Examination of Witnesses (Questions 440
WEDNESDAY 31 OCTOBER 2001
440. You got your figures wrong and you then
decided you could not continue with your own estimates?
(Mr Marshall) No, no that really is unfair. If you
will permit me to explain.
441. I would never dream of being unfair, Mr
Marshall. I am trying to work out whose figures were they?
(Mr Marshall) They were priced by Railtrack.
(Mr Marshall) If I can be absolutely clear.
(Mr Marshall) The reality with rail projects, and
it is going to be as much an issue for Railtrack's successor and
who is picking up the risk as it has been in the past, is entirely
dependent on what stage of evolution that feasibility study of
the project has got to.
444. What stage of evolution the project has
(Mr Marshall) Yes.
445. Therefore your figures could be wholly
wrong because the project is evolving?
(Mr Marshall) Because it is too early to price it
446. Why did you then price it? Is this unusual?
Do people not normally give prices at the beginning of a project
and make at least a wild stab at staying somewhere near them?
(Mr Marshall) You make a wild stab early on because
everybody wants a wild stab and as you do your pre-feasability
level, you define the scope of a project. You then do a full feasibility.
You talk with your client or your funder constantly as you are
going through that process. The reality is until you have got
the scope up and down, and you have probably spent about ten per
cent of the cost of the project, nobody in their right mind would
go on risk and price it and say "This is the final price,
this is what will be the project".
447. So no-one should take any of your prices
seriously at the beginning of a project?
(Mr Marshall) They should not take anyone's guesstimates
at the beginning of a project seriously.
448. Mr Marshall, is it true that at the beginning
of this year you did say that the cost of the East Coast Main
Line had increased by nearly 100 per cent in some of the instances?
Now this is a point the Chairman was making. Here we have got
a situation that an estimate was made and then within a short
period of time it had increased by 100 per cent. Is that a fact?
Is that something that did happen?
(Mr Marshall) Firstly, it is not a fact at all.
449. What was the increase?
(Mr Marshall) The underlying increaseand you
will recall perhaps that the SRA came out with the statement two
weeks after that assertion had been madewas less than 20
per cent, that is a fact. The second point, if I may, because
it is relevant, is that the Rail Regulator, not known as a soft
touch, himself has come out in his regulatory framework and said
that no project that Railtrack enters into should go on risk,
priced as we were calling it, until it gets to level five which
is the point I was suggesting to you, a full feasibility study,
the scope nailed down and at that point one goes on risk to the
450. Would it be fair to say that with the reports
that we have gotand this was on 1st May this yearthat
some of the estimates had increased by 100 per cent, that Railtrack
said they could not handle the improvements and the work required
on the East Coast Main Line, that there was this question of facilities
for passengers which were being withdrawn or reduced, would it
be fair to say, Mr Marshall, with that scenario that the Secretary
of State was right to say Railtrack had got it wrong and that
he wanted to make sure the business went ahead in the best interests
of the travelling public?
(Mr Marshall) You are tempting me to get into areas
which I suspect Madam Chairman will prevent me from getting into
but if I could respond in shorthand. Firstly, whatever the merits
and views about the future of the industry, the way the Secretary
of State choked Railtrack by his own actions is unforgivable and
will have a huge cost to the public purse in the ability to raise
451. Are we not saying then that the way that
Railtrack handled the East Coast Main Line development was unforgivable?
(Mr Marshall) It certainly is not unforgivable. The
fact is that Railtrack itself, when nobody else was prepared to
fund it, took the initiative and launched phase one.
452. What was your function, Mr Marshall, if
not to find upgrades of railway systems?
(Mr Marshall) It was and, indeed, that is why
453. Clearly it is hardly relevant to say that
no-one else was prepared to undertake that task?
(Mr Marshall) No, forgive me, we went ahead without
funding sponsorship. At the end of the day Railtrack can only
borrow and fund if at some point it is going to get a return on
the scheme. The point I am making is that we went ahead.
454. On this point about Railtrack's responsibilities
here. I put to you earlier on, Mr Marshall, West Coast Main Line,
you gave evidence to this Committee, quite clearly in your blunt
fashion, very much appreciated that if the Government did not
come forward with a £4 billion grant for the West Coast Main
Line, which you were committed to, it would not go ahead. You
have walked away from the East Coast Main Line, you have been
kicked out of the Channel Tunnel phase two, what major project
have you actually done without saying to the Government "We
want you to pay for it"?
(Mr Marshall) Firstly, we were not kicked out of phase
two of the Channel Tunnel Rail Link at all, we chose not to exercise
our option. Secondly, the fact is that no private company can
fund upgrades without being paid. If one looks at the West Coast
Main Line, £4 billion of the £6.3 is renewal of the
network that is already there.
455. We are going to get stopped here but I
think the Committee does really want this clarified. You are making
the point, which you consider to be valid, that really it has
been Government that has choked you off, it has been the Treasury
that has done this business and all the rest of it, when the reality
is that West Coast Main Line would not go aheadand it was
not £6.3 when there was £4 billion, it was 5.8, you
then shoved it up to 6.3unless the public purse paid for
it. The question I am asking isto try to put this in contextwhich
major project have Railtrack been responsible for that has not
actually involved the Government, the public purse, paying for
it? Which one? Tell me one.
(Mr Marshall) Absolutely none. If I may explain why,
without any embarrassment. The fact is that no major projects
in the rail industry are commercially viable.
456. No private money at all?
(Mr Marshall) It does not matter whether it is British
Rail or Railtrack or son of Railtrack, private money and raising
on the debt markets, as Railtrack has done, £4 billion debt
on the debt markets helps but the reality is, and particularly
with the renewal of the core network which is two thirds of any
major upgrade you choose, that has to come via the regulator because
the railway commercially does not pay its way.
Mr Stevenson: That is very helpful.
Mr O'Brien: A question to Mr Bloom. The three
phases which have been referred to for the East Coast Main Line,
the three phases that Railtrack is reported as saying they could
not handle, has that been identified with any of the business
or research that you have taken over from Railtrack?
457. Is that part of your continuing programme,
(Mr Rollings) It is indeed, yes.
458. Are you looking at these figures?
(Mr Rollings) Yes, we are looking at them but there
is not much progress on that as we speak. I cannot give you anything
459. Could you let us have a note on that because
after all said and done the East Coast is important and the West
Coast is important. We have been told that Railtrack could not
handle these three phases. I want to know what is happening and
what the estimated cost will be? I wonder if you could let us
have some information on that.
(Mr Bloom) Yes.