TUESDAY 12 DECEMBER 2000 _________ Members present: Mrs Gwyneth Dunwoody, in the Chair Mr Andrew F Bennett Mr Brian H Donohoe Mrs Teresa Gorman Mr Stephen Ladyman Miss Anne McIntosh Mr Bill O'Brien Mr Bill Olner Mr George Stevenson _________ EXAMINATION OF WITNESSES RT HON LORD MACDONALD OF TRADESTON, CBE, a Member of the House of Lords, Minister for Transport, and MR BOB LINNARD, Director, Railways Directorate, Department of the Environment, Transport and the Regions, examined. Chairman 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 identify yourself. (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 might mean. 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-reaction - his word - and that people are thinking he 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 is unsatisfactory. 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. Mr Stevenson 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 money? (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 stake holders, 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 aware - I am sure you are - that 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. 960. In return for this massive amount of money, which I will return to in a moment if I might, you have said to the Committee today that the quid pro quo for that is to encourage Railtrack to be "better managed". (Lord Macdonald of Tradeston) Better managed. 961. Is that the deal? (Lord Macdonald of Tradeston) It must be better managed and better regulated. 962. Lord MacDonald, are you aware that the current capitalisation of Railtrack is between œ4 and œ5 billion. (Lord Macdonald of Tradeston) Indeed. 963. You will also be aware then that the œ4 billion grant that the Government has agreed through the SRA to be made is almost the total capitalisation of the company. Do you not feel it is a little strange and would not the public at large find it a little strange that here we have a Government giving as a direct grant to Railtrack œ4 billion which is nearly the total capitalisation of the company without taking some direct involvement in that company? (Lord Macdonald of Tradeston) We are investing to try and build a better social railway and I think that that is entirely desirable as an aim. At the same time we obviously do not want to weaken the company in any way, but I do not think that the monies that are going in would be parlayed into its market capitalisation. 964. I think it was last week when Mr Marshall, the current Chief Executive of Railtrack, was here that he was asked two direct questions on the œ4 billion. He was asked what would happen to the West Coast Main Line project if œ4 billion was not available and he said it would not go ahead. This is not encouraging better management. This is not having a perverse influence, as some of the newspapers and some of the people in the industry would have you believe (who have their own agenda, I suspect). This is the Government effectively financing a massive project that Railtrack should have financed themselves. The second question he was asked was if Railtrack have to finance this œ4 billion on the capital market what would be the cost to Railtrack and his answer, I paraphrase slightly, is they would have to offer a rights issue of some œ1 billion. So in effect the Government is giving Railtrack œ5 billion. How can it be then that you are so reluctant to see your way clear to protect the public interest by making sure that that money is spent effectively rather than this wish list of "we hope they are better managed". (Dr Shannon) We believe that with the influence of the Regulator and the Strategic Rail Authority that the public monies will be well monitored and well spent. I accept, as you say, that there could have been other ways of reorganising a railway after it was privatised, but we are where we are and rather than go for the possibility of restructuring, with all of the consequent upheaval that might go with it, we have gone for a strategy of trying to support the industry with investment, but under careful monitoring and regulation. Mr Stevenson: I think, Lord MacDonald, most members, if not all, would agree with that proposition. We want to support the railways, we want to see more investment. What is biting at my tongue, so to speak, is the notion that we can give a private monopoly company more than the capitalisation of the whole company, "Here you are, free, gratis, off you go, get on with it", and then at some stage in the future, not defined, we hope they will be better managed. That does not sound like a deal to me, that sounds like a one-sided arrangement that a private monopoly will benefit from. Chairman 965. Mr Linnard, do you have the magic answer? (Mr Linnard) The figure of 4 billion, which is the cost of exceptional renewals, mainly for the West Coast, spread over a period of at least five years, probably needs to be compared with Railtrack's annual turnover with the market capitalisation. The annual turnover is 2.5 billion, something of that order. It is perfectly true that if the money for West Coast Mainline and other projects was not coming from the Government then the project would not go ahead because Railtrack only has ultimately two sources of revenues, that is the Government or the fare box, via train operators. What the SRA are doing with the money that is going into Railtrack, either through access charges or through direct grants - it is not giving Railtrack the money - is purchasing enhancements, improvements to the railway, which otherwise would not be forthcoming. Mr Stevenson 966. Mr Linnard, that is very interesting but that is not the impression we are getting. Last week Sir Alastair Morton in evidence in response to a question described this 4 billion as, "It's a gift". You are saying, "We are not giving anybody anything". He is very clear in his mind it is a gift. It is free, gratis, it is a gift, and without it the scheme would not go ahead. Given the amount of Government money that is part of Railtrack's revenue, the centre of their revenue, and these capital grants 14.7, nine billion over ten years and four billion in the short-term, is it not effectively a Government agency? (Lord Macdonald of Tradeston) It is not a Government agency, it is clearly a public limited company. It is clearly the agent of Government policy, particularly at the level of, if you like, to paraphrase Sir Alastair, of its utility activities of selling track access to companies. Sir Alastair, as you know, goes on to say that it does have another area of activity, which is to try and enhance and expand the railways, and in that way it can have a double function. Mr Stevenson: Thank you. Chairman 967. Do you think they have been carrying that out properly over the last three years and they need all of this money now? (Dr Shannon) Clearly they have not been carrying it out properly when we see the extent of problems on the track and difficulties in the relationships with the maintenance sub-contractors. There have been management problems in the company and I hope that the new management will address those urgently. 