Examination of Witnesses (Questions 1040
TUESDAY 12 DECEMBER 2000
CBE, AND MR
1040. On the West Coast Mainline, are you really
confident that the Government got a good deal with Railtrack about
(Lord Macdonald of Tradeston) That is a judgment,
of course, that has been made by the Regulator, whom I know you
have interrogated at great length on this. The Regulator assures
us that he has gone very thoroughly through all of the figures
and the calculations made here and we have accepted his judgment.
1041. It is a blank cheque, really. What guarantee
is there that this management that you have just described is
going to deliver the West Coast Mainline modernisation on time
and to budget the very substantially increased budget?
(Lord Macdonald of Tradeston) I would hope that the
Regulator would be involved in a much more rigorous way than would
have been the case in the past. The strategic role of Sir Alastair
and the SRA gives us the reassurance that, perhaps, was lacking
in the past. I am grateful for the work this Committee has done
in setting up that new architecture for the railway.
1042. Are you also confident that the Government
has not been hard done by, by Virgin and by Railtrack over the
West Coast Mainline?
(Lord Macdonald of Tradeston) We, of course, were
unhappy with the very significant increase in the cost of work
that was going on on the West Coast Mainline. In view of the analysis
made by the Regulator we felt that in the interests of getting
a more effective and more efficient railway that was a price that
should be paid.
1043. In modernising the railways, generally,
do you see more of a role for third parties rather than Railtrack?
(Lord Macdonald of Tradeston) It is something that
is being explored through the rail modernisation fund and the
special purpose vehicles that Sir Alastair has been talking about.
We hope that Railtrack will play a central part in joint ventures
or other financial constructions that were put together in there.
Of course the train operating companies, through the franchising
process, are being encouraged to invest in developing their own
services alongside Railtrack, alongside the SRA and, perhaps,
other financial institutions.
1044. In the metropolitan areas are you happy
the Strategic Rail Authority is going to take the lead? Would
it not be more logical for local transport experts to be having
much more say on modernisation?
(Lord Macdonald of Tradeston) I believe that the SRA
and the PTEs will work well together.
Mr Bennett: Are you sure about that?
1045. Why do you think that, my Lord?
(Lord Macdonald of Tradeston) From the contact that
I have had with PTEs I do not hear a great volume of concern about
it. There was a time when the Transport Bill was going through
that people were particularly concerned to lose the aegis of the
Department over the grants. I feel that that concern has lessened.
Mr Linnard has been more involved with the PTEs in some of these
(Mr Linnard) Yes, I think that is right. Clearly there
has to be a balance struck. It is very difficult for the Government
and Parliament to set up a Strategic Rail Authority and not give
it a purview which extends across the country. There will be discussions,
particularly between the SRA and the PTEs, when franchises involving
the PTE, or which will cover PTE areas, come up for replacement
or renegotiation. The test will be whether those discussions and
those negotiations can be concluded successfully. We have no reason
to think they will not be.
1046. The franchise replacement programme is
going pretty slowly, is it not?
(Lord Macdonald of Tradeston) It is going at a pace
that Sir Alastair and Mr Grant judge to be appropriate for it.
1047. Do you think that is appropriate?
(Lord Macdonald of Tradeston) At the moment we have
no complaints about the pace of it. It delivers the kind of investment
and improvement and services that are required. We have to keep
in mind that many of these franchises would not be expiring anyway
1048. The second phase of the Channel Tunnel
link, is there going to be some more money from Railtrack?
(Lord Macdonald of Tradeston) That is obviously an
option that Railtrack have open to them up until 2003, to be involved
in the financing and purchase of the Channel Tunnel rail link
part two. Preliminary work has already started there and we should
be able to press on with that, irrespective. We will be looking
for meaningful discussions in the early New Year.
(Mr Linnard) They have told us very recently they
would like to come and talk to us.
1049. How much money are you going to give them?
(Mr Linnard) I do not know.
1050. Are you feeling generous, entering the
Christmas spirit? When you shake your head we need it for the
record, you are definitely saying no to the Christmas spirit.
(Mr Linnard) We are not feeling generous.
1051. We are told that Railtrack is going to
produce an efficiency saving of 17 per cent over the next five
years, that is a bit of nonsense, is it not?
