CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 412-iHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFORESCOTTISH AFFAIRS COMMITTEE
SCOTTISH TRANSPORT LINKS AND THE CREDIT CRUNCH
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This is a
corrected transcript of evidence taken in public and reported to the House.
The transcript has been placed on the internet on the authority of the
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The transcript is an approved formal record of these proceedings. It will be printed in due course. |
Oral Evidence
Taken before the Scottish Affairs Committee
on
Members present
Mr Mohammad Sarwar, in the Chair
Mr Alistair Carmichael
Mr Ian Davidson
Mr Jim Devine
David Mundell
Lindsay Roy
Mr Charles Walker
Mr Ben Wallace
________________
Witnesses: Mr Robert Boyle, Director of Strategy and Business Units, British Airways, and Mr Alec McTavish, Director of Policy and Operations, Association of Train Operating Companies, gave evidence.
Q1 Chairman: Good afternoon. I would like to welcome today's witnesses to our session. Can you please introduce yourselves for the record?
Mr Boyle: Robert Boyle, from British Airways.
Mr McTavish: Alec McTavish, from the Association of Train Operating Companies.
Q2 Chairman: Before we start on detailed questions, would you like to make any opening remarks?
Mr Boyle: British Airways thanks the
Committee for the opportunity to give evidence to your inquiry. We welcome your interest in the subject and
the recognition that implies for the economic importance of transportation
links and the challenges presented by the current economic environment.
Mr McTavish: Thank you for the opportunity
to present evidence to you. Train
operators are very conscious of the contribution that rail makes in the economy
of
Q3 Chairman:
How
has the provision of services between
Mr Boyle: For British Airways, for our
summer schedule which we have just commenced, we have reduced our number of
flights between
Q4 Chairman:
When
you make the decision on the number of routes or number of flights going from
Mr Boyle: We would obviously start
first with looking at what the customer position is. We talk to customers all the time, whether
through surveys or through direct conversations with smaller groups,
particularly our frequent fliers and our major corporate customers. On a route for example such as the
Q5 Mr
Devine: I think you should be aware that amongst MPs
British Airways is known as BAD, British Airways Delayed. This Committee has taken a decision not to
use British Airways because it appears that, if there are leaves on the runway,
flights between
Mr Boyle: Can I start first with punctuality of the services? We would accept that the punctuality we offered in previous years was not to the standards that we aspire to. The opening of Terminal Five after the initial problems has made a huge difference to our ability to operate a punctual service. For the last 12 months the punctuality levels at the standard 15 minute level are the highest we have ever seen on the three Heathrow Scottish routes. They are between 80 and 85 per cent and that is up around nine points improvement versus the previous year. I would certainly encourage you to give us another try.
Q6 Mr Devine: One in five flights is still late. What about cancellations?
Mr Boyle: We operate to a target level of 99.5 per cent reliability - i.e., to cancel less than half a per cent of flights across the network - and obviously there are occasions when we cannot avoid doing so, occasionally an unavoidable, technical problem where we do not have a spare aeroplane or more normally weather incidents such as we had in February.
Q7 David
Mundell: Do you think the opening of Terminal Five has
enhanced the customer experience for the passenger travelling to
Mr Boyle: We do not just operate to
Heathrow. We also have built up over the
last few years a significant operation to
Q8 David
Mundell: I suggest that you go through the security
arrangements at Terminal Five on a more regular basis because my experience of
them is that they are far from satisfactory.
They considerably diminish the travel experience. Indeed, I do not think that making Terminal
Five unattractive is a basis for encouraging travel at City. I think the experience from City is a very
good one but that is because the comparison with Terminal Five is so
awful. I detect between yourselves and
the British Airports Authority a complacency in relation to the Terminal Five
experience. For someone who is certainly
in short haul
Mr Boyle: I cannot speak for BAA who are obviously responsible for the provision of security. We have a close and ongoing dialogue with them and we seek to hold them to account to improve the performance and are doing so as we speak.
Q9 Mr Carmichael: I am tempted to give you my 15 minute dialogue on the subject of British Airways and Terminal Five at the moment but I will resist the temptation. I want to be quite clear what it is you are telling us this morning. A nine per cent increase in the last year?
Mr Boyle: Decrease.
Q10 Mr Carmichael: Decrease in delays? Is that what you are telling us?
Mr Boyle: Nine points, yes.
Q11 Mr Carmichael: When did Terminal Five open?
Mr Boyle: It opened on 27 March.
Q12 Mr Carmichael: Of last year?
Mr Boyle: Yes.
Q13 Mr Carmichael: When does the year run from and to?
Mr Boyle: The 12 month performance I have just cited ran from 1 April through to 31 March, which was our financial year end.
Q14 Mr Carmichael: It would include the start of the shambles at the opening?
Mr Boyle: It would include the first week or two of the immediate aftermath of Terminal Five opening.
Q15 Mr
Carmichael: You told us that you employ 500 staff in
Mr Boyle: I am not sure exactly but we have probably reduced by about 800 staff in terms of direct employment, albeit a number of those are working for suppliers.
Q16 Mr
Carmichael: You run 285 flights with 40,000 seats per
week. What would that have been two
years ago? Before you withdrew from
flying out of Inverness, before you cut the flights out of
Mr Boyle: The figures I was quoting
were between
Q17 Mr Carmichael: That is a 300,000 seat reduction in a calendar year?
Mr Boyle: In two years.
Q18 Mr Carmichael: Per year?
Mr Boyle: Per year.
Q19 Mr
Carmichael: Is that a mark of British Airways' commitment
to
Mr Boyle: It is a sign of the
challenges of the industry. Obviously
there are a number of factors driving that.
We have had record fuel prices at the beginning of this year. We now have the economic downturn to which we
have to respond. As a company we are
about to report our financial figures for the group for the financial year
ending March. In terms of the guidance
we have given the City for the outlook for profits, we have indicated an
operating loss of £150 million before restructuring costs of another £75
million, so a £225 million operating loss for the year. That is a £1.1 billion deterioration versus
the previous year. That gives you the
scale of the challenges that we face across the whole of our business, not just
to
Q20 Mr
Carmichael: It is your evidence to the Committee that the
services you cut from Inverness,
Mr Boyle: They were loss making.
Q21 Mr
Davidson: I came down via yourselves to
Mr Boyle: On domestic services, yes, we look very closely at the performance relative to BMI. Two years ago that was not a good comparison. We have put a lot of hard work in, including getting the benefits of Terminal Five, and we now regularly beat them on punctuality.
Q22 Mr Davidson: You are now better than BMI on both punctuality and cancellations, are you?
Mr Boyle: I was quoting on punctuality.
Q23 Mr Davidson: What about cancellations?
Mr Boyle: I do not have a direct
comparison. On the cancellation side, we
do have dilemmas as a company when we are forced to make cancellations due to
for example a runway being closed. As a
network operator with a mixture of long range flights and short range flights,
we do look to try to minimise the overall customer impact of disruption. That does tend to mean we will look first to
take some flights out of a high frequency route, particularly one where there
is a rail alternative so that we can get passengers to their end destination
and protect for example a flight where we would otherwise leave people stranded
in another continent, where there is only maybe a flight every day. Within that we look to make an overall
balance and that can result in us perhaps cancelling a higher proportion of our
short range flights, not just to
Q24 Mr Carmichael: It is always the Scottish flights that get the chop first.
Mr Boyle: No. It is high frequency flights.
