Uncorrected Evidence 219

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Oral Evidence

Taken before the Transport Committee

on Wednesday 20 February 2008

Members present

Mrs Gwyneth Dunwoody, in the Chair

Clive Efford

Mrs Louise Ellman

Mr Philip Hollobone

Mr John Leech

Mr Eric Martlew

Mr Lee Scott

Graham Stringer

________________

Memoranda submitted by the Rail Safety and Standards Board and by Peter G Rayner, Safety Consultant

Examination of Witnesses

Witnesses: Mr Anson Jack, Deputy Chief Executive, and Mr Stephen McKay, Safety Policy Adviser, Rail Safety and Standards Board; and Mr Peter Rayner, Consultant and Expert on Railway Operations and Safety, gave evidence.

Chairman: Good afternoon, gentlemen. You are most warmly welcome to our Committee session. We have one little bit of housekeeping before we start: Members having an interest to declare.

Mr Martlew: Member of GMB and Unite.

Graham Stringer: Member of Unite.

Clive Efford: Member of Unite.

Chairman: Gwyneth Dunwoody, Aslef.

Mrs Ellman: Member of Unite.

Q324 Chairman: Gentlemen, for the purposes of the record, I should be grateful if you would identify yourself.

Mr Rayner: My name is Peter Rayner.

Mr Jack: I am Anson Jack, Deputy Chief Executive of Rail Safety and Standards Board and Director responsible for policy, research and risk.

Mr McKay: Stephen McKay, Safety Policy Adviser for the Rail Safety and Standards Board.

Q325 Chairman: Does any one of you want to make a brief opening statement, or may we go straight to questions?

Mr Jack: I would just like to explain that the Rail Safety and Standards Board is an industry body, owned by the industry, and we work with the industry to help them to deliver continuous improvement in safety, performance and overall business performance.

Q326 Chairman: Thank you, Mr Jack. We will probably want to probe some of the aspects of that. Is the White Paper a long-term vision to develop infrastructure fit for the middle of the 21^st century?

Mr Rayner: No, in my opinion.

Q327 Chairman: In what sense, Mr Rayner?

Mr Rayner: It is short-term and it does not look very seriously at electrification in particular. It grudgingly accepts that there is a case for electrification and then it says the case is not made. I think that is perhaps the most short-term thing about it because, unless one looks forward to electrification, there is no way in which the emissions and all the other problems that we face can be tackled; so I believe it is short-term in that. I believe it also talks of cab signalling and muddles it slightly with another form of signalling, and therefore takes itself into the realms of something which is only an experiment. There is no real set of ideas that looks at strategic routing or many of the other things and, unless we address them, the railway will stagnate.

Q328 Chairman: What do you think governs that? Do you think that the dead hand of the Treasury is uppermost in this paper?

Mr Rayner: Yes. In my view, the reason electrification is not tackled is because electrification does mean spending money now and achieving those results long outside the five years that one might well have expected; so, yes, I do believe that that is the reason why. I think also that electrification needs driving centrally, because different partners within the railway have no real desire to do it. Train operating companies, Network Rail, had no real desire to do it; so the thing stagnated and then, of course, at Christmas time it was discovered that the skills, following the headlines, were missing. I therefore believe that the only strategic way forward for the railway is to restart the electrification and put money towards rebuilding the expertise, and perhaps doing smaller schemes like the Fylde coast from Blackpool, to build up the expertise so that you can then do big main lines. Money for that, I believe, would be well spent. Without going into too much detail, I find other pinch points are not addressed and therefore there is, for example, Ł200 million going towards New Street for something that is cosmetic and will not help the railway in the slightest. I believe that that Ł200 million should go to kick-starting electrification, which would be strategic and would take us a fair way forward. I believe that those opportunities are not in this paper; neither are routing strategies, like the Woodhead route. There are a number of mothballed railways. Perhaps not all should be brought back but, in a paper that purports to be a 30-year strategy, those subjects are not even discussed.

Q329 Chairman: Is there not sufficient encouragement for a proactive modal shift, do you think, to the railways? Is that nowhere in the paper?

Mr Rayner: I do not think that this is a paper about helping the railway at all. This is a paper about keeping the status quo and moving forward on things that do not cost a lot. I believe that, unless one bites the bullet of electrification and that is done - one has to come back to that and that has to be the way forward - the railway will stagnate. The only item of vision in the railway today is the scheme for Reading, which is going to go ahead. Yet this paper makes three references to New Street, and I have to come back to that. It is immoral to me that the Department for Transport's money can be used, Ł200 million of it, for something which is merely about selling pizzas - perhaps that is the cynical view - but a circulating area. They are going to create in New Street a large Rolls-Royce of a thing and leave, below, the two-stroke engine that it is now. You cannot improve the throughput of New Street station by the Gateway scheme that they are proposing. The signalling does not support it.

Chairman: Mr Rayner, you have started lots of important hares running there and we have questions for you.

Q330 Graham Stringer: This is precisely that point. I am not familiar with all the details of the New Street improvements, but I understand that there was to be extra platform capacity, extra throughput, and that would improve the whole of the network. Are you saying that there is not any extra capacity, any extra throughput, going to come from the New Street scheme? That it is just shops?

Mr Rayner: Nothing at all. That is not the case. Even the secretary of state said that it would make life easier for the passengers as they pass through. It is about a circulating area above and it is about developing property above New Street. It will not improve the throughput of trains. If you visualise New Street, it is two stations back to back with signals in the middle: two buffer-stop stations without buffer stops. You can come in from either direction at 10 m.p.h. and approach two red signals, and there is nothing between that red signal and the other one. There is nothing you can do to improve that. If you wish to improve the speed at which you come into the station, you cannot have the two signals back to back. If you wish to lengthen the trains more than six or seven coaches, you will in fact occupy two platforms - you will turn their two platforms into one platform. The Gateway scheme does not even purport to improve the throughput at New Street. There are very marginal improvements they might make with the odd coach here or there, but that is not about railways: it is about property.

Q331 Graham Stringer: Are you saying that there is not an inch of extra platform or an inch of extra rail created?

Mr Rayner: Very little. You might get another platform in the middle road, but you cannot get much more in. The footings of the Bull Ring are in your way for a start. You are constrained. New Street ought to be the Farringdon of Thameslink; the place where you go into the middle. I am sure that it is a good shopping centre. That is not ever going to be a terminal for a city the size of Birmingham. New Street is a suburban station in the middle of Birmingham and is not ever going to be the terminal. You will never have the Berlin Hauptbahnhof, if you look at it in Birmingham. It is a large station. You need such a station if you are to have a high-speed line; if you are to have a system. It is a great sadness to me, what is being done at New Street. They are not even claiming that it does anything for the railway.

Q332 Mr Martlew: Just on this and on the points that you have made, Mr Rayner. It is very interesting when you say that they were wasting Ł200 million at New Street - and that is arguable, but I will take it that you are right. Just put forward the process. Have you costed how much your proposals would be for the electrification and the other issues you mention? How much more Treasury money would we need?

Mr Rayner: I think that the Ł200 million that is going towards New Street - it is a Ł400 million job but money is coming from other parts - the Department for Transport's Ł200 million would start the electrification process. If you electrified the Great Western Main Line, I could not tell you how much it would cost because some of that cost will be in the Crossrail system.

Q333 Mr Martlew: Is it not a worry that we have all sorts of experts on the railways who have great ideas but they never know where the money is going to come from?

Mr Rayner: That is a possibility. The money comes from the Treasury.

Q334 Mr Martlew: How much more would you want from the Treasury?

Mr Rayner: All the money does. What I am saying to you is that with the scheme for, for example, the electrification of the Great Western Main Line - which is one that will have to come, I am fully sure - I could not put a price on that, you could not put a price on that, and very few people could, because we do not yet know how much will be paid for by the Crossrail, which will take you halfway to Reading. What I am saying is that, if you spend money on improving the cosmetics of New Street, which will not do a thing for the railway, that Ł200 million could be better spent.

Q335 Mr Martlew: We are talking about probably billions of pounds and you are talking about making a Ł200 million saving. Where does the rest come from?

Mr Rayner: I do not know the precise amount that the electrification would cost but, if we do not roll forward electrification like the rest of Europe is, then you will in fact end up with a stagnated railway.

Q336 Mrs Ellman: Is the White Paper, together with the High Level Output Statement, sufficiently joined up with other government policies in areas like spatial planning, environment and energy use?

Mr Jack: I think that the White Paper is a good start and to the extent that it needs to be. Because the High Level Output Statements cover a five-year period, I think they are joined up with other government policies. If we are looking 20, 30 years into the future, there are issues about how things will develop.

Q337 Mrs Ellman: So is it joined up or is it not?

Mr Jack: I think that it is sufficiently joined up at this stage, when one is looking five years out.

Q338 Mrs Ellman: Does everyone agree with that? Does no one disagree? (No response) What about the structure of the rail industry? Would you say that it is satisfactory, or should there be further changes?

Mr Jack: There is generally always a debate about the structure of the railways. It could be quite fun to have a debate for the next few years and to look at restructuring the railways; but, as far as colleagues in the railway businesses are concerned, the main task is to get on with delivering against the targets that are set, against improved levels of service, safety and reliability.

Q339 Chairman: You were actually asked about the structure, not the workings.

Mr Jack: Yes, but, with respect, Madam Chairman, the point that I am trying to make is that if the industry were invited to spend the next few years arguing about its structure and considering restructuring, then that is what managers would be focused on and not on delivering performance, safety and reliability for the passengers and the freight customers.

Q340 Mrs Ellman: Mr Rayner, would you say the current structure is fit to deliver those objectives?

Mr Rayner: I do not believe that the current structure is right. I agree with Mr Jack that too much tinkering may not be a good thing, but the problem is that the structure is wrong because there is still a contractor culture. There was talk of bringing contracting inside. Unless you have the right number of staff, unless you train those staff, unless you supervise those staff, unless you audit the working, bringing it in-house will not make any difference. I believe that there is too much emphasis on civil engineering and, indeed, that the railway is being run by a civil engineering culture; whereas the railway should be run by an amalgamation of disciplines. It is rather like a large boat. If you navigate that large boat, you need a master mariner on the bridge and you need an engineer in the engine room. Network Rail is turning the railway into being civil engineering-led, and it is not about civil engineering: it is about running railways. That is how they got in a muddle at Christmas time, because they did not address it as a running railway; they addressed it as a building site and the building site overran. I would not make substantial changes but I would remove the emphasis from too much engineering to the general skill of operating a railway.

Q341 Mrs Ellman: You have made some comments, Mr Rayner, about the adequacy or otherwise of the Office of Rail Regulation. You have said that it has been weakened. What do you mean by that?

Mr Rayner: I was criticising, in essence, the 2005 Act which reduced the powers of the Office of the Rail Regulator, did away with the Strategic Rail Authority and brought all the power to the Department for Transport. I believe that to be wrong. I believe that the Office of Rail Regulation has not been able to do what its predecessor did. It has not had the teeth. I believe that the Act of 2005, I think it was, has to some extent neutered the Office of the Rail Regulator. It did away with the Strategic Rail Authority, and so it all exists in the Department. That, I believe, is unsafe - unsuitable.

