UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 266-i

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Transport Committee

Access to ports

Monday 1 July 2013

Richard Bird, Jim Stewart, Clemence Cheng and Warren Marshall

Chris Welsh, Adam Cunliffe, Lindsay Durham and John Smith

Richard Blyth, Mark Basnett, Mike Ibbotson, Richard Meeks and George Kieffer

Evidence heard in Public Questions 1 - 92

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Oral Evidence

Taken before the Transport Committee

on Monday 1 July 2013

Members present:

Mrs Louise Ellman (Chair)

Sarah Champion

Jim Dobbin

Karen Lumley

Jason McCartney

Karl McCartney

Adrian Sanders

Iain Stewart

Graham Stringer

________________

Examination of Witnesses

Witnesses: Richard Bird, Executive Director, UK Major Ports Group, Jim Stewart, Chairman, British Ports Association, and Chief Executive Officer, Poole Harbour Commissioners, Clemence Cheng, Chief Executive Officer, Hutchison Ports (UK), and Warren Marshall, Group Head of Port Planning, Peel Ports, gave evidence.

Q1 Chair: Good afternoon and welcome to the Transport Select Committee. Would you give your name and the organisation you represent?

Richard Bird: I am Richard Bird, Executive Director of the UK Major Ports Group.

Jim Stewart: I am Jim Stewart, Chief Executive of Poole Harbour Commissioners and representing British Ports Association.

Clemence Cheng: I am Clemence Cheng, the CEO of Hutchison Ports (UK).

Warren Marshall: I am Warren Marshall, the Group Head of Port Planning at Peel Ports Group.

Q2 Chair: Could each of you give us an example of problems that you know about at the moment that are happening currently in relation to access to ports?

Jim Stewart: As I said, I am chief executive of Poole Harbour Commissioners, which manages the port of Poole in Dorset. Certainly we have some port access issues at the moment. Some of those relate to a lack of funding for existing infrastructure. We have two lifting bridges into the port and currently there is a lack of funding to do the maintenance work for one of those bridges. That is something we are working on with the local authorities and the LEP.

Additionally, there is a general issue with Poole, which is common to many other ports in the UK, and that is the infrastructure linking smaller ports to the major national infrastructure. The last five miles down to the port is problematic, and, going forward, that is something we would like to see resolved.

Q3 Chair: Mr Bird, can you give us any examples you have in mind at the moment of problems of access in relation to ports?

Richard Bird: Taking an overview of this-of course I don’t represent a particular port business-the rail connections to ports are an area of success. There has been considerable achievement over the last few years, but, looking ahead, there are also some big challenges. We expect that traffic from ports by container and, for example, biomass, is likely to increase substantially. There are concerns that, unless the investment goes into the rail sector, we will not get the benefits that rail onward transport can provide for those particular commodities.

It is a general point, perhaps particularly underlined in relation to biomass, which is moving into scope very quickly. We don’t yet seem to have structures in place that will enable the investment going in at ports elsewhere to be matched by improvements in the rail system.

Q4 Chair: Mr Marshall, could you give us any thoughts on that?

Warren Marshall: Our biggest issue is the port of Liverpool. As Jim has already mentioned, and this is a reflection of most ports, there is a bottleneck with the final three miles of the journey from the motorway network to the port itself. Liverpool is identified as one of the 10 largest ports in the country, along with the sixth largest airport. We are on the map, as it were, on the strategic national corridors, in terms of being one of the largest ports, but we do feel that it is difficult to overcome the bottleneck. We need national solutions to what is effectively a local problem.

Clemence Cheng: The ports are there to connect the hinterland to the sea. Not only is there rail and road but marine access is also very important. When you look at the overall access to Felixstowe, which is the biggest container port in the country, we welcomed the announcement last week by the Chief Secretary to the Treasury to improve the A14, which is the most important one. There is also rail, which is important as far as access to the port is concerned. In that respect, we need more joined-up thinking in terms of planning the whole access to a port.

On the A14 in particular, although we welcome the announcement, there were some discussions about tolling it. We obviously need to do quite a lot of studies and, going forward, that is something we need to have proper consultation on.

Q5 Chair: What is the significance of the problems you have all identified? Does it lead to a loss of trade or is it an increase in costs and logistics? Would anybody like to comment on that? Mr Bird, from where you are sitting, you are looking at a national picture. Does this sort of problem result in loss of trade in particular areas or is it added costs?

Richard Bird: Imports have to come into the UK, so I think, ultimately, the business will come in. For exports, it is different. If there are poor communications, that can lead to a loss of export business for time-critical markets. As far as imports are concerned, I guess the problem is in relation to lost efficiency and additional cost for the UK economy more widely. Opportunities for growth and development are lost at the same time. The effects are probably in a wider economic sense. Individual ports can lose to other ports if a particular bottleneck is not attended to.

Q6 Chair: Would anybody else like to comment on loss of trade or added costs?

Clemence Cheng: From my perspective, I also look after European business for Hutchison Ports. The UK ports are not just competing within the UK itself but with the likes of Rotterdam. Over many years, we have seen our transhipment business gradually eroding over to Rotterdam, for example. When you look at our growth in the last few years, it is pretty subdued. We talk about coastal feeding for the UK, but Rotterdam can also feed into Bristol and all the other ports that we have in the UK. In the longer term, it has increased the cost for the exporters as well as for the importers. We have to have a very efficient infrastructure to back up trade. The most important thing is for our country to be able to trade out of the current economic difficulties.

Jim Stewart: We have had a recent example of that with a customer that we have been trying to attract to the port. They sent a lorry down to see how long it would take to get to the port. He got a particularly bad day, to be honest, but, on the strength of that, he did not relocate to our port and went to another one that he perceived to have better infrastructure links. It is a critical issue for ports. The geographical position of a port is obviously crucial, but so is the infrastructure. If you don’t have the infrastructure right, then you are going to struggle to win new business, and that has a kick-on to UK plc.

Warren Marshall: What is really important is that ports are part of a wider logistics supply chain sector. Journey time reliability is critical to the hauliers and the retailers. They need to keep the supermarket shelves filled. The port of Heysham in Lancashire is a good example. There is now consent for a link road and funding is allocated, but, to put that into perspective, the journey from the M6 to Heysham, in the absence of a reliable connection, can be anything up to an hour. This is a port that services the Isle of Man, Northern Ireland and the Republic of Ireland. It is all about trade connections, journey time reliability and trying to make sure that goods arrive in time for sailings and don’t miss sailings. That is the best way to put it. With a proper connection, there is a lot more certainty for the port and the supply chain sector.

Q7 Jim Dobbin: My constituency is midway between the ports of Hull and Liverpool on that motorway system. I, therefore, have an interest in rail freight. I would be interested in the panel’s view on that. How much ability is there to increase rail freight from the ports? What would you and the Government need to do to enable that to happen?

Richard Bird: As I said, there has been impressive growth of rail freight to and from ports over the last 10 years. For some traffic such as coal, rail is the only viable means of transport. There has been a very substantial increase in the proportion carried by rail in the container sector, which has had strong long-term growth, although not so much recently. Investment in the network is required to secure further improvement there so that containers can be carried easily. It is partly a gauge issue so that they can fit under tunnels, bridges, through stations and so on. It is also a speed and reliability issue. They benefit from electrification schemes. There is a capacity issue in terms of the length of trains. All these are important issues that need to be addressed.

There is also the other end of the journey. It is very important to have good receiving facilities to take containers by rail. We would hope that over the next 10 to 15 years there is a sustained improvement in all those areas. It will require money, but this is good remunerative business for the rail operators. I think there is enthusiasm for putting the money in. Clearly, this has to be judged against other competing priorities for the rail system.

Clemence Cheng: Speaking from our experience, when you look at the throughput at Felixstowe, about 28% of that goes by rail, 3% by coastal feeder and 69% by road. We only had one rail service from Felixstowe to the midlands 10 years ago, but today we have 10. Over 50% of the containers going out from Felixstowe to the west midlands are going by rail. We have been making a continuous improvement to our facilities. At the same time, working with Network Rail, we have managed to clear quite a lot of the bottlenecks in the system, but there is more work to be done on that. For example, we recently opened a new rail terminal, and that will allow us to increase the length of a train from 24 to 30 wagons. Rail is a business where you need scale. The more you can put on one train, the more economical it is. From that perspective, the infrastructure needs to be able to take these bigger trains. At the moment there is not a sufficient diversionary route for these trains to go on. On that basis, even though we can handle longer trains, the system cannot really cope with that. That is a very important point to note.

Q8 Jim Dobbin: On this issue again, are there sufficient interchange facilities around the country to aid change from ports to rail?

Clemence Cheng: We have 29 trains going in and 29 trains going out at the moment. To push for the 30th train, we have just allocated one additional train. The problem that we face is that we are fighting with passenger capacity. When it comes to capacity utilisation, precedence is always given to passenger trains. We understand that. We need to find a cleverer way to deal with it. As you say, we need more interchanges. The more resilience we can build into the system, the better it is.