Q25 Mr
Davidson: This is very interesting. I think it would be helpful if you gave us
figures perhaps in a note to the Committee indicating the frequency with which
Scottish flights are cancelled as distinct from other short haul flights, as
distinct from other frequent flights. My
colleague is expressing the view that
Mr Boyle: We would be happy to provide something specific on that.[1]
Q26 Mr
Davidson: There is a general view that I want to raise
with you before we go into the detail that, in a sense, you have lost a bit of
interest in
Mr Boyle: There is clearly a challenge in terms of slots at Heathrow. Notwithstanding the short term downturn in demand on any kind of medium or long term basis, Heathrow is significantly under capacity relative to the demand. Therefore all airlines, not just British Airways, are constantly having to make trade offs as to what they use those slots for. Obviously a high frequency, short range route consumes a lot of slots for relatively less revenue that will be generated versus flying out to a further distance. Therefore, you will find across the whole airport - it has happened more for other operators than for BA for reasons I can cover in a second - there has been a continual switch away from short range flights to long range flights as those economic drivers have played out across the whole airport. That is why we believe that it is in the interests of anybody who values a feeder flight into Heathrow to support the development of additional runway capacity, because that is really the only basis on which the whole airport is not to continue the trend of the last 20 years, which is towards a gradual bias towards long haul services. British Airways operates a higher proportion of the short range services than the airport does. We are in fact more biased towards short haul than the airport is as a whole, which I think most people do not appreciate. Part of the reason for that is that, for us, it is our hub. A flight to Edinburgh, Glasgow or Aberdeen is not only bringing passengers to London; it is also bringing a large number of passengers onto our broader network, supporting that long haul network and delivering greater economic value to us and to the Scottish economy. Therefore, we absolutely are committed and want to retain these links and to provide better connectivity but to do so in a world where capacity constraints remain as they are you will see a continual trend over time from all operators to shift away from short haul services.
Q27 Mr
Carmichael: British Airways is holding a gun to
Mr Boyle: No. I am merely commenting on some of the economic trends.
Q28 Mr Carmichael: You told us a minute or two ago that if you want to keep your services you have to support the case for a third runway. Are you telling us if we do not get a third runway that you are going to cut the services?
Mr Boyle: No, I am not saying that.
Q29 Mr Carmichael: What is the relevance of the third runway then?
Mr Boyle: Without a third runway there
will be continued pressure on short range services, not just to
Q30 Mr Carmichael: You say there is going to be pressure. What are the consequences of that pressure going to be?
Mr Boyle: It depends on the circumstances at the time. Right now we do not have a strong economic case or a demand to grow our long haul network, given the current economic environment. It does depend on what is happening but if you believe over the medium and longer term that we will get back to renewed global economic growth, if the airport is constrained in terms of its runway capacity, it is simple economics that over time those slots will tend to migrate towards the ----
Q31 Mr Carmichael: The slots will tend to migrate?
Mr Boyle: Yes.
Q32 Mr
Carmichael: That means you are going to cut the slots from
Mr Boyle: There would be economic pressure to do so.
Mr Carmichael: Are you going to succumb to that economic pressure?
Q33 Chairman: I cannot understand the economic pressures. The air fares between Glasgow and London Heathrow are more than £400 or £440. The aeroplanes are full so why is it not economically viable? I fail to understand this.
Mr Boyle: The fare that you are quoting is a return fare, last minute availability, fully flexible. That is the highest fare that we would charge.
Q34 Chairman: That is what we are charged as MPs all the time. I have never seen a ticket where I am charged less than £400.
Mr Boyle: If you look at the equivalent
fares on other European routes for example, which are shorter distances for us
to fly, the fully flexible fares to
Q35 Lindsay Roy: You are not saying though that the Scottish operation is a loss making venture?
Mr Boyle: Right now, it is harder to find things that make money rather than pick out the ones that lose money. The business overall is going to lose £225 million this year with no real prospect of doing better than that in the next financial year.
Q36 Lindsay Roy: Over the last two years how has the Scottish operation compared to other short haul provision?
Mr Boyle: I would say it is similar.
Q37 Lindsay Roy: Has it made a profit over that time until recently?
Mr Boyle: Parts of it have; parts of it have not.
Q38 Lindsay Roy: What about the Scottish end of it?
Mr Boyle: The same is true of the Scottish routes. They do swing around from losses to profits. Particularly at Heathrow, we do not just look at the profits of the route. We also look at the overall contribution to the network, as I have mentioned, and domestic flights that we have remaining are strong contributors to the onward network, so they score well on that front.
Q39 Mr Carmichael: I want to look in particular at your business services. How has the proportion of people travelling in business class changed over the last year? Have you seen an impact of the economic downturn in that regard? Mr McTavish, for you I guess it would be first class rather than business.
Mr McTavish: On the Anglo-Scottish services, comparing the last three months with the corresponding period last year, our overall patronage has gone up by two per cent. Previously, we were growing much faster than that so it represents a reduction on the growth rate that we were experiencing. In terms of the first class business, that has been disproportionately affected. We tend to find that with recessions in the past. People seek to find the cheaper fares, so there has been a shift out of first class. Overall, the market is holding up. It is weaker than it has been and there has been a disproportionate effect on the first class business.
Q40 Mr Carmichael: Overall, you have gone up by two per cent?
Mr McTavish: Indeed.
Q41 Mr
Carmichael: Do you think that is an indication of the
inadequacy of the rail services between
Mr McTavish: On the contrary.
Q42 Mr Carmichael: Surely you would be looking for a more ambitious rise?
Mr McTavish: Indeed.
Q43 Mr Carmichael: Why have you not got it?
Mr McTavish: We have been enjoying very
high growth rates, five per cent plus, which result in very substantial
growth. Clearly the economy is affecting
our business as it is everyone else's.
We have been improving our services.
You will know the improvements in journey time for example on the west
coast that have been brought in. We are
cutting 40 minutes off the journey between
Q44 Mr Carmichael: Do you think the ATOC role in setting fare structures is a helpful one?
Mr McTavish: We need to be clear what the ATOC role is.
Q45 Mr Carmichael: You tell the operating companies what they can charge, do you not?
Mr McTavish: No, we do not.
Q46 Mr Carmichael: That is what they tell me.
Mr McTavish: First of all, there are a
number of regulated fares, regulated by government through the franchise
agreement. That is about half the fares
that are bought. That means that there
is a basket of these fares that needs to be constrained within a formula, RPI
plus one. That bundle of fares, in terms
of level, is regulated by government. The
other half of the fares is unregulated and therefore train operators are able
to price for the relevant market. That
has resulted in the sort of offers you see on advance purchase and so on. Those advance purchase fares that you see,
the £12.50 to
Q47 Mr
Carmichael: If I go from here to Euston, what will a
single fare be to
Mr McTavish: First class to
Q48 Mr Carmichael: How far ahead would I need to book in advance to get something that I could afford?
Mr McTavish: Last night in preparation I
looked at what I could get going to
Mr Boyle: We have a single class product on our Scottish routes, so it is more a question of flexibility.
Q49 Mr Carmichael: You still get stuck in row 23.
Mr Boyle: Across the whole business, business class and fully flexible ticket types have been under very heavy pressure in this environment. Our overall premium traffic in February was down 20 per cent. It was down slightly less than that in March but that was largely an Easter effect. At the current time we are seeing about a 20 per cent decline in business type traffic. Whilst that does vary slightly across the network, it is pretty universal as companies in particular have cut back on travel spend and travel budgets and imposed restrictions.
