WEDNESDAY 15 NOVEMBER 2000

MR RICHARD BROWN, MR GEORGE MUIR AND MR KEITH LUDEMAN

  440. Can I ask how close we are to achieving through ticketing for one journey involving more than one train operating company?
  (Mr Ludeman) It depends on which part of the network you look at. There are a number of instances, for example, the South East and the London commuter network. The travel card allows you to effectively travel from a lot of different points for one ticket. Throughout the rest of the country there are plenty of examples in PTE areas. If you are referring to inter-availability between train operating companies, there are some examples of that, but we accept we need to do more work on that.

  441. Do you have a view as to whether the provision of maintenance of the track by Railtrack is best performed in-house or by outside consultants?
  (Mr Ludeman) Again, it is early days. I am not a civil engineer and I am not really the best judge—I am not trying to avoid the question, but I do not feel competent enough to answer that question. Clearly, Railtrack will have a view on the best way forward and we will work with Railtrack to develop that solution.

  442. Have you expressed any view to Railtrack about the level of maintenance that they have provided for your franchises?
  (Mr Brown) Yes, we have, Madam Chairman, and we have said that we are concerned about that level of maintenance and particularly the rate of renewals of the track, and we will be looking for that to increase. That does provide a basis for that happening.

  443. Did you point out that the fact that so much had to be renewed all in one go, which has caused you such major difficulty, might indicate to those who are not very sophisticated that Railtrack had not been maintaining the rails at the level to which you would have expected it to do?
  (Mr Brown) I do not think one could possibly argue with that.

  444. I am not asking you to argue with me, Mr Brown. If you want to argue with me we can do that any time you like, I am very good at it, but have you expressed this view to Railtrack?
  (Mr Brown) Yes, we have.
  (Mr Ludeman) We have a great deal of opportunities to meet with Railtrack. I have worked out that with one of my train companies we have met them every week on safety related issues. One of the problems is data and the amount of data we get from Railtrack that is specific to our company. What we tend to get is zonal information that gives us a global position on issues like broken rails, but we are not afforded the opportunity we would like to talk about risk mitigation in dealing with that broken rail programme. What we are asking for in the future is more information from Railtrack about the condition of the network.

  445. You are asking for greater fragmentation of the database?
  (Mr Ludeman) We are certainly asking for more company-related information, which, in the main, we do not get at the moment.

  446. Is not the point of what has gone on in the last few weeks the compensation that you get? What is the split on that, what goes on to the public and what do you keep?
  (Mr Brown) There are several mechanisms. First of all, we get compensation from Railtrack under the track access contracts that we have with them. A significant proportion of that is effectively passed straight through to the SRA under the franchise agreements, penalties and incentives, if you like, for train companies to deliver punctuality. A further significant percentage goes to passenger compensation.

  447. So what percentage is it?
  (Mr Brown) I cannot give you percentages, because it varies enormously from one company to another and one situation to another.

  448. In the past that compensation has been paid out on reducing people's season tickets, it has not been a direct compensation itself, has it?
  (Mr Brown) What has become the practice in a lot of companies is that they effectively declare what is called "a void day" if the travel on that route has been so disrupted that passengers have not enjoyed anything like the service that they should have done. That effectively allows passengers either to extend their season ticket by a day when it would otherwise come up for renewal, or—I think most companies, but I could not categorically say all companies yet—give cash back to those passengers for the lost day. So passengers are increasingly being given the choice.

  449. Is the trigger of compensation to you the same as the trigger of compensation to the passenger?
  (Mr Brown) The trigger of compensation to passengers is the level of service delivered for passengers, whether it is the train company's fault, if you like, to determine what caused the poor service, was it a series of train breakdowns, or was it Railtrack who were at fault? It is not determined by whether we are compensating for Railtrack.

  450. Would the trigger be the same if it were Railtrack's problem?
  (Mr Brown) The trigger is the same.

  451. Is it not a little earner for the train operating companies?
  (Mr Brown) No, because that trigger effectively passes that compensation directly through to passengers.

  452. If I can turn to another matter, does the Government's 10 year plan strike the right balance between public and private sector investment?
  (Mr Brown) We do believe it does when put together with the re-franchising process. We have asked for longer franchises. There are now extensive discussions going on and progress being made with negotiating longer franchises. The fact that the Government is so clearly prepared to put public investment into the railway system thorough the 10 year transport plan, we are quite sure provides the platform so the private sector can then come in with a very substantial investment against the 20 year franchises. I think the two do need to be,and will go forward, hand in hand.

