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


Memorandum by Railtrack (PRF 38)

PASSENGER RAIL FRANCHISING

INTRODUCTION

  Railtrack owns and operates the rail infrastructure of Great Britain—the tracks, signals, tunnels, viaducts, level crossings and stations. We own 2,500 stations, which are mainly leased to the train operating companies. Railtrack owns and operates 14 major stations.

  Railtrack welcomes the Transport Sub-Committee's Inquiry into the implications for rail services of the Government's recently issued draft policy statement on passenger rail franchising and the draft directions and guidance to the SRA. Railtrack notes that this new approach places emphasis on the negotiation of changes and short extensions to existing franchises, rather than on the awarding of new long-term contracts.

  The rail industry has faced a number of significant difficulties in the last 12 months, from which we are now showing some signs of recovering. The consequences of those difficulties have been all too visible to our customers—passengers and freight shippers. Delivering improvements in quality of service for customers requires a significant and sustained team effort. Over the last 12 months both the industry and Government have shown a willingness to co-operate and have begun to work more closely together to find solutions to the problems that we have all encountered. The changes that are heralded in the policy papers that are the subject of this inquiry are significant elements of this new approach—and we broadly welcome them as a response to the recent experience of operational performance and the difficulties encountered in re-franchising. There is still much to do to earn trust and restore credibility to the industry. Railtrack is committed to playing its part in delivering the improvements and changes that are needed—albeit a lesser part than was once contemplated for us now that the SRA takes on the mantle for developing enhancements.

  The Committee asked that respondents address specific questions in submitting their written evidence. Railtrack's comments are set out against each of the questions below:

1.   Will the new approach ensure that rapid improvements in the safety, punctuality, reliability, comfort and frequency of services are achieved?

  Railtrack welcomes the clarity that the new approach gives the industry around the need to focus on short-term deliverables. In themselves the Directions and Guidance cannot assure delivery of "day-to-day" outputs, but the overall focus on delivery is appreciated and understood, we believe, by all the industry.

 the transport, local government and the regions committee

  Railtrack is focusing its efforts to re-build public confidence in delivery of a safe and well performing railway, and working with the industry to promote safety, punctuality and reliability. In many cases increasing the frequency of services requires significant investment and can therefore take some time to achieve.

  Over recent months the efforts put into restoring punctuality have begun to work and the chart below summarises the reductions in delays caused by infrastructure over the 26 weeks from April to September 2001.


  The industry continues to work together to deliver better performance and safety through a number of national initiatives, including:

    —  National Task Force focusing on performance, safety and industry-wide strategic issues,

    —  cross-industry working to respond to the Cullen and Cullen/Uff recommendations,

    —  creation of Systems Authorities for Wheel-Rail Interface and other safety issues, and

    —  Rail Industry Group—Rolling Stock sub group—work on train reliability,

as well as continuing local performance and safety initiatives with individual customers.

  In our response to the draft Directions and Guidance we have suggested that the SRA should be required to produce a performance strategy for the network that takes into account the level of train service, and the requirements for basic maintenance and infrastructure improvement. In particular we see that there are opportunities for the SRA to promote better performance by reviewing Public Service Requirements (PSRs), changes to franchise agreements that avoid perverse incentives, and other changes which place a higher value on performance for passengers.

2.   Will the new approach secure investment in additional network capacity and other improvements to meet both the long and short-term needs of the railways and will the sums allocated to rail investment remain adequate in the light of events since the publication of the Government's ten-year plan for transport?

  We believe that a shorter-term approach to franchising will not, by itself, promote investment. However, for reasons set out below, we do not think that this approach will, in itself, hinder investment.

  Two-year extensions to franchise serve to highlight the potential for severing infrastructure investment from franchising, which we support. The recent re-franchising round has failed to achieve significant risk transfer to the private sector for many reasons. It sought commitments from Train Operators that they were not in a position to deliver, and it failed to acknowledge the complex interdependencies and long development timescales for infrastructure investment. In short it left the Government with little choice but to focus on short-term extensions in order to make any progress at all. With infrastructure investment decoupled from franchising, the SRA will be better placed to develop a robust plan, taking account of national priorities, the resources available to it and the industry, and to procure investment and services at the appropriate speed and time.

