Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 1 - 19)




  1. This afternoon we are discussing the Comptroller & Auditor General's Report on the Shadow Strategic Rail Authority: Action to Improve Passenger Rail Services. We have in front of us Mike Grant. Perhaps you would like to introduce your colleagues, Mr Grant?

  (Mr Grant) Good afternoon, thank you. On my right is Mr Terence Jenner, Corporate Services Director of the Shadow Strategic Rail Authority, and our senior legal adviser. On my left is Mr Martin McGann, our Finance Director and Principal Finance Officer.

  2. Thank you. Our procedure relates very closely to the report. I will try to give you some indication before each question which bit of the report I am talking about so you can refer to that. I am going to start with paragraph 2.7 which reports that you have set an aspirational target of 15 out of 16 trains being on time. I suppose at the moment that might sound rather humorous. What are you doing to achieve this target and when do you expect it to be met?
  (Mr Grant) Perhaps a few words on the aspirations because 15 out of 16 trains is an aspiration that the SRA has for over some time period and it will vary from franchisee to franchisee. Just to put it in a bit of context, 15 out of 16 trains arriving on time is well within the bounds of normal railway operation for the Netherlands, for Spain, for Switzerland and for France. The 15 out of 16 is something that is achievable. What are we trying to do to achieve that 15 out of 16 trains and when are we trying to achieve it by? The principal method of trying to achieve the 15 out of 16 trains, which is an aspiration, is through franchise replacement. The two franchises that have been awarded so far—heads of terms, that is, not franchise agreements—for Chiltern and GoVia both have those within the life of the franchise to be achieved.

  3. Thank you very much. Do you have any estimates for the rest of them? That is two out of how many?
  (Mr Grant) Two out of 25. They will come forward as we negotiate each franchise and we would be aiming to have those 15 out of 16 trains within the life of the franchise.

  4. Of all franchises?
  (Mr Grant) Of all franchises.

  5. And they are how long typically?
  (Mr Grant) We are talking about up to 20 years.

  6. That is quite a long time, is it not?
  (Mr Grant) It is quite a long time but the achievement of that 15 out of 16 is dependent probably mainly on improvements in infrastructure and major infrastructure takes a considerable amount of time to put in place.

  7. So you are saying that it could take 20 years before we get 15 out of 16 trains on time?
  (Mr Grant) In some cases it may well be.

  8. I see. I am sure others will come back on that. My next question relates to figure eight which actually ties in rather well with this. It shows a large variation in the reliability and punctuality of different train companies. If the poorer companies could achieve the standards of the best this would produce a dramatic improvement over the whole network. What are you doing to bring about such an improvement?
  (Mr Grant) On the punctuality and reliability, it is important to look at the causes of the punctuality problems. The main problems of punctuality and reliability are contained in one of the charts further on, which are mainly down, to if you like, causes of delay in figure 13 which shows that the operator causes about 50 per cent, Railtrack causes about 35 per cent and external causes about 15 per cent. On the operator causes, in the franchise replacement we are looking for resilience in the train operations, so they need to provide adequate trains, adequate train crew. As far as Railtrack are concerned, a lot of this comes back to infrastructure, so the major infrastructure developments will help that punctuality and reliability.

  9. How are you going to ensure that will happen? We had the Office of the Rail Regulator in before the summer and one of the number of things that came up was the ineffectiveness of the enforcement of the penalties structure that we currently have. How are you going to make sure that they actually do what you want them to do?
  (Mr Grant) The Committee will be aware from the report that the penalty regime we have suggested for new franchises should be doubled. Punctuality should be brought within the terms of enforcement, which it is not at the moment. New franchises should include provisions for performance benchmarking which will be raised through the life of the franchise. Again, it comes back to franchise replacement as far as the train operator is concerned.