968. Because we know they cannot manage, because we hope they are going to get better, we are going to give them a whole lot of money and say, "Here you are". (Lord Macdonald of Tradeston) We believe that with the crisis in the railways at the moment the best course is to try and give as much support as possible to all of the parties who are trying get the railroad back and running again. That is priority, to make sure that their promise that there will be significant improvements by the end of January is, in fact, delivered and that, as they see it, the tail-ends of the problems will be sorted by Easter of next year. 969. The tail-ends, is that the day-to-day running, most trains being about an hour or two hours late? (Lord Macdonald of Tradeston) They said to us - and there is a meeting going on at this moment - they will be able to deliver a significant improvement by the end of January. There will be then a tail of work that has to be done. We said that we hope that is a short tail and not a long tail and they have assured us that it should be completed, with the railways back to normal by Easter. Mr Bennett 970. As long as it does not snow. (Lord Macdonald of Tradeston) As long as it does not snow or flood or do anything else. Chairman: Which normally happens in the winter, I understand. Mr Olner 971. I would like to ask the minister how confident he is that those predictions, that things will be mostly back to normal by the end of January, are accurate? (Lord Macdonald of Tradeston) We have put our trust in the effort that we see being made by the week. There were around 20,000 people out at the weekend and I was told just before coming here that approximately 28 miles of track were re-railed last week. 972. I do have to say, Lord MacDonald, and I travel by train every week, since this crisis started my journey from Nuneaton to London, which is just over 100 miles, has got later all the time this crisis has gone on, even with the new timetable. When it should take two and a half hours, it is taking two and three quarter hours. I put it to you that the public out there are losing confidence very, very quickly in your ability to ensure that Railtrack and the rail companies do deliver what they promise. (Lord Macdonald of Tradeston) Would it help, Madam Chairman, if I told you what had been promised to us today by Railtrack and what the situation is said to be on the railways? Chairman 973. Was that before or after you read the article in The Mirror saying that a man who had never been on railways before was made the supervisor for the day of a gang, when he was colour-blind and inexperienced? (Lord Macdonald of Tradeston) It was actually after I had held a meeting with Railtrack and the Health and Safety Executive on that very matter. You will see that Railtrack have made a statement about that article in The Mirror. It is something that we have said that we will pursue. I did hold that meeting and then I got the information about the action group. 974. Give us the figures, Lord Macdonald, anything is manna in the desert. (Lord Macdonald of Tradeston) Let me say that as at 11th December the number of speed restrictions is down from a total of 553 to 538 over the week. It has to be remembered that the work on assessing the damage inside the network is still going on. The number of 20 mile per hour speed limits has been reduced from 451 to 379. The 40 miles an hour down from 69 to 45. The number at 60 miles an hour up from 83 to 114. The number of services running normally in percentage terms as at 11th December, of the normal services running, this is trains leaving - leave aside their punctuality - is inter-city 78 per cent are running, and of London commuting trains, 93 per cent. 975. Can we agree the definitions? The definitions is as they leave. Can we have some indication of where they go or whether they get to wherever they are supposed to go? (Lord Macdonald of Tradeston) That is my next line. The percentage of normal services which are running is 78 per cent intercity, 93 per cent London commuting and 96 per cent elsewhere in the country. Of the percentage running punctually, 64 per cent of inter-city trains, 65 per cent of London commuting and 76 per cent elsewhere in the country. Mr Olner 976. Are these percentages on the new timetables? (Lord Macdonald of Tradeston) These are on the current timetables and these are figures that come from the train operating companies. 977. I do not think those figures are correct because even on the new emergency timetables they are still not delivering. This is what is causing the frustration, where people plan on an emergency timetable and still cannot get there. (Lord Macdonald of Tradeston) These are compared to the current timetables. That is figures given to us by the train operating companies. Chairman 978. We are agreed this is the United Kingdom, are we? (Lord Macdonald of Tradeston) I should say that as far as the train operators are concerned, in terms of the percentage of normal revenue they took for the weekend of 9 December 87 per cent of their normal revenue. Chairman: It just shows what piracy leads to, does it not? Mr Olner 979. Do you think the Post Office, given what some people would say are reasonably good efficiency figures, over-reacted in moving most of their Christmas mail off rail and on to plane and road? (Lord Macdonald of Tradeston) I had a meeting with the Royal Mail people, with EWS, the freight company, and I had a chance to discuss these matters with them last week. They had a percentage of first class mail going by EWS and that has been transferred to road and plane. There will be, I understand, compensation paid by EWS on a contractual basis to the Royal Mail and they in turn will have a contractual relationship with Railtrack, but there was an interesting article, too - you may have seen it - in the leader article in The Times yesterday about the other problems inside the Royal Mail that may be delaying some of the post. Chairman 980. Royal Mail are controlled by a regulator, they have targets, they are expected to meet certain commitments in the same way railway companies are and I have been talking to them since this began. Does it not seem to you that they have contractual obligations, they have been working hard and they have been very badly treated? (Lord Macdonald of Tradeston) Indeed. It is clearly something that is of great regret to us because we are very concerned about the delivery of the mail, but I know it is of great concern to EWS as well. They are working hard obviously to keep the relationship with the Royal Mail. Railtrack tell me that they too are trying to ensure that the Royal Mail trains which predominantly travel on the main lines will be improved as soon as possible, but they have also got other priorities concerned with the commuter services particularly around London, so it is a job for them to try and find a balance in all of this. Again, we have the freight companies, Freightline and EWS, with the Rail Action Group at this moment. Mr Olner 981. Can I ask how quickly this compensation will come through to these companies? I have a company in my constituency, Links, which took over the old British Rail Red Star Parcels and it has failed because there are no parcels coming by train. How quickly will that company be able to go through all the minefield of recovering compensation? Will your recovery team be giving some direction in this? (Lord Macdonald of Tradeston) I am at a disadvantage because the Rail Action Group is meeting at this moment and discussing the freight question. But having brought it to my attention, certainly if there are issues like that on particular companies I will very happily take it up with the companies involved. 982. Finally you mentioned changes in Railtrack's management. I know it has been a few minutes since you said it but it sounded rather to me like certain sort of creatures jumping off ships. Do you think the recent senior management changes at Railtrack give enough prominence to engineering and technical considerations? (Lord Macdonald of Tradeston) That is certainly a concern we have expressed and others have expressed publicly. Railtrack moved to allay those concerns by bringing forward a number of engineers into higher ranks inside the company. Miss McIntosh 983. If I could remind the Committee of my interest declared. Is there a crisis in the rail industry, Minister? (Lord Macdonald of Tradeston) There is a crisis, indeed I think it is a multiple crisis, as I tried to say unsuccessfully the other day. 984. In your view has the Government contributed to this crisis? (Lord Macdonald of Tradeston) I believe that the Government has tried to manage the crisis. As I said last week, it is a multiple crisis. Part of the crisis is one we have inherited with the fragmentation of the railways and also the lack of investment in the railways over many years. 985. In your view would you support the separation of the track and the ownership of track from the operation of services on that track? (Lord Macdonald of Tradeston) What my priority is at the moment is to make sure the railway gets back and running. I therefore am concentrating all my efforts on making sure that the system as it exists at the moment works as efficiently as possible because to contemplate any radical changes in that at the moment might be destabilising. 