Examination of Witnesses (Questions 960
TUESDAY 12 DECEMBER 2000
CBE, AND MR
960. In return for this massive amount of money,
which I will return to in a moment if I might, you have said to
the Committee today that the quid pro quo for that is to
encourage Railtrack to be "better managed".
(Lord Macdonald of Tradeston) Better managed.
961. Is that the deal?
(Lord Macdonald of Tradeston) It must be better managed
and better regulated.
962. Lord MacDonald, are you aware that the
current capitalisation of Railtrack is between £4 and £5
(Lord Macdonald of Tradeston) Indeed.
963. You will also be aware then that the £4
billion grant that the Government has agreed through the SRA to
be made is almost the total capitalisation of the company. Do
you not feel it is a little strange and would not the public at
large find it a little strange that here we have a Government
giving as a direct grant to Railtrack £4 billion which is
nearly the total capitalisation of the company without taking
some direct involvement in that company?
(Lord Macdonald of Tradeston) We are investing to
try and build a better social railway and I think that that is
entirely desirable as an aim. At the same time we obviously do
not want to weaken the company in any way, but I do not think
that the monies that are going in would be parlayed into its market
964. I think it was last week when Mr Marshall,
the current Chief Executive of Railtrack, was here that he was
asked two direct questions on the £4 billion. He was asked
what would happen to the West Coast Main Line project if £4
billion was not available and he said it would not go ahead. This
is not encouraging better management. This is not having a perverse
influence, as some of the newspapers and some of the people in
the industry would have you believe (who have their own agenda,
I suspect). This is the Government effectively financing a massive
project that Railtrack should have financed themselves. The second
question he was asked was if Railtrack have to finance this £4
billion on the capital market what would be the cost to Railtrack
and his answer, I paraphrase slightly, is they would have to offer
a rights issue of some £1 billion. So in effect the Government
is giving Railtrack £5 billion. How can it be then that you
are so reluctant to see your way clear to protect the public interest
by making sure that that money is spent effectively rather than
this wish list of "we hope they are better managed".
(Lord Macdonald of Tradeston) We believe that with
the influence of the Regulator and the Strategic Rail Authority
that the public monies will be well monitored and well spent.
I accept, as you say, that there could have been other ways of
reorganising a railway after it was privatised, but we are where
we are and rather than go for the possibility of restructuring,
with all of the consequent upheaval that might go with it, we
have gone for a strategy of trying to support the industry with
investment, but under careful monitoring and regulation.
Mr Stevenson: I think, Lord MacDonald, most
members, if not all, would agree with that proposition. We want
to support the railways, we want to see more investment. What
is biting at my tongue, so to speak, is the notion that we can
give a private monopoly company more than the capitalisation of
the whole company, "Here you are, free, gratis, off you go,
get on with it", and then at some stage in the future, not
defined, we hope they will be better managed. That does not sound
like a deal to me, that sounds like a one-sided arrangement that
a private monopoly will benefit from.
965. Mr Linnard, do you have the magic answer?
(Mr Linnard) The figure of 4 billion, which is the
cost of exceptional renewals, mainly for the West Coast, spread
over a period of at least five years, probably needs to be compared
with Railtrack's annual turnover rather than with the market capitalisation.
The annual turnover is 2.5 billion, something of that order. It
is perfectly true that if the money for West Coast Mainline and
other projects was not coming from the Government then the project
would not go ahead because Railtrack only has ultimately two sources
of revenues, that is the Government or the fare box, via train
operators. What the SRA are doing with the money that is going
into Railtrack, either through access charges or through direct
grantsit is not giving Railtrack the moneyis purchasing
enhancements, improvements to the railway, which otherwise would
not be forthcoming.
966. Mr Linnard, that is very interesting but
that is not the impression we are getting. Last week Sir Alastair
Morton in evidence in response to a question described this 4
billion as, "It's a gift". You are saying, "We
are not giving anybody anything". He is very clear in his
mind it is a gift. It is free, gratis, it is a gift, and without
it the scheme would not go ahead. Given the amount of Government
money that is part of Railtrack's revenue, the centre of their
revenue, and these capital grants 14.7, nine billion over ten
years and four billion in the short-term, is it not effectively
a Government agency?
(Lord Macdonald of Tradeston) It is not a Government
agency, it is clearly a public limited company. It is clearly
the agent of Government policy, particularly at the level of,
if you like, to paraphrase Sir Alastair, of its utility activities
of selling track access to companies. Sir Alastair, as you know,
goes on to say that it does have another area of activity, which
is to try and enhance and expand the railways, and in that way
it can have a double function.
Mr Stevenson: Thank you.
967. Do you think they have been carrying that
out properly over the last three years and they need all of this
(Lord Macdonald of Tradeston) Clearly they have not
been carrying it out properly when we see the extent of problems
on the track and difficulties in the relationships with the maintenance
sub-contractors. There have been management problems in the company
and I hope that the new management will address those urgently.