Q342 Mrs Ellman: Would you say that the Office of Rail Regulation has been proactive enough, particularly looking at what happened over the Christmas/New Year period?

Mr Rayner: It is extremely difficult to be continually complaining. If I were sat there as the Office of the Rail Regulator I might well have not moved, as he did not move. I think that they were slow to move. It is ever so easy to criticise after the event. They do not have the power that Tom Windsor had when he was the Rail Regulator and they have been much less strong.

Q343 Mrs Ellman: Is there sufficient enforcement on Network Rail to deliver its obligations?

Mr Rayner: I would think that it is there if it is used. I do not think that it is used enough. I believe that the Office of the Rail Regulator could have been stronger earlier; but it is extremely easy to criticise when there has been a nonsense. It all went wrong at Christmas time and many people within the industry knew it would go wrong, sadly.

Q344 Chairman: Why did not the people in charge know that it would go wrong? If it was general knowledge amongst the industry that this was all going to go pear-shaped over Christmas and the New Year, it did not require a great brain to work out that this might not actually do the railway a lot of good. Was it not known to the ORR? To be fair, was it not known to the Managing Director and certainly the Chairman of Network Rail? Why did it come as such a surprise to them?

Mr Rayner: I do not know, Chairman, why that was not spoken about. There were fears within the industry that they had bitten ---

Q345 Chairman: What part of the industry, Mr Rayner? Are we talking about some of these engineers? Are we talking about unions? Who are we talking about?

Mr Rayner: We are talking about middle managers, who were responsible for organising the engineering work that was to take place over Christmas. I think that they bit off more than they could chew and did not pull back in time. I think the reality of it is that they planned to do too much. If I had still been running the West Coast, I would not have shut both sides of Rugby at the same time. In fact, when they got out of trouble, they got out of trouble by going back to the time-honoured system of doing the left-hand side of the station and then the right-hand side of the station. What we would have done - we would have had to shut it for some period of time - would have been to set our stall out to shut it. It has been a different culture. It is the civil engineering-led culture that turns it into a building site and says, "We will erect plastic fences; we will put on hard hats, and we will deal with it like that". We - perhaps wrongly, and we made a mess of it from time to time - continued to run the railway and maintain it at the same time. We did not always get it right, but our main objective was to move trains. I do not think I would have - well, I am sure I would not have - authorised a complete block at Rugby over that period of time.

Chairman: Okay, we have got the message.

Q346 Mrs Ellman: Is the system of fining Network Rail likely to be effective, when really it is just more money from the taxpayer?

Mr Rayner: As far as I am concerned you are fining the taxpayer and shuffling money from one pocket to another; so I do not see that that is in any way anything to do with it.

Mr Jack: I was going to comment, and coming back to your earlier point about enforcement, that I think there really is a difficulty if one is looking for more enforcement action; that is, if the regulator is always enforcing then the regulated is inclined to sit back and say, "You tell me what to do". I think that both the industry and the public want to see Network Rail take responsibility and use that responsibility, and for the regulator to have a balanced approach to enforcement is the best way to encourage that.

Q347 Mrs Ellman: What is the role of the regulator then, if they should not act and they should not actually regulate?

Mr Jack: It is generally there to oversee and there is the potential threat; but if the threat is always used, then it effectively becomes the manager.

Q348 Mrs Ellman: Would you say that threat has been used too much?

Mr Jack: I do not have a particular comment on that. As Mr Rayner pointed out, using it a lot would have ----

Q349 Chairman: Come on, Mr Jack, do not be so shy! You must have a view. You may not want to comment on it but you must have a view. Let us into the secret. What do you think?

Mr Jack: The view I have is that the regulator should not intervene.

Q350 Chairman: You were not asked that. We got that point. Then you were asked, "Are they doing it too much?"

Mr Jack: I do not believe so.

Q351 Chairman: You do not believe so?

Mr Jack: No.

Q352 Chairman: So you believe they should not interfere but you do not believe they are? Am I with you?

Mr Jack: Yes, that is right. I believe that it would not be appropriate for them to intervene more.

Q353 Chairman: It would not be appropriate, but they are not doing it anyway.

Mr Jack: You would have to talk to the regulator's office about how much they are intervening.

Q354 Chairman: No, Mr Jack, I am talking to you. I will talk to the regulator; he is not going to escape.

Mr Jack: They are conducting an investigation and they will be considering and announcing what decision they are taking later in the month.

Q355 Chairman: And your view is that they do not intervene too often?

Mr Jack: I think that what they are doing is an appropriate reaction. I do not know how they are going to decide.

Chairman: Okay, we got there in the end.

Q356 Mrs Ellman: What about the current system of rail franchising? Do you think that it is adequate to deliver the improvements and growth that are required?

Mr Jack: It is somewhat away from the competence of RSSB but, as I have been encouraged to give a response ----

Q357 Chairman: You are. An opinion. We think that you are clever fellow. Tell us.

Mr Jack: The current system of franchising has many benefits in terms of encouraging innovative approaches to passenger service. It has delivered a significant amount in terms of growth. It has delivered a competitive environment, and I think that most people would say that, as a result of that, the taxpayer gets good value for money. On the other hand, it creates and has the potential to create a relatively short-term approach to some issues, particularly with the long asset lives of the railways.

Q358 Mrs Ellman: On balance, is it a system that will deliver the results we need?

Mr Jack: I think that it is capable of delivering the results that the country needs through good franchising. That involves good specification of what the taxpayer wants, what the travelling public wants.

Q359 Mrs Ellman: Is that the case at the moment?

Mr Jack: I think that there is still progress to go, but I think it is moving in the right direction.

Q360 Mrs Ellman: How much progress is needed?

Mr Jack: You give me the scale and I will give you a number.

Q361 Mrs Ellman: No, to deliver the results that we need in terms of growth and improved reliability.

Mr Jack: I think that the point about franchising is that franchising itself cannot deliver the growth, because there are a lot of issues that relate to infrastructure, management and investment.

Q362 Mrs Ellman: Do you see the current franchising system as a help or a hindrance to deliver the improvements that are required?

Mr Jack: I think that it is a help, because it gives the Government periodic opportunities to specify what it wants for the travelling public and to procure it.

Q363 Mr Leech: I would be interested to hear what Mr Jack and Mr Rayner have to say on this, but do you think that longer franchises would have a beneficial effect in terms of investment from train operating companies?

Mr Jack: If one is looking to get franchisees to invest, then longer franchises would be a benefit. There are other means by which the Government can secure investment without going for longer franchises.

Q364 Chairman: Mr Rayner, did you want to come in on that?

Mr Rayner: As far as I am concerned, I am not a great believer in the franchising method. I cannot see it being altered, but I will say this. For example, the franchises put out for the West Midlands 18 months ago: if they are going to be specified by the Department for Transport, who by and large have put misleading ones out in the case of the West Midlands - I happen to have been as aware of what was going on at the airport as I was what was going on with the railway with some other work I was doing - the two things are not compatible. In the context of the franchising system being a flawed system and totally in the hands of the Department to specify and to control the number of trains, I think that it is a bad system. If it was got right, however, there would obviously be advantages in a longer-term thing, because someone would invest, hopefully wisely, in something that was almost its own. It is like a long-term lease.

Chairman: I am now going to ask much shorter questions - and shorter answers.

Q365 Mr Hollobone: The RSSB facilitates a set of System Interface Committees to bring all the multiple players in the industry together. Is that not a sign that the industry has in fact become too fragmented and too complex?

Mr Jack: You could look at it that way, but if you have an industry that has more than one player - and, in the case of this industry, British Rail turned into about 100 players - then, if you do not provide a facility for them to come together, there is likely to be more disparate action. We therefore see this as a success of the industry: that it is enabled to come together; it can work on solutions jointly; and propose efficient and safe means of going forward.

Q366 Mr Hollobone: Would it be a good idea for train operating companies to play a greater role in specifying and implementing infrastructure improvements on the lines which they operate?

Mr Rayner: If they could specify and be part of going forward, yes. Given that the flawed system we have has to exist, it would be better for the train operating company to have a say, for example, in the scheme that is coming at Reading, which a lot of money has been put into; or indeed Virgin should have had a better chance to say what they wanted about what is going on at New Street. Clearly, the more people you can involve - if you have to have a silly, fragmented system in which people are relying on contracts rather than on vertical chains of command - the more liaison there is, the better; but it does not make the system right.

Q367 Mr Hollobone: Are the railways safer than they were before privatisation?

Mr Rayner: The railway is always safer than road or air or other things. There are degrees of safety. I would argue that the fragmentation makes safety more difficult to manage, which is why we have organisations like that represented by Mr Jack and we have the ORR. We have to have positions in place in order to keep the fragmentation safe. If I tell you that with the Teebay accident, which was a tragedy, there were 12 different organisations up there on Shap that night, all relying on contracts, one with another, to keep the railway safe. If you fragment the system into contractors, subcontractors and sub-subcontractors, you are going to have to have contracts in place in order to keep it safe. That is not going to be the safest way to run anything, but that is what we have got.

Q368 Mr Hollobone: How does the safety of the railways in the UK compare to the safety of railways in other European countries?

Mr Jack: In the years since privatisation the safety of the railways has been better than it has ever been, under British Rail and under pre-British Rail days. In the last three years there has unfortunately been one person killed in a train accident. There was never a period under British Rail when there were no fatality accidents for two years. On virtually every measure that one can think of the railway system is safer now than it has ever been. In comparison with European railways and worldwide railways, the British system is alongside the best.

Q369 Mr Hollobone: The White Paper specifies a target of a 3% cut in safety risk for passengers and rail workers by 2014. Are these safety targets achievable?

Mr Jack: The Rail Safety and Standards Board has just issued a three-year strategic safety plan on behalf of the industry. Within that plan, we have had a look forward to the five-year period of the High Level Output Specification and those 3% targets and, of the work that we have done alongside the industry, we are confident that those targets can be met.

Q370 Mr Hollobone: Mr Rayner?

Mr Rayner: I am sure that what Mr Jack is proposing he believes in. I do not know the measures he is putting. I think that to have a target like the one in the White Paper is meaningless, to be honest. That may make me a Luddite. If he has a plan to achieve it, then I hope he does achieve it. I do not think it is a target that is worth having. You work towards safety as best you can. There is no such thing as absolute safety. The only safe railway is a railway that does not move any trains. The only safe road is a road that does not move any cars. You have to have systems in place and you have to have professional people.

Chairman: They were aiming, through your system, of not having any trains over Christmas, Mr Rayner!

Q371 Clive Efford: Mr Rayner, are the Department for Transport's rail growth forecasts accurate?

Mr Rayner: No, I do not think they are accurate. They fly in the face of the National Audit Office. The points at which the railway becomes completely overcrowded and cannot contain it are different. The Department for Transport talks happily about the West Midlands and going into 2020 before they reach saturation point. The National Audit Office - or whatever the other thing is that I quote in my paper - says 2010. By the time they have finished in many of those places and what they are doing at New Street, they will be full up again. They conflict with other government statistics.

