can also have a significant disruptive effect on freight trains as they have to constantly slow down for each restriction then speed up again afterwards. This can also cause "knock on" delays to passenger trains. Over a 23 mile section of a freight route between Edinburgh and Glasgow there are six separate speed restrictions totalling four miles.

Network Rationalisation

  The capacity and capability of the network can be reduced as facilities not currently used, but of strategic importance for the future, are withdrawn. This can lead to short-term cost savings for Railtrack at the expense of increased costs for rebuilding the asset in the future. An example of this occurred in Manchester where Railtrack removed a connection to a former freight terminal that had to be restored within two years.

Railtrack's 2000 Network Management Statement

  The freight section of Railtrack's 2000 Network Management Statement was extremely disappointing. Railtrack's opportunity to state its long-term vision for rail freight growth was missed. Instead Railtrack chose to focus on:

    —  critical comments about recent freight growth. Their pessimism is contradicted by the recent DETR statistics;

    —  their perception of the economics of rail freight and a call for significant increases in freight track access charges. This contradicts the research undertaken by EWS and ORR.

  The NMS also shows that there are 26 disputes between EWS and Railtrack regarding the development of our "reasonable requirements" for the rail network. Many of these disputes relate to the feasibility studies and introduction of additional capacity and capability (to enable longer, wider, higher and heavier trains) for freight. We do not accept Railtrack's assertion that all freight growth can be accommodated on the network in the next five years.

  A copy of our response to Railtrack's 2000 Network Management Statement can be supplied to the Committee.

EWS recommendation

  EWS recommends that the Rail Regulator should undertake a detailed review of the benefits of using high quality infrastructure components on the UK rail network.

  EWS supports the Regulator's proposals for asset monitoring in the next control period.

  EWS believes that the monitoring of freight assets and freight routes should receive specific attention.

  EWS believes that the Regulator should review the freight commitments within the 2000 NMS.

TRACK ACCESS CHARGES AND RELATED ISSUES

  The adequacy of the oversight exercised in the past by the Office of the Rail Regulator of Railtrack's performance, its contribution to the development of Railtrack's future plans with particular reference to the review of track access charges, and the means by which the Office of the Rail Regulator intends to ensure that Railtrack in future honours its commitments.

Track access charges

  The review of track access charges is fundamental to the future of freight on rail. Track Access charges are 30 per cent of EWS's costs and a significant reduction will be necessary to ensure that rail freight can remain competitive. There have been a number of recent announcements by the Government that will enhance the competitive position of road haulage:

    —  The decision to permit the general introduction of 44 tonne lorries with a target date of 1 January 2001. EWS has estimated that up to 19 per cent of existing rail traffic could transfer to road as a result.

    —  The reduction in Vehicle Excise Duty for 44 tonne and 40 tonne lorries. VED is the charge closest to rail track access charges as it is deemed to represent the impact of the Heavy Goods Vehicle on the road infrastructure.

    —  The decision not to increase fuel duty above the rate of inflation although the previous policy had:

      —  reduced the imbalances of road and rail costs;

      —  recognised that Heavy Goods Vehicles pay only 70 per cent of their external costs;

      —  acknowledged that road vehicles produced significantly higher emissions per tonne kilometre than rail-especially CO2.

    —  In addition we understand that Government are considering a road building and widening programme. This will further aid road haulage productivity.

  This, when combined with our analysis of Railtrack's efficiency potential and Government's policy to increase freight on rail, has led EWS to argue for significantly lower track access charges. EWS's position is summarised by the Rail Regulator in his consultation document on freight track access charges Review of freight charging policy, a consultation document. In paragraph 1.7 the Rail Regulator states:

    "Freight operators have generally argued that Railtrack's track access charges should be as low as possible to ensure that rail can compete with other transport modes. Access charges should therefore, in their view, be no higher than Railtrack's avoidable costs from freight operations. In addition, they argue that these avoidable costs should reflect Railtrack's potential for improved efficiency and that this potential should be measured against international best practice. They generally argue that the variable charge should be low to reflect their view of the marginal costs of freight operation."

  Essentially freight is a marginal user of a passenger network and should, therefore, pay only its genuinely avoidable costs.

