TUESDAY 12 DECEMBER 2000
_________
Members present:
Mrs Gwyneth Dunwoody, in the Chair
Mr Andrew F Bennett
Mr Brian H Donohoe
Mrs Teresa Gorman
Mr Stephen Ladyman
Miss Anne McIntosh
Mr Bill O'Brien
Mr Bill Olner
Mr George Stevenson
_________
EXAMINATION OF WITNESSES
RT HON LORD MACDONALD OF TRADESTON, CBE, a Member of the House of Lords,
Minister for Transport, and MR BOB LINNARD, Director, Railways
Directorate, Department of the Environment, Transport and the
Regions, examined.
Chairman
947. Good afternoon, my Lord. Thank you for joining us today. We
know you are very busy, even though you do not think there is a lot going on!
Would you be kind enough to identify yourself.
(Lord Macdonald of Tradeston) Madam Chairman, my name is Gus Macdonald
and I am Minister for Transport at DETR.
(Mr Linnard) I am Bob Linnard, Director of Railways at DETR.
948. Thank you very much. My Lord, did you want to say anything
to begin with?
(Lord Macdonald of Tradeston) Just perhaps to clarify your quip
there. I do think there is a great deal going on. In reply to a journalistic
question last week I said "I think there is a crisis in the railways that has
to be managed." Unfortunately that was not reported. I then went on to
suggest that it was indeed a multiple crisis. Be in no doubt, we believe it
is a crisis and we are trying to deal with it by the day.
949. Thank very much. Has Railtrack over-reacted to the Hatfield
accident?
(Lord Macdonald of Tradeston) There is a concern (which we share)
that people perhaps feared that not knowing the extent of gauge corner
cracking or the dangers involved in it, they took their speed limits back to
20 miles per hour, which has been the traditional fall back position there,
and it was done on such a scale because of the nervousness that was involved
that it did perhaps have a disproportionate effect, but it was an
understandable reaction and we have tried to deal with that.
950. It was understandable if you did not know what state the
railway system was in. Is that right?
(Lord Macdonald of Tradeston) Understandable since they were unaware
of what the phenomenon of gauge corner cracking might mean.
951. Why was that since it had been well-known for some years, not
only in this country but elsewhere?
(Lord Macdonald of Tradeston) I have not had the impression from the
railway industry that it was well-known to them just what forms that might
take. They certainly knew of its existence but it seems to have come through
in a new form, particularly in what they call the "rate of propagation" and
they have certainly got many experts working on it now to see what the
comparative experience has been between countries such as the UK, Germany,
France and Japan and so on. I think Sir Alistair Morton has said that he felt
that there was an over-reaction - his word - and that people are thinking he
had been spooked a bit by it. We have tried to counter this by ensuring that
the industry can get round the table on a regular basis. Indeed, we started
off on a daily basis with our Rail Recovery Action Group and that was simply
to try and help the Railtrack management with responses coming from all
quarters, from HSE, from regulators, from government, from passengers.
952. I do not want to stop you because we all support the idea of
having this Committee which is excellent, but are you not implying that
Railtrack were not doing the job properly because otherwise they would not
only have known there were problems but they could have been seeking to deal
with them in a balanced and programmed way and they would not need to have
been panicked in the way they have been?
(Lord Macdonald of Tradeston) Indeed, I think Railtrack have said that
their relationship with their maintenance sub-contractors is unsatisfactory.
953. What does that mean? Who is responsible for a legal
relationship with a contractor except the person directing the contract in
the first place, that is to say Railtrack?
(Lord Macdonald of Tradeston) Indeed, and I think they concede that
they have a management responsibility there and that the practices in the past
have been inadequate. Certainly it is for the people on the ground to be
under quite clear command from above and that does not seem to have always
been the case. That is a matter that Railtrack tell us they are investigating
with some urgency and, clearly, it is one of the reasons why people on the
ground may have perhaps over-reacted.
954. How are you going to ensure that this sort of thing does not
happen again because there are literally hundreds of thousands of people out
there who are unable to get to work in the normal time, unable to get home,
unable to get about their normal business. The total cost of this chaos to
the economy of the United Kingdom must be absolutely astronomical. How are
you going to ensure it does not happen again?
(Lord Macdonald of Tradeston) In two ways. By ensuring that we
encourage Railtrack to be better managed inside a more supportive architecture
for the industry with more involved regulators and with the Strategic Rail
Authority in place and with considerably larger sums of government money being
invested in the railway.
955. Why should large sums of money be invested in somebody who
patently cannot do the job.
(Lord Macdonald of Tradeston) We believe Railtrack can do the job if
it is better managed and that is the emphasis we have had to put on this
because we are where we are.
956. You are satisfied that the recent changes have ensured it is
so well managed that there will not be a problem?
(Lord Macdonald of Tradeston) No, we are not yet satisfied. We have
to see the evidence of the effectiveness of the new management. From what we
have seen in recent weeks, they are trying very hard and they seem to have
made a good start. We know that further board changes are in prospect with
the Chairman intending to stand down and we have heard, too, about the belief
that they must strengthen the non-executive side of their board.
Chairman: I think Mr Stevenson wants to come back on various aspects of
this.
Mr Stevenson
957. Lord Macdonald, why has the Government rejected the notion
that in return for the massive amount of public grants and money that have
been made available to Railtrack in the medium and long term that an equity
shareholding should be acquired in Railtrack in return for those massive
amounts of public money?
(Lord Macdonald of Tradeston) In the belief that in a public limited
company having a minority stake would not buy influence over policy. The
board members of a PLC are under a fiduciary duty to ensure that they serve
the interests of all stake holders, all shareholders and therefore a minority
shareholder is not able to go into the board of a PLC and try and pursue their
own interests.
958. Are you aware - I am sure you are - that in evidence to this
Committee in July the then Chief Executive, Mr Corbett, gave evidence to the
fact that in his view (backed up by Mr Marshall, the then Finance Director)
the SRA on behalf of the Government taking a preferential share option in
Railtrack was "the best possible option for levering in private money"? Are
you aware of that?
(Lord Macdonald of Tradeston) I am indeed. I can see the attractions
from Railtrack's point of view where you would get government money in there
but, as I say, the government even with board members would have no authority
over a board of a PLC by putting that money in. However, it would in a sense
make the Government complicit with the decisions made by the management of the
company and I do not think that would be desirable given our relationship with
the regulators.
959. It may be interpreted as making government complicit but
could it not also be interpreted that it would allow government to be
influential?
(Lord Macdonald of Tradeston) I do not believe inside the structure of
company law that a minority shareholder could have the influence that you ask
for. It just would not be allowed.
960. In return for this massive amount of money, which I will
return to in a moment if I might, you have said to the Committee today that
the quid pro quo for that is to encourage Railtrack to be "better managed".
(Lord Macdonald of Tradeston) Better managed.
961. Is that the deal?
(Lord Macdonald of Tradeston) It must be better managed and better
regulated.
962. Lord MacDonald, are you aware that the current capitalisation
of Railtrack is between œ4 and œ5 billion.
(Lord Macdonald of Tradeston) Indeed.