Q50 Mr Carmichael: You are down 20; you are up two so frankly there are a lot of people travelling in the downturn. As the market becomes more competitive, do you think it is more or less important to pay attention to customer service and quality of care?
Mr Boyle: I think it has always been tremendously important and is now more so than ever.
Q51 Mr
Carmichael: Do you think you may be suffering now the
consequences of getting rid of all your ground staff in
Mr Boyle: I will not deny there were some blips in service during the transition but our customer satisfaction scores now some time afterwards are higher than they were beforehand.
Q52 David
Mundell: Can I challenge you, Mr McTavish, on your
statement about improved services from
Mr McTavish: Indeed. You make a very powerful point as well that
we should not just concentrate on the
Q53 David Mundell: When I challenge the rail companies on why they are not stopping, they say that it is because the Department for Transport effectively will not let them. Even though these trains are passing through these stations, because they have fixed a set time to get from, say, Birmingham to Glasgow, stopping will make it less likely that that time can be achieved. Is that a simple analysis of the situation?
Mr McTavish: Yes. The government clearly does, through the franchise process, set the outputs it expects train operators to deliver. Government plays a big role in the determination of services that are offered. There is always a question at the margin as to how much flex and discretion the train operator should be able to exercise but you are right. The core services are determined by government through the franchising process.
Q54 David Mundell: Is it relatively straightforward to achieve a more flexible model so that you can travel from stations other than main line city centre stations?
Mr McTavish: Yes. Even if we put aside government involvement in this, there is always a trade off between the through services between the major cities and stopping intermediately. That is a trade off that has existed ever since railways started. Train operators and government as well do try to balance these considerations. It is not easy. People are adversely affected sometimes because they would wish a train to stop at their station whereas a number of people on the train would wish it to go through. That is always a conundrum.
Q55 Mr Davidson: Can I ask you about times and reliability in terms of your figures? How do your figures for example compare with British Airways in terms of timing and reliability?
Mr McTavish: First of all, let me explain the way in which we measure reliability. We measure it on nought to ten minutes. A long distance train is on time if it arrives within ten minutes of the scheduled time.
Q56 Mr Davidson: It can be ten minutes late and still be on time.
Mr McTavish: Exactly. There is an important difference. We measure on different bases.
Q57 Mr Davidson: What is the figure for British Airways then?
Mr Boyle: 15 minutes.
Mr McTavish: We have to be clear what the basis is.
Mr Boyle: That is push back from the gate to chocks on at the gate.
Q58 David Mundell: Does it include the people getting off? I have several times been on aircraft where the aircraft has arrived and I have been unable to get off it because the door has not been opened for some significant time, because there are not steps. I am just seeking to clarify whether your arrival time ----
Mr Boyle: It would not include delays at deplaning, I do not believe, no.
Q59 Mr Davidson: It does not include sitting on the plane? The 15 minutes that you are giving us for the 80/85 per cent does not actually include the time that you spend sitting on the plane because you cannot get off it. That is a fairly meaningless figure then, is it not?
Mr Boyle: It is the standard industry measure.
Q60 Mr Davidson: That is not a different thing though, is it, really?
Mr Boyle: I am not 100 per cent sure of the answer to this question. If you would like, I can get that clarified and sent through afterwards.[2]
Q61 David Mundell: It is important in your customer satisfaction because I find nothing more frustrating than the captain announcing that you have arrived early and then finding that you wait an additional time before you can get off the plane.
Mr Boyle: I understand that. We also measure directly customer satisfaction with punctuality which is a customer perception measure, which is extremely well correlated with the operators.
Q62 Chairman:
If I
have an appointment here at
Mr Boyle: I am not 100 per cent sure on the definition of the statistic. I will get that checked and sent through to you.[3]
Q63 Mr Davidson: It would be helpful if we had maybe a note explaining what punctuality means. Ten minutes late is on time?
Mr McTavish: Yes and about 85 per cent of trains arrive on time.
Q64 Mr Davidson: About?
Mr McTavish: 85.
Q65 Mr Davidson: Not about 85 then?
Mr McTavish: We have a number of different train operators that operate between ----
Q66 Mr Devine: They have different clocks.
Mr McTavish: If you like I can explain the performance of each train operator.[4]
Q67 Mr Davidson: It would be helpful if we had maybe a note about that. Can I clarify the point about opening the doors? Generally, my experience has been, when the train arrives in the station, you open the doors. You do not have an equivalent to British Airways sitting on the runway for a period of time.
Mr McTavish: That is right. We are timed as we get into the station.
Mr Boyle: Any time when the aircraft has not arrived at the gate is definitely included in the delay statistics. What I am not sure about is whether, if you are on the gate and for whatever reason they are unable to open the gate to let you deplane, which happens occasionally, that is included or not.
Q68 Mr Davidson: That would be a bit of a scandal, would it not, if it is not?
Mr Boyle: We have to measure ----
Mr Davidson: "Yes" I think is the word you are looking for there.
Q69 Lindsay Roy: Would it not be fairer to say "within schedule" because you have set a schedule of 15 minutes and ten minutes respectively, rather than saying "on time"?
Mr Boyle: No. Internally we strive to hit an on time departure. On time does include a three minute gap. If we depart at 2.5 minutes, that is on time.
Q70 Lindsay Roy: On time from your definition is if you arrive within 15 minutes of the arrival time.
Mr Boyle: We measure several things. What I gave you was the performance on the industry standard measure, which is a 15 minute punctuality. There are departure punctuality stats, so you cannot meddle with them by adjusting the planned journey time. We also measure arrival punctuality which is as good or nowadays usually better than the departure punctuality time. We measure both 15 minute, on time, which is up to three minutes, and we also measure something which we call "ready to go", which is the statistic that we can directly influence. You can get areas where we are ready to go; the doors are closed; the aeroplane is ready and we have done everything that we can. We are now waiting for air traffic control to allow the aeroplane to push back and join the runway. Obviously there can be substantial delays at times due to air traffic congestion. We measure all those things in an attempt to absolutely get our goal, which is to get the plane away on time or early.
Q71 Mr Davidson: The train seems to be much easier in this regard. Either it leaves on time or it does not. It arrives and you do not have this problem about not opening the doors generally. In terms of capacity and capacity constraints, am I right in thinking that in general terms you can just add more coaches to the London Scottish journeys and that therefore there should be no reasonable constraints on capacity?
Mr McTavish: There are plans to indeed add more carriages.
Q72 Mr Davidson: It does not seem to be too complicated a concept, does it?
Mr McTavish: The reason it can sometimes be quite expensive and more difficult than it sounds is that one also needs to have platforms that match these extra lengths. Therefore, as part of the next five year programme of enhancing capacity, a lot of the money to do with increasing the capacity of the trains is going into the infrastructure.
Q73 Mr
Davidson: If we are dealing with
Mr McTavish: No.
Q74 Mr Davidson: What are you saying then?
Mr McTavish: Yes, we are adding additional coaches on the west coast. That is a significant increase in capacity that is coming through. I am simply pointing out that, when looking at increasing capacity, one needs not only to look at the length of the train.
Q75 Mr Davidson: You have also just pointed out to me that the length of the platform is not a problem at either Glasgow, Edinburgh or Euston. I do not quite see the relevance of that point at all for anywhere except possibly Lockerbie. People getting off at Lockerbie could be asked to move to the middle of the train. There is no difficulty about adding carriages on in terms of constraints?
Mr McTavish: That is indeed what is planned to happen.
