Select Committee on Transport Tenth Report


Conclusions and recommendations


A 30-year vision for the railways?

THE HIGH LEVEL OUTPUT STATEMENT (HLOS)

1.  The High Level Output Statement will give the industry a degree of stability and direction which we welcome. We accept that the validity of some of the assumptions which underpin the HLOS, such as economic growth and the price of oil, will change over time, and that every change should not result in alterations to the HLOS. However, where seismic shifts that are likely to remain in the medium-term occur, and where they are likely to create extra passenger growth, we think the Government needs to consider making adjustments to the HLOS. We believe the massive increases in oil prices over the past year, and the fact that prices are expected to remain very high for the foreseeable future represent such a case. (Paragraph 10)

THE LONG-TERM STRATEGY AND VISION

2.  We warmly welcome the Government's effort to create a long-term vision and strategy for the railways. We are particularly pleased that the White Paper sets out a positive plan for growth. However, we agree with the vast majority of our witnesses from across the industry, that the level of ambition in the White Paper is too modest. The Government's policy of responding to demand with "just-in-time investments" ignores the potential of rail investment to reduce regional disparities and improve the environment. After years of sustained growth in rail patronage, we urge the Government to be bolder in its vision and to set out a proper long-term strategy, including the planning and development of infrastructure which will improve the environment and the spatial economic development of the country. (Paragraph 17)

3.  When the Government does develop a proper long-term strategy for the railways, it is essential that it is thoroughly integrated with other Government and regional policies, on transport, the environment and planning. Policy-making on rail needs to be integrated with other policy areas in such a way that it is able not only to react to, but also to adapt to, inform and influence them. We await a more integrated policy approach and expect to see clear evidence of it in the next High Level Output Statement (HLOS) and the Transport White Paper accompanying it. (Paragraph 22)

4.  It is deeply disappointing that the White Paper dodged the decision on high-speed rail. Given the additional capacity and the limited additional cost in building high-speed as opposed to conventional rail lines, we recommend that the Government consider very seriously the possibility of building high-speed lines where new lines are to be constructed. Although there have been encouraging signs of movement in the Government's position since the publication of the White Paper, we firmly believe that this is an area where the Government needs to move into a different gear. We welcome the preparatory study to develop and evaluate options recently announced by Network Rail. Once the study is complete, it will be incumbent on the Government to make decisions and initiate the work without delay. The time frames for the planning, procurement and construction of high-speed rail links are measured in decades rather than years. Hesitation now will mean years of avoidable misery and overcrowding on the network. (Paragraph 28)

5.  As we have already noted in our annual review of the work of the Department in 2007, the White Paper dismisses electrification too easily. Even small-scale, infill electrification projects are not given the credit that they deserve. The case for electrification is strong, and it is based on both environmental considerations and improvements in capacity. Recent indications are that the Government is now changing its mind, and that an electrification programme may be initiated later this year. We are pleased the Government appears finally to have seen sense on electrification, and we recommend that a strategy for the gradual electrification of the rail network be developed as a matter of priority. (Paragraph 33)

Network Rail - up to the challenge?

THE ENGINEERING OVERRUNS AT NEW YEAR 2008

6.  The management of engineering projects and work sites, together with the associated risks, are core responsibilities of Network Rail. The management of the three engineering projects, which overran at New Year, indicates that there are serious deficiencies in terms of central control and internal oversight mechanisms within Network Rail. It also provides evidence of flawed management of teams and of contractors, including the dubious practice of self-certification. (Paragraph 41)

7.  The range of similarities between the Portsmouth overrun in 2007 and the overruns at London Liverpool Street and Glasgow Shields Junction at New Year 2007-08 is significant. The lack of discernible improvement in the intervening twelve months, despite the imposition of a significant fine for the Portsmouth overrun, is a clear indication that either Network Rail's management has failed to act effectively, or that their actions have not filtered down to the operational level. (Paragraph 42)

8.  Network Rail needs to re-balance the distribution of risks between itself and its contractors as a matter of urgency. (Paragraph 44)

9.  We remain to be convinced that Network Rail is any more cautious in handing out contracts to companies with a history of failure than other areas of the public sector. We conclude that the threat of future exclusion is an insufficient spur to effective discharge of contracts. (Paragraph 45)

10.  The time has come for Network Rail to bring all strategic resources, such as overhead line engineering staff, back in-house. Network Rail should also ensure that it has a permanent programme to develop and maintain such strategic skills in order that a stable pool of core skills is maintained within the organisation at any one time. This should enable Network Rail to manage key resources with much reduced risks of crucial staff shortages which might cause overruns and endanger the viability of large scale projects such as the West Coast Route Modernisation. (Paragraph 47)

11.  Communication within Network Rail as well as between it and the train operators is seriously deficient. This is, in part, a consequence of the separate ownership of trains and track. The failure of internal communications within Network Rail makes it impossible for senior managers to take appropriate action and resolve problems as quickly as possible. The failure to communicate adequately with train operators is likely to be, at least in part, a consequence of poor internal communication. Both failures have serious consequences for passengers. (Paragraph 49)