  In contrast Railtrack are arguing that freight access charges should be increased by at least 25 per cent (Financial Times, 8 April 2000).

  Railtrack's case is based on the misconception that its variable freight costs are significantly higher than previously thought. This view has been dismissed by our own research and, equally importantly, by the Regulator's own consultants who have estimated that Railtrack's variable freight costs are very similar to the level currently paid by EWS.

  Even the view of the Regulator's consultants overstates variable freight costs. Their work underestimates Railtrack's efficiency potential, allocates the cost of passenger assets to freight, fails to take into account the low traffic density of the Railtrack network and ignores key areas of cost causation such as curvature, rail wear, switches and crossings and ballast maintenance.

Efficiency potential

  EWS believes that efficiency savings in excess of the five per cent per annum target proposed by the Regulator should be achievable. EWS has undertaken extensive research into the efficiency potential of Railtrack. Using the techniques outlined above the United States Class 1 (major) railroads have achieved average efficiency improvements of nearly seven per cent a year for the last 17 years. In the early years this was without the benefit of mechanisation techniques now available to Railtrack and without the international benchmarking now also available to Railtrack.

Supplier unit cost reductions

  The supplier contracts in place during the last control period have been replaced by new maintenance and renewal contracts offering unit cost reductions of between 15 and 25 per cent. Although the Regulator's consultants have yet to report on the effect of the new rates on efficiency levels, EWS's believes that they will help to achieve improvements in excess of the Regulator's proposed range of three to five per cent.

Improved Methods of Work

  Railtrack is introducing some efficient methods of working. These should be reflected in the future efficiency targets. Examples include:

Track Machinery

  Track machinery equipment recently introduced includes:

    —  stone-blowers that reduce track geometry maintenance frequency from one to three years

    —  track relaying machines that increase renewals productivity rate by two to three times.

Possession productivity

  It is argued that the limited amount of track time prevents efficient work being done, however until very recently a typical eight hour possession of the line has yielded only two to five hours productive work time. Recent changes in the management of possessions has added another productive hour.

Other productivity

  Other areas of potential efficiency have been identified by the Regulator's consultants:

    —  Railtrack should incentivise their contractors to achieve best practice or bench-mark them against one another.

    —  Railtrack's Corporate overheads are 20 per cent higher than comparative industries as a result to HQ staffing levels.

    —  Railtrack's project management costs contribute to overall costs up to 40 per cent higher than comparable projects.

EWS recommendation

  The Rail Regulator must research all the issues relating to freight track access charges given the long-term impact of his eventual conclusions.

  The Regulator should employ independent engineering advisers to review the research undertaken to date and to identify the best international practices and efficiency available to Railtrack. Higher efficiency targets and lower Railtrack's costs will benefit both passenger and freight.

  The Regulator should ensure there is a widespread understanding of the genuinely avoidable costs of freight operation. These findings should then be incorporated in Railtrack's efficiency targets. For passenger lower track access charges will mean lower subsidy and the ability to reallocate subsidy to investment.

ROLE OF THE STRATEGIC RAIL AUTHORITY

What role should be played by the (currently shadow) Strategic Rail Authority in the renewal, maintenance and development of the rail network both directly and by securing investment from sources other than Railtrack, including from train operating companies through the franchise replacement process? What criteria the Authority is using to decide on the replacement of franchises?

Efficiency potential

  The Strategic Rail Authority should take a keen interest in Railtrack's efficiency potential as the resulting lower access charges will enable funds to be deployed on investment. EWS has presented its research on efficiency potential to the SRA.

Ten Year Network Investment Plan

  The Strategic Rail Authority has a fundamental role to play in the development of the rail network to ensure that the potential for rail freight growth is realised. EWS has identified a five billion pound network investment programme for the next ten years that will be a key part of achieving at least a doubling of the current level of rail freight activity. This programme has been adopted by the campaign Transport Choices for Industry-the railfreight opportunity. The campaign members are the Confederation of British Industry, the Freight Transport Association, the Rail Freight Group, EWS, Freightliner, GB Railfreight and Railtrack. They are pressing the Government and the Strategic Rail Authority to include this five billion pound investment plan in the Ten Year transport strategy and the Strategic Rail Authority's strategic plan. We wish to see the Government's Comprehensive Spending Review including sufficient funds to cover the first years of our network investment plan.

