Select Committee on Transport, Local Government and the Regions First Report


PASSENGER RAIL FRANCHISING AND THE FUTURE OF RAILWAY INFRASTRUCTURE

The management of franchise replacement

  19. The Strategic Rail Authority's poor leadership has been blamed for reducing the benefits expected from franchise replacement by failing to state clearly what it wanted from bidders. The Authority produced its first guide to franchise replacement only after bidders had pre-qualified for the first replacement franchise round.[51] That was followed by a revised version of the guide only a few months later.[52] Great North Eastern Railway said that the franchise replacement programme had suffered from "a lack of clarity and strategic vision". According to Great North Eastern Railway, bidders were invited to embark on "a costly journey without knowing the conditions of carriage and unclear of the final destination".[53] The Department was also aware of concerns about the length and complexity of bidding rounds and the lack of guidance on the nature of bids required. The Department considered that the Strategic Rail Authority's approach of, by and large, leaving train operators to make proposals on matters such as rolling stock replacement had resulted in a range of incomparable bids that were difficult for the Authority to evaluate.[54]

The consequences of mismanagement

  20. As a consequence of the delay and confusion surrounding franchise replacement, passengers have been denied improvements on inter-city and regional services. The prospect of infrastructure enhancements to provide much-needed new capacity on many routes is as far off as ever. While responsibility for those difficulties lies principally with the Strategic Rail Authority as the franchising authority, it has become increasingly clear that Railtrack could not undertake the infrastructure improvements that were part of the new franchise proposals. The Government also bears some responsibility for the Strategic Rail Authority's failure and, in particular, its continued dithering over the new East Coast franchise. Although he conceded that the Authority was "way behind schedule" on refranchising, Sir Alastair Morton also blamed the "appallingly long silence" as the Government considered what to do about the East Coast. He said that the Authority had intended to finalise three franchises in the time that it took the Government to reach that decision; the Government's conduct in the matter had severely damaged the Authority's credibility.[55]

The July 2001 initiative

  21. In July 2001, the Government published its draft franchising statement,[56] in which the SRA was charged with securing early improvements for passengers under existing franchises or by negotiating two-year extensions. Citing Midland Mainline as an example,[57] the Secretary of State declared that the early replacement of franchises should be made "the exception rather than the rule".[58] The franchising statement and the Department's draft Directions and Guidance to the Authority[59] are intended to ensure that the Authority concentrates on implementing the 10 Year Plan, improving punctuality, safety and comfort standards throughout franchised services and adopts a more focussed approach to franchising. "Top priority"[60] must be given to achieving the 10 Year Plan's key targets for the railways of increasing passenger and freight volumes and reducing overcrowding on passenger services.

22. The Strategic Rail Authority now intends to follow a more structured approach to franchising that would require train operators to submit a "core proposal" that the Authority would purchase. The train operators would also propose a menu of optional extras from which the Strategic Rail Authority could chose to purchase elements.[61] The specification of the "core proposal" would clearly state what the Strategic Rail Authority expected from the franchise and ensure that bids from different companies were directly comparable.[62] The prospect of the Strategic Rail Authority giving more direction to bidders was welcomed by the Go-Ahead Group, which was looking for more of "a command and control" approach.[63] The new policy approach generally separates the passenger benefits that can broadly be achieved by the train operating companies through the franchise agreements from the development of major infrastructure projects. As Railtrack had agreed,[64] in April 2001, to concentrate on the maintenance and renewal of the existing network, these enhancement projects would depend on the company's former role being performed by third parties, which could lead to further fragmentation.