986. Are you prepared to review the role of the Regulator insofar as the performance targets such as punctuality that the Regulator is setting may conflict with the safety requirements? (Lord Macdonald of Tradeston) As you may have heard from Sir Alistair Morton, he has a number of working groups sitting at the moment and they bring together all sides of the industry to try and ensure that any perceived conflicts that there might be between efficiency, punctuality and safety are tackled and dispelled. We do not believe, and I am sure Alistair and Mr Winsor have said to you that they do not feel it is incompatible to run an efficient company and a safe company. 987. When in your view did the problem of gauge corner cracking first become appreciated in this country? (Lord Macdonald of Tradeston) My knowledge of it is only since the Hatfield disaster. I am told that engineers were aware of it but not that it had spread so widely or indeed its propagation, as they call it, could take place in rails that were perhaps only a year or two old. I think the assumption had been that the track would have to be much older than that before this phenomenon hit it. We do have studies going on at the moment and we look forward to hearing within a matter of days just what the initial conclusions have been of those studies. 988. In evidence we took from Tom Winsor, the Regulator, last week, page 25, paragraph 879, I asked the Regulator what would happen if the franchised passenger operators cannot pay the amounts because the numbers of people and amount of freight do not materialise over a five-year period. He told the Committee that they would get it from the Government, the Government would have to pay more. Is there any provision for extra payment if by the end of this year or next year there are fewer passengers and freight travelling on railways? (Lord Macdonald of Tradeston) First I should say it is an anticipation shared by the industry that they can get back to the previous levels of passengers on the railway in a relatively short time, and I hope the same will be true of freight although that will need further inquiry. Inside our ten-year plan there are unallocated provisions there which might be able to help fund any kind of unexpected shortfall of that kind, but at the moment we have not made any provision for it. Chairman 989. Mr Grant, on the other hand, said he would accept it if companies went bankrupt. (Lord Macdonald of Tradeston) Indeed, I think Mr Grant and Sir Alistair would accept that if a train operating company was not viable then it could indeed get taken over or go to the wall in the normal course of business, but, as you know, Sir Alistair has powers of last resort were a company not taken over but there does not seem to be any shortage of interest in those companies that have been less than financially robust in the past. Mr Bennett 990. How much is this unallocated money? (Lord Macdonald of Tradeston) I will let Mr Linnard come in here. (Mr Linnard) I have not got the figures with me but it is quite significant in the latter period of the ten-year plan for unallocated transport capital. 991. I would like to get to the bottom of how much money there was that was not allocated. Presumably you had to fight Treasury to get the money so there must have been some vain hope that it would be spent on something. Are we losing something in order to get the money for this purpose? (Mr Linnard) There is a sum of money in the ten year plan, largely in the years five to ten, which is allocated to transport capital but not allocated as between road or rail or the other spending programmes within transport. That is simply because it is impossible to set with total precision the allocation of capital spend across the different modes and across the different programmes. 992. Are we going to get a by-pass in order to get us out of this difficulty? (Mr Linnard) That does not follow. 993. What does follow? Can you give us some clear information? Presumably you did argue fairly strongly with the Treasury that that money was needed for something. If it was needed for something and if it is going to be spent in a different way, we are not going to get what it was needed for. (Mr Linnard) Out of the total expenditure provision in the ten year plan there is a total of about nine billion which is unallocated. One would expect, anyway, that railways would get a proportion of that when the spending priorities and the investment cases become clearer. Chairman 994. Investment as opposed to reimbursement for losing passengers and income. (Mr Linnard) Yes. I think that is a distinction that we need to keep very clearly in mind. What Mike Grant was saying, I would imagine, is when he is awarding franchises there is no total safety net that stops a private sector train operator from ultimately going bust. What Mr Winsor, I imagine, would have been saying in the evidence that he gave is that what he has set in his periodic review is the amount, in his judgment, which Railtrack needs to maintain and renew the core railway over the next five years. That is money which is due to Railtrack and has been settled by Mr Winsor on the periodic review. Chairman: To increase its payment in dividends. Miss McIntosh 995. Would you agree, Minister, that safety on railways over the last ten years has been infinitely greater than safety on the road? What are you doing to boost confidence in the railways and to encourage people to go back on to the railways? (Lord Macdonald of Tradeston) I, of course, agree that railways are a far safer mode of travel than on the road. It is true too that over the past ten years there have been some significant area of progress in terms of better safety on the railways - signals past at danger have been coming down steadily across the last decade. If you look at the numbers of serious incidents in terms of collisions or derailments, there is a downward trend there too. We always have to bear in mind that inside those generally encouraging statistics there is the possibility of the awful disasters we have seen at Paddington, Southall and most recently at Hatfield. Chairman: Mr O'Brien. Mr O'Brien 996. Minister, my interests are heightened when you talk about, if some of these operating companies do not do well there is plenty of other people lining up to take-over; is that correct? (Lord Macdonald of Tradeston) From the limited experience we have there has not been a shortage of interest in people looking to take over companies that might have been weakened. There have not been too many companies, as I recall, in that condition. 997. It is a fact that shares in GB Railways and Anglia Railways franchises have fallen to an all time low and some of the companies are saying that if they do not increase their income, their profits, then they will go to the wall. This is happening. What contingency plans are the Government operating to ensure that any new bidders will take over the consequences of safety and other issues without further subsidies. (Lord Macdonald of Tradeston) The Strategic Rail Authority are deferring penalties that they might have been collecting. I also believe that Railtrack's board have taken a decision to try and stand behind companies that might be in temporary trouble for cash-flow, and so on. 998. Would you agree that, perhaps, some of the problems that are causing a reluctance to invest in rail are because of the fact of the shortage of skilled staff? (Lord Macdonald of Tradeston) I think there has been a problem of de-skilling across the railways. We saw it, and also skills shortages created in some areas after privatisation, when, for instance, train drivers were paid off and then there had to be an attempt to recruit them back very quickly after that. We can see too, just on the increase in salaries, for instance, that the shortage of staff there has lead to an increase in salary to try and attract more people into those grades. More broadly it was judged a couple of years ago to be a developing problem and, indeed, the mechanisms were set up to try and increase training in the railways. The comments made by the Department for Employment and Education showed that the take-up, for