Examination of Witnesses (Questions 400
WEDNESDAY 31 OCTOBER 2001
400. Do you think you will be able to do that
and retain the present board with the exception of Mr Marshall?
(Mr Bloom) I am confident that we will be able to
401. You are confident that you will be able
to do that?
(Mr Bloom) I am confident that a combination of the
Railtrack staff and we are able to do it.
402. The Railtrack staff.
(Mr Bloom) The team, the workforce and the board at
Railtrack combined with the administration team.
Chairman: The workforce and the board.
403. Mr Marshall, according to press reports
which quote city sources we are told that Railtrack promised to
pay Virgin £250 million because Railtrack had defaulted on
its obligations on West Coast Main Line organisation. Is that
(Mr Marshall) There is a great deal that appears in
the press but
404. Is it true?
(Mr Marshall) If I may. We had a series of options
that, as I have already remarked, were to be presented to Government,
we never got there. They were not binding. They would have had
impacts on other customers and the SRA were not party to those
405. Is it true that you offered compensation
to Virgin for Railtrack's failure to deliver modernisation on
the West Coast Main Line?
(Mr Marshall) Compensation of varying amounts would
and could have been payable to Virgin if we had got to the point
where we could have tabled those to Government and involved the
SRA and got a deal. We never got to that point and that is why
I am hedging. They were commercially confidential so, if you will
forgive me, I would prefer to step back from quoting specific
406. So, Mr Marshall, does that mean that Railtrack
had accepted that they did default on their obligations on West
Coast Main Line with Virgin?
(Mr Marshall) Not a matter of default at all. We are
powering ahead as we sit here today with phase one and we had
significant commercial concerns, as we already flagged, on some
output journey times, and we were looking to get those adjusted.
They would have required compensation but I should not go into
the detail because we are bound by commercial confidentiality.
407. On the legacy you have left in Railtrack,
when would Virgin's trains, the tilting trains, be able to run
on the West Coast Main Line at 140 miles an hour? What date would
that be possible?
(Mr Marshall) That is as yet unclear and will need
to be, as I have already said in this hearing, now resolved by
commercial negotiation with Virgin, other users of the route,
the SRA and the Government who now have a course for more direct
408. Does that then mean that on the legacy
that you have left, the promises that were made that those tilting
trains would be able to run on the West Coast Main Line would
not have been met?
(Mr Marshall) A contract was signed in 1997 to ultimately,
in 2005, run 140 mile an hour trains. We, in commercial negotiation,
with our partner were seeking to vary that contract. That process
409. You were not able to meet that contract?
(Mr Marshall) We would have chosen to have varied
410. In other words the trains would not run
(Mr Marshall) No, in our view, and I can only set
out Railtrack's view because the commercial contract is there
until it is changed
411. Did you seek a discussion on compensation?
(Mr Marshall) in our view, 140 mile an hour
running was not appropriate value for money for the use of resources.
412. Therefore, you were not going to be able
to deliver that?
(Mr Marshall) We would not have ceased to proceed
on that basis until we had negotiated a new commercial agreement.
413. You believed you would not be able to deliver
(Mr Marshall) We believed that the cost would have
been prohibitive to doing it but we have done everything we should
do to proceed in that direction until we reach the point where
by mutual agreement we do something else.
414. You are not going to be able to do it now.
Now, Mr Bloom, there are also reports that Virgin are considering
approaching yourselves to seek compensation for failure to modernise
the West Coast Main Line. Would you consider it appropriate to
pay compensation to Virgin in such circumstances?
(Mr Rollings) Perhaps I can answer that. We have arranged
to meet Virgin but there is no agenda to that meeting. I do not
know if they will be asking for compensation or whether or not
the discussions will follow along the lines that Mr Marshall has
415. In principle, would you consider it appropriate
to pay from public funds compensation to Virgin?
(Mr Rollings) I think we will look at all the options
very carefully and in discussion with DTLR assess what is the
most appropriate for the public purse and good value for money.
416. In principle that is something you might
(Mr Rollings) I think we have to look at all the options
and evaluate those on the basis of ability to achieve and to the
417. That could be one option.
(Mr Bloom) Just to clarify. The position of the administrators
is not different, they do not have a different set of contractual
arrangements with Virgin to the set of contractual arrangements
that Railtrack have. There is merely a different group of people
that Virgin need to speak to as well as the people they have been
speaking to at Railtrack. We have been involved with this for
three weeks now. It is a highly complex set of arrangements that
have been going on for a long time and, indeed, the negotiations
that have been going on with Virgin have been going on for a long
time. For us to have a different view at this stageat this
very early stage of assessmentwould be very difficult.
418. Mr Rollings, you said in reply to an earlier
question that you were reconsidering or considering major projects
on a project by project basis.
(Mr Rollings) That is right, yes.
419. What does that mean for West Coast Main
(Mr Rollings) I meant in addition to the West Coast
Main Line we are looking at, obviously, Thameslink 2000 and other
projects in the round. I was looking at projects including West
Coast Main Line, Thameslink 2000 and others, looking at them in
the round. Clearly these things are not entirely without consequential
effects on each other to the extent that there is limited resource
and funding available for them.