The reaction to short-term franchise extensions

  23. The new approach to franchising, outlined in the draft franchising statement, prompted concerns from the Rail Passengers Council that the Government would favour quick, short-term gains—presumably at a lower cost—to the detriment of long-term investment.[65] The Department regretted that the draft statement had been misunderstood or misrepresented as being focussed narrowly on franchise extension and conceded that that may have been a consequence of poor drafting.[66] The intention had been that the policy would permit the Strategic Rail Authority to do whatever was most appropriate to benefit passengers, whether through enhancements or extensions to existing contracts or their early replacement.[67] However, the Strategic Rail Authority was certain that the Secretary of State wanted to secure early improvements through the negotiation of short extensions or the better management of existing franchises.[68]

24. There was some support for short-term extensions. National Express told us that such extensions, like that granted to Midland Mainline, one of its own franchises, offered a good way of improving services quickly. Furthermore, with Railtrack in administration, short-term extensions could prove to be the only practicable means of taking franchises forward in the immediate future.[69] National Express conceded that the circumstances surrounding that franchise were not typical.[70] The original franchise, awarded for 10 years, had been already longer than most, and the extra two years were granted at a comparatively early stage in the contract to extend the franchise to 2008. In addition, rather than requiring subsidy as with other franchises, premium payments were scheduled for Midland Mainline towards the end of the initial agreement. Great North Eastern Railway's chief executive, Mr Christopher Garnett, said that the Government was misleading to refer to Midland Mainline in the way that it had, because the case was "a unique example".[71]

25. Considerable doubt was cast over whether a policy of short-term extensions would achieve the benefits that have been claimed for it by the Government. Arriva Trains Northern, another franchise subject to a short-term extension, has suffered from severe difficulties. In February 2000, Arriva took over the then Northern Spirit franchise and, in February 2001, it agreed a two-year extension to the franchise. According to the Passenger Transport Executive Group, Arriva received substantial additional funding on the understanding that there would be a marked improvement in performance. Unfortunately, there has been no investment in new rolling stock and performance has deteriorated, leading to staff recruitment and training problems.[72] Disruption to services has been extensive, with the cancellation of approximately 1,000 trains a week between May and September 2001.[73] Passengers have suffered considerable inconvenience as a consequence. As an interim measure, many trains have been replaced by buses.[74] We are concerned at the increasing use of buses to replace train services because of shortages of rail staff.

26. Another train operating company, Great North Eastern Railway was also firmly of the view that "only longer-term contracts, within a long-term strategic vision for the rail industry, can deliver substantial passenger benefits through continuous, long-term investment".[75] It felt that train operators with short-term contracts would be much less likely to have the incentive to address long-standing and deeply-entrenched obstacles to better service performance.[76] According to Great North Eastern Railway, two-year franchise extensions would do nothing to solve problems on its route, the East Coast Main Line, such as lack of track capacity and an inadequate power supply for electric traction.[77] It was also doubtful that short-term extensions allowed sufficient time to introduce new rolling stock. Although under Section 54 of the Railways Act 1993 the Government may underwrite an order for new trains to ensure that they will be used by a subsequent franchisee, Great North Eastern Railway believed that that provision would not help. The company found that manufacturers and bankers were reluctant to become involved in a deal in which there was no certainty that the franchisee ordering the new rolling stock would be in place to take delivery.[78] Investment in staff, new trains and infrastructure would also be jeopardised. Great North Eastern Railway said that the recruitment, retention and training of high-quality employees was difficult when the future for franchisees was uncertain.[79]

27. The Go-Ahead Group also warned that there would be "no step-change improvements in frequency, reliability and punctuality" with that approach.[80] Sir Alastair Morton said that existing franchises had achieved as much as possible and that had not been enough. New franchises "with substantially enhanced performance and investment requirements" would be needed.[81]

28. The Strategic Rail Authority announced in December 2001 that it had resumed the franchise replacement programme and that it had invited expressions of interest in three new franchises.[82] In line with the Government's wishes, the Authority's new approach will include short-term extensions and longer-term commitments, with franchise length determined by investment requirements amongst other factors.[83] Two-year extensions may be negotiated for up to six of the franchises which the Authority says should be re-let upon expiry of the existing contracts. The Strategic Rail Authority will also be looking at the benefits of combining franchises. It believes that there could be several benefits from reducing the number of train operating companies, including to be able to make better use of available capacity on congested routes, especially at the major London termini. The proposed first stage in simplifying the franchise map is the creation of a Greater Anglia franchise in 2004. The services currently using London Liverpool Street (operated by Anglia, First Great Eastern and the West Anglia part of West Anglia Great Northern) would be grouped together in a single franchise.[84] The placing of all train services at a large London terminus in the hands of only one company, however, could lead, at the very least, to a reduction in innovation and, at worst, to the exploitation of passengers. We are concerned that passengers could be disadvantaged by allowing a single operator to provide services to and from certain London stations. Better use should be made of existing capacity at London termini by the Strategic Rail Authority improving its management of conflicts between train operators at congested stations; or if the number of franchises is to be reduced, tighter controls, such as the more extensive and effective regulation of fares should be imposed.   

