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


Examination of Witnesses (Questions 140 - 159)

WEDNESDAY 30 JANUARY 2002

RICHARD BOWKER AND PETER TREWIN

  140. So, therefore, we have the capacity study postponed beyond 2010, for Manchester and the West Midlands, but phase two of the West Coast Main Line is still in the picture?
  (Mr Bowker) I am seeing them as separate issues; but there are discussions under way at the moment between Virgin, Railtrack and the freight operators.

  141. In your opinion, will the West Coast Main Line phase two fall foul of postponement beyond 2010?
  (Mr Bowker) I could not honestly say. I believe that there is a significant risk that phase two of the West Coast Main Line will certainly not be completed by May 2005.

  142. Two questions, if I might, following on from that. When will you know, your Authority, so that we all know when you know; are we talking about weeks, months, years?
  (Mr Bowker) We are not talking years, but we may not be talking weeks. Discussions are under way at the moment; there is a lot of work going on between them. And, I would say, within a matter of months, the position will be much clearer.

  143. You will appreciate the importance of us knowing?
  (Mr Bowker) Absolutely.

  144. So it is within months?
  (Mr Bowker) It is within months, where there will be more clarity.

  145. My next question then is on that. What is the main reason why phase two of the West Coast Main Line is now in some serious doubt?
  (Mr Bowker) It is a combination of factors, and I am not sure it is possible to say there is one main reason. Certainly, the scoping of the project in the early days by Railtrack was not adequate, the project management of the process has not been adequate and decisions that were taken during the course of the project, for example, not to go for in-cab signalling, have had significant impacts on capacity. So it is not one simple factor, it is a combination of things.

  146. I accept that; is one of them cost?
  (Mr Bowker) Outturn cost, certainly, has been a product of a failure of those other things.

  147. I understand all that, we have been round this before. I am simply trying to identify the main ingredients, not the history, really, but the main ingredients, as to why it is that prior to the production of your Plan we were anticipating the West Coast Main Line complete upgrade being completed, we realise the difficulty; along comes the Plan and the West Coast Main Line phase two is now in serious doubt. The costs have escalated considerably, the anticipated costs. Therefore, I am trying to tie you down a little bit. Is the significantly increased costs of the projects a significant factor, in your view, the view of your Authority, that phase two of the scheme is now in serious doubt?
  (Mr Bowker) It is a factor; but the most important thing is the deliverability of the project itself, and the parties to the project are saying they have serious doubts over deliverability within the time frame that was originally estimated.

  148. Thank you. Following on from that, there has been considerable concern expressed about the apparent regionalisation of investment plans in your document, concentrating more, not exclusively, but more, on the South East. Would you accept that observation?
  (Mr Bowker) It is in danger of being a slightly one-sided observation. It is true that the major capital investment that is contemplated in the Plan is focused on London and the South East commuter networks and the inter-city networks, that is true; and that really is a reflection of the fact that we do have such a high proportion of total journeys that do use those networks, and the fact that issues around overcrowding, for example, are very serious on those networks. However, what we have done is made major provision in the Plan for the base services that we operate currently, throughout the UK, to continue; so, for example, the average subsidy per journey in London and the South East is only about one-thirteenth the average subsidy across the rest of the regional networks, and yet we have made provision for the services that those networks have. So support should be considered for both revenue and capital, I think it needs to be said.

  149. Yes, I would like to come to that. But if, as you have said, you see your appointment as being primarily to deliver the targets in the Plan, I wrote that down earlier on, then there is an almost impelling logic in that, that if the 50 per cent increased target is going to be delivered, or that 40, 50 per cent is going to be delivered, then concentrating on the South East is where it can be delivered, in terms of increase in passenger parameters. Would you accept that observation?
  (Mr Bowker) I think, to be honest, one of the reasons why there is so much capital in the South East is because we have significant overcrowding issues as well. It is true that, when 70 per cent of all passengers use routes in and out of London and the South East, including commuting, that is the market that we are addressing.