963. You will also be aware then that the œ4 billion grant that
the Government has agreed through the SRA to be made is almost the total
capitalisation of the company. Do you not feel it is a little strange and
would not the public at large find it a little strange that here we have a
Government giving as a direct grant to Railtrack œ4 billion which is nearly
the total capitalisation of the company without taking some direct involvement
in that company?
(Lord Macdonald of Tradeston) We are investing to try and build a
better social railway and I think that that is entirely desirable as an aim.
At the same time we obviously do not want to weaken the company in any way,
but I do not think that the monies that are going in would be parlayed into
its market capitalisation.
964. I think it was last week when Mr Marshall, the current Chief
Executive of Railtrack, was here that he was asked two direct questions on the
œ4 billion. He was asked what would happen to the West Coast Main Line
project if œ4 billion was not available and he said it would not go ahead.
This is not encouraging better management. This is not having a perverse
influence, as some of the newspapers and some of the people in the industry
would have you believe (who have their own agenda, I suspect). This is the
Government effectively financing a massive project that Railtrack should have
financed themselves. The second question he was asked was if Railtrack have
to finance this œ4 billion on the capital market what would be the cost to
Railtrack and his answer, I paraphrase slightly, is they would have to offer
a rights issue of some œ1 billion. So in effect the Government is giving
Railtrack œ5 billion. How can it be then that you are so reluctant to see
your way clear to protect the public interest by making sure that that money
is spent effectively rather than this wish list of "we hope they are better
managed".
(Dr Shannon) We believe that with the influence of the Regulator and
the Strategic Rail Authority that the public monies will be well monitored and
well spent. I accept, as you say, that there could have been other ways of
reorganising a railway after it was privatised, but we are where we are and
rather than go for the possibility of restructuring, with all of the
consequent upheaval that might go with it, we have gone for a strategy of
trying to support the industry with investment, but under careful monitoring
and regulation.
Mr Stevenson: I think, Lord MacDonald, most members, if not all, would
agree with that proposition. We want to support the railways, we want to see
more investment. What is biting at my tongue, so to speak, is the notion that
we can give a private monopoly company more than the capitalisation of the
whole company, "Here you are, free, gratis, off you go, get on with it", and
then at some stage in the future, not defined, we hope they will be better
managed. That does not sound like a deal to me, that sounds like a one-sided
arrangement that a private monopoly will benefit from.
Chairman
965. Mr Linnard, do you have the magic answer?
(Mr Linnard) The figure of 4 billion, which is the cost of exceptional
renewals, mainly for the West Coast, spread over a period of at least five
years, probably needs to be compared with Railtrack's annual turnover with the
market capitalisation. The annual turnover is 2.5 billion, something of that
order. It is perfectly true that if the money for West Coast Mainline and
other projects was not coming from the Government then the project would not
go ahead because Railtrack only has ultimately two sources of revenues, that
is the Government or the fare box, via train operators. What the SRA are
doing with the money that is going into Railtrack, either through access
charges or through direct grants - it is not giving Railtrack the money - is
purchasing enhancements, improvements to the railway, which otherwise would
not be forthcoming.
Mr Stevenson
966. Mr Linnard, that is very interesting but that is not the
impression we are getting. Last week Sir Alastair Morton in evidence in
response to a question described this 4 billion as, "It's a gift". You are
saying, "We are not giving anybody anything". He is very clear in his mind it
is a gift. It is free, gratis, it is a gift, and without it the scheme would
not go ahead. Given the amount of Government money that is part of
Railtrack's revenue, the centre of their revenue, and these capital grants
14.7, nine billion over ten years and four billion in the short-term, is it
not effectively a Government agency?
(Lord Macdonald of Tradeston) It is not a Government agency, it is
clearly a public limited company. It is clearly the agent of Government
policy, particularly at the level of, if you like, to paraphrase Sir Alastair,
of its utility activities of selling track access to companies. Sir Alastair,
as you know, goes on to say that it does have another area of activity, which
is to try and enhance and expand the railways, and in that way it can have a
double function.
Mr Stevenson: Thank you.
Chairman
967. Do you think they have been carrying that out properly over
the last three years and they need all of this money now?
(Dr Shannon) Clearly they have not been carrying it out properly when
we see the extent of problems on the track and difficulties in the
relationships with the maintenance sub-contractors. There have been
management problems in the company and I hope that the new management will
address those urgently.
968. Because we know they cannot manage, because we hope they are
going to get better, we are going to give them a whole lot of money and say,
"Here you are".
(Lord Macdonald of Tradeston) We believe that with the crisis in the
railways at the moment the best course is to try and give as much support as
possible to all of the parties who are trying get the railroad back and
running again. That is priority, to make sure that their promise that there
will be significant improvements by the end of January is, in fact, delivered
and that, as they see it, the tail-ends of the problems will be sorted by
Easter of next year.
969. The tail-ends, is that the day-to-day running, most trains
being about an hour or two hours late?
(Lord Macdonald of Tradeston) They said to us - and there is a meeting
going on at this moment - they will be able to deliver a significant
improvement by the end of January. There will be then a tail of work that has
to be done. We said that we hope that is a short tail and not a long tail and
they have assured us that it should be completed, with the railways back to
normal by Easter.
Mr Bennett
970. As long as it does not snow.
(Lord Macdonald of Tradeston) As long as it does not snow or flood or
do anything else.
Chairman: Which normally happens in the winter, I understand.
Mr Olner
971. I would like to ask the minister how confident he is that
those predictions, that things will be mostly back to normal by the end of
January, are accurate?
(Lord Macdonald of Tradeston) We have put our trust in the effort that
we see being made by the week. There were around 20,000 people out at the
weekend and I was told just before coming here that approximately 28 miles of
track were re-railed last week.
972. I do have to say, Lord MacDonald, and I travel by train every
week, since this crisis started my journey from Nuneaton to London, which is
just over 100 miles, has got later all the time this crisis has gone on, even
with the new timetable. When it should take two and a half hours, it is taking
two and three quarter hours. I put it to you that the public out there are
losing confidence very, very quickly in your ability to ensure that Railtrack
and the rail companies do deliver what they promise.
(Lord Macdonald of Tradeston) Would it help, Madam Chairman, if I told
you what had been promised to us today by Railtrack and what the situation is
said to be on the railways?
Chairman
973. Was that before or after you read the article in The Mirror
saying that a man who had never been on railways before was made the
supervisor for the day of a gang, when he was colour-blind and inexperienced?
(Lord Macdonald of Tradeston) It was actually after I had held a
meeting with Railtrack and the Health and Safety Executive on that very
matter. You will see that Railtrack have made a statement about that article
in The Mirror. It is something that we have said that we will pursue. I did
hold that meeting and then I got the information about the action group.
974. Give us the figures, Lord Macdonald, anything is manna in the
desert.
(Lord Macdonald of Tradeston) Let me say that as at 11th December the
number of speed restrictions is down from a total of 553 to 538 over the week.
It has to be remembered that the work on assessing the damage inside the
network is still going on. The number of 20 mile per hour speed limits has
been reduced from 451 to 379. The 40 miles an hour down from 69 to 45. The
number at 60 miles an hour up from 83 to 114. The number of services running
normally in percentage terms as at 11th December, of the normal services
running, this is trains leaving - leave aside their punctuality - is
inter-city 78 per cent are running, and of London commuting trains, 93 per
cent.
