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

Supplementary memorandum by RMT (RI 02A)


  The National Union of Rail, Maritime and Transport Workers welcome the opportunity to submit additional comments on the rail industry to the Environment, Transport and Regional Affairs Committee. In particular we wish to comment upon the question outlined in the terms of reference on Railtrack's past performance in renewing, maintaining and developing the national rail network and the likely impact of its plans for the future.

  As the largest rail union we are naturally concerned about the future of the industry. RMT believe that the fundamental problems with the rail industry will not be solved without public ownership. This is most crucial in the case of the network provider. However RMT has welcomed the Regulator's tougher stance and the recent announcement by Government of a ten-year investment plan for transport.

  Very recently we submitted comments on the Network Management Statement and the proposed ten-year spending plan for transport published by Government. In the pages below we repeat many of our comments in respect of the proposed investment. Also contained within the RMT submission is a critique of the current regulatory system, which we hope you will find useful in your consideration of this matter.


  RMT has campaigned for higher investment in our railways for many decades. Further, we have argued for a seismic shift of investment away from the promotion of individual road travel and towards public transport. Within this context we welcomed the publication of Railtrack's Network Management Statement 2000 (NMS2000), which, unlike its predecessors, does at least outline most of the railway schemes RMT has argued for over the past decade.

  Perhaps of even more significance than the NMS2000 is the subsequent announcement by the Government of a ten year spending plan for transport which substantially increases public investment in rail and, to some degree at least, attempts to outline how many of the projects suggested by Railtrack in NMS2000 will be funded.

  Yet while we do not doubt the Government's commitment to increase investment, RMT remains concerned about both Railtrack's approach to investment strategy and about their ability to deliver that increased spending. As we have stated already in this submission, many of these doubts arise because of the fundamentally flawed nature of the financial and regulatory structures of the railway since privatisation.

  Until the publication of the Government's Ten Year Plan, NMS2000 remained a wish list, albeit an improved, better research wish list than previous years' Network Management Statements which have represented a willingness by Railtrack to do only as much as they could get away with before falling foul of what was, at the time, largely ineffectual regulation.

  Equally while the NMS2000 is an improvement for a company, which frankly had plenty of improving to do, in terms of actually committed spending as against what might be it represents little of substance. The spending plans, outlined for the period 2001-12 consists of two distinct sets of proposed expenditure; committed spending and enhancement options:

£ billion
Enhancement Options
Recommended capacity options2.9
Other capacity options6.5
SRA Incremental Output Statements2.7
Station improvements2.4
New and re-opened lines4.6

  Our first key concern is the way that Railtrack continue to treat routine maintenance and renewals, certainly when they make their public pronouncements, as part of overall investment. This is what leads to headlines proclaiming Railtrack's £51 billion spending plans. It is inappropriate and also misleading to the public for routine spending to be labelled in this way and RMT has had cause to complain about it on numerous occasions since privatisation.

  RMT are concerned that recent reports in the press indicate that the Rail Regulator may make a significant concession to the company in negotiations on the Regulators five-year review of Railtrack operations. The Regulator may increase the defined value of Railtrack's asset base and agree with the company that renewing the track has enhanced the network. RMT hope that these reports turn out to be unfounded.

  It should go without saying that Railtrack expenditure to maintain track, signalling and stations and to replace materials and plant as and when it reaches the end of its useful life. The travelling public would expect as much in our view. New investment is what counts, and despite all the hype, actual committed investment in enhancements to the existing railway within NMS2000 amount to, by our calculations, just £4.2 billion with almost two-thirds of that spending on just two projects:

£ million
West Coast Main Line Phase 1&21,940
Sunderland Metro90
Leeds Station34
Cardiff Central13
Aberdeen Freight Terminal10
Thameslink 2000830
TPWS cab installation310
Disabled access improvements290
Other unspecified schemes634

  We have no wish to decry this programme, containing as it does many improvements that we welcome such as WCML, Thameslink 2000, disabled access and TPWS. However, given the parlous state of the railway, it remains an insubstantial list of localised projects, which in terms of an overall strategy to transform the railway, speaks volumes about Railtrack's timidity and lack of vision.

  RMT conducted a survey of Railtrack signallers, supervisors and associated grades. RMT asked these employees what they thought of investment levels as proposed by their company. 69 per cent stated that they believed Railtrack was not investing enough. We suspect that, notwithstanding the Government's 10 year spending plans, most rail travellers would agree with our members that there is not enough investment, and that what there is, is not necessarily in the right place.