For example, one point to note is that the line from Felixstowe out to Ipswich is still not electrified. If we electrified that particular portion, it would allow the more efficient use of trains to go down the North London Loop for the West Coast Main Line.

Richard Bird: If I could follow that point up specifically on the interchanges, there have been quite significant planning issues for one or two interchanges. This is probably an area where a national policy statement for national networks could be very helpful. The siting of the interchange has to be market-driven, but the Government still have a role, in a sense, in seeing how that fits into a coherent network. That is an area where we would see there being a need for some improvement. The present arrangements are not ideal and planning delays are a significant issue.

Q9 Jim Dobbin: My next point is on the issue of the planning process and how that helps or doesn’t help ports and rail freight. As we understand it, it is based on a five-year control period. We wondered whether that was helpful to the ports. Should there be some very similar planning legislation to that which applies for roads for ports and rail freight?

Chair: Are the five-year planning periods helpful or not?

Warren Marshall: We have touched on this already. Whereas the national policy statement around networks was just going to be about road and rail, I think that it should be more all-encompassing. Instead of being just road and rail-i.e. terrestrial access-it should also cover other forms of transport, such as coastal shipping, inland waterways and strategic rail freight interchanges. At the moment, there is a vacuum where certain types of transport do not get any coverage at all. With other sectors such road and rail, a national policy statement is expected.

In terms of your question about planning, most of the major port projects are already consented under the previous planning regime. I don’t think any of the port operators can speak with any great knowledge as to how the new system is shaping up, other than to say that the new system is very much predicated on the localism agenda. Whereas in the past there was an overarching regional policy or more direct guidance to port operators and promoters of schemes, the way forward now is around localism. That brings its own challenges when you are trying to plan for regional and national projects and when you have to deal with things at a very local level.

Q10 Chair: The question is about rail. Is the five-year planning period helpful?

Clemence Cheng: Yes. From the point of view of certainty of funding, it is quite useful. The high level output specification for 2014-19 has set out certain projects. We feel that the most important aspect is Network Rail appointing a freight director, which has allowed a lot of the schemes to go ahead, whereas, before, we could negotiate with the local Network Rail director, but then further down the track it isn’t gauge cleared. Certainly, that appointment itself is probably quite important in that respect.

Richard Bird: There is always an argument about the ideal length of period. Ideally, one would want more than five years. On the other hand, the downside is that the world changes increasingly quickly. There is also a risk that funding arrangements may change during that period and a 10-year plan turns out to be a four or five-year plan.

I tend to agree that five years is probably about the best that we can go for at the moment. I should say that rail has some advantages over road in this respect. The planning and financing arrangements are a bit more secure. If we had an equivalent for roads, that would be an improvement. Indeed, the Chief Secretary’s recent statements, moving the funding up to 2020, may be quite helpful in that regard. We would certainly want to see road catching up with rail.

Jim Stewart: Two thirds of freight is currently moved by road. Obviously, there are improvements that should be made to the rail structure. However, there are certain types of cargo that will never translate across to rail. From my perspective, road access is much more important than improvements on the rail network.

Q11 Iain Stewart: Before I come on to the main question I wanted to ask, I have one supplementary on rail freight. Clearly, there is an issue with rail infrastructure capacity. Where freight trains are competing against passenger services for slots on the main lines, do you feel that rail freight gets a fair bite of the cherry, or are you always the poor relation to passenger services?

Clemence Cheng: I think we are poor relations. That is certainly our feeling.

Q12 Iain Stewart: Do you have any suggestions about who should regulate the different demands better? Is that for the Department for Transport or Network Rail?

Clemence Cheng: I would imagine Network Rail would be a good point of contact first in that respect.

Richard Bird: There is a slight danger of the situation getting less satisfactory if there is a closer link between the infrastructure and passenger rail operating companies, which is another direction of travel for the rail sector at the moment. At least we have Network Rail, which does give increasing priority to freight, although when the crunch comes it tends to be passenger services that get priority. If we had a very close tie-up between the infrastructure and rail operating companies, then there is a risk that freight will lose out. Most freight journeys go across two or three different rail operating company domains, if I can put it that way. Therefore, a system that is more divided up on the basis of rail operating companies could be more difficult for the freight sector to manage. We would very much hope that the interests of freight are taken into account in the development of those discussions.

Q13 Iain Stewart: My main question was to pick up on a comment Mr Cheng made in his introductory comments. That relates to the danger of the UK losing shipping trade to the continent, and particularly Rotterdam, as international maritime economics change and ships get much larger. Is the UK’s competitive danger a function of the surface access, or is there a capacity issue in how much of that very large volume freight we can handle, notwithstanding the developments at Felixstowe, London Gateway and Liverpool? Is there a capacity issue at the ports as well as surface access?

Clemence Cheng: It is one of economics. When you think about it, the capacity can be put on. The planning regime that we have in this country is pretty difficult and lengthy. When I go to my board and ask for funding for expansion, if I say to them that it is going to be another five or six years before we start to have some certainty in relation to approval and so on, it is quite difficult to get that. If we do not develop our port infrastructure faster, certainly it will go across to the continental ports. They will feed back either through the short sea route or they will use the Eurotunnel to feed some cargo back. The market will always find the cheapest way to bring the cargo back to this country. The consequence of that, going forward, is loss of jobs and expertise.

Q14 Iain Stewart: Forgive me if I wasn’t entirely clear in my question. If the surface access was optimal to ports and there were not road or rail issues, will we have sufficient capacity at our main ports to handle the volume of cargo that would be coming in and out? Are we still going to have a capacity constraint?

Clemence Cheng: I do not believe that we will have any capacity constraint in the next few years with all the development going on in Felixstowe, Southampton and Thames Gateway.

Q15 Iain Stewart: Is that view shared by the rest of the panel?

Jim Stewart: I would add to that. There are so many planning hurdles. When you spot an opportunity in the market, you then have to get involved in the planning process right at the beginning. To see it from start to finish can easily take seven years and cost an awful lot of money during that period, when you are dealing with issues such as the Habitats Directive and doing environmental impact assessments. I know these things are important, but the planning hurdles that we have to jump are a significant obstacle to the ports industry. There is a long gap between envisaging a project and completing it.

Q16 Graham Stringer: I would like to follow up on some of Iain’s questions. Just before I do, it is not a current interest but I used to be a director of the Manchester Ship Canal Company, which eventually became a wholly owned subsidiary of Peel. The Committee should know that.

I am still not clear, in your response to Iain Stewart’s questions, whether the issue of trade going to Rotterdam is, as you say in your written evidence, because ships don’t want to make a detour down the west coast of the United Kingdom, or whether it is the size of the berths and our ports can’t take these new larger ships. Which is it?

Clemence Cheng: If I may take this particular question, when you look at the history of how our maritime industry developed and the ports themselves, when we have a lot of transatlantic trade that is where the west coast of the country benefits. When you switch over to the east, the middle east and European trade, the major shipping lanes coming out are through the English channel and then into northern European ports. They will naturally choose somewhere closer to that particular shipping lane.

To give you some numbers, the deviation from that shipping lane to Felixstowe is around 30 miles. If you take that deviation to, say, Liverpool, it is 500 miles, and it costs a lot of money to take one of these very big container vessels up the west coast. On that basis it is, again, coming back to the economics itself.

Warren Marshall: On that point, for the avoidance of doubt, with the widened Panama canal, which is due to open by 2015, and what Clemence has articulated in terms of how Liverpool used to prosper, we have suffered over the years because ship size has got bigger and Liverpool can’t accommodate bigger vessels. In answer to your question, I don’t think you got a straight answer, but in terms of the capacity within the UK there are at least six deep-sea container ports either being built or consented. In answer to your question, there is sufficient capacity around the coastline to accommodate the larger deep-sea container vessels. The issue then is which port is closest to where the cargo is coming from. Clemence and I will probably politely agree to disagree. Our business model for Liverpool is predicated on trade coming through the Panama canal into Liverpool.

Q17 Graham Stringer: I would like to ask Mr Marshall a question as well. What Mr Cheng is saying is that, whatever surface transport we put into our northern ports, and however good or large the facilities are, ships are not going to bypass Rotterdam because it is a 500-mile journey and you have to put a lot of petrol in the tank to get round the coast. In a sense, it does not matter how good the facilities are for trade-it is going to Rotterdam. Is that a fair representation of what you are saying?

Clemence Cheng: That is not quite correct. The deep-water vessels will call at one port in the UK. They will obviously call at Rotterdam. They will make three or four calls in Europe-maybe a couple of ports in continental Europe. But if they have a choice, they will always make one UK call. You want to make sure that they do call in the UK and don’t bring all their cargo to Rotterdam. On that basis, the east coast is closer to the main shipping lane.

Q18 Graham Stringer: That brings me to a point that Mr Marshall made in Peel’s written evidence, which was that you believe there is a hidden or artificial subsidy going into the southern coast because they get more investment in the surface transport infrastructure. I think that is what the written evidence says. It is a bold statement in the written evidence, but can you put numbers on it?