Network benefits

  The £5 billion investment, spread over 10 years, is far outweighed by the external benefit of the existing and future levels of freight on rail. Research undertaken by OXERA has identified the benefits of existing levels of rail freight as worth £750 million per annum based on 4.3p per tonne kilometre. Growth of 8 per cent per year will produce total external benefits of over £10 billion. If increased congestion and the environmental effect of emissions increases the per tonne kilometre rate by 3 per cent per annum (based on the average increase in congestion over the last decade) the 10 year external benefit will rise to £12 billion.

  EWS believes that the benefits of current traffic levels should be included in the calculation of the overall return on the £5 billion network investment. This is because without investment in the network for freight capacity existing volumes will reduce as passenger traffic expands to absorb available capacity.

Scope of the investment plan

  In summary, the network investment required for freight in the next 10 years is:
£ million
Capacity2,678
Electrification382
Gauge enhancement952
Heavier trains293
Increased train length526
Total4,831


  EWS has not quantified the total terminal investment required but we have identified land being sold by BR with a value of £23 million that would be suitable for freight use. EWS has argued that this land should be retained by the Strategic Rail Authority and drawn down for transport use rather than being lost to the rail industry because it has been sold to higher bids for retail, leisure or housing purposes.

  The Rail Freight Group has identified further capital expenditure requirements for terminals and yard projects that bring the total sum required to £5 billion.

  This investment covers a wide range of facilities and is focused on a variety of outcomes. These include:

Capacity

  Sufficient capacity on the rail network to accommodate growth in freight as well as passengers. The provision of this capacity can range from minor enhancement of the network to avoid conflicting moves, through the provision of additional capacity on existing arteries to the development of primary freight routes in parallel with passenger routes. The capacity must be adequate to accommodate high-speed services with passenger train operating characteristics as well as to service more traditional freight services.

  It is absolutely vital that this capacity is available 24 hours a day, 365 days a year.

Capability

  The ability to run freight trains at high speed with reduced journey times. This includes ensuring that the network is free of speed restrictions that have an adverse effect on freight services. High-speed services will operate day and night and it is essential that the maintenance and renewal strategy of the network accommodates nighttime freight services.

  Initiatives to make more productive use of the rail network and the resources required to run:

    —  Heavier trains (1).   If the network could take heavier axle weights it would be possible to convey more product within one train. The maximum axle-weight in Great Britain is 25.5 tonnes whilst in the USA it is 36 tonnes with the average exceeding 30 tonnes. Work needed to achieve heavier trains includes a review of structures and network formation and the design of wagons to accommodate the additional weights.

    —  Heavier trains (2).   The absolute weight of a train is affected by the power of the locomotive, coupling strengths within the train and the ability of the train to attain and maintain speeds compatible with other services. In developing routes for freight traffic it will be important to design them in a way to maximise the total weight of the train.

    —  Longer trains. Services for both bulk freight and lighter goods benefit from longer trains, especially on long-distance journeys. This allows more freight to be moved per network path thus easing rail congestion. Longer trains require compatible infrastructure on the network (such as bypass loops), extension of tracks in yards and the upgrading of terminals.

  Investment to provide a network that can accommodate the trend for all freight equipment to become higher and wider. This initiative, generically known as gauge enhancement, is focused on intermodal equipment such as containers and swapbodies, piggyback (the ability to convey road vehicles by rail) and conventional high capacity wagons.

Terminals, yards and sidings

  Access to the rail network is essential if the benefits of other investment are to be realised. Terminal developments can range from the small, single commodity facility used on an occasional basis, through larger facilities associated with a customer's premises, to major storage and distribution centres offering modal transfer facilities. The potential of ports should not be underestimated. The volume of traffic handled by Britain's ports—517 million tonnes pa[2]—requires transportation to and from the port facility.

  The operation of a rail freight network requires modern facilities for marshalling and stabling trains. This is particularly important for networks moving less than full trainloads. Such facilities, known as yards and sidings, need to be able to handle long trains and be laid out to permit rapid interchange between services.