Q372 Clive Efford: Do you think the figures are inflated in any way?

Mr Rayner: I think that the number claimed of people carried - the claim in the paper that never have more people travelled by rail - is indeed an inflation. The way in which the numbers are counted is different from the way previously. It is quite simple why. If you travel from Hastings to somewhere in Scotland, you will be counted four times because you go on four different organisations. A ticket on BR from Hastings to somewhere in Scotland would count as one. If you buy a ticket for London with another London station in it, that counts as two. There is therefore a degree of double-counting. Although it is a time when we have a lot of people using the railway, to state "more passengers than ever" does ignore the double and sometimes triple-counting. That is therefore a problem that someone has to address.

Q373 Clive Efford: Can I ask you, Mr Jack, is it sensible that civil servants as opposed to industry people on the ground should specify the Intercity Express Project?

Mr Jack: I think, almost going back to the discussion we were having earlier about how one secures long-term investment, if one has relatively short-term franchises then someone has to do it or it would not happen. Yes, civil servants are specifying the Intercity Express Project. I am not directly involved in it myself but I have seen that they are very closely involving professionals in both the rolling stock and the infrastructure side of the rail industry; so I think that they have the best expertise available to them.

Q374 Clive Efford: Are you saying that you feel that the civil servants are basing their decisions on evidence from the right people?

Mr Jack: I believe that they are basing their specification on inputs from the right experts. I am not competent to judge the quality of the output.

Q375 Clive Efford: What other forms of rolling stock, apart from the Intercity 125s, are approaching their life expiry date?

Mr Jack: I am not an expert on the age of rolling stock. I know the stuff I travel on to work is probably 20 years old.

Q376 Clive Efford: Mr Rayner, do you have anything to say on that?

Mr Jack: I think the 142s and the 150s ---

Q377 Chairman: The 142s and the 150s?

Mr Rayner: They look like a little donkey going along, DMUs.

Q378 Clive Efford: Where are they used?

Mr Rayner: They are diesel multiple units. They are certainly nearly life-expired. The problem is - and I am sure that there will be other experts on rolling stock later - that it is sometimes cheaper for train operating companies to hire these older ones than it is some of the new. There are still units around which are not crashworthy, whereas there are other, crashworthy units not in stock. The whole question of how stock is hired and how rolling stock companies get rid of their assets or hire their assets out I think is worthy of examination, but I am not an expert in that or have not gone into it.

Q379 Chairman: Mr Jack, has anybody ever asked you your view? After all, that is one of your functions, safety, is it not? Has anybody ever asked?

Mr Jack: Our view about the age of rolling stock?

Q380 Chairman: Yes.

Mr Jack: I do not think they have directly but, whenever we are looking at things like new designs for rolling stock, we do in our analysis ---

Q381 Chairman: Yes, but that would be somebody giving you an existing project and saying, "Please look at it".

Mr Jack: Yes. When we look at the overall risk of the industry, we take account of the fact that older rolling stock has generally been built to a slightly lower standard.

Q382 Mr Scott: To what extent was Eddington's assessment of the suitability of high-speed rail to United Kingdom circumstances correct?

Mr Rayner: We have only the one high-speed line, which is the line from the Channel Tunnel link into St Pancras. There are plans for other high-speed lines. I have seen papers from different organisations. Something called Greengauge 21 has a plan for a high-speed line through the middle of England, which gets involved in the West Midlands. The problem, and again one of my criticisms of this document, is that, for a strategic document on the next 30 years, you would expect it to at least talk about high-speed lines and talk about alternative routes. There are alternative routes. There is an alternative route, for example, from Worcester right through the West Midlands and out through Burton, Derby. You could have an alternative route right through. The fact that they are going to build a tramway on it is ridiculous, but they are going to do so. However, if you did that, it would open up opportunities for a high-speed line. The French, when they built the high-speed line, did it to relieve the line to Dijon. There are a number of schemes. They are not debated in this paper.

Q383 Mr Scott: The Government has said that journey times are less important to passengers than reliability and flexibility of services. Does it follow? Would the London to Paris route have been as successful in your opinion if it was not a fast line?

Mr Rayner: No, it would not have been successful. In a way, partly what they are saying is true. You need to go as fast as is sensibly possible and you need high-speed lines; but, having gone there, you should not push it to the nth degree. People would be much happier with a high-speed line that you could rely on. One of the worst things is to have something you cannot rely on; so I can understand that emotion. Certainly we have to move forward with high-speed lines. We will be left even further behind. In France they are now going to generation four ---

Q384 Mr Scott: I am sorry to interrupt you, Mr Rayner, but it is because of time. Would it be fair to say that you would agree that high-speed lines across the country would actually encourage more and more people to use rail - whether it be quoted for one, two or three journeys, however many times they want to count people - but high-speed lines would make a difference?

Mr Rayner: High-speed lines would make all the difference and has to be faced.

Q385 Graham Stringer: We talk about an improving safety record for passengers. Is this mirrored by an improving safety record for workers on the railway?

Mr Jack: Yes, it is.

Q386 Graham Stringer: By the same amount? How many deaths have there been over the same three-year period?

Mr Jack: I could leave this document with you, if the Committee would like. It is a recent publication that we have issued of safety performance in 2007. For the third consecutive year there were no workforce fatalities on trains. Two members of the workforce were killed by being struck by trains, which is the same as the previous year. I am going to generalise now - I do not have the numbers at my fingertips - but in the last days of British Rail the rate of fatality of workforce was in between five and ten people a year.

Q387 Graham Stringer: There has clearly been an improvement in safety then for both passengers and for workers. What has been the cost of this?

Mr Jack: The way that railway companies go about improving safety is through progressive investment in modern techniques and technology, which is generally driven by operating the business more efficiently; and therefore there is generally not a cost associated with it.

Q388 Graham Stringer: Some of the improvements are in the Train Protection and Warning systems, are they not? Some is improvement in signalling itself. Is it not possible to put a figure on that?

Mr Jack: The Train Protection and Warning System did cost several hundred million pounds and that has led to a significant improvement in the reduction in risks of signals passed at danger.

Q389 Graham Stringer: When we had Network Rail here a few weeks ago and we asked them about signals passed at danger, they said that it was now no longer a problem; that the numbers had reduced and those SPADs that were recorded actually were not dangerous ones: they were technically where the train had gone past the signal. Is that your assessment? That, while we were all obsessed with SPADs eight or nine years ago, it is now not a problem?

Mr Jack: We run a model that monitors the risk from SPADs and it was baselined in 2001 at 100. The current risk from the SPADs is running at 12% of that. There is therefore still a small level of risk associated with SPADs. The Train Protection and Warning System is not a full, automatic train protection system. The installation of TPWS has substantially reduced the risk, but there is a small level of risk that remains.

Q390 Graham Stringer: Are there any recommendations you are making that have not been implemented? What is the next big step forward that will help hit that 3% target?

Mr Jack: What will help the 3% target is the delivery of a significant number of the investments that are already committed as part of Network Rail and train operators' investment plans. There are no big step changes that we anticipate. The largest level of risk remaining on the railways arises at level crossings. So far as level crossings are concerned, the industry has a significant number of initiatives, many in conjunction with highway authorities, to improve the performance at level crossings. Of course, one of the challenges there is that almost all of the risk arises from the behaviour of people that are not directly under the control of the railways, i.e. the road user.

Q391 Graham Stringer: I do not know if I asked the question clearly. Are there any recommendations you have made that have not been implemented?

Mr Jack: We generally do not make recommendations any more. Until two years ago, we conducted accident investigations. We no longer do that. The recommendations arising from accidents therefore come from a government body, the Rail Accident Investigation Branch. Where we make recommendations, they are entirely voluntary to our colleagues in the industry and they get considered by relevant industry expert committees. We are satisfied with them picking them up, duly considering them, and making appropriate decisions.

Q392 Graham Stringer: Have some of those appropriate decisions been to reject what you have recommended?

Mr Jack: Oh, yes.

Q393 Graham Stringer: Can you tell us what they are? The bigger ones, obviously; the more important ones.

Mr Jack: There are no big ones that ---

Q394 Graham Stringer: Tell us some little ones then.

Mr Jack: If we recommend that the industry considers a particular adjustment to a standard and the relevant experts in the industry get together and say, "We don't think that would bring about an improvement..." - but there are no issues of that nature where we are saying, "We think you should do this to improve safety" and anyone turns round and says, "No". There are just no examples of that.

Q395 Mr Leech: I just want to bring you very briefly back to high-speed rail. The West Coast Main Line is likely to be full by 2014. A new high-speed line to the North West is predicted by Network Rail to increase capacity on the existing West Coast Main Line by about 50%. Would you agree with that?

Mr Rayner: I would agree that, if you bring a high-speed line in, you would increase capacity considerably and by about that amount. The strength of bringing it in is that it would free up the present West Coast Main Line for the freight route that is going to be needed. If you have had Lord Barclay and others here in front of you, you will know that ---

Q396 Chairman: Mr Rayner, we are doing something else on freight. I am not letting you tempt us down that path.

Mr Rayner: I apologise, Madam Chairman.

Chairman: You have all been very helpful. I am sorry to have detained you longer than we should have done, but it has been very useful. Thank you very much indeed.

Memoranda submitted by Transport Salaried Staffs' Association and

the National Union of Rail, Maritime and Transport Workers

Examination of Witnesses

Witnesses: Mr Gerry Doherty, General Secretary, Transport Salaried Staffs' Association; Mr Bob Crow, General Secretary, and Mr Alex Gordon, Executive Committee Member, the National Union of Rail, Maritime and Transport Workers (RMT), gave evidence.

Q397 Chairman: Good afternoon, gentlemen. Would you be kind enough to tell us who you are?

Mr Gordon: My name is Alex Gordon and I am a member of the National Executive Committee of the National Union of Rail, Maritime and Transport Workers.

Mr Crow: Bob Crow, General Secretary of the RMT.

Mr Gordon: Gerry Doherty, General Secretary, Transport Salaried Staffs' Association.

Q398 Chairman: Did any of you have anything you wanted to say briefly, or may we go to questions?

Mr Crow: A brief statement, please, Chair?

Q399 Chairman: Yes. If it is not brief, Mr Crow, you will hear.

Mr Crow: We would like to highlight four areas of concern. First, the 30-year rail strategy has not addressed the waste and inefficiency caused by fragmentation and privatisation. The Government has ignored the recommendation by the Transport Committee in April 2004 that there should be a new public sector railway agency, given all the powers required to manage the entire railway system. We believe Britain's railways should be brought back into public ownership. Secondly, passengers are paying the cost of privatisation. The Government's Ł1 billion cut in funding over the next five years will see passengers paying through the nose with increased fares, while train operators continue to make massive profits. Even higher rail fares and the refusal to develop high-speed rail north of the capital will not help the fight against climate change. Thirdly, the Government plans to introduce 1,300 carriages and new high-speed trains should be a golden opportunity to protect what is left of British train manufacturing, and should be built in Britain. Finally, there is no industry-wide forum to address issues such as skills, training and staff assaults. We also need such a forum to discuss the report of the Railways Pension Commission, which met yesterday. Network Rail's unilateral decision to launch an inferior pension scheme is an attempt to sabotage those discussions.