  RMT is a long-standing supporter of the electrification of key routes. Electrification, as well as being the most environmentally efficient form of railway investment, also allows train operators to get away from reliance upon diesel, which is becoming ever more price volatile.

  Yet electrification of our network, while once a priority of British Rail has slipped down Railtrack's agenda over the past five years. At the start of the 90s, one-third of the network was electrified. Now, a decade later, that figure remains unchanged.

  Of even greater concern is that under NMS2000, Railtrack propose to increase the proportion of the network electrified over the next 12 years by only 0.3 per cent.

  Compare this to the progress made in previous decades:

YearRoute Kms open for traffic
Increase+22.3 per cent
Increase+13.6 per cent

  Turning to the uncommitted elements of NMS2000, RMT broadly support the schemes suggested for action. We are particularly concerned about the need to bring forward schemes that will increase capacity in and around London and the South East.

  There is a desperate need to increase platform lengths across the franchises, to upgrade the Waterloo routes to the South West, and to begin work on modernising the Great Western routes into Paddington.

  RMT is attempting to be constructive about Railtrack's plans, and the Government's commitment to provide consistent funding over the next decade means that there is now little excuse for the schemes not going ahead.

  That said we remain concerned about two key questions. The first is the ability of Railtrack to deliver investment in the light of all known experience so far. The second is the demand forecasts that appear to underpin both Railtrack's plans and those unveiled by the Government as part of the Ten Year programme.

  Turning first to delivery, Railtrack's stewardship of the West Coast Route Modernisation, for example, brings into question its ability to manage major projects effectively. This project has been in Railtrack's hands since privatisation.

  In December 1999, Railtrack announced that the costs of the project had increased substantially from an original estimate of £2.3 billion to a current projection of £5.8 billion. Reminiscent as this is of the overruns incurred on some other private sector rail infrastructure projects like the Channel Tunnel, such a situation had been almost unheard of when the railway was under the stewardship of British Rail. The East Coast Main Line Electrification, for example, was completed in 1991, on time and within budget.

  We note that the Government now intend to bail Railtrack out by providing some £4 billion of state funding for the modernisation of the West Coast Main Line, and that Railtrack now believe that expenditure will be even greater than was envisaged last December. It is our view that the West Coast Main Line must be modernised. The line was last upgraded in the 1960s, and has suffered since the mid-1980s from the unwillingness of Government to finance upgrading.

  RMT, like many other observers, remain concerned that the bargain between the State and Railtrack is decidedly one way. What incentive has Railtrack to get projects like the WCML right, to deliver on time and to budget, when it knows that—even under privatisation—the State will bail it out. Looking deeper, it is difficult to see how the taxpayer is obtaining a fair deal when the Government is paying for the line to be overhauled yet Railtrack will still remain the owner upon completion.

  We also remain concerned at the demand forecasts that are implicit behind both Railtrack's plans and those announced by the Government. In the document Transport 2010—The Ten Year Plan the DETR set out their key assumption for rail:

    "On current forecasts rail passenger demand will grow by 34 per cent over the next 10 years, but capacity constraints on the network would limit actual growth to 23 per cent. Providing additional capacity and improved services is forecast to increase this to 50 per cent."

  We welcome the Government commitment to increase use of the railway, as measured in passenger kms by 50 per cent over the next 10 years and note that Railtrack themselves believe that demand may grow by as much as 64 per cent over broadly the same period.

  Our problem with this analysis is that, in RMT's view, whether demand rises in this way or not, the railway will still need modernising. Yet, the Government itself is underpinning most of its hopes for increased private sector investment on an increase in fare revenue, with some 60 per cent of investment forecast to come from the revenue generated by extra demand.

  Indeed, there is great hype surrounding the current demand upswing for rail travel despite the fact that growth has only been sustained for five years following an immediate fall after privatisation:

93-9494-95 95-9696-9797-98 98-99

  Even with this substantial growth, rail demand remains only slightly higher than in 1988-89 (34.3 billion), the last big peak in traffic and this illustrates RMT's point well. New investment can and will increase traffic, as the East Coast Main Line project illustrates. However, a substantial part of rail demand remains closely tied to economic growth—particularly on commuter routes.

  During the late 1980s' demand grew at significant levels—with an increase of 15.4 per cent between 1985 and 1989. Yet by 1994, demand had fallen back almost to its 1985 level:

84-8588-89 93-94

  This indicates that rail demand is substantially more vulnerable to recession—or even a lesser growth—than either the Government or Railtrack have taken into account.