29. New, long-term replacement franchises, with tougher penalties for failure and higher rewards for success, are essential to bring significant improvements in train service performance, staff retention and development, and investment in new rolling stock and smaller infrastructure enhancements. It is appalling that Heads of Terms have been agreed on only three such contracts, despite the target of replacing all 18 existing shorter-term franchises by the end of 2001. All short-term franchises should be replaced as a matter of urgency. Limited benefits may be gained through short-term franchise extensions. However, the atypical Midland Mainline franchise is the only example of a successful extension to date; the disastrous performance of Arriva Trains Northern may well be more typical. The Government's decision to place less emphasis on long-term contracts is a significant step backwards from achieving the goal of high quality passenger services. We recommend that:

  • new long-term franchises be awarded without delay if there is to be a step-change in the quality of rail services. Priority should be given to safety, performance and investment when negotiating the new contracts and the basis for choosing the preferred bidder should be transparent. The cost and the timescale for the improvements that franchisees agree to make should be clear and enforceable with the train operators subject to higher penalties and rewards; and
  • the ability of train operators to introduce new trains with only a short franchise extension must be reviewed. In spite of the provisions made under Section 54 of the Railways Act 1993, there are practical procurement problems which must be addressed urgently.

THE GOVERNMENT-STRATEGIC RAIL AUTHORITY RELATIONSHIP

1. The delays and confusion affecting the franchise replacement programme were exacerbated by the deteriorating relationship between the Government and the Strategic Rail Authority. Sir Alastair Morton saw the Government's hesitation over the award of the new East Coast franchise, for example, as "a major source of difficulty".[85] In his opinion, the Strategic Rail Authority could not achieve its objectives because it had been placed under the complete direction of the Department.[86] According to Sir Alastair the two organisations did not enjoy a useful relationship because "almost every breath we draw has to be cleared by Ministers".[87] Moreover, the new draft Directions and Guidance to the Strategic Rail Authority issued by the Department would tighten "the Departmental grip" on the Authority.[88] In response to our questions, the Secretary of State denied that the draft Directions and Guidance were about "prescription or second-guessing" the Authority.[89] Furthermore, one of the purposes of the document was to make the respective roles of the two bodies "absolutely clear".[90]

2. Relations between the Government and the Strategic Rail Authority have soured, to the detriment of the development of the railways. The appointment of the Strategic Rail Authority's new Chairman is an opportunity to develop a constructive working relationship. The Department for Transport, Local Government and the Region's draft directions and guidance has now set clear objectives for the Authority which should remove any uncertainty about its priorities. While the Department should make policy and provide funds for the Strategic Rail Authority, it must not interfere in its day-to-day management.

Railtrack

THE BACKGROUND TO RAILWAY ADMINISTRATION

3. During the course of this inquiry, a major development took place that will affect the franchise replacement programme and have more profound implications for the future ownership and operation of the national rail network. On 7 October 2001, the High Court accepted the Secretary of State's petition to place Railtrack PLC in railway administration. That action was taken after the Secretary of State refused the Board's request to issue a letter of comfort that would have enabled the company to raise further capital in the markets, and remain a going concern. The Secretary of State stated in the petition to the High Court that the company would have a deficit of £700 million by early December 2001, which would rise to £1.7 billion by March 2002.[91] The company had already been granted additional funding following the Rail Regulator's final conclusions, published in October 2000, on the periodic review of Railtrack's access charges. The Regulator had determined that the company was entitled to earn almost £15 billion from the train operating companies between 2001 and 2006.[92] Together with its other sources of income, he said that this gave Railtrack total revenues of £17.5 billion over that period, which was £5 billion more than it had over the first years after privatisation.[93] The amount allocated to Railtrack for operations, renewals and maintenance for the second control period[94] (2001-06) represented an increase of 50 per cent over that allocated during the first control period. In addition, it was agreed that a payment of £1.5 billion to Railtrack should be brought forward from the third control period starting in 2006.[95] In return for the early receipt of that revenue, Railtrack agreed to additional measures to improve its accountability and to a change in its role. Third parties would in future take responsibility for funding and implementing major enhancement projects, leaving Railtrack better able to concentrate on its core business of operating, maintaining and renewing the existing network (see paragraph 57).[96]

