DEREK TWIGG, MR MARK LAMBIRTH AND MR ROGER JONES

19 JULY 2006

  Q420  Mrs Ellman: Do you think more could be done on linking up franchise specification, pushing to increase usage of the railway, with infrastructure planning? Are you satisfied with the way that operates now?

  Derek Twigg: I think the current structure works well. Again, I am not suggesting it is perfect and cannot be improved, but I think the partnership working with Network Rail and the train operating companies works quite well, the integrated control centres are in place in a number of areas of the network. Obviously, the investment has gone in in terms of the renewals and maintenance of signalling and so forth, which has helped improve reliability. With the involvement of train operating companies with Network Rail, we are actually putting pressure on them, obviously, to make sure that things work correctly on the railway and put problems right quickly. Also in terms of Network Rail, they have a challenge now because they have responsibility for performance, and they need to rise to that challenge, and I think they are doing so.

  Q421  Mrs Ellman: Do you think there is enough linkage between, for example, the Route Utilisation Strategy, Regional Planning Assessment and the High Level Output Statements? Are all these things working together?

  Derek Twigg: The High Level Output Specification will need to take account of what is going on in the Route Utilisation Strategies and obviously the Regional Planning Assessments as well, which are very important in looking at the short to medium term. Obviously, going into the High Level Output Specification in terms of the longer term, and obviously the longer-term strategy, we are also looking at 20-25 years. So I think for the first time in a number of years we have seen some long-term planning thinking taking place in the industry about how it can be taken forward, so they do all work into each other and certainly the High Level Output Specification will take account of them.

  Q422  Mrs Ellman: You are confident that is going to happen soon then?

  Derek Twigg: The High Level Output Specification work has started now, obviously to be completed next year, and that will be all part of that.

  Q423  Mrs Ellman: Franchises were reduced from 25 to 19. What was your thinking behind that?

  Derek Twigg: The franchise policy we are looking at currently is in terms of how we align them better with the Network Rail routes or regions, in terms of improving the sort of partnership and challenge that you were talking about a few moments ago in your earlier question. We think that would work better and we have been looking at the franchises in terms of how they sit in a particular part of the country, which is important as well, but I think specifically to fit in with the Network Rail structures is going to be a very important part of our thinking on that.

  Q424  Mrs Ellman: Routes out of London termini have been consolidated into one franchise but that is not happening anywhere else, is it?

  Derek Twigg: I am not quite sure, Mrs Ellman. Services outside London will obviously be covered by a range of franchises. That will continue to be our policy.

  Q425  Mrs Ellman: Are they not being consolidated into one franchise for the individual termini?

  Derek Twigg: You mean, for instance, West Coast going into Euston?

  Q426  Chairman: The services will be under one franchise. Is that not correct?

  Derek Twigg: No. If you want to clarify that later on, I am happy to write back to the Committee.

  Mr Lambirth: If you look at what we did in relation to the Midlands franchises, what we were trying to do there was to create an East Midlands franchise which broadly aligns with the Network Rail route which runs up the Midlands main line, a West Midlands franchise which aligns with the services around Birmingham and the West Coast main line and a cross-country route because there are always going to be routes which you cannot map on to the Network Rail route map. That is how we approach that. I do not think we have any plans to try and align services with termini in major provincial towns.

  Q427  Chairman: Yet, of course, there is a problem, is there not, for many of these major towns? They have exactly the same problems with commuters as they do in London.

  Derek Twigg: In terms of?

  Q428  Chairman: In terms of people using the system, lots of people getting on lots of trains and finding it difficult to get lots of seats.

  Derek Twigg: In terms of Manchester and Leeds, for instance, and Birmingham . . .

  Q429  Chairman: So why are you not using the same systems in relation to them?

  Derek Twigg: For a number of reasons. In terms of, say, the West Midlands franchise, clearly the impact of travelling to Birmingham is a very important part of that. We are actually increasing the services in all three franchises by some 3-5%. I think there are going to be 40 extra train services in terms of the West Midlands. It is the impact, of course, not just on local services we have to take account of but the longer services, Intercity services, and therefore the whole service we provide in a particular franchise area is very important in that respect.

  Q430  Chairman: Mr Lambirth, why did you not do it when you were reorganising West and East Midlands?

