Select Committee on Public Accounts Minutes of Evidence

Memorandum submitted by the Shadow Strategic Rail Authority PAC 2000-2001/275

  The purpose of this paper is to inform the Committee of relevant developments since the publication of the NAO Report (HC 842. 1999-000) on 3 August 2000. It is hoped that the Committee will find this information useful in advance of the oral session to be held on 27 November 2000 with Mike Grant, the Director of Passenger Rail Franchising and Chief Executive of the Shadow Strategic Rail Authority.


  The industry has been shaken by the tragic accident at Hatfield and its immediate consequences following Railtrack safety checks across the network. The implications of this are being examined as a matter of urgency through a joint industry review process which is explained further below.


  The plan, published in July, announced a £60 billion package for the railways, about half of which will be funded by the SRA directly. It sets out the targets for growth and quality which the railways must meet to deliver their part of the overall transport plan.

  The elements of the plan to be funded by the SRA includes:

    —  £12 billion for support for the passenger and freight railway;

    —  £4 billion for projects including WCML (West Coast Main Line);

    —  £5 billion for CTRL (Channel Tunnel Rail Link); and

    —  £7 billion for the RMF (Rail Modernisation Fund).


  As the NAO Report explains (at para 1.10), the sSRA, under Objectives, Instructions and Guidance from the Secretary of State, embarked in 1999 on a programme of franchise replacement aimed at stimulating investment in additional capacity and improving the quality of services for passengers. That programme is proceeding apace.

  On 10 August, the sSRA announced that Heads of Terms had been reached with M40 Trains on the replacement Chiltern Railways franchise. This has been followed by continuing negotiation and due diligence which will lead to the signing of a new 20 year franchise agreement in due course. As the first of the new replacement franchises, this gives an indication of the significant investment that is to be achieved in increased capacity and service quality through this approach. The Chiltern franchise has generally been well run, with relatively modern equipment, and has achieved growth of some 15 per cent passenger miles for five years. The replacement franchise indicates the further step change in quality and capacity which is possible and which will deliver the objectives sought in the 10 Year Plan.

  Committed investment in the franchise totals £370 million and the key features under negotiation of the first phase of the new franchise are designed to deliver:

    —  50 per cent increase in train miles;

    —  15 out of 16 trains to run on time;

    —  All trains to be new or refurbished;

    —  Level access at all stations within the first four years; and

    —  Increased car parking at stations.

  As a second stage, the franchisee will develop plans for journey time improvements on its services to Aylesbury.

  In the longer term, the new franchisee will examine the case for:

    —  A new interchange station at West Hampstead, giving access to the Jubilee Line and other parts of the national rail network;

    —  A new line from Princes Risborough to Oxford via a new Parkway Station from the M40;

    —  Possible restoration of services north of Aylesbury onto the east-west route which runs from Oxford to Bletchley and Milton Keynes;

    —  An extension north of Aylesbury to an M1/M6 Parkway Station near Rugby.

  On 24 October, the sSRA also announced that it had reached Heads of Terms with GoVia the preferred bidder for the South Central Franchise, securing total investment of almost £1.5 billion.

    —  £325 million in infrastructure;

    —  £250 million in stations and depots;

    —  £900 million in rolling stock;

as well as creating additional train paths between London and the Sussex Coast, enhancing South London Metro services, replacing Mark I trains and electrification of the two remaining diesel routes.

  The sSRA expects by end-2001 to reach Heads of Terms with preferred bidders to replace 18 franchises due to expire by September 2004. Those include the Merseyrail and Island (Isle of Wight) franchises, for which a different form of local franchise is under discussion.


  On 10 August, the sSRA announced a two year extension of the MML (Midland Main Line) franchise, operated by National Express Group.

  The MML franchise was a longer franchise, due to expire in 2008. The extension to the franchise has been agreed on a "no subsidy/no premium" basis, and has secured £238 million of new investment by the company. The benefits include:

    —  A new fleet of high speed trains;

    —  Infrastructure improvements;

    —  Ten minute journey time reduction between London and Sheffield;

    —  A 2 per cent improvement in punctuality by 2008; and

    —  Station improvements.

  In August and September, the sSRA announced negotiated deals, first with Prism Trains (holder of four franchises) and then with National Express Group which moved from five to nine when it acquired Prism with the Franchising Director's consent. The net product of those deals will be significant investment in the long-term London, Tilbury and Southend franchise (London commuters) and consent to proceed early without further cost to terminate two franchises whose routes will go into Wales & Borders or Wessex and one, WAGN (West Anglia Great Northern), which will be split and absorbed into Thameslink and Great Eastern upon refranchising.


  The NAO Report (at 3.25) rightly drew attention to network capacity as the root cause of overcrowding and increased capacity as the key to accommodating passenger growth.

  The £7 billion RMF provided in the 10-Year Plan is to be managed by the SRA and will provide funding direct to Railtrack and others throughout the 10 year period both as a basis to lever in additional private sector investment in infrastructure, and to purchase incremental capacity or performance outputs where this is not a commercial proposition within a normal period for return on capital or have wider social benefits. The RMF will supplement the SRA's support of infrastructure investment through franchise support payments to TOCs, enabling them to meet Railtrack's track access charges.


  The Rail Regulator published his Final Conclusions on setting Railtrack's charges for the next control period (2001-2006) on 23 October 2000. These provide for a very substantial rise in Railtrack's income over the next control period as compared with the last six years. The Regulator has described his review as providing Railtrack with £15 billion over the next five years to deliver a modern safe railway able to invest strongly, competently and efficiently in the railway industry. The sSRA is discussing the implementation of the review with Railtrack and the train operators.


  Between Royal Assent to the Transport Bill 2000 and the formal establishment of the SRA (assumed to be 1 February 2001), the sSRA will publish a Shadow Strategic Plan. This will be a statement of intent for vigorous action during 2001 and beyond on refranchising, freight development and infrastructure project preparation and progress (the last in partnership with Railtrack). This statement will invite comment and reaction to our intentions, and will specify a number of strategies on which we are obliged to consult before adoption. Following that process, the SRA's first formal Strategic Plan will be published in Autumn 2001.


  The Shadow Strategic Plan will also reflect the findings of the joint industry examination of impediments to integrated operation of the railway to ensure safety, performance and capacity for growth. This review, requested by the Deputy Prime Minister in response to the issues raised by the accident at Hatfield on 17 October 2000 and its aftermath, is being led by Sir Alastair Morton, Chairman of the Shadow Strategic Rail Authority. Through a series of joint working groups it is examining where perverse or conflicting incentives or interests may be militating against integrated operation of the railway. The sSRA Chairman will report to Ministers in December.

Strategic Rail Authority

13 November 2000

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