THE DECISION TO PLACE RAILTRACK IN ADMINISTRATION

4. The sequence of events leading up to Railtrack's administration has been a source of controversy. The Transport Sub-Committee received several supplementary memoranda relating to the events leading up to the High Court's decision. That additional information has failed to provide incontrovertible evidence of the crucial events that led to Railtrack's demise and this Committee is in no better position, having received that information, to make an informed assessment of Railtrack's financial position at the time it was placed in administration.

5. Attention has focussed on whether the company was insolvent.[97] The Secretary of State has said that the Government had provided additional funds to the company in April, only to be told at a meeting on 25 July by Railtrack's chairman that it would require a letter of comfort from the Government if it were to continue to raise investment funds in the market.[98] According to the Secretary of State, Railtrack's advisors presented, at a subsequent meeting in August, the three options that they considered feasible—restructuring, renationalisation or receivership.[99] In view of the company's financial position, Mr Byers subsequently asked for the possibility of placing Railtrack into railway administration to be explored on a contingency basis.[100] The restructuring option would have required public funding to cover all the company's costs plus profit, and a four-year suspension of the regulatory system. The Secretary of State concluded that he could not give Railtrack "a blank cheque".[101]

6. The Secretary of State was by now firmly of the opinion that the Railtrack was "not part of the solution for our railways" but "a major problem".[102] It had become clear that the company was facing "financial meltdown"[103] and would be unable to finance its activities without further significant financial support from the Government.[104] The City had also taken an increasingly pessimistic view of Railtrack's prospects, especially following the Ladbroke Grove and Hatfield accidents.[105] Mr Byers considered it time to address the root cause of the problem and ensure that in future value for money improvements for passengers were obtained in return for public-sector investment.[106] Although discussions continued until 3 October, an alternative solution to the problem could not be found, and two days later it was decided that a petition for a railway administration order would be lodged with the High Court.[107]

7. Railtrack's conduct in relation to avoiding being placed in administration is puzzling. Mr Winsor told us that, even though in January 2001 he had intimated to Railtrack that if an application for an interim review were received he would consider it, between 15 January 2001 and 5 October 2001, Railtrack had made no application for an interim review, which could have provided the additional funds it required.[108] On 5 October, the Secretary of State held meetings with the Rail Regulator and with the chairman of Railtrack. At those meetings the Secretary of State explained his intention to apply for Railtrack to be placed in railway administration.[109] The Rail Regulator was unaware of the severity of the company's financial difficulties before that meeting, because "the company wrongly decided not to use the established regulatory mechanisms for dealing with its financial position and instead conducted direct negotiations for additional funding with the Government".[110] On 6 October 2001, the chairman and chief executive of Railtrack telephoned Mr Winsor and asked him whether "if the company made an application [to the Rail Regulator] that night, there was any prospect of my carrying out an immediate interim review".[111] Mr Winsor, said that, having asked about the grounds for the review and the amount of money the company needed, the answers made it clear to him that "in the time available, there was no prospect of doing what the company said was essential to protect it from administration".[112] Accordingly, having been informed of that view, Railtrack did not make an application. We accept Mr Winsor's assertion that although he was willing to undertake a review it could not be concluded in the time required by the company.

