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

Memorandum by Rail Passengers Council (TYP 16)

  The Rail Passengers Council welcomes the opportunity to be a witness for the Transport Sub Committee's inquiry into the 10 Year Plan.

  Clause 228 (4) of the Transport Act 2000 provides for the RPC network to "keep under review matters affecting the interests of the public in relation to railway passenger services and station services". To this end the RPC network has begun to consider rail in a broader social, economic and environmental context. The network sees rail as the backbone of an integrated transport system and therefore takes an interest in matters that affect all modes of transport. This memorandum follows the outline of the press notice although the Rail Passengers Council has not addressed every item.

  The Plan makes a number of assumptions including factors such as motoring, public transport and fuel costs and land use policy.

    —  What assumptions should be modified or challenged?

  The 10 Year Plan was published in July 2000. There was little information and analysis around at the time to confirm that the outputs set out in the document were the right outputs and were affordable within the money available. Annex 3 of the 10 Year Plan laid out its investment and charging assumptions. Although there is no doubt the plan was published in good faith, was heralded with much optimism, there were a number of exclusions from these assumptions. A series of events have subsequently highlighted problems with the assumptions made for rail in particular.

  Significant exclusions from the plan for rail included the cost of implementing the Disability Discrimination Act and the implications of the Uff/Cullen recommendations. The result of the Rail Regulator's review was also unknown at the time the plan was being drawn up. The latter alone resulted in a £1.5 billion payment from the SRA to Railtrack.

  The inadequate maintenance of the network prior to the Hatfield derailment skewed the projected costs of this part of Railtrack's work. Given the rising costs involved in maintaining the network and completing existing projects, the sums earmarked for investment in Britain's railways in the 10 Year Plan are unlikely to deliver all the improvements to the network that were first anticipated and the assumed costs for these projects at the time of the plan, based on Railtrack's 2000 Network Management Statement, have been rendered obsolete.

  At the time of the 10 Year Plan, it was also assumed that Railtrack had the financial ability to deliver its enhancement programme. Project Endeavour, which resulted in the SRA taking over Railtrack's enhancement programme earmarked a further £1.5 billion of public funding for the beleaguered company. This and the Regulator's review have essentially eaten away at the £4 billion earmarked for the SRA's rail modernisation fund laying open questions about the public sector capital support assumed in the 10 Year Plan.

  Revenue support to the TOCs has also increased owing to the SRA's request for some TOCs to go on to short term contracts, in order to facilitate a remapping of the network. These contracts are on "cost plus" terms. That is to say that when the franchises were let to the TOCs they were let on individually agreed bases, with a declining subsidy profile, to the TOCs' risk. The TOCs took a view of potential passenger growth and their ability to cut costs and if they could not deliver that would be their problem. With the refranchising process, individual TOCs who were asked to alter their franchise agreements to facilitate the franchise remapping exercise have asked for payment to change their franchise agreements. In doing so they have asked for payment for what running their existing services actually cost plus a profit margin. This is costing significant amounts of public money unaccounted for in the 10 Year Plan.

  It could not have been envisaged, at the time of the 10 Year Plan that Railtrack would be called into Railway Administration by October 2001. Railtrack sat at the heart of the railway and unless all the functions that Railtrack was set up to do are assured—eg capacity allocation/timetabling, signalling, procurement, enhancement and safety.—any strategy for the rail industry is going to collapse. Meanwhile it is not clear how soon a successor for Railtrack can be up and running. The current situation is delaying planned projects, is costing the public purse in Administrator's and legal fees and is discouraging to potential private investors. Infrastructure renewal, maintenance and enhancement costs are spiralling as risk is factored into the "on cost".

  The last 12 months has also seen a reduction in the amount of rail freight passing through the Channel Tunnel mainly owing to border immigration problems. As a result the net effect will be counter to the assumed growth in rail freight volumes outlined in the 10 Year Plan.

  The combination of all the factors so far outlined makes the rail industry less attractive to private investors and there is scepticism that the £34 billion private investment assumed for rail over the next 10 years will be forthcoming given the present climate. More risk will be perceived in investing in the railways and this will be priced accordingly by potential investors.

  More generally there is concern that the £56 billion total private sector transport investment assumed over the 10 year period may be optimistic given the general downturn in the global economy exacerbated by events following 11 September 2001.

  It is also suggested that the abandonment of the Fuel duty escalator means that models of future motoring traffic growth (and road freight) may underestimate growth in road use adding further to congestion problems. The recently proposed change in land-use policy, for example regarding the need for public inquiries and planning consent, will also not have been factored into the traffic-growth modelling.

In particular, will the expected number of congestion charging and workplace parking levy schemes be implemented and when?

  There is scepticism that 12 workplace parking levy schemes will be introduced. Many cities are fearful of driving commercial investment away to places which are more "car friendly". This may be a case for national harmonisation on such policies. The congestion charging schemes are more likely to be achieved, provided the technology is there to support them. Both schemes require that affordable alternatives to the car are available. At a meeting of the Rail Passengers Council in June 2001, the Director of Centro stated that it was clear to him that investing in local rail services bought less congestion in Birmingham. Some light rail (or combined light/heavy rail) schemes have delivered passenger growth for example, in Manchester. The reasons for such successes should be analysed so that best practice can be introduced elsewhere. Ring fencing the revenue from congestion charging and workplace parking levies for investment in local transport and road enhancements should be on the basis that there is an existing public transport infrastructure that offers car drivers a real choice. Any other assumption starts a classic chicken and egg debate.

How important are the assumptions to the outcome of the plan? What remedial action is necessary if assumptions or targets need to be changed?

  If the assumptions are inadequate, as implied by our response to the first part of this memo, the plan might fail to achieve its objectives in its entirity. A number of assumptions in the 10 Year Plan have been shown to be unsafe 18 months later and need, therefore to be reconsidered. Confidence needs to be restored in the rail industry so that costs are not inflated to cover perceived risk, to encourage investment and to develop and retain skilled labour. To this end it is imperative that Railtrack's successor body is up and running as soon as possible and some stability is restored to the network.

  Before this happens and the future structure of the industry is clear, particularly with regards to a mechanism for delivering enhancements and a means of accurately estimating cost, it is difficult to see exactly what any new assumptions should be based upon.

Are the skills and capacity available to deliver the improvements suggested?

  There is a serious shortage of human resource at every level across the whole rail industry. This is affecting not only the running of current services but is having a significant effect on development schemes. The RPC expects this to be addressed in the SRA's Strategic Plan with a particular emphasis on management and technical skills.

  In particular, there is a severe shortage of railway signalling planners and technicians—there are too few even to do work currently waiting to go ahead. It has been suggested that no one company has the certainty of contract to put that resource in place and that it is possible to grow that base of skills within an 18 month or 2 year time scale. For any one company that commitment in training is substantial which may be an argument for a central multi-industry training scheme which is financed by all of the supply side. However, uncertainty about the future size of the market is having a serious effect.

Implementation of the Plan depends on the provision of a mixture of public and private sector finance

  How will the current situation in the railway industry affect the need for and provision of private and public sector finance?

  There is scepticism that the current climate can encourage £34 billion private investment in rail. The alternative is that finance sources will be persuaded to charge a higher rate of interest than would previously have been the case. The Rail Passengers Council has advocated that rail's ability to deliver the government's social, economic and environmental policies, should be fully understood by government and, as a result, the case for increased public funding made. The EC White Paper European Transport Policy for 2010: Time to decide quite vividly makes this case in a European context.

Is the balance and phasing of investment across funding areas correct?

  There is concern that owing to the contractual nature of the rail industry, the Capital/Revenue split for the public funding earmarked for rail is capital heavy. Furthermore, given committed expenditure, it appears there is little discretionary spend for the SRA in Control Period Two—ie the first five years of the 10 Year Plan.

Are more flexible financing arrangements required to deliver major local schemes?

  Local authorities have been the champions of many schemes. The role of local authorities and, in the future, Regional Development Agencies and regional authorities, in initiating schemes could be encouraged and developed to ensure that regional priorities and needs are being taken into account. Financing schemes which encourage local participation in implementing solutions for local problems is to be encouraged.

  The RPC network welcomed the extension and simplification of the Rail Passenger Partnership scheme which now covers capital projects as well as feasibility studies. It also welcomes David Jamieson, MP Parliamentary Under-Secretary of State's clarification to RPC Western England "that while the RPP Scheme would be the main source of funding for local schemes, in the case of major projects (those with gross capital costs of over £5 million) where a significant proportion of the funding gap is not eligible for RPP support, it is possible for LTP funding to be made available in addition to RPP funding."

  Innovative flexible financing arrangements should be explored. For example, a developer of a retail complex might contribute a certain amount of one-off funding for local public transport to serve the site. It might be possible to word such agreements so that a further contribution is made to reflect demand or excessive car congestion.

How do the emerging multi-modal studies affect the 10 Year Plan?

  Multi-modal studies are very important depending very much on their terms of reference which should not be drawn too narrowly to risk missing the wider picture. They might recommend an alteration in the balance between investment in roads and investment in public transport. However, the outcome of Multi-modal studies will, in some cases be well into the 10 Year Plan. The danger therefore is that action on recommendations, especially in rail, might not happen until the second half of the 10 Year Plan. This would be too late to realise the targets set out in the 10 Year Plan. There is no assured funding associated with multi-modal studies.