Land

  All terminals require land. Some of this land exists within the industry's ownership, including that held by the Strategic Rail Authority, and needs to be regards as a long-term resource that may not be utilised straight away. It is essential that land for potential rail use is protected in local development plans. An immediate need is to protect land still owned by the British Railways Board.

  The full list of network investment schemes is too extensive to be included in this evidence. The full details are available in the EWS 10 year network investment plan that is available on our web site and can be supplied to the Committee. A summary of the key schemes is listed below.

West Coast Main Line upgrade

  Provision of replacement capacity and increased capability on the main UK freight artery. Includes commitment to provide 42 additional paths on the "slow" line.

East Coast Main Line upgrade

  Provision of a parallel freight primary route and increased capability as part of the upgrade for passenger services.

East Coast port routes

  Increased capacity and ability to move longer, heavier trains on east-west and Transpennine routes.

London route upgrade

  Development of existing routes to increase capacity and reduce journey times for freight traffic that has to travel through London.

West Midlands routes

  Re-open and upgrade routes to separate freight and passenger traffic through Birmingham. Reopen the Stourbridge to Lichfield route.

Gauge enhancement

  Enhance the loading gauge on key rail arteries to enable the movement of 96 containers, high capacity wagons and Piggyback services.

Funding of investment

  In parallel with the development of the 10 year network investment plan it will be necessary to identify the funding options.

  These include:

    —  direct funding of capital investment by the railway industry;

    —  direct funding of capital investment by customers;

    —  direct funding of capital investment by Government;

    —  direct funding of capital investment by third-party developers;

    —  direct funding of capital investment by other parties benefiting from the industry such as port and terminal operators;

    —  grant funding of capital investment by Government for developments underwritten by customers, infrastructure providers and operators;

    —  grant funding by Government to support the operating costs of traffic that would not otherwise move by rail but offers environmental and economic benefits.

  We do not support third-party funding recovered through access charges as this obscures the efficiency benefits that should be reflected in access charges.

  The sources of such investment could include equity, debt and leasing as well as Government funds. To maintain credibility the industry should be able to demonstrate that all efficiency reserves have been obtained either as a result of competitive pressure or by regulatory requirement.

  It is EWS's view that the primary role of the operators is to invest in rolling stock and facilities and systems associated with train operation. EWS is investing around £700 million in these areas. Given the speed and extent of operators' investment we are looking for others within the rail industry, Government and third parties to make the necessary investment in infrastructure.

Investment timing

  Investment of an essentially infrastructure nature takes time to put into place especially where planning permissions are required. To give customers confidence that the network will be able to accommodate freight growth it will be important for commitments to be made to the investment early in the life of the 10 year plan.

Decision criteria for franchise replacement

  EWS's prime concern with the franchise replacement process is that the needs of the freight railway are taken into account. Franchise bidders will be constructing service enhancements that will absorb capacity on an increasingly congested railway. There is a distinct risk that such aspirations, if accepted by the SRA, will adversely affect existing services and also absorb capacity necessary for freight growth. The experience of the West Coast Main Line upgrade shows the result of accepting one operator's expansion plans without taking into account the needs of other operators. The commitment by Railtrack to provide 42 additional paths on the slow lines of the West Coast Main Line only replaces existing spare capacity taken to allow the enhancement of Virgin services.

EWS recommendation

  EWS recommends that the Strategic Rail Authority should review the impact of Railtrack's efficiency potential on track access charges and subsidy.

  EWS recommends that the external benefits of existing traffic should be included in the assessment of the network investment plan.

  EWS recommends that the £5 billion network investment plan should be incorporated in the Government's 10 year transport strategy and that early commitments should be in the comprehensive spending review.

  EWS also recommends that the network investment plan should be incorporated in to the Strategic Rail Authority's freight strategy and overall strategy.

  EWS recommends that the Strategic Rail Authority should undertake a joint study with the Rail Regulator on Freight investment funding. EWS believes that the proposal to introduce third-party investment in infrastructure should be given serious consideration.

  The Strategic Rail Authority must protect freight interests during the refranchising process otherwise freight growth opportunities will be extremely limited.

June 2000


2   Maritime Statistics 1998, DETR. Back


 
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