Memorandum by the Railway Industry Association
THE GOVERNMENT'S TRANSPORT WHITE PAPER:
"A NEW DEAL FOR TRANSPORT"
1.1 The Railway Industry Association (RIA) is
the trade association for UK based manufacturers, contractors
leasing companies, consultants and providers of other specialist
services to the worldwide railway industry.
1.2 RIA is an active participant in the work
of the Railway Forum, the umbrella organisation for the railway
industry as a whole. RIA's concerns are included among the points
put forward by the Forum in their parallel submission to the Committee.
The purposes of this paper are:
to place particular emphasis on some
of the key points put forward by the Forum; and
to provide additional evidence to
the Committee on one point which is a major issue for many members
of RIA: the artificial and seriously damaging "feast and
famine" distortions in the rolling stock market induced by
the franchising process.
2. KEY POINTS:
2.1 RIA urges the early establishment of the
proposed Strategic Rail Authority, whether in full or shadow form,
so that rapid progress can be made on two crucial issues: the
harmonisation of the appraisal framework and of pricing
principles between road and rail, taking account of the social
and environmental costs and benefits involved.
2.2 There is also a series of environmental
and other requirements where rail is subject to more stringent
obligations than road. The Authority or the Commission for Integrated
Transport should take action to level the playing field in these
2.3 We applaud the EU initiatives
to bring pricing principles into line between modes, and urge
the British Government to support those initiatives and to bring
them into force in this country as quickly as possible.
2.4 RIA also looks to the Government to make
available the resources required to fund investment which is shown
to be in the national interest under the new appraisal and pricing
arrangements, but which does not meet commercial criteria. The
Government's objectives in the White Paper, to encourage people
to switch from cars to public transport, can only be accomplished
with a modern, attractive and efficient railwaynot by one
which is widely characterised by Victorian infrastructure and
by the effects of decades of under-investment, with inevitable
consequences for service quality and reliability.
2.5 Substantial private-sector investment is
planned, and the new investment funds announced by the Government
will help. We suspect, however, that they will make only small
inroads into the backlog of socially-necessary investment which
has been built up. Rectifying this backlog is one of the most
urgent tasks facing the railway and Government today, using funding
released by the fall in subsidy payments to the franchisees over
2.6 We welcome the Government's intention to
allow local authorities to charge for the use of roads and for
workplace parking and to use the proceeds to enhance public transport
provision. This is a long-awaited initiative which could have
potentially significant effects. But it is vital that the powers
should be drawn up in a way which is fully adequate for their
purpose, that they should be introduced quickly, and that the
Treasury should be prevented from docking the other resources
made available to local authorities because of the income from
the new charges.
2.7 It will also be vitally important that the
Government encourages authorities actually to use the new powers
once they are available. The best mechanism for this is likely
to be the Regional Planning Guidance, encouraging all authorities
in an area to introduce charging together so that no authority
need fear being undercut by its neighbours.
2.8 In addition, however, it is important that
the Government encourages the local acceptability of charges.
Charges and restraints need to go hand-in-hand with improved public
transport provision, or there is a real risk that schemes will
fail or be withdrawn. Government therefore needs to provide resources
in advance to ensure that better public transport services are
available as soon as charges are introduced.
2.9 Like the Forum, we fail to understand why
the White Paper suggests that light rail schemes should not be
a priority. It is in our view wrong to adopt pre-conceived notions
of priority when the appraisal system exists to allow informed
judgements to be made of the restrictive merits of competing investments.
2.10 Light rail schemes on the continent have
shown their ability to transform the quality of life in urban
areas, especially in city centres. They have demonstrated that
people are willing to leave their cars at home where a high-quality
public transport alternative is provided. We believe that such
schemes are therefore likely to play an important part in delivering
the White Paper objectives. We accordingly look forward to the
opening of the schemes in the West Midlands and Croydon, and in
due course the extensions at Manchester, and consider that they
should be followed by others where appraisal shows them to be
justified by environmental and other social benefits.
3. KEY POINTS:
3.1 In recent years the rolling stock supply
industry has made a series of important innovations in a highly
competitive market. The cost of new vehicles has been cut dramatically
in real terms. That is due largely to the development by the supply
industry of innovative design and assembly techniques: a standard
coach now takes far fewer man-hours to build. And a wholly new
commercial framework has been created, in which manufacturers
are prepared to take responsibility for the long-term maintenance
and continuing serviceability of the fleet that they provide,
with tough penalties for any failure to deliver to time, cost
3.2 That success is reflected in the currently
healthy state of the order book. But that is a short-term peak
in demand, with great uncertainty facing the industry very soon.
The scale of the fluctuations in demand for main-line domestic
rolling stock is illustrated by the attached chart (which is already
in the public domain).
3.3 The issue is not with the quantity of investment
but with its phasing. Approximately 400 vehicles a year were ordered
in the late 1980s and early 1990sroughly the long-term
average needed to maintain the age profile of the fleet nationally.
There were then virtually no orders for main-line rolling stock
throughout 1994, 1995 and 1996. That caused a permanent contraction
in the capacity of the British rolling stock industry and the
loss of some 10,000 jobs.
3.4 Large orders have been placed this year
and last: some 2,000 vehicles. Yet that was simply catching up
with the absence of orders from 1994-96. The recent orders were
largely given as a result of franchise commitments, and ordering
has now become substantially a function of the franchising process.
Yet the next main round of franchising does not begin until 2003.
By the time that any consequent orders are placed, we may have
seen a repeat of the famine of orders that beset the rolling stock
industry from 1994 to 1996.
3.5 The effect on the rolling stock supply industry,
if nothing is done, will be grave. While we fully recognise that
variations in annual orders are inevitable, the fluctuations that
we have seen are extreme. No industry can afford to keep expensive
capital and a substantial workforce idle for a period of years
waiting for future orders. And it should not be asked to do so
for artificial reasons caused essentially by an administrative
3.6 There is no lack of underlying demand for
rolling stock. The White Paper says that the franchises were let
on the basis of average passenger growth forecasts of nearly 25
per cent by 2002-03, and many franchises are experiencing growth
faster than they anticipated in their bids. Yet very few trains
have been ordered to cater for this growth: the great bulk of
the 2,000 vehicles on order are for the replacement of existing
aged fleets. In the absence of further orders, trains will inevitably
become more and more overcrowdedjust as the Government
is seeking to encourage more people to switch to public transport.
3.7 The reason is simple: as the unexpired period
of a franchise diminishes, the franchisee has less and less of
an incentive to order new stock. This is not a new point: the
Rail Regulator in his May 1998 report, for example, recommended
"the Government, the proposed Strategic
Rail Authority and OPRAF, as appropriate, should identify means
of reducing current uncertainties over the future strategic direction
of the passenger railway and the rolling stock requirements likely
to be needed to support it, and over the approach to be adopted
to the next franchise round, with the aim of facilitating planning
of new investment in rolling stock and encouraging competