Memorandum submitted by National Express
Group/Wales & Borders Train Operating Company
National Express is pleased to submit this memorandum
in response to the Welsh Affairs Committee Inquiry announced on
24 October 2001 on the topic of Transport in Wales.
This memorandum has been submitted in confidence.
Senior management of the National Express Group and Wales &
Borders Trains will be available to provide oral evidence.
WALES & BORDERS
National Express Group (NEG) is the franchise
of the Wales & Borders Train Company operating in much of
Wales. This Train Operating Company (TOC) was formed on 14 October
2001 at the instigation of the Strategic Rail Authority (SRA)
in accordance with their franchise re-mapping policy announced
by Sir Alastair Morton. It was formed from:
parts of the former Wales and West
TOCCardiff to south west Wales, Holyhead, Manchester, Birmingham,
Waterloo and Penzance:
parts of Central Trains TOCBirmingham
to Aberystwyth, Pwllheli and Chester; and
the Cardiff Railway TOCCardiff
Valleys services for all of which NEG was the franchisee.
The "InterCity" stations in South
Wales currently operated by First Great Western are to transfer
to Wales & Border TOC shortly.
These alterations are a result of an agreement
made earlier this year between NEG and the SRA, which also enabled
the TOCs to operate on a firmer financial basis than had existed
for Wales & West and Cardiff Railway under the previous Prism
National Express Group is a leading public transport
group. We carry over one billion passengers a year world-wide
through our bus, train, tram, and express coach operations. We
hold leading market positions in the United Kingdom, the USA and
Australia. Within the UK, we operate buses, trains and coaches.
With the privatisation of the UK rail industry
in the mid-1990s, we were awarded our first franchises in 1996
with a total award of five franchises as a result of the privatisation
process. Our presence in rail was further extended in September
2000 when we acquired Prison Rail. This brought Wales and West
and Valley Lines into the Group as well as two busy London commuter
train operating companies. WAGN and c2c 200 million journeys were
made on our franchises last year. We are also a leading member
of the joint venture that manages Eurostar. Our trains division
has a turnover of £1.5bn and employs 15,000 people.
We are committed to achieving customer and revenue
growth through five key objectives:
delivering high quality, accessible,
value for money services to the highest safety standards;
improving continuously, standards
of reliability, punctuality and other important elements of operational
establishing Quality Partnerships
with local authorities;
integrating different modes of transport;
re-investing profits for long term
We operate a highly devolved management structure
which reflects our belief that local management teams are best
placed to understand and meet the diverse needs of customers and
communities they service. Day to day operations are managed through
individual divisions, which comprise a number of autonomous subsidiary
businesses. The corporate headquarters primarily concentrates
on strategic development and financial control.
We are passionate about train travel and the
vital contribution it makes to a nation's travel needs. As a major
provider of rail services, National Express is uniquely placed
to encourage the use of rail as the preferred method of transport
and to improve transport integration.
We are committed to building a railway network
Operates to high standards of safety;
Runs more trains to a wider choice
Provides a reliable, comfortable
and secure service;
Offers attractive fares that win
people back to train travel; and
Invests consistently in new and refurbished
trains and stations.
To achieve this we recognise a number of key
stakeholders who are vital to the success of the business including
Government and trade unions.
We aspire to bring benefits to peoples' lives
by providing safe, innovative, integrated and quality ways to
A. Questions raised in invitation to attend
letter dated 5 November
How do we operate in terms of providing an integrated
National Express has experience in operating
integrated public transport networks both in Melbourne, Australia
and in Birmingham, through our ownership of the Midland Metro
and West Midlands Travel local bus network. We recognise the high
value of integration of travel opportunities by different modes.
In Wales, most of our stations include car parking,
including spaces for the disabled, car drop-off points and taxi
waiting facilities together with publicity for local bus services
and telephones to enable passengers to contact taxis and friends
for onward journeys.
