MEMORANDUM OF EVIDENCE SUBMITTED ON 30 NOVEMBER 1998 TO THE HOUSE OF

INTRODUCTION

  1. The Piggyback Consortium was formed in 1993 with the aim of securing an increase in the railway loading gauge (the height and width of structure over the track) so that 4 metre high semi-trailers could be carried by train at least between the Channel Tunnel and Scotland.

  2. Railtrack gave oral evidence to the Committee on 18 November 1998 during which it was suggested that creation of the full piggyback loading gauge ("PB gauge") required to meet the Consortium's aspirations was not the best way to serve the market.

  3. This evidence explains why the Consortium believes PB gauge to be necessary to bring about a significant transfer of lorry traffic from the M1, M6 and M25 motorways in particular, and responds to some of the arguments put forward by Railtrack in favour of adopting a smaller loading gauge enhancement.

  4. Until July 1998, Railtrack was an active member of the Piggyback Consortium. It commissioned market studies from Deloitte & Touche Consulting Group which confirmed the conclusion of an earlier study by MDS Transmodal that there was a significant market for high gauge piggyback traffic.

  5. On 25 March 1998, Railtrack published its annual Network Management Statement which said on page 74:

"Through our involvement in the Piggyback Consortium we have taken the lead in developing and investing in the project to enable higher gauge freight to be transported by rail from the Channel Tunnel to London, the Midlands, the North and Scotland. The freight involved could include road trailers, swap bodies and 9 ft 6 in containers. The result would be to transfer up to 400,000 long distance lorry journeys every year from road to rail . . .

"We have now finalised the previous estimates of the capital costs for enhancing the route via London and along the whole of the west Coast Main Line and for developing an alternative for part of the route to bypass London . . .

"The next step is for us to work in parallel with the DETR, ORR and our customers to finalise the funding package. From our discussions to date, we expect part of the funding to be provided by the DETR under its existing mechanisms for encouraging the transfer of freight from road to rail"

  6. All appeared to change in July; since that date, Railtrack has sought to demonstrate that the market for high gauge piggyback is no longer significant and that a lower gauge to accommodate 9 ft 6 in containers on flat rail wagons will satisfy the market better.

  7. The Consortium maintains that Railtrack is confusing two separate markets in order to avoid investing its own money in freight-related infrastructure improvements. This memorandum highlights the paltry share of freight-related investment to date, and suggests reasons to Railtrack's sudden change of policy.

  8. It concludes by outlining means, through Section 17 of the 1993 Railways Act and the regulatory process, to force a gauge upgrade on Railtrack. It also suggests that such unwillingness to take reasonable risk in their investment should be taken into account by the Government when setting the guidance to the SRA and Rail Regulator, and by the Rail Regulator in his current Review of Railtrack's Access Charges.

THE PIGGYBACK CONSORTIUM

  9. Members of the Piggyback Consortium are listed in the appendix. They include customers and customer groups (Road Haulage Association and Freight Transport Association) who collectively are keen to see the introduction of piggyback on rail in the UK, starting with the Channel Tunnel to Glasgow corridor.

WAGONS BUILT AND SERVICES STARTED WITH LOW HEIGHT TRAILERS

  10. Thrall Eurospine wagons are now in service for Parcelforce between London and Glasgow, and Babcock's first MEGA 3 pocket wagon is at present going through its approval process. English Welsh and Scottish Railway has ordered 20 Eurospine wagons from Thrall, each capable of carrying four trailers, and Freightliner has signed a letter of intent to order 110 of Babcock's MEGA 3 wagons. Both wagon designs allow standard width trailers to be carried. These wagons can also carry deep-sea containers and swap bodies. Freightliner has started a Manchester-Tilbury service using the former Charterail wagons, which require trailers with reduced width wheelbases.

  11. All these pioneering piggyback services operate using low height trailers, suitable for tanker traffic (chemicals, etc.), and heavy loads since these are the only ones which can get within the present loading gauge height in the UK.

MARKETS FOR RAIL FREIGHT

Lorry semi-trailers

  12. Among the many markets open to rail freight now, two of the largest are lorry semi-trailers and deep-sea containers.

  13. Lorry semi-trailers carry 74 per cent UK's road freight (measured in tonnes-km in 1997), and the majority of these (about 75 per cent) are built to the largest permissible size to enable them to carry the greatest volume. They also carry 75 per cent of general cargo between the UK and the continent. This preponderance of high-sided lorry semi-trailers is evident on all major motorways.

  14. It is this large market for the highest semi-trailers that piggyback seeks to attract to rail. With the exception of the niche but still significant tank and heavy goods market, which can be carried by rail at present, the customers (logistics service providers and many RHA/FTA members) demand the greatest trailer height to achieve volume. They are not interested in purchasing specialised equipment which carries less volume just to enable it to be carried by rail.

