WEDNESDAY 26 JUNE 2002
Mrs Gwyneth Dunwoody, in the Chair
Mr Gregory Campbell
Examination of Witnesses
RT HON JOHN SPELLAR, a Member of the House, Minister for Transport, and MR MARK COULSHED, Divisional Manager, Railways Sponsorship Division, Department for Transport, examined.
(Mr Spellar) John Spellar, Minister for Transport and I am with Mark Coulshed, Head of the Rail Sponsorship Division.
(Mr Spellar) No, I think I am quite happy to move into questions on quite a wide-ranging topic.
(Mr Spellar) Yes, I think so, but I wonder why there is a question on that.
(Mr Spellar) Well, all the time, if we are looking at Railtrack, and this would obviously be true right the way across the system, they should be looking towards through-life costing and, therefore, assessing the need for maintenance, but also of course a rolling programme of renewal. Now, in one sense what that means is that they actually have to have a clear view of their assets and a clear register of their assets and, as the Committee will be aware, one of our concerns which has been heightened since Railtrack went into administration and the new management have come in is that there was a significant deficiency in their understanding of their assets, let alone of their cost base, and the new management is having to wrestle with that.
(Mr Spellar) Well, the whole question of Network Rail and the role of Network Rail, although it will obviously be more widely discussed when we are able to make an announcement on this subject once negotiations have been completed and the Secretary of State is able to make ----
(Mr Spellar) This is true.
(Mr Spellar) True, Chairman, but I think also I am slightly constrained by the final details and the detailed announcement which will probably be made to the full Chamber of the House of Commons.
(Mr Spellar) Well, just generally on the question of Network Rail and of the new arrangements and the finalisation of the deal.
(Mr Spellar) Well, I think there are a number of areas which Railtrack will be addressing and of course that applies not just in the north, but right the way ----
(Mr Spellar) No, but Railtrack at the moment have been addressing under Railtrack in administration, under the management on the operational side, have been examining the system operating, particularly because they have a number of examples where outside contractors, outside of the main contractors, would have been able to bid for doing work considerably less than Railtrack. I had an example yesterday when I was in Yorkshire, this is a small station improvement and a difference of over £1 million between the estimate from Railtrack and the estimate from another builder. That is a good example, I think, of the variation in cost. In quite a number of cases Railtrack have been contracting work out and again, as an example of their failure to understand or control their costs, therefore, paying far more for those services than they would have done in a proper contracted environment, and I am sure that the current Railtrack management and then Network Rail will be looking at how they can rationalise that work and actually get costs which are more comparable with both costs and indeed the rate of return which prevails in the commercial sector.
(Mr Spellar) I think there are a number of issues wrapped up there, ones which you rightly indicate I would not be in a position to make a statement on, namely the financial settlement with the Treasury. However, I think also it is fair to say that we still have to resolve the issue of a number of projects which have run substantially over budget, of which one is obviously the West Coast Mainline, and discussions are still taking place between the various parties to scope that problem and then obviously to make decisions arising from it. Now, we then have to look further down the line at other projects, but while we are dealing with the major projects, of course a number of smaller projects, smaller enhancements, Rail Partnership projects are also going ahead, and of course work has been going ahead both at Manchester Piccadilly and, for example, at Leeds where I was yesterday where there has been a very significant enhancement both to the station, but also, therefore, of course to the availability and capacity at Leeds as well.
(Mr Spellar) Well, I do not know that it was always the case that when it was a private company they picked up the tab because they kept coming back to us asking for more money and that was the underlying problem that Railtrack faced and which finally led to them having to be put into administration. Of course the operations of Network Rail, indeed the operations of any infrastructure company on the railway are dependent on the monies that the Government makes available in order to fund the system, and that is the basis on which of course they can borrow in order to run their operation. Therefore, the Government has a very keen interest in ensuring that they are rather robust figures for a scheme and indeed that is the work that is currently being undertaken on behalf of Railtrack, but also obviously of the other parties involved by Bechtel.