Warren Marshall: When we previously appeared here under the remit of the Government’s port policy, we made the comment that the Government’s policy is to let the ports sector decide where and when to invest. We fully agree with that approach, but the implication of having better road and rail connections to your port basically gives you a competitive advantage over one of your other ports in the UK. The principle is that you can have all the best port facilities around the coastline, but if your surface access is non-existent you clearly can’t do much about that.

On your question about proportions, I am happy to follow this up separately with the Committee in terms of numbers-

Q19 Chair: No; this is where you follow it up.

Warren Marshall: Okay. When we previously appeared there was a suggestion of investment in the north-west. There was a project called the Olive Mount Chord into Liverpool. It was circa £5 million worth of rail investment. When we added up all the investment in the control period at that time, it was in the hundreds of millions of pounds into southern ports. It was not even a 50:50 split. It was heavily geared towards greater south-eastern ports.

Q20 Graham Stringer: That is helpful. What difference would it make if the motorway system was completed into Liverpool Docks? How would that change your business? How would it change the trade?

Warren Marshall: It would make a massive difference. We are investing in the deep-water terminal. We have a motorway network three miles away. We have a bottleneck. This will basically make our business case a lot more robust and will enable us to expand the port with more jobs and investment. It will enable the north-west to compete.

Q21 Graham Stringer: We have talked about competition between continental ports and United Kingdom ports. Most of our ports are owned by private businesses and run on a commercial basis. Most of the European ports are owned by the local authorities or the Governments. What changes do you fear, if any, in the proposed European legislation on ports?

Richard Bird: We are worried that it will work particularly to our disadvantage. The UK port model is different from the standard continental model. As you have said, the large continental ports tend to be public bodies of some sort or other. In the UK, most of our major ports are privately owned. We have been very successful in acquiring investment, despite the problems to which my colleagues have referred. We are worried that this will be put at risk. For example, if the regulation that has just been published went through as drafted, there would be some involvement, or at worst interference, in commercial pricing negotiations between ports and their customers. I know this is an issue that also worries our shipping colleagues.

There would also be a large number of additional procedures to go through when contracts for port services were being tendered. There would be an additional regulatory body established for ports in the UK. For all these reasons we are very concerned about this proposal. We very much hope that it will be withdrawn-this is precedented-or, if not, very substantially amended so that there is no constraint on UK ports.

Q22 Jason McCartney: My question is probably more relevant to Mr Marshall and Mr Cheng, but, Mr Stewart and Mr Bird, please come in at the end. With reference to the specific ports that you are responsible for, what is your top campaigning transport scheme priority? Which scheme is top of your wish list? How are you campaigning and lobbying for that scheme to happen? Which agencies are you engaging with? Are you aware of which agencies you have to engage with?

The reason I am asking is because I am a Yorkshire MP from Huddersfield way. A group of cross-party MPs campaigned very effectively to get the Northern Hub Network Rail project to go ahead. It was a £550 million scheme. We worked together cross-party and that was almost shovel ready to go. I think Government are listening at the moment and want shovel-ready schemes ready to go ahead. Mr Marshall first, please.

Warren Marshall: Our number one priority is access to the port of Liverpool for the reasons I have mentioned.

Q23 Jason McCartney: What do you mean by that? Is it rail or road? Do you have a name for that scheme?

Warren Marshall: The scheme is known as Access to the Port of Liverpool. The reason why we don’t have a name-

Jason McCartney: You need a catchy name for it.

Warren Marshall: We need a catchy name.

Jason McCartney: Who is from a marketing company?

Warren Marshall: The problem we have is that there is no scheme on the table or the drawing board. Without a scheme, you can’t lobby for funding.

Q24 Chair: When is there going to be a scheme?

Warren Marshall: There will have to be a scheme.

Q25 Chair: But when?

Warren Marshall: When will there be a scheme? That is a good question. By 2020, we estimate that the local roads will be at such gridlock-

Q26 Chair: But when will there be a scheme? Mr McCartney is asking for a scheme.

Jason McCartney: Say I am the Chancellor. What are you actually asking for?

Warren Marshall: The second part of your question is more pertinent, which is how we are trying to identify and secure a scheme. We have to deal with the local enterprise partnership, the Highways Agency, Network Rail and the local authority. This is part of the challenge we have in Peel Port in trying to cajole all these various agencies together to identify a scheme and then campaign for the funding.

Q27 Jason McCartney: It sounds very piecemeal. Mr Cheng, can you be more specific?

Clemence Cheng: There is a lot of publicity about roads, and the A14 is a big one as far as Felixstowe is concerned. When you consider that only 3% of traffic on that stretch of road is freight coming up from Felixstowe, it is important to us but it is not that important. More important is the rail franchise and the access. We see that there is a great demand to shift more freight from road on to rail.

Q28 Jason McCartney: That is quite general again. What specific scheme do you have in mind and who are you engaging with?

Clemence Cheng: We will be engaging with Network Rail first of all for discussions about, for example, building in more loops, so-called.

Q29 Jason McCartney: This is all very wishy-washy general stuff. What specific scheme do you have?

Clemence Cheng: We have the Felixstowe to Nuneaton gauge cleared.

Jason McCartney: It is not my part of the world.

Clemence Cheng: There is also the East Coast Main Line. There are more diversions that need to be put into place.

Q30 Jason McCartney: Which agencies are you engaging with on this?

Clemence Cheng: At the moment we are discussing it with Network Rail and the Department for Transport.

Q31 Jason McCartney: Mr Stewart, what about you?

Jim Stewart: I mentioned earlier on that there is a maintenance issue with a lifting bridge close to the port. In terms of major schemes, what we would like to see is increased dualling on the A31, which effectively links Dorset back up to the M27. We will then engage with the motorway network in the UK. That is the biggest scheme for us. It is going to cost about £150 million. We are engaging with the Highways Agency and local authorities. The LEP is very aware of that as well as local transport bodies. We are engaging on all fronts. There is an issue of lack of funding. It is all very well having these ambitions-

Q32 Jason McCartney: But where there’s a will there’s a way.

Jim Stewart: We have the ambition. We have to try and find the finance for it now.

Q33 Jason McCartney: Finally, Mr Bird, anything from you?

Richard Bird: I have nothing to add, no. This is an area we leave to our members.

Q34 Karl McCartney: I am following up on my colleague Jason McCartney. I noticed that he referred to himself perhaps as the Chancellor. I will be a step below that and say that, maybe as Secretary of State for Transport, I am aware that recently there has been an announcement by the Department for Transport for funding for particular pinch points. A number of you have mentioned road infrastructure improvements. Were you aware of those? I know we have now delved into the fact that they weren’t actual schemes and they need to be, if you like, shovel ready. My constituency benefited from that. I am sure, if I think about Immingham, that there are various road infrastructure improvements that need to take place there.

Are you all aware of that as an industry, and are you working together cohesively on those particular issues? You talk about 2020, but that is another seven years away. If you are even thinking about getting together to push things through, it is going to be a long while before you see those improvements.

Warren Marshall: To differentiate, the 2020 was a long-term proper infrastructure intervention, but we are working with the Highways Agency on a short-term pinch point programme of about £6 million on the Dunnings Bridge road corridor to the port of Liverpool. We are extremely grateful for the money and the work that the Highways Agency is doing to provide some short-term intervention on this gateway corridor.

Q35 Karl McCartney: Mr Cheng, you mentioned that East Coast moves the rail freight. This is particularly appropriate for me and my Lincoln constituency. There is an awful lot of rail freight going through the centre of our city and cutting the high street in half. What proposals have you made to Network Rail regarding the East Coast and the loops or the electrification of different parts of the line that might improve capacity and where rail freight might go rather than the current paths that it takes, because they are trying to differentiate between all the problems or move the constraints of capacity.

Clemence Cheng: As the Chinese say, you move one step at a time. What we are talking to them about, first, is probably the Felixstowe to Nuneaton stretch. On that basis, there is no specific thing that we are talking to Network Rail about at this stage.

Coming back to the A14, we talk about a shovel-ready project. The announcement last week was for 2016. That is still a few years away from now. We welcome the news that that will now get attention, but it was a stretch of road that, under the previous Government, was shovel ready to go.

Karl McCartney: But had never been done. I thought I would get that little dig in there.

Q36 Chair: Very briefly, do you think that the Government’s guidance is clear on who should pay for infrastructure and getting access to ports? I know there are differences of opinion on who should pay, but my question isn’t so much that but who should be paying for it.

Richard Bird: The simple answer is no. It is also very out of date and very unfair. We very much hope that it will be reconsidered. It was produced in a different era-in 2008. The world has moved on since then. It is very complex. It has never actually been tried in practice, and one of the reasons is that it would impose huge additional constraints and burdens on ports. The concept is wrong. The idea somehow that ports, as well as financing all their own investment, should finance improvements to the road network seems contrary to common sense. It is certainly out of step with what happens in Europe. It would certainly put our ports at a competitive disadvantage. We are very strongly of the view that the DFT needs to reconsider this guidance.

Q37 Chair: Does anybody disagree with that or want to add anything new to it? Does that mean you are all basically in agreement with that?