Our initiatives to provide road-rail integration
of public transport rely heavily upon co-operation with other,
private bus operators, as NEG does not operate any local bus services
in Wales, and upon sponsorship by local authorities. We have had
numerous successes in this respect, notably:
the dedicated bus link between Maestag
La sponsored bus links Ystrad Rhondda
to Maerdy, Aberdare to Hirwaun, Rhymney to Tredegar;
proposed LA sponsored bus link Ystrad
Mynach to Blackwood;
through ticketing rail/bus in the
Valleys area including onto Cardiff City local services;
Participation in Cardiff Capitalcard/Cardiff
Bus add-on/Cardiff Bay bus add-pon ticketing schemes;
numerous through ticketing opportunities
Co-ordination of operations is complicated as
rail timings are influenced by the availability of "slots"
elsewhere on the rail network and cannot easily be altered. In
contrast, timings of bus services are easy to adjust, but, given
commercial pressures upon the private operators, occur more frequently.
We continue to seek more stability in associated bus timetables.
A further constraint is that the Traffic Commissioners
impose a performance regime upon bus operators, which encourages
punctual running. This is not compatible with holding bus services
for late running trains. Some easement of these requirements would
assist in integrated working. Trains do not generally wait for
late running buses due to the importance of rail network interconnectivity
and the extensive disruption to other services that can arise
if a train departure is delayed.
What is our working relationship with the various
transport authorities and the UK Government? Transport consortia
of local authorities in Wales
We have worked closely for many years with local
consortia, being prime mover in obtaining support for a long-term
rail development strategy for the Cambrian routes (Mid Wales),
and for the Cardiff Valleys network (SWIFT). We have been instrumental
in these developments, involving reintroduction of passenger services
(eg Vale of Glamorgan), development of stations and specification
of resignalling schemes. We are actively supporting the initiatives
to provide a passenger service on the Ebbw Vale line (TIGER consortium),
providing operational and other consultancy advice without charge.
We have developed successful marketing initiatives
such as the Devon & Cornwall Rail Partnership and the Heart
of Wales Line Partnership. These are specifically designed to
promote rail-based tourism and bring together key local organisations
to promote their regions. We contribute to the funding of Rail
Development Officers in Local Authorities.
We fully support the further development of
local consortia, as they have proved very effective in bringing
together the various unitary authorities in Wales at a strategic
level, which we consider the appropriate level for rail developments
We welcome the support given to rail investment
by the National Assembly for Wales. We have developed a close
working relationship with the Assembly and its officers, and have
been pleased to be able to provide professional rail operations
advice. Our commitment to establishing a working relationship
with the National Assembly for Wales has led us to appoint a dedicated
member of staff who acts as a key contact with both civil servants
and elected members.
Many of the discussions have related to the
schemes referred to above, given the funding mechanisms within
Wales. Our joint working with SWIFT and the National Assembly
for Wales has resulted in indicative funding of over £50m
for rail infrastructure projects over the next five years.
We have also been instrumental in moving the
concept of an All-Wales franchise into existence through the initial
creation of the Wales & Borders TOC.
Across the whole of the UK, including Wales,
we have been able to develop a co-operative relationship. This
had led to recent successes such as the two year Franchise extension
agreement for the Midland Main Line TOC, and to the creation of
the Wales & Borders TOC through the franchise re-mapping process.
We have engaged the SRA extensively in developing
our joint thoughts on the content of an All-Wales franchise and
eagerly await the next steps in the process.
National Express has a range of contacts with
the DTLR; Wales & Borders TOC has very limited contact.
What have been the main obstacles to providing
a high standard of service?
The key issue of rail services in Wales is that
the volume of passengers, at the fares that can be charged, is
insufficient to make services commercially viable. The extent
and quality of services is thus dependent upon the subsidy available.
The service levels to be operated are determined
by the Franchise Agreement with the SRA, which contains minimum
service levels (known as the passenger service requirement). These
service levels are covered by the existing franchise subsidy.
We are only able to exceed these levels where we can identify
commercial opportunities, which are very limited in Wales, or
if their losses are covered by additional subsidy, which is determined
by the funding bodies rather than the operator. It is also clear
that the cost assumptions of Prism in their bid for the franchise
were unrealistically low. This has been resolved with the transfer
to National Express, which has stabilised the situationfurther
development is now dependent upon a revised franchise agreement.
Within the service specifications, our view
is that we have been providing a good value for money service.