12.  The engineering overruns over New Year were quite simply unacceptable. Much excellent work is done by a large workforce of good and dedicated staff at Network Rail, but the lack of clear procedures, consistency, communication and management controls combine to undermine all these undoubted achievements. The ORR's careful analysis of events exposes serious management failures. (Paragraph 52)

13.  The Government along with the ORR must ensure that the risk of this kind of overrun occurring again—ever—is minimised. The Government, along with the ORR, must monitor closely the progress made by Network Rail over the next year, and examine what structural changes might be required to ensure that Network Rail is capable of managing its projects effectively and consistently. (Paragraph 54)

THE WHITE PAPER CHALLENGE FOR NETWORK RAIL

14.  It is quite extraordinary for Network Rail to reward its senior managers with huge financial bonuses in a year where passengers have been humiliated and inconvenienced by three separate major engineering fiascos, where an entire catalogue of management failings has been laid bare for all to see, and where a record fine has been imposed for breach of the Network Licence. It is a gesture which adds insult to injury for the long-suffering passengers who have had to struggle with the consequences of the company's failings. If Network Rail's members cannot, or will not challenge and block such a move, they are not a body worth having. (Paragraph 63)

15.  We support the ORR's proposals to alter Network Rail's licence so as to change the incentives policy. Greater transparency about financial incentives, paid for by tax payers and passengers, is welcome. So is the proposal that incentives should take account of all aspects of Network Rail's performance against its licence. This should prevent generous bonuses being handed out for good performance in some areas against a background of catastrophic failure in others. Such changes to the framework would not, however, be a substitute for scrutiny and tough questions by Network Rail members. (Paragraph 64)

16.  We do not agree with the Minister and the ORR that the governance structure of Network Rail is adequate. The range and seriousness of management failings identified above will only be rectified through very strong leadership from the Board combined with robust oversight and challenge by members. This would require a structure that brought accountability for passengers and the public and created a smaller, independent group to whom the Board was answerable for operational matters. Passengers, Government and train operators all have a significant stake in the success of network Rail. The current system where members are effectively approved by Network Rail's Board, albeit indirectly, is inadequate. We recommend that the Government consider alternative options for a more effective governance and scrutiny of Network Rail. (Paragraph 66)

17.  The completion of the current phase of the route modernisation on the West Coast Main Line in time for the introduction of the new timetable in December 2008 will provide a final test of the ability of Network Rail to plan and manage major infrastructure projects, as well as of the ability of the Office of Rail Regulation to regulate Network Rail adequately. If this project fails, we would expect the Government to intervene and take responsibility for the integrity of services as well as the introduction of the new timetable on the West Coast Main Line. (Paragraph 70)

18.  We welcome the commitment of both Network Rail and the Government to the seven-day per week railway, where engineering works are done overnight, avoiding major engineering possessions at weekends and Bank Holidays. Network Rail will need to implement many changes to the network, such as rerouting and double tracking before the seven day per week railway can become anything more than a distant dream. It will also be crucial for Network Rail to make very significant improvements in the efficiency of its renewal and maintenance operations. (Paragraph 74)

19.  No other organisation is more important than Network Rail to the achievement of the targets and objectives contained in the Rail White Paper and the High Level Output Statement. If Network Rail fails, the industry as a whole will fail. The Government and the ORR, in collaboration with Network Rail itself, must take action to ensure that it is equipped to meet the challenges ahead. (Paragraph 75)

Capacity - accommodating growth?

THE GOVERNMENT'S PLANS

20.  We are pleased that the Government has recognised the need to plan for growth on the railways, and we congratulate Ministers on the development of the first structured plan to develop our railways in many decades. We hope this will be the first of many such plans. (Paragraph 84)

FORECASTING AND PLANNING FOR GROWTH

21.  In an industry where the development and procurement of infrastructure takes many years, or even decades, it is crucial that forecasting is as accurate and sophisticated as possible. We are concerned that the Government is failing to take the concerns of the industry seriously, and that the Department appears to be working in isolation when it comes to predicting future rail patronage. We recommend that the Department revise its method for predicting developments in rail patronage, in collaboration with other Government Departments as well as local and regional authorities. (Paragraph 95)

NETWORK CAPACITY

22.  The Government's approach to increasing capacity on the rail network through investment in infrastructure is over-cautious. While we welcome the small-scale measures such as platform lengthening and station re-modelling included in the High Level Output Statement, we are convinced that significant investment in new rail lines will be essential, and the Government must join Network Rail to plan for significant expansion of the network sooner rather than later. An investment plan to remove those among the 15 pinch points, identified in the 1998 White Paper, which have not already been remedied, should be produced urgently. (Paragraph 98)

23.  We welcome the Government's commitment not to close railway lines. However, we find the Minister's argument against the possibility of re-opening disused lines less than convincing. The notion that the immediate availability of rolling stock should dictate whether a rail line is reopened puts the cart before the horse. If there is sound justification for reopening a line, either because extra capacity or a diversionary route is required, then rolling stock will simply have to be acquired for it. (Paragraph 99)

