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


Examination of witnesses (Question Numbers 20-39)

TUESDAY 1 MAY 2001

SIR ALASTAIR MORTON AND MR MIKE GRANT

  20. How is your relationship between the Strategic Rail Authority and the Scottish Executive?
  (Sir Alastair Morton) I am happy to listen to their answer. Mike Grant has had the most recent meeting with them. As far as I am aware they know they have to give us instructions and guidance, and we are waiting for them, meanwhile the relationship is perfectly open.

  Chairman: Mr Grant, how do you get on with the Scots?

  Mr Donohoe: It is a different, it is the Scottish Executive.

Chairman

  21. The Scottish Executive.
  (Mr Grant) We have a very good working relationship. We are constantly in touch with the Scottish Executive and I have not been told there are any problems between us and the Scottish Executive.

Mr Donohoe

  22. Who is the lead in that relationship, you or them?
  (Mr Grant) It is a partnership, I am not avoiding the question. We are going to do a study with them, we expect to receive some instructions and guidance in the autumn. Clearly, as far as lead is concerned it comes from them once they have issued the instructions and guidance.

  23. You are the Strategic Authority.
  (Mr Grant) We are their agents and we will implement their—

  24. If they make different decisions to the ones that the British Government take that would affect your strategy, is that what you are saying?
  (Mr Grant) In relation to intra Scotland services they have the final say.

  Chairman: That is another one of the things that is going to evolve.

Mr Olner

  25. Sir Alastair, do you think Virgin Trains are justified in raising their fares by up to ten per cent in view of the continuing disruption?
  (Sir Alastair Morton) Let us get the fundamental of the answer out first. They were free to do so.

  26. Do you think they were justified?
  (Sir Alastair Morton) There was no case under our powers and under any legislation for us telling them they could not do that. They had previously either held them down or reduced them and they now increased them in a surprising jump back to a trained line that others were already on. Nevertheless, it was a big jump at a bad time and we said so. Mike Grant had the meeting with Chris Green that discussed that.

  27. Do you think you ought to be seeking additional powers to limit price increases?
  (Sir Alastair Morton) I would like guidance from Parliament or from ministers in the first instance on why we should work to transfer financial risk from the users of the railway and the owners of the companies to the taxpayer, whereas presently it resides with the owners of the companies and the users of the railway.

  28. Instead of sitting on the sidelines, do you think, Sir Alastair, you ought to be compensating train operators for some of the losses that have been incurred since Hatfield?
  (Sir Alastair Morton) Again, you would like me not only to take the risk off the travellers but also off the owners by compensating for the damage they have suffered.

  29. The public think that the Strategic Rail Authority is the authority—you mentioned the inverted cone previously—it is going to put it right, are you going to be able to put it right?
  (Sir Alastair Morton) The Strategic Rail Authority is not the British Railways Board recreated and it is not the Treasury. If the Treasury tell us, "We wish to compensate everyone who has suffered from the aftermath of Hatfield, please pay them out and send us the bill", we will act as the agent for the Treasury in that, but until they do so we do not have power to go down to the Barclays Bank and say, "Hand over a lot of money because we want to give it to railway people, owners of companies and users of trains". We may be called an authority but we do not have unlimited funding.

  30. It seems to me that you ought to be shouting a little more. You mentioned before, in your response to the Virgin Trains justifying ten per cent fare increases, it was only weeks before that they slashed them to 50 per cent to encourage more passengers back on to the rail and then a month later they were putting their fares up ten per cent. Surely you ought to have kicked up more of a fuss on that than you did?
  (Sir Alastair Morton) They are the ones who will suffer the consequences.

  31. The passengers will.
  (Sir Alastair Morton) The passengers will stay off the trains if they want to.

  32. It appears to me that you do not want to take-up being the passengers' champion?
  (Sir Alastair Morton) The only way I can tell people, where I have no regulatory power, to keep their fares down and reduce their revenues is by increasing the subsidy we pay them, and that is behind your second question of why do we not ease their pain from Hatfield.

Chairman

  33. Is that not rather convenient, you saying, "We do not have the money for doing it and, anyway, we are not there". We are laying down the strategy but we are not telling them what to do. We are not giving them an overall indication of where we want the industry to be. We are allowing these policies to evolve. You do not interpret that your role is in any way pointing out to the train operating companies the direct connection between prices and rears on seats, you do not feel that is something which you need to discuss.
  (Sir Alastair Morton) We did point that out quite strongly to Virgin.
  (Mr Grant) I had a meeting with Virgin and we did express our disappointment at the fact that they had raised their fares.

Mr Olner

  34. I have to say that is not half the disappointment the passengers on the station feel.
  (Mr Grant) Most of the leisure fares were not raised. The regulated fares were not raised, it was the unregulated fares that were raised and Virgin were discounting a lot of fares, even from 16th April to 19th May there were fares of £13 from Manchester to London.

Chairman

  35. That was at a time when they were so disastrously off their timetables that it required an effort and will, concentration and desire to expand one's education by being prepared to read for many hours to take the train in the first place.
  (Sir Alastair Morton) Correct.
  (Mr Grant) It is still running at a discount fare. The regulated fares were not raised, it was the unregulated fares, which is in the contract.
  (Sir Alastair Morton) Unless you take the view that first class passengers should be a protected species at the expense of ordinary rate taxpayers; and you already know, I am sure, that Railcard holders and Young Persons Railcard holders are entitled to saver fares at any time; what is going on, and it is quite aggressive, is the introduction of airline yield management to railways. We lack capacity in our railways and until Parliament and the Treasury passed legislation and provide funds,and the time passes to get more capacity on to the line, there is going to be an issue about what is the correct pricing and how to best manage the yield from trains. We have privatised the industry, we did not do it, Parliament did, and the people to whom it was privatised signed up to pay certain bills and they signed up to receive in return certain revenues. If they are able to manage the yield so that a lot of people pay less and some people pay more, but in general people are driven to planning their journey earlier if they want to pay less, in general terms, that is the privilege that Parliament gave them. We do not rewrite legislation in the SRA.

  36. Have you discussed with the operating companies the suggestion that you make that they are driving towards an air lines type of control of the yield and individual trains or is that something that you interpret from the information you received?
  (Sir Alastair Morton) We discussed it.

  37. What is the view of the operating companies? Is that their view, is that what they say they are doing?
  (Sir Alastair Morton) They interpret it to different degrees.

  38. Have you pointed out to them that it might not be in the interest of the railway industry, as a whole, and certainly not of the passengers.
  (Sir Alastair Morton) They would point out—

  39. No, have you, Sir Alastair, as part of the Strategic Authority pointed out to them that such a decision would have an immediate impact on both passengers and the future of the railway system?
  (Sir Alastair Morton) We have pointed out that raising charges when giving bad service is poor tactics in our opinion.


 
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