(Mr Spellar) Well, it is then the case that you have to evaluate how far you proceed with that scheme, which is precisely why an evaluation of West Cost Mainline is being undertaken at the moment, and the same reason why very careful work is being done on East Coast Mainline, because it was quite clear before Railtrack had to go into administration, even more clear since, that they had lost control of the costs of that project and indeed did not even understand the costs that they were incurring and there was a systemic failure within the management system of that company.
(Mr Spellar) I do not think that. I think that in fact, which I think you might be alluding to, it is becoming clearer, the underlying costs to which Railtrack were committing without actually having clear view as to how that would finally resolve itself in terms of numbers. We do have a greater degree of confidence that there is a better understanding, but also, I think, an understanding of some of the underlying problems which I was alluding to earlier regarding the extra costs that Railtrack are paying over and above that which would be experienced outside in the commercial contracting sector.
(Mr Spellar) I think we can be fairly clear that it is going to be greater than that, but we are finalising the balance to be struck between the various parties and looking at the feasibility of alternatives.
(Mr Spellar) At the moment the SRA are driving forward this programme for the prospect of an infrastructure upgrade and they are working closely with Railtrack and they will be taking it forward as a special-purpose vehicle. Indeed we announced in April of last year that it would be taken forward as a joint venture with the SRA in the lead and potentially involving train operators, project managers and financiers, but it is still, I think, a little too early for us to make an announcement on the final shape of the proposals for the upgrade, but you are right, that this is obviously a project that commends itself to a special-purpose vehicle.
(Mr Spellar) I have not seen that report yet, although I have seen reports of that report.
(Mr Spellar) I know that Bechtel have been working very intensively on this and they are in discussions with obviously the main actors in this, but I have not as yet seen the report.
(Mr Spellar) I do not think I as yet have a date for that, but obviously we are hoping to get a report as soon as possible so that we can then get a clearer view of the options for the way ahead and the various trade-offs to be struck on that.
(Mr Spellar) As I have said, I have seen reports of it.
Chairman: Yes, you did answer that.
(Mr Spellar) I have not seen that report yet, but, as I said, we are waiting to get the report from Bechtel, plus the discussions which have taken place between the actors principally involved.
(Mr Spellar) Well, I think one key area which has already been discussed is not to proceed through to 140 miles per hour and looking at the gain in journey time or the cut in journey time as a result of that against the cost of such a project. Now, that does have a knock-on effect potentially on the number of train-sets required particularly on the main route operated by Virgin and obviously discussions are taking place between the SRA and Virgin on that.
(Mr Spellar) It certainly was not what the boss of Virgin, Sir Richard Branson, was saying the other day when he was standing alongside Brian Souter of Stagecoach where he was being very positive about developments, but also the much better working relationship that he has with Railtrack and with the Strategic Rail Authority under their new management, and was being very upbeat about the prospects of success for the new Pendolino trains.
(Mr Spellar) Well, the SRA are hoping to publish their proposed West Coast Strategy in the next month or so, but they are in pretty intensive negotiations with the main companies and organisations involved in this and there are a whole number of interests, and indeed in some cases not necessarily with compatible interests which have to deal with the outcome of this very unsatisfactory affair, namely the failure of previous Railtrack in any way to manage, budget for or price the West Coast Mainline.
(Mr Spellar) There are a number of aspects of the Ten-Year Plan and targets and aspirations in that, including the increase of 50 per cent in passenger traffic and also 80 per cent in rail freight.
(Mr Spellar) Well, I am actually answering it because particularly if we are talking about rail freight and the 80 per cent increase figure for rail freight, that is very much tied in with the operations across the regions and particularly in trying to enhance rail freight capacity within the regions of the country, particularly those main manufacturing regions, and obviously an enhancement of that rail capacity is a significant part of economic regeneration in those areas.
(Mr Spellar) But they are taking into account ----
(Mr Spellar) No, they are taking into account the need to increase again the percentage of those travelling by rail and the regeneration then of many major city centres in the regions of the country. They are directing themselves to enhancing services, for example, the improvement in the Crossrail service in Birmingham, the enhancement of capacity at Leeds, which is precisely to improve the access of Leeds to London, but also dealing with suburban rail services and also the enhancements of Piccadilly. All of these are looking at the changing employment patterns in the regions of the country and actually providing capacity in order to be able to enhance that. Equally, the proposals for the Trans-Pennine Express are for that franchise looking at achieving a faster and, therefore, also a higher-volume service which will enable transport between the main towns of the north precisely in order to be able to enhance the regional competitiveness of the regions.