  RMT make this point not to talk rail down. We believe that substantial investment and better pricing policies can and will increase traffic. Rather, we are concerned at the effect even a mild recession may have on an investment programme that even the Government admit is heavily dependent upon the private sector. It seems that the Government and Railtrack have ignored this fact.

  Similarly, whilst we note that the Government has stabilised revenue support to the train operating companies (and hence to Railtrack) at an average of £1.13 billion a year for the next 10 years it remains the case that this is substantially below the average subsidy provided in the five years immediately following privatisation:

PUBLIC SUBSIDY 1994-95 TO 2011
Year£ billion
Average Annual Subsidy94-95 to 95-99 1.9
Average Annual Subsidy2000-2010 1.13

  Subsidy has reduced during the past two years, but this has been against a backdrop of buoyant demand and even with the increases in public subsidy agreed by the Government for the next 10 years our concern is, again, that a deterioration in economic conditions will lead to a dramatic hiatus in private sector rail investment, as well as an unwillingness of train operators to bring forward schemes for partnerships with Railtrack. In short, such companies will be under the type of commercial pressures that have not been seen since privatisation and their reaction will be unpredictable.

  We note that the SSRA's solution to this scenario is to seek franchise partners who are "big enough to withstand a recession and keep investing". Our experience is that under poor economic conditions it is always the major infrastructure projects that are put on hold first, and a good example of this would be the ill-fated private involvement in the Jubilee Line extension.


  The Network Management Statement has set out a wish list of possible investment in the rail network. Railtrack have made it quite clear that significant levels of funding will have to be forthcoming if all these schemes are to go ahead. With the total level of potential investment at £51.5 billion over 12 years this is not unexpected. What is disappointing is the fact that the state of the rail network has declined since Railtrack became its guardian.

  The Office of Rail Regulator is of course well aware of the problems. The company have been the subject of record numbers of complaints. Last year the Rail Regulator voiced his concern over the numbers of broken rails and a critical report from Booz-Allen and Hamilton on the state of the network.

  It has been hard to determine the exact state of the network, not least because Railtrack has been unable to provide accurate information. The above report still represents one of the few proper studies on the state of railway assets. The report analysed track quality across the whole network between 1995-95 and 1997-98 and found that more of the track was in a "poor" or "very poor" condition by the end of this period. They also found that track assets have aged across the network.

  The report also compared the rate of track renewals by Railtrack with those on other rail networks in Europe. In the UK track renewals averaged around 1.3 per cent during the control period whilst other European railways averaged around 2-3 per cent per annum. In addition this rate of renewal was significantly below the estimated renewal rate of 2.2 per cent quoted in the Railtrack 1995 Business Plan.

  It has also been the policy of Railtrack to extend the life of existing signalling assets and the report expressed concern that the company may not have sufficient knowledge of existing signalling assets for this not to cause a backlog of work in the future. The station regeneration programme has been concerned with maintenance rather than renewal. The report states that the current renewals expenditure on stations may need to be expanded if customer expectations are to be raised. In addition RMT remain concerned that much investment in this area has been concerned with creating shopping havens that of course generate additional revenue for Railtrack but do little to enhance the operational capacity of the railway.

  The report concluded, "Overall, it appears that the physical programmes have in aggregate been below those which were envisaged at the time of determination. It is likely that there has been a decline in the underlying quality of the network assets as a whole".

  The deteriorating state of the network has also meant redundancies for many maintenance and renewal workers. In 1998 infrastructure companies advised RMT that Railtrack were concentrating most renewals work on the West Coast Main Line. Maintaining the life of existing assets was the preferred policy of the company, and this was confirmed by Railtrack in comments in 1998 to the trade journal New Civil Engineer. Since Railtrack has become the custodian of the rail network there has been a significant reduction in the number of track workers employed on maintenance and renewal work. [4]

  Earlier in the paper we referred to the high levels of Government support to the railway in the years immediately following privatisation. Public subsidies for rail in the last two years immediately before and after privatisation were as follows:
Year£ billion

  RMT are concerned that the additional Government money that will now be made available to Railtrack will be used to fund the backlog of maintenance for which they have already been paid. It is our view that Railtrack should be able to not only clear the backlog of maintenance referred to above but also fund substantial levels of investment before any further claims are made on the taxpayer.