Jim Stewart: I would endorse that. This particular route is unprecedented anywhere else in Europe. Ports are great drivers for the national economy. If you put these contributions into ports, many of these projects won’t come forward because people won’t be able to afford them.

Chair: Thank you very much to all of you for answering our questions today.

Examination of Witnesses

Witnesses: Chris Welsh, Director of Global and European Policy, Freight Transport Association, Adam Cunliffe, Managing Director, Freightliner, Lindsay Durham, Head of Rail Strategy, Freightliner, and John Smith, Managing Director, GB Railfreight, gave evidence.

Q38 Chair: Good afternoon and welcome to the Transport Select Committee. Would you give your name and organisation, please?

Chris Welsh: I am Chris Welsh, director of global and European policy for the Freight Transport Association.

Adam Cunliffe: I am Adam Cunliffe, managing director, Freightliner Ltd.

Lindsay Durham: I am Lindsay Durham, head of rail strategy, Freightliner Group.

John Smith: I am John Smith, managing director of GB Railfreight.

Q39 Chair: Mr Welsh, could you tell us what the main problems are with road access to UK ports at the moment?

Chris Welsh: The main problems are on some key roads and routes into major ports. Some of those have been mentioned already in the previous session. The A14 has been identified by our members as being in need of upgrade to one of our major ports. In addition to that, as has been previously said, increasingly with regional ports it is the last five miles where they are quite local roads, but they are critical in terms of access to the ports and the wider problems that that causes for congestion.

I have a very detailed list here that I would be happy to give to the Committee. It gives the national and more regional routes where our members throughout the country have identified specific roads that need investment.

Q40 Chair: What are the problems that arise from difficulties in road access specifically? Is trade lost? Is it costs added?

Chris Welsh: It is a mix of things. There are problems caused through local congestion. It raises issues of literally getting access to the ports. There are tailbacks of trucks. Local residents have problems and there are air quality issues. Inevitably, the perception is often that the UK infrastructure, particularly to and from ports, is weak. The perception more broadly is that our infrastructure is not up to it.

Q41 Chair: Can I ask the other panel members what the implications are for your businesses of problems of access to ports, whether it is road or rail?

Lindsay Durham: I can answer specifically on rail because that is what we specialise in. There is a general point that there is a lack of certainty of capacity on some of the key routes, notably the West Coast Main Line and the East Coast Main Line. There has been a lot of growth in passengers and freight, so there is a lack of future capacity on those routes.

On specifics, the branch line between Felixstowe and Ipswich constrains the number of trains that can be moved at the moment out of Felixstowe. There is a different problem at Southampton. There is a lack of a gauge cleared diversionary route, which means that, if there are any engineering works such as the major upgrade at Reading or any problems, we do not have an alternative route. As London Gateway and Tilbury are near each other, we think the big issues there will be capacity, particularly on the West Coast and East Coast Main Line, coming out of that port.

Q42 Chair: Mr Smith, what problems have you identified?

John Smith: From our perspective, for GB Railfreight it mainly relates into how quickly we grow the business and the efficient access to the ports for rail. There are a number of locations. If you consider the ports as our major stations like King’s Cross, there are a number of places that are served by archaic infrastructure-for example, the Felixstowe to Ipswich stretch of railway. If you look at Immingham, where a lot of bulk commodities come through, there are restrictions from a capacity perspective in terms of the signalling that serves that area. That then drives inefficiency into what we do. Unless we are efficient, we don’t make money out of what we do. Efficiency and getting into and out of the ports is key to our ability to invest in rolling stock and to develop the business more.

Q43 Chair: Mr Cunliffe, do you want to add anything?

Adam Cunliffe: I can add many things to that, but I can give you a couple more specifics that are relevant to us at the moment. Your previous panel members referred to a major development on the Thames Gateway. At the moment, we could not run electrified services, if that was competing, for example, with Tilbury, which is six miles up the road, because the branch line to there isn’t electrified. It is turning into a wee bit of an issue for a number of our customers. Thames Port is a similar port but on the other side of the Thames. It is entirely not gauge cleared, so the only way we could operate traffic from that port is through very specialist and very expensive types of wagons and rolling stock to take it into the hinterland. At the moment, we have a number of particularly short-sea type customers rather than on the deep-sea side, who would love to use our services but can only use road and therefore it affects costs because the infrastructure doesn’t exist to allow that to be moved by rail.

Q44 Jim Dobbin: I will stick to the line of questioning that I took with our first panel. Mr Smith has already touched on some of this. How easy would it be to increase rail freight from the ports? What really needs to happen to make that possible?

John Smith: It is important to understand that there are different commodities that rail carries from the ports. The intermodal market, which is deep-sea containers, is very different from the bulk markets in terms of how we might grow. Therefore, there are different restrictions on each of the commodities. With intermodal, we receive some revenue support from the Department for Transport that encourages the growth of containers on to rail. The whole economic model within which that operates is key for the Department for Transport to understand in order to encourage the growth that we need. We compete very hard between ourselves in what we offer the market, but almost certainly help is needed from the Government in terms of additional support, particularly for the intermodal sector.

In the bulk sector, as I have mentioned before, it mainly relates to the efficiency of the infrastructure. Over many years, prior to privatisation, considerable elements of the rail infrastructure were rationalised. Some major interface points such as Doncaster on the East Coast Main Line have been rationalised almost to the point where they can’t cater for the growth of passenger and rail freight that operates through there. It is important to understand those pinch points and for Network Rail to invest in those areas in order that we can then invest to expand our businesses.

Lindsay Durham: I would certainly support John on the importance of the mode shift revenue support grant that he mentioned. It expires in March 2015 and we are very concerned about whether it will be continued. It is revenue spend, with a budget currently of only £19 million a year, but it supports over 60% of containers that move by rail. So it is vital. If it was suddenly to be cut off, it would cause quite a large mode shift to road. It would also have knock-on effects because, if you lose 60% of your support, you are unable to run a train any more. That is really vital.

There has been investment in the rail network, and quite a lot of the key routes are now gauge cleared, which means that you can run what is now becoming a standard 9 ft 6 in high box on a standard rail wagon, which helps the economics of rail. There is still some further investment needed. Some routes are still not gauge cleared. The new challenge is really capacity and finding efficient paths on the network in among the passenger services.

Adam Cunliffe: My two colleagues have said most of what needs to be said. I would add that, in terms of the revenue support grant, it does effectively equalise what we do against road. We pay a track access charge. That helps to equalise what would be an equivalent road tolling charge, if such a thing existed, to allow rail to run on routes particularly to the sites you mentioned. You talked earlier in this session about the growth in Birmingham from one to 10 trains-and about Felixstowe. One of the reasons for that is that the revenue support scheme allows the shorter distance rail flows to compete with road. That is why that growth has been so strong.

The second point is that there is a very broad customer base. I am speaking from a deep-sea and-to an extent-short-sea perspective here. They want to increase what they do by rail. They have an end user. Their own customers want to use rail more and they are looking for us to drive forward the solutions. We have a customer base now that uses rail at a 5% level, which could use a lot more, but does not. There are those who use up to 65% by rail, who overuse rail because they want to sell it, even though it is more expensive than using the road or short-sea alternatives.

Chris Welsh: Echoing a lot of what has previously been said, clearly continued support through the mode shift revenue grant is really quite critical. Confidence that investment in the strategic freight network is going to be delivered, delivering the improvements and efficiency that our colleagues on the more operational side of rail freight have indicated, is important. The other thing is customer perceptions in terms of what rail freight will deliver from a shipper point of view. That means creating, for example, the concept and reality of a 24/7 railway. These days supply chains are operating seven days a week. Where freight cannot move at night, where there is a conflict with improvements on the network or at weekends and that kind of thing, it reduces the flexibility that customers are increasingly seeking.

The other thing is long-term certainty about the pricing of rail freight in the market. We have gone through a six to nine-month process on the review of track access charges. The way that has been handled has caused quite a lot of uncertainty for customers about what the long-term pricing structure for rail freight is going to be.

Q45 Jim Dobbin: Would the strategic creation of more interchanges help the situation as far as rail is concerned?

Chris Welsh: Yes, absolutely. We believe in a market-led system rather than designating where particular interchanges should be. As an association, we have identified the specific regions and parts of the country where it would be most propitious to place an interchange. We think this is quite critical, particularly for intermodal rail freight and the development of new types of traffic rather than the traditional traffic. Again, it is so much linked to some of the issues that were raised in the earlier session to do with the planning process to enable that to be speeded up. We need greater certainty that we can actually deliver these interchanges that are so needed.

Adam Cunliffe: I personally would not quite agree with that. I think there is more capacity at the interchanges than may sometimes be perceived. A number of our major customers do not perceive the inland capacity as an issue. There are currently third-party terminals that I could offer as examples, such as Birmingham, Manchester and the midlands. Indeed, our own terminal network also has capacity within it and is offered to third parties to allow that to grow. There is a danger that we sit here and say there is a huge shortage of terminal capacity, whereas, because of the current economic crisis, we are in the process of restricting what we do through our terminals for the very reason that the volume that existed in 2007 is not coming through those terminals today, despite a growth in market share. That is a reflection of how we perform.

