Examination of Witnesses (Questions 980
TUESDAY 12 DECEMBER 2000
CBE, AND MR
980. Royal Mail are controlled by a regulator,
they have targets, they are expected to meet certain commitments
in the same way railway companies are and I have been talking
to them since this began. Does it not seem to you that they have
contractual obligations, they have been working hard and they
have been very badly treated?
(Lord Macdonald of Tradeston) Indeed. It is clearly
something that is of great regret to us because we are very concerned
about the delivery of the mail, but I know it is of great concern
to EWS as well. They are working hard obviously to keep the relationship
with the Royal Mail. Railtrack tell me that they too are trying
to ensure that the Royal Mail trains which predominantly travel
on the main lines will be improved as soon as possible, but they
have also got other priorities concerned with the commuter services
particularly around London, so it is a job for them to try and
find a balance in all of this. Again, we have the freight companies,
Freightliner and EWS, with the Rail Action Group at this moment.
981. Can I ask how quickly this compensation
will come through to these companies? I have a company in my constituency,
Links, which took over the old British Rail Red Star Parcels and
it has failed because there are no parcels coming by train. How
quickly will that company be able to go through all the minefield
of recovering compensation? Will your recovery team be giving
some direction in this?
(Lord Macdonald of Tradeston) I am at a disadvantage
because the Rail Action Group is meeting at this moment and discussing
the freight question. But having brought it to my attention, certainly
if there are issues like that on particular companies I will very
happily take it up with the companies involved.
982. Finally you mentioned changes in Railtrack's
management. I know it has been a few minutes since you said it
but it sounded rather to me like certain sort of creatures jumping
off ships. Do you think the recent senior management changes at
Railtrack give enough prominence to engineering and technical
(Lord Macdonald of Tradeston) That is certainly a
concern we have expressed and others have expressed publicly.
Railtrack moved to allay those concerns by bringing forward a
number of engineers into higher ranks inside the company.
983. If I could remind the Committee of my interest
declared. Is there a crisis in the rail industry, Minister?
(Lord Macdonald of Tradeston) There is a crisis, indeed
I think it is a multiple crisis, as I tried to say unsuccessfully
the other day.
984. In your view has the Government contributed
to this crisis?
(Lord Macdonald of Tradeston) I believe that the Government
has tried to manage the crisis. As I said last week, it is a multiple
crisis. Part of the crisis is one we have inherited with the fragmentation
of the railways and also the lack of investment in the railways
over many years.
985. In your view would you support the separation
of the track and the ownership of track from the operation of
services on that track?
(Lord Macdonald of Tradeston) What my priority is
at the moment is to make sure the railway gets back and running.
I therefore am concentrating all my efforts on making sure that
the system as it exists at the moment works as efficiently as
possible because to contemplate any radical changes in that at
the moment might be destabilising.
986. Are you prepared to review the role of
the Regulator insofar as the performance targets such as punctuality
that the Regulator is setting may conflict with the safety requirements?
(Lord Macdonald of Tradeston) As you may have heard
from Sir Alastair Morton, he has a number of working groups sitting
at the moment and they bring together all sides of the industry
to try and ensure that any perceived conflicts that there might
be between efficiency, punctuality and safety are tackled and
dispelled. We do not believe, and I am sure Alastair and Mr Winsor
have said to you that they do not feel it is incompatible to run
an efficient company and a safe company.
987. When in your view did the problem of gauge
corner cracking first become appreciated in this country?
(Lord Macdonald of Tradeston) My knowledge of it is
only since the Hatfield disaster. I am told that engineers were
aware of it but not that it had spread so widely or indeed its
propagation, as they call it, could take place in rails that were
perhaps only a year or two old. I think the assumption had been
that the track would have to be much older than that before this
phenomenon hit it. We do have studies going on at the moment and
we look forward to hearing within a matter of days just what the
initial conclusions have been of those studies.
988. In evidence we took from Tom Winsor, the
Regulator, last week, page 25, paragraph 879, I asked the Regulator
what would happen if the franchised passenger operators cannot
pay the amounts because the numbers of people and amount of freight
do not materialise over a five-year period. He told the Committee
that they would get it from the Government, the Government would
have to pay more. Is there any provision for extra payment if
by the end of this year or next year there are fewer passengers
and freight travelling on railways?
(Lord Macdonald of Tradeston) First I should say it
is an anticipation shared by the industry that they can get back
to the previous levels of passengers on the railway in a relatively
short time, and I hope the same will be true of freight although
that will need further inquiry. Inside our 10-year plan there
are unallocated provisions there which might be able to help fund
any kind of unexpected shortfall of that kind, but at the moment
we have not made any provision for it.
989. Mr Grant, on the other hand, said he would
accept it if companies went bankrupt.
(Lord Macdonald of Tradeston) Indeed, I think Mr Grant
and Sir Alastair would accept that if a train operating company
was not viable then it could indeed get taken over or go to the
wall in the normal course of business, but, as you know, Sir Alastair
has powers of last resort were a company not taken over but there
does not seem to be any shortage of interest in those companies
that have been less than financially robust in the past.
990. How much is this unallocated money?
(Lord Macdonald of Tradeston) I will let Mr Linnard
come in here.
