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


Memorandum by the Rail Freight Group (PRF 18)

PASSENGER RAIL FRANCHISING

INTRODUCTION

  The Rail Freight Group (RFG) is the representative body of the rail freight industry in the UK. Its objective is to grow the volume of freight carried by rail.

  RFG welcomes the Committee's Inquiry since, although it is primarily directed to passenger traffic, many of the issues affect freight as well. We confine our response to such issues.

BACKGROUND

  The SRA has been formally in existence since 1st February 2001. Before that, it has been working in shadow form for about 18 months.

  In May 2001, following extensive consultation, the SRA published its Freight Strategy, indicating how it intended that the Government target of an 80 per cent increase in rail freight be achieved. It set out proposals as to what, where and how this growth will be achieved, by increasing the capacity and capability of the network to enable longer, heavier, higher and faster trains to be run, by the creation of a network that was available 24 hours a day, seven days a week for freight, by the development of new terminals and the upgrade of certain routes as priorities.

  This Strategy has been widely welcomed by the industry, and it is considered that it has contributed significantly to the current more positive view of future prospects for freight growth, and that all four rail freight operators have announced new services during the summer.

  Freightliner announced the signature of a ten-year contract with OOCL to provide a new daily container services between Southampton and Manchester. EWS has launched a new high-speed freight service from Motherwell to Inverness and intends to extend the service from the west Midlands to Aberdeen later this year. GB Railfreight and Johnson Stevens Agency have announced a new dedicated intermodal service between Felixstowe and Doncaster. Direct Rail Services has started a new service for W H Malcolm from Grangemouth to Daventry.

  Provided that the Rail Regulator and the SRA are able to implement the proposed reduction in track access charges, there is every expectation that the industry could achieve the 80 per cent growth by 2010, on top of the 40 per cent growth in the last five years. Industry itself has invested over £1bn in this time in facilities above tracks, including locomotives and rolling stock, terminals, IT systems etc. We welcomed the announcement in the Government's Ten Year Transport Plan of £10bn for rail freight over the period.

INTERACTION BETWEEN PASSENGER AND FREIGHT

  Freight and passenger traffic mainly use the same lines and with Government targets for a 50 per cent growth in passenger traffic alongside the 80 per cent for freight, there is now inevitably congestion on much of the main routes of the network. The privatisation structure was designed to incentivised Railtrack to invest in additional capacity ahead of demand, but it has not happened; worse still, Railtrack has reduced maintenance significantly so that capacity and reliability is probably worse now than when Railtrack took over responsibility for the network. This was set out in more detail in previous RFG submissions to the Committee.

  Thus, much of the slack in the network has already been taken up. Although the £4bn over ten years for freight will be of great benefit to the industry, there is also the need for a policy, programme and finance for upgrades which are often passenger-led but which significantly affect freight as well.

  For example, the Felixstowe-Nuneaton gauge enhancement project for freight, the first of the SRA freight projects, is required to allow the passage of 9' 6" containers on standard flat wagons, and has the potential to attract large volumes of containers off the road onto rail. The project involves about 30 bridges being raised (or track lowered). Railtrack has been involved in studying this for over a year. The process involves five stages of estimation of costs and programme; each one funded separately by the SRA. SRA funding stopped for several months in 2001 at the time of the Railtrack/SRA/DTLR crisis announcement in April on Railtrack's funding which resulting in rebudgeting with much reduced funding for studies.

  To add to this complex situation, there is also a capacity problem on the Felixstowe Nuneaton route, so that, to get the maximum potential for freight, work must be done at Leicester and elsewhere to reduce conflicting train movements. However, these are largely caused by passenger train requirements and we understand that nobody can make a decision on these until new franchises are discussed and let. As is well known, the DTLR has put on hold the negotiations of new franchises.

  All this will result in the gauge enhancement, without capacity, taking some seven years to be achieved on this line. Even then, the capacity is likely to be constrained, resulting in the short term in reduced value for money which could put the whole project at risk.