Q76 Mr
Devine: The Herald has been running articles
over the last week on the train service in
Mr McTavish: Yes. The pricing of these flows is a commercial matter. The train company managers will form a view of the appropriate price to charge. It has indeed always been the case that there are instances that one can find where the sum of the parts is less than the whole. In other words, if you do it in legs, you can travel more cheaply. There is no easy solution. You ask which do you want to change. Do you want the intermediate fares put up? Generally, people would say no. Do you want a ----
Q77 Mr Devine: Would I know that as a consumer? If I went to the train station and bought the return broken down, would I know that? Would I be advised of that?
Mr McTavish: In terms of travelling with
individual tickets, they are priced on the basis that that is your destination
rather than you sit in the seat and just continue travelling. If someone says, "What is the price of a
ticket from
Q78 Mr Devine: Do you think the changes in your services can affect the success of business during this economic downturn? What are you doing to encourage people to travel?
Mr McTavish: We are doing a lot. We are first of all making sure that the basics are right, which are performance, capacity and customer service. The next thing is making sure that people are told about it. Virgin for example ----
Q79 Mr Devine: You just told me you would not tell me about a cheaper pricing policy.
Mr McTavish: There are already really good
value fares that exist. I mentioned one
earlier in terms of the
Q80 Mr
Devine: How important do you think transport is in
creating a joined up economy between the north of
Mr McTavish: It is very important. If you look at where people are travelling to
and from, it is not just
Q81 Mr Walker: When I fly on British Airways I get a sandwich and a biscuit included in the price of the ticket. Why is it, when you travel for even more money on your operators' trains, you do not get a sandwich and a biscuit? You get nothing. Everything you have to pay for. Why is their in-flight catering so much more generous than your members' given the prices you charge? You just said you are doing everything possible to attract people to use trains but people, funnily enough, value a sandwich, a drink and a biscuit. Your train operators do not provide it to anyone but in first class. It is just an interesting quirk of your operators. Why do they not do that?
Mr McTavish: In first class on Virgin, you will get that seat and a meal. It is a question of getting the offer right for customers and that includes the price. It is always a trade off between the content of what you are offering and the price you are able to offer to people. Different companies form different views. For example, on east coast, they take the view that more should be charged rather than the Virgin approach. That is competition for you and that is good. We embrace being competitive on all those routes we have talked about.
Q82 Mr Walker: There seems to be a shortage of real, genuine innovation amongst train companies. It is all around pricing. Pricing is important but there does seem to be a shortage of innovation. Virgin admittedly may be an honourable exception but I am never overwhelmed by train operators and the service they offer.
Mr McTavish: Look at what is coming in May. There will be Wi-Fi at your seat on all east coast and west coast. That is innovation. You can work from your seat using the internet.
Q83 Mr Walker: What about if you are going on holiday and you are not taking your computer with you? What is there to attract tourists?
Mr McTavish: Again, it is the basics. It is about having trains that arrive on time. I mentioned the figures earlier and they are going to improve. We have plans to improve those levels of performance into the low nineties. The first thing is performance. Secondly, there is capacity and getting a seat which is really important. There is extra capacity going into the network. 500 million is being spent on the east coast for example over the next five years on extra capacity. There is the availability of trains when you want to travel, the seven day railway in a sense. There is over 200 million going in to make sure that there will be trains when you want to travel and you will not be put on buses and so on. That is a big programme. What we are trying to do is to improve those basic things that customers want.
Q84 Lindsay
Roy: Do you have any idea how many people using
domestic flights from
Mr Boyle: I do not have reliable figures, certainly here with me. There are various survey-based data. I think there is an international passenger survey done at Edinburgh and Glasgow which does question people on their reason for travel and so on.
Q85 Lindsay Roy: Could you give us a follow-up in writing then?
Mr Boyle: Yes, I can certainly forward what figures we have.[5]
Q86 Mr
Lindsay Roy: Is there any incentive for people coming in
from the
Mr Boyle: One thing that we do do, and we have certainly been doing it recently in a number of promotions that we have been running, is put free domestic add-ons to flights, so, whatever fare we have available to London, if you purchase a through fare that connects you to a UK domestic point, that would be no additional charge. Those are the sorts of things we do to try to stimulate travel, particularly in such difficult times.
Q87 Lindsay Roy: How successful has that been? What is the take-up?
Mr Boyle: I have not seen the analysis of that particular promotion, but generally they are attractive.
Q88 Lindsay Roy: Again, if you have the information can you provide it to the Committee?
Mr Boyle: I can see what we have on that.[6]
Q89 Lindsay
Roy: Do you also have information, both Mr McTavish
and yourself, about tourists buying tickets to come to
Mr Boyle: We would have some
information where people have pre-planned that itinerary, so they plan to do a
few days in
Mr McTavish: I am not sure we would have information if a tourist bought a ticket in this country to differentiate them from residents buying tickets. I am not sure if there are statistics. We can certainly look.[8]
Q90 Mr
Carmichael: Of course, the deals you are talking about
will only take people to
Mr Boyle: We have again one or two glitches in a couple of areas but generally it is working well.
Q91 Mr Carmichael: I had a piece of casework recently from my constituency where the code-share only really seems to put the interlining of baggage through. It does not seem to bring any other benefits at all. For example, you cannot now send unaccompanied minors on a flight for a journey that involves both Flybe and British Airways. Is that not the sort of thing a code-share should do?
Mr Boyle: Generally speaking we try to bring service benefits to make it as seamless an experience as possible. There are some areas, and that is one of them, where it is legally the case that we are not carrying the person in terms of taking minors on an unaccompanied basis. That is a particularly sensitive area and one on which our legal advice is that we should not do it.
Q92 Mr Carmichael: So you could do it when you had the franchise with Loganair, but if Loganair has got the franchise with Flybe you just will not do that any more?
Mr Boyle: That has been the position.
Q93 Mr
Carmichael: Is that another indication of your commitment
to
Mr Boyle: It has got nothing to do with
Q94 Mr
Carmichael:
Mr Boyle: As I say, it is a policy which is applied to all our code-share services, wherever those are, and we have many.
Q95 Mr Carmichael: Does that reflect in your improved customer satisfaction surveys?
Mr Boyle: Everything is encompassed in the satisfaction we measure, and if there are some customers who are dissatisfied with that there are many more that are satisfied.
Q96 Mr Carmichael: What was the legal advice that told you you should not take unaccompanied minors from Flybe? What is the law that prevents that?
Mr Boyle: I do not know the specifics. I know that in general it was a concern over how much we could be confident of enforcing and carrying out our duty of care in terms of unaccompanied minors.
Q97 Mr Carmichael: But surely your duty of care only kicks in the second you take charge of that unaccompanied minor?
Mr Boyle: A number of people would take a different view if we managed to lose somebody somewhere in the join between leaving our -----
Q98 Mr Carmichael: Oh, right, so it is not about your duty of care; it is about your ability to talk to another airline? What is the point of having a code-share?
Mr Boyle: It has many benefits, including through ticketing, through fares, through check-in of passengers and bags. There are one or two areas where it is clearly not the same as being a single airline.
Q99 Mr
Carmichael: So when you withdrew from the Highlands and
Mr Boyle: I cannot speak for Loganair and Flybe's customer satisfaction results.
Q100 Mr Carmichael: No, we are talking about what British Airways told us when they withdrew from the Highlands and Islands, and we were told that because we would have a code-share arrangement in place we would see no difference, but that is clearly not the case, is it?
Mr Boyle: In that specific incidence you are correct. There is a change of policy.
Q101 Chairman: Mr McTavish, do you have any evidence on what factors influence tourists on method of transport or whether to make the journey at all?