As we discussed, and maybe it is for a separate question, the restrictions are about some of the network issues, getting more volume out of the ports and the ability to run that volume out of the ports, to allow the interchange points to be utilised better and therefore go to the point of investment in the next stage.

Q46 Jim Dobbin: It would be interesting to find out what our next two panellists agree with.

John Smith: I agree a little bit with both-diplomatically. The congestion points tend to be more port-oriented. We tend to view each of the key ports in terms of their capacity and what they can deliver into the country. If you then look into particular geographic areas, it is a bit of a curate’s egg as to whether there are adequate strategic interchanges.

Equally, I would highlight that intermodal is only one portion of rail freight. Bulk commodities are another portion. They do not need interchanges; they are normally delivering either directly to generators or to manufacturers of bulk products. It is important to focus on each individual port to know what it is that they handle-Immingham being coal and moving into biomass-and to make sure that the infrastructure that supports the destination to which they are going is robust. In essence, it is taking a strategic freight corridor from a particular port, because there are not that many, into particular geographic areas for certain commodities and understanding how that infrastructure is being invested in to encourage growth on to rail freight.

Q47 Chair: Ms Durham, did you want to add anything?

Lindsay Durham: No.

Q48 Graham Stringer: Mr Welsh, I was interested in your answer about freight access charges. We had Network Rail before the Committee just before Christmas. We asked them about the consultation and the potential for huge increases in access charges. They pooh-poohed that and said it was just a hypothetical limit.

I would like you to expand on whether you believe that there is a realistic chance of very large increases and what impact the consultation process has had on the freight industry.

Chris Welsh: The recent draft determination that has been released by Network Rail has, in part, responded to industry’s concerns about the level of charging. They have reduced those charges quite considerably, and we are still consulting our members at the moment before we respond to the final determination.

The nature of track access charging is changing somewhat from previous policy, where it has been Government policy to have a charging regime that encourages freight on to rail mainly through marginal cost pricing, but now specific charges are being placed against particular commodities on what the market will bear. It is targeted at a number of commodities.

There is a fear from other commodities that, if this is a long-term shift in policy, which it looks like it is, they are going to have specific freight charges foisted on them. There is that underlying concern that is causing some lack of confidence in the long-term pricing structure.

The other issue has been the very long-winded consultation process. It has been going on, as I say, for at least six months or maybe a bit more. It is the process itself and the way that it has been conducted over that period that has caused a lot of concern among prospective customers about what the charging regime is going to be, especially for those customers who have to make long-term decisions about committing to rail freight and the investments that they themselves would have to make.

Q49 Mr Sanders: I want to come back to rail. If you started with a blank piece of paper and wanted to draw up a rail freight network of tracks, it would probably look very different from the rail network we have today. Has anybody done any work on that to show where you really would want new rail in order to make the network work better for freight?

John Smith: In a small way, yes. There is a strategic fund that Network Rail manages on behalf of the Department for Transport for investment in rail freight issues. That allies itself to the control periods. The first time that took place was within CP4, which we are just coming to the end of. There is another lump of money in CP5, which is circa £200 million to be invested. We all work together with Network Rail to agree with them where that money is best invested in order to create an efficient rail freight system. To be honest, at the level that it is funded you are only ever looking at small construction work that can take place.

Indeed, as we debate with Network Rail how that fund will be allocated for the period for CP5, certainly our wish list is a lot longer in terms of cost than the amount of money available. It will be an interesting debate to find out what is prioritised in those circumstances.

Q50 Mr Sanders: It would be interesting to see what that wish list is, given that we have this HS2 and HS3 multi-billion pound wish list on the table at the moment. If freight is not coming in and saying, "Actually, we need some investment in our side of the network, which in turn could help the passenger network in terms of capacity," maybe you should be publishing that and thinking bigger. You may have to accept that you are not going to get everything you want but maybe thinking bigger in terms of what you could be asking for.

John Smith: That is true. Our market is relatively embryonic. We have all only existed in the private sector for 15 years. How we ally ourselves together and have a joint voice has been developing. The problems we have faced over the charging proposals at the rail regulator table has brought us a lot closer together. Freightliner can comment for themselves, but I feel that that has started to create some momentum around what you are describing.

Lindsay Durham: We certainly lobby the DFT and put our case to them about more investment. We are pleased that investment has been made. A good example of drawing a new line is the one that is being developed from Felixstowe to Nuneaton. That goes cross- country via Ely, Peterborough and Leicester, to give you some idea, instead of all the trains being routed via London, though some of them will still have to come via London. That route, because it was quite rural, needs a lot of major upgrade, which is being done in parts. It has commenced the work, but there is more investment to come. We are not absolutely clear what investment is being made over the next five-year control period. There are various parts like the flyover at Leicester, which we believe to be part of the Midland Main Line electrification scheme, but the details are still to be worked through. Ely is part of another scheme. So all the bits need to be joined together.

Q51 Mr Sanders: You mentioned earlier problems with Reading. Is that because freight has to go through Reading in order to go to the north of England?

Lindsay Durham: Yes.

Q52 Mr Sanders: How could you resolve that with new infrastructure?

Lindsay Durham: If you drew a completely new map, you would just draw straight lines from the ports over the shortest possible route, but that is probably not realistic. The trains from Southampton are routed via Reading and Didcot and then northwards towards Birmingham, which is about the fastest or the shortest rail route from Southampton.

You mentioned HS2 and HS3. Once HS2 is developed, one of the keys going forward is capacity on the West Coast Main Line, which is a key artery for freight. Over 90% of the intermodal trains, which are the fastest growing type of train, go over the West Coast Main Line at some point in their journey. What happens to the West Coast Main Line post-HS2, how that capacity is used and what happens during the interim between HS2 and HS3, when the fast trains will be joining just north of Birmingham, are going to be key issues for capacity for freight. Because HS2 is still over 10 years away, there is potentially a problem in the interim that will prevent growth.

Adam Cunliffe: I do not think I have anything to add to that. There are some easy wins that we have described, such as Felixstowe to Nuneaton, Southampton electrification and the gauge clearance to the north-east and maybe south of the river. Those are going to be your real network advantages as we go forward. On top of that gauge clearance, there is the investment that has already happened.

Q53 Sarah Champion: Ms Durham, in Freightliner’s submission to the Committee it is said that the five-year funding periods for Network Rail are too short to plan investments with assets that have a 30-plus year lifespan. Could you give us some specifics about what the issues are around that?

Lindsay Durham: Yes. There is a good and bad thing about having five years. The bad thing is that, as Chris alluded to, the track access charges that we pay to Network Rail-in lieu of fuel duty for road-are set every five years. There has been quite a traumatic process this time. There was a proposal that they were going to increase by well over 100%. We had to lobby the Office of Rail Regulation, who set the charges, quite hard. They have now made their draft decision and, on average, the increase is about 20% by the end of the five-year period. That five-year period does create a lot of uncertainty, both for ourselves who are investing in locomotives, wagons and terminals, which all last 30-plus years, and also for other investors in the chain. You don’t really get the same uncertainty on road at the moment in terms of setting the charges. That is a big problem. Ideally, we would like a longer term and a stable framework so that we could predict a bit more what our charges were going to be, even if they were not absolutely set.

The railway benefits in terms of investment from having a five-year control period because that is not the case for road at the moment. It creates a bit more certainty in terms of investment. It means it is less vulnerable to short-term cuts. Even so, the infrastructure that Network Rail is investing in lasts 35, 50 or 60 years. Therefore, in an ideal world, you would have a longer control period. I recognise that it is difficult when you have different parties involved at different stages.

John Smith: I would just add to that. We are probably lucky to have a five-year funding programme-just to reach the five years. I think that is a good thing. We do take risks on assets. Most of our asset lives are for 30 years and you have to borrow money to support those assets. Five years clearly does not dovetail into that.

I would seek more certainty and stability in what takes place at each of the control period reviews. It took us somewhat by surprise this time round that our track access charges were deemed to change so much after we had been operating for 15 years, when you would have thought the cost of what we do in terms of damage to track would be clear. What we would seek is stability so that, even if it is reviewed every five years, it is not varying from the norm by much more than 2% or 3%, because that then allows us to have the trust to plan and invest.

Q54 Sarah Champion: I have a general question for the whole panel. Given that you are all working nationally, what has your impression been so far of working with the LEPs and local transport? Specifically, are you clear who has responsibility for decisions?

Chair: Could anybody briefly give us general impressions? I know it is early days for a lot of these organisations.

Lindsay Durham: We have not had a lot of contact with the LEPs. It is quite a difficult relationship between the national companies that are relatively thinly spread and LEPs. I am sure it is difficult for them to have expertise in areas such as rail freight or even freight. It is quite a specialist subject. We have had contact with a couple, but it has been fairly superficial. I think it is difficult.

Q55 Chair: Mr Smith, do you agree with that?

John Smith: I would agree with that. We have not had a great deal of contact.

Q56 Chair: I see that Mr Cunliffe is nodding, so there is general agreement on that.