  There are many other projects, both large and small, in the same situation of process gridlock.

GOVERNMENT AND THE SRA

  Unfortunately, the SRA has not so far produced an overall strategy for the railways and passenger services. It has also contributed, with the Rail Regulator, to a situation where it appears that Railtrack is given a blank cheque on projects such as the West Coast Main Line; detailed scrutiny of Railtrack's costs and the need for them has not so far taken place.

  Thus we were not surprised that, at the end of June, the DTLR issues new instructions and Guidance to the Strategic Rail Authority, as allowed in the Transport Act 2001. These concentrate mostly on passenger issues, now requiring or encouraging the SRA to do what many thought they should have done already and to a large extend already have for freight.

   We note that the SRA must act in the way best calculated to contribute to the achievement of sustainable development. It confirms the Government's transport policy, Ten Year plan and targets to achieve a "significant increase in rail freight market share resulting with an 80 per cent increase in rail freight by 2010, provided that the rail freight companies can deliver improvements in performance and efficiency". We are concerned at the apparently less firm commitment to freight than passenger growth and, since the majority of problems in performance and efficiency are caused by Railtrack, it is surprising that the DTLR document confines its qualification to the operators.

  Outcomes expected include improved levels of customer satisfaction, more competition and efficiency, and an increase in rail freight's market share to around 10 per cent, equating to an additional 15bn tonnes-km of rail freight each year.

  The Government instructs the SRA to provide leadership for the rail industry and ensure that the different parts work co-operatively towards a common goal. "It will need to set priorities for action by itself and others". The SRA should work "consistently and purposefully with the Rail Regulator and the HSC to strengthen and support the railway and establish close working relationships with them".

  The SRA "must publish a first overall strategy in November 2001, addressing the full range of objectives set out for it in these Instructions and Guidance".

  The document supports the new proposals for rail freight grants, and requires the SRA to "secure increases in the capacity of the railway to accommodate the expected growth in passenger and freight traffic" and "to develop a policy for the allocation of capacity among users".

  "The Authority will need to address vigorously the blockages which currently affect the delivery of new trains by their manufacturers". It must achieve a significant improvement in resilience of the railway operations.

  The SRA is now required to advise Government Offices and regional planning bodies on rail proposals for incorporation into Regional Transport Strategies, and should comment on and participate in regional planning documentation and multi-modal studies.

  On railway land, the Government confirms the current policy of the SRA, and confirms that it may retain its land for future rail use. Since Railtrack land is also "railway land", it is a pity that there is no mention of this in the document.

  The SRA is to encourage and, where appropriate, commission research, as well as compile and publish statistics on national rail trends.

  RFG welcomes this document in general terms, although we have concerns about the Government's commitment to the 80 per cent growth figure for freight. It is clear that the SRA has much to do in the fields which it has not so far seen as a priority; rolling stock and other technical issues, delivering network capacity, sorting out capacity allocation, to name but a few. What there is on freight is positive, and may reflect the existence of a freight strategy.

  However, the document reveals a serious loss of confidence in the SRA, with the DTLR apparently taking over much of the control and decision making processes.

  The SRA, under a new Chairman, will need to catch up on two lost years; a full Strategy by November will take some work (except for freight), to describe how it is going to deliver more capacity (but within its budget), provide leadership and demonstrate a new positive relationship with Mr Winsor, the Rail Regulator as well as with the new ministerial team.

  We trust that, when the new team is installed, the Government will then let go and allow the SRA to get on and do its job without continued interference on policy, on accidents, on funding.

INVESTMENT IN THE RAILWAYS

  One objective of the draft Directions and Guidance is to ensure the long term investment in the industry. This is certainly essential. The private sector will invest if it sees an appropriate return, if it sees a policy and stability from Government, and if the bureaucracy is not seen to be too Byzantine. At present, the railways fail on many of these counts.