975. Can we agree the definitions? The definitions is as they
leave. Can we have some indication of where they go or whether they get to
wherever they are supposed to go?
(Lord Macdonald of Tradeston) That is my next line. The percentage of
normal services which are running is 78 per cent intercity, 93 per cent London
commuting and 96 per cent elsewhere in the country. Of the percentage running
punctually, 64 per cent of inter-city trains, 65 per cent of London commuting
and 76 per cent elsewhere in the country.
Mr Olner
976. Are these percentages on the new timetables?
(Lord Macdonald of Tradeston) These are on the current timetables and
these are figures that come from the train operating companies.
977. I do not think those figures are correct because even on the
new emergency timetables they are still not delivering. This is what is
causing the frustration, where people plan on an emergency timetable and still
cannot get there.
(Lord Macdonald of Tradeston) These are compared to the current
timetables. That is figures given to us by the train operating companies.
Chairman
978. We are agreed this is the United Kingdom, are we?
(Lord Macdonald of Tradeston) I should say that as far as the train
operators are concerned, in terms of the percentage of normal revenue they
took for the weekend of 9 December 87 per cent of their normal revenue.
Chairman: It just shows what piracy leads to, does it not?
Mr Olner
979. Do you think the Post Office, given what some people would
say are reasonably good efficiency figures, over-reacted in moving most of
their Christmas mail off rail and on to plane and road?
(Lord Macdonald of Tradeston) I had a meeting with the Royal Mail
people, with EWS, the freight company, and I had a chance to discuss these
matters with them last week. They had a percentage of first class mail going
by EWS and that has been transferred to road and plane. There will be, I
understand, compensation paid by EWS on a contractual basis to the Royal Mail
and they in turn will have a contractual relationship with Railtrack, but
there was an interesting article, too - you may have seen it - in the leader
article in The Times yesterday about the other problems inside the Royal Mail
that may be delaying some of the post.
Chairman
980. Royal Mail are controlled by a regulator, they have targets,
they are expected to meet certain commitments in the same way railway
companies are and I have been talking to them since this began. Does it not
seem to you that they have contractual obligations, they have been working
hard and they have been very badly treated?
(Lord Macdonald of Tradeston) Indeed. It is clearly something that is
of great regret to us because we are very concerned about the delivery of the
mail, but I know it is of great concern to EWS as well. They are working hard
obviously to keep the relationship with the Royal Mail. Railtrack tell me
that they too are trying to ensure that the Royal Mail trains which
predominantly travel on the main lines will be improved as soon as possible,
but they have also got other priorities concerned with the commuter services
particularly around London, so it is a job for them to try and find a balance
in all of this. Again, we have the freight companies, Freightline and EWS,
with the Rail Action Group at this moment.
Mr Olner
981. Can I ask how quickly this compensation will come through to
these companies? I have a company in my constituency, Links, which took over
the old British Rail Red Star Parcels and it has failed because there are no
parcels coming by train. How quickly will that company be able to go through
all the minefield of recovering compensation? Will your recovery team be
giving some direction in this?
(Lord Macdonald of Tradeston) I am at a disadvantage because the Rail
Action Group is meeting at this moment and discussing the freight question.
But having brought it to my attention, certainly if there are issues like that
on particular companies I will very happily take it up with the companies
involved.
982. Finally you mentioned changes in Railtrack's management. I
know it has been a few minutes since you said it but it sounded rather to me
like certain sort of creatures jumping off ships. Do you think the recent
senior management changes at Railtrack give enough prominence to engineering
and technical considerations?
(Lord Macdonald of Tradeston) That is certainly a concern we have
expressed and others have expressed publicly. Railtrack moved to allay those
concerns by bringing forward a number of engineers into higher ranks inside
the company.
Miss McIntosh
983. If I could remind the Committee of my interest declared. Is
there a crisis in the rail industry, Minister?
(Lord Macdonald of Tradeston) There is a crisis, indeed I think it is
a multiple crisis, as I tried to say unsuccessfully the other day.
984. In your view has the Government contributed to this crisis?
(Lord Macdonald of Tradeston) I believe that the Government has tried
to manage the crisis. As I said last week, it is a multiple crisis. Part of
the crisis is one we have inherited with the fragmentation of the railways and
also the lack of investment in the railways over many years.
985. In your view would you support the separation of the track
and the ownership of track from the operation of services on that track?
(Lord Macdonald of Tradeston) What my priority is at the moment is to
make sure the railway gets back and running. I therefore am concentrating all
my efforts on making sure that the system as it exists at the moment works as
efficiently as possible because to contemplate any radical changes in that at
the moment might be destabilising.
986. Are you prepared to review the role of the Regulator insofar
as the performance targets such as punctuality that the Regulator is setting
may conflict with the safety requirements?
(Lord Macdonald of Tradeston) As you may have heard from Sir Alistair
Morton, he has a number of working groups sitting at the moment and they bring
together all sides of the industry to try and ensure that any perceived
conflicts that there might be between efficiency, punctuality and safety are
tackled and dispelled. We do not believe, and I am sure Alistair and Mr
Winsor have said to you that they do not feel it is incompatible to run an
efficient company and a safe company.
987. When in your view did the problem of gauge corner cracking
first become appreciated in this country?
(Lord Macdonald of Tradeston) My knowledge of it is only since the
Hatfield disaster. I am told that engineers were aware of it but not that it
had spread so widely or indeed its propagation, as they call it, could take
place in rails that were perhaps only a year or two old. I think the
assumption had been that the track would have to be much older than that
before this phenomenon hit it. We do have studies going on at the moment and
we look forward to hearing within a matter of days just what the initial
conclusions have been of those studies.
988. In evidence we took from Tom Winsor, the Regulator, last
week, page 25, paragraph 879, I asked the Regulator what would happen if the
franchised passenger operators cannot pay the amounts because the numbers of
people and amount of freight do not materialise over a five-year period. He
told the Committee that they would get it from the Government, the Government
would have to pay more. Is there any provision for extra payment if by the
end of this year or next year there are fewer passengers and freight
travelling on railways?
(Lord Macdonald of Tradeston) First I should say it is an anticipation
shared by the industry that they can get back to the previous levels of
passengers on the railway in a relatively short time, and I hope the same will
be true of freight although that will need further inquiry. Inside our
ten-year plan there are unallocated provisions there which might be able to
help fund any kind of unexpected shortfall of that kind, but at the moment we
have not made any provision for it.
Chairman
989. Mr Grant, on the other hand, said he would accept it if
companies went bankrupt.
(Lord Macdonald of Tradeston) Indeed, I think Mr Grant and Sir
Alistair would accept that if a train operating company was not viable then
it could indeed get taken over or go to the wall in the normal course of
business, but, as you know, Sir Alistair has powers of last resort were a
company not taken over but there does not seem to be any shortage of interest
in those companies that have been less than financially robust in the past.
Mr Bennett
990. How much is this unallocated money?
(Lord Macdonald of Tradeston) I will let Mr Linnard come in here.
(Mr Linnard) I have not got the figures with me but it is quite
significant in the latter period of the ten-year plan for unallocated
transport capital.
991. I would like to get to the bottom of how much money there was
that was not allocated. Presumably you had to fight Treasury to get the money
so there must have been some vain hope that it would be spent on something.
Are we losing something in order to get the money for this purpose?
