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

Conclusions and Recommendations

(a)The Government must ensure that the Strategic Rail Authority provides the industry with a clear direction and must hold it to the deadlines for publishing future Strategic Plans. We are concerned that the exact cost and the timescale for implementing all the Plan's proposals have not been set out. The first Plan must be implemented to a clear timetable, so that passengers will know when they will see improved services. (Paragraph 12).
(b)We are concerned at the increasing use of buses to replace train services because of shortages of rail staff. (Paragraph 26).
(c)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. (Paragraph 29).
(d)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. (Paragraph 30).
(e)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. (Paragraph 30).

(a)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'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. (Paragraph 32).
(b)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". The Sub-Committee intends to return to this matter in the near future. (Paragraph 43).
(c)We are astonished that no contingency plan to cover for Railtrack's failure to perform and its eventual administration had been proposed. Ministers were apparently surprised at how quickly Railtrack's position had deteriorated. We do not think that Railtrack's successor can be established within six months of the company being placed in administration even though this is urgent. (Paragraph 47).
(d)The Government must restore stability to the industry with the minimum of delay. It is imperative that the process of administration be completed as soon as possible, and a new more unified structure be established. No plans for improving the railways will come to fruition if the core services provided by the infrastructure operator do not work properly. We are also concerned that the administrators' fees could consume large sums of money without bringing any direct benefits to the travelling public. (Paragraph 47).
(e)It is essential that Railtrack's successor has access to sufficient funds to operate, maintain and renew the rail network adequately. It will, therefore, require a credit rating of single-A or higher. The Government has not explained how this credit rating will be secured. It must do so without delay. (Paragraph 50).
(f)If the company that emerges from the débâcle of administration is not to repeat its predecessor's failings, it should be manifestly different from Railtrack in the following ways. It must:

  • focus on the operation, maintenance and renewal of the network;
  • have direct responsibility for inspecting the network and for directly employing those who are responsible for the maintenance and renewal of the network; and
  • place much greater emphasis on the engineering skills and experience of its staff. (Paragraph 51).

(g)We recommend that details about the condition of the railway infrastructure be added to Railtrack's asset register urgently, as this information is of fundamental importance, not least in determining a programme of essential investment (Paragraph 52).
(h)The fragmentation brought about by privatisation contributed to the chaos and delay that paralysed the industry. It is essential that the fragmentation of the industry is significantly reduced. We therefore strongly recommend that the Government should consider the role and responsibility of the Strategic Rail Authority in relation to maintenance, renewal and development of rail network. (Paragraph 54).
(i)There is no evidence that vertical integration would work. (Paragraph 56).
(j)There is no simple solution to the conundrum of how to upgrade railway infrastructure: Railtrack was not up to the task and there is no evidence that special purpose vehicles will be successful as they have yet to be used to enhance the existing network. The fundamental problem is that the modernisation work requires continuing large sums of public money over a period of many years, which cannot be funded from the farebox alone. The Treasury must accept this reality and provide the money needed to pay for these projects. A full assessment should be carried out before using the special purpose vehicle approach, taking account of the risks involved, to ensure that it represents better value for money than conventional public sector funding through the Strategic Rail Authority. (Paragraph 60).
(k)If a special purpose vehicle is to be used to take forward an enhancement scheme on the existing network, clarity will be required in:

  • the allocation of risks between the Government and those undertaking the work;
  • the arrangements for minimising disruption to the existing network; and
  • the arrangements for transferring the enhanced asset to Railtrack's successor on completion. (Paragraph 61).

(l)We recommend that the Strategic Rail Authority implement a programme of electrification without delay. (Paragraph 62).
(m)The Government should examine the costs and benefits of building new railway lines alongside existing routes to reduce the disruption to passengers and freight users when existing lines are being upgraded. Ways of reducing the time that it takes to open new lines should also be investigated. (Paragraph 63).
(n)It is extraordinary that the future of the West Coast Main Line, a major strategic route, is again in doubt and that the date for the completion of the upgrade remains unclear. We recommend that the Government establish how and at what cost the West Coast modernisation project can best be salvaged from Railtrack's mismanagement and it sets a firm timetable for the completion of the work. The scheme should be a priority and it will be seen as an important test of the Government's commitment to implementing major enhancement projects. (Paragraph 64).
(o)While the need for an independent economic regulator with clearly defined responsibilities, duties and objectives will continue, the respective roles of the Regulator and the Strategic Rail Authority should be reviewed. (Paragraph 66).
(p)While private sector companies remain involved in the railways, it is clear that the industry must have an independent Regulator. However, if the Strategic Rail Authority is to play a strategic role, it should be given sole responsibility for allocating funds and deciding how network track capacity be used and overall responsibility for rail infrastructure. Even though it may take some time before any legislative changes are in place, we further recommend that the Government present its proposals for changing the regulatory regime before Railtrack's successor emerges from the process of administration. (Paragraph 66).
(q)The economy of the United Kingdom depends on an efficient railway. This will not be achieved without investment on a scale which dwarfs the figures proposed in the first 10 Year Plan. We recommend that the forthcoming review of the 10 Year Plan establish the amount of additional public money needed for rail investment and that the Treasury make an unequivocal commitment to provide the necessary long-term funding. Without additional resources, the Department for Transport, Local Government and the Regions will have to reallocate more money in the 10 Year Plan from roads to railways in order to ensure that the targets for rail are met. (Paragraph 70).
(r)Both short- and long-term measures must be taken urgently to put the industry right:

  • The Strategic Rail Authority must be made into an effective body; it must perform its key tasks of planning strategically for the industry, and letting and managing new franchises much more efficiently than in the past; it must not be micro-managed by the Department;
  • New, long-term passenger franchises with bigger, properly-enforced, penalties and incentives to ensure that the train operating companies improve their performance dramatically;
  • Railtrack's successor must be taken out of administration as quickly as possible and by October 2002 at the very latest;
  • The new company should be directly responsible for inspecting the network and for directly employing maintenance and renewal workers;
  • The Government must ensure that Railtrack's successor is adequately funded and it must indicate soon how it will achieve at least a single-A credit rating;
  • There is no simple solution to the conundrum of how to upgrade railway infrastructure: Railtrack was not up to the task and the proposed alternative, the use of Special Purpose Vehicles, is unproven. It is essential that clarity exists between those responsible for rail infrastructure and train operation. We strongly recommend consideration be given to the Strategic Rail Authority's role and responsibility in relation to the maintenance, renewal and development of the rail network. The fundamental problem is that the modernisation work will require very large sums of public money and the Treasury must accept this reality;
  • Ways of constructing new lines alongside existing routes and reducing the amount of time that it takes to build new routes should be investigated; and
  • Very large sums must be made available for the railways. The funding proposed in the 10 Year Plan is inadequate. Sufficient funding to meet the targets set in the Plan is the very minimum that the Government must provide. (Paragraph 71).

(s)Once the new arrangements are in place, the railways will need a period of stability with minimal Government interference to enable the day-to-day performance of train services to be improved and to invest in new infrastructure and rolling stock. (Paragraph 72).

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