(Mr Spellar) Well, they will obviously be looking at the work that they undertake with the rail operators in order to be able to make a comparison between different bidders for the franchises in order to be able to make an assessment. Of course Ministers also look at that as well and are very much aware of the need for regeneration of the regions of the country.
(Mr Spellar) I certainly think that and of course I am always willing to entertain representations where people may indicate to the contrary, taking into account of course that we are talking about the mobility of passengers and there are a number of mechanisms for achieving that in all cities. In some cases light rail may be more appropriate and I think my recollection is that the SRA's estimate is that the Manchester Metrolink is carrying more passengers than the other suburban lines put together in Manchester, which may be an indication that there is a package that actually works more effectively within that environment and also in a number of areas bus priority systems may also meet the need. So from the point of view of the Department, it is looking at transport requirement and transport need in areas, not necessarily just meeting it by one mechanism.
(Mr Spellar) Light rail in Merseyside, there is an application in for that and that is being evaluated at the moment by the Department along with the officials from Mersey Travel.
(Mr Spellar) In which, sorry?
(Mr Spellar) In which area?
(Mr Spellar) I think that there is a real difficulty here because one of the successes of the privatisation of passenger rail has been a more market-orientated focus of the rail system, and actually looking at the capacity that rail is carrying and attempting to fill a greater percentage of that capacity, which is more analogous to the way in which the airlines operate rather than the more rigid formula that we had previously.
(Mr Spellar) What I feel is that there are advantages and disadvantages to both schemes.
(Mr Spellar) Well, one of the driving forces behind the increase in the number of passengers using rail has been the more effective marketing of the new companies compared with the old British Rail, and I do not think that that is really deniable. There is on the other side the high premiums charged for services which are over-subscribed and, therefore, that market mechanism operating, and I know that that causes concerns particularly for business in a number of areas as to whether that is actually achieving the best balance. It does also of course lead to estimates of comparisons between fares in the UK and rail fares in other European countries which do not necessarily capture the full range of fares which are available in the UK. I do not think we should underestimate the impact that the much cheaper fares have had in enabling mobility of people across the country.
(Mr Spellar) I think that there certainly is a perception that some of the increases have been excessive and indeed may have worked against certain parts of the country and I think these are matters that need to be taken up, particularly through the regional rail passenger councils, with the particularly companies in order to make that argument at first instance.
(Mr Spellar) I did say at first instance. If the answer is unsatisfactory, then obviously Members may well wish to raise that with Ministers.
(Mr Spellar) I think we do have to convey, as Members of Parliament do and we have to work on that, the mood of the travelling public and whether they think they are getting a fair deal, but I do put it into context where we have to take into account the very considerable increase in traffic that there has been, some of which has been driven obviously by the general economic situation, but some has been driven by the better marketing of the new companies.
(Mr Spellar) I think initially what we are looking at are the schemes that we have, and we are particularly talking about the problems with West Coast Mainline, and other significant priorities. Because of the history of under-investment for several decades in the rail system, there are a whole number of existing problems and, therefore, it is a case, firstly, of looking at the pressing issues of the schemes that are already in progress and also where they are costing more money and also then looking at the priorities for further other schemes. I will ask Mark Coulshed to say something on the ports access, and I am presuming this is the Humberside ports access.
Mr O'Brien: Well, what happened is that we have transport between the Humber ports and the west coast ports along the M62 corridor and this is over-congested and, therefore, we need to take traffic off the road and the best place is the rail, but we have no direct east-west link. Part of the programme was to develop the east-west link to enhance the competitiveness within the Yorkshire and Humber region with other regions. We are now told that this is not going to be available until whenever and not before 2010.
(Mr Spellar) Well, some is on some of the east coast ports because we are undertaking work for the East Anglian ports and improving the availability up through Nuneaton. I will ask Mark Coulshed to say something about the Humber ports.