  150. Yes, exactly; that is very helpful. I want to put it to you that, when the 10 Year Plan was produced, had there been a paragraph in there that said, "Oh, and, by the way, to reach these targets we are going to have to concentrate on the South East," there would have been a completely different political, and public, reaction to that document. Now your document comes along, the Strategic Plan, that actually says that is going to happen. It is therefore difficult not to conclude that you are more interested in getting the targets delivered than you are in producing a Strategic Rail Plan?
  (Mr Bowker) I think the Strategic Plan is actually quite balanced. It says that, in terms of addressing the major capacity and capital investment needs, those are concentrated in London and the South East. That does not mean it is a Plan for the South East of England's railway. There is a huge amount of things in here, for example, we have extended very considerably something called the Rail Passenger Partnership Fund, which has been a very successful thing, it is directed primarily at much more targeted investment on the regional networks, and it can have a huge impact. It could be that £half a million, or £5 million, in perhaps the North West, or the West Midlands, can have as significant an impact on the journey experience for the customers that use the network as £500 million might have putting a new bridge across the River Thames, for example. So there is a danger in assuming, I think, that the bigger the capital number the more you are actually doing; actually, it is possible, through quite a lot of the methods that are here, to give a real benefit for much smaller numbers.

  151. Thank you. My colleague, Brian Donohoe, asked about private sector investment, on which, of course, the Plan is predicated, and you commented that, I think you said, it is already happening, we have investment by the TOCs, we have investment in the ROSCOs, and so on; yes, that is true. But, specifically on the infrastructure side of it, according to evidence we received from Railtrack in the past, not one penny of private capital has come into the major infrastructure projects, as yet. What happens if you do not get that private sector investment in the infrastructure; have you any contingencies, in that event, which is perfectly possible?
  (Mr Bowker) I must be quite candid and say that I do not think it is likely, because the process—

Chairman

  152. What is not likely, Mr Bowker?
  (Mr Bowker) I do not think it is likely, Madam Chair, that we will not get private sector investment.

  153. Double negatives; you say "We will get the investment from the private sector"?
  (Mr Bowker) I believe we will; and I believe that the reason we will do that is because we will set about doing it in a very disciplined and very clear way, and I am not convinced that that has been done so far.

Mr Stevenson

  154. I would not, for one second, attribute any criticism to your undoubted ability, determination and ambition, I have no doubt about that whatsoever; but we have had a series of very professional people in front of this Committee saying exactly the same thing. And, as we sit here, not one penny of private sector money has come into major investment projects on the railway so far. So you will excuse me for being a little bit sceptical. On a scale of ten, your confidence would be, what, seven, eight?
  (Mr Bowker) I am really not sure that I will gain much by making that sort of assessment. I am very confident, if we do it right, it can be done. I must say, there is significant private investment that has gone in; for example, the CTRL project is a major railway infrastructure project where there is a lot of private capital going in. So it can be done. We are about to make some announcements shortly that show it can be done. I have looked at, for example, some of the SPV work that has been done, and it is clear to me that some of the risk allocation issues that have not been properly resolved can be properly resolved. And it will be like, I believe, when the PFI projects were first done, ten years ago, and I was heavily involved at the time, the first one was very difficult and you were creating a new mechanism; once the first ones were done, it became clearer to all the parties, they understood what was happening, and the production line started. And I believe it can be the same here.

  155. Would it be fair of me then, finally, to assume, in your answers, that you have no contingency plan whatsoever, or are you thinking of one, in the event of the private infrastructure investment not being forthcoming to the degree that the Plan envisages?
  (Mr Bowker) I believe that the assumptions that we have used, in terms of how much private sector money can be brought in to railway investment, are robust and deliverable.

Chairman

  156. Do you have anywhere in your calculations the information based on the fact that many of the commuter services are making a profit only because they are badly overcrowded? Is that an element you have taken into account?
  (Mr Bowker) We need to address overcrowding, that is clear, and the significant investment that is in here to do that and get crowding levels, particularly on commuter services, to acceptable levels, that is certainly here. So, to the extent that overcrowding is an issue, I believe we have addressed that.

  157. But it is an issue in terms of cash, as well?
  (Mr Bowker) I am not sure I entirely understand the question.

  158. It is very clear that there are some of the companies that are only making money because they are prepared to accept a degree of overcrowding, which makes their cash-flow position better, but which would be completely reversed if they had to produce high-quality services?
  (Mr Bowker) I think, if you are a passenger, you want to get on the train.

  159. I am not arguing with you, Mr Bowker; all I saying is, have you taken this element into account when you are thinking about the future planning and the viability of some of the companies with whom you will be dealing?
  (Mr Bowker) Certainly, we have taken account of viability, and we have made some forecasts of what we believe it will cost to run Train Operating Companies in the future; that has been taken into account.


 
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