(Mr Linnard) There is a sum of money in the ten year plan, largely in
the years five to ten, which is allocated to transport capital but not
allocated as between road or rail or the other spending programmes within
transport. That is simply because it is impossible to set with total
precision the allocation of capital spend across the different modes and
across the different programmes.
992. Are we going to get a by-pass in order to get us out of this
difficulty?
(Mr Linnard) That does not follow.
993. What does follow? Can you give us some clear information?
Presumably you did argue fairly strongly with the Treasury that that money was
needed for something. If it was needed for something and if it is going to
be spent in a different way, we are not going to get what it was needed for.
(Mr Linnard) Out of the total expenditure provision in the ten year
plan there is a total of about nine billion which is unallocated. One would
expect, anyway, that railways would get a proportion of that when the spending
priorities and the investment cases become clearer.
Chairman
994. Investment as opposed to reimbursement for losing passengers
and income.
(Mr Linnard) Yes. I think that is a distinction that we need to keep
very clearly in mind. What Mike Grant was saying, I would imagine, is when
he is awarding franchises there is no total safety net that stops a private
sector train operator from ultimately going bust. What Mr Winsor, I imagine,
would have been saying in the evidence that he gave is that what he has set
in his periodic review is the amount, in his judgment, which Railtrack needs
to maintain and renew the core railway over the next five years. That is
money which is due to Railtrack and has been settled by Mr Winsor on the
periodic review.
Chairman: To increase its payment in dividends.
Miss McIntosh
995. Would you agree, Minister, that safety on railways over the
last ten years has been infinitely greater than safety on the road? What are
you doing to boost confidence in the railways and to encourage people to go
back on to the railways?
(Lord Macdonald of Tradeston) I, of course, agree that railways are a
far safer mode of travel than on the road. It is true too that over the past
ten years there have been some significant area of progress in terms of better
safety on the railways - signals past at danger have been coming down steadily
across the last decade. If you look at the numbers of serious incidents in
terms of collisions or derailments, there is a downward trend there too. We
always have to bear in mind that inside those generally encouraging statistics
there is the possibility of the awful disasters we have seen at Paddington,
Southall and most recently at Hatfield.
Chairman: Mr O'Brien.
Mr O'Brien
996. Minister, my interests are heightened when you talk about, if
some of these operating companies do not do well there is plenty of other
people lining up to take-over; is that correct?
(Lord Macdonald of Tradeston) From the limited experience we have
there has not been a shortage of interest in people looking to take over
companies that might have been weakened. There have not been too many
companies, as I recall, in that condition.
997. It is a fact that shares in GB Railways and Anglia Railways
franchises have fallen to an all time low and some of the companies are saying
that if they do not increase their income, their profits, then they will go
to the wall. This is happening. What contingency plans are the Government
operating to ensure that any new bidders will take over the consequences of
safety and other issues without further subsidies.
(Lord Macdonald of Tradeston) The Strategic Rail Authority are
deferring penalties that they might have been collecting. I also believe that
Railtrack's board have taken a decision to try and stand behind companies that
might be in temporary trouble for cash-flow, and so on.
998. Would you agree that, perhaps, some of the problems that are
causing a reluctance to invest in rail are because of the fact of the shortage
of skilled staff?
(Lord Macdonald of Tradeston) I think there has been a problem of
de-skilling across the railways. We saw it, and also skills shortages created
in some areas after privatisation, when, for instance, train drivers were paid
off and then there had to be an attempt to recruit them back very quickly
after that. We can see too, just on the increase in salaries, for instance,
that the shortage of staff there has lead to an increase in salary to try and
attract more people into those grades. More broadly it was judged a couple
of years ago to be a developing problem and, indeed, the mechanisms were set
up to try and increase training in the railways. The comments made by the
Department for Employment and Education showed that the take-up, for instance,
of some of the vocational qualifications inside the railway are very low.
There is a real problem with training in the railways. Of course the ten
year plan with that 60 billion extra investment could exacerbate that. At
least the comfort we can take is that if you have a ten year commitment to
investment and expansion then companies should be able to begin to recruit and
train with greater certainty than in the past.
999. Is there any matter or any issues involving the new
franchises where they have to apply skills training and there has to be an
upgrading of skilled staff in the companies? Is this written into the
franchises?
(Lord Macdonald of Tradeston) I am not entirely clear, maybe Mr
Linnard would know.
(Mr Linnard) It is certainly one of the things that the SRA look very
carefully at when they are judging between different bidders and when they are
taking decisions on who should be allowed to qualify for bids. I am not sure
whether they look specifically at training, but they certainly do look at
technical and managerial competence in some detail. What the SRA have also
done as a cross-industry initiative is to participate, I think they are
actually one of the main movers, in setting up the Institution of Railway
Operators to provide a much clearer focus on training and links with the City
University, and so forth.
1000. This uncertainty that you inform us of, this is not going to
help the railways to get back to where they were before Hatfield and to
advance upon that. One of the strategies in the ten year plan is to increase
the amount of passenger and freight on to rails. We are 25 per cent below
Hatfield now, what is going to be the position or what do you envisage the
position will be post-Hatfield, are we going to reach the targets? How long
will it be without skilled operators?
(Lord Macdonald of Tradeston) I should say that the SRA, the
Government and the Health and Safety Executive are planning to have
discussions to see what extra action, in addition to what Mr Linnard has
described, would be needed to try and develop skills and training. There is
no doubt there is a developing shortage in the railways, as there is, of
course, in many other industries. With the expansion that we have and the
prospect of 50 per cent growth in passenger travel over the next ten years it
is vital that we try to get recruitment and the training up to the necessary
levels.
1001. What is the Government doing about this?
(Lord Macdonald of Tradeston) As I said, we have given them a ten year
plan, which should allow them to begin to recruit and train with much greater
confidence. We have the discussions planned for the SRA and with the Health
and Safety Executive to say, "What more do we have to do?" The initiative
described by Mr Linnard and the Institution of Railway Operators came after
the 1998 Rail Summit. I think it is time to go up a gear or two on that.
1002. When do you anticipate that there will be some results of the
training coming through so that we can see growth? Do you consider that there
will be conflicting pressures upon the network with safety performance and
growth and that without skilled workers this will be exacerbated?
(Lord Macdonald of Tradeston) Running a railway is clearly very
demanding and the companies involved in it have to be quite clear that we need
the level of skills and experience that perhaps was there in days past and we
hear has been too easily lost - in some areas of track maintenance, for
instance.
Dr Ladyman
1003. Lord MacDonald, before you became a Minister you were a very
successful private businessman at a very senior level in those businesses.
What, in your judgment, was the right balance on the boards of the companies
with which you were involved between industry specific knowledge and general
business knowledge?
(Lord Macdonald of Tradeston) There has to be a balance particularly
in a regulated company like Railtrack, so you do want people who understand
the pressures of public life and the political demands but you want, too,
people with experience of industry, experience of perhaps heavy engineering
in particular, experience of systems as well as the kind of financial
expertise and corporate legal expertise that you would look for in a FTSE 100
board.
1004. Out of the 13 board members were you aware that there were
only two members of the Railtrack board that had any experience of the
railways?