  Mr Lambirth: As I say, the 2004 White Paper announced a policy reducing franchises from about 25 to about 17 with the aim of trying to improve the alignment with the Network Rail routes, and the reason for that is to address one of the downsides ofnvertical segregation of the railway—it has advantages as well—in which you have a separate infrastructure operator responsible for one set of decisions, a train operating company responsible for another set of decisions and they need to work very closely together. So the intention was, and this isnbeing followed through, to align the two management structures. That is largely what drives the reduction.

  Q431  Mr Goodwill: If I could pick up something you said, Minister, in your very first comment, which was that you wanted to extend passenger services, we have heard from a number of witnesses already that the current franchise system is seen by some as being too prescriptive and mitigating against innovation and flexibility. We have heard this afternoon that the open access arrangements are only a handful at the moment and likely to be less than 10 in the future. Do you not think that the current system in effect freezes our railway network into a time warp and that we should think of ways to maybe break that current log jam?

  Derek Twigg: No, I do not accept that. As I have said previously, there has been a 42% increase in passenger journeys since the mid Nineties, over a billion passengers last year. The new franchises, East Midlands, the Cross Country and the West Midlands will see services grow by about 3-5%. So we are actually growing services. If you look at the West Coast main line, significant growth in service and further growth in service is expected from 2008-09, with three trains an hour going to Manchester, to Birmingham, and faster services both to Glasgow and Liverpool, more services possibly to Liverpool during the peak time, increased services on the West Coast line from Birmingham onwards, stopping off at more stations. So I do not accept that. The specifications where we do franchise, I think there is a lot of scope for innovation, for thinking about additional services. It is all also subject in terms of capacity and obviously how that works, but the facts are that there is a significant improvement and growth in the railway.

  Q432  Mr Goodwill: Would you say those comments would apply to Northern Rail, for example? When we took evidence last week the Dutch owners of the company basically said, "We operate the railway as we are told to under these fairly tight, prescriptive parameters set out in the franchise" and they almost said, "We don't really see our job as coming up with suggestions as to how this can be made better or different. We just operate it as we are told." Do you think maybe that is an area that we could look at in the future to try and introduce a bit more innovation and flexibility into a big network like Northern?

  Derek Twigg: We do not specify what the times of the trains would be. We say what the minimum number of trains may be that should be run per hour or whatever. So there is quite a lot of scope. OK, it is subject to the availability and track capacity and obviously whether it impinges on other franchises. All these types of issues have to be taken account of, but there is significant leeway if they wished to and obviously can justify doing that. If you take the Northern franchise, what was interesting there was that people were expecting cuts in the service. I looked at it with the Secretary of State and felt that actually, given the savings that were deliverable, it just did not stack up anyway. Secondly, Northern Rail felt they could grow the service within the Northern franchise. I am not saying it could ever be anything like some of the franchises where they have been paying premiums, because they obviously receive a heavy subsidy.

  Q433  Mr Goodwill: An 80% subsidy at the moment.

  Derek Twigg: But if you talk to Northern Rail, if you talk to the Managing Director, Heidi Mottram, she is very confident she can grow the services. They are also doing quite interesting things there in terms of involving passengers, in terms of involving local authorities, working together to see how they can improve that.

  Q434  Mr Goodwill: You mentioned that you are trying to align the franchises with the Network Rail regions. Would that make it easier to move to a more vertically integrated type of rail system?

  Derek Twigg: I do not really see that there is a strong argument. We have just had a rail review. We have obviously gone from nationalisation to privatisation, from Railtrack and obviously what happened at Hatfield, and I do not see why we would want to put the rail industry through another lot of upheaval again and a whole load of change, when actually, the current system is delivering significant results, both in passenger numbers and in terms of improvement in service. Further improvement is obviously possible and will happen, but also, Network Rail are working well with the train operating companies. I am not saying every relationship is perfect, but if I give you an example of Midland Mainline and how following changes that were made there in terms of how it was managed, both Network Rail and Midland Mainline, massive improvements in reliability and performance, and that is seen as significant in large parts of the country. So I think the relationship works well. I think it can continue to improve. There are still a lot of lessons to learn. I also think in terms of the track renewals and maintenance, it is very important that they work closely with the train operating companies.

