Examination of witnesses (Questions 480
- 499)
WEDNESDAY 1 JULY 1998
MR JOHN
BALLARD, MR
CHRIS BREARLEY
and MR DAVID
ROWLANDS
480. That would be terrific, yes.
(Mr Rowlands) I think the position ought to be
that if there was a very substantial change of some kind, whether
it was the Tunnel went out of action or some other change that
significantly changed the risk profile, that there was a risk
that the Government guarantee on the bonds would be called, then
I imagine the Office of National Statistics would want to revisit
its decision and might come to a different conclusion.
481. It might not be just sort of an Armageddon
close-down, it might be what Mr Stringer was saying, supposing
figures just drop to four million?
(Mr Rowlands) Can I just pursue, if it did drop
to four million.
482. For a long period?
(Mr Rowlands) Yes. Were it to drop to four million
in the immediate future, the next, say, two or three years, I
think the likelihood is that the first consequence would be that
the second stage of CTRL would be delayed. If the ridership fell
to something like four million, I doubt we would proceed with
the second phase; that would remove the risk of some element of
the Government bonds being called, because you would not be issuing
bonds to pay for a second stage that you were not building, though
it would still leave a risk in relation to phase one.
Chairman
483. I think, actually, Mr Rowlands, you
may have inadvertently found the answer to all our transport problems.
All we have to do is transmit them into international treaties
and then not only will we be able to keep secret most of the things
that happen but we will not have it counted against the PSBR.
This is a very unique and interesting discovery on your part.
I am going to bring you on to freight. Are the expenditures on
freight grants expected to continue increasing in future years?
(Mr Rowlands) The unhelpful answer is, of course,
I should say we must wait for the outcome of the Comprehensive
Spending Review.
484. I think we have heard that, yes.
(Mr Rowlands) The more helpful answer is, yes,
that would be the expectation. If you look in the Annual Report
and go back only a year or two, you will find freight grant was
running at two, three, £4 million a year. Last year the budget
was £31 million for freight grant and we actually spent £29
million; the budget for this year is £40 million, so it is
up about a third, and we already have committed payments of £29
million for this year. Though I must not anticipate things, as
I say, like the Comprehensive Spending Review, I think we could
all anticipate at least some further increase in the budget for
freight grants.
485. Have you streamlined the administration
of this scheme?
(Mr Rowlands) Yes. Following an earlier report
from your predecessor Committee, we have quite substantially streamlined
everything, it was taking far too long to process claims and we
are now turning them round certainly far more quickly, and we
also took on board the old Transport Committee's recommendation
that we ought to publicise the thing better as well.
486. Which is why you are having to spend
out more on freight grants?
(Mr Rowlands) It is part of the reason. We have
a new brochure that the Freight Transport Association put in its
monthly magazine as a flyer to all of the members, there is a
new promotional video, and that is part of the reason. I think
it is also a reflection of, if you like, the work that people
like English, Welsh and Scottish Railways are putting in, to generate
business, they are generating extra business, and through that
itself generating new applications for freight grants.
487. That is very encouraging. Can you tell
us what is being done to ensure land classified as non-operational
in 1994 is being safeguarded for future railway use? You will
remember that this concerned the Committee very much, because
we felt that if freight was going to develop there were all sorts
of related problems with land?
(Mr Rowlands) You will remember, at the point
of privatisation, land and property was divided in-between what
at that stage was seen as operational land, which went to Railtrack,
and so-called non-operational land remaining with the British
Railways Board for it to dispose of. I think that there is an
understandable concern in the industry, and amongst others, that
there is perhaps some of that non-operational land, which in times
past might have stayed like that, but there is growth in the freight
railway now and perhaps what was once non-operational might become
operational again. Hitherto, British Rail has offered both to
Railtrack, freight railway operators and to local authorities,
if you like, first pick at some of the stuff which it is proposing
to dispose of, but I think it is fair to say the Government shares
the general concern about the inadvertent disposal of land that
still might have operational value; the Board is looking at that
at the moment. My expectation is, though this is not yet certain,
that the Board will probably propose that it looks at what it
has still got, divides it into, if you like, two clearly separate
parcels, one parcel being land and property that by no stretch
of the imagination it is ever going to have operational value.
They recently disposed, for example, of Euston House, their old
headquarters, which is just an office block in London, it has
no operational value from the railways' point of view, it has
still got fishing rights on the River Esk, which I do not think
will ever have railway value. There is a lot of stuff like that.
They propose to divide it, as I say, into that sort of category
and, probably, on a size basis, the bigger parcels, to put in
a second category. If the Government is generally content with
that approach, they can get on with getting rid of the stuff that
will never have operational value, and they would then turn to
look in more detail at the stuff that may have operational value,
and they would hold it back from the market whilst we and perhaps
some others go through that and look at it.
488. Is the Government still pressuring
British Rail to get rid of a certain amount of land every year?
(Mr Rowlands) The Government never pressurises
British Rail to get rid of land.