(Lord Macdonald of Tradeston) I understand the weakness of the board
which has been discussed publicly in recent months and I think Sir Alistair
has drawn your attention to that, Madam Chairman. In the creation of the
company taking it over into the private sector, the board membership may not
have evolved to the kind of levels demanded by a FTSE company in the time that
it has been in existence.
1005. So you accept that there are weaknesses in the board?
(Lord Macdonald of Tradeston) From my business background I would say
it is a board that could be strengthened. Since we anticipate an incoming
Chairman in the months ahead I am sure that would be a priority for that
incoming Chairman or Chairwoman.
1006. Would you like to comment on the fact that the Safety
Committee on the board did not have a railwayman on it?
(Lord Macdonald of Tradeston) Again if that implies a lack of
expertise in the areas of safety that it is dealing in, that would clearly
seem to be an omission, but I know that there are considerable changes going
on inside the safety regime in Railtrack.
1007. When you were in business and you went to your financiers for
money for investing in your companies, did you expect them to make comments
about the way the company was managed or did you not regard that as any of
their business?
(Lord Macdonald of Tradeston) Since many of the financial analysts
that you meet represent major institutional stake holders, then of course you
anticipate that there is a very detailed grasp of your business and a very
sharp critique of it. That is indeed the way a PLC should work since in the
end it is owned by its shareholders and those shareholders can feed in their
views. As I said earlier, the board itself has a fiduciary duty to all
shareholders and therefore cannot act on the instruction of any single
shareholder.
1008. Did you ever when you were borrowing money for any of your
businesses write to your financiers and tell them that you were an independent
business, "keep your nose out"?
(Lord Macdonald of Tradeston) I would never have been in a position to
do that because I was in an industry regulated by the ITC.
1009. You would be horrified if anybody did that?
(Lord Macdonald of Tradeston) I would certainly be surprised. It
would not have been inside my business practice.
1010. What did you say to Railtrack when they did that?
(Lord Macdonald of Tradeston) It is not something I would have to say
I am immediately aware of. I would have to look at the text and context of
what was said.
Chairman
1011. It was quite public, was it not, Lord MacDonald?
(Lord Macdonald of Tradeston) As I say, I have not seen the context or
detail of it.
Dr Ladyman
1012. Following up Mr Stevenson's remarks about the amount of money
that the Government has put into Railtrack - and I accept at the present time
the Government is only a very, very tiny shareholder in Railtrack because of
the way that the industry was privatised - the fact of the matter is that the
Government is putting a huge amount of money in. If you are not prepared to
go down the road that Mr Stevenson was perhaps trying to take you down in
taking a stake in the company again, would it not at the very least be a
reasonable thing for the Government to do to insist on having a veto over who
becomes Chief Executive and Chairman?
(Lord Macdonald of Tradeston) No, I do not believe that would be
consistent with the governance of a PLC. I think that must be something for
the shareholders in the end to decide. If they are interested in the stakes
that they have in a company, they must ensure that they have got the right
board which will appoint the right management. If the management is wrong,
the board should act. If the board is inactive, the shareholders should act.
1013. We have a situation here where we have an entire industry in
chaos; not your fault, you were not responsible for privatising it, and a
structure that everybody agrees is entirely failing; not your fault, you were
not responsible for that structure. It is industry which everybody now agrees
is poorly managed and is letting down its customers and its main investors
(which I would suggest is the Government, not just the shareholders) and
within all of this chaos you do not think that there is a role for the
Government to insist on being able to at least appoint or to veto members of
the Safety Committee on the board or the Chairman of the board? You think it
is entirely down to ordinary shareholders to influence that?
(Lord Macdonald of Tradeston) But you will recall that within recent
weeks we have just passed a Transport Bill and made it an Act which embodied
in it the Government's thoughts about the architecture that is required for
the railways. Indeed, when it was a Railways Bill before it was a Transport
Bill your Committee, I believe, gave it a very thorough going over and tried
to put in place the kind of architecture that the railways would need for the
future. As I recall, I was coming into the job at the time, the Government
very readily accepted the good work you had done in trying to create that
architecture. Had there been something else that might have been done, I feel
it might have been spotted at that time when there was a Transport Bill that
could have taken it into law.
1014. So you have never at any point considered since the Hatfield
incident that maybe the time has come to insist, in return for the money that
you are putting into the industry, on a golden share or some other mechanism
whereby you would have more direct influence over the day-to-day decision-
making of Railtrack?
(Lord Macdonald of Tradeston) My approach has been to try to focus on
getting the railways running again and working with that management to ensure
that it gets more miles rerailed every week and more speed restrictions
lifted. I do not think it would help were I to speculate about what the
options might be if that in any way destabilised the company or in any way
demotivated the management or the workforce.
1015. Finally then, you said to Mr Stevenson "We are putting this
money in and we are expecting better management out." That was your bottom
line. Do you accept that the ethos within a board, the way the board thinks
does permeate all the way through a company and has a direct influence on the
way managers, middle managers and junior managers implement the decisions of
the board and therefore manage that business?
(Lord Macdonald of Tradeston) I do indeed, but I think it is also true
that a company made up of 12,000 individuals which has the unique
characteristic of having been a nationalised railway company which is taken
into the private sector, is still in a state of change and it is therefore a
very difficult culture, I would imagine, to try and manage. So I have got
some sympathy with those managers who were trying to sort out all those
dilemmas that they inherited inside a very difficult structure, a very
complicated structure of that new privatised railway, but at the same time it
should not be beyond a company with the resources of Railtrack to ensure that
those issues are addressed urgently and the right people are recruited and the
right board is in place.
1016. But that ethos that those 12,000 people are working within is
set by a board which was made up, until 12 months ago, of the Chairman of a
supermarket, a number of people who have extensive experience in the property
industry and the ex-Chief Executive of the Dome. Under what circumstances is
the ethos they are setting within the board going to permeate down to those
12,000 people who are trying to run a railway?
(Lord Macdonald of Tradeston) That must be a judgment for the Chairman
and the Board of that company, informed by their stakeholders. I accept that
the Government does have a stakeholding in it. All I can say is that you have
the opportunity now, with the chairman having announced that he is standing
down, to get a strong chairperson in there. I am sure the body will be very
much seized of its responsibilities and, perhaps, need to extend the range of
its experience in the light of what it has gone through in recent times.
Mr Donohoe
1017. Have you happened to have read today's Herald?
(Lord Macdonald of Tradeston) The Glasgow Herald? Sadly speaking, for
my old newspaper, it arrives a day late, so I will not see it until tomorrow.
1018. You will not have seen the headlines to suggest there is
another problem looming, out of 690 new trains only three are going to run
before May of next year?
(Lord Macdonald of Tradeston) No, I have not seen that report. I was
talking earlier today with Richard Branson who was very enthusiastic about the
new trains that he hoped to bring on to the network.
Chairman: Have you ever known Sir Richard when he was not enthusiastic?
Mr Donohoe
1019. He has made an announcement about 14 times that these trains
were going to run, maybe that is 15 times. In Scotland itself, have you seen
yesterday's Herald which identified a problem with the new rolling-stock in
Scotland? You must have read that by now if you get it one day late. That
is magnified by every company across the whole network. What the Herald are
saying today is that only three trains out of 690 are to be delivered and are
going to run before May of next year, which is going to impact immensely on
the industry. If you thought you had a crisis, as far as the industry itself
is concerned, with Railtrack, the operating companies are going to have a
major, major problem. The article does mention, in fact, that only one of
Richard Branson's trains will run on time, the rest will not.
