Examination of Witness (Questions 260
WEDNESDAY 12 JULY 2000
MR T WINSOR
260. "Short time"?
(Mr Winsor) By the end of this month. The fact is
that Railtrack has spent more than was assumed by my predecessor
in 1995 when he set the structure and level of charges at the
time. I must make an assessment as to how much money they have
spent more and whether that money was efficiently spentbecause
you can spend money inefficiently, that is very clearand
whether or not they spent it on the right things and therefore
how much additional money to allow them to recover in the future
access charges in relation to the amount they have already spent.
I shall be fair and I can assure you that I am scrutinising these
matters and I am not merely taking the figures that Railtrack
produce just because they happen to be Railtrack's figures.
261. May I ask a general principle rather than
a matter of detail which I am sure you would not be able to help
us with today for reasons you have given? May I ask whether you
believe it is important to alter the current track access charging
system better to align the incentives on Railtrack and the train
(Mr Winsor) Yes.
262. To what extent would you alter it? How
would you alter it?
(Mr Winsor) I shall be announcing shortly the extent
to which I shall alter it, but I do believe very strongly, in
spite of some of the rather ill-informed remarks by members of
the press and others, in incentive regulation rather than enforcement
regulation. However, whilst I believe in carrots, I am not going
to throw away the stick. I believe it is important to align much
more closely the incentives which Railtrack has to invest in the
network and to improve performance in the interests of passengers
and freight customers and therefore of the train operators. My
conclusions at the end of July will say how and to what extent.
263. How many companies do you think will be
operating trains in 10 years' time?
(Mr Winsor) I do not have a clue and it is not a decision
for me; that is a decision for Sir Alastair Morton and Mike Grant
of the Strategic Rail Authority because it is they, not I, who
decide who gets a franchise. They will also be making decisions
as to how much public money will go into growing the capacity
of the railway. If there is more capacity, there may be more traffic
and there may be more opportunities. It will be a number less
than the present number. I am afraid I cannot be any more specific
than that. Ten years is a long time as well. The franchise replacement
programme, which is already under way, is a remarkable process
in terms of the rigour of the obligations which the Franchising
Director is going to be demanding from the new companies. They
are not going to get soft contracts like they got last time, I
264. You were here earlier and you heard the
evidence of what Sir Alastair said and some of the questioning
there was in connection with the numbers we were going to be faced
with, not so much in terms of the operating companies but the
ownership of these operating companies and as to whether or not
there is a potential there for good practice if there is a reducing
number of companies. I was under the impression that was your
responsibility or that you could in fact control that as an element.
(Mr Winsor) I cannot dictate how many owners there
will be, but I can affect how many owners there will be because
under the licences which the companies hold, there is what is
called a change of control provision. The same sort of rules apply
in the franchise agreements, so there is control in both the Franchising
Director's hands and mine. If there is a change of control proposed,
where two companies may be getting together, which we regard as
objectionable on public interest grounds, then we can block it.
What we cannot do is arrange forced marriages. We can keep parties
apart but we cannot drive them together.
265. That is a fairly excessive power, is it
not really? That is going to be the end of the line, when you
get two companies whom you believe really present some kind of
public interest danger. They would have to be a long way down
the line before you were asked to rule on that.
(Mr Winsor) No, I doubt that, if I may say so. I do
not regard any of the powers I have as excessive, but the judgement
really needs to be as to how they are used. I should like to correct
something Mr Corbett said at the last hearing in a minute. Is
it something which would only come in at the last minute? Technically
the way it is drafted, the answer is yes, we can object once the
change of control has already taken place. In fact the change
of control power is drafted in exactly the same way as the North
Sea operating licences have been since 1964 and the practice in
that industry and the practice in the railway industry is that
when parties want to get together they come to the regulatory
authorities first saying, "If we did this, would you object?".
We can give them guidance and prior clearance and that is how
266. What, say, of the fact that one company
can control the West Coast and the East Coast after the present
round of franchising is complete? Would you have anything to say
about that, as to whether or not it is healthy or unhealthy?
(Mr Winsor) Yes. The Franchising Director decides
who gets the franchise, so he does not have to rely on a change
of control power.
267. But if you were being told as part of the
consultation process that there must be, that it was possible
you were going to end up with one company running down both sides
of the country, you could have a view which would say no, you
are not, you are not having that.
(Mr Winsor) Yes, I could stop it.
268. Why is it taking so long to restore the
quality of the track on the network to the 1994 levels?
