Examination of Witnesses (Questions 603
WEDNESDAY 7 NOVEMBER 2001
603. Good afternoon gentlemen. I am very grateful
to you for coming this afternoon. Would you be kind enough to
(Mr Grant) Mike Grant, Chief Executive
of the Strategic Rail Authority and Mr Jenner, who is Director
of Corporate Services at the Strategic Rail Authority.
604. Before we begin we have to declare interests.
May I now ask anyone who has an interest in transport to declare
their involvement? I myself am a fully paid-up member of the Rail,
Maritime and Transport Union.
Mr Stevenson: I am a member of the Transport
and General Workers' Union.
Mr Donohoe: I am a member of the Transport and
General Workers' Union.
Miss McIntosh: I am a member of the dwindling
number of shareholders of Railtrack First Group and Eurotunnel.
Mrs Ellman: I am a member of the Transport and
General Workers' Union.
605. Did you have something you wanted to say?
(Mr Grant) Yes, please. Just a short opening statement.
First of all a bit of background. The SRA was not involved in
the considerations which led the Government to place Railtrack
PLC into railway administration on 7 October. The Authority welcome
the Government's decisive action as Railtrack's difficulties over
funding had become a major issue. We were also facing difficulties
in progressing infrastructure enhancements whether through franchise
replacements or other means. This had been recognised in the statement
of principles entered into between the Government and Railtrack
in April 2001 which established first that the funding and delivery
of major enhancement schemes could rest with other companies or
consortia, although Railtrack with its responsibility for network
integration would continue to be actively involved. Second, enhancement
should be managed separately from operations, maintenance and
routine renewals. However, one recognises that it needs to be
planned and co-ordinated together. Third, a new procurement and
funding framework would be developed by the SRA, the DTLR, Treasury
and Railtrack to enable third parties in addition to Railtrack
to undertake enhancement project development and to bid competitively
for specific projects to be undertaken as joint ventures. We consider
that this approach is crucial for the development of the railway,
which the ten-year transport plan and our forthcoming strategic
plan envisage. Railtrack administration offers the opportunity
for consolidating the new mechanisms and importantly in addition
securing through the successor body an attitude of commitment
to and enthusiasm for this approach in improving the railway.
We are pleased that the Secretary of State included in his guidelines
to possible bidders for Railtrack a willingness to facilitate
enhancement by special purpose vehicles. On a more personal note,
I welcome the appointment of Richard Bowker as Chairman of the
SRA and I look forward to working with him. At the same time I
should like to record my thanks to Sir Alastair Morton, who I
believe has made a significant contribution in developing a vision
for the railway future. Sir Alastair has made his views known
on the policy issues. My job as Chief Executive and Accounting
Officer of the Strategic Rail Authority have been to make the
SRA an organisation useful to Ministers and one which meets the
objectives set by Government. One of our principal, and I believe
central, roles going forward it to inform and guide the debate
to ensure whatever comes out in administration improves the railway
for passengers and freight and is able to raise large sums needed
to finance the railway for the future.
606. That is all very admirable, but you were
not consulted, is that what you are telling us?
(Mr Grant) That is correct.
607. Has anybody asked you whether you intend
to leave your job?
(Mr Grant) Nobody has asked me to leave my job.
608. No-one has suggested it to you.
(Mr Grant) Other than the press, no.
609. There has been no discussion with you on
the future of the Authority directly.
(Mr Grant) I have had some initial discussion with
Richard Bowker since he has been nominated as Chairman of the
610. Have Ministers consulted you on the shape
of the new Authority?
(Mr Grant) Not as yet.
611. Are you intending, or are you aware of
any meeting which has been fixed?
(Mr Grant) For the last two weeks the SRA has been
invited to take part in the governmentside discussions in a steering
group on which I am the SRA representative. The whole question
of the industry going forward, the SRA's role, regulation, performance
regimes, are all on the agenda but they have not been discussed
612. The DTLR have indicated that they would
like to see emerging in any new organisation to replace Railtrack
a single entity company with the same licence obligations. In
evidence to us Sir Alastair Morton suggested that this would be
a mistake and a lost opportunity. He argued that there should
be a slimmed down Railtrack with regional structures and equity
stake for train operators. Which of those two do you think may
be correct for the future of the industry or neither of them?
(Mr Grant) It is very difficult to take things in
isolation. The whole of the structure, regulation, performance,
the structure of Railtrack, structure of the SRA, cannot be designed
separately. They have to go forward. It is absolutely crucial
that the influence of the train operating companies does take
place on whatever body comes out of the administration. Whether
that is through a shareholding or representation is too early
613. The difficulty some of us have with that
concept of regional companies and special purpose vehicles and
their like is that it could add to the blight of fragmentation
which the industry has suffered from for so long. Would you agree
with that proposition?
(Mr Grant) As far as special purpose vehicles are
concerned, the whole idea going forward has been to try to align
interests. Special purpose vehicles are just part of the process
of trying to enhance the railway. May I take it in four stages?
The first stage is that we need some sort of master plan where
we can identify enhancements, major renewals, maintenance, which
co-ordinates that work going forward. The second stage is to develop
the projects to a good enough state that they can be bid for by
special purpose vehicles or anyone else. The third stage would
be the actual special purpose vehicle delivering the enhancement
and the fourth stage would be handing it back for integration
and for the operator.
614. My question was more to do with the fragmentation
rather than the mechanism. This is an issue which bothers us,
as you well appreciate. You have given evidence before on that.
We have heard from officials of the DLTR that there could becould
be15 special purpose vehicles. There could be half a dozen
regions operating under this new system. Would that not inevitably
lead to more complication, less co-operation and more fragmentation
without worrying too much at this stage about the mechanism?
(Mr Grant) The two issues to be addressed are: are
the problems around the railway structural or are they managerial?
It is a mixture of both. In lots of places a lot of people are
doing good work across these structures. Yes, there is some need
to address some of the structural points, but the whole approach
is that from a managerial point of view it needs to be more co-ordinated
through people. In some places structures need to be amended,
but it is about management.
615. Can you confirm that your strategic plan
is due to be published this month? What guidance will it offer
to the railway industry?
(Mr Grant) The strategic plan is in its final throes
616. It is very late, is it not?
(Mr Grant) We have always said that the strategic
plan would be ready in November and it will be ready in November.
(Mr Grant) We have tried to split it in a number of
ways. We have looked at the periods: first of all short term,
which is four to five years in railway terms; medium term is up
to ten years; and beyond the ten-year period. We have also looked
at various scenarios, we have done the analysis of how each franchise
and each project contributes to the objectives set for us by the
Secretary of State, that is 50 per cent growth in passengers,
80 per cent growth in freight and to deal with the overcrowding.
It will give the guidance of which projects we think we need to
achieve those objectives. It will also deal with future franchising.
618. When you say that the industry needs an
overall plan, is it a different plan from the one you are going
(Mr Grant) No, sorry, I did not mean that at all.
The strategic plan will lay out our views on what the industry
needs over the next ten years.
619. When Sir Alastair says he thinks that the
SRA's credibility has been damaged you would not agree with him.
(Mr Grant) Not producing a strategic plan at an earlier
stage was probably a mistake.