Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 100 - 119)



  100. You will be brief because I do not want to take too much time.
  (Mr Jenner) The performance target will be 93.75 over the life of the franchise rather than the current BR historic figure. The incentive rates, performance penalties or bonuses will be doubled from what they are at the moment. There will be an enforcement regime on punctuality. At the moment they can be breached and possibly lose their franchise on total cancellations or cancellations, but now a similar enforcement regime will apply to the trains running on time or not. There will be customer satisfaction targets that they will have to meet: cleanliness of trains, cleanliness of toilets and that kind of thing. If they fail to meet them then up to half a million pounds per half year they may have to spend in putting those matters right.

  101. What happens if they achieve the targets quite easily during the franchise, will you be able to amend them to make them more difficult?
  (Mr Jenner) What we have built in for a long-term franchise up to 20 years is a series of review points. The purpose of the review is to ratchet up the performance on customer satisfaction targets, so it is a gradually rising trend throughout the whole of the franchise period.

  102. So you are saying that the franchise will be flexible?
  (Mr Jenner) Our intention is that it certainly should not finish where it starts off from.

  103. What can be done to get improvements in performance incentives for those companies whose franchises have not yet come to an end?
  (Mr Grant) That is obviously a difficult issue. Other than encouragement, we have a contract with them that—

  104. Can you threaten them with not getting the new franchises?
  (Mr Grant) They have a contract and we have to honour that contract. If they breach the contract or they are in contravention of it then, of course, there are powers to take that franchise away, but as long as they operate within the terms and conditions of that contract there is not much that we can do.

  105. I have stated, I do not know whether you admitted it, that some of these franchises were so lax and so easy to achieve that on the performance that we have seen in the past, although they have achieved the actual franchise, they have not been performing and giving a first class service. Why should they be considered again for a new franchise?
  (Mr Grant) They are performing within the contract. Clearly we will be looking for them in new franchises to meet the aspirations and the targets that we are setting, but we cannot really do that much with existing contracts.

  106. On page 33, paragraph 2.22, half way down the page, it says: "The Authority stated that it will expect train operators to `build in sufficient resilience to their plans to deal with problems that are reasonably foreseeable, such as staff shortages'. It will also seek to build in review points every five to seven years to assess the franchisee's performance." I am interested in how that is going to work.
  (Mr Grant) On figure two of the document—

  107. Which page is that?
  (Mr Grant) Page 13. It just outlines the main components of a franchise agreement. That includes a passenger service requirement, a train plan, the incentive and penalty regimes, regulation of fares and other aspects of passenger service. We are analysing in a great deal of detail the proposals put forward to us and that will include the resilience point, which is not just the train plan, the drivers available to it, but it is also about infrastructure and making sure that the operator's infrastructure can provide for a bigger and better railway. As we go forward, what I have done in terms of the organisation is to put the emphasis of our organisation on delivering. I know we are not a delivery organisation in terms of actually providing the trains, but we will be focusing very much on the Railtrack and train operating company interface which is what the passenger receives. We will have much more focus on the delivery, we will be looking in a great deal more detail at the train plans and making sure there is resilience. Some of the punctuality and reliability issues are down to not enough drivers.

  108. Could the franchise be terminated if, for example, it was clear that the holder was badly under-performing?
  (Mr Grant) Over a period of time there would be tests in there and it could be terminated.

  109. Figure 11, page 30, and also 2.18, which is basically talking about figure 11. I must admit, considering the state of the railways at the present time, I was very sceptical that this was actually a very sincere plan, particularly when I noticed that Railtrack had a major input into it. It seems to me that there are lots of plans around but not a great deal of action taking place. I notice that you have just come from Railtrack, have you not?
  (Mr Grant) I was at Railtrack for five months.