Mr McTavish: Indeed we do. Obviously, the first thing is the range of
destinations you are able to provide and that is an area in which rail is well
served because we can serve most of the destinations that people want to go
to. We know that people are influenced
by things like the
Q102 David
Mundell: Can I ask both of you, but Mr McTavish first,
how government policy impacts on the maintaining of transport links between
Mr McTavish: The way it works is that the
Government establishes a franchise proposition and that includes service
levels, it includes quality of service, it includes a whole series of things
the train operator is expected to deliver by way of outputs. People are then obliged to deliver that
package to Government, and if they do not they can be in breach of their
agreement, and persistent breach can lead to the loss of the franchise, so
there are really strong levers that the Government has to make sure their
specification is delivered. So far as
the role that Transport Scotland play on the Anglo-Scottish routes, they are
very significant consultees in this process, and indeed, for example, on the
East Coast franchise which was let a couple of years ago they made their views
very clear as to what they wished to see done.
A lot of what we provide is determined by the Government. They specify the services provided and
Transport
Q103 David Mundell: But how straightforward is it to provide a service, for example, which is not currently available? I recently met an operator which wants to provide a Glasgow-Nottingham service and a Glasgow-Liverpool service which it says are at the moment particularly complex journeys to negotiate but for which there is a demand. Does the current framework facilitate the easy introduction of such a service?
Mr McTavish: The significant issue there
is around ensuring that the capacity and the paths are available. A train operator can at its own risk, in a
sense, provide additional services even within the context of a franchise
agreement, so if they see a market opportunity they can say, "Yes, I am going
to run a service from
Q104 David
Mundell: Mr Boyle, in relation to your services between
Mr Boyle: Yes, we fly to
Q105 David
Mundell: But not from
Mr Boyle: No.
Q106 David
Mundell: So all the
Mr Boyle: Yes.
Q107 David Mundell: How does government policy then impact on your cross-border activities?
Mr Boyle: It is principally in the area
of infrastructure. We have talked about
runway capacity constraints. Equally,
air traffic control is a huge driver of our ability to operate reliably and
punctually. Strong competition from
train, obviously, impedes or helps us make a service viable. As I mentioned before, the air passenger duty
is a significant cost for us, particularly on a short route such as
Q108 Chairman:
What
is your view on high-speed rail services between
Mr McTavish: As I am sure you are aware,
in the study that is being initiated by the Secretary of State, and we are very
supportive of that, we think high-speed has a role. We want to make sure that we do the numbers
right, which is the job of the group that is looking at high-speed between
Q109 Mr Davidson: Could I come back to the question of the franchise arrangements that you mentioned earlier on? Do I take it that once the franchises have been agreed they are then not up for renegotiation when the economic situation changes?
Mr McTavish: Yes. The franchise agreements are set for the period of the franchise, and that is the deal that people bid on.
Q110 Mr Davidson: That is helpful. I met last night somebody from ASLEF, the train drivers' union, who said that the East Coast line had sought to lay aside their agreed salary increase on the grounds that the money was not there and then, after the union refused to accept that, the money suddenly was there. Is that the normal way in which the rail companies deal with their staff?
Mr McTavish: Clearly, at a time when we are in a recession -----
Q111 Mr Davidson: So is that a yes or a no?
Mr McTavish: What I am saying is that it is a perfectly reasonable thing for a train operator to do, to consider affordability when considering wage increases.
Q112 Mr
Davidson: Also relating to the franchise, you said that
there were penalties if people did not meet their targets. In terms of the lines into and out of
Mr McTavish: I do not.
Q113 Mr Davidson: Could you maybe give us a note indicating how many penalties have been applied and what they have been for, and give us your view as to whether or not you regard the Government as being a soft touch on this issue in terms of not applying penalties when penalties could be applied for non-delivery of service?
Mr McTavish: Yes, I can certainly provide a note on that.[9]
Q114 Mr
Davidson: The Chairman touched on the question of the
high-speed line. It has also been
suggested to us that it is possible to open a freight line up through the spine
of
Mr McTavish: These are the sorts of things that the group that is looking at options will be considering, because the group that has been set up to consider high speed is looking at options and that is exactly the right thing to do.
Q115 Mr Davidson: I want to be clear. I have got it as looking at options for the high-speed line, not whether or not you could create another line which would take freight which would then free up capacity on the existing lines. I thought that was beyond its remit.
Mr McTavish: Yes. I must confess I do not know what they are putting into their base option, but I would imagine that in thinking of the case for high-speed, as with any evaluation, the key thing to get right is the base case, in other words, what are you comparing it against? If there was a value-for-money option around that would significantly affect the economics of a high-speed line then that should be taken into account. I do not know for sure that that is what is happening but that would be the way I would expect it to happen.
Q116 Chairman: Can I thank the witnesses for their attendance? Before I declare the meeting closed would you like to say anything in conclusion, perhaps on areas which were not covered during our questions?
Mr Boyle: No, apart from just to repeat that I am grateful to come along and give our views on this topic, and I hope that the Committee might reconsider its choice of airline in the future so we can prove to you that we are the best option.
Chairman: There are a number of questions you were unable to answer and I request you to write to the Clerk after the meeting. Thank you very much.
Q117 Mr Carmichael: Can I just ask on that point, when we are getting the figures on delays it would be very helpful if you could explain to us how you build runway time into your overall scheduling because the flying time is always a great deal less than the scheduled time, so it would make it more meaningful if we could get that explained to us as well.
Mr Boyle: We could do that.[10] If you are at all interested, we could also organise a visit for the Committee to come and see the people who do this on a day-to-day basis.
Mr Carmichael: More time at the airport!
Chairman: Thank you once again.
Witness: Lord Adonis, a Member of the House of Lords, Minister of State for Transport, gave evidence.
Q118 Chairman: Good afternoon. I would like to thank you for coming and I am sorry for the delay of some 25 minutes.
Lord Adonis: Not at all.
Q119 Chairman: Perhaps you can introduce yourself for the record.
Lord Adonis: Andrew Adonis. I am Minister of State for Transport.
Q120 Chairman: Before we start on detailed questions do you have any opening remarks you would like to make?
Lord Adonis: No. I am all yours.
Q121 Chairman:
What
does the Government consider its priorities to be when thinking about transport
links between
Lord Adonis: Our priorities are to maintain the excellent links that there are between Scotland and England in terms of road, rail and air, and to see that those links are sustained during the economic downturn, which I know has been particularly significant to you and to your Committee, Chairman, and, insofar as we are capable of doing so, which in many areas we are because we directly franchise train services, it is our intention to see that Scotland-England services are fully protected.
Q122 David Mundell: Thank you, Minister, and, just for the record, I was very pleased that the last occasion we met was at the opening of the M6 between Carlisle and Gretna, which was a very welcome development, not just for my constituents but also for Scotland. I want to ask you about a specific element of what I perceive to be your department's policy in terms of rail services which is detrimental to my constituents and to others who use intermediate stations on the West Coast Main Line, and that is the department's apparent obsession with city-to-city journey times and requiring franchisees to meet these city-to-city journey times which means that there are fewer stops at stations such as Lockerbie, Carstairs, Motherwell or, to the south, stations like Warrington and Penrith. Is it not a mirage to suggest that there are better city-to-city times when that is partially being achieved by not stopping at intermediate stations, thus depriving people who use those stations of the opportunity of rail travel?
