Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence

Examination of witnesses (Questions 480 - 499)



  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.


  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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