24.  The time and cost involved in developing new railway lines from scratch is vast, compared to the cost of preserving and maintaining the large network of disused lines for possible future use. The Government must make a commitment that all disused lines with any potential for future rail use, be it as part of the strategic rail network or as diversionary routes, should be preserved. Where such lines are put to other uses, this must be reversible so that they can be re-commissioned, should the reopening of the railway become an option. (Paragraph 101)

25.  The 1,300 new carriages pledged in the High Level Output Statement are much needed and very welcome. But it is clear that, due to the growth in rail patronage, the new stock is unlikely to relieve overcrowding significantly. (Paragraph 107)

26.  We note how little new rolling stock is going to be available to areas outside London and the South East. We expect the Government to address this imbalance through the cascading of rolling stock throughout the system. It is essential that all rolling stock is well matched to the circumstances and requirements of individual lines and that old rolling stock is not replaced by newer, but less suitable cars. (Paragraph 108)

27.  It is entirely appropriate that strategic decisions about rolling stock procurement and specification should be taken centrally. Given the level of fragmentation of the industry, there is no other way to ensure sensible use of tax-payers' money for long-term investments such as rolling stock. However, we are concerned that the Department may not have adequate and appropriate expertise to handle such vital strategic decisions in-house, and to do so efficiently. Matters of such importance should not be left to expensive external consultants. (Paragraph 111)

28.  We look forward to the Competition Commission's report on the rolling stock market in the UK, due in 2009. In the meantime, the Department must improve its rolling stock procurement strategy so as to create a stable and consistent pattern of procurement. By doing so, it will achieve the best value for money for tax payers, and it will ensure that Britain can continue to have a rolling stock industry. (Paragraph 113)

29.  We welcome the Government's commitment to re-modelling stations that are significant pinch points on the strategic rail network. We acknowledge the importance of improving the serious passenger overcrowding at Birmingham New Street Station, but we are not convinced that the current project is adequate. The Government must address the issue of whether Birmingham New Street is ever going to be able to accommodate the throughput of trains required in two or three decades, when the number of services might have doubled. If the station cannot be adapted to such throughputs, then the Government must look for alternative solutions now. (Paragraph 117)

30.  We welcome the Minister's assertion that the Government is looking at other major pinch points on the network such as Manchester, and that investments to remodel such stations might be forthcoming. We remind the Government that the elimination of such pinch points on the rail network in the north of England is vital to achieve the rail capacity improvements, which in turn will underpin efforts to drive up economic growth and prosperity in the region. We do not expect to wait till the next HLOS before action is taken. (Paragraph 118)

31.  We welcome the HLOS commitment to modernise and upgrade 150 stations. We expect the Government to ensure that the process of selecting stations is fully transparent, and we encourage Network Rail's drive to secure additional funding from other sources for the station refurbishment programme. (Paragraph 119)

ENCOURAGING MODAL SHIFT

32.  The Government should encourage modal shift. Amongst arguments for embracing a policy to promote a modal shift away from roads and air and towards the railways, environmental impacts along with congestion management are the most compelling. We expect the next High Level Output Statement to include detailed plans and targets for significant increases in the share of journeys made using the railways. (Paragraph 124)

Financial sustainability

33.  We have little doubt that cost control has been weak across the industry, and we believe controlling costs needs to be the Government's top priority in terms of funding for the railways. The current funding discussions between the ORR and Network Rail may go some way towards controlling costs at Network Rail, but as we have said in the past, the Government needs to do more to ensure that franchises also control their costs tightly. As we have shown on several occasions past, the sheer complexity of the industry has made it prone to unnecessary cost escalation and waste. (Paragraph 132)

34.  We are deeply concerned that the rapid shift away from taxpayer contributions and towards passengers paying a significantly larger share of the cost of running the railways will be detrimental to passengers and the future of the railways alike. We accept that the level of subsidy now paid by taxpayers is probably too large for the longer term, but a rapid shift in this balance will counteract any efforts to encourage modal shift. Furthermore, if a full-scale economic downturn were to develop, passenger numbers are unlikely to grow as fast as projected in the High Level Output Statement. This situation could jeopardise the current hard-won level of financial stability. We therefore recommend that the Government review the planned shift between tax payers' subsidy and the fare box with a view to pacing this transition over a significantly longer period of time. (Paragraph 138)

Conclusion

35.  The White Paper, setting out the Government's objectives for the railways over the next 30 years, and the HLOS, providing a detailed five-year plan, were published as one integrated document. Our analysis of this document has demonstrated that the White Paper has very little to add to the five-year plan set out in the HLOS. If the two had been entirely separate documents, there would have been very little to publish as a White Paper, and the Department would have been forced to come up with a much stronger and bolder vision for the long-term future of the railways. The Government should now seek to develop a genuine 30-year strategy. (Paragraph 141)



 
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