This is reflected in the recent growth in passenger volumes (eg
+23 per cent on the Valley network in two and a half years). The
resources available to us have been determined by the availability
of subsidy and this was based upon a Franchise Agreement based
on resource and cost minimisation. Recently, both network congestion,
as other operators have increased their services, the track difficulties
experienced by Railtrack, and overcrowding of services from passenger
growth, have caused an imbalance in the previous relationship
between costs and quality.
We do recognise that passengers desire even
better delivery of services and this is likely to feature highly
in the letting of the new franchise. We have a thorough understanding
of what initiatives are available to, enhance delivery, but, in
a highly subsidised environment, the rewards available to us from
more people travelling will be less than the cost of many of these
initiatives. We therefore need to look at mechanisms to provide
Just as road transport will always be susceptible
to congestion delays, rail services will be exposed to problems
on the network, by they infrastructure failures or problems with
other operators' services. These will only be resolved by national
initiatives to improve performance to which our own improvements
You might wish to outline service improvements
you are proposing for the future
We have numerous proposals for significant rail
improvements. These are based upon the priority areas outlined
by the Secretary of State in July, including:
Improve the travel experience
We also stand ready to operate the new services
being proposed by the National Assembly for Wales in conjunction
with their investment in infrastructure developments.
B. RESPONSE TO
1. An integrated transport policy for Wales
The interrelationship of the responsibilities
of the UK Government and the National Assembly for Wales in providing
an integrated transport network for Wales, in particular:
the integration of passenger transport
provided for by road (including walking and cycling), rail, sea
the integration of transport provision
in the private, public and voluntary sectors; and
the relationship between transport
and land use.
The relative responsibilities of the UK Government
and the National Assembly for Wales (and local authorities in
Wales) are a matter for a political decision. We would observe,
from a professional point of view, that the current arrangements
have responsibility split between various public and private sector
bodies. It is inevitable that each of these parties will have
different detailed priorities and objectives and this can work
against a fully integrated approach.
We would note however that despite this, much
success has been achieved in transport integration by close partnership
working between public and private bodies and there are numerous
examples in Wales of successful bus/rail inter-working schemes
and integrated station forecourt developments.
Transport issues which are specific to rural
Wales and the Valleys, as well as those which are specific to
urban areas, including case studies of transport problems facing
particular areas of the country.
In rural Wales the key issue is the low population
density and hence limited potential regular usage of services.
This limits the level of service that can be afforded and results
in significant call on public subsidy to maintain services. Most
available economies, such as the introduction of radio signalling,
were secured under BR ownership in the 1980s.
The Cardiff Valleys network is characterised
by an intensive network of lines serving a large urban population
with a relatively high frequency of services with frequent stops.
This results in high passenger levels but at relatively low average
fares from, mainly, short journeys, and higher than average unit
costs (more intensive use of brakes and doors; fewer miles per
traincrew duty). Opportunities to increase services are generally
dependent upon increasing the capacity of the infrastructure as
well as the acquisition of additional train vehicles. With current
Railtrack issues, resources for infrastructure enhancement are
becoming focussed on projects in England rather than in Wales.
The role of transport in promoting social inclusion
in Wales, including access to transport for Disabled people.
Those parts of the community suffering social
exclusion do not generally have access to private transport and
are thus dependent upon public transport, including taxis, for
access to jobs, shopping and leisure activities. Most people are
able to have access to taxis but these are expensive for regular
use. Buses and trains are only able to operate where sufficient
numbers of people generally use them for fares income to be sufficient
to cover the costs of provision, or where a subsidy is provided
to cover such shortfall.
The provision of services more accessible to
the disabled is taking place with the introduction of new bus
and rail vehicles. Modification of existing vehicles is much more
difficult and in some instances is simply not possible. Full access
to rail boarding points to also very expensive, as it often requires
a new footbridge across railway tracks with long and expensive
ramped approaches. Given limits on the availability of funds,
a pragmatic approach is desirable, such as provision at certain
locations, with use of other modes (eg dial-a-ride services) to
access those points. As Operators we would advocate a balanced
approach which enabled disabled people to make journeys without
necessarily enabling every method of making a journey.
The impact of the Transport Act 2000 in Wales
This has not had any particular effect upon
rail activity as it is governed by pre-existing Franchise Agreements
with the SRA.