Q400 Chairman: We will come to various aspects of that and so, if you do not mind, is it all right if we go to questions?

Mr Doherty: Yes, certainly, Madam Chair.

Q401 Chairman: Is the White Paper a long-term vision for the infrastructure for the middle of the 21^st century?

Mr Doherty: In a one-word answer, no, it is not. We were extremely disappointed, along with Bob, that the White Paper has failed to address what we see as the underlying problems, namely ownership of the railways and fragmentation. It is not the first time I have said that before this Committee. Even more than that, however, what was really disappointing about the White Paper was the paucity of comment on the possibilities of the economic benefits of high-speed lines; particularly high-speed lines from the capital to the outlying regions, at a time when our European counterparts recognise the benefits of investment in high-speed lines. In fact, it is very appropriate that we should be sitting before you in the month when a new high-speed line in Spain opens. It is publicly built at a cost of Ł15 billion; it can run between the two main cities in Spain at a speed of 220 m.p.h. Compare that one, 400-mile journey with the 80 miles that we have in this country, and which is all that we will have up until at least 2015 and long after that, given the lead-in times it takes to build high-speed lines. This was therefore a golden opportunity that has been missed, yet again, by the Government.

Q402 Mrs Ellman: Do you want to see the whole of the rail industry re-nationalised?

Mr Doherty: The "nationalisation" word is a word that people run away from. We saw what happened in the Northern Rock debate in the House this week. Our view is that there are different ways. If you are talking about going back to the days of the British Railways Board, when the railways were starved of investment by governments of all colours for over 40 years, no, we do not want to go back to that. What we do see at the moment, however, is public money being put into the railways, not to improve services, not to reduce cost, but merely to provide profits for shareholders. It is the same groups of companies that are bidding every time franchises come up. It is like "musical chairs" on the railways these days.

Q403 Mrs Ellman: What are the major changes that would bring actual improvements for passengers that you would like to see?

Mr Doherty: First of all, if you are talking about purely for passengers, you have to deal with the fragmentation issue. I heard Mr Rayner saying earlier that it was four different organisations involved in getting someone from Hastings to Scotland. The passenger does not really care how many organisations there are. What they want is a smooth journey. If those organisations are not working together and it affects the quality of service, as we say that it does - and that is right from the outset, getting information as to when trains run, getting the proper prices, because it is a minefield trying to get the right price, particularly the lowest price, these days - if that is affecting the quality that the passenger experiences, then that is the first thing you have to address. We say that the fragmentation, along with ownership, needs to be addressed before you actually start to address the needs of the passengers.

Q404 Mrs Ellman: Does the present regulation system work? What do you think about the Office of Rail Regulation?

Mr Doherty: We have a system that regulates, or supposedly regulates, on behalf of the passenger. You would really have to ask the passenger whether it does. I am a user of the railways and I do not think that you get the same level of service from the railways. There is nothing more frustrating than sitting in a train that is not moving and someone coming on and blaming another company. It is either a freight train that has broken down in front of you, or Network Rail has not got someone out. The passenger really does not care. What the passenger wants to know is when is the system, the industry, going to get them from A to B: not who is to blame.

Q405 Mrs Ellman: But what is your view about the way the Office of Rail Regulation operates at the moment?

Mr Doherty: I think that it operates as well as it can within the system that it has. What we are saying is that the system itself is broken. They are only a part of the system.

Q406 Mrs Ellman: Do you think that it could be more proactive within the system that we have?

Mr Doherty: It certainly does seem to be more reactive. It would react, for example, to what happened at Rugby over Christmas. It does not seem to take a hands-on view. Perhaps if it had a proactive approach to the major engineering projects that were going on, perhaps some sort of regulatory role to ensure that there were enough resources, for example, designed to ensure that the closures actually did what they said they were going to do.

Q407 Mrs Ellman: Do you think that the system of fining Network Rail is likely to be successful, or do you see it as just more money coming from the taxpayer?

Mr Doherty: I think it is a nonsense. Network Rail are not paying anything. At the end of the day, the taxpayer is funding the whole of the system. As I said before, the smokes and mirrors of the financial structures within the industry make it very difficult to see exactly where money is going. I think that there is more clarity about it these days than there ever was; but if you are referring specifically to fines, I do not see the point in it. What is the point? The only way that fines will change anything is if the enormous bonuses that the directors receive in a year-on-year basis are actually starting to be affected. That is the only effect, and it is really marginal.

Q408 Mrs Ellman: Do you think that there is any scope for the train operating companies to be involved in enhancements on the lines that they are operating on?

Mr Doherty: I think that would muddy the waters even further. If there has been any improvement in performance in the railway industry since privatisation, it is since the demise of Railtrack and the establishment of Network Rail. The difference, of course, is that Railtrack were running for profit; Network Rail is run on a not-for-profit basis now. The Government can call it. I have always said that I do not care whether it is the private or the public, as long as public money is being used to invest in the railway and not to make rich people even richer.

Q409 Mrs Ellman: You have spoken about a different system that you want to see; but, within the current system, what would you say is the basic problem with Network Rail? Do you think there is a problem?

Mr Doherty: If you are comparing it to Railtrack then it is a better model. My own personal view is that the governance of Network Rail - this 140-member governance that is supposed to hold it to account - definitely needs strengthening. There does not seem to be any proper holding to account of the performance of the board of Network Rail at the moment; but actually I think the structure is wrong in the first place.

Q410 Mrs Ellman: The White Paper talks about a 24/7 society and the need for rail to operate all the time. Do you think that is feasible?

Mr Doherty: I used to work in the railway system and I remember, for example, working on Christmas Day in the 1970s. It is not that long ago that actually - perhaps not in England, but certainly in Scotland - in those days we ran trains on Christmas Day. Now they seem to shut it down for long periods of time. If Network Rail have an ambition and an aspiration to run a 24/7 train service, then obviously we would welcome that. We have to recognise that the infrastructure is being used to huge capacity at the moment, and creating space for maintenance is a difficulty. I understand that; but I welcome the aspiration of a 24/7 service. In Japan, for example, where they have the high-speed lines, they do not run at night. The maintenance is done at night. It is as simple as that: it closes down.

Q411 Mrs Ellman: So you think that this aspiration is reasonable and could be implemented?

Mr Doherty: I do not know whether it can be implemented or not, when you have an increasing use of the infrastructure. Certainly if you create more capacity, by for example building high-speed lines, then you have the opportunity of closing down those high-speed lines at night-time for maintenance. As Peter Rayner said earlier, if you take the West Coast Main Line, if you had a high-speed mainline running between London and parallel to the West Coast Main Line, they at least would be interchangeable whenever there were major projects required.

Q412 Mrs Ellman: Are you then in favour of high-speed lines?

Mr Doherty: Absolutely.

Q413 Mr Scott: Can I ask Mr Gordon and Mr Crown this question. We have heard from the earlier witnesses that they felt that, since privatisation, safety for both passengers and indeed workers had improved. Do you agree with that?

Mr Crow: No, I do not think it has improved at all. In the run-up to privatisation, we should not forget that one of the major accidents happened under British Rail, which was Clapham; but it was in the run-up to privatisation, where we believe that financial considerations were given over the actual running of the railway network. Of course, you can do what you want with statistics. It may well be that only two people have died in the last two years, one of them being at Reading where a person was struck by a train early in the morning late last year. The point is that we do not believe that the safety systems in place are any better, in the sense of the word. We do not think that there is the involvement of the staff safety reps that should be involved in risk assessments. What we would like to do, of course, is eliminate all risk at all, but because there are less deaths it does not mean that there are less accidents caused by other parts of the railway industry as well. One of the biggest accidents we have is on the basis of tripping and slipping, especially at this time of the year.

Q414 Mr Scott: How do we compare with other European countries, in your opinion, with our safety records?

Mr Crow: It all depends what country you want to compare it with.

Q415 Mr Scott: We heard mention of Spain earlier, so let us take Spain.

Mr Crow: Per capita, I think the railway network is probably on a par with Spain; but the reality is that it could be a lot safer. We make it absolutely clear: we want public ownership of the railway network. We are not saying that because someone is a private company in a railway they are unsafe; but it is the systems that are in place. It is the magnitude of different companies. Our whole problem with the railway network being privatised is not so much the privatisation; it is the splintering of all the groups out there. You have got no captain in charge of the entire ship. That is our view: that the railway should be run with a captain in charge of the whole ship. Before, when British Railways was in being, for instance, if a light bulb went missing or went out of place in Inverness station, the chairman of British Rail could ring up and say, "Change the light bulb". Now we would have to find out which train operating company is responsible.

Q416 Chairman: I do not think that many of them actually did that, did they, Mr Crow?

Mr Crow: I am not saying ---

Q417 Chairman: They must have had a rather busy time!

Mr Crow: It might not be about changing a light bulb, but they could have a direct conversation. Now you have got a train operating company; a train operating company that contracts the maintenance out; and a maintenance company that then subcontracts the maintenance out to an agency. Everyone has got a solicitor involved and everyone has got a profit margin involved, rather than just picking the telephone up and saying, "It's our railway. I'm the controller. Please run it".

Mr Doherty: Specifically on safety, I have already said before to this Committee it is very difficult to make a comparison between the public-owned railway and the private railway in terms of safety and it does depend on what you count; Bob has indicated that. For me the issue is the perception, and I think there is a perception out there that the private railway operators are cutting corners in order to maximise profits and therefore that must undermine safety. I do not know whether it does or whether it does not, it is very difficult to make that comparison, but it is quite clear that that perception is out there, and that is a worry.

Q418 Mr Scott: There is one specific issue that I would just like to raise. As I said, it was alleged and not denied, so I am assuming it is true, that there have been unskilled workmen working at night who were coming from prisons basically - it was reported and I looked into it myself. Would you agree with me that that, if they are not supervised or trained in the proper manner, can only increase the problems of safety drastically and could only be done possibly for working on the cheap so to speak?

Mr Crow: Number one, we are not opposed to people coming out of the prison system and working on the railway network.

Q419 Mr Scott: I was talking about the safety.

Mr Crow: There have been a number of MPs that have come out of prison and worked back in the system over the years as well, so we are not opposed to that.

Q420 Chairman: Not many of them got back in here.

Mr Crow: Perhaps they should not have been here in the first place, but that is another issue. What we are trying to say is that we are not opposed to any person working on the railway system; it was not the fact that they had come out of prison that we were opposed to them working the railway network, what we were concerned about is that they were coming out of prison on the weekend, working the railway, what training were they given?

Q421 Mr Scott: That is my point.

Mr Crow: Could they be risking other people, lowering the safety standards or whatever for the people they were working with and, also, who is their safety representative because the rest of the workforce could go to their branch meeting, the rest of the workforce could see their safety rep, all they could see is their prison warder.

Q422 Mr Scott: Basically, would you agree with me that it was a way of doing it on the cheap?