  The last annual report published by HM Chief Inspector Of Railways (1998-99) on the safety record of the railways in Great Britain gives further cause for concern. The report looked at three quarters of the rail network, based on route miles, with latest data from mid 1998. It concluded that track quality on Britain's national rail infrastructure, at sample date of June 1998, was getting worse. 45 per cent of the network was judged to be static, 33 per cent was in decline whilst 22 per cent was getting better. The report advised that this was bound to affect safety at some stage if this was not reversed.

  Concern was also expressed over the role of contractors in keeping the track in a safe condition. Significant numbers of derailments have been investigated by HMRI where the condition of the track was a major factor.

  In the last few months the Rail Regulator has expressed further concern over the state of the network. In August 2000 he decided to order a team of professionals to sort out the problem. The significant increase in the number of broken rails confirms RMT's evidence. In the four years between 1994-95 and 1998—99 there was a 42 per cent increase in broken rails. Railtrack promised to reduce the number of breaks to less than 450, but in the last two years the number has been well in excess of 900.

  RMT is also aware of the critical submissions that have previously been made to the Rail Regulator by other rail companies on the performance of Railtrack. In submissions to the Rail Regulator made last year the freight company English, Welsh and Scottish Railways, and numerous train operating companies were highly critical.

  Train Operating Companies complained of the network provider's very loose definition of replacing parts of the network in a "modern equivalent form". Central Trains sited the company extend the lift of signalling systems rather than replacing them. The Managing Director apparently stated that "The new policy of expanding the life of existing signalling installations in preference to large scale renewal may well inhibit the possibility of improvement in the capacity and capability of a number of routes" (Sunday Business, 19-9-99).

  Connex South Central complained that they had been waiting since 1996 for the replacement of a broken wheel lathe in their maintenance depot at Selhurst, South London. Wheel lathes play an important part in helping train companies avoid delays caused by leaves on the line. Apparently the dispute revolved around Railtrack's insistence that a 17 per cent return be earned on the new lathe while Connex wanted to pay only 8 per cent.

  Railtrack are only responsible for one part of London Underground's network; the northern end of the Bakerloo Line. The experience of train operating companies has been replicated here. LUL had to threaten to suspend the track agreement before they could persuade Railtrack to take their concerns over track quality seriously, and start the planning process for restoring the line to the higher standards of maintenance inherited from British Rail.

  Recent reports have indicated that these problems are still occurring. The Financial Times recently reported that Connex South Eastern was going it alone in plans to revamp southeast commuter stations after Railtrack stated that it was unable to provide funding. The Connex commercial manager for Chatham and Medway told local council members that the £5 million plan announced last year had been indefinitely suspended, and that Connex would now go ahead with the scheme but the initial planned investment would be cut by £2 million. While RMT does not accept it is necessary to turn stations into mini shopping centres, this continues a disturbing trend.


  The previous Government considered a number of options for the structure of the newly privatised rail system. In the event they opted for the worst of all worlds. The privatisation options placed before the Secretary of State had recommended that if the track authority and train service providers were to be separated ownership of the network should be with a publicly owned company which could then charge private companies for the right to run on the network, as for example happened in Sweden.

  The regulation of the network was also split. The Rail Regulator was charged with overseeing Railtrack, determining their track access charges and ensuring they properly invested in the network whilst protecting the interests of users of the network and the passengers. The Health and Safety Executive oversaw safety, whilst OPRAF were responsible for securing the rail passenger services through franchise agreements with train operating companies and liaison with Railtrack. The duties of OPRAF have of course now been taken over by the (Shadow) Strategic Rail Authority established in July 1999.

  In addition to the former functions of OPRAF, the SSRA has a wider strategic brief for the rail network, seeking to bring in investment and improving the overall quality of the network for the benefit of the consumer. The SSRA also has the residual functions of the British Railways Board and following the enactment of the Transport Bill will take over consumer issues and freight grants from the Rail Regulator and the DETR respectively.

  RMT have welcomed the setting up of the (Shadow) Strategic Rail Authority and their strategic view over the network. However the structure of the rail industry set up for privatisation in 1994 remains intact. The rail industry was fragmented into over 100 companies overseen by a complicated yet often largely ineffectual regulatory structure. The fragmentation of the industry inevitably has implications for health and safety when so many different interfaces have been created.