  453. When the private sector put money into an investment, they get a return on their money. What does the public sector get?
  (Mr Brown) What the public sector gets is an expanding railway compared with one which has been relatively static in size for many, many years in terms of passengers carried, and improving the railway in the longer-run so that the hope and the intention is a better financed railway, better able to finance its investment and its own costs within the railway system. But as we all know, railway investment is very long-term and there needs to be a kick start, if you like, to get the sort of investment that I think everybody believes is necessary for going forward.

  454. What if there is a down-turn in the economy, is that investment in the private sector going to take place?
  (Mr Ludeman) The private sector takes a return on its investment, because the way in which the franchises are being structured is to try and mitigate risk. If we take the instance of the down-turn in the economy, the private sector in this instance will take the risk on the revenue reduction, and it might be we lose money. The principle of the PFI deal, which is what a lot of these new franchises are, is that the risk is placed where the individual or the management is seen as best able to manage that risk. So in the instance of, for example, revenue, the argument is that the train operating company is best able to try and mitigate the risk of a down-turn in the economy, whereas the Government, who is not running the company, is not best placed. The deal, if you like, is that we take the return, but we carry the risk. I can assure you, the way in which Sir Alistair Morton has negotiated these franchises, he has achieved some extremely good deals for the Government in those franchises, and there is a lot of risk transfer from Government to the private sector.

  455. When one of these companies that are taking this risk goes belly up, what then?
  (Mr Ludeman) The way in which the SRA try and mitigate that risk to you, the customer, is to ensure that there are enough contracts put in place so that in the event that a train operating company fails, they step in and they go and find another train operating company to take over that job.

  456. What is your opinion of the public investment programme being maintained over the 10 year period?
  (Mr Ludeman) I think, as was said earlier, the mere fact that the public sector is putting so much money into the railways—we very much welcome that—provides a sign to the private sector that there is the confidence in this Government in the railways, and they are very happy to match and, indeed, better the amount of money that the Government put in. The mere fact that the 10 year plan is there, in our view, is a massive achievement by those who have put it together. It has given the private sector the confidence to invest in the railways, and we believe that 10 year plan is deliverable. You will see through the re-franchising process, money come into the railway industry to match that that has been provided by the public sector.

  457. It is a bit ironic, is it not, if you took over all these assets in the first place on the assumption that private industry would be able to raise enough finance to rebuild the railway system, but when it actually comes down to it the taxpayer is still continuing to put very large amounts of money in?
  (Mr Ludeman) In fact, the first time round we put very little money into the franchises.

  Chairman: We had noticed. That had crossed our consciousness.

  458. Do you think there is sufficient money being put into the whole question of rail safety over the next period?
  (Mr Ludeman) Through the various inquiries there will be recommendations for what we suspect to be massive restructuring of the railway safety environment, and the industry is committed to delivering whatever Lord Cullen recommends from those inquiries. Railtrack, the train operating companies, and the ROSCOs, who own the trains, are already investing considerable sums in TPWS and there are some companies that already have that fitted to all of their trains, and in some cases, to all of the track. There has been a lot of accelerated investment in safety since the Ladbroke Grove accident, and a lot of work behind the scenes and investment in driver training and simulators and in other initiatives. I do not see that slackening off, I see that increasing very substantially over the years ahead, because all of us in all of our businesses always place safety first. If you do not run a safe business you have no customers.

  459. My last question is in connection with the delivery of new trains, which, by virtue of what you are saying, is going to start to happen, although there has been a promise for some time now that we were going to get new trains in my patch and we have been waiting two years. One of the reasons for that is that there does not seem to be the investment in getting the train from the manufacturer to running on rails. Do you as an organisation have any concept of how that can be improved, because there is certainly something fundamentally wrong as far as that aspect is concerned?
  (Mr Brown) There clearly is something very wrong with the current position, where substantial numbers of new trains have been ordered, a fair number have been built, but relatively few are yet in reliable service. It is something where there is another working group set up by the Strategic Rail Authority, which we are participating in. I think there will need to be a lot of changes in the way train companies let contracts to train manufacturers, giving them longer to test their trains before they bring them into service, making sure they are more thoroughly tested away from the passenger environment so that we are not testing them in active passenger service, as is frankly happening in a number of areas.

  Mr Donohoe: What is the timescale for this working group, because working groups have this dreadful habit of demanding a long time? I think we really need to take action and there needs to be action now, because there is the investment and I have been told 14 times by Richard Branson that there are new trains coming on the West Coast Mainline. The fact is that we are getting to the point where we do see that there is the investment that is going to bring on to the tracks new trains, yet we have them all sitting in sidings. A working party in itself is not going to change that, is it? What is ATOC doing to make the necessary representations to make sure that the investment is in place, that these trains go straight from the manufacturer on to the tracks and start delivering?