instance, of some of the vocational qualifications inside the railway are very low. There is a real problem with training in the railways. Of course the ten year plan with that 60 billion extra investment could exacerbate that. At least the comfort we can take is that if you have a ten year commitment to investment and expansion then companies should be able to begin to recruit and train with greater certainty than in the past. 999. Is there any matter or any issues involving the new franchises where they have to apply skills training and there has to be an upgrading of skilled staff in the companies? Is this written into the franchises? (Lord Macdonald of Tradeston) I am not entirely clear, maybe Mr Linnard would know. (Mr Linnard) It is certainly one of the things that the SRA look very carefully at when they are judging between different bidders and when they are taking decisions on who should be allowed to qualify for bids. I am not sure whether they look specifically at training, but they certainly do look at technical and managerial competence in some detail. What the SRA have also done as a cross-industry initiative is to participate, I think they are actually one of the main movers, in setting up the Institution of Railway Operators to provide a much clearer focus on training and links with the City University, and so forth. 1000. This uncertainty that you inform us of, this is not going to help the railways to get back to where they were before Hatfield and to advance upon that. One of the strategies in the ten year plan is to increase the amount of passenger and freight on to rails. We are 25 per cent below Hatfield now, what is going to be the position or what do you envisage the position will be post-Hatfield, are we going to reach the targets? How long will it be without skilled operators? (Lord Macdonald of Tradeston) I should say that the SRA, the Government and the Health and Safety Executive are planning to have discussions to see what extra action, in addition to what Mr Linnard has described, would be needed to try and develop skills and training. There is no doubt there is a developing shortage in the railways, as there is, of course, in many other industries. With the expansion that we have and the prospect of 50 per cent growth in passenger travel over the next ten years it is vital that we try to get recruitment and the training up to the necessary levels. 1001. What is the Government doing about this? (Lord Macdonald of Tradeston) As I said, we have given them a ten year plan, which should allow them to begin to recruit and train with much greater confidence. We have the discussions planned for the SRA and with the Health and Safety Executive to say, "What more do we have to do?" The initiative described by Mr Linnard and the Institution of Railway Operators came after the 1998 Rail Summit. I think it is time to go up a gear or two on that. 1002. When do you anticipate that there will be some results of the training coming through so that we can see growth? Do you consider that there will be conflicting pressures upon the network with safety performance and growth and that without skilled workers this will be exacerbated? (Lord Macdonald of Tradeston) Running a railway is clearly very demanding and the companies involved in it have to be quite clear that we need the level of skills and experience that perhaps was there in days past and we hear has been too easily lost - in some areas of track maintenance, for instance. Dr Ladyman 1003. Lord MacDonald, before you became a Minister you were a very successful private businessman at a very senior level in those businesses. What, in your judgment, was the right balance on the boards of the companies with which you were involved between industry specific knowledge and general business knowledge? (Lord Macdonald of Tradeston) There has to be a balance particularly in a regulated company like Railtrack, so you do want people who understand the pressures of public life and the political demands but you want, too, people with experience of industry, experience of perhaps heavy engineering in particular, experience of systems as well as the kind of financial expertise and corporate legal expertise that you would look for in a FTSE 100 board. 1004. Out of the 13 board members were you aware that there were only two members of the Railtrack board that had any experience of the railways? (Lord Macdonald of Tradeston) I understand the weakness of the board which has been discussed publicly in recent months and I think Sir Alistair has drawn your attention to that, Madam Chairman. In the creation of the company taking it over into the private sector, the board membership may not have evolved to the kind of levels demanded by a FTSE company in the time that it has been in existence. 1005. So you accept that there are weaknesses in the board? (Lord Macdonald of Tradeston) From my business background I would say it is a board that could be strengthened. Since we anticipate an incoming Chairman in the months ahead I am sure that would be a priority for that incoming Chairman or Chairwoman. 1006. Would you like to comment on the fact that the Safety Committee on the board did not have a railwayman on it? (Lord Macdonald of Tradeston) Again if that implies a lack of expertise in the areas of safety that it is dealing in, that would clearly seem to be an omission, but I know that there are considerable changes going on inside the safety regime in Railtrack. 1007. When you were in business and you went to your financiers for money for investing in your companies, did you expect them to make comments about the way the company was managed or did you not regard that as any of their business? (Lord Macdonald of Tradeston) Since many of the financial analysts that you meet represent major institutional stake holders, then of course you anticipate that there is a very detailed grasp of your business and a very sharp critique of it. That is indeed the way a PLC should work since in the end it is owned by its shareholders and those shareholders can feed in their views. As I said earlier, the board itself has a fiduciary duty to all shareholders and therefore cannot act on the instruction of any single shareholder. 1008. Did you ever when you were borrowing money for any of your businesses write to your financiers and tell them that you were an independent business, "keep your nose out"? (Lord Macdonald of Tradeston) I would never have been in a position to do that because I was in an industry regulated by the ITC. 1009. You would be horrified if anybody did that? (Lord Macdonald of Tradeston) I would certainly be surprised. It would not have been inside my business practice. 1010. What did you say to Railtrack when they did that? (Lord Macdonald of Tradeston) It is not something I would have to say I am immediately aware of. I would have to look at the text and context of what was said. Chairman 1011. It was quite public, was it not, Lord MacDonald? (Lord Macdonald of Tradeston) As I say, I have not seen the context or detail of it. Dr Ladyman 1012. Following up Mr Stevenson's remarks about the amount of money that the Government has put into Railtrack - and I accept at the present time the Government is only a very, very tiny shareholder in Railtrack because of the way that the industry was privatised - the fact of the matter is that the Government is putting a huge amount of money in. If you are not prepared to go down the road that Mr Stevenson was perhaps trying to take you down in taking a stake in the company again, would it not at the very least be a reasonable thing for the Government to do to insist on having a veto over who becomes Chief Executive and Chairman? (Lord Macdonald of Tradeston) No, I do not believe that would be consistent with the governance of a PLC. I think that must be something for the shareholders in the end to decide. If they are interested in the stakes that they have in a company, they must ensure that they have got the right board which will appoint the right management. If the management is wrong, the board should act. If the board is inactive, the shareholders should act. 1013. We have a situation here where we have an entire industry in chaos; not your