  10. Let us pick up on that doubling. Paragraph 2.10 explains how your consultants, London Economics and AEA Technology, found a "mainly insignificant" relationship between the punctuality and reliability incentives and better performance. Do you think that doubling will alter that?
  (Mr Grant) We believe it will. Obviously I was not around at the time when this was set up but what I have gleaned from my colleagues is that when these regimes were put in place they actually measured the value to passengers in lost time, not the consequence of how much it would cost to put it right. We believe that doubling it will make a difference, but in some cases because the cost of putting it absolutely right may be billions, it is between the two, ie the existing does not work as well as it should and if you had a very penal rate then it would not work either.

  11. We have had, particularly in the last few weeks, complaints from more than one rail company head, Mr Corbett perhaps being the most obvious, about the safety implications of the incentive structure in the industry. Will this not make it worse?
  (Mr Grant) If I can answer that question in two time frames. Considering the amount of money, public and private money, that is in the Government's ten year plan it seems almost impossible that you would not expect to have a safe, reliable, punctual railway. Clearly that is the plan for ourselves and the ten year plan, to provide that railway. In the shorter term, it is hard to deny that under the current circumstances because there is concern about safety, punctuality and performance, that is not good enough.

  12. So you are saying in the short-term it is not possible to deliver punctuality safely?
  (Mr Grant) What I am saying in this current period, as we stand today, is you can see the effects of safety and performance, but in the long-term—

  13. I can see the effects of the current management of the railway, whether that is safety I am not sure.
  (Mr Grant) At the moment there is a safety concern and the performance is affected because it is not operating properly.

  14. I will let others come back on that, it will be an issue I am sure you will have to answer more questions on. Let me move on to paragraphs nine and ten which show that the number of passengers on the railway is growing rapidly and that this is resulting in increased overcrowding on trains. What are you doing to bring about investment in new rolling stock to relieve this overcrowding?
  (Mr Grant) Sorry, could I just check the reference?

  15. Paragraphs nine and ten of the C&AG's Report. The issue is the question of overcrowding and getting more rolling stock on the tracks. How are you going to do that?
  (Mr Grant) The SRA sponsored two action groups, one short-term action group and the other a long-term action group, specifically to try to deal with the rolling stock position which at the moment is unsatisfactory. Maybe I could just mention some of the causes to start off with. First of all, on the Railtrack side, whether they are providing adequate information so rolling stock companies and manufacturers can get the rolling stock on board and, then, of course, the question of whether the rolling stock can actually perform once it is in service. The short-term action group did have some success in getting the LTS, c2c trains and South West Trains into service in the spring, but subsequently they had to be withdrawn because of the poor manufacturing performance. In the longer term we are sponsoring a number of actions whereby the manufacturers and Railtrack share more information to try to make the acceptance that much smoother. In addition, one of the working groups that has been set up by Sir Alastair Morton, as requested by the Deputy Prime Minister, is looking at vehicle acceptance and how that can be improved.

  16. You are doing that on their behalf, are you? I see. I expect others will come back on that. It strikes me as something which should be fairly straight forward for the operating companies to get right, but however. The Government announced earlier this year a large increase in public spending on the railways, the total grant to Railtrack from you, in effect, totalling £4.7 billion over the course of five years. What do you expect to get from that investment?
  (Mr Grant) Clearly we have been looking at the ten year period and the ten year plan. We have been looking to the major enhancements that will come forward, ideally the safer, the bigger, the better railway. We will be producing a Strategic Plan in the New Year which will contain a number of projects and the direction in which we think is the appropriate way to go.

  17. We are not seeing you in the New Year. You have got £4.7 billion, how are you expecting it to be spent and how will you make sure that it is spent?
  (Mr Grant) I will let Mr McGann go through the details on the financing side.

  18. By all means.
  (Mr McGann) I think the £4.7 billion you are referring to is the capital grant, part of which is in respect of the renewal of the West Coast Main Line and part of which is in respect of the renewal to cover a degree of under maintenance previously on signalling and telecoms. It is a combination of those two.

  19. And how will you police that? Anybody can answer.
  (Mr Jenner) It is very much for the Regulator to police it as it is sustaining the basic existing railway. It is part of his jurisdiction to ensure that the money is spent appropriately and what is produced is an efficient network as a result.

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