8. The Rail Regulator accepted that Railtrack, on the basis of the facts available to him on 5 October 2001, was solvent, however, he made it clear that Railtrack had failed to disclose its true position to him.[113] He said:

    "it is for the court to make a determination as to whether or not the company is insolvent and the High Court decided, on the basis of the information given to it on Sunday afternoon, that the company was insolvent. It is a question for the directors as to how the company could be insolvent on the Sunday, when it was not insolvent according to their evidence on the Friday."[114]

9. On 7 October 2001, the court decided that Railtrack was insolvent and so made the order putting the company into administration. The company did not oppose the petition for administration.[115] The Rail Regulator was "genuinely surprised and puzzled" that the company had not done more to prevent insolvency and railway administration; the company had waived the right to two days' notice of the petition and did not oppose the petition.[116] The Rail Regulator's interpretation of the company's inaction in defending itself from railway administration to stem from the Board's view that the Secretary of State's statement that emergency legislation would be introduced to stop an interim review was equivalent "in all material respects to a statute already enacted and brought into force".[117] The Secretary of State's decisions not to provide any money above the regulatory settlement, and to neutralise the Regulator by emergency legislation, had in Railtrack's view, closed the door on any possible escape from railway administration, and having made that assessment the company acquiesced with the process.[118]

10. The controversy surrounding the demise of Railtrack was, in part, related to the Government's failure to provide funds under the RenewCo arrangements.[119] The RenewCo proposal, agreed in April 2001, would have enabled Railtrack to receive £162 million on 1 October 2001. Payment of the RenewCo arrangements was dependent on several conditions, including a requirement that it should not be consolidated in either Railtrack's accounts or classified as being in the public sector.[120] The Office of National Statistics undertook the determination of the RenewCo's status, and following changes to the proposals confirmed on 5 October 2001 that RenewCo would be classified in the public sector.[121] The Secretary of State confirmed that the conditions for the RenewCo had not been met by the deadline and therefore the funds were not made available to Railtrack.[122] The Secretary of State denied that the Department had intervened to block the payment to Railtrack. Furthermore, a supplementary memorandum from the Department states that while RenewCo could not proceed because of the Office of National Statistics classification, "Railtrack could have received £162 million on 1 October under the October 2000 determination".[123] The 'October 2000 determination' refers to the Rail Regulator's determination of Railtrack's revenues for the second control period, from April 2001 to March 2006, under which the first £162 million instalment of capital grant was due to be paid on 1 October 2001.[124] The Department's supplementary memorandum states that "Railtrack made no request for the money to be paid under the October 2000 determination".[125] Correspondence between the Department and Strategic Rail Authority indicates that the Authority had discharged its responsibilities in respect of RenewCo, although the Strategic Rail Authority criticised the Department and the Treasury.[126] The Department confirmed that the final decision on the RenewCo rested with the Government, having received advice from the Office of National Statistics.

11. Subsequently, Railtrack argued it was not insolvent until the Government decided to make it so,[127] however, placing Railtrack in railway administration was, ultimately, a matter for the High Court to decide. In granting the Secretary of State's petition, the High Court clearly agreed that Railtrack was, or would be, unable to pay its creditors.[128]

12. Doubt has been expressed about Railtrack's precise financial position at the time of the administration order. Certainly, if the company were solvent at the time of that the Secretary of State applied to the High Court then the company would be justified in its subsequent complaint. It is very surprising that Railtrack's management were unable to provide the High Court with proof of that financial position. Railtrack were unable to provide the Rail Regulator, their only remaining remedy, with sufficient information for him to undertake an interim review and were "nowhere near being able" to make a case for a review.[129]