fault, you were not responsible for privatising it, and a structure that everybody agrees is entirely failing; not your fault, you were not responsible for that structure. It is industry which everybody now agrees is poorly managed and is letting down its customers and its main investors (which I would suggest is the Government, not just the shareholders) and within all of this chaos you do not think that there is a role for the Government to insist on being able to at least appoint or to veto members of the Safety Committee on the board or the Chairman of the board? You think it is entirely down to ordinary shareholders to influence that? (Lord Macdonald of Tradeston) But you will recall that within recent weeks we have just passed a Transport Bill and made it an Act which embodied in it the Government's thoughts about the architecture that is required for the railways. Indeed, when it was a Railways Bill before it was a Transport Bill your Committee, I believe, gave it a very thorough going over and tried to put in place the kind of architecture that the railways would need for the future. As I recall, I was coming into the job at the time, the Government very readily accepted the good work you had done in trying to create that architecture. Had there been something else that might have been done, I feel it might have been spotted at that time when there was a Transport Bill that could have taken it into law. 1014. So you have never at any point considered since the Hatfield incident that maybe the time has come to insist, in return for the money that you are putting into the industry, on a golden share or some other mechanism whereby you would have more direct influence over the day-to-day decision- making of Railtrack? (Lord Macdonald of Tradeston) My approach has been to try to focus on getting the railways running again and working with that management to ensure that it gets more miles rerailed every week and more speed restrictions lifted. I do not think it would help were I to speculate about what the options might be if that in any way destabilised the company or in any way demotivated the management or the workforce. 1015. Finally then, you said to Mr Stevenson "We are putting this money in and we are expecting better management out." That was your bottom line. Do you accept that the ethos within a board, the way the board thinks does permeate all the way through a company and has a direct influence on the way managers, middle managers and junior managers implement the decisions of the board and therefore manage that business? (Lord Macdonald of Tradeston) I do indeed, but I think it is also true that a company made up of 12,000 individuals which has the unique characteristic of having been a nationalised railway company which is taken into the private sector, is still in a state of change and it is therefore a very difficult culture, I would imagine, to try and manage. So I have got some sympathy with those managers who were trying to sort out all those dilemmas that they inherited inside a very difficult structure, a very complicated structure of that new privatised railway, but at the same time it should not be beyond a company with the resources of Railtrack to ensure that those issues are addressed urgently and the right people are recruited and the right board is in place. 1016. But that ethos that those 12,000 people are working within is set by a board which was made up, until 12 months ago, of the Chairman of a supermarket, a number of people who have extensive experience in the property industry and the ex-Chief Executive of the Dome. Under what circumstances is the ethos they are setting within the board going to permeate down to those 12,000 people who are trying to run a railway? (Lord Macdonald of Tradeston) That must be a judgment for the Chairman and the Board of that company, informed by their stakeholders. I accept that the Government does have a stakeholding in it. All I can say is that you have the opportunity now, with the chairman having announced that he is standing down, to get a strong chairperson in there. I am sure the body will be very much seized of its responsibilities and, perhaps, need to extend the range of its experience in the light of what it has gone through in recent times. Mr Donohoe 1017. Have you happened to have read today's Herald? (Lord Macdonald of Tradeston) The Glasgow Herald? Sadly speaking, for my old newspaper, it arrives a day late, so I will not see it until tomorrow. 1018. You will not have seen the headlines to suggest there is another problem looming, out of 690 new trains only three are going to run before May of next year? (Lord Macdonald of Tradeston) No, I have not seen that report. I was talking earlier today with Richard Branson who was very enthusiastic about the new trains that he hoped to bring on to the network. Chairman: Have you ever known Sir Richard when he was not enthusiastic? Mr Donohoe 1019. He has made an announcement about 14 times that these trains were going to run, maybe that is 15 times. In Scotland itself, have you seen yesterday's Herald which identified a problem with the new rolling-stock in Scotland? You must have read that by now if you get it one day late. That is magnified by every company across the whole network. What the Herald are saying today is that only three trains out of 690 are to be delivered and are going to run before May of next year, which is going to impact immensely on the industry. If you thought you had a crisis, as far as the industry itself is concerned, with Railtrack, the operating companies are going to have a major, major problem. The article does mention, in fact, that only one of Richard Branson's trains will run on time, the rest will not. (Lord Macdonald of Tradeston) Sir Alastair Morton is chairing various groups that are trying to push through the use of the new rolling-stock. I believe that if you look at the categories, if you like, the diesel and the electric rolling-stock, on the diesel side they have had quite a success in managing to get more into service, but there are continuing problems with some of the electrical units. One of the problems we have in this country is a lack of test track. I believe we are in a position where some of these trains have to be tested elsewhere on the continent. Chairman 1020. Railtrack is demanding that somebody builds a test track. (Lord Macdonald of Tradeston) Various options are being looked at as to how we could improve the testing on track before they are put into service. (Mr Linnard) One of the things that the SRA were asked to do about a month ago was to set up a group, which became five sub-groups under a steering group chaired by Sir Alastair Morton, to look at various structural problems within the industry, not in terms of whether Railtrack ought to be split up, or anything like that, but what has been described as the sore points, contractual, regulatory problems within the industry. One of those groups has been looking specifically at vehicle acceptance and reliability and the fact that a lot of the new rolling-stock is not--- 1021. It is a little late, is it not, Mr Linnard, because these problems have existed for, certainly, the last two years, to my knowledge? (Mr Linnard) The problems have existed. The Strategic Rail Authority were asked about 18 months ago to set up a group with rolling-stock manufacturers, leasing company train operators, which they have done and which has produced some good results in terms of speeding up delivery. 1022. Has it got any more rolling-stock on to the rails that are producing good results? (Mr Linnard) It has speeded up the delivery of some rolling-stock, yes, but there are still problems. One of the problems, as the Minister said, is the fact that when the stock does come out of the production line it does not operate reliably enough. 