Chris Welsh: It is very much an emerging situation at the moment.

Chair: It is a new situation; we just wanted to have an impression.

Q57 Iain Stewart: I would like to ask about the likely changes in the UK’s energy generation mix and the sourcing of raw materials in the medium to long term. As far as we can predict, there is going to be a decline in carbon fuels and an increase in renewables and nuclear. Is that likely to be a game changer for rail freight and what you transport round the country?

John Smith: Yes, very much so. In the energy mix for many years-if not hundreds- rail freight has carried coal, which is a considerable part of our portfolio. Its imminent demise is of great concern. When you are carrying a bulk commodity such as coal, you have one single customer who is contracting you with numerous trains over a lengthy period of three to five years. You have a degree of certainty around the assets in which you are investing. That allows you to take more risk in other areas, such as the intermodal market, which tends to be riskier because you are filling trains with a number of customers’ commodities.

In consequence, we are the only carrier of biomass in the country at the moment on behalf of Drax and E.ON. The migration towards biomass, certainly in terms of energy generation, is very important for rail freight. It gives us a commodity that could replace coal as coal-fired power stations diminish or some of them convert to biomass. Consequently, the efficiency of the infrastructure that supports that is hugely important.

If you look at understanding how rail freight is part of the wider economic debate that we have, it is important that Government is joined up from the point of view of energy policy, port policy and rail policy in terms of encouraging how materials such as biomass might be carried, if that is deemed to be the greenest and best way to go.

For me, running a rail freight business, coal is a diminishing market. It is absolutely vital for our survival that biomass replaces it over a period of time in order that we have a volume of work that can support other commodities that we also work with.

Q58 Iain Stewart: What percentage of coal comes through the ports as imports?

John Smith: It is likely to have increased recently because of the demise of Scottish Coal. I don’t know the actual figure.

Adam Cunliffe: It is very high.

Lindsay Durham: It was about 80%, but now it is probably slightly higher. It is probably nearer 90% now with the demise of Scottish Coal.

John Smith: Yes; it is 80% to 85% I would think, at the moment.

Q59 Iain Stewart: If there is going to be a decline in coal that you are transporting from the ports and you might not be able to replace all that with biomass, does that not give you additional capacity for container transportation by rail freight? Does a decline in one give you space to do more of the other?

John Smith: Not really, no.

Adam Cunliffe: It depends where coal runs from, where biomass might or might not run from and where the containers run from. The broad corridors for containers are from the southern ports. It is the London ports such as Tilbury and the Gateways, then Felixstowe on the east coast, and Southampton on the south coast. They are the main throughputs for containers and there is not a great deal of coal demand coming from those ports into power stations, which are typically based in the Yorkshire corridor.

John Smith: Most of the bulk markets are on the east coast north of Hull. They are a different selection of ports. Immingham is one of the biggest bulk ports in the UK, whereas Felixstowe is one of the biggest intermodal ports. They serve different corridors and different markets from a rail perspective. So, no, it is not easily replaced.

Lindsay Durham: Government policy looks as though it is going to encourage biomass at existing coal power stations for the next 10 to 15 years. That is an opportunity for us, but we don’t actually know which ports and power stations exactly will operate. We may have a challenge in working out new routes, but they won’t be the same routes as the intermodal services.

John Smith: From a perspective of efficient capital load, the one good thing about biomass replacing coal is the fact that it uses existing rail freight infrastructure and goes into existing power stations that deal with existing connections to the grid. You would think that the overall economics of that-

Adam Cunliffe: It may mean slightly converting existing rolling stock.

Q60 Iain Stewart: I would like to raise a separate issue to pick up on a comment made by our previous panel of witnesses. It concerns where rail freight has to compete with passenger operators for slots on often congested rail lines. A concern was raised that the development of alliances between Network Rail and the passenger train operating companies might disadvantage rail freight companies. Is that a concern that you share?

Lindsay Durham: It is. There has only been one real alliance at the moment in Wessex. To be fair to them, they have made a real effort to work with rail freight companies in that area. I think that is because they are the first and trying to show that they are willing to work with us.

The bigger risk is around generic demand on the railway. It is good news. It is a good problem to have-that passenger demand and freight demand are growing. When you plan passenger trains, you plan to start a new service on x date and you announce your new timetable. Everything starts on that date, whether the trains are full or not. With a freight train, you work with a customer or customers trying to develop a new service. You will only start running that service when you have sufficient demand for it, so the trains start at ad hoc times of the year. It makes it much harder to get capacity on the timetable graph for freight. We have been working with the rest of the industry, with Network Rail, with the Department for Transport and with the Office of Rail Regulation about developing a concept called strategic freight capacity, which we hope will identify and reserve some capacity for freight on key corridors. That concept has not yet turned into reality, but it will be important for planning growth in the future so that we can give certainty to our customers that we can grow.

Q61 Chair: Could you conclude your thoughts on that because we need to move on?

Lindsay Durham: It is also important for Government because they are investing, so they will want to make sure that they get the benefits from their investment.

Q62 Jason McCartney: I go back to HS2. The Secretary of State for Transport introduced a hybrid Bill last week, particularly emphasising the capacity as opposed to the actual speed. Overall, bearing in mind that we have already talked about lack of capacity on the network, do your organisations and companies see HS2 as a positive thing or money being spent in the wrong area?

Chair: Could I ask you to give answers as briefly as you can?

Chris Welsh: We think it is a positive thing. Through efficiency, it should free up more capacity for rail freight, but there are some dangers that were previously mentioned in ensuring that we can conserve a strategic rail freight network.

Adam Cunliffe: If you are going to spend £43 million, a portion of that would be much better spent helping to develop what was opened at Felixstowe a couple of weeks ago, with the new north rail terminal where most operators, though not all operators, can run 30-wagon trains-

Q63 Chair: Mr Cunliffe, the question is, if HS2 goes ahead, what benefits do you see? Have you been involved in any discussions about how there might be more freight access to existing lines?

Jason McCartney: Would there be any benefits?

Adam Cunliffe: For capacity, yes, but there are other ways of achieving those benefits.

Q64 Chair: But the question is, do you think there will be any benefits?

Adam Cunliffe: Yes.

Lindsay Durham: If we can get the capacity on the West Coast Main Line for freight, yes.

John Smith: Yes. We have lobbied in favour of HS2.

Chair: Thank you all very much for coming and answering our questions.

Examination of Witnesses

Witnesses: Richard Blyth, Head of Policy Practice and Research, Royal Town Planning Institute, Mark Basnett, Executive Director, Liverpool City Region Local Enterprise Partnership, Mike Ibbotson, Transport Policy Manager, Hull City Council, Richard Meeks, Network Development Manager, London Rail, Transport for London, and George Kieffer, Chairman, Haven Gateway Partnership, gave evidence.

Q65 Chair: Good afternoon and welcome to the Transport Select Committee. Would you give your name and organisation, please?

George Kieffer: I am George Kieffer. I am the chairman of the Haven Gateway Partnership. I should also say that I am deputy chair of the Harwich Haven Authority and vice-chair of the South-East Local Enterprise Partnership.

Richard Meeks: I am Richard Meeks from Transport for London.

Mike Ibbotson: I am Mike Ibbotson from Hull city council.

Mark Basnett: I am Mark Basnett, executive director of the Liverpool City Region LEP.

Richard Blyth: I am Richard Blyth from the Royal Town Planning Institute.

Q66 Chair: We are expecting a vote to take place at 6 o’clock. If that happens, that will conclude the meeting, so I would ask you to give your answers as concisely as you can.

Could you each tell me the main problems you see in relation to access to ports, with reference to your own areas, where that is appropriate?

Mark Basnett: If you look at the city region’s principal access point to the port, it is a three-mile stretch of trunk road that leads from the motorway to the port. That stretch of road is also the primary commuter route for a large part of the city region. Whilst local and commuter traffic takes up 90% of that road, 10% is port-related. As the port expands, we are concerned that that will significantly cause inconvenience to local residents and commuters.

Currently, the impact on business and commuters is slower journey times and some of the issues referenced earlier of pollution and so on. There is some congestion that delays freight traffic, which has a negative impact on business competitiveness in the natural hinterland of the port, which is typically about two hours’ drive away. At the moment, that is not excessive. Our concern is more about the future-that it becomes excessive as investment in deep-water facilities bring a significant increase in freight.

Richard Meeks: Our biggest priority is ensuring sufficient capacity in the rail network, in north London in particular, for both passenger and freight services. Mayoral policy supports both rail freight and passenger, and both are subject to fairly enormous growth at the moment. Rail freight services come down from the Haven and Thames ports and have to wind their way through very congested parts of the rail network, with the North London Line and the Gospel Oak to Barking Line. This is primarily intermodal traffic-the container traffic from the ports. That has been forecast to grow at 2.5% for the next 30 years in a recent study by Network Rail. With London Gateway port in particular, the London, Tilbury and Southend Line is looking at an increase from 20 trains a day in both directions up to 110. It is an enormous increase in potential traffic from London Gateway.