Lord Adonis: It is certainly not a mirage
to say that some of the city-to-city journey times have improved. If you take the completed West Coast Main
Line, the
Q123 David Mundell: Could I ask you to look again at that balance because I think you would accept that if someone is resident in greater Glasgow, for example, there is an opportunity to go to Glasgow Airport as an alternative to travelling to London, but if you are in the rural south of Scotland, in Lanarkshire or Dumfriesshire, then making the journey to that airport is in itself a significant journey, so therefore that individual is not somebody who is making a decision between air travel and rail travel. That is somebody who is being deprived of the opportunity to travel by rail because of the less frequent services.
Lord Adonis: Let me say I fully accept
that this is a difficult balance to strike, and when the franchises come up for
renewal and re-tendering this, of course, is an issue that we will look at
exhaustively and do so with our partners.
We will do so with the Scottish Executive and with the local authorities
combined. We will in future, as we have
done in the past, go through a full process of consultation. As you will be aware, there is a difficult
trade-off. The view we hear very
strongly from the major Scottish cities is that they want faster journey times
to
Q124 David Mundell: But those opportunities should be available to everyone, not just people who are resident within an urban area adjacent to an airport.
Lord Adonis: And I do fully accept the
point you make about needing to strike a balance. I have just completed a nationwide rail tour
which took me to Carlisle and a good part of
Q125 Mr Carmichael: What would you put down as being a competitive time?
Lord Adonis: The international evidence is
that to get a significant switch from air to rail you need a journey of around
three hours. That may be changing. I have been looking at a lot of European
high-speed rail systems and talking about the factors that need to be taken
into account in planning them, in particular how you get a competitive offer
against domestic, or indeed, in Europe's case, cross-border air travel. There is a view that the competitive edge is
now moving to
Q126 Mr Davidson: As you have said, though, the Barcelona-Madrid train does not stop at Lockerbie, does it? Presumably it is a straight through train, is it?
Lord Adonis: The Barcelona-Madrid trains do stop two or three times. It is not the case that high-speed trains only stop end-to-end; they do make intermediate stops. On the continent, where they have got high-speed lines, they have big and very fraught debates about how often high-speed trains should stop. It is not an easy judgment to make in any country because, of course, the intermediate towns and cities are very anxious to have their services too. Nowhere I went to finds this issue easy to deal with, the trade-off you get between conurbation-to-conurbation journey times which are faster if you have no or few stops and the desire of intermediate stations to have stops.
Q127 Mr
Davidson: Can I ask about pricing, taking in
Barcelona-Madrid, and I mean pricing as compared to rail versus air? At the moment for us, when we are going to
fly down, rail is usually more expensive than flight, and, obviously, that is
an incentive. Has cost played a part in
transferring the traffic from air to rail in
Lord Adonis: Rail is fairly
competitive. It is still not very cheap
but it is fairly competitive with airlines, but it depends very much on the
market. For business travellers it is a
straightforward convenience factor, the fact that the city-to-city journey time
is now faster and the journey is a more user-friendly journey in terms of the
capacity to work en route. This alone
appears to be the decisive factor. I do
not think there is a big difference in price.
It may be that the airlines are somewhat cheaper. However, when it comes to off-peak
travellers, of course, they shop around and high-speed rail operators need to
start making competitive offers in the same way that airlines do. I heard your questions earlier about
pricing. I fully accept that standard
tickets, first class and standard class, which include the capacity to travel
during peak hours, are expensive. I do
not know that that is necessarily a fair comparison to make though because we
do regulate, and will continue to regulate, an off-peak return fare, and the
off-peak return fare from Glasgow and Edinburgh to
Q128 Mr
Davidson: Can I pick up a question about areas of
Lord Adonis: We have been very anxious to
promote better services between most Scottish cities and the major English
cities besides
Q129 Mr
Davidson: Are you aware of any particular demands that
are being made either by the CBI in
Lord Adonis: I am not personally aware but I probably will be very much aware by close of play on Thursday evening because I am spending the day in Edinburgh and Glasgow and meeting business leaders as part of that visit and no doubt they will put to me their concerns.
Mr Davidson: And no doubt you will give them the same answers that you have given us.
Q130 Mr Devine: Network Rail is a big player in your government department.
Mr Adonis: Yes.
Q131 Mr Devine: Do you have confidence in the management of Network Rail?
Lord Adonis: Yes.
Q132 Mr Devine: I did a debate about six weeks ago which highlighted a lot of problems and I do not know if you have seen the Mail on Sunday where it said that a senior manager referred to a female employee as a "silly f---g black bitch", kissed a woman employee when she was on the phone to her boyfriend, told one woman employee she had "a nice arse", and suggested she dress up like a photo of a scantily-clad woman, complimented the same woman on her tan and asked her to take off her top to show the strap marks, dismissed a female employee even though she was in the middle of IVF treatment. If I said to you that the individual who did this was Peter Bennett, the Head of Human Resources at Network Rail, can you confirm that?
Lord Adonis: I cannot, I am afraid. Of course, behaviour of that kind would be totally unacceptable, but I cannot confirm any particular -----
Q133 Mr Devine: Are you aware there have been 155 confidentiality HR agreements with staff over the last few years, some of them going up to as high as £850,000 pay-off because of inappropriate and unacceptable behaviour?
Lord Adonis: This is a matter for Network Rail.
Q134 Mr Devine: No, I am sorry, I think it is a matter for you as the Minister because when I raised this debate six weeks ago I raised these points and I asked at the very end of the debate 14 questions and I am still awaiting an answer, and I would like a guarantee from you today that I will get an answer to these questions that I raised.
Lord Adonis: I have read the debate and I have read my colleague, Paul Clark's reply, and he did undertake to reply and we will, of course, reply.[11]
Q135 Mr
Devine: Network Rail is receiving substantial public
money. Are you aware that last weekend
they used Schillings lawyers, which is the most expensive legal company, I
understand, in
Lord Adonis: I was not aware of that, no.
Q136 Mr Devine: Can we get an assurance that we will have a full inquiry into how this company is being run, because I think it is totally unacceptable that a director, and I am saying to you it is the Director of HR, is behaving in such a manner that clearly his department is not fit for purpose, and it clearly has implications for the Chief Executive as well if we are effectively spending tens of millions of pounds on confidentiality agreements to buy people off so that the employment practices that prevail within this company are not exposed at an industrial tribunal?
Lord Adonis: I will certainly undertake, as you would expect, to reply in full to the points that you made in the debate and to any other points that you wish to raise with me, and, of course, we would also expect Network Rail to respond to any points that you wish to make. I think that is their duty and that is my duty but I cannot comment beyond that because I am not familiar with the details.
Q137 Mr Devine: Can you also give us a promise that if you reply to the allegations that I make, which, as I say, I am very confident about, there will be no bonuses paid to senior managers because we are paying millions of pounds in bonuses to these people and, quite frankly, I cannot find one reason why?
Lord Adonis: Bonuses again are a matter for Network Rail; they are not a matter for the Government, but I have made it repeatedly clear that we expect Network Rail to be mindful of the public mood on bonuses.
Q138 Mr Devine: So you will get back to the Committee?
Lord Adonis: Of course I will, in response to the points that you made.[12]
Q139 Mr
Carmichael: I want to explore with you, Minister, some of
your comments earlier about maintaining the excellent links now between
Lord Adonis: I did not hear that evidence. I certainly think that they should not hold a gun to anyone's head. I think it is perfectly reasonable for British Airways to express their view on what airport capacity they believe they need to provide certain services.