13. For the purposes of this inquiry, however, the key issue has been not the events surrounding the decision of 5 October, but whether Railtrack had performed its task effectively and whether it was likely to do so in the future and whether the present structure of the industry will be able to deliver Government's objectives for the railways. The company's performance has been woeful, and criticism of the company has been widespread and sustained. Indeed, in December 2001, what was reportedly one of the largest corporate fines to date was imposed on the company for failing to meet its performance targets.[130] Mr Tom Winsor, the Rail Regulator, told us that the railway industry's core problem was the competence of Railtrack's management. The company neglected its assets, failing even to complete an asset register, and was hostile to its customers. Moreover, Mr Winsor described dealing with Railtrack as being "a very, very difficult and unpromising process".[131] Those failings within Railtrack had direct consequences for the franchise replacement programme. For example, the company's inability to estimate the cost of infrastructure enhancements accurately and in a timely manner posed considerable difficulties for train operators.[132] According to Mr Stephen Grant, Railtrack would inflate project costs by three or four times, but as a monopoly supplier, it was not required to justify its figures.[133] This Committee's predecessor—the Environment, Transport and Regional Affairs Committee—examined the maintenance, renewal and development of the national rail network in considerable detail and concluded that Railtrack's stewardship of the nation's rail infrastructure was severely lacking, not least its failure to maintain and renew the network properly, its inadequate knowledge of its assets and its poor management and monitoring of the work of its maintenance contractors.[134] On balance the Committee considers the Secretary of State's decision to apply for railway administration was correct. It was the failings of its own senior managers that led to Railtrack's downfall. As the Rail Regulator has said: "Railtrack are the authors of their own misfortune".[135] The Sub-Committee intends to return to this matter in the near future.


51   'Building a Better Railway: the SSRA sets out its Approach to Franchise Replacement', SSRA News Release, 27 January 2000. Back

52   'Building a Better Railway: the SSRA underlines its Approach to Franchise Replacement', SSRA News Release, 25 May 2000.  Back

53   PRF 33, para. 2.4. The cost of Great North Eastern Railway's bid for the replacement East Coast franchise, for example, was between £2million and £4 million (Q 495).  Back

54   PRF 35, para. 33. Back

55   Q 128. Back

56   Passenger Rail Franchising: Draft for Consultation, DTLR, 16 July 2001. Back

57   See paragraph 25. Back

58   'Concentrate on early gains for passengers: Byers spells out new franchising policy', DTLR News Release, 16 July 2001. Back

59   Draft Directions and Guidance to the Strategic Rail Authority, DTLR, 29 June 2001. Back

60   PRF 35, para. 1. Back

61   Ibid,, para. 34. Back

62   Passenger Rail Franchising, para. 10. Back

63   Q 276. Back

64   PRF 39, para. 8. Back

65   PRF 17. Back

66   Q 66. Back

67   PRF 35, paras. 2 and 3.  Back

68   PRF 39, para. 8. Back

69   Q 238. Back

70   Q 253. Back

71   Q 565. Back

72   PRF 15, section 5. Back

73   'Arriva Trains faces £2 million fine in SRA Enforcement Action', SRA News Release, 25 October 2001. Back

74   Q 813. In October 2001, the Strategic Rail Authority proposed to fine the company £2 million for the cancelled trains and proposed further measures to ensure that Arriva resolved the shortage of drivers which was the cause of the problem. As an interim measure, buses would replace trains on approximately 1,000 services per week. ('Arriva Trains faces £2 million fine in SRA Enforcement Action', SRA News Release, 25 October 2001). Back

75   PRF 33, para. 2.2. Back

76   Ibid, para. 3.1. Back

77   Ibid, para. 3.4. Back

78   Ibid, para. 2.5. Back

79   Q 543; The Rail Industry Training Council thought similarly that the granting of short extensions would be detrimental as the industry is already suffering from skills shortages and a period of stability is needed (PRF 19). In addition, ASLEF highlighted the uncertainty caused by franchising for the employees of train operating companies, which it said was "not conducive to high morale or efficient working" (PRF 40).  Back

80   PRF 43, para. 2.1.1. Back

81   PRF 42. Back

82   'Building a better railway: new franchising plan to bring forward benefits for passengers', SRA News Release, 19 December 2001. The three franchises are Wales & Borders, Northern and Merseyside. This announcement coincided with the publication of the Government's policy statement on passenger rail franchising which had been issued earlier in the year in draft form for consultation ('Byers welcomes SRA franchising programme: delivers short and long term improvements for the passenger', DTLR News Release, 19 December 2001). Back

83   Any long-term franchises that are awarded are likely to be for periods of up to 15 years ('Building a better railway: new franchising plan to bring forward benefits for passengers', SRA News Release, 19 December 2001).  Back

84   'Building a better railway: new franchising plan to bring forward benefits for passengers', SRA News Release, 19 December 2001. Back