(Lord Macdonald of Tradeston) Sir Alastair Morton is chairing various
groups that are trying to push through the use of the new rolling-stock. I
believe that if you look at the categories, if you like, the diesel and the
electric rolling-stock, on the diesel side they have had quite a success in
managing to get more into service, but there are continuing problems with some
of the electrical units. One of the problems we have in this country is a
lack of test track. I believe we are in a position where some of these
trains have to be tested elsewhere on the continent.
Chairman
1020. Railtrack is demanding that somebody builds a test track.
(Lord Macdonald of Tradeston) Various options are being looked at as
to how we could improve the testing on track before they are put into service.
(Mr Linnard) One of the things that the SRA were asked to do about a
month ago was to set up a group, which became five sub-groups under a steering
group chaired by Sir Alastair Morton, to look at various structural problems
within the industry, not in terms of whether Railtrack ought to be split up,
or anything like that, but what has been described as the sore points,
contractual, regulatory problems within the industry. One of those groups has
been looking specifically at vehicle acceptance and reliability and the fact
that a lot of the new rolling-stock is not---
1021. It is a little late, is it not, Mr Linnard, because these
problems have existed for, certainly, the last two years, to my knowledge?
(Mr Linnard) The problems have existed. The Strategic Rail Authority
were asked about 18 months ago to set up a group with rolling-stock
manufacturers, leasing company train operators, which they have done and which
has produced some good results in terms of speeding up delivery.
1022. Has it got any more rolling-stock on to the rails that are
producing good results?
(Mr Linnard) It has speeded up the delivery of some rolling-stock, yes,
but there are still problems. One of the problems, as the Minister said, is
the fact that when the stock does come out of the production line it does not
operate reliably enough.
1023. Everyone in the rail industry operates existing rolling-stock
on the assumption that the way to find out if there are any problems is to run
the equipment over the first year before they accepted delivery, deal with the
manufacturers, put them into operation and when they are only working properly
then to accept delivery. This is not a new problem, it has existed in the
rail industry since the original George Stevenson was at the game. Now
suddenly it is being extended by Railtrack.
(Mr Linnard) If I can respond to that, I do not think it is a new
problem that has been discovered. What is, undoubtedly, true is because of
the intensity of use on the network, with the growth that has happened over
the last three or four years, the effect of a breakdown is much more serious
on a lot of crowded commuter lines than it used to be.
Mr Donohoe
1024. When you were talking to Sir Richard did he indicate to you
that All Star, who have something to do with these trains, have been granted
a variation order to defer the delivery of these trains? Were you aware of
that?
(Lord Macdonald of Tradeston) No, I was not, no.
Chairman: Perhaps you would like to talk to the Italians, who deliver
them without any trouble at all.
Mr Donohoe
1025. The figure is something like a four month delay. In private
conversation with train operating companies I am sure you get a different
response than you will probably in public. As far as the service that they
get from Railtrack is concerned there seems to almost be intimidation in terms
of the way that Railtrack almost coerces the rail operating companies into
lying. Can you just confirm that some of the operating companies themselves
have made representations to you to suggest that Railtrack is broken up and
they, in fact, as franchisees will be given the responsibility of the
maintenance of the Railtrack?
(Lord Macdonald of Tradeston) Some of the work that we did after the
Paddington disaster was looking at the relationship between the train
operating companies and Railtrack. We had heard about concerns that Railtrack
were less than responsive to the needs of the talks. The work that we did
showed no conclusive evidence of that. In reading what the Regulator had to
say when he came to see you, he too had not had complaints of intimidation,
as I recall him saying.
Mr Bennett
1026. He did make a pretty firm statement about the need for a
change of attitude.
(Lord Macdonald of Tradeston) It was very much a change of attitude,
because we do believe that Railtrack has to focus much more on its customers,
the train operating companies and their customers and the passenger. So, yes,
it does need a change of culture, and from everything we hear from the new
management they are intent on delivering that.
Mr Donohoe
1027. The problem is that this crisis is almost open-ended as to
when it is going to come to a conclusion. Are you saying it is going to be
by Easter?
(Lord Macdonald of Tradeston) I am saying that very significant
changes are promised by the end of January. There will be a post
Christmas/New Year schedule brought in on 8th January and then another
schedule on 29th January, according to the last information I was given by
Railtrack. At that point we will have had, "A very significant improvement",
I quote their words.
1028. The problem is that in using your statistics, as you did when
asked the question, they are almost fundamentally flawed. You are using
changed timetables to come to the conclusions that you have. These changed
timetables have added as much as an hour or two hours on to a journey. The
airlines have done that for years, it is the oldest trick in the game to
extend the period between A and B in terms of time and then to suggest to the
travelling public that things are improving when in actual fact they are not.
(Lord Macdonald of Tradeston) Please let me be clear, these are not my
statistics, they are statistics delivered by Railtrack and by the train
operating companies. The levels of punctuality that we were talking about,
the percentage of normal services running are percentages of that original
timetable. The punctuality is compared with the current timetable.
1029. That is a problem, because if you are dealing with the
current, which has been elongated over a period of time, you are not dealing
with a situation that was invoked six months ago, where the timetable was much
adjusted to what it is today. That is the problem with your statistics.
(Lord Macdonald of Tradeston) Again not my statistics, these are the
TOCs' statistics.
1030. But it is fundamentally warped by virtue of the fact that it
is not looking at it on the basis of like for like.
(Mr Linnard) Could I explain what I understand Railtrack to be saying
when they say services will be "substantially back to normal by the end of
January". What they are saying is that compared with the normal timetables,
the pre-Hatfield timetables, well over half the services will be running to
these timetables, ie, within the normal tolerances, and for the remaining
services, on the Anglo-Scottish inter-city routes all the services will be
running within 45 minutes of the normal timetable, and on the inter-city
routes all the services will be running within 30 minutes of the normal
timetable.
Chairman
1031. But they already are much longer. The point Mr Donohoe is
making is very straightforward. Originally the line between Crewe and London
ran trains at one hour 50 minutes. Of course that was under British Rail.
Then it went to two hours. Last Friday, for my sins, it went to three and a
quarter hours and somebody went from London to Crewe yesterday was and it
three and three-quarter hours. Frankly, coming and saying we are within X
degrees of getting somewhere near the present timetable is a load of nonsense,
is it not? There are vast numbers of people travelling in every day and
travelling into areas where there are vast numbers of problems who will not
recognise that as any kind statistic at all.
(Lord Macdonald of Tradeston) The speed restrictions are there because
engineers have found cracks in the rail. It is not, surely, for government
or a select committee to put pressure on the people at the rail level to say
"lift those restrictions and get us running on time" if there is a safety
risk.
1032. Not one member of this Committee has suggested that to you.
You gave us the figures and you said, "This is what these kind gentlemen have
told me. This is how it is all going to be alright. This is the future.
These are the figures." All I am saying to you is unless we can agree the
baseline there is absolutely no point in saying by Easter (which is what we
are talking about) we ought to be back to a timetable. Whose timetable and
under what circumstances and how many hours are we talking about?