There are similar increases from the Haven ports, from Felixstowe, though some of that traffic can go cross-country on the Felixstowe to Nuneaton route that has been described. There is still a lot of growth.

At the same time, passenger demand on the London overground network has more than doubled since TFL took it over in 2007. It has nearly trebled. London’s population is growing, and those lines serve regeneration areas. Passenger and freight demand can only increase. Our big priority in the long term is how to provide sufficient capacity to satisfy both markets.

Mike Ibbotson: In relation to the port of Hull, the problem in terms of rail is the poor line speed, reliability and the opening hours on the railway line, which is closed for long periods overnight. We see electrification as being the main solution to that problem. It is something that is being addressed at the moment. Hull Trains are trying to put forward a package of private funding to supplement the Network Rail money, which has not yet been forthcoming.

In terms of the road network, we welcome the Treasury’s announcement last week on the A63 Castle Street-which this Committee heard about two years ago-but we are still anxiously looking at making sure that that does not stall again. It has stalled three times over the last 20 years and we don’t want it to happen again. We heard the announcement that Danny Alexander was looking at a mechanism to make sure that there was certainty of delivery. We look forward to seeing what that is.

We also want to make sure that that is the correct scheme for the area. There are other objectives as well as access to the port in terms of the city centre, connectivity and severance to development sites, which are very important for jobs in the city.

There are issues about the quality of the trunk road, the landscaping and poor maintenance, which gives a very bad impression for new investors and the million visitors we get through Hull each year.

George Kieffer: I share quite a few of the problems that my colleagues announced, but, specifically around the Haven ports, I would not want to lose sight of the seaward access to ports-channel deepening in particular. We heard that larger vessels are coming on stream. We need to be ready. There is a channel-deepening exercise around the Harwich area. It is going to cost in the order of £70 million. That is a significant investment for the private sector to make.

The other aspect I would focus on is the resilience routes. The A14 has already been mentioned. The A120 is a resilience route for the A14 if an accident blocks the A14 around Cambridge. There are private sector contributions of some significant magnitude available for that of the order of £100 million plus. Clearly, there has to be a mechanism to drive some of these initiatives forward. I would hasten to add that that contribution is not from the port; it is from other developers.

Q67 Chair: Mr Blyth, from your perspective, how do you think that support for access to ports in the UK compares with what happens in other parts of Europe in relation to European competitors? Are there any general issues that members of the panel have not raised that you want to draw to our attention?

Richard Blyth: In our evidence we refer to the difficulty of the national ports policy statement-

Chair: The Committee is suspended and we will come back as soon as we can.

Sitting suspended for a Division in the House.

On resuming-

Q68 Chair: Mr Blyth, could you tell us how you see what is happening in the UK in relation to ports access compared with what is happening with European competitor ports?

Richard Blyth: The point we made in evidence really related to the issues of the national ports planning statement and this notion that you can step away from planning these issues and let the free market function entirely on its own. The difficulty there is that in fact the performance of ports, as we have been hearing, is very much dependent on what is spent on its infrastructure. One issue that does not seem to have been catered for is the question of whether UK ports could function as a way of taking business from the continent, in a fighting back kind of manner. If you are an exporter in Germany, could you not put your goods on a train and export them out of a UK port rather than using a continental port? This idea that somehow we can all function with the Government standing back completely may not be the reality. There may be a big role to play in terms of influencing the way the markets function.

Q69 Chair: Do any of you have views on the current rules on the funding of access to ports and whether port operators should have to pay a contribution to that or the whole of it?

Mark Basnett: Liverpool, which is a privately-owned port, has gone to great lengths to secure the private capital necessary to secure a £350 million investment in new deep-water facilities. That could have a significant advantage and benefit, not just for our city region but in a broad hinterland of two or three hours’ distance as the nearest port for large manufacturers and retailers. Our concern would be that, if you then added the burden of funding road and rail infrastructure on top of that, the private sector would not have invested in that situation if they had that additional burden to bear. That would be our concern, but my experience relates purely to our experience in the city region.

Q70 Chair: Does anybody else want to comment on this issue?

George Kieffer: If one looks at the UK as a competitor to the continental European countries, we have to be aware that, in continental Europe, by and large harbours are publicly owned and the infrastructure is financed by the taxpayer. It is a little bit of a fallacious argument because, ultimately, we all pay as either consumers or taxpayers for the additional costs of the infrastructure. I look specifically at the free port at Riga, which is publicly owned. It brings together municipal and national Government. They plan and deliver the infrastructure there themselves.

Let us take the example of Hutchison Ports, one of our core partners. They own a container terminal in Rotterdam. They themselves have investment decisions to make. Do they invest in Felixstowe or Thamesport in the UK, or do they invest in Rotterdam? It could damage UK competitiveness. It is not a question of Felixstowe competing with Liverpool or anything of that nature.

Q71 Jim Dobbin: Have the panel any concerns about the level of funding that is available to the local transport boards? Have you spoken about or discussed this with the Government?

George Kieffer: The south-east local transport board is coterminous with the south-east local enterprise partnership. We have been allocated funding of £98 million plus or minus 30%, which means the envelope is from about £66 million to £122 million. That is quite a wide envelope. Interestingly enough, we have gone through the first prioritisation and there are a number of freight-related projects in there, including secure lorry parking facilities in Kent. The board is taking that on. However, the local transport board does not have responsibility for the Highways Agency for national trunk roads, for instance. At the moment, there is a lack of integration between the Highways Agency and the local transport boards.

Q72 Chair: Mr Ibbotson, I think you raised an issue on this in your written evidence. Can you tell us more?

Mike Ibbotson: Did I? In the Humber, things have probably moved on a little bit now. We are in a position where we are due, like yourselves, to get an allocation through the local transport board of about £22 million plus or minus 30%.

Q73 Chair: When you said "like yourselves," who are you referring to? Our records don’t show people pointing. Who are you referring to?

Mike Ibbotson: Mr Kieffer-the Haven ports. That allocation is allocated on the basis of population. In common with Mr Kieffer and the Haven ports, the issue then is that it is not enough money to address the major infrastructure blockages. We would still expect the Highways Agency and Network Rail to pick up those.

Richard Meeks: I think we should recognise that the Government have invested really rather heavily in the strategic freight network, both through the control periods-the five-year funding process-and the high-level output specifications, but also separately through the spending reviews, the Budgets and the autumn statements. Last week they announced the electrification of the Gospel Oak to Barking Line, which is of huge strategic importance to rail freight. Of course we would like more funding, but I think we should recognise the amount that the Government are providing.

Q74 Jim Dobbin: Have you discussed any of this with the Government?

Richard Meeks: We discuss funding continuously with the Government; a day never goes by.

Q75 Chair: With what result?

Richard Meeks: Partly things like the electrification of the Gospel Oak to Barking Line. That is something for which we have been lobbying for years and years. TFL is making a contribution of £25 million towards that, and it got announced last week. We think it is a direct consequence of our efforts.

Q76 Iain Stewart: I would like to ask about the scope for expanding coastal shipping as a way of increasing the onward distribution of cargo into the UK. How big an opportunity do you see there is for coastal shipping, particularly given the changing demand of the logistics network, with online shopping requiring a much faster turn-round of goods? Do you see it as a huge prospect for coastal shipping?

Mark Basnett: We see a big opportunity for coastal shipping. It provides a very carbon-efficient way of moving goods to and from centres of population. If you imagine a coastal network of ports serving populations, certainly a move to internet retailing, as you have referenced, means that goods need to be close to consumers to service that need. We have seen a significant increase in the last year or two in additional coastal feeders coming from the main hub ports of Southampton and Felixstowe into Liverpool directly to serve the large population that Liverpool is closest to. It saves significant journey time by road. It takes longer, but it is more cost-efficient and a lot more carbon-efficient to move goods in that way.

George Kieffer: I would agree with that. In the east of England region we are operating a low-carbon freight dividend, which is a European regional development funded programme. It is worth about £3.8 million. In effect, it gives grants to SMEs to make the modal shift from road to either rail or short-sea shipping. There is a feeder service coming out of Felixstowe operated by Unifeeder. The key criteria of success of those are the certainty of the service operating and the certainty of delivery.

Richard Blyth: I would comment about the way in which the seas are being planned. There is a new body called the Maritime Management Organisation that is rolling out a series of marine plans. One of the questions in relation to coastal shipping is to make sure that the right balance is struck between, for example, areas of sea preservation and species, and also sea access to ports, which has been raised once or twice this afternoon.

Q77 Iain Stewart: Very broadly, the figures I have show that about 10% of cargo is distributed by coastal shipping. On a general scale, how do you see that changing? Could it double or triple?

Mark Basnett: I am probably not equipped to say. Our experience is that it is increasing, but the port of Liverpool in particular has relied on coastal or transhipments because it has not had deep-water facilities. We have seen an increase in coastal shipping. Given the trends in the industry, I think we are going to continue to see that coastal shipping increase as well as, for Liverpool, securing deep-water vessels in addition to that. We don’t see it completely replacing coastal shipping. Quite the contrary-we see it creating an opportunity to do coastal shipping from Liverpool and feeding outwards into other ports in the vicinity.