Mr Crow: Absolutely.

Mr Scott: Thank you.

Chairman: Prison officers are quite well organised though so it might be quite a good line of communication. Mr Hollobone.

Q423 Mr Hollobone: The Government's funding projections for five years from 2009 to 2014 are based on a 34% growth in passenger revenue; do you think that is realistic?

Mr Gordon: May I come in on that? The vision in the White Paper talks about the growth in funding through the fare box but it is really quite a vulnerable statistic. We have seen - and it has just been discussed by your previous witnesses - the substantial increase that is claimed in passenger numbers travelling on the railway and whether there is double counting or triple counting going on or not it is the case that the system is running at very near capacity at the moment. Any downturn in the economy is bound to have a downturn in the fare box; any downturn in the economy is bound to put in peril some of the underpinning financial projections within this White Paper and we think that it is not based on solid foundations in the sense that it is trying to rely increasingly on income through the fare box which we hope is not going to go on a downward slide, but nevertheless that is not something that can be overlooked.

Q424 Mr Hollobone: What about the TSSA?

Mr Doherty: Perhaps just to expand on that, if you look back through the last century patronage of the railways was always in line with the economic conditions within the country; whenever there was economic growth patronage of the railway went up, whenever there was a decline patronage went down. For the last ten years we have had economic growth; the economy does appear to be less stable looking into the future than it has been in the past, certainly in terms of growth. It depends on the transfer of finances for the railway, but the intention of the Government to transfer from 50% to 75% does seem to be questionable and does seem to be based on continuing economic growth and we wonder what sort of account they have taken or what sort of risk management they have got in place should there be a downturn because if there was to be a downturn I have no doubt whatsoever that if some of these franchises were to lose out in the fare box and therefore the financial structure they have got in place for bidding for the franchise was to be undermined by that, then they would simply shut up shop and walk away because they are not taking any risk. It is the old adage, is it not, privatise the profits and nationalise the risk; the Government would be the one left to

pick up the tab in those circumstances.

Q425 Mr Hollobone: Given that switch in funding from operations to infrastructure, are you saying that that is not sensible and therefore poses risks for the railway, and what would you like to see instead?

Mr Crow: In which way?

Q426 Mr Hollobone: The Government's subsidy to rail operators is effectively going to decline over control period 4 and the travelling public is going to have to bear a bigger share of paying for the costs of the railway. If you disagree with that system, what would you like to see instead?

Mr Crow: In one way or the other the railways cannot purely run on passenger fares and there has to be some kind of subsidy. If you lower the subsidies of the train operating companies properly you have two options: you either have to expect a higher increase in fares or the workforce has to take a decrease in the amount of pay that is paid to them. The reality is that over the last ten years the train operating companies alone - never mind the contractors - have extracted massive profits out of the railway industry and they have had something in the region of Ł20 billion worth of public subsidy. That is on top of what they get in fare increases. To put it in simple terms, if you walked into a fish and chip shop down the road here and ask for cod and chips and said to the waiter at the end "How much do I owe you?" and he said "No, we will pay you to eat" you would think he had gone mad, but that is what has happened to the railway industry, they have actually been paid on top for running the railway system as well.

Q427 Mr Hollobone: You would like to see an increase in public subsidy as well as an increase in fares?

Mr Crow: We would like to see some fairness in it, not just an increase for the sake of having an increase. We would not want an increase that would go straight into the private coffers of the train operating companies; what we would like to see is a real increase in subsidy which would increase the amount of train journeys or a reduction in fares and also sociable train journeys as well. A lot of the train journeys late at night are on the basis that loved ones need to see their friends and family in hospital; they are the antisocial services that the companies want to run down because they do not make a profit out of them, what they want are the peak journeys from the 0645 to the 0945 at night, the rest of the service has become a nuisance to them.

Mr Gordon: If I could just add to that, Mr Hollobone, we completely acknowledge that the pre-privatisation level of subsidy was three times less than the current level of subsidy the taxpayer is paying to the privatised industry. Our criticism is what is happening to that subsidy, and our criticism is that it is leaking out of the industry to the tune of about Ł6 billion since 1996, Ł6 billion over the last 11 years, and that has gone into the pockets of shareholders and into private banks, lenders. The premise of railway privatisation, that it was going to bring private capital into the industry, is fundamentally turned on its head when you look at the reality, which is that it is taxpayers' money haemorrhaging out of the industry year on year on year, whether it is in the pockets of train operating companies or whether it is in the banks that underwrite Network Rail.

Q428 Mr Hollobone: Do you have an estimate at all of what could have been done with that Ł6 billion in terms of output on the railway?

Mr Gordon: We could all have a wish list but Ł6 billion is more than the annual subsidy for the entire rail sector so you get a clearer idea of the immense potential that is being wasted at the moment. In addition, we have also pointed out in our written response to the White Paper that there is a tax fiddle that is being turned a blind eye to currently by the Government, a tax fiddle that is going on whereby rail companies are paying about Ł1.3 billion annually in unpaid tax which should have been collected by the Treasury. It seems quite incredible that this is tolerated when we are told that budgets are tight and the public sector has to get rid of needless waste. The whole structure of the rail industry is one that is rife with waste and haemorrhaging of public resources and it really does need to be looked at in a much more root and branch way than this White Paper attempts to do.

Q429 Mr Hollobone: Could you explain to the Committee the basics of how that tax fiddle works? It is a very large sum of money; presumably if that is right then Revenue & Customs would wish to investigate that. How are they doing that?

Mr Gordon: We have certainly made the information that we have available to Her Majesty's Government and we are urging them in fact to investigate that. We of course can furnish you with the paperwork and furnish the Committee with any information that you require.

Q430 Mr Hollobone: My last question, Chairman, is about the difference between regulated fares and unregulated fares and the growing divergence in those prices. Are you concerned about the effect that that may have on certain services, for example overcrowding on trains which offer Saver tickets?

Mr Crow: What is happening in our view is that the fares have purely been devised on the basis of maximum income and in fact sometimes it is on the basis of keeping people off the trains. When you see some of the prices of the fares, they are unbelievable. There are different standards of fares that people do not understand, that if you get on the internet you can get a cheaper fare, but some people have not got access to the internet. We believe at the end of the day that rather than looking inwards, keeping people off the train services because they become overcrowded and putting fares up, what you need to do is to use those resources to increase capacity on the railway network. As Peter Rayner said earlier on you can only increase capacity on the railway network if you give people another option and surely a fund should be set up on the basis of rejuvenating the railway network by having a further high speed rail line out of the access. We have had over the course of the years people coming in and taking a level of profit from certain companies if they reach standards; we believe that a percentage should come out of those fares on the basis of increasing high speed rail links which will increase the capacity for everyone to use the railway network.

Mr Doherty: In relation to the fares debate that is going on, just before Christmas there was a media frenzy about the increase in fares. I actually did write to Ruth Kelly to see if we could get her to extract from the train operating companies just how many of these mythical cheap fares were available, particularly at times like Christmas, because they do not publish them. They will tell you that you can buy this cheap fare if your granny happened to be born on pancake Tuesday and there was a full moon that day and you have access to the internet, but even now if you have access to the internet all of a sudden the Trainline puts on a booking fee, without any announcement whatsoever, so the fares that were available or at least have been advertised as available are subject to a booking fee if you book on the internet. They are not available if you go to the booking office, they are not available if you do not have access to the internet, and if we are talking about social inclusion it does tend to be those people who are not relatively well off who do not have access to the internet.

Q431 Chairman: Come now, Mr Doherty, you are not being cruel enough to suggest that the railway companies are not offering any large number of these cheap fares, are you?

Mr Doherty: I am saying they are not telling us how many they are offering.

Q432 Chairman: What was the answer you got from the secretary of state?

Mr Doherty: I have asked her to take it up; I have not got a reply yet. The train operating companies, Chairman, do not tell us, they say it is commercially sensitive.

Q433 Chairman: Has any of you ever set up a conscious experiment to try and work out how many named journeys are undertaken between particular points and how many cheap tickets are available? If nobody else is going to do it, why does the union movement not choose to find out how many cheap tickets are available on a particular day by asking them?

Mr Crow: We did, Chairman, have a meeting last year in Parliament over the question of fares.

Q434 Chairman: Forgive me, you can have as many meetings as you like, Mr Crow, what I am saying is why has this not been investigated using the facilities you have available?

Mr Crow: We have looked at Fares Watch and other committees that are being set up around the country on the basis of how many different fares there are. Most of the advertised cheap fares - if you buy the Daily Mail or the Daily Express you get a cheap fare here or a cheap fare there.

Q435 Chairman: I do not have the advantage.

Mr Crow: No, nor do I, but what I am saying is that is where it is mainly advertised.

Q436 Chairman: I am still asking you for evidence. Are any of you able to put any numbers on particular routes where you do not think there are large numbers of cheap tickets?

Mr Doherty: The answer to that is we have not done that. There was a debate, as I said, prior to Christmas and we asked the specific question because it was the view of the train operating companies that we were being unfair and we were quoting the dearest fares, and I can understand that. It is surely a reasonable question then to ask them, when they say that the fares are available, to tell us how many actually are available.

Q437 Chairman: The answer is you did not get an answer.

Mr Doherty: At this stage they say it is commercially sensitive. We have asked the secretary of state if she can find out; if we cannot get it from her then obviously we will have to look at other means by which we can get that information.

Mr Gordon: If I could just add, Chairman, the other issue that has been raised about the regulated fares is that the train operating companies have the ability to restrict the validity of regulated fares far more than was understood, I believe, at the time when franchises were let out. So we have seen a situation where although they can raise the price of unregulated fares - and that has taken most of the criticism - the fact is that the hours when you can actually buy and use regulated tickets have been greatly restricted at the same time. That is almost as great a scandal as what has gone on with raising the unregulated prices.

Q438 Clive Efford: Could you tell us what you see as the reasons for the two major engineering overruns at Liverpool Street and Rugby over the New Year?

Mr Crow: The one at Rugby, it is quite clear, was an overhead line maintenance problem where the work had been subcontracted out. What happened was that Network Rail had subcontracted the work out for overhead line renewal work being done over that period, with maximum access to the railway network. They could not get into a situation where they had enough engineers to work, and what actually happened in some of the circumstances was that there were overhead line members of staff who actually work for Network Rail who were prepared to actually come and help out, and they were told you could not have a second job. Then they found out that they were running around the place offering people who did not work for Network Rail a second job to come and work at Rugby. It demonstrates the point once again, that if this work had been done in-house it would not have happened; the question of Liverpool Street falls into the same situation. You had a contractor there called Colas that is an amalgamation of two separate engineering companies, and it failed to deliver, with the removal of the bridge at Liverpool Street, enough labour. Once again what you had was Network Rail was in charge of the overall job but the actual people working for them were a number of contractors and subcontractors. Since then we have now seen Ian Coucher - I think he is the chief executive now since John Armitt has moved on - saying that a number of these functions will now be brought in-house. We are not talking about bringing them back in-house because it will save money or on the basis of some kind of face save for Network Rail, but if Network Rail had been in charge of that project from the start of undoing the first electrical wire to putting back the last washer when that job had finished, we would not be in the situation we are now. Yes, there are always faults, whether it is a nationalised industry or a privatised industry, but it brought it home to bear once again. What we have been trying to stress is that all the infrastructure now is brought back in-house and the safety record has improved, but the renewals are still out of house. It seems to us only natural that if you can bring the infrastructure back in-house and it has been a success then bring the renewals back as well and it can be a double success.