(Lord Macdonald of Tradeston) Madam Chairman, we have round the table
a number of times a week the Health and Safety Executive and Railtrack and the
other bodies involved in this to try and ensure that we find the quickest
route to run a safe railway. We want to lift the speed restrictions as
quickly as possible but we have to be aware that they are there because rails
are said to be cracked and dangerous.
Mrs Gorman
1033. Lord MacDonald, you have heard of the expression "it will
never get better if you pick it." Do you think that the rail industry, over
and above all the other industries we have privatised, has been subjected to
an extra special set of standards and complications, that is to say is it a
political football and is that the problem?
(Lord Macdonald of Tradeston) I suspect that one of the problems is
that the railway was broken into too many pieces and therefore for all those
pieces to be put together again you need more complex structures than might
have been the case if it had been done in a different way.
1034. Do you accept that it must be one of the most heavily
regulated of the so-called deregulated industries. After all, we deregulated
many inefficient public industries, the car industry, British Airways, and all
the rest of it but without setting these impossible standards for them. Do
you think the railways are subjected to something over and above what might
reasonably be considered acceptable?
(Lord Macdonald of Tradeston) I do not think they are impossible
standards but they are standards of service that can only be reached with a
considerable investment from the government. The aim that you could eliminate
all subsidy from the railway was incorrect. The belief that railways were at
best static and probably in inexorable decline, which was the basis on which
many judgments were made, turned out to be wrong and therefore the subsidies
put in place at privatisation have had to be enhanced because of the
increasing demand and because of our belief that there should be an expanding
social railway in this country and that fares should be at an affordable level
against other comparative forms of travel. So for all those reasons I think
we have to have regulation in place to say that public money is well spent or
better spent than it has been.
1035. But there are so many bodies regulating with a finger in the
pie. Under your description of the Rail Recovery Action Group, we have a list
of half a dozen or more organisations who all have a finger in the pie of
whether or not the railways are considered to be operating satisfactorily.
How do you run a business with all these public bodies constantly coming in
and poking their noses into what you are trying to run?
(Lord Macdonald of Tradeston) That is the nature of trying to run a
business in a regulated environment and that has been my particular business
experience. I am sure that you would welcome the fact that, for instance, the
Rail Passengers' Council has some say now in how the railways are run and that
has been strengthened, I am sure, through the good works of this Committee in
its preparation of the railways part of the Transport Bill and I am sure, too,
that a Strategic Rail Authority is something that this Committee endorsed
because of the direction it could give to the expansion and development of the
railway. I believe, too, that the Health and Safety Executive has a role
round that table because of the concerns, which again I am sure have been
echoed in this Committee, about safety on the railways in the last two or
three years. I do not see that one would willingly exclude any of those
parties from the discussion of how best to run a railway, but I agree with you
that there should not be too many distractions for a management. The reason
we have got this group is to get people round the table so that they can all
talk without having separate meetings and in that way distracting Railtrack's
management from the real job which is getting the railway running again as
quickly as possible.
1036. Do you think you should judge an industry partly on the
degree to which the public is willing to patronise it, in which case the
railways are doing a good job because they have added to the number of people
using their services over the period of four years since they were privatised
or semi-privatised?
(Lord Macdonald of Tradeston) I agree it was very encouraging to see
the number of passengers using rail before Hatfield at the highest it had ever
been since 1947. You can see in our ten-year plan our political decision to
invest in that welcome change by taking the increase up from the 25 per cent
or so that we have had since privatisation in terms of an increase up to
another 50 per cent beyond that.
1037. Do you believe it is the public that is making this fuss or
the opinion formers?
(Lord Macdonald of Tradeston) I think it is a very understandable
shared concern and clearly the public, those involved in travelling by the
railway, will have every right to be very frustrated and vocal about it, and
it is not surprising at all that the media should echo that.
1038. We do not all go mad if one aeroplane falls out of the sky
and impose the standards that we are now doing with the railway and check
every single aeroplane causing chaos for so many individuals. My point is are
we not trying to make the railway do something which we do not expect of other
aspects of travel?
(Lord Macdonald of Tradeston) I hope our reaction is not
disproportionate. We know the public concern there was after Paddington and
there has been after Hatfield and we will try to respond to that, I hope in
proportionate way, but there is no doubt at all that the public concern that
has been expressed in Parliament and in the media has contributed to the
concern that Railtrack rightly have about the dangers of gauge corner
cracking. One hopes that they will be able to get reassurance from the expert
studies that are being delivered and from the closer relationship with HSE
under they aegis of government and regulators and that they will be able to
make judgments about the balance of risk involved. There is always a balance
of risk. I do not think anybody would expect to run anything as complicated
as a railway with 24,000 miles of track and 75,000 trains running on it
without accidents, but it is our job obviously to try and minimise those
accidents.
Mrs Gorman: Can I say one thing to compliment you on the fact that
recently you made a very sensible remark about the railways and the reaction
of people. You implied that this industry was not so much in chaos but that
people were panicking about it, that is the big difference. Is it not true
that in the four years since privatisation two of them have not had a single
accident involving rail where more than five people were injured or in any
other way harmed by it?
Chairman
1039. We can be kind to you, Lord MacDonald.
(Lord MacDonald) Of course it was a cause of great satisfaction for the
railways when they had those years with no accidents at all but, of course,
we have had three very serious accidents in recent years and we have to be
concerned about any reoccurrence of that, particularly if there is any
suggestion that bad maintenance or management of the railways is in any way
contributing to that. I think what we found after the accidents at Southall,
Paddington, and now at Hatfield, is that safety on the railways does repay
greater investment and greater scrutiny. You will be aware that we are
committed to putting new train protection systems across the network.
Mr Bennett
1040. On the West Coast Mainline, are you really confident that the
Government got a good deal with Railtrack about the modernisation?
(Lord Macdonald of Tradeston) That is a judgment, of course, that has
been made by the Regulator, whom I know you have interrogated at great length
on this. The Regulator assures us that he has gone very thoroughly through
all of the figures and the calculations made here and we have accepted his
judgment.
1041. It is a blank cheque, really. What guarantee is there that
this management that you have just described is going to deliver the West
Coast Mainline modernisation on time and to budget the very substantially
increased budget?
(Lord Macdonald of Tradeston) I would hope that the Regulator would be
involved in a much more rigorous way than would have been the case in the
past. The strategic role of Sir Alastair and the SRA gives us the reassurance
that, perhaps, was lacking in the past. I am grateful for the work this
Committee has done in setting up that new architecture for the railway.
1042. Are you also confident that the Government has not been hard
done by, by Virgin and by Railtrack over the West Coast Mainline?
(Lord Macdonald of Tradeston) We, of course, were unhappy with the
very significant increase in the cost of work that was going on on the West
Coast Mainline. In view of the analysis made by the Regulator we felt that
in the interests of getting a more effective and more efficient railway that
was a price that should be paid.
1043. In modernising the railways, generally, do you see more of a
role for third parties rather than Railtrack?
(Lord Macdonald of Tradeston) It is something that is being explored
through the rail modernisation fund and the special purpose vehicle that Sir
Alastair has been talking about. We hope that Railtrack will play a central
part in joint ventures or other financial constructions that were put together
in there. Of course the train operating companies, through the franchising
process, are being encouraged to invest in developing their own services
alongside Railtrack, alongside the SRA and, perhaps, other financial
institutions.