  As mentioned earlier, the rail freight industry has invested over £1bn above the tracks since privatisation. We believe that the rail passenger industry, particularly the ROSCOs, have invested large sums as well. However, little has been done on the infrastructure and, even if one ignored Railtrack's current inability to invest. A structure that requires freight infrastructure investment to be paid directly to Railtrack and passenger investment generally being paid to Railtrack via the Train Operating Companies is itself very confusing and of course open to endless debate as to who is responsible for what.

  Add to that, the inability of the TOCs, the SRA or the Regulator, or the private sector terminal operator (who is faced with a "take it or leave it" approach from a monopoly supplier), to ensure that Railtrack delivers Value for Money, it is hardly surprising that even the smallest project can take several years to achieve, and the larger ones rarely get started.

  There have also been many statements by Railtrack recently about the lack of signalling resources preventing them from undertaking new works. Some RFG members have been told by Railtrack that they can have no new terminal connections involving signalling until 2004-05. We have investigated whether this shortage is so serious as to justify such delays. We find that many of the signalling contractors can provide signalling staff to work on any contract provided that it is not for Railtrack.

  Furthermore, the contractors say that they can always fit in small projects between the peaks and troughs of work of larger ones. We conclude that Railtrack's statements about lack of signalling staff precluding further works is more likely to be because they do not want others to do them and therefore lose control and, possibly ownership of the new assert.

  An example is the Stirling-Alloa-Dumfermeline line in Scotland, which the Scottish Executive wish to see reopened for passenger and freight traffic. Railtrack has recently stated that it will not invest in this project, so the Executive and others are seeking funding from other sources. If the work is completed and connected to the network not at Railtrack's expense, then the question should be asked—who owns that line on completion?

  There is no reason why Railtrack should and, furthermore, since it will gain additional capacity and therefore revenue on the alternative route of the Forth Bridge without any investment, then we would argue that the Regulator should reduce Railtrack's Regulatory Asset Base or Efficiency Targets by the amount of investment that Railtrack should have made but did not.

CONCLUSION

  We conclude that we are not surprised that the Government has sought to take greater control of the SRA and to get action on many issues which should, in our view, have been done by the SRA without waiting for instructions.

  However, we do not believe that, as they are drafted, they will ensure the "rapid improvements to the safety, punctuality, reliability, comfort and frequency of services", certainly for freight unless and until the Government addresses the real cause of the problems—the unmaintained and underinvested infrastructure, operated by a monopoly supplier whose costs, plans and general management appear to be largely out of control or jammed in a gridlock of bureaucracy.

  The same comment applies to investment, for reasons which we have stated above. Investment above the rail will not continue unless the Government demonstrates an intention to achieve an infrastructure that is efficient and effective 24 hours a day seven days a week.

  Investment in the rail infrastructure itself is now largely coming from government anyway; it would appear very much preferably to pay this directly to Railtrack, for small schemes, and directly to contractors for larger schemes, rather than through passenger train operators. This requires a level of quality and quantity of expertise and experience in managing major contracts in the SRA. We do not believe that Railtrack has yet fully accepted that their future role is confined to the maintenance and renewal of the existing network. We note that there are still many delays, much lack of information and continuing ridiculously high prices quoted; this again requires urgent action to resolve.

  As things stand, the railway industry is in a state of process and investment gridlock. We believe that the new draft Directions and Guidance to the SRA are a necessary step in achieving the Government objectives. They are not, in themselves, sufficient. The DTLR is probably considerably less capable of undertaking the work of the SRA itself; it should not try to second-guess every move or payment made by the SRA. Rather, it should ensure that the SRA is staffed by people in whom it has confidence to deliver its outputs and policies and then start delegating authority to the new SRA.

  Secondly, it is time that the Government removed its blind spot about discussions about Railtrack. The present structure of the company and its ownership is, we believe, incompatible with the growth targets and other Government policies. We are already more than a year into the Ten-year Plan; it is time for the Government to take action both on the SRA and Railtrack if it wants the targets achieved.

17 September 2001


 
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