(Mr Winsor) You might ask. It is taking a long time
because network maintenance and renewal practices do take a long
time. If it is a substantial amount of work, replacing significant
amounts of rail and so on, these can only take place in what are
called possessions, when the railway is closed for maintenance
work. There are two long possessions in the year, Christmas and
Easter, and there are others of shorter duration. The possessions
have to be booked a lot of months in advance in order to get the
time to make the changes. Operationally there is a lot of planning
involved, but you may ask why the network is in a poorer state
now than it was in 1994 and what are Railtrack doing to get it
back. Railtrack has agreed with my predecessor, and I am monitoring
it very carefully, a thing called the Track Quality Improvement
Programme to get the track back up to 1994 standards by certain
target dates, one of which is 1 April 2001. They are getting close
to it but they are not there yet. I regard it as very regrettable
that Railtrack allowed the quality of the network to deteriorate
in the first place. I believe that if they had spent wisely and
well and in a timely manner then these problems would not have
occurred. My predecessor took the view that he should take action
in relation to this matter in 1998 and the track quality improvement
programme was established in 1999 a few months before I took over.
We are on Railtrack's case.
269. Have your consultants reviewed Railtrack's
claim about the impact of additional traffic on track quality?
(Mr Winsor) Yes.
270. What is that?
(Mr Winsor) I shall be announcing my conclusions as
part of the periodic review. I apologise for being a little cagey.
We do need to make assessments about the sufficiency of Railtrack's
spending and how much has to be done and I have to announce that
at the end of July.
271. But there are one or two bits of track
which have not had any extra trains on them and yet the rails
seem to keep breaking. Is that not right?
(Mr Winsor) Rail breaks take place for a variety of
reasons. I can go into the technical reasons; but probably not.
Chairman: I would rather you did not.
272. Who determines the quality of the rail
(Mr Winsor) Railtrack is under a general obligation
to maintain and develop the network in accordance with best practice.
Best practice is a matter determined by me, resulting from my
consultants' and my internal experts' advice.
273. So the specifications, right down to the
type of metal, would be coming from your office, would they?
(Mr Winsor) They can be.
274. Are they?
(Mr Winsor) The specifications are coming out to a
certain level of detail. I am not able to tell you, because that
really is a very technical matter, just what level of detail,
but not to the finest scintilla of detail.
275. The trouble is that when those of us who
have the misfortune to travel on trains are told there is a fishplate
broken at Euston and we must now get off at Watford Junction,
we have to learn to take what you might call a detailed interest
in the state of the rail. What you are being asked, since you
have identified this gap, this lack of urgency in Railtrack, since
you have already told us you intend to make comment on that, what
we are asking you is at what point somebody comes along to you
and says yes, but the real state of the track is this and the
reason is that and the technical reasons are this and to get it
changed you have to do that? Forgive me, it is not normally part
of a lawyer's training to know about fishplates.
(Mr Winsor) Although this lawyer knows more about
fishplates than most lawyers.
Chairman: I am glad to hear it. I was told that
railwaymen were astounded to think they still existed. Perhaps
you have the advantage of all of us.
Mr Donohoe: From the experience of the continent
the levels of specification which are going into the rails there
are far higher than they are in this country. It would seem to
me very sensible that if you have the powers then you can make
the specifications under British standards or whatever to improve
upon that. It is no use, is it, that investment going in and it
might be billions, it might be for whatever?
Chairman: You have already told us that. You
want to know that they do not spend their money badly.
276. Why do you not specify to a level which
is going to mean that the rails which are made today do not break
for the next 20 years?
(Mr Winsor) I am going to give Railtrack very much
277. Excellent. That is what I want to hear.
(Mr Winsor) I have announced additional controls on
Railtrack and the establishment of what we call Reporters. They
are used in the water industry and they are going to be used in
the railway industry. These guys are going to go around the network.
They will be paid for by Railtrack, engaged by Railtrack, appointed
only on my say-so and they will be reporting directly to me with
a legal duty of care to me. They will be all over Railtrack, with
what intensity I decide. They will provide me with reports monthly,
annually, in whatever degree of specification I choose. They will
have access to every aspect of Railtrack's organisation, books,
records, electronic data, the track itself, its contractors and
278. Where are they going to be placed, within
your organisation or within Railtrack?
(Mr Winsor) There will be an independent firm of consultants
and they will be around the network with orange jackets.
Chairman: With respect, the world is full of
279. When do they start?
(Mr Winsor) I need to get the network licence amended
before I can get them appointed. I need Railtrack's agreement
to that as part of the periodic review settlement. I expect Railtrack
will give that agreement. If they will not give that agreement,
then I shall refer the matter to the Competition Commission.