(Mr Linnard) I have not got the figures with me but
it is quite significant in the latter period of the ten-year plan
for unallocated transport capital.
991. I would like to get to the bottom of how
much money there was that was not allocated. Presumably you had
to fight Treasury to get the money so there must have been some
vain hope that it would be spent on something. Are we losing something
in order to get the money for this purpose?
(Mr Linnard) There is a sum of money in the ten year
plan, largely in the years five to ten, which is allocated to
transport capital but not allocated as between road or rail or
the other spending programmes within transport. That is simply
because it is impossible to set with total precision the allocation
of capital spend across the different modes and across the different
992. Are we going to get a by-pass in order
to get us out of this difficulty?
(Mr Linnard) That does not follow.
993. What does follow? Can you give us some
clear information? Presumably you did argue fairly strongly with
the Treasury that that money was needed for something. If it was
needed for something and if it is going to be spent in a different
way, we are not going to get what it was needed for.
(Mr Linnard) Out of the total expenditure provision
in the ten year plan there is a total of about nine billion which
is unallocated. One would expect, anyway, that railways would
get a proportion of that when the spending priorities and the
investment cases become clearer.
994. Investment as opposed to reimbursement
for losing passengers and income.
(Mr Linnard) Yes. I think that is a distinction that
we need to keep very clearly in mind. What Mike Grant was saying,
I would imagine, is when he is awarding franchises there is no
total safety net that stops a private sector train operator from
ultimately going bust. What Mr Winsor, I imagine, would have been
saying in the evidence that he gave is that what he has set in
his periodic review is the amount, in his judgment, which Railtrack
needs to maintain and renew the core railway over the next five
years. That is money which is due to Railtrack and has been settled
by Mr Winsor in the periodic review.
Chairman: To increase its payment in dividends.
995. Would you agree, Minister, that safety
on railways over the last 10 years has been infinitely greater
than safety on the road? What are you doing to boost confidence
in the railways and to encourage people to go back on to the railways?
(Lord Macdonald of Tradeston) I, of course, agree
that railways are a far safer mode of travel than on the road.
It is true too that over the past 10 years there have been some
significant area of progress in terms of better safety on the
railwayssignals passed at danger have been coming down
steadily across the last decade. If you look at the numbers of
serious incidents in terms of collisions or derailments, there
is a downward trend there too. We always have to bear in mind
that inside those generally encouraging statistics there is the
possibility of the awful disasters we have seen at Paddington,
Southall and most recently at Hatfield.
Chairman: Mr O'Brien.
996. Minister, my interests are heightened when
you talk about, if some of these operating companies do not do
well there is plenty of other people lining up to take-over; is
(Lord Macdonald of Tradeston) From the limited experience
we have there has not been a shortage of interest in people looking
to take over companies that might have been weakened. There have
not been too many companies, as I recall, in that condition.
997. It is a fact that shares in GB Railways
and Anglia Railways franchises have fallen to an all time low
and some of the companies are saying that if they do not increase
their income, their profits, then they will go to the wall. This
is happening. What contingency plans are the Government operating
to ensure that any new bidders will take over the consequences
of safety and other issues without further subsidies.
(Lord Macdonald of Tradeston) The Strategic Rail Authority
are deferring penalties that they might have been collecting.
I also believe that Railtrack's board have taken a decision to
try and stand behind companies that might be in temporary trouble
for cash-flow, and so on.
998. Would you agree that, perhaps, some of
the problems that are causing a reluctance to invest in rail are
because of the fact of the shortage of skilled staff?
(Lord Macdonald of Tradeston) I think there has been
a problem of de-skilling across the railways. We saw it, and also
skills shortages created in some areas after privatisation, when,
for instance, train drivers were paid off and then there had to
be an attempt to recruit them back very quickly after that. We
can see too, just on the increase in salaries, for instance, that
the shortage of staff there has lead to an increase in salary
to try and attract more people into those grades. More broadly
it was judged a couple of years ago to be a developing problem
and, indeed, the mechanisms were set up to try and increase training
in the railways. The comments made by the Department for Employment
and Education showed that the take-up, for instance, of some of
the vocational qualifications inside the railway are very low.
There is a real problem with training in the railways. Of course
the 10 year plan with that 60 billion extra investment could exacerbate
that. At least the comfort we can take is that if you have a 10
year commitment to investment and expansion then companies should
be able to begin to recruit and train with greater certainty than
in the past.
999. Is there any matter or any issues involving
the new franchises where they have to apply skills training and
there has to be an upgrading of skilled staff in the companies?
Is this written into the franchises?
(Lord Macdonald of Tradeston) I am not entirely clear,
maybe Mr Linnard would know.
(Mr Linnard) It is certainly one of the things that
the SRA look very carefully at when they are judging between different
bidders and when they are taking decisions on who should be allowed
to qualify for bids. I am not sure whether they look specifically
at training, but they certainly do look at technical and managerial
competence in some detail. What the SRA have also done as a cross-industry
initiative is to participate, I think they are actually one of
the main movers, in setting up the Institution of Railway Operators
to provide a much clearer focus on training and links with the
City University, and so forth.