Mike Ibbotson: I would like to register that, in terms of the port of Hull, most of our cargoes are bulk cargoes, which come in and go straight to an individual definite end point within the country, like a power station or some such ultimate destination. We do not see much scope there for any double handling or moving stuff around the coast. It is something we would welcome for other ports. From a sustainability point of view, it would seem like a good idea.

Q78 Iain Stewart: Other than the scheme that Mr Kieffer referred to, is there anything specific that you think the Department for Transport could do to encourage it?

George Kieffer: The Department for Transport has the mode shift revenue support scheme, which operates for both rail and coastal shipping but tends to be available only to the larger companies. Ours is specifically restricted to SMEs.

Q79 Jason McCartney: Just before I ask my question, I would point out that I went to the National Coal Mining Museum in Wakefield last week, which is my adjoining constituency. They have just opened an exhibition on the transfer 200 years ago of coal from the north-east down the Thames into London. It used to take three weeks, by the way, so, hopefully, it will be a little bit quicker than that these days.

Our session started this afternoon with a number of representatives from companies. I asked them about the one transport scheme that they are campaigning for that will increase the access and competitiveness of their ports. There is a bit of overlap in terms of areas with some of you gentlemen. I would like to start off with Mr Kieffer and go along the line. What is the one transport scheme that you think would massively increase connectivity access to a port? I know some of you have specific areas and some of you cover the whole country. What is that scheme, what is it called and what are you doing to campaign on that?

George Kieffer: It is easy to answer. If I am only allowed to choose one, it would be the rail scheme, but in two parts. It is the Felixstowe to Nuneaton line, fully electrified, gauge cleared and crossing over at Leicester, and the North London Loop Line, which will be key not just for the port of Felixstowe but also for London Gateway.

Q80 Jason McCartney: I have got to snap on the first bit of that.

George Kieffer: We are working closely with the local transport board, Network Rail and others on promoting those schemes. As Mr Meeks has said, we have had some success on at least the Gospel Oak to Barking Line.

Q81 Jason McCartney: Mr Meeks, would you please re-emphasise what you said. You have mentioned a couple of schemes, but what would be your top priority, if you could have one?

Richard Meeks: Our biggest concern at the moment is the link between High Speed 2 and High Speed 1. It happens in the Camden Road area where the North London Line turns right and freight services carry on over Camden Road Viaduct to reach the West Coast Main Line.

Q82 Jason McCartney: Does that scheme have a name?

Richard Meeks: It is called the HS2-HS1 Link. What is being proposed at the moment by HS2 Ltd is not fit for purpose in TFL’s view. We are very concerned that it will actually take away freight and passenger capacity from the current situation, and most certainly not allow for growth. This is in the context of enormous forecast growth in both passenger and freight services. We very strongly believe that the opportunity should be taken to put the brakes on the link at the moment and do it properly at some point in the future rather than the currently proposed scheme. We are actively campaigning on this point and joining forces with Network Rail.

Mike Ibbotson: If you had asked me a week ago, I would have said the A63 Castle Street, but I will leave that one for the moment. It is electrification between the East Coast Main Line and the port of Hull. This is a scheme on which Network Rail has already done a cost-benefit analysis and a business case. It gave a healthy business case, but, unfortunately, the Government did not see fit to announce it when they announced the rest of the TransPennine route between Manchester, York and Selby. It is a relatively modest scheme at about £77 million. We have a private company now, First Hull Trains, which is an open-access operator and wants to put in a significant amount of money, although it has not told us exactly how much. We also have Network Rail, which is due to spend money on signalling and line speed in CP5. We have a very modest cost of about £3 million to get full gauge clearance. There are a couple of bridge schemes in there.

If you throw them all in together, you should get a very healthy business case, and that is something we are progressing. We have already lobbied the Secretary of State. He came to Hull a couple of weeks ago, and we are reasonably confident that discussions are ongoing. We hope to put a combined business case together later this summer.

Q83 Jason McCartney: It is good news on the Humber Bridge tolls. Mr Basnett?

Mark Basnett: We have identified four key areas that need to be addressed. I know you asked for one. The priority among those four has to be the highway access. I referred to the trunk road earlier as being the key point of connectivity.

Q84 Jason McCartney: Does that scheme have a name?

Mark Basnett: It doesn’t have a name.

Jason McCartney: We were discussing this an hour-and-a-half ago.

Q85 Chair: Do you think you could find a name for it so that we know what you are talking about?

Jason McCartney: Access to Liverpool is what I wrote down.

Mark Basnett: Access to Liverpool is as good as any to the port of Liverpool. What have we done about it? We have made that a priority. We have scoped a TEN-T bid for European funding, which all partners have bought into. It is a strategic priority for the whole of the city region; everyone acknowledges that. That bid is awaiting approval from the EU. That will fund the detailed technical and financial appraisal of the options for that scheme. There are a number of local sensitivities, as there are obviously with major road schemes. It is of absolute immediate strategic importance. The longer-term issues are around better use of rail and the canal, but the first thing that comes into view in our area is this road access. It is primarily that main road, but there are also some adjoining roads to the port.

Richard Blyth: I am not in a position to favour a particular place. My plea is that, in any of the evaluations of these schemes and when the bids are considered, the whole range of holistic benefits are thought about. We know as a country that it is really important to get access to housing and employment land. In fact, parts of the country are crying out for access to housing land. Housing developers can’t afford to pay for it largely themselves, so I would simply ask that, in the evaluation of access to ports schemes, the full range of benefits that may accrue from those schemes to a wide range of issues within that area are added on when the evaluations are made.

Q86 Chair: The ports and logistics companies have told us that the current planning process is unduly long and complex. Do you think that can be changed in any way without trampling on the rights of local home owners? Does anybody have any views on that?

Richard Blyth: We have a new process for the largest ports developments. I checked on the planning inspectorate website today, and two port-related proposals have tried to use it. One has been withdrawn, and the other one, which is in the Hull area, is awaiting a decision. Somewhat worryingly, the Secretary of State has asked for longer to make the decision than he is officially supposed to have, but I would expect that, even so, a decision will be fairly quick. The situation was amended in 2008 in relation to major infrastructure, but it is still a bit untried. The other risk to promoters of proposals that way is that, although your rear-end process is very specifically set out in time scales, albeit that the Secretary of State can extend them, the onus on a promoter to get a scheme to the position where it can be accepted is very great in terms of pre-application and discussion with a community. It is a big process. That is quite an imposition that any promoter will have to take on board and consider seriously.

Q87 Chair: Are you saying that you don’t think it can be changed?

Richard Blyth: It was changed in 2008.

Q88 Chair: Yes, but I am talking about the current situation.

Richard Blyth: What-further changed again?

Chair: Yes.

Richard Blyth: That is not something I have evaluated recently. One of the things that worries us in planning generally as a profession is that too many changes to the systems have transactional and frictional costs down the line, which may sometimes be underestimated when they seem a good idea at the time.

Q89 Chair: Are there any other views on this issue?

George Kieffer: The planning system is still expensive and overlong. I looked at the most recent planning applications by the port of Felixstowe, which took 20 months for the Secretary of State to determine. He remitted them to public inquiry, whereupon that particular planning application was withdrawn. It clearly represents constraints.

Q90 Chair: Do any of you have views on how the current arrangements are now working with local authorities, local enterprise partnerships and transport boards with regard to strategic decision making in relation to ports? It is early days and you all represent relatively new organisations, apart from Mr Basnett, who represents a local enterprise partnership-in fact in a slightly different category. I will still ask him for his view. Does anybody else want to make any comment on how those structures are working in relation to strategic planning, but not referring to very localised decision making? It is strategic planning, access to finance and developing a strategy for port development.

George Kieffer: Having been a board member and deputy chairman of the East of England Development Agency and now on the local enterprise partnership for the south-east, I must confess that the local enterprise partnerships do not have quite the same resources that the regional development agencies had. While EEDA had developed a very good understanding of the ports and logistics sector, that is not as yet the case with the local enterprise partnerships certainly around our area.

Q91 Chair: Does anybody else want to comment on this issue?

Richard Blyth: It is a speculation, but the announcements on 27 June in relation to national infrastructure investment were that, the more an area demonstrated strategic co-operation, the more money it was likely to get. Sometimes nothing concentrates the mind more than the prospect of funding, so I am optimistic that that will work.

Q92 Chair: Mr Basnett, do you wish to comment on this?

Mark Basnett: Yes, but I would preface what I say by pointing out that I do represent a local enterprise partnership so I perhaps have a particular view. We have established a local transport body with the Mayor of Liverpool, five city region cabinet leaders and the chair of the LEP representing the private sector. That has gone through a rigorous process of prioritising the spend of the funding to which we have access, which is £35 million in this first wave. The DFT has been very pleased with the prioritisation process that we have put in place for the use of that money, and we are confident that that puts us in a good position for future rounds. That said, the situation across the UK is very varied. We are quite unusual as a LEP in being as well constituted as we are.

Chair: Thank you very much for coming and answering our questions. I am sorry you were kept so late.

Prepared 5th July 2013