  Q435  Mr Goodwill: Do you think maybe that important lessons could be learned from possibly a pilot project with, say, Merseyrail, who seem keen to get involved in more integration? Would that maybe allow us to take a better view as to other areas where we could roll out this type of policy?

  Derek Twigg: We discussed this in the White Paper, and the reactions on that and the Act. Clearly, there is an argument for it because it is pretty self-contained. I use it myself on a regular basis. It is a pretty self-contained area. But Network Rail obviously did not feel that was the best way to go, and they decided they did not want to do that.

  Q436  Mr Goodwill: Did they want to keep their empire in one piece?

  Derek Twigg: No. If you look at it, I think Merseyrail's current punctuality PPM performance is about 92-93%. I think it had been up to 94, even 95. They are one of the top performing train operating companies in the country. That is partly obviously because of the way they run it but a lot of it is also to do with Network Rail and the way they work and support them in terms of the maintenance of that particular part of the network. So they are already into high numbers in terms of punctuality, and they want to improve further. I think what has got to happen is to make sure that Network Rail and Merseytravel build on that relationship to improve it further.

  Q437  Graham Stringer: Is there not one figure that dominates all the thinking, whether it is you or the absent Treasury Minister's thinking, the £5 billion you put into the railway when it was expected pre-Hatfield that it would be about zero at the moment? When do you expect this figure to come down, and what will it come down to?

  Derek Twigg: We are going through the process now, as you know, in terms of the HLOS and of course the Spending Review, and I do not want to pre-empt any of them, but we are spending for this control period, that is the five-year period up to 2008, about £23 billion in terms of the railway. A lot of the increased expenditure has been down to, obviously, major renewals and maintenance work that has been undertaken by Network Rail because of the decades of under-investment and now the investment by Network Rail. Obviously, you would not need to have that amount of money in terms of the future but, having said that, we then have to look at what we need to do in terms of capacity as part of the HLOS process and also maintain the maintenance renewals and also the safety aspects of the railway as well. So at this stage I think the White Paper in 2000 said it is going up to round about £3.5 billion, but clearly, while the process is in train in terms of HLOS and the Spending Review, I do not want to pre-empt that at the moment.

  Q438  Graham Stringer: That is an interesting answer, Minister. Do you envisage—I do not know what they are; maybe you could tell us—that there will be investment in the 20-odd pinch points in the rail system that were identified in a previous White Paper? Can we expect improvement in the capacity of the railways over the next five years?

  Derek Twigg: I think you can expect improvements in capacity as part of the issue around HLOS and the next control period, which is part of the discussions, and of course, you will be aware that Network Rail produced their base case only a couple of weeks ago and raised a number of issues in terms of the pinch points you refer to and the investment in that. Reading is a typical example that I can quote there. Clearly, this is all part of the consideration we have been giving obviously with the regulator as part of the next control period investment. Clearly, there are a number of infrastructure improvements that can be made which will improve capacity.

  Q439  Graham Stringer: You are considering that. Can you be more specific about whether there will be any of them dealt with, or will it be five, 10, 15, 20 of these pinch points? The previous evidence we have heard from some expert witnesses said that there really are not any major investment decisions that have been taken for the future. We know the West Coast main line has improved and the fast link to the Channel Tunnel is under way but what major projects can we look forward to in the future?

  Derek Twigg: If you take, say, Reading, for example, clearly, in terms of the signalling, that has got to be replaced by about 2012, 2013, 2014, and clearly there are issues there about platform capacity, and obviously something needs to be done there. But clearly, we have to look at the whole picture in terms of how we deal with that and how all that is funded. There are, as you know, in terms of Birmingham New Street issues there in terms of the platform capacity and moving passengers around there. It is an interesting point you make in terms of the big projects. What I think passengers want most of all is a reliable, good-quality train service, and I want to see that continue. Whether that can be brought about by just basically putting extra trains on or extending the length of trains or platforms is one way of looking at it, but in terms of whether we can bring about infrastructure improvements, we can help that as well. It has got to be based on what is affordable and on what is determined as being a priority. I think what passengers want most of all is to ensure reliability, performance, and of course the cost of travel. They are the things that are important to them.