1023. Everyone in the rail industry operates existing rolling-stock on the assumption that the way to find out if there are any problems is to run the equipment over the first year before they accepted delivery, deal with the manufacturers, put them into operation and when they are only working properly then to accept delivery. This is not a new problem, it has existed in the rail industry since the original George Stevenson was at the game. Now suddenly it is being extended by Railtrack. (Mr Linnard) If I can respond to that, I do not think it is a new problem that has been discovered. What is, undoubtedly, true is because of the intensity of use on the network, with the growth that has happened over the last three or four years, the effect of a breakdown is much more serious on a lot of crowded commuter lines than it used to be. Mr Donohoe 1024. When you were talking to Sir Richard did he indicate to you that All Star, who have something to do with these trains, have been granted a variation order to defer the delivery of these trains? Were you aware of that? (Lord Macdonald of Tradeston) No, I was not, no. Chairman: Perhaps you would like to talk to the Italians, who deliver them without any trouble at all. Mr Donohoe 1025. The figure is something like a four month delay. In private conversation with train operating companies I am sure you get a different response than you will probably in public. As far as the service that they get from Railtrack is concerned there seems to almost be intimidation in terms of the way that Railtrack almost coerces the rail operating companies into lying. Can you just confirm that some of the operating companies themselves have made representations to you to suggest that Railtrack is broken up and they, in fact, as franchisees will be given the responsibility of the maintenance of the Railtrack? (Lord Macdonald of Tradeston) Some of the work that we did after the Paddington disaster was looking at the relationship between the train operating companies and Railtrack. We had heard about concerns that Railtrack were less than responsive to the needs of the talks. The work that we did showed no conclusive evidence of that. In reading what the Regulator had to say when he came to see you, he too had not had complaints of intimidation, as I recall him saying. Mr Bennett 1026. He did make a pretty firm statement about the need for a change of attitude. (Lord Macdonald of Tradeston) It was very much a change of attitude, because we do believe that Railtrack has to focus much more on its customers, the train operating companies and their customers and the passenger. So, yes, it does need a change of culture, and from everything we hear from the new management they are intent on delivering that. Mr Donohoe 1027. The problem is that this crisis is almost open-ended as to when it is going to come to a conclusion. Are you saying it is going to be by Easter? (Lord Macdonald of Tradeston) I am saying that very significant changes are promised by the end of January. There will be a post Christmas/New Year schedule brought in on 8th January and then another schedule on 29th January, according to the last information I was given by Railtrack. At that point we will have had, "A very significant improvement", I quote their words. 1028. The problem is that in using your statistics, as you did when asked the question, they are almost fundamentally flawed. You are using changed timetables to come to the conclusions that you have. These changed timetables have added as much as an hour or two hours on to a journey. The airlines have done that for years, it is the oldest trick in the game to extend the period between A and B in terms of time and then to suggest to the travelling public that things are improving when in actual fact they are not. (Lord Macdonald of Tradeston) Please let me be clear, these are not my statistics, they are statistics delivered by Railtrack and by the train operating companies. The levels of punctuality that we were talking about, the percentage of normal services running are percentages of that original timetable. The punctuality is compared with the current timetable. 1029. That is a problem, because if you are dealing with the current, which has been elongated over a period of time, you are not dealing with a situation that was invoked six months ago, where the timetable was much adjusted to what it is today. That is the problem with your statistics. (Lord Macdonald of Tradeston) Again not my statistics, these are the TOCs' statistics. 1030. But it is fundamentally warped by virtue of the fact that it is not looking at it on the basis of like for like. (Mr Linnard) Could I explain what I understand Railtrack to be saying when they say services will be "substantially back to normal by the end of January". What they are saying is that compared with the normal timetables, the pre-Hatfield timetables, well over half the services will be running to these timetables, ie, within the normal tolerances, and for the remaining services, on the Anglo-Scottish inter-city routes all the services will be running within 45 minutes of the normal timetable, and on the inter-city routes all the services will be running within 30 minutes of the normal timetable. Chairman 1031. But they already are much longer. The point Mr Donohoe is making is very straightforward. Originally the line between Crewe and London ran trains at one hour 50 minutes. Of course that was under British Rail. Then it went to two hours. Last Friday, for my sins, it went to three and a quarter hours and somebody went from London to Crewe yesterday was and it three and three-quarter hours. Frankly, coming and saying we are within X degrees of getting somewhere near the present timetable is a load of nonsense, is it not? There are vast numbers of people travelling in every day and travelling into areas where there are vast numbers of problems who will not recognise that as any kind statistic at all. (Lord Macdonald of Tradeston) The speed restrictions are there because engineers have found cracks in the rail. It is not, surely, for government or a select committee to put pressure on the people at the rail level to say "lift those restrictions and get us running on time" if there is a safety risk. 1032. Not one member of this Committee has suggested that to you. You gave us the figures and you said, "This is what these kind gentlemen have told me. This is how it is all going to be alright. This is the future. These are the figures." All I am saying to you is unless we can agree the baseline there is absolutely no point in saying by Easter (which is what we are talking about) we ought to be back to a timetable. Whose timetable and under what circumstances and how many hours are we talking about? (Lord Macdonald of Tradeston) Madam Chairman, we have round the table a number of times a week the Health and Safety Executive and Railtrack and the other bodies involved in this to try and ensure that we find the quickest route to run a safe railway. We want to lift the speed restrictions as quickly as possible but we have to be aware that they are there because rails are said to be cracked and dangerous. Mrs Gorman 1033. Lord MacDonald, you have heard of the expression "it will never get better if you pick it." Do you think that the rail industry, over and above all the other industries we have privatised, has been subjected to an extra special set of standards and complications, that is to say is it a political football and is that the problem? (Lord Macdonald of Tradeston) I suspect that one of the problems is that the railway was broken into too many pieces and therefore for all those pieces to be put together again you need more complex structures than might have been the case if it had been done in a different way. 1034. Do you accept that it must be one of the most heavily regulated of the so-called deregulated industries. After all, we deregulated many inefficient public industries, the car industry, British Airways, and all the rest of it but without setting these impossible standards for them. Do you think the railways are subjected to something over and above what might reasonably be considered acceptable? (Lord Macdonald of Tradeston) I do not think they are impossible standards but they are standards of service that can only be reached with a considerable investment from the government. The aim that you could eliminate all subsidy from the railway was incorrect. The belief that railways were at best static and probably in inexorable decline, which was the basis on which many judgments were made, turned out to be wrong