Q140 Mr
Carmichael: But do you think it is acceptable that British
Airways should say in terms that if a third runway does not go ahead then
Lord Adonis: I think it is reasonable for him to tell you what he believes will be the consequences of a failure to provide additional capacity because if those consequences do indeed flow then you and the Committee would, I think, wish to know about them before rather than after that, so in the cause of transparency and openness I think it is perfectly reasonable for British Airways to give you their view as to what the impact of certain policy decisions will be on service levels. A dialogue, of course, will then need -----
Q141 Mr
Carmichael: If for any reason the third runway did not go
ahead, and that reason might be political, it might be commercial, would you
step in to prevent British Airways from withdrawing finally from
Lord Adonis: That is a hypothetical question.
Q142 Mr Carmichael: The hypothesis has been given to us and you yourself said that before we make this decision it has to be on the basis of information and a full debate. Your answer to that question is part of that debate.
Lord Adonis: I cannot give an answer to that question now because it is a hypothetical question which we have not even considered.
Q143 Mr
Carmichael: So you will not do anything to guarantee
Lord Adonis: I find it inconceivable that British Airways would not wish to continue offering a service -----
Q144 Mr Carmichael: British Airways can conceive of it.
Lord Adonis: I can only give you my view. I find it inconceivable that -----
Q145 Mr Carmichael: And we heard that in terms just about an hour ago.
Lord Adonis: If you wish me to consider that eventuality I am happy to do so and to come back to you but, as I say, it is not a scenario we have entertained hitherto.[13]
Q146 Mr
Carmichael: The other links, of course, are not just
transport links. There are also
constitutional links between
Lord Adonis: We have noted the work. Of course, decisions would be taken on a
cross-government basis, and, indeed, in terms of a dialogue between the
Government in
Q147 Mr Carmichael: I think you probably did hear the evidence from both witnesses earlier which indicated that they are seeing a downturn in business travel as a consequence of the economic downturn, which, of course, has a disproportionate effect financially on both rail and aviation links.
Lord Adonis: Yes, I did.
Q148 Mr Carmichael: What view would the Government take on the basis for an extra public subsidy on these cross-border links if this is to continue? You might want to treat the modes differently.
Lord Adonis: In respect of rail, there are public subsidies that apply to operators which are in receipt of revenue support and those public subsidies, of course, rise when traffic levels decline, so there could be for the franchises which are in receipt of revenue support more public subsidy and that would be allowed for under the contractual arrangements which apply. However, it is the department's policy not to renegotiate franchises, so we would not provide additional public subsidy simply because an operator was feeling the pinch and wished us to provide them with subsidies over and above those which apply within their franchise.
Q149 Mr Carmichael: Although there is a precedent for renegotiating franchises, GNER.
Lord Adonis: No, there is not a precedent for renegotiating franchises. There is a precedent for GNER withdrawing from a franchise. It is very important, Chairman, that the Committee understand what happened in respect of the East Coast Main Line because I know that there is a debate about what might happen if the situation occurred. What happened was that Sea Containers, the commercial organisation behind GNER, did not wish to proceed with the East Coast Main Line franchise on the basis that had been negotiated. They approached the Government to see if the Government would provide additional subsidy for them, on which basis they would have been prepared to continue. The Government declined to do so. The Government said that it would on that basis wish to re-tender the franchise but in the interim it agreed a management contract with GNER to manage the franchise while the re-tendering took place. We did not renegotiate the franchise; it is very important that that is understood. What we did was to agree a management contract with GNER for a period, which was, I think, somewhat over a year, during the re-tendering process.
Q150 Mr Carmichael: Who got the new franchise?
Lord Adonis: We then re-let the franchise and National Express East Coast won it, and they actually won it with a bid which was for the life of the franchise worth to the Government £100 million more than the franchise which Sea Containers had walked away from. We did not renegotiate the franchise. At the end of the day we got a better deal for the taxpayer from a new operator than we would have got from continuing with GNER, let alone providing additional subsidies to GNER, which is, of course, what they were seeking. In respect of subsidies on air services, I do not have the information to hand to answer that but I am very happy to do so in writing afterwards.[14]
Q151 David
Mundell: Can I just expand on that in relation to your
working relationship with the Scottish Government and how your perspective of
the
Lord Adonis: Let me emphasise to the
Committee that we see ourselves as having important public responsibilities in
terms of maintaining these crucial strategic road and rail connections between
Q152 David
Mundell: It is only logical because you cannot have
half a high-speed rail link with
Lord Adonis: Indeed.
Q153 David Mundell: How do you discharge your responsibilities that remain within Scotland because in the examples which I alluded to earlier, particularly in relation to Lockerbie and Motherwell, cross-border services remain entirely, ultimately, your responsibility, so what form does the liaison with Holyrood take in that regard?
Lord Adonis: When we come to frame the content of franchises we engage in an extensive dialogue with interested parties about what should go in those franchises, and I can undertake that when we come to re-franchise the Scotland-England rail services we will engage in a full dialogue with the Scottish Government about what should go in those franchises next time, as we did last time. I would also welcome the views of the Committee when that issue comes up.
Q154 David Mundell: Mine is quite clear. It is more trains stopping at Lockerbie station.
Lord Adonis: I firmly agree with that!
Mr Davidson: Irrespective of where they are going.
Mr Carmichael: From
Q155 David Mundell: In relation to journey patterns from the north of England to Scotland, cities and urban and rural areas, is there research on how many journeys are made and what the frequency of travel is and the desirability of travel?
Lord Adonis: My department has a huge body of statistics of that kind which I am happy to make available to the Committee if you wish to specify what it is you are seeking.
Q156 David
Mundell: Certainly, as Alistair Carmichael referred to,
the Calman Commission did take evidence in
Lord Adonis: Yes, and I am aware of this. I have had a number of meetings with Members of Parliament about the issue of the A1 north of Newcastle, which I know has been raised and which is not an easy issue because it does not have sufficient movements to qualify as a national road in the way that the M6 does, and therefore it is a regional road and so an issue for the region as to how they prioritise the resources that we give them in the north east. However, as you will also be aware, we are engaging in a very expensive upgrade of the A1 south of Newcastle between Dishforth and Barton which will very significantly enhance the A1, so even accepting that there is a debate about what should be done north of Newcastle, we are at the moment improving the A1 south of Newcastle.
Q157 Mr
Davidson: Can I just follow on directly from the point
that you mentioned about the M6 and the
Lord Adonis: Yes.
Q158 Mr Davidson: Which was of virtually no value whatsoever to anyone, yet was funded, presumably, from an English budget, and presumably then the Scottish Executive would receive a Barnett consequential in addition to the benefit that was coming from the road.
Lord Adonis: Do you know, I do not know the answer to that question. I am going to have to look at it and come back to you.
Q159 Mr Davidson: That is a bonus mark for me. Not only have I caught you out; to get a Minister to admit it is somewhat unusual.
Lord Adonis: I assume, given that the Barnett Formula is based on public spending in England on English projects dealing with infrastructure, that must be the case, but precisely how you relate particular investments to -----
Q160 Mr Davidson: Can you maybe arrange for the appropriate person to give us a note about how that works?
Lord Adonis: Absolutely.[15]
Q161 Mr
Davidson: Clearly the whole question of Barnett
consequentials is an area that interests us, and presumably the same thing
would apply but not quite as obviously when you are dealing with the sections
of the A1 that you referred to south of Newcastle. Part of that would be servicing
Lord Adonis: I believe all the points you
are making are correct in that the Barnett Formula is based on levels of public
spending in
Q162 Mr Davidson: I think that would be very helpful if you let us have that.