  The Plan sets a number of targets for growth in areas such as travel by rail and bus and reductions in factors such as congestion and vehicle emissions.

Are the targets and the dates for their achievement well designed (eg is reducing congestion the right objective)?

  Targets set out in the 10 Year Plan to which the railway will contribute include reducing road congestion, improving air quality and reducing greenhouse gases. These targets should influence, and not be adjunct or secondary to, the specific priority targets for rail as outlined in the 10 Year Plan and reiterated in the Government's Draft Directions and Guidance to the SRA.

  There is concern that, in the case of rail, a lot of emphasis has been placed on the three priority targets of increasing passenger kilometres by 50 per cent, increasing freight usage by 80 per cent and reducing overcrowding. Reducing fares, increasing rail service frequencies and rising motoring costs impact on passenger rail demand. There is, therefore, concern that the targets for passenger growth and reduced overcrowding may be mutually exclusive within the set timeframe.

  In laying out targets for rail, there has to be a clear understanding of the priority for government policy objectives. At present, some of the objectives are competing.

  Road congestion in cities and towns around the country is a national problem. On the micro side, Builth Wells, a town of a few thousand people, saw extra services on the Heart of Wales line as a means towards tackling town centre congestion. On a larger scale, Rob Donald, Director, CENTRO, has made it clear that investing in rail services bought less road congestion in Birmingham. Targeting services within urban areas, rather than between them, is likely to have a greater impact on road congestion and is likely to increase the number of passenger journeys which is distinct from passenger kilometres.

  Short journey commuters are not as commercially attractive as long-distance travellers are. However, in the recent PIXC figures, five London train operators were in breach of capacity limits. Targeting capacity for commuter services is more likely therefore to reduce overcrowding.

  Enhancement of local services can help tackle social exclusion and peripherality and can aid economic regeneration but is unlikely to be commercially attractive in isolation and will be dependent on subsidy. Intercity journeys, in contrast, may be self-financing and passengers may have a choice of alternative modes but these choices may be less sustainable and be less environmentally friendly.

  Parliament needs to decide what it wants from its transport system. The EC White paper suggests that given European policy objectives concerning sustainability, congestion and CO2 emissions, rail is the target growth area.

What other targets, if any, should be included (eg modal shift, walking, traffic levels?)

  Modal shift should be encouraged. This is likely to be an outcome of the multi-modal studies and is in line with European objectives. There should be a target, for example, to switch passengers from air to rail on UK internal flights eg between London and Manchester. Modal shift could also be encouraged to less polluting modes of transport such as inland waterway transport.

  Targeting rail bottlenecks would be in line with the EC White Paper and would help to ensure that rail passenger and freight growth targets can be achieved.

  Encouraging walking and reduced traffic levels is to be lauded. However to have a great effect this would require a change in the need to travel per se. Centralising hospitals, schools and banks, the high cost of living within walking/local transport commuting distance, out of town retail parks and supermarkets are amongst the things which contribute to the need to travel by modes other than walking. The Government has previously recognised that integrated transport involves integration with spatial planning

Should a more regional approach be adopted for target setting?

  Dialogue with local authorities, devolved government, regional assemblies, PTEs and other stakeholders such as the RPC network is vital to ensure that the Government is fully aware of the economic, social and environmental impacts of its targets. A regional approach should provide the opportunity to take advantage of national, regional and local government transport strategies.

  The 10 Year Plan is the investment plan to deliver the Government's integrated transport policy.

What impacts will policies in the European White Paper on Transport have on the Plan?

  The EC White Paper may change the emphasis on the Plan's targets. The European White Paper on Transport spells out the need to develop sustainable modes of transport. It advocates harmonisation of taxation on commercial transport and seeks to level the playing field between modes for charging for infrastructure use to reflect the cost of damage to the infrastructure, the environment or added congestion. The aim is to incentivise the use of the cleanest modes or the least congested networks.

  The White Paper has a target to restore the rail/road balance to 1998 levels and advocates redirecting Community co-financing to give priority to rail, sea and inland waterway transport. It highlights the need to get a European freight network for rail and advocates dedicated routes for freight. It also advocates a network of high-speed passenger routes.

  A case could be made for a dedicated freight line to revitalise international rail freight; which could be shared with international rail passenger flows towards the end of the 10 Year Plan, if backing were given now. Moves should be made to tackle the increase in domestic air traffic where destinations are easily reachable by rail.

  The Rail Passengers Council will be responding to the DTLR consultation on the EC White paper.

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