Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 237-239)




  237. Good afternoon. I apologise for keeping you waiting. Would you be kind enough to identify yourselves, for the record?
  (Mr Brown) Good afternoon, Madam Chairman. My name is Richard Brown. I am Commercial Director of National Express Group.
  (Mr Ludeman) I am Keith Ludeman. I am the Chief Executive of the Go-Ahead Group's Rail Division, responsible for Thames Trains, Thameslink and South Central, recently acquired from Connex.

  238. Do either of you gentlemen wish to say anything?
  (Mr Brown) If I may, I would like to say just two or three very brief things, Madam Chairman; and, first of all, thank you very much for the opportunity to give evidence today. As ever, your inquiry is very well timed, because of the vitally important range of issues facing the industry. Events have moved on very substantially since we submitted our evidence, and that was only just over a month ago, both with the attacks in New York and their ongoing repercussions, and Railtrack's administration. However, we do still believe that the short-term franchise extensions of two or more years offer a good way of delivering early improvements for passengers; we actually see them as complementary to long-term franchises, because they can be introduced whilst work proceeds on the smaller number of long-term franchises, but which usually take longer to get in place. And, indeed, with the current situation at Railtrack, it is possible that they are the only practical means of moving franchises forward in the immediate future. As regards Railtrack and its successor, we do believe that time is of the essence; there is no doubt that investment and confidence has been badly affected by recent events, as our own trading update, this last Monday, is a further example, and that they will not start to ramp up again until the new industry model is both understood and in place. So, to summarise the key message of our submission, we do believe that the DTLR's July policy thrust to put more emphasis on short-term franchise extensions remains right, and should still be pushed forward rapidly. We also believe that top priority must be given to designing and implementing an effective successor to Railtrack.
  (Mr Ludeman) Madam Chair, I also very much appreciate being asked to come here today and give evidence. I appreciate that you have got a lot of business to get through, so I will be brief. My written evidence, along with my colleague's, was put together before Railtrack was placed in railway administration; it was based on our first-hand experience of the refranchising process, we bid for Chiltern and South Central and Thameslink besides, and also as a railway operator based in the London area which now accounts for 20 per cent of all UK rail passenger journeys. Our conclusion is that the original refranchising process was flawed and change is required, and we believe very strongly that it is important in the future that a single body be given the authority to devise prescriptive, core franchise propositions to give consistency of strategic direction to the rail industry, reducing duplication and controlling costs; that, in our view, has not been evident to date. We believe there is a place for short-term, negotiated extensions, as my colleague has said in his evidence, but we believe this must be seen as an interim measure only. Short-term extensions will not create step-change improvements in punctuality, reliability and comfort. Substantial investment is required to deliver these improvements from an existing network, which is, as many customers who use the railway network know, fragile and unreliable, and we need to invest that money to return it to the levels of performance that were seen in the late nineties. Short-term extensions will also not attract private investment unless they are backed up by Government guarantees, and there is something called a Section 54 agreement, which we can probably discuss today. Financiers, as we know, generally require lengthy periods of time over which to recover their investment, unless high rates of return are achievable. Now, so far as the Railtrack contractor model that has been used on West Coast Main Line and on other schemes, we have seen that they have some problems with cost and time overruns. Go-Ahead, with a long franchise for South Central, has been developing the SPV concept, or, let us call it, a financial structure, which we see as the future for enhancements in the rail industry.

  239. Doubtless we will want to question you on that, Mr Ludeman. But, for the moment, is it a good idea for Railtrack's successor to be a single entity, with the same licence obligations as its predecessor?
  (Mr Ludeman) If you look at Railtrack and the lessons that perhaps everyone in the industry has learned over the last seven years, it is not a failure of the wheel-rail interface, it is more a failure of the management of the business. In the early years, Railtrack possibly devolved too many of its responsibilities to contractors.

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