85   Q 101. Back

86   Q 103. Back

87   Q 144. Back

88   PRF 42. Back

89   Q 822. Back

90   Q 862. Back

91   H C Deb, 15 October 2001, col. 955. Back

92   The periodic review was formally accepted by Railtrack in January 2001. Back

93   PRF 53, para. 5. Back

94   A period, usually of five years, for which the Regulator set Railtrack's access income from franchised passenger operators. Back

95   PRF 53, para 7. Back

96   'Prescott unveils £7.5 billion rail boost under 10 Year Plan', DETR News Release, 2 April 2001. Back

97   The announcement that Railtrack Group PLC made a pre-tax profit of £292 million in the six month period that ended on 30 September 2001 added to this controversy (Interim Report for the Six Months ended 30 September 2001, Railtrack Group PLC, 18 December 2001).  Back

98   Q 845 and H C Deb, 15 October 2001, col. 954. Back

99   H C Deb, 15 October 2001, col. 954.  Back

100   Ibid; Preliminary contact was made with Ernst & Young on 23 August.  Back

101   H C Deb, 15 October 2001, col. 955. Back

102   Q 822. Back

103   Q 889. Back

104   Q 853. Railtrack's position as a quoted company which is dependent on the Government for two-thirds of its revenue was unique according to the Secretary of State ('Railtrack placed in administration: Byers proposes a private company without shareholders, but with the interests of the travelling public as a top priority', DTLR Press Release, 7 October 2001). In 2001-01, 85 per cent of Railtrack's £2,476 million income was paid to it in access charges by train operating companies, which in turn received £1,130 million in revenue support grants from the public sector. The company continued to receive indirect support through track access charges during the current financial year. It also received £337 million in direct grant payment from the Strategic Rail Authority in October 2001 and will be given a further £162 million when requested by the railway administrators (H C Deb, 22 October 2001, 95W). Furthermore, as Railtrack pointed out no major rail projects have been implemented without public funds because they were not commercially viable (Q 455). Back

105   The company's shares had risen sharply from the floatation price of 380p to a peak of more than £17. On the last trading day before administration, however, the shares were changing hands at only 280p each ('Private shareholders "likely to lose all"', Guardian, 8 October 2001). Suggestions that his comments had made it more difficult for the company to raise finance were denied by the Regulator. On the contrary, he pointed out that he has a statutory duty not to make it unduly difficult for the company to finance its activities (Q 764). Back

106   Q 822. Back

107   H C Deb, 15 October 2001, cols. 954 and 955. Back

108   QQ 733, 766-769. Back

109   Q733. Back

110   Q 733. Back

111   Ibid. Back

112   QQ 733, 770-771. Back

113   Q 791. Back

114   Q 793. Back

115   Q 733. Back

116   QQ 795-797. Back

117   Q 793. Back

118   Ibid. Back

119   PRF 35D, paras. 18-20. In April 2001, Railtrack and the Strategic Rail Authority undertook to use their best endeavours to put in place the RenewCo scheme, whereby the capital grants due to Railtrack under the October 2000 determination would be paid into a new special purpose vehicle. Back

120   PRF 35D, para. 19 Back

121   Ibid, para. 21; HC Deb, 4 Dec 2001, col 207W. Back

122   Q 855. Back

123   PRF 35D, para. 20.  Back

124   Ibid.  Back

125   Ibid; QQ 855-856. Back

126   See correspondence between Sir Alastair Morton and Sir Richard Mottram, dated 1 October and 11 October 2001. Back

127   Q 345. Back

128   H C Deb, 15 October 2001, col. 955. Back

129   QQ 785-786. Back

130   The Rail Regulator announced a fine of £7.9 million because Railtrack failed to meet its target for reducing delays to train services between 1999 and 2000. The company could have been fined up to £10 million ('Huge fine for Railtrack', Guardian, 13 December 2001). Back

131   Q 799. Back

132   See comments by Great North Eastern Railway (Q 485).  Back

133   Q 591. Back

134   The Sixth Report of the Environment, Transport and Regional Affairs Committee, Rail Investment: Renewal, Maintenance and Development of the National Rail Network, HC (2000-01) 18. Back

135   Q 799. Back


 
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