Lord Adonis: In terms of these very large infrastructure projects, £170 million in respect of the M6 completion, £640 million in terms of the upgrade of the A1 that I have referred to, they are being paid for entirely from English budgets.
Q163 Mr Davidson: I am thinking aloud here. I can see how there is a legitimate charge that could be levied against the Scottish budget for road and rail services which are benefiting Scotland even though they are not physically within Scotland.
Lord Adonis: One of the issues that will be in debate as we draw up plans for a high-speed line will be the contribution that local authorities and in the case of Scotland the Scottish Parliament might wish to make to it, so that is going to be an ongoing issue.
Q164 Mr Davidson: Can I ask, just in the context of a high-speed line, because I think you were here when I raised it with the train operating companies person, on the question of the alternative route that could be opened up being a freight line if there was only somewhere between 50 or 15 additional miles of track laid to link this, that and the other, will that be part of the examination of the high-speed rail economics?
Lord Adonis: As you know, our colleague Kelvin Hopkins has been campaigning hard for such a freight line. We are looking at the potential for such a freight line but I am not optimistic that the cost/benefit will add up for it. It is much more likely that the cost/benefit will add up for a dedicated high-speed line, one of the major consequences of which is to free up capacity on the existing East Coast and West Coast Main Lines for freight. It is important to understand that this will be a very significant benefit of a new high-speed line for passengers, which would, of course, be predominantly for passenger traffic. Around 45 per cent of all rail freight movements in the country use the West Coast Main Line at some point, and, of course, the West Coast Main Line, particularly south of Rugby, is running at or near capacity, so if it were possible to build a north-south high-speed line, one of the major beneficiaries would be rail freight for which there would be significant additional capacity on these two lines.
Q165 Mr Davidson: Absolutely. I am assuming if we have to move some rail freight from the West Coast Main Line it would not then be necessary to have the high-speed line; it would just be necessary to have an alternative line, which might or might not be cheaper, depending on the Kelvin Hopkins hypothesis.
Lord Adonis: That is absolutely true, but, of course, it also follows that you would not get the benefits to passengers of having a high-speed line. It is the benefits to passengers which are significant.
Q166 Mr Davidson: Part of the debate, as I understand it, on the West Coast Line is that the timetabling has had to be devised in such a way as to accommodate substantial amounts of freight traffic.
Lord Adonis: That is true, but when you speak to the freight operators, of course, they take the view that they very much play second fiddle to the passenger services because, as they tell me in terms, they do not get paths that they wish they were able to get. If you had the high-speed line it would be possible to make significantly more paths available on the existing West Coast Main Line.
Q167 Mr Davidson: I understand that. The final point I want to raise which relates to the point that you mentioned as well in that last answer is the question of the franchise agreements and whether or not the Government was a soft touch in terms of the penalties that were being applied for breaches. It has been suggested to me that you are far too cosy with the train operating companies, that you do not apply the penalties as and when you could. There is far too great a degree of understanding, as it were, or accommodation of the train companies' needs and I wondered what your response was to that.
Lord Adonis: I do not think they see me or Geoff Hoon as a soft touch at all. We have been very robust in saying that there will be no renegotiation of contracts, that we expect obligations to be fulfilled and that we will be exerting all of the remedies which are available to us under those contracts to see that they are honoured.
Q168 Mr Davidson: Yes, that is a question of renegotiating the contract; I understand that, but there are also items in contracts and franchises relating to the cancellation figures, relating to percentages on time and so on. We are, I think, having a note given to us by the train operating companies about the penalties that have been levied on that. I think it would be helpful, upon reflection, if you gave us one that indicated what charges could have been levied and what you did actually levy, because in many cases you will not have applied the full penalty that you could have applied, for a variety of reasons that you took into account, and it would be helpful if you gave us an indication of what those reasons and explanations were.
Lord Adonis: I would be very happy to do that, but I should point out that we have been very tough with train operating companies that have been in serious breach of their service obligations.[16] You will be aware of First Great Western which was in serious breach of its service obligations a short while ago and we did serve formal notices on them to improve their services in response to this.
Q169 Mr Davidson: That is right. My anxiety is not that you are not tough enough when it comes to maybe refusing a renegotiation or if somebody is outrageously in breach you will then deal with that. It is that there is a constant low level breaking of the franchise arrangements where you are not as tough as you could be under the terms of the agreement, and I think it would be helpful to us to clarify exactly the extent to which that was true or not and to have the reasons from yourselves as to why you sought not to apply the full penalty that you could have applied.
Lord Adonis: I would be very happy to provide such a note but I would not wish you to go away with the impression that we are not on their case the whole time. We are, and that is also true of Network Rail. The department does very much see its job as to stand up robustly for passengers and to see that both the train operating companies and Network Rail meet in full their obligations, and that is not simply in terms of services that they are obliged to provide in the normal course of business. A particular issue which is of concern to us at the moment, and I know is a big concern to you, Chairman, is how engineering works are handled, how diversionary services are provided when engineering works need to be undertaken, and the view which we have expressed in very robust terms is that Network Rail and the train operating companies need to raise their game in terms of providing better alternative services and a better handling of disruption so that passengers are not inconvenienced as much in future as they have been in the recent past by engineering work on the main Scottish-English routes.
Q170 Chairman:
Are
you optimistic that high-speed rail services will be extended from
Lord Adonis: I think it is very important,
Chairman, to distinguish between high-speed services and a high-speed
line. I am optimistic that from the
beginning of any high-speed line it will be possible to provide high-speed
services through
Q171 Chairman:
No, I
am talking about the high-speed line from
Lord Adonis: That will be a much tougher call because, of course, building an entirely new railway line is a very expensive business, so I think that will only be done, to be frank, a stage at a time, but it is important to understand that from the beginning of any high-speed line, whatever the route mileage is that you are able to provide in the first instance, it will be possible to run high-speed services which run off that line onto the existing network. A key requirement we have placed on the new company, High Speed 2, is that their design work for any high-speed line should ensure that such a line is fully interoperable with the existing lines, so that we adopt very much the French approach to developing high-speed rail, which is to have the high-speed lines fully interoperable with the existing network, and not the Japanese approach, which has been to have an entirely self-contained high-speed line where the trains cannot run off the high-speed line onto the existing network. We see it as a crucial objective of the policy in Britain that cities beyond those immediately served by the high-speed line should be able to benefit from high-speed services on that line, so that, for example, in the case of a line which, for the sake of argument, started by going from London to Birmingham, the full journey time saving on such a line should be available to destinations north, including to Scotland.
Q172 Chairman:
It is
clear from your evidence that you want to maintain excellent rail links and
public transport links between the cities and people in
Lord Adonis: I think it would be calamitous for the economy and it is not a scenario which the Government entertains at all. We see maintenance improvements of rail services as our priority. We are continuing to invest in rail services and I am glad to hear from the airlines that they are not contemplating any significant reductions in services.
Q173 Chairman:
Do
you consider that the air services from
Lord Adonis: They are very much priority routes. I am not sure whether you are asking me whether they should be protected in some special form.
Q174 Chairman: Do you consider them as priority routes?
Lord Adonis: We do definitely regard them
as priority routes, and indeed I am glad to see that
Q175 Chairman: Can I thank you for your attendance this afternoon. Before I declare the meeting closed do you wish to say anything in conclusion, perhaps on areas not covered during our questions?
Lord Adonis: I have nothing more to say, Chairman, but, of course, I am very happy to follow up in correspondence any other issues you wish to open with the department.
Chairman: Thank you.
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