  15. The effective maximum height for trailers engaged on international journeys is 4 m road mode. On rail, with the air springs deflated, this height of trailer plus the rail wagon just fits into PB gauge. It also happens to fit just within the GB+ loading gauge, which is the standard in all parts of Northern Europe and on selected routes between the Channel Tunnel and Italy.

Deep sea containers

  16. Deep-sea containers (boxes) are carried between ports such as Felixstowe, Southampton, Tilbury, and Liverpool to centres of manufacture or consumption. Their height varies, generally between 8 ft 6 in and 9 ft 6 in.

  17. Whereas the 8 ft 6 in boxes are carried today on the main routes in Britain on standard rail flat wagons, the newer 9 ft 6 in high boxes cannot be carried on such wagons within the existing loading gauge.

  18. The 9 ft 6 in boxes now comprise 10 to 15 per cent of the market with this share growing rapidly. If the railways wish keep their market share, let alone increase it, they will have to raise the gauge height to accommodate the 9 ft 6 in high boxes on flat wagons or build special low wagons at extra cost. This new gauge (called here the "9 ft 6 in gauge") is 230 mm (9 in) lower than PB gauge.

ROUTES FOR GAUGE ENHANCEMENT

  19. The main market for piggyback is alongside congested motorways, particularly the M1 and the M6. That is why Railtrack, at the time when it was supporting piggyback, chose the West Coast Main Line for the piggyback upgrade.

  20. The 9 ft 6 in container traffic however needs to access to major deep-sea container ports: Felixstowe, Southampton, Tilbury and Liverpool. This particularly affects the Nuneaton-Peterborough-Felixstowe and Birmingham-Reading-Southampton routes.

  21. Both the PB gauge route from Glasgow to the Channel Tunnel and the 9 ft 6 in gauge for deep-sea containers to ports are described in Railtrack's 1998 Network Management Statement, map page 67.

THE FLAWS IN RAILTRACK'S SOLUTION TO "MEETING MARKET DEMAND"

  22. We understand that Railtrack has argued that a network of 9 ft 6 in gauge routes as described above will be able to capture 90 per cent of the "market". We question which market. If it is the deep-sea container market, that may be correct in the long term, and the proposed upgrade to 9 ft 6 in gauge on these routes is very much to be welcome.

  23. However, such a gauge can probably only cater for less than 20 per cent of the lorry semi-trailer market which, although welcome, is still only a niche in a very much larger market, and on routes which generally follows congested motorways such as the M1 and M6. These routes require PB gauge to make any significant inroad into the lorry semi-trailer market.

  24. Thus, there are two very different markets, with some small overlap. They should each be treated on their own merits, not mixed and confused.

PB GAUGE ENHANCEMENT ON WCML

  25. Railtrack chose the WCML for gauge enhancement, and freight operators have welcomed it since it provides the fastest service and access to more terminals.

Capacity

  26. We believe, however, that Railtrack is now realising that there are severe capacity constraints on the WCML, and that the proposed transmission based signalling, on which the capacity enhancement is based, is unlikely to be fully operational for many years. Experts in the industry have noted that, if all the passenger train demands are met south of Milton Keynes, there will be no capacity at all for freight during the daytime.

  27. Freight operators have asked for the following capacity on the part or all of the WCML for 2008:

Trains per day in each direction	Standard gauge	PB gauge
EWS	100	20
Freightliner	56	10

  Other new operators may also wish to bid for paths.

  28. We therefore have to question whether one of the main reasons for Railtrack's sudden change from full support for PB gauge to outright opposition may not be unrelated to the fact that, if they cannot provide capacity for standard height trains, why spend money on gauge enhancement to increase demand still further?

  29. It also begs the question as to why Railtrack has not considered seriously alternative routes to the crowded southern end of the WCML either for high gauge or standard gauge trains.

Costs

  30. We believe that Railtrack's estimated cost of piggyback upgrade on the WCML is £250 million. This is made up of engineering costs plus compensation costs to other train operators when their trains are delayed by such works:

	Capital cost	Compensation cost
	£ million	£ million
Upgrade two slow tracks	75	27
Upgrade all four tracks (Rugby to Wembley)	132	117
Source: Railtrack December 1997.

  Railtrack says that all four tracks must be upgraded, since their maintenance regime requires nightly closures of one or other pairs of tracks.

  31. Railtrack states that, for construction of the gauge upgrade, it has also allowed for possession (closure) times on WCML south of Rugby of either two tracks closed for 21 months or four tracks closed for up to six months.

  32. The Consortium believes that these figures are grossly inflated and has to agree that possessions for the length of time proposed would be unacceptable to all users of the railways. However, we do not believe that they are necessary to achieve such a gauge upgrade, since there are a number of creative suggestions which could reduce costs and possession times very significantly. We would have expected Railtrack to investigate these fully already in view of the quotes from the Network Management Statement contained in paragraph 5 above. They include:

—  rearrange maintenance possessions so that one slow track is always open. Saving on capital costs about £148 million to be balanced against slightly higher maintenance cost.