968. Because we know they cannot manage, because
we hope they are going to get better, we are going to give them
a whole lot of money and say, "Here you are".
(Lord Macdonald of Tradeston) We believe that with
the crisis in the railways at the moment the best course is to
try and give as much support as possible to all of the parties
who are trying get the railroad back and running again. That is
the priority, to make sure that their promise that there will
be significant improvements by the end of January is, in fact,
delivered and that, as they see it, the tail-ends of the problems
will be sorted by Easter of next year.
969. The tail-ends, is that the day-to-day running,
most trains being about an hour or two hours late?
(Lord Macdonald of Tradeston) They said to usand
there is a meeting going on at this momentthey will be
able to deliver a significant improvement by the end of January.
There will be then a tail of work that has to be done. We said
that we hope that is a short tail and not a long tail and they
have assured us that it should be completed, with the railways
back to normal by Easter.
970. As long as it does not snow.
(Lord Macdonald of Tradeston) As long as it does not
snow or flood or do anything else.
Chairman: Which normally happens in the winter,
971. I would like to ask the minister how confident
he is that those predictions, that things will be mostly back
to normal by the end of January, are accurate?
(Lord Macdonald of Tradeston) We have put our trust
in the effort that we see being made by the week. There were around
20,000 people out at the weekend and I was told just before coming
here that approximately 28 miles of track were re-railed last
972. I do have to say, Lord MacDonald, and I
travel by train every week, since this crisis started my journey
from Nuneaton to London, which is just over 100 miles, has got
later all the time this crisis has gone on, even with the new
timetable. When it should take two and a half hours, it is taking
two and three quarter hours. I put it to you that the public out
there are losing confidence very, very quickly in your ability
to ensure that Railtrack and the rail companies do deliver what
(Lord Macdonald of Tradeston) Would it help, Madam
Chairman, if I told you what had been promised to us today by
Railtrack and what the situation is said to be on the railways?
973. Was that before or after you read the article
in The Mirror saying that a man who had never been on railways
before was made the supervisor for the day of a gang, when he
was colour-blind and inexperienced?
(Lord Macdonald of Tradeston) It was actually after
I had held a meeting with Railtrack and the Health and Safety
Executive on that very matter. You will see that Railtrack have
made a statement about that article in The Mirror. It is
something that we have said that we will pursue. I did hold that
meeting and then I got the information about the action group.
974. Give us the figures, Lord Macdonald, anything
is manna in the desert.
(Lord Macdonald of Tradeston) Let me say that as at
11 December the number of speed restrictions is down from a total
of 553 to 538 over the week. It has to be remembered that the
work on assessing the damage inside the network is still going
on. The number of 20 mile per hour speed limits has been reduced
from 451 to 379. The 40 miles an hour down from 69 to 45. The
number at 60 miles an hour up from 83 to 114. The number of services
running normally in percentage terms as at 11 December, of the
normal services running, this is trains leavingleave aside
their punctualityis inter-city 78 per cent are running,
and of London commuting trains, 93 per cent.
975. Can we agree the definitions? The definitions
is as they leave. Can we have some indication of where they go
or whether they get to wherever they are supposed to go?
(Lord Macdonald of Tradeston) That is my next line.
The percentage of normal services which are running is 78 per
cent intercity, 93 per cent London commuting and 96 per cent elsewhere
in the country. Of the percentage running punctually, 64 per cent
of inter-city trains, 65 per cent of London commuting and 76 per
cent elsewhere in the country.
976. Are these percentages on the new timetables?
(Lord Macdonald of Tradeston) These are on the current
timetables and these are figures that come from the train operating
977. I do not think those figures are correct
because even on the new emergency timetables they are still not
delivering. This is what is causing the frustration, where people
plan on an emergency timetable and still cannot get there.
(Lord Macdonald of Tradeston) These are compared to
the current timetables. That is figures given to us by the train
978. We are agreed this is the United Kingdom,
(Lord Macdonald of Tradeston) I should say that as
far as the train operators are concerned, in terms of the percentage
of normal revenue they took for the weekend of 9 December 87 per
cent of their normal revenue.
Chairman: It just shows what piracy leads to,
does it not?
979. Do you think the Post Office, given what
some people would say are reasonably good efficiency figures,
over-reacted in moving most of their Christmas mail off rail and
on to plane and road?
(Lord Macdonald of Tradeston) I had a meeting with
the Royal Mail people, with EWS, the freight company, and I had
a chance to discuss these matters with them last week. They had
a percentage of first class mail going by EWS and that has been
transferred to road and plane. There will be, I understand, compensation
paid by EWS on a contractual basis to the Royal Mail and they
in turn will have a contractual relationship with Railtrack, but
there was an interesting article, tooyou may have seen
itin the leader article in The Times yesterday about
the other problems inside the Royal Mail that may be delaying
some of the post.