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


Further memorandum by Greater Manchester Passenger Transport Authority and Executive (PRF 27A)

1.  INTRODUCTION

  Greater Manchester Passenger Transport Authority (GMPTA) is responsible for specifying and developing the local rail network in the Greater Manchester area through the Greater Manchester Passenger Transport Executive (GMPTE).

  This joint GMPTA and GMPTE submission follows the 14 September letter in response to the Transport Sub-Committee's original call for evidence on Passenger Rail Franchising.

  The four issues raised in your request for comments on additional terms of reference are dealt with in the following paragraphs. The further opportunity to participate in your Inquiry into Passenger Rail Franchising is appreciated.

2.  THE IMPACT OF RAILTRACK PLC BEING PLACED IN RAILWAY ADMINISTRATION ON THE GOVERNMENT'S FRANCHISING POLICY

  We feel that it is unlikely that the recent events will make any significant difference to the basis upon which the Strategic Rail Authority (SRA) has been pursuing the franchising policy on behalf of the Government. However, there is a concern that it may increase the requirement for subsidy to underpin new franchises.

  This opinion is based on the SRA assumption, promulgated in recent discussions regarding the Trans-Pennine Express (TPE) franchise, that over the next five years Railtrack (or its successor) cannot be looked to as a source of funding for infrastructure improvements. Furthermore, the SRA had advised that, as Railtrack's workload had absorbed all its current financial and physical resources, it would be unlikely that bidders for TPE could even have schemes costed before making bids. This approach by the SRA was apparent prior to Railtrack being placed into Railway Administration; matters are not understood to have changed significantly as a result of the announcement.

  However, the announcement, and its associated lack of clarity on the nature and structure of Railtrack's successor, has injected considerable uncertainty into the future of railway infrastructure projects. This could have two significant implications.

  Firstly, the uncertainty is likely to encourage bidders to develop submissions which demand higher levels of subsidy, so as to cover any additional risk which they may perceive to arise from unknown factors relating to the future division of responsibility for investment. Secondly, it is unlikely that bidders will make any firm commitment to improvements until they fully understand how the new railway industry structure will operate, especially in the context of the value for the franchise for which they are bidding.

  It is anticipated that these circumstances could result in the suspension of the franchising process until the current uncertainties in the railway industry have been resolved, as potential bidders may feel unable to develop credible bids until assurances on the fundamental rail industry structure and charging regime are in place.

3.  THE FINANCIAL STRUCTURE OF RAILTRACK'S SUCCESSOR

  From the perspective of GMPTA/E, the fundamental requirement is for clarification of the successor company's role and responsibilities. Once this central issue has been clarified, greater consideration can be given to additional concerns. If the future company is to be solely an organisation to maintain and operate the network, then the track access charge regime could be retained with some modification. We believe that, if this modification is undertaken competently, there should be no element of risk, which cannot be adequately allowed for within the track access charges regime.

  However, if Railtrack is to be involved in major infrastructure schemes it is recommended that there should be a separate financial agreement tailored to each individual scheme, involving all parties who have a funding interest.

4.  THE RELATIONSHIP OF RAILTRACK'S SUCCESSOR TO THE TRAIN OPERATING COMPANIES, THE RAILWAY REGULATORY BODIES, AND THE SRA

  It will be imperative for Railtarck's successor to be properly accountable to the stakeholders in the railway industry. Furthermore, we are keen to stress the importance of the inclusion of Passenger Transport Executives (PTEs).

  PTEs, as co-signatories to certain franchise agreements, have a contractual relationship with train operating companies (TOCs). There is an absence of any such formal contract between PTEs and Railtrack, resulting in the PTEs being forced to bring pressure to bear on Railtrack indirectly through the TOCs.

  This arrangement has not always achieved the results required by the PTEs as TOCs have sometimes been reluctant to act on behalf of the PTEs when it has not served their wider interests. In addition, it has been apparent that the TOC/Railtrack contracts have been drafted in a way, which tends to favour Railtrack. This has not facilitated achievement of PTE objectives via TOCs.

  It is therefore essential, if the PTEs are to successfully implement the objectives of Local Transport Plans that this current inefficient arrangement is replaced by a direct formal relationship with Railtrack.

  This should include a series of binding commitments and recognise the essential role of PTEs in developing the local rail network and acting on behalf of the travelling public. PTEs should be able to apply direct pressure on Railtrack's successor to enforce maintenance regimes and secure passenger facility improvements.

5.  THE ALLOCATION OF RISK BETWEEN THE NEW COMPANY AND THE GOVERNMENT

  As stated above, risk depends on the extent of operations which Railtrack's successor will be expected to undertake and the overlying responsibilities it will bear.

  Clearly, the operation of a safe railway is the most basic requirement which could be made of the new company. Within this could be the requirement to ensure a regime of adequate maintenance and competent operation. Subject to the company being suitably well-managed, there should be minimal risk attached to this; contingencies for factors such as adverse weather conditions should be able to be estimated and incorporated into the track access charges. This would avoid excessive additional costs in the order of those following Hatfield, which resulted from poor asset management.

  It is recommended that the Government should only take risk in regard to major infrastructure improvement projects. Indeed, in the present environment, it is difficult to see how future major schemes will be undertaken at an affordable cost or at all, without the Government providing such guarantees for major projects.

October 2001


 
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