Mr Doherty: I do not know what happened, I can only tell you what Network Rail say happened, and it is not dissimilar to what Rob says. This governing structure that Network Rail has - as I say, I am a member of that and there was an interim report to that body from the board of Network Rail the week after Rugby was up and running again. The issue here as I see it is that Network Rail are the people who suffered the reputational damage as to what happened in Rugby, and the other one to a lesser extent is Virgin because they were the main train operating company on that section of line and they were completely helpless and blameless in the whole situation. That again is symptomatic of the problems and the structure that we have in the railway industry. If the railway itself had been one body and it had caused that then there is no issue about who is to blame here, there is no issue about whose reputation suffers, there is no issue then if there is compensation required as to who is to pay that. The structure lends itself to this kind of blame culture, but as I mentioned before when he is sitting in a train the passenger really does not care who is to blame in all of this. What the passenger wanted to know was how they were going to get from Birmingham to London after New Year and, by the way, it ended up that I had to put up with my mother-in-law for another four days because she could not get back up the West Coast Main Line, but that is a different problem.

Chairman: I do not think we want to intrude on your private grief.

Q439 Clive Efford: Are you both saying then that it is not just a one-off incident that happened over that period where Network Rail perhaps was over-ambitious over the New Year period, but that there is something in the structure and the way that they operate?

Mr Crow: When Railtrack was in place it broke itself into five regions, it became five separate companies, basically autonomous of each other, and they had the opportunity then to subcontract the work out. We then had the crash at Potter's Bar, we had the crash at Hatfield, we had the crash at Paddington and as a result of that it all came back on the basis of Network Rail being set up as a result of the bankruptcy of Railtrack. What took place then was that they let one contract out in the Reading area to see if they brought that back in-house what would it mean in terms of the cost of materials, the cost of labour and how much profit they could make; it became a success overnight so they went for another contract and that contract produced a success. Then what Network Rail moved to was that they bought all the materials so the companies could not have some kind of opportunity to say they were going to buy the materials and what the costs were, and that made another saving for them. They brought the infrastructure back in and the safety record has gone up since the infrastructure has come back under Network Rail and the costs have gone down. The renewals work - which is no different to maintenance, it just means a bigger part of the component is renewed rather than maintained - is still let out to the private industry; our view is that if you can make a success out of the infrastructure being brought back in-house then why not bring back the renewals as well and have direct control? As Gerry said, we knock Virgin when they do wrong, but I have to say Virgin had nothing to do with the incidents that took place at Rugby and One Railway, owned by National Express, had nothing to do with what happened at Liverpool Street at Christmas.

Q440 Clive Efford: Can I just clarify something that you have just said, because we have taken evidence about what went on over the New Year and we have been told that there is a list of engineers that was produced and a substantial number of those engineers did not show over that period to do the work. What you are saying is that there were engineers available, maybe not the ones that were on that list, who were directly employed by Network Rail, whom they could have brought in to get that work done, but because they were not subcontractors they refused to have them, hence the work did not get done and we had the overruns that we saw.

Mr Crow: Yes, Chairman; you have seen the list and the amount of companies that were involved and all those companies were quite clearly subcontractors of the main contractors that were supposed to have been doing the renewals work. There were directly employed overhead line workforces working for Network Rail who volunteered to work over the Christmas and New Year period and were told that you cannot have a second job, e.g. you cannot work for Network Rail and work on this job because it was designed as a contractor's job, only to find out that some of the contractors that were turning up to work were doing a second job before they actually came and did that job.

Chairman: We are getting very tight on time so I am going to call Mr Stringer.

Q441 Graham Stringer: If I could follow up Mr Efford's question, when we had Network Rail before us and some of the other people involved in the problems over the New Year we were told they could not get the engineers; since that inquiry has been televised I have had two or three emails saying that actually what has happened on that site and what has happened at other times is that people turn up and they sit in their cars, eat their sandwiches, have a flask of tea, they have a game of Bragg or whatever and actually they do not do the work. Is that something that you would recognise?

Mr Crow: They do not do the work?

Q442 Graham Stringer: Yes, that they stay in their cars - they claim the money, sometimes people who do not exist claim the money, so there is a big fiddle going on. Is that something that happens?

Mr Crow: I would not like to set hares running and say there is a big fiddle going on, that people just turn up. I think what may have happened is that you have a casual group of workers who may well be used by an agency who says we require you tonight and then when they turn up they are not required and will be sent home. I do not honestly believe that the company is going out there and claiming money for work that has not been done - that is not what I am complaining about. What we are complaining about is why, with the list of all these different agencies, when Network Rail could actually get hold of the entire workforce and say we are going to need a overhead line maintenance facility to do the work it was not done.

Q443 Graham Stringer: I do understand that, but I am testing it. People have sent me emails and I am just wondering whether you recognise it.

Mr Crow: No doubt that has gone on. There is a film that we produce called The Navigator and after privatisation of the railway network these issues went on, but they were going on 50, 60, 70 years ago as well. With casual labour you do get an element of corruption because the reality is that you only get paid for the actual time you work - I do not know about that specific issue at Rugby and Liverpool Street, whether people were sitting in their cars and playing Bragg or whist. I suppose they play other sensitive games rather than Bragg or whist any more, but certainly I do not know about those instances.

Mr Doherty: Again, I am relaying back what Mr Coucher has said to the governing body of Network Rail; what he said was that it was not just an issue of the quantity of subcontractors or overhead line people, it was the quality of the work that they were getting from the agency staff. The words that he used were that they had loyalty to their wallet, not to their employer, and what he said was the whole situation was exacerbated because of the quality of the work that these agency staff had carried out - what he referred to as snagging. In other words, the work that they had done had to be checked and presumably redone whenever the quality had not met the standards. That exacerbated the overruns and it in fact contributed quite a lot to the overrun, particularly at Rugby. What he also said was that it was Network Rail staff that came in and actually got the system up and running again, and indeed he said that at times they had to send Network Rail staff home, such was their loyalty that they were actually working over the allotted hours that they should have been as far as safe working is concerned. Again it comes back to is the structure correct? What about the public ethos? The railway workers that I certainly experienced when I worked on the railway wanted to do a good job to get passengers from A to B. There are always things going on in railway systems, I accept that, but the structure that we have quite clearly is proving not to be fit for purpose and it really is time.

Q444 Chairman: Did Mr Coucher, since he had the direct responsibility for controlling all these particular individual contractors, say to you or the governing body that this was something with which he could not work and that at any point he had not been able to check the quality of the work?

Mr Doherty: What he said was they were not in direct control of it, Bechtel was in direct control - this was at Rugby.

Q445 Chairman: Did he point out the reason that he was not directly in control was because he had appointed Bechtel as the project director?

Mr Doherty: He said that Bechtel had been appointed as the main contractor for the West Coast Main Line upgrade, which was before Network Rail was set up, when it was Railtrack. It was Bechtel who then subcontracted the work and there were eight other contractors. The only difficulty that had been identified according to Mr Coucher was the subcontract for the overhead lines. There must have been other subcontractors working on things like renewal of the tracks themselves and the signals et cetera, but he did not indicate that there had been any problems with the subcontractor for that particular work, only the overhead lines. That begs the question are there actually enough resources, bearing in mind that there were 31 projects going on over that period; are there enough resources in the country to take on that amount of work over that short period of time.

Q446 Chairman: I accept that, Mr Doherty, but let me put it to you in this sense: you are the general secretary of your union, which is an efficient union, full of a lot of hard-working and bright people. If something went wrong with one of your union organisers at some point, who would take the can back to your executive committee?

Mr Doherty: Me.

Chairman: Thank you very much. Mr Stringer.

Q447 Graham Stringer: A question I have asked almost every person from the railway who has come before us over the last few years is the public subsidy to the railways has gone up to Ł5 billion, and it is scheduled to reduce to Ł3 billion per year over the next five years. That is hugely more than the public subsidy during the nationalised period, yet when you look at the punctuality and reliability figures the railways are not performing as well as they were pre-Hatfield. Why is that, can you give us a simple explanation - more money in, worse service?

Mr Crow: Number one you have got the situation that Gerry opened up with on the basis of public ownership versus nationalisation; we are not saying that nationalisation was fantastic but it was a better system than the one we have got at the moment. Number one we had a joined-up railway so every aspect of the railway network was controlled by the chairman of the board through his advisers and, secondly, on top of that what you have got is a massive amount of skimming-off of money into profits. We now have a situation where I would say that safety is being compromised purely for profits because every pound that is spent by the train operating companies once they get the franchise is a pound extra that can be given back as a dividend. The contradiction is that the private companies' first onus is to produce a dividend for their shareholder.

Mr Doherty: The simple answer is that the way that railway privatisation was sold to the nation was that the efficiencies in the private sector would mean a reduction in the subsidy.

Q448 Graham Stringer: No subsidy they said.

Mr Doherty: No subsidy; certainly the premise was that you would get better quality for less public subsidy. The reality is that the complete opposite has happened. If you want to look for reasons there must be innumerable reasons: there are 20 odd train operating companies who all have to make a profit; British Rail never had to make a profit, so that is an added cost to the system even if everything else was the same. There are 22 train operating companies having 22 human resources departments, 22 procurement departments; the economies of scale of one industry have been lost and that must be increasing the cost to the industry wherever it is coming from, whether it is from the fare box or from the taxpayer. What we are saying is we have had ten years of it now; how long are we going to put up with this before somebody gets a bit of sanity into the situation and says that the premise on which it was sold has not delivered and it is time to look at a different structure.

Chairman: Thank you, gentlemen, you have been very helpful, I am very grateful to you all. Can I have my next set of witnesses, please?

Memoranda submitted by Bombardier Transportation Group and Angel Trains

Examination of Witnesses

Witnesses: Mr Colin Walton, Chairman & Chief Country Representative, UK & Ireland, Bombardier Transportation Group and Mr Haydn Abbott, Managing Director, Angel Trains, gave evidence.

Q449 Chairman: Good afternoon to you, gentlemen, I am sorry to have kept you waiting but I am afraid that we have been drifting a little on our timing today. Can I ask you firstly to identify yourselves for the record? On my left.

Mr Abbott: I am Haydn Abbott, I am the Chief Executive of Angel Trains Group.

Mr Walton: I am Colin Walton, I am the Chairman & Chief Country Representative of Bombardier Transportation in the UK and Ireland.

Q450 Chairman: Thank you, Mr Walton. I should explain to you both, in case you think it is a deliberate ploy, in about ten minutes the members of this Committee are going to leave you, perhaps for some reasonable amount of time; please bear with us, if there is a division called then of course we will have to suspend the Committee. Can I ask either of you if you have anything you wanted to say?