and therefore the subsidies put in place at privatisation have had to be enhanced because of the increasing demand and because of our belief that there should be an expanding social railway in this country and that fares should be at an affordable level against other comparative forms of travel. So for all those reasons I think we have to have regulation in place to say that public money is well spent or better spent than it has been. 1035. But there are so many bodies regulating with a finger in the pie. Under your description of the Rail Recovery Action Group, we have a list of half a dozen or more organisations who all have a finger in the pie of whether or not the railways are considered to be operating satisfactorily. How do you run a business with all these public bodies constantly coming in and poking their noses into what you are trying to run? (Lord Macdonald of Tradeston) That is the nature of trying to run a business in a regulated environment and that has been my particular business experience. I am sure that you would welcome the fact that, for instance, the Rail Passengers' Council has some say now in how the railways are run and that has been strengthened, I am sure, through the good works of this Committee in its preparation of the railways part of the Transport Bill and I am sure, too, that a Strategic Rail Authority is something that this Committee endorsed because of the direction it could give to the expansion and development of the railway. I believe, too, that the Health and Safety Executive has a role round that table because of the concerns, which again I am sure have been echoed in this Committee, about safety on the railways in the last two or three years. I do not see that one would willingly exclude any of those parties from the discussion of how best to run a railway, but I agree with you that there should not be too many distractions for a management. The reason we have got this group is to get people round the table so that they can all talk without having separate meetings and in that way distracting Railtrack's management from the real job which is getting the railway running again as quickly as possible. 1036. Do you think you should judge an industry partly on the degree to which the public is willing to patronise it, in which case the railways are doing a good job because they have added to the number of people using their services over the period of four years since they were privatised or semi-privatised? (Lord Macdonald of Tradeston) I agree it was very encouraging to see the number of passengers using rail before Hatfield at the highest it had ever been since 1947. You can see in our ten-year plan our political decision to invest in that welcome change by taking the increase up from the 25 per cent or so that we have had since privatisation in terms of an increase up to another 50 per cent beyond that. 1037. Do you believe it is the public that is making this fuss or the opinion formers? (Lord Macdonald of Tradeston) I think it is a very understandable shared concern and clearly the public, those involved in travelling by the railway, will have every right to be very frustrated and vocal about it, and it is not surprising at all that the media should echo that. 1038. We do not all go mad if one aeroplane falls out of the sky and impose the standards that we are now doing with the railway and check every single aeroplane causing chaos for so many individuals. My point is are we not trying to make the railway do something which we do not expect of other aspects of travel? (Lord Macdonald of Tradeston) I hope our reaction is not disproportionate. We know the public concern there was after Paddington and there has been after Hatfield and we will try to respond to that, I hope in proportionate way, but there is no doubt at all that the public concern that has been expressed in Parliament and in the media has contributed to the concern that Railtrack rightly have about the dangers of gauge corner cracking. One hopes that they will be able to get reassurance from the expert studies that are being delivered and from the closer relationship with HSE under they aegis of government and regulators and that they will be able to make judgments about the balance of risk involved. There is always a balance of risk. I do not think anybody would expect to run anything as complicated as a railway with 24,000 miles of track and 75,000 trains running on it without accidents, but it is our job obviously to try and minimise those accidents. Mrs Gorman: Can I say one thing to compliment you on the fact that recently you made a very sensible remark about the railways and the reaction of people. You implied that this industry was not so much in chaos but that people were panicking about it, that is the big difference. Is it not true that in the four years since privatisation two of them have not had a single accident involving rail where more than five people were injured or in any other way harmed by it? Chairman 1039. We can be kind to you, Lord MacDonald. (Lord MacDonald) Of course it was a cause of great satisfaction for the railways when they had those years with no accidents at all but, of course, we have had three very serious accidents in recent years and we have to be concerned about any reoccurrence of that, particularly if there is any suggestion that bad maintenance or management of the railways is in any way contributing to that. I think what we found after the accidents at Southall, Paddington, and now at Hatfield, is that safety on the railways does repay greater investment and greater scrutiny. You will be aware that we are committed to putting new train protection systems across the network. Mr Bennett 1040. On the West Coast Mainline, are you really confident that the Government got a good deal with Railtrack about the modernisation? (Lord Macdonald of Tradeston) That is a judgment, of course, that has been made by the Regulator, whom I know you have interrogated at great length on this. The Regulator assures us that he has gone very thoroughly through all of the figures and the calculations made here and we have accepted his judgment. 1041. It is a blank cheque, really. What guarantee is there that this management that you have just described is going to deliver the West Coast Mainline modernisation on time and to budget the very substantially increased budget? (Lord Macdonald of Tradeston) I would hope that the Regulator would be involved in a much more rigorous way than would have been the case in the past. The strategic role of Sir Alastair and the SRA gives us the reassurance that, perhaps, was lacking in the past. I am grateful for the work this Committee has done in setting up that new architecture for the railway. 1042. Are you also confident that the Government has not been hard done by, by Virgin and by Railtrack over the West Coast Mainline? (Lord Macdonald of Tradeston) We, of course, were unhappy with the very significant increase in the cost of work that was going on on the West Coast Mainline. In view of the analysis made by the Regulator we felt that in the interests of getting a more effective and more efficient railway that was a price that should be paid. 1043. In modernising the railways, generally, do you see more of a role for third parties rather than Railtrack? (Lord Macdonald of Tradeston) It is something that is being explored through the rail modernisation fund and the special purpose vehicle that Sir Alastair has been talking about. We hope that Railtrack will play a central part in joint ventures or other financial constructions that were put together in there. Of course the train operating companies, through the franchising process, are being encouraged to invest in developing their own services alongside Railtrack, alongside the SRA and, perhaps, other financial institutions. 