2. Railways in Wales
The current and future role of the UK Government,
the Strategic Rail Authority and the National Assembly for Wales
in providing efficient and affordable rail services within Wales,
The selection of the franchise for Wales and
Borders and the possibility of an all-Wales franchise.
To complete an "All-Wales" franchise
requires the train services in North Wales, currently operated
by First North Western (FNW), to be added to the existing Wales
& Borders portfolio. We assume it is not envisaged that the
service operating in the Borders area would be removed in the
creation of an All-Wales franchise. Our understanding is that
the SRA has reached agreement with FNW to facilitate the transfer
of their services, and that it is proposed that this should happen
concurrently with the "activation" of the All-Wales
franchise. We are not aware of any intention to franchise the
current Wales & Borders activity separately.
It is unclear to us whether a process of "extension"
or "competition" will be used to let the franchise.
Either approach is possible, each with its own advantages.
Development of franchise propositions to date
have been heavily influenced by consultation with National Assembly
for Wales representatives, local authorities and user groups and
we believe all potential bidders are aware of the aspirations
of the Welsh community for the rail franchise. The SRA have now
made clear that they intend to be highly prescriptive over the
content of the franchise based upon public affordability, given
the highly subsidised nature of rail in Wales and opportunities
for un-commercial "extras" will be severely limited.
We anticipate and welcome, that there will also be greater transparency
to bidders over the selection criteria to be adopted.
The involvement of the National for Wales or
others in the process for selection of the franchisee is a matter
for the SRA.
The future investment required in
Wales's railway infrastructure
Investment requires three elements:
availability of the initial capital
availability of annual funds to repay
the capital outlay;
availability of annual funds to cover
the operating costs;
both the latter funds can come from the fares
received from additional rail use but in the Welsh environment
this is unlikely ever to be sufficient and public subsidy will
The National Assembly for Wales has made funds
available as grants for the initial capital outlay for a number
of infrastructure schemes and, with this mechanism, annual funds
to repay the capital are not required. Only the operating costs
need to be covered and these are expected to be covered within
the terms of the franchise (ie SRA subsidy for the franchise will
provide the public subsidy to cover operating costs after allowance
for fares income).
One element of the operating cost is the leasing
charge for the additional rolling stock required. National Express
has suggested to the National Assembly for Wales that they consider
capital grant funding the additional rolling stock, as a way to
reduce the operating cost and hence the call on public subsidy.
This has already been applied in Wales where EU funds were used
to purchase trains for new services to Maesteg and on the Swanline
routethe trains being owned by local authorities.
A key issue with delivery of the proposed infrastructure
schemes is Railtrack's involvement in the technical approval,
and implementation of schemes, and the current resource constraints,
which they have ascribed to the higher priority being given to
UK national projects (West Coast Main Line, train protection systems).
National Express believes that a more radical review of procedures,
involving some Government initiatives could assist in overcoming
The rights and responsibilities of the SRA in
relation to the National Assembly for Wales.
This is essentially an issue about devolution
of responsibility from Government to the National Assembly for
3. Objective 1 Funding for Transport Projects
The ways in which European Structural Funds
may be used to improve passenger transport services in Wales and
the uses to which ESF money has been put in other Member States,
including expenditure on moving assets.
National Express, in submitting its initial
proposal for the All-Wales franchise to the SRA last December,
identified numerous infrastructure enhancement schemes that appeared
to be eligible for EU Objective 1 funding. We subsequently submitted
a formal application to the scrutiny committee. Some of the schemes
are no longer likely to take place as they are unlikely to feature
in the SRA's Franchise proposition (as their operation required
additional subsidy), but some, such as the SWIFT schemes in the
Cardiff Valleys could still benefit.
We are eager to assist in the submissions for
funding, but are unable to do so as effectively as we would wish,
given the uncertainty over the franchising process.
A key issue is that plans for a scheme, and
commitment to the operating subsidy is required well in advance
of securing the EU funding. However, once this commitment is given,
it is difficult to argue that the scheme is dependent upon the
EU Funds, a key requirement in obtaining the funds. Some mechanism
for extending the timescales for advance commitment from the EU
would assist, given the timescales for infrastructure works and
train vehicle construction.
National Express Group
12 November 2001