(Mr Coulshed) There is money set aside in the SRA Strategic Plan for freight enhancements, nothing specifically in relation to Humber ports and I am afraid I do not know what has been said to Mr O'Brien, and he may have better information than I do. One of the things that the SRA will be doing of course is over the second half of this year looking again at the Strategic Plan, and they are under a duty to produce an update of the Strategic Plan in January next year and they will have that opportunity to pick up representations which have been made here and elsewhere about precisely the questions of priorities within the funds which are available, so I dare say they may have more to say about the Humber ports and possibly about other matters to be raised.
(Mr Spellar) Can I undertake to write to the Committee?
Chairman: It would be helpful and if you would also deal with the multi-modal point because that was something you raised yourself and we would like to know what your view is.
(Mr Spellar) Very much so both from a number of those individual companies, from Members of Parliament's representations, also meetings that I have had with the industry collectively, and also discussions that I have had with EWS. As the Committee will be aware, both myself, the previous and the current Secretary of State as well as the Foreign Secretary, the Home Secretary and the Prime Minister have all been pressing very hard with the French Government in order to get improvements. I met the French Transport Minister at the recent Transport Council in Luxembourg and I hope Members will be pleased that there is now an acceleration of the construction programme of a much more robust fence than the one which was previously built and indeed I am shortly due to meet the head of SNCF to explore that further and to see what ----
(Mr Spellar) I was going to come on, Chairman, to the second part of that equation which is a much stronger commitment from the new Interior Minister to providing an adequate police presence in that ----
(Mr Spellar) Is he paying for which?
(Mr Spellar) The extra police are the responsibility of the French Government and we are making or the Strategic Rail Authority is making a contribution towards the fence.
(Mr Spellar) Indeed because it is extremely important, for all the reasons that have been identified by Miss McIntosh, very important that we actually get stability and then get the increased provision of train services, not just because of the immediate impact, but of course a number of companies, if they move from rail back to road, they then have to sign medium to long-term contracts with the hauliers, so, therefore, it is not a case of when we re-establish the service that there is an immediate return to rail and that is why it is imperative that we improve the situation as soon as possible. I am pleased, however, that for the first time in answering on this I think that there is actually a considerable amount of real improvement taking place actually on the ground and I am getting an indication of the greater degree of confidence now from the industry than I have previously.
(Mr Spellar) Well, I think it is pretty rich, Chairman, when we are actually taking measures to deal with a very serious problem for freight and we are actually, therefore, facilitating and expediting those that we then get criticised for it. We are dealing with a real problem, that is what government does, and trying to solve it and, as I said, it is as bit rich to then be criticised for actually taking action when the Committee and others have all been fairly free with their criticism in the past for not actually achieving results. It has not been easy, but we are now getting progress.
(Mr Spellar) Yes, indeed and we have recently announced strengthening that role by having a board for the rail regulator.
(Mr Spellar) Not replacing him by. In fact in regulation generally it is the normal practice to have a regulator and a regulatory board, so it is not a replacement. It is actually coming in line with common regulatory practice.
(Mr Spellar) I am saying it is bringing it in line and being consistent.
Chairman: So it is not a renewal, just an enhancement.
(Mr Spellar) Well, they would obviously be looking at a price that they would be charging consistent with loading capacity on their trains. As I said in my earlier answer, it is undeniable that the targeted marketing of the rail companies in looking at using the capacity on their trains has been a significant factor in the increase in passenger usage in this country. There is the other side of that which is the higher premium fares for those who are using the trains at peak times.
(Mr Spellar) Well, I do not think the figures indicate that there is a discouraging effect, although I think there might be an argument as to whether there is an equity issue.
(Mr Coulshed) If I may add something about this, the SRA will shortly be publishing a consultation paper on fares policy. We have been talking to them about the issues which might be raised in it and one particular issue, indeed two or three of the issues that have been mentioned this afternoon are certainly covered, in particular this difficult trade-off between financing investment and keeping fares down to a reasonable level, and also the question raised earlier about whether it is reasonable to allow for the definition of regulated fares to be varied in the way it has been.