489. Is the Government encouraging British
Rail to get rid of a certain amount of land every year?
(Mr Rowlands) The Government is certainly encouraging
them to get rid of some land and property.
490. And are they the same figures that
were used by the previous Government?
(Mr Rowlands) The figures for last year, I think,
from memory, were essentially those which the previous Government
was using. The British Rail budget for last year had £75
million in it for land and property disposals, and they sold £73
million. This year's budget, although not public, has £57
million in for land and property disposals, and they are about
a third of the way towards that total this year. The problem one
needs to bear in mind is that, to the extent that British Rail
do not dispose of land and property that they might have done,
so, say, for example, this year, they sell significantly less
than the £57 million in the budget, because the Government
would like them to hold back while we look at it, you do not get
a free lunch, they still need that money to make their budget
add up, if they do not get it through land and property sales,
it would have, I suspect, to come from the Department as a grant,
which means we would have to go somewhere else within the Department's
programmes to find the money, whether it is from local transport,
or roads, or some other area.
491. Yes, one understands that, but the
Government cannot say, on the one hand, "We don't want you
to get rid of the relevant land" and, on the other hand,
"We do want you to find this money from your budget by selling
your assets"?
(Mr Rowlands) Which is why I was saying I think
the Board is likely to propose this approach of dividing what
it has got into two, get on with selling stuff that everybody
agrees will never have any operational value, and look more closely
at what is left. If the consequence of that is that they do not,
in fact, make £57 million worth of sales for this financial
year then I think the Department would have to accept that as
the inevitable outcome and we would have to look to make up the
difference.
492. Can we then bring you, therefore, on
to another aspect which concerns us, that is consultancy fees.
Why are there differences in the figures given for "Other
rail consultancies" expenditure in your Annual Report and
the Explanatory Memorandum; what are the correct figures?
(Mr Rowlands) Is the discrepancy you are talking
about for the current financial year, where the Railways chapter
of the Annual Report shows——
493. Let me help you. The "Other rail
consultancies" entry, in Figure 12.a, 1996-97 expenditure
of £5 million, an estimated outturn of £1 million in
1997-98, no projected spending in 1998-99; this is page 110. Your
Explanatory Memorandum for the same period indicates expenditure
of £7 million, £1.1 million, and £5.7 million,
respectively?
(Mr Rowlands) For 1996-97, the original provision
was £7 million for "Other railway consultancies"
for that year, it outturned at £5 million, the difference
was wholly accounted for by the inclusion in the original net
provision of £2 million for Crossrail consultancies, and
they were not proceeded with because at the time the Government
took the conclusion that the project was being postponed, therefore
the money was not spent on consultants. I do not think there is
a problem for 1997-98. For this present year, Table 12.a, on page
110, shows zero for "Other rail consultancies", whereas
the Memorandum shows, I think, from memory, £6 million. That
is wholly accounted for by the fact that the £6 million figure
is made up of £5 million for consultancy costs in relation
to the Underground PPP, and about £650,000 consultancy costs
in relation to JLE, rounded to £6 million. It actually appears
on page 150-something, at the back, but it is not included in
paragraph 12.a because this is national railways, and all of the
£6 million is Underground, actually, for this year.
494. That amount, is that in addition to
the £65 million that could be spent on consultancies out
of the £365 million extra grant to the Underground?
(Mr Rowlands) Yes.
495. So it is in addition?
(Mr Rowlands) Yes.
496. Does the Department decide whether
it is necessary to appoint external consultants to provide advice,
rather than rely on in-house specialists?
(Mr Rowlands) It depends what the question is
we are trying to get an answer to.
497. Well, £365 million plus £6
million, those sorts of answers?
(Mr Ballard) The £365 million figure is made
up of 300 additional investment and 65 the cost of getting through
to a PPP; so that allows for the fact that there will be costs
incurred by London Transport. The figure we have been referring
to here is the additional cost which the Department itself will
expect to incur, or might well incur.
498. That the Department would expect to
incur?
(Mr Ballard) Yes.
499. Again, I ask you, how do you decide
"We don't use the people internally, we use somebody outside";
who takes that decision?
(Mr Ballard) I think, in determining what these
figures are, obviously, we are drawing on our experience of recent
years with the use of consultants in respect to the privatisation
of British Railways.
Chairman: Yes, but,
Mr Ballard, what was clear under all the privatisations, and indeed
if you read the National Audit Reports on things as diverse as
the sale of Army houses, or the privatisation of British Rail,
it was very clear that the previous Government cheerfully slung
vast amounts of money away on consultants, much of which has been
questioned by the National Audit Office, in considerable detail
and, indeed, rather acid terms, on occasion. So are we to take
it that you are continuing with the largesse that was dispensed
before the election, or are we to assume that you believe that
you have nobody who can give you advice of a suitable level and
you must, perforce, employ people at large sums of money; what
are we to conclude?
Mr Pickles: You are
not asking leading questions, I hope.
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