1044. In the metropolitan areas are you happy the Strategic Rail
Authority is going to take the lead? Would it not be more logical for local
transport experts to be having much more say on modernisation?
(Lord Macdonald of Tradeston) I believe that the SRA and the PTEs will
work well together.
Mr Bennett: Are you sure about that?
Chairman
1045. Why do you think that, my Lord?
(Lord Macdonald of Tradeston) From the contact that I have had with
PTEs I do not hear a great volume of concern about it. There was a time when
the Transport Bill was going through that people were particularly concerned
to lose the aegis of the Department over the grants. I feel that that concern
has lessened. Mr Linnard has been more involved with the PTEs in some of
these areas.
(Mr Linnard) Yes, I think that is right. Clearly there has to be a
balance struck. It is very difficult for the Government and Parliament to set
up a Strategic Rail Authority and not give it a purview which extends across
the country. There will be discussions, particularly between the SRA and the
PTEs, when franchises involving the PTE, or which will cover PTE areas, come
up for replacement or renegotiation. The test will be whether those
discussions and those negotiations can be concluded successfully. We have no
reason to think they will not be.
Mr Bennett
1046. The franchise replacement programme is going pretty slowly,
is it not?
(Lord Macdonald of Tradeston) It is going at a pace that Sir Alastair
and Mr Grant judge to be appropriate for it.
1047. Do you think that is appropriate?
(Lord Macdonald of Tradeston) At the moment we have no complaints
about the pace of it. It delivers the kind of investment and improvement and
services that are required. We have to keep in mind that many of these
franchises would not be expiring anyway until 2004.
1048. The second phase of the Channel Tunnel link, is there going
to be some more money from Railtrack?
(Lord Macdonald of Tradeston) That is obviously an option that
Railtrack have open to them up until 2003, to be involved in the financing and
purchase of the Channel Tunnel rail link part two. Preliminary work has
already started there and we should be able to press on with that,
irrespective. We will be looking for meaningful discussions in the early New
Year.
(Mr Linnard) They have told us very recently they would like to come
and talk to us.
Chairman
1049. How much money are you going to give them?
(Mr Linnard) I do not know.
Mr Bennett
1050. Are you feeling generous, entering the Christmas spirit?
When you shake your head we need it for the record, you are definitely saying
no to the Christmas spirit.
(Mr Linnard) We are not feeling generous.
1051. We are told that Railtrack is going to produce an efficiency
saving of 17 per cent over the next five years, that is a bit of nonsense, is
it not?
(Lord Macdonald of Tradeston) The Regulator has looked into this in
great depth we are assured. It is not 17 per cent of present costs, of
course, because the Railtrack revenues will go up very significantly. What
we are looking at there is an improvement in efficiencies across the board,
which the Regulator will argue in comparison to other formerly publically-
owned companies is not overly demanding.
Chairman
1052. Until Hatfield we did not know how inefficient they were, did
we?
(Lord Macdonald of Tradeston) The Regulator believes that this will
not put undue pressure on the company.
1053. It may be that there are others of us who think that a little
undue pressure on the company might produce some results.
(Lord Macdonald of Tradeston) Indeed. As Mrs Gorman says, this is a
company that is under pressure from many different angles, that is
understandable.
1054. That is not very accountable, is it?
(Lord Macdonald of Tradeston) We believe that it is clearly
accountable inside its regulatory regime.
1055. Are you satisfied that is a tough enough regime? It is your
money, our money, that they are walking way with.
(Lord Macdonald of Tradeston) I am sure Mr Winsor will have assured
you that he is running a much tougher regime than previously.
1056. You will have seen from the questions, the last thing I asked
him was why it was that he talked tough but gave more money that he intended
in the first place.
(Lord Macdonald of Tradeston) He has done that after a very thorough
analysis.
1057. I do not doubt that. The reality is that he, in fact, has
given more money.
(Lord Macdonald of Tradeston) That is because we are finding out the
true cost of running an efficient and expanding railway.
1058. That is how you were able to "up" the dividends they were
paid.
(Lord Macdonald of Tradeston) It was a very marginal increase in their
dividend. In presentational terms it was not something I would have done had
I been in the chief executive's or the chairman's position.
1059. You do not think they are very accountable.
(Lord Macdonald of Tradeston) I think the declaration of dividend is
something that they do in the light of what they hear from their shareholders
and from the City generally. Some of those factors may go into the financial
strength of the company on which it will borrow for the future. It may be that
it is looking for that strength to try and expand and develop the railway.
1060. They obviously do not know you have this sum of money tucked
away in the ten year plan and they are going to be able to get their hands on
it, do they?
(Lord Macdonald of Tradeston) If they read the plan it should be very
apparent to them.
1061. They obviously do not know that you have got this sum of
money tucked away in the ten-year plan which they will be able to get their
hands on.
(Lord Macdonald of Tradeston) If they have read the plan it should be
very apparent to them.
1062. Finally, my Lord, will you report back to us on the question
of electric trains. Can we have a written note once you have seen this
article. It would also be helpful if you could give us one or two up-to-date
reports on how many of the rolling stock problems are going to be solved
within the next six months. Do not worry, you are not going to escape without
me asking something about aviation. You are foolish enough to come and I am
foolish enough to ask you the question. There are a lot of people who will
be very dismayed when they arrive at the stations this Christmas with a valid
ticket (which in most cases is costing them a considerable amount more than
it used to) and they discover that they are unable to get on a train because
GNER has insisted that all the trains are booked in advance. As you know, in
aviation it is quite common for companies to overbook and insist on people
booking beforehand and many of the rail companies would like to move to that
system. Would you make it quite clear to them that the passenger comes first
and it is not for the convenience of the companies and would you also be
prepared to ask them what they intend to do for those passengers who are left
at Christmas on the stations unable to find a train to take them to their
destinations.
(Lord Macdonald of Tradeston) I will certainly put that on the agenda
of the next Rail Recovery Action Group meeting.
1063. Will that be before Christmas or after Christmas?
(Lord Macdonald of Tradeston) It will be this week.
1064. I am sure we will be delighted to hear the results. Of
course you will tell us?
(Lord Macdonald of Tradeston) I shall indeed.
1065. Could I say one thing to you in passing. This Committee is
very concerned about not just the future of transport in this country but that
the passengers should receive the highest, the most comfortable, and the
safest form of transport. We believe this is a Government that is investing
for the first time for many, many, many years in a way that will make that
possible, but it is absolutely vital to us to know that there are not people
benefiting from the public purse without performing their duties responsibly,
sanely and, in the ultimate, to the comfort of their passengers. May I ask
you to keep that very much in mind not only when you come to see us but when
you go to one of these many working groups. Finally could you tell us why the
aviation consultation document was given to everybody except the Transport
Committee?
(Lord Macdonald of Tradeston) Madam Chairman, I think it is being
published today and I hope it is on its way to you.
1066. Perhaps, my Lord, you would enter every member of this
Committee as a member of the press and then we can ensure we get copies of
documents coming from your Department in the future.
(Lord Macdonald of Tradeston) I shall certainly take that on board,
Madam Chairman.
Chairman: How kind. Thank you very much for coming.