—  Upgrade slow lines only and provide diversion for the PB gauge route when WCML slow lines closed via Reading/Oxford/Leamington Spa or Midland Main Line. Likely saving about £100 million.

—  Look at construction methods and capital costs again to minimise costs to freight, for example:

Consider double shield construction method for the nine tunnel bores south of Rugby requiring just six hours possession each night and allowing trains to run in daytime in between, possibly removing 75 per cent of compensation costs, say £80 million.

The total reconstruction of Kilsby Tunnel on fast line south of Rugby is unlikely to be necessary for PB gauge enhancement, although we believe that this may be required anyway because of its poor state of repair. In this case, the costs should not be attributed to PB gauge upgrade. For these reasons, about £30 million could be saved by doing only minor works since clearances are only just out of gauge.

  33. Thus, we believe that Railtrack could, if it wished, find significant savings to bring down the cost, including compensation to train operators during construction, to under £150 million.

FINANCING THE PIGGYBACK GAUGE UPGRADE

  34. The Piggyback Consortium has never believed that the gauge enhancement project could be achieved without government grant, but equally there were strong indications that such a grant would be given sympathetic consideration if an application were made.

  35. So far, Railtrack has neither applied for a Freight Facility/Track Access grant from the DETR, or for a Trans-Europe Network (TEN) fund grant for this project.

  36. Assuming a 50 per cent grant, made up from DETR and TEN, how much might be required from grant sources and Railtrack for the Channel Tunnel to Glasgow PB gauge upgrade to take 400,000 lorries a year off the road?

	Total capital cost including compensation to TOCs	Railtrack share	Grant
	£ million	£ million	£ million
Railtrack's current estimate	250	125	125
Lower, more realistic estimate	150	75	75

  37. If the construction period is five years, that makes Railtrack's annual investment in piggyback between £15 million and £25 million. This might not seem excessive compared with Railtrack's total investment in 1998-99 of £1,450 million. However, it is large compared with Railtrack's investment in freight infrastructure in the current year of £5 million.

  38. Since Railtrack's revenue from freight is about 10 per cent of its total revenue from all train operators, one might expect that 10 per cent of its investment should be in freight infrastructure. This would equate to £145 million per annum.

Summary	£ million
Railtrack's total investment 1998-99	1,450
of which investment in freight infrastructure	5
Investment required from Railtrack for piggyback gauge per annum for five years (assuming 50 per cent grant)	15 to 25
With ratio of passenger to freight revenue of 10 to 1, if investment made in same ratio, Railtrack's annual investment in freight would be	145

  39. Comment has also been made by Railtrack that freight operators should purchase long-term capacity. No doubt Railtrack would like that since they argue that passenger TOCs do just that, but the TOCs are only able to do so because they have a virtually guaranteed revenue from OPRAF. Freight does not, and is in competition with road.

  40. Shippers do not make long term commitments either to the Highways Agency to use the motorways or to ports to help finance new berths. Port authorities or ferry companies assess the market and make their own investment decisions accordingly, taking the commercial risk that the traffic and revenue will be forthcoming when the new facilities open for business.

CONCLUSION

  41. We are uncertain as to what are the real reasons behind Railtrack's sudden rejection of the piggyback gauge upgrade might be.

—  it could be a "misunderstanding" of the two different markets for containers and trailers;

—  it could be a realisation that it cannot provide capacity on the WCML even for the trains which do not require gauge enhancement. If this were the case, then we would expect Railtrack to offer alternative routes for piggyback;

—  it could be unwillingness to invest even moderate sums of money (when put against Railtrack's overall figure) even if it is alongside a substantial grant.

  42. The Consortium awaits with interest a meeting with Railtrack on 8 December where we hope to receive answers to our questions.

  43. Members of the Consortium are also considering seriously the possibility of applying for the DETR grants and for a Network Change order under the Access Conditions, as well as for access for high gauge piggyback under Section 17 of the Railways Act, to force Railtrack to do the work or to allow others into the tracks to do it.

  44. We also hope that the Government will take into account this experience in setting the Objectives, Instructions and Guidance to the shadow Strategic Rail Authority and Guidance to the Rail Regulator, and by the Rail Regulator in his Periodic Review of Railtrack's Access Charges.

  45. In the meantime, we conclude that Railtrack's investment in freight infrastructure last year was derisory. It may increase this year. Sad to say, these problems seem to stem from an apparent lack of interest in freight on Railtrack's part.

  46. If the company were serious about encouraging rail freight, it would see piggyback as an important element in the growth of freight. It would seek solutions to make it happen in the most cost-effective way, as many of its staff were trying to up to last summer, and apply for grants to help fund it, rather than come up with more and more bizarre reasons for not doing it.

29 November 1998