Mr Abbott: Nothing.

Mr Walton: Chairman, I have a brief statement I would like to add to our document we have already sent to you. In general Bombardier welcomes the 30-year HLOS and particularly the rolling stock plan; we believe it is long overdue. We are disappointed that there are not specific actions actually in there in relationship to project timescales or products or who leads and when they would lead. In terms of projected rolling stock provision, the 1300 cars that get regular mention, we have some concerns surrounding that as we have always maintained that for a railway fleet of the size that we have in the UK some 400 cars per year are required. We have seen no real major orders for the last three years; that is 1200 cars there as a backlog and so we can see very little growth or easing of passenger ridership. We would also point out that even if an order was placed today it would take some two years to deliver the first cars, and our information is that it is likely that the major orders would come towards the end of this year and therefore we have already lost two years of a five year plan, so again we have some concerns in that area. We have always maintained that peaks and troughs are a real challenge to particularly the manufacturing industry, and we all remember with a good deal of pain what happened in 2004 with the slam-door rolling stock. We have been maintaining for some while now that 2014 becomes a peak; it is very difficult to manage a peak and it is also not cost-effective for the taxpayer; we have always said that a programme of sustained manufacture would give at least a saving of something in the order of 10%, so we are very much mindful of the peaks and troughs scenario. We believe that the DfT are the best people to manage the peaks and troughs because they have the overview and it seems to us that what they are looking at doing is putting the emphasis on the train operators who, by definition, have a very short franchise duration of some seven years on an asset that is valued over 30 years. It does seem to us that we need to find a better way of doing that. There are regular tripartite meetings we are told for the next stage with DfT and Network Rail and the train operators, but neither the ROSCOs nor the manufacturers are involved, so again we need to see how that pans out and works.

Q451 Chairman: Why have people been excluded, Mr Walton?

Mr Walton: I do not think, if I may say, it is a case of deliberate exclusion, I would imagine that the issue is complex and therefore the fewer people around the table with a view is possibly the best way forward.

Q452 Chairman: Surely if I am your customer then I am going to obviously know how my business is going to grow and I ought to talk to the people who will do the job, should I not?

Mr Walton: That is our view and we have asked the Department for clarification; we are in discussions with them because we feel that we have a lot to contribute to such a discussion.

Q453 Chairman: Mr Abbott, you are quite an important player in this establishment; have you pointed out to the Department that you should be included?

Mr Abbott: Yes, we pointed out to the Department that we own roughly 40% of the UK rolling stock, which means that we are in a unique position to help in the implementation of the rolling stock plan in terms of cascades. We have demonstrated our ability to invest in new rolling stock, both in the UK and more recently outside of the UK, and we clearly have developed procurement expertise in rolling stock which is probably second to none in Europe today because we have as a company purchased more rolling stock and more different types of rolling stock than almost anyone else in Europe, including most of the state railways. We have pointed out, exactly as Mr Walton has said, that our ability to be able to help with the smoothing of orders and ordering in bulk rather than 10s, 20s and 30s from time to time is a way of achieving a significant cost reduction in terms of the manufacturing costs.

Q454 Chairman: You have pointed out the economies of scale, you have pointed out that you actually do it and a lot of the other ROSCOs do not do it in quite the same numbers; have you asked why you are not included?

Mr Abbott: Yes, and we have never received a satisfactory response.

Q455 Chairman: What response did you receive, satisfactory or otherwise?

Mr Abbott: Essentially the response was "we will call you".

Chairman: I see, "do not call us, we will call you" - I have always wanted to say that to a banker. Mr Stringer.

Q456 Graham Stringer: You have pointed out that you own about 40% of the rolling stock; the Competition Commission said that there is a constraint on the supply of second hand rolling stock; was that a fair point?

Mr Abbott: The issue is that there is a constraint on the supply of rolling stock in total. As Mr Walton has just said, effectively there have been virtually no orders of new rolling stock for the last three years; we have only just started to place one or two orders for rolling stock over the last few months in fact, and that means that the total volume of rolling stock in the UK has not increased and will not increase over the next two years. The net result is that there is a shortage of rolling stock, as manifested by people either keeping or not releasing or not being allowed to release by the DfT the rolling stock which they already have. If we had more rolling stock in the system then the competition around older rolling stock would quite naturally increase.

Q457 Graham Stringer: To simplify that, that is because there are no orders for new rolling stock so it does not release old rolling stock?

Mr Abbott: That is correct.

Q458 Graham Stringer: That is the simple point. I would like to explore just what the relationship is when you are leasing trains; who is actually your customer, is it the train operating company or is it the Department for Transport? I know the Department is involved but how is it involved; is it really the customer or is it the train operating companies?

Mr Abbott: Officially it is the train operating companies but the way the franchises are specified very often the DfT - which by the way has already admitted this in its evidence to the Competition Commission - either prescribes the rolling stock that will be used in a franchise or proscribes, by saying for example that there will be no new rolling stock in the franchise because they have some programme which they wish to carry out rather than the industry as a whole wishes to carry out. In addition, the DfT actively prevents the movement of rolling stock between franchises or indeed from franchises to open access operators.

Q459 Graham Stringer: How does it do that?

Mr Abbott: Because it controls the train operating companies and does not allow the train operating companies if they have rolling stock on lease to release that rolling stock, or if a train operating company wishes to take new rolling stock on lease then it will prevent the train operating company from taking new rolling stock on lease because it has those powers under its franchise agreement.

Q460 Mr Sharma: What you seem to be describing is not a market operating normally but a virtual market that is controlled by the Department for Transport; is that a fair comment?

Mr Abbott: It is significantly like that, yes.

Q461 Graham Stringer: We have talked about the poor supply of rolling stock; what are the consequences in terms of the price because if there is a free market working then in theory, at any rate, that should drive down prices. Is there a price consequence of this virtual market?

Mr Abbott: As I said in my written evidence the UK is not actually an island physically, but in rolling stock terms because of the differences in gauge the rolling stock is an island in terms of rolling stock. When we lease rolling stock in our European operations and we buy rolling stock for example from my friend here, basically we can operate that rolling stock in several different countries; if we buy rolling stock in the UK it is more or less UK gauge, UK size and very often with unique power supplies. That means that when we are trying to order rolling stock and we are ordering it in small quantities, we will be ordering only from rolling stock which is produced by the manufactures of a certain size and shape which is unique to the UK; therefore unless you have the ability to order larger quantities of rolling stock you will have tremendous problems of lack of scale. If you order 20 trains as distinct from 200 trains or 300 trains then naturally the price is higher.

Q462 Graham Stringer: Could you put a figure on the cost of the Department's interference in these terms?

Mr Abbott: Not in total terms, but I would agree with the comment that Mr Walton has put forward, that it adds at least 10% and possibly even more to the cost of trains.

Chairman: I am afraid the Committee is now suspended; if there are two divisions I would be grateful if Members could return as soon after 20 minutes as possible.

The Committee suspended from 4.28 pm to 4.49 pm for a division in the House.

Chairman: I am grateful to you for that; Mr Stringer.

Q463 Graham Stringer: When the railways were privatised in the Nineties there was some criticism that the leasing companies were the only unregulated part of the system. Would it be fair to say that the Department for Transport have put themselves in the position of a very ineffective regulator without telling us about it? Is that what they are trying to do, are they trying to regulate you?

Mr Abbott: Yes; the only word I would question in that statement is "ineffective" because they actually are quite effective in the length and the breadth of the control that they actually have.

Q464 Graham Stringer: That is a fair point; what I was meaning to convey is from your answers they effectively control but they are not effective in the way you expect normal regulators to be effective in keeping prices down.

Mr Abbott: The bigger issue, if I may add, is that in an environment such as we are in today there is very clear and obvious demand for new rolling stock and where, for capacity reasons and in certain places replacement, it would be the natural function of a private industry for us to contract with a manufacturer such as Bombardier and others for the manufacture of such rolling stock and then to contract with the train operating companies. We are essentially not free to do that unless we have a very specific opportunity which is authorised by the DfT through the franchising system.

Q465 Graham Stringer: What we have got is a halfway house, is it not, we have neither got a free market where you are free to procure and sell on, nor have we got a transparent, regulated system. I do not want to put words into your mouth, but it seems to me - and I would be interested to know whether you agree - that we would be better off with either a regulated public sector system where things are transparent or a private system. We seem to have got the worst of both worlds; is that a fair comment?

Mr Abbott: We have indeed ended up with a problem of the dynamics of the market and this is clearly an issue which is under the spotlight with the Competition Commission. Looking at the benefits to the UK railway of providing additional capacity, our view - and you will not find this surprising - is that it would be better if we had a market in which we could contract with the train operating companies to provide additional rolling stock in a timely way rather than the process at the moment which does take an inordinately long time to procure new rolling stock into the market.

Mr Walton: May I add something to your original question? You asked who is the customer; from where Bombardier sits it is a very difficult question to answer, to be absolutely honest.

Q466 Graham Stringer: That is very strange, is it not, in the commercial world, that you do not know?

Mr Walton: It is. The thing is, you see, we are in a tripartite discussion all the time. For example, if a train operator is wishing to have new trains the train operators will either bring the ROSCO in with them early on in the process or do it themselves and then look at financing the trains after. Usually they bring the ROSCOs to the table at the same time, but the criteria of the train operator and the ROSCO are very different, they are looking at different things - for example, one wants it extremely early and as quickly as possible to make use of its franchise length, the other may be looking at some longer terms and making sure that it has the right technical aspects of the project and that it is more of a go-anywhere train as opposed to a specific route. Also, the train operator then will enter into some kind of a maintenance agreement with Bombardier or what we call a technical support agreement, so again we tend to have a triangle working all the time. As Mr Abbott says, what happens then is it goes to the DfT for endorsement, so whatever the three parties all agree it would then go to the DfT for its blessing and they then can - and quite often do - change again the criteria. Mr Abbott is quite right, he is the one who pays me the cheque and therefore you could say he is the customer, but a train operator will equally say we are the customer, we are just bringing in the rolling stock company, so we have that dilemma. You mentioned quite a bit on price and affordability; in the 30 year plan it mentions that affordability will be looked at so it is not to say that just because new trains are needed they will be purchased, they have to look at the affordability of them. What we would like to see is the criteria that they will judge that on: for example, any work that Bombardier do is done in the UK, for each pound that comes into our new build facility two pounds goes to the economy, it is that kind of a factor and that is being supported by an independent review. What we are saying is that must be of advantage to the UK taxpayer on the whole, but we do not see that in any way as part of the DfT's assessment as to whether to place an order with Bombardier or somebody else. I guess we are still learning the rules that we have to live by and they are the people who set the rules, so we are like one step removed immediately and this is why we want to get closer to having our views taken into account.

Graham Stringer: Just one question on that, do the Department have the expertise to interfere sensibly - think carefully.

Q467 Chairman: Given that they are the final arbiter think very carefully.