(Lord Macdonald of Tradeston) The Regulator has looked
into this in great depth we are assured. It is not 17 per cent
of present costs, of course, because the Railtrack revenues will
go up very significantly. What we are looking at there is an improvement
in efficiencies across the board, which the Regulator will argue
in comparison to other formerly publically-owned companies is
not overly demanding.
1052. Until Hatfield we did not know how inefficient
they were, did we?
(Lord Macdonald of Tradeston) The Regulator believes
that this will not put undue pressure on the company.
1053. It may be that there are others of us
who think that a little undue pressure on the company might produce
(Lord Macdonald of Tradeston) Indeed. As Mrs Gorman
says, this is a company that is under pressure from many different
angles, that is understandable.
1054. That is not very accountable, is it?
(Lord Macdonald of Tradeston) We believe that it is
clearly accountable inside its regulatory regime.
1055. Are you satisfied that is a tough enough
regime? It is your money, our money, that they are walking way
(Lord Macdonald of Tradeston) I am sure Mr Winsor
will have assured you that he is running a much tougher regime
1056. You will have seen from the questions,
the last thing I asked him was why it was that he talked tough
but gave more money that he intended in the first place.
(Lord Macdonald of Tradeston) He has done that after
a very thorough analysis.
1057. I do not doubt that. The reality is that
he, in fact, has given more money.
(Lord Macdonald of Tradeston) That is because we are
finding out the true cost of running an efficient and expanding
1058. That is how you were able to "up"
the dividends they were paid.
(Lord Macdonald of Tradeston) It was a very marginal
increase in their dividend. In presentational terms it was not
something I would have done had I been in the chief executive's
or the chairman's position.
1059. You do not think they are very accountable.
(Lord Macdonald of Tradeston) I think the declaration
of dividend is something that they do in the light of what they
hear from their shareholders and from the City generally. Some
of those factors may go into the financial strength of the company
on which it will borrow for the future. It may be that it is looking
for that strength to try and expand and develop the railway.
1060. They obviously do not know you have this
sum of money tucked away in the ten year plan and they are going
to be able to get their hands on it, do they?
(Lord Macdonald of Tradeston) If they read the plan
it should be very apparent to them.
1061. Finally, my Lord, will you report back
to us on the question of electric trains. Can we have a written
note once you have seen this article. It would also be helpful
if you could give us one or two up-to-date reports on how many
of the rolling stock problems are going to be solved within the
next six months. Do not worry, you are not going to escape without
me asking something about aviation. You are foolish enough to
come and I am foolish enough to ask you the question. There are
a lot of people who will be very dismayed when they arrive at
the stations this Christmas with a valid ticket (which in most
cases is costing them a considerable amount more than it used
to) and they discover that they are unable to get on a train because
GNER has insisted that all the trains are booked in advance. As
you know, in aviation it is quite common for companies to overbook
and insist on people booking beforehand and many of the rail companies
would like to move to that system. Would you make it quite clear
to them that the passenger comes first and it is not for the convenience
of the companies and would you also be prepared to ask them what
they intend to do for those passengers who are left at Christmas
on the stations unable to find a train to take them to their destinations.
(Lord Macdonald of Tradeston) I will
certainly put that on the agenda of the next Rail Recovery Action
1062. Will that be before Christmas or after
(Lord Macdonald of Tradeston) It will be this week.
1063. I am sure we will be delighted to hear
the results. Of course you will tell us?
(Lord Macdonald of Tradeston) I shall indeed.
1064. Could I say one thing to you in passing.
This Committee is very concerned about not just the future of
transport in this country but that the passengers should receive
the highest, the most comfortable, and the safest form of transport.
We believe this is a Government that is investing for the first
time for many, many, many years in a way that will make that possible,
but it is absolutely vital to us to know that there are not people
benefiting from the public purse without performing their duties
responsibly, sanely and, in the ultimate, to the comfort of their
passengers. May I ask you to keep that very much in mind not only
when you come to see us but when you go to one of these many working
groups. Finally could you tell us why the aviation consultation
document was given to everybody except the Transport Committee?
(Lord Macdonald of Tradeston) Madam Chairman, I think
it is being published today and I hope it is on its way to you.
1065. Perhaps, my Lord, you would enter every
member of this Committee as a member of the press and then we
can ensure we get copies of documents coming from your Department
in the future.
(Lord Macdonald of Tradeston) I shall certainly take
that on board, Madam Chairman.
Chairman: How kind. Thank you very much for