  110. Did you not like it?
  (Mr Grant) I got offered a better job.

  111. Just in time.
  (Mr Grant) Ah—

  112. Tell us about this plan because, frankly, if you read the ten points in it, some of them are jokes really, are they not, if you consider what has happened in the last two years? For example, target track maintenance work on reducing delays, work together on better timetable planning, you go on, target the 50 worst delay hotspots. This is 1998 but not a lot seems to have been done.
  (Mr Grant) As far as the ten point plan is concerned—

  113. What has been achieved?
  (Mr Grant) Certainly the Punctuality Task Force was achieved, 800 drivers was achieved. They did identify the 50 worst delay hotspots.

  114. They found them. They did not do a great deal about them, did they?
  (Mr Grant) I think what you will find is in the most recent delays in punctuality and reliability, Railtrack have been pretty flat in their percentage of problems. You will see that in figure 12, the Railtrack delay, 43 per cent, is flat. I think you have also to take into account that there has been an increase in the number of trains running every day which will lead to obvious difficulties and extra strain on the infrastructure. In the most recent—

  115. I am not really convinced, to be honest. I am not convinced at all. It seems to me there seem to be lots of plans around and lots of targets but at the end of the day we have got a railway system now which is worse than it was three years ago. I am now catching the aeroplane and the aeroplane is three hours quicker coming from the North East of England. Frankly it is deplorable. You can have all the plans in the world but if they are not achieving anything, it just seems a great shame. If we move on and look at paragraph 3.13 on page 42, this paragraph seems to sum up privatisation really. There are companies who are doing their best. GNER, for example, I have no complaints against them, they are doing a good job and they are making their profit and that is fair enough. But there are others, are there not, that have under-performed, under-achieved, they could not give a monkey's cuss about the customer, all they are interested in is making a profit for the shareholder? Why has your organisation just stood by and let it happen, because it has happened? Nobody is happy with the railways.
  (Mr Grant) When you say let it happen, I think it is fair to say, and the report recognises this, that OPRAF as an organisation did what it could within the contractual limits.

  116. You had companies who were prepared to be fined, who would rather take off rolling stock and be fined because it is still more advantageous for them to make profits for their shareholders and provide a worse service. They were actually prepared to do that. That cannot be a very compassionate sort of service they are offering. All they are keen on doing is making a huge profit for the shareholders. I was at a meeting on Friday night, and I will not say where, and one question one person asked at the meeting was "what about the shareholders in all this?" What about the shareholders? I could not give a monkey's cuss about the shareholders, it is the passengers who are travelling who are not getting the service. That seems to me to be the attitude of a lot of these companies. It is your job to do something about it.
  (Mr Grant) We are doing something about it in the new franchise agreements. As I said to you earlier, unless they are in breach of the contract there is not much we can do about it. In terms of profitability going forward, under the new franchise agreements if they are making super profits then we will claw some of those profits back.

  117. It has been mentioned that railways are being used now 24 per cent more than they were before which means that if that is the case these train companies must be making huge profits. Do the present franchises allow those profits to be shared or are they just taken by the rail companies? Presumably if they are not, is there the possibility that in the future, as we saw with the utilities being given away and the windfall tax being brought in at a later date, is there the chance of this happening in the railways?
  (Mr Grant) Under the current franchise arrangements there is not a profit share. Clearly it is a mixed picture across the railways because it is not all of the companies that are making profits, some of them are in difficulties. As far as windfall tax, and I look to Mr Jenner, I believe there was a windfall tax based on Railtrack a year or two ago.
  (Mr Jenner) Yes.

  118. I am talking about the companies themselves.
  (Mr Grant) There is not any proposal to have any windfall tax other than, as I say, under the new franchise agreements there will be an opportunity to claw back profits.

  Mr Steinberg: Thank you.

Mr Love

  119. Good afternoon, Mr Grant. This Report shows that commuter services in Greater London are not only the most expensive in the country but they are also the most overcrowded and, indeed, have an appalling record on punctuality and reliability. Are London passengers getting a raw deal?
  (Mr Grant) I cannot dispute that the facts that you just said, that according to the information contained in the Report they are getting more per mile.

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