Mr Walton: Yes. Clearly, the Department have got people in there with a good deal of expertise in specific areas and they are increasing their engineering team. Under the SRA, for example, there were very few engineers but now the Department are getting in a team where they understand the engineering solutions, but really the situation is that if you have someone who wants to buy a product, from whichever manufacturer, and they are taking virtually all the risks of that product, you have to look to see who else can add value to that scenario. If you cannot add any value, my opinion is that you need to stay out of the game a little bit.

Graham Stringer: A very diplomatic answer; thank you.

Q468 Clive Efford: What you are saying is that the Department for Transport has a separate set of criteria for determining whether an order should be placed than the people involved in the industry. What is it, do you think, that is uppermost in the mind of the Department for Transport that would lead them to come to perhaps a different conclusion from the train operating companies, the manufacturers and the ROSCOs?

Mr Abbott: Cost.

Q469 Clive Efford: Cost to?

Mr Abbott: To the Treasury.

Q470 Clive Efford: Each new train that is placed on the railway has a cost to the Treasury.

Mr Abbott: It has a cost to the train operating company, mitigated by any increase that the train operating company will get by increased fares, but if there is a net cost for that train the Department are concerned that that cost might in some way end up with the Department, either through increased subsidy or decreased premium in the end.

Clive Efford: If it is the private sector that is involved in the provision of rail services and if those sitting around the table - the ROSCOs, the train operating companies and the manufacturers - say here is a project for new rolling stock that will not cost the Department for Transport or the Treasury a penny, would the Department for Transport take the same approach to try to second-guess what you are doing? What I am saying is are you risk averse, do you only ever put rolling stock on the railways that you get a bung from the Government for.

Q471 Chairman: I say; a payment.

Mr Abbott: When we buy rolling stock - this leads on partly from something that Mr Walton said - our interest in rolling stock is for 30 years. We buy rolling stock essentially to keep it and to lease it out over several franchises. If that is procured or semi-procured by a train operating company and then financed by us, it is fair to say that the TOC has a seven year horizon for that rolling stock, we have a 30-year horizon. We have to finance it and then get our money back over the remaining 23 years of the rolling stock; it gives us a very long term view. Therefore, when someone approaches us, whether it be Virgin West Coast, South-West Trains or any of the other operators, and says "We would like you to finance some rolling stock", we do not just look at what is happening today, we look at what will happen, as far as we can tell, over an extended period of time because we are not interested in buying rolling stock which is leased for only four or five years in the first franchise, we have to think of buying rolling stock which is going to be attractive to customers, the train operating companies, over a long period. That gives us a very different perspective; the rolling stock companies are virtually the only private operations that have very long-term investments in the railway.

Q472 Clive Efford: Correct me if I am wrong, in answer to the questions of Mr Stringer did you not say that the rolling stock is bespoke for the UK rail system, you cannot sell those abroad or take them elsewhere across Europe?

Mr Abbott: That is generally true. A very small amount of rolling stock has been sold from the UK to New Zealand, Iran and a few other countries, but very small amounts of rolling stock.

Q473 Clive Efford: The chief reason for that is because it is not compatible, or is there another reason?

Mr Abbott: It is generally not compatible because the UK has a smaller loading gauge by and large than most countries and our trains are therefore too small for the applications that you would have, for example, in Germany or most of continental Europe.

Q474 Clive Efford: Mr Walton, you said earlier on that you felt there should be 400 new carriages ordered per year in order to sustain the network. The White Paper says there will be 1300 new carriages by 2015; is that sufficient?

Mr Walton: The White Paper says there will be 1300 carriages on a table under HLOS from 2009 to 2014. 2009 we have missed already; it is not possible to get trains that have not been ordered in in that period. The situation is though that the carriages that have actually been identified, a lot of the 1300 are cascaded stock, so they are not new stock. We are therefore still trying to rationalise the numbers that the DfT have come up with on actual specific train operations or opportunities, and what we see is that a lot of the scenario is a small number of trains going into one location and then trains cascaded out, maybe a larger number cascaded out because the newer trains are more reliable or more flexible, but in some cases the new trains going in, because of the safety standards, have even less seats than the older trains, so to cascade them out you need more new trains going in. We are at the moment exploring that if you put 50 cars into Northern franchise and then how many do you move out, where do those cars go and what effect does it have on somewhere else? Each of these cars could be owned by a different ROSCO or they can have a different set of technical parameters on them that make it a little bit more difficult for another train operator to use. For example, dual voltage trains; if you are not using the dual voltage in terms of third rail or overhead line you do not need to be carrying that much weight around on routes that are not specific to it, so there are a lot of dimensions to go in. All of that is in the 1300 number so it is not at the moment 1300 that we can identify, but we have been assured that there will be 1300 new cars. At the moment we have a table that we are trying to rationalise and then we have a statement that is on top of that table and we are just trying to put the two together.

Q475 Clive Efford: Is it appropriate that the demand forecasts underpinning the White Paper and the High Level Output Statement are based almost entirely on the Passenger Demand Forecasting Handbook?

Mr Walton: It is based on passenger demands going forward that have been evaluated on the possibility of those happening. All the train operators I have spoken to believe it is very conservative in terms of demand and therefore they are all saying they need more trains than the 1300 to be able to reduce overcrowding. What we say is even the 1300, if they all could have been delivered today, would not help the future predictions but would help overcrowding today in certain areas. As we know, however, a lot of the 1300 is very much London-specific and we know there is a lot of overcrowding in some places other than London that we are not seeing identified in great numbers.

Q476 Clive Efford: Has the specification for the Inter City Express Programme taken too long?

Mr Walton: We bid the Inter City Express Programme once - a full bid when it was led by one of the train operators and then Angel themselves put out a tender which we responded to and bid. Now there is a new tender out with some new variances; the whole process takes a good deal of time, I guess we are where we are now and we want to see it come to fruition. The issue is what is the actual product and how many variants are there of the product because the key thing is that it gets into the electrification debate; do you need diesel trains if you are going to electrify, do you need a hybrid train? All of those have to be taken into account and you can be analysing everything in such great detail that you never do anything. I am not suggesting that the DfT would ever do that but there are instances, for example, where we are looking at changes in the environment and the different types of engine for the new environment, the green trains. If you wait for every possible solution that is on the drawing board, you will never get anything built.

Q477 Clive Efford: Do you think that the consultants involved in the process have been able to oil the wheels or do you think that they have been too costly and slowed the process down?

Mr Walton: I cannot speak about their costs because I do not know how much their costs are, but it is connected with an earlier question that you asked, does the Department for Transport have the resources to be able to technically look and vet? Clearly in this specific case they felt they have not so they have gone out to the consultant market to come along and assist them. None of that really speeds up a process and the big issue is the accountability - I have not met many consultants yet who are accountable for the actual specifications. They will say you need this specification, it has to be done in a certain way, but they will not underwrite it, the manufacturers will have to underwrite it.

Q478 Clive Efford: How do we overcome this problem of feast and famine in terms of supply of rolling stock?

Mr Walton: This is one we have been wrestling with really since privatisation and indeed before, even in BR's times. Just when BR was privatised there was a big influx of new trains; those trains all get old at the same time so you inevitably build in a peak. In 2004 there was the slam-door peak and it will all need refurbishing, probably at the same time, it will all need replacing at the same time. What we have maintained and said and demonstrated is that if we can keep a flow of small orders for topping up a process (a) you do not have to go through the safety case every time - which is a very expensive and long-term process - you do not have to keep reinventing the wheel and the reliability forecasts, and for a very small amount of money you can keep production lines going and get the benefits from having continuous production, which is not only the benefit in costs but also is a benefit to the situation that we have in that we had to make people redundant at the time of 2005 because we had been recruiting 60 people a week to get the deliveries in 2004 and then laying off 80 people a week in early 2005. That is not a good marketplace to say come to work for us as an apprentice or a graduate engineer.

Mr Abbott: One of the real problems here is that we are dealing with an industry which is essentially very long term. Rolling stock has a life of 30 years and with some well over 11000 vehicles in the UK, including Scotland and Wales, you do need to have a strategy. You need to understand very clearly what you are going to be doing over certainly the next 20 years with the issues around electrification or disability compliance and all of those issues in order to set up a framework to know what you are going to do. The IEP is a very good example of that: we put forward two views on IEP which were related to the current HST fleet, because we own the majority of the current HSTs, and we created an economic model that said either we do a very, very major refurbishment of the HSTs to take them up to 2020, including, for example, fitting retention toilets and that kind of thing to make them much more acceptable, or we should replace them early. We went out, as Mr Walton has said, with a programme and a specification to buy replacement HSTs some three to four years ago. That process was stopped for reasons I never quite understood from the DfT, but normally we would have expected that we would have made a short term extension to the life of the current HSTs and then brought in new trains in the period 2009, 2010 and 2011. What we have actually done is something completely different. Angel Trains alone has invested Ł110 million in life extension of the current HSTs and people like First Group and others have invested also a very large sum. We are now looking at a very expensive programme for the IEP procurement which stretches out now to 2015, and indeed we have already missed the IEP deadlines for trying to bring the train into service for 2013. This lack of joined-up thinking does increase the costs left, right and centre and does not actually deliver what we need to deliver, and when you go back to the manufacturers the manufacturers then do not know what to plan, what capacity to plan, and that does not work. I went with Mr Walton some time ago to see the secretary of state at a time when Bombardier were being pushed to make redundancies in their factories in the UK and suggested that we put in a stop-gap order sufficient to keep the manufacturing lines in Bombardier working. We received no response whatsoever.

Q479 Clive Efford: One last question on the procurement, just to go back to my point, when you buy in new rolling stock how long does it take you to amortise the capital outlay?

Mr Abbott: There are two answers to that: one is that we depreciate the trains typically over 30 years - in the UK at least - and in terms of the economic return as an investor we make an economic return something around the year 23 or 24.

Chairman: That is very helpful. Mr Hollobone and then Mrs Ellman.

Q480 Mr Hollobone: The feast or famine point, Chairman, is not a difficult concept to grasp and, Mr Abbott, you say that you made contact with the secretary of state to raise this issue. Did you actually have a meeting with the secretary of state?

Mr Abbott: Yes.

Q481 Mr Hollobone: When you say that there was no response, what do you mean?

Mr Abbott: We put forward the view that (a) capacity was needed and (b) there was for us a serious issue about the continuation of Bombardier's manufacturing in the UK. There is a certain amount of self-interest as a rolling stock company because we do look to the long term support of rolling stock in the UK and we do look to people such as Bombardier to maintain very high levels of engineering resource to actually support the 4000 or so vehicles that we have got, so we have a certain amount of interest in that. The first view that was put forward was that this was not possible under European procurement rules, but I did point out that in fact we as a private company are not actually covered by the European procurement rules and that we could have ordered rolling stock without going through that process. I am not necessarily saying that we favour our friends in Bombardier more than the other manufacturers, we work with the other manufacturers equally well, but having left that proposal on the table I think it is fair to say - and Mr Walton will confirm - that we received no response whatsoever to our proposal.

Q482 Mr Hollobone: When did you go and see the secretary of state?

Mr Walton: Two years ago.

Q483 Mr Hollobone: Who was the secretary of state at that time?

Mr Walton: It was Alistair Darling.