(Mr Coulshed) Yes, I understand the SRA are hoping to publish this document in the next two or three weeks.
(Mr Coulshed) I do not think I want to talk about all the things which might be in this draft. I know of things they have talked to us about.
Chairman: We just have this old-fashioned idea that you ought to know what is in it and also tell us.
(Mr Spellar) Well, the Wigan Hub is not just a rail plan, but it is tied in with a road plan as well. It is a mixed development which they have certainly talked to the Department about. At the moment we are looking at and hopefully getting a better picture of the commitments that we already have. We also have the Rail Partnership funding and we are also concerned that we should not be over-concentrating just on big schemes to the detriment of a considerable number of smaller schemes which may deliver a very substantial enhancement to the network.
(Mr Spellar) No, it is not just that we are not against small schemes, but we actually believe that the previous focus maybe of the Strategic Rail Authority largely towards large schemes, there may need to be a degree of correction because a considerable number of smaller schemes may deliver quite substantial enhancement to the network.
(Mr Spellar) That is very much the focus of the franchise for the Trans-Pennine Express in order to look at the enhancement of faster trains between those centres and also to grow that market and separating that out, therefore, from the more local trains and getting that different focus for those two franchises.
(Mr Spellar) I would obviously have to look at the proposals --
(Mr Spellar) -- that are going to be coming out of the franchise bids.
(Mr Spellar) There was an initial proposal from Railtrack which was just to close for a block period - three to four weeks is my recollection but we can correct that if I am wrong. There was considerable resistance from the business community in the north west to seeing that shut off for that period. There is a lot of work being done in order to minimise the inconvenience to passengers over those weekends and quite a bit of money being spent, but it is a straightforward trade-off. The engineers, quite frankly, would nearly always prefer to have a solid block of time because of the time it takes to secure the network before they move workers on to it; then, of course, the time when you are dismantling those provisions as well. It really is a case where there needs to be a decision; it is not an easy one and I think there are arguments on both sides, but I think there would have been considerable opposition had there been the closure for that period of time. It is the difficulty with retrofitting an existing system.
(Mr Spellar) One reason is I think we operate under more stringent health and safety procedures now.
(Mr Spellar) I think that the procedures under which you have to work, particularly the closeness of the tracks here and the ability to be working while train systems are still running, makes that extremely difficult.
(Mr Spellar) That is what my advice is, and I am sure that those train companies who are being affected by this would have been pressing for this very strongly if they had not been convinced of the argument that closure, either over weekends or for a block period, was required. After all, this is the sort of difficulty we face on motorways as well, in terms of how we do repairs.
(Mr Spellar) The Highways Agency is doing that and you are now drawing attention to some of the underlying problems, as I said, with Railtrack. Notwithstanding that there is still a requirement for closure either at weekends or on a completed block.
(Mr Spellar) The rail companies are, in fact, working with the SRA doing a considerable amount on that; in pretty well all of the franchises there are a lot of drivers in training, there has been an extensive recruitment campaign, and driver shortages are certainly reducing as reasons for delays.
(Mr Spellar) That might be regarded as a restraint on the ability of the drivers themselves to move between one company and another, but quite apart from that the key issue is to ensure that we have sufficient train drivers and that all franchisees are making sure they are training enough drivers to meet their requirements, and a number of them had not. In some cases indeed, after privatisation, some had as I recall laid off train drivers.
(Mr Spellar) Standardisation and uniformity of what?
(Mr Spellar) I am not aware --
(Mr Spellar) But after the HSE have put in improvements then we will be seeing, even if it is not consistency because they are dealing with different groups, adequate training of drivers so they meet the standards. That is quite different, of course, from the question of national rates and conditions and standardised rates and conditions, which is a quite separate issue.
(Mr Spellar) I very much take that on board and it is quite interesting that, if one looks at public perceptions of different rail companies and then you compare with the objective reliability, very often the public's perception of some companies is much better and one of the key factors may be that those companies give much better information so that even if people are delayed they have a better view.
Andrew Bennett: What are you doing about it?
(Mr Spellar) Of course, that is an aspiration in both regards!
Chairman: Thank you very much.