1044. In the metropolitan areas are you happy the Strategic Rail Authority is going to take the lead? Would it not be more logical for local transport experts to be having much more say on modernisation? (Lord Macdonald of Tradeston) I believe that the SRA and the PTEs will work well together. Mr Bennett: Are you sure about that? Chairman 1045. Why do you think that, my Lord? (Lord Macdonald of Tradeston) From the contact that I have had with PTEs I do not hear a great volume of concern about it. There was a time when the Transport Bill was going through that people were particularly concerned to lose the aegis of the Department over the grants. I feel that that concern has lessened. Mr Linnard has been more involved with the PTEs in some of these areas. (Mr Linnard) Yes, I think that is right. Clearly there has to be a balance struck. It is very difficult for the Government and Parliament to set up a Strategic Rail Authority and not give it a purview which extends across the country. There will be discussions, particularly between the SRA and the PTEs, when franchises involving the PTE, or which will cover PTE areas, come up for replacement or renegotiation. The test will be whether those discussions and those negotiations can be concluded successfully. We have no reason to think they will not be. Mr Bennett 1046. The franchise replacement programme is going pretty slowly, is it not? (Lord Macdonald of Tradeston) It is going at a pace that Sir Alastair and Mr Grant judge to be appropriate for it. 1047. Do you think that is appropriate? (Lord Macdonald of Tradeston) At the moment we have no complaints about the pace of it. It delivers the kind of investment and improvement and services that are required. We have to keep in mind that many of these franchises would not be expiring anyway until 2004. 1048. The second phase of the Channel Tunnel link, is there going to be some more money from Railtrack? (Lord Macdonald of Tradeston) That is obviously an option that Railtrack have open to them up until 2003, to be involved in the financing and purchase of the Channel Tunnel rail link part two. Preliminary work has already started there and we should be able to press on with that, irrespective. We will be looking for meaningful discussions in the early New Year. (Mr Linnard) They have told us very recently they would like to come and talk to us. Chairman 1049. How much money are you going to give them? (Mr Linnard) I do not know. Mr Bennett 1050. Are you feeling generous, entering the Christmas spirit? When you shake your head we need it for the record, you are definitely saying no to the Christmas spirit. (Mr Linnard) We are not feeling generous. 1051. We are told that Railtrack is going to produce an efficiency saving of 17 per cent over the next five years, that is a bit of nonsense, is it not? (Lord Macdonald of Tradeston) The Regulator has looked into this in great depth we are assured. It is not 17 per cent of present costs, of course, because the Railtrack revenues will go up very significantly. What we are looking at there is an improvement in efficiencies across the board, which the Regulator will argue in comparison to other formerly publically- owned companies is not overly demanding. Chairman 1052. Until Hatfield we did not know how inefficient they were, did we? (Lord Macdonald of Tradeston) The Regulator believes that this will not put undue pressure on the company. 1053. It may be that there are others of us who think that a little undue pressure on the company might produce some results. (Lord Macdonald of Tradeston) Indeed. As Mrs Gorman says, this is a company that is under pressure from many different angles, that is understandable. 1054. That is not very accountable, is it? (Lord Macdonald of Tradeston) We believe that it is clearly accountable inside its regulatory regime. 1055. Are you satisfied that is a tough enough regime? It is your money, our money, that they are walking way with. (Lord Macdonald of Tradeston) I am sure Mr Winsor will have assured you that he is running a much tougher regime than previously. 1056. You will have seen from the questions, the last thing I asked him was why it was that he talked tough but gave more money that he intended in the first place. (Lord Macdonald of Tradeston) He has done that after a very thorough analysis. 1057. I do not doubt that. The reality is that he, in fact, has given more money. (Lord Macdonald of Tradeston) That is because we are finding out the true cost of running an efficient and expanding railway. 1058. That is how you were able to "up" the dividends they were paid. (Lord Macdonald of Tradeston) It was a very marginal increase in their dividend. In presentational terms it was not something I would have done had I been in the chief executive's or the chairman's position. 1059. You do not think they are very accountable. (Lord Macdonald of Tradeston) I think the declaration of dividend is something that they do in the light of what they hear from their shareholders and from the City generally. Some of those factors may go into the financial strength of the company on which it will borrow for the future. It may be that it is looking for that strength to try and expand and develop the railway. 1060. They obviously do not know you have this sum of money tucked away in the ten year plan and they are going to be able to get their hands on it, do they? (Lord Macdonald of Tradeston) If they read the plan it should be very apparent to them. 1061. They obviously do not know that you have got this sum of money tucked away in the ten-year plan which they will be able to get their hands on. (Lord Macdonald of Tradeston) If they have read the plan it should be very apparent to them. 1062. Finally, my Lord, will you report back to us on the question of electric trains. Can we have a written note once you have seen this article. It would also be helpful if you could give us one or two up-to-date reports on how many of the rolling stock problems are going to be solved within the next six months. Do not worry, you are not going to escape without me asking something about aviation. You are foolish enough to come and I am foolish enough to ask you the question. There are a lot of people who will be very dismayed when they arrive at the stations this Christmas with a valid ticket (which in most cases is costing them a considerable amount more than it used to) and they discover that they are unable to get on a train because GNER has insisted that all the trains are booked in advance. As you know, in aviation it is quite common for companies to overbook and insist on people booking beforehand and many of the rail companies would like to move to that system. Would you make it quite clear to them that the passenger comes first and it is not for the convenience of the companies and would you also be prepared to ask them what they intend to do for those passengers who are left at Christmas on the stations unable to find a train to take them to their destinations. (Lord Macdonald of Tradeston) I will certainly put that on the agenda of the next Rail Recovery Action Group meeting. 1063. Will that be before Christmas or after Christmas? (Lord Macdonald of Tradeston) It will be this week. 1064. I am sure we will be delighted to hear the results. Of course you will tell us? (Lord Macdonald of Tradeston) I shall indeed. 1065. Could I say one thing to you in passing. This Committee is very concerned about not just the future of transport in this country but that the passengers should receive the highest, the most comfortable, and the safest form of transport. We believe this is a Government that is investing for the first time for many, many, many years in a way that will make that possible, but it is absolutely vital to us to know that there are not people benefiting from the public purse without performing their duties responsibly, sanely and, in the ultimate, to the comfort of their passengers. May I ask you to keep that very much in mind not only when you come to see us but when you go to one of these many working groups. Finally could you tell us why the aviation consultation document was given to everybody except the Transport Committee? (Lord Macdonald of Tradeston) Madam Chairman, I think it is being published today and I hope it is on its way to you. 1066. Perhaps, my Lord, you would enter every member of this Committee as a member of the press and then we can ensure we get copies of documents coming from your Department in the future. (Lord Macdonald of Tradeston) I shall certainly take that on board, Madam Chairman. Chairman: How kind. Thank you very much for coming.