  The SRA's ability to fund its contribution to new commitments, including those projects currently being explored, is not yet clearly established. Railtrack is working positively with the SRA, DTLR and HMT to help the SRA develop their new framework for funding and delivering enhancements through third parties (Special Purpose Vehicles). A new procurement framework for enhancement is a necessary precondition for significant new private capital to be brought into funding the ten-year plan.

  The SRA's strategic plan should address the question of how much funding is required to deliver long-term Government objectives, and we look forward to its publication next month.

3.   Will the new approach provide the framework for major infrastructure enhancement projects to be taken forward now that Railtrack is to focus on the maintenance and renewal of the existing network?

  The Committee should note that whilst Railtrack is to focus on the maintenance and renewal of the existing network it also has commitments to deliver several major enhancements, including West Coast Route Modernisation, TPWS, ECML phase one (principally Leeds First), Sunderland Direct, Virgin Cross-Country Upgrade and Channel Tunnel Rail Link phase one.

  The new approach creates the environment in which the SRA can lead the development and implementation of major upgrades—and we welcome this. In settling the new framework there are many complex issues relating to risk allocation which provide a challenge to the designers of the framework, to ensure the safe, efficient and timely delivery of enhancements. Railtrack has committed substantial resources to helping the SRA identify these issues and to find ways to enable the SRA to deal with them. It is too early to say how effective this will be in achieving the SRA's objectives.

  In promoting development of the network, we believe that it is critical that the SRA should prioritise its ambitions according to the value for money that each potential scheme represents for the public. Railtrack will support this process through both its network stewardship and business development roles.

  The Statement of Principles, agreed between Government and Railtrack in April 2001, stated that in order to allow Railtrack to focus on day-to-day delivery, Railtrack would not take forward projects to enhance the network above a certain threshold. In order to be able to focus on our maintenance and renewal responsibilities, Railtrack is asking Government to confirm this through the Direction and Guidance. Government also agreed that it will clarify the respective responsibilities of the Rail Regulator and the SRA in relation to infrastructure development to avoid potential overlaps. This should be done partly through the Directions and Guidance to the SRA. It is important to complete this process along with the procurement framework in order to provide clarity as to the respective roles of the SRA, the Regulator and Railtrack for both the future maintenance and future enhancement of the network.

  It is important that sufficient time and investment is allowed for major projects to be developed to allow firm scope, project plans and cost estimates to be formed before commitments are made to implement and parties are invited to go on risk. A major constraint on the delivery of enhancements to the rail network is the availability of resources to the rail industry, both financial and in terms of specialised skills. It is important that the SRA's Strategic Plan provides a realistic assessment of these constraints and the consequences of them for the delivery of the Government's Ten Year Plan and safety targets.

4.   Will the new approach transform the SRA's leadership of the industry, its day-to-day management of franchises and the way in which it assesses and awards new and extended contracts for passenger services?

  We note that the SRA is in the process of going through a charge of leadership, and that the Directions and Guidance bring SRA decision-making more into the control of government. It follows that Government will itself have a more direct role in providing leadership to the rail industry, with the SRA's role being to implement the Government policy.

  SRA should produce a Strategic Plan that has been consulted with stakeholders and which has their support. The franchising process should be used to promote the goals set out in the Strategic Plan.

  We welcome the requirement in the Directions and Guidance for the SRA to set out clear specifications for future franchises and clear criteria through which bids will be judged. We believe the strategic plan should contain a timetable for franchising. The Directions and Guidance allow for the separation of franchising and infrastructure investment. We agree with this separation—the recent experience of trying to combine the two has helped to highlight the difficulties it creates. Separation enables the SRA to concentrate on the separation activities of developing (a) network capability, and (b) service provision.

5.   Will the new approach improve the poor state of industrial relations in the railways?

  We do not believe that the new approach set out in the two policy statements has been specifically designed with industrial relations goals in mind, and we believe it will not, in itself, change industrial relations in the industry. The industry is turning its attention to ensuring that it trains and retains people with key skills—eg in signalling design or electrification installation. The industry is now planning much more closely together to provide the right environment to meet its long term needs in terms of skills and manpower—through a number of initiatives led both from within the industry and also with the Department for Education and Skills and the SRA. A strategic plan that enables suppliers to plan their business with more certainty is a prerequisite to developing and retaining skilled resources in the supply side of the industry. We are working very closely with the SRA to ensure that they understand our perspective on the need to plan realistically across many disciplines.

October 2001


 
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