  All the new rail companies are seeking to operate as efficiently as possible and make a profit in an industry that had previously operated as an integrated whole for the benefit of all. The focus of performance can override more important factors. For example Railtrack were last year threatened with a fine of £10 million for failing to reduce train delays. It is of course right that Railtrack must be made to ensure that the infrastructure is in good condition but a fine of only £1.5 million was imposed on Great Western for an offence under the Health and Safety at Work Act following the Southall train crash, (see evidence already submitted).

  Separating the infrastructure of the network from the operations, leasing the track to private sector companies, and selling the whole network to a private sector company where commercial considerations are also to the fore has created an unwieldy regulatory systems.

  Planning for the whole industry, and accountability has been made more difficult by the fact that the public subsidies assimilated into the charging regime of the industry are determined by two regulators. The Rail Regulator sets the track access charges that the Train Operating Companies pay to Railtrack whilst the SSRA determines the level of government subsidies and incentives to the Train Operating Companies through the franchise agreements. In addition under the new Rail Passenger Partnership Fund the SSRA also now invests certain sums of money for the improvement of local rail services. The level of public subsidy to the railway and the benefits that are returned to the taxpayer are therefore not transparent.

  Despite the fact that increased levels of subsidy have been pumped into the railways, the newly privatised industry has not delivered. OPRAF reported that more than £1.2 billion was given by the taxpayer in public subsidies to the passenger train operators in 1996-97. In the same financial year over £2 billion in public subsidy was given to the industry as whole. The National Audit Office reported that the rail industry still received £1.8 billion in overall public subsidies in 1997-98.

  The level of subsidy going into passenger services has increased significantly in the years immediately following privatisation. The Train Operating Companies awarded the franchises to run passenger services were usually those with the lowest bids for public subsidy and therefore the initial levels of public subsidy were actually determined by the prospective operators and the demands of their shareholders and not Government.

  The increased levels of public subsidy have not guaranteed decent levels of services on all routes. Many train operating companies have made rail workers redundant in an endeavour to deliver higher levels of profit. South West Trains laid off so many drivers that numerous timetabled trains had subsequently to be cancelled. However the most serious problem is the actual state of the network. For Railtrack commercial considerations have consistently received priority, and it is only now following welcome pressure from the newly installed Rail Regulator that the company have started to talk about the sort of investment that the rail network so desperately needs.

  The present regulatory structure, and the part played by the SSRA (previously OPRAF) and the Rail Regulator has so far determined the level of public subsidies. The amount of Government money going into the railways has now been reviewed and it seems likely that far more money than originally envisaged will go into the network in order that Government plans for greatly increased capacity can be achieved. However at the time of privatisation the taxpayer was promised declining levels of public subsidies (£0.9 billion in 2002, until the recent review by Government) with still further reductions in subsequent years.

  Any reduction in the level of track access charges would make Railtrack's cost recovery very difficult without a significant increase in business. Increased business will not be generated without substantial investment and this will not be forthcoming from Railtrack if their guaranteed income stream is reduced. The levels of track access charges are the most crucial factor in helping to determine the subsidy needed by train operating companies for running passenger services. That said we are concerned about the attempts by Railtrack to railroad the Regulator into allowing higher track access charges, and we remain sceptical about Railtrack's claim of borrowing difficulties for investment under the current regulatory regime.

  The structure of the railway industry is incapable of delivering the efficiency gains spoken of at the time of privatisation. It is the view of RMT that public ownership of the network provider would enable higher levels of investment. Instead the convoluted and inefficient structure of the industry will mean indefinite levels of subsidy and state funded investment at least as high as those made to British Rail, irrespective of funding for additional network capacity.

  We have constantly argued that Railtrack has a clear conflict of interest between its duty to provide a safe, efficient and modern railway system and its obligations to its shareholders. There is real concern that at least some of the extra Government grant will be diverted to Railtrack shareholders. In total Railtrack has so far diverted £750 million to shareholders, of which £175 million was paid to the Treasury in tax. This revenue could have been used for maintenance and renewal of the network.

  Given the spending commitments now provided by Government to the railway on behalf of the taxpayer, we find it inconceivable that the state should not seek something in return. Our immediate preference is for the Government to take an equity stake in Railtrack equivalent to the money that is to be spent. This way Government can have far greater influence in co-ordinating investment for the overall benefit of all users and passengers on the rail network.

October 2000

4   RMT wrote to the Deputy Prime Minister, and Sir Philip Beck, Chairman of Railtrack, in September of 1999 expressing serious concern over the lack of maintenance and renewals spending on the rail network. Back

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