Supplementary memorandum by the Association
of Train Operating Companies (RI 17B)
Is there any merit in the suggestion that Railtrack
should be divided into regional companies (along the lines of
its existing zones) which would undertake infrastructure works
with other functions, such as signalling, being given to other
bodies which would have responsibility for the whole network?
The immediate task of Railtrack is to restore
the network to the point that normal train services can be safely
operated, and then to manage the enhancement of the network in
line with the Government's 10 year plan.
It is clear from recent events that to achieve
these aims Railtrack must improve its capabilities in three areas:
ATOC has seen no evidence that breaking up Railtrack
into regional companies will assist in the achievement of these
objectives or advance the development of the appropriate capabilities.
Should Railtrack bring the track maintenance workforce
There is no doubt that the relationship between
Railtrack and its track maintenance contractors is one of the
critical areas which must now be re-examined in the light of Hatfield.
A partbut only a partof that relationship is the
proportion of Railtrack's work that is undertaken in-house. Other
components are the nature of the contract between Railtrack and
its contractors; the degree of oversight and quality control exercised
by Railtrack; and the involvement of train operators in the process.
All of these issues are currently being reviewed
by Railtrack. ATOC believe that it is right for the organisation
which is responsible for delivering the output (ie Railtrack)
to be in the initiative. ATOC will naturally wish to discuss with
Railtrack once they have formed a view.
Does ATOC have any concerns about the way in which
the Rail Regulator's final conclusions may be translated in track
Track access charges have four parts to them:
Variable costs associated with track
wear and tear.
Congestion charges (otherwise known
as capacity reservation charges).
The policy of the Rail Regulator has been to
align charges with costs. The effect of this is to shift the balance
of track charges to variable charges, largely because of the impact
of increased congestion charges.
The effect of higher variable charges is to
reduce the incentive on train operators to increase service levels.
This sits uneasily with an objective to shift traffic from roads
How large a problem this is depends upon the
translation of pricing principles into charges for each train
service. Train operators have not yet seen the detail of these
With certain fares expected to rise at a rate
below that of inflation and the possibility that passenger numbers
might fluctuate in the future, is it reasonable for the Government's
10-year plan to assume that 60 per cent of investment in new rail
capacity will be generated by a continuing rise in fare revenue?
The case for investment over the next 10 years
by train operators is largely based on traffic growth. To some
degree it depends upon fare levels, but it is unlikely that the
overall growth in fares will differ greatly from general rates
As the question implies, there is significant
risk associated with revenue over a period as long as 10 years.
Much of this risk can be managed by train operators, but there
remains some risks on such things as GDP and central London employment
which are outside their control.
Train operators have however shown themselves
to be willing to take on demand risks in the two franchises which
have recently been announced. In the case of South Central franchise,
Govia has agreed to a £1.5 billion investment programme.
In the case of the Chiltern franchise, M40 Trains has committed
itself to £370 million of investment, and is developing plans
for a further £1 billion of investment.
So far therefore, train operators have shown
a willingness to shoulder their share of the rail investment programme
set out in the Government's 10-year plan.
Will the continuing disruption caused by emergency
engineering works following the Hatfield accident, as well as
by the recent flooding, reduce demand for passenger rail travel
in the long-term?
Passenger revenue in the four weeks between
15 October and 11 November was £55 million below expectations,
ie £257 million rather than £312 million, and in the
four weeks between 12 November and 9 December it was £65
million below expectations. In addition to this a special compensation
package has been announced for that will cost a further £70
In the short to medium term effect on passenger
demand will depend upon:
The length of disruption that is
experienced by customers. In some areas the train services are
already back to normal, but in others such as GNER it may be several
months before the full capability of the network is returned.
The speed with which confidence amongst
customers is re-established and they return to rail. This is particularly
important for leisure travel and business travel.
In the longer termie 3 years plusit
is the underlying forces which will determine passenger demand,
investment in the rail network and
in new rolling stock
the relative cost of different modes
employment patterns, particularly
The long-term prospects for these are unlikely
to have been fundamentally changed by Hatfield.
In summary therefore, there has already been
a high short-term cost of Hatfield; the long-term rate of growth
on the other hand depends on fundamental factors which have probably
not been charged. What matters most is the path between now and
the long-term and this will depend crucially on how the rail industry
responds to the current crisis and on how customers respond in
Would it be easier to strike a balance between
safety, reliability and capacity issues on the rail network if
the SRA took a leading role in determining the timetable?
The SSRA already have an important role in determining
the timetable through the establishment of a minimum public service
requirement (the PSR). Train companies can add to this if they
believe that there is a market for the additional services, or
if they can persuade the SSRA or local authorities that there
is a wider benefit which justifies additional subsidy.
The SSRA also has an important role in providing
investment for additional network capacity. This is needed to
relieve bottlenecks which restrict the growth of the network and
The detailed determination of the timetable
is and should be a matter for train companies.
Would it be possible to have more details on the
special purpose vehicle proposed for the New Southern Railway
referred to by Mr Ludeman in his oral evidence (Q.437)?
GoVia is the preferred bidder for the South
Central franchise which is currently operated by Connex. They
have proposed a £1.5 billion investment programme of which
£600 million is in infrastructure improvements.
GoVia naturally wish to ensure that these infrastructure
investments are delivered in a timely way. They are therefore
exploring with Railtrack and other partners innovative ways of
financing and managing this programme. One option is for GoVia,
Railtrack and other partners to form a Special Purpose Vehicle
(SPV). The reason that it is called a Specific Purpose Vehicle
is that it is a joint venture company specially set up for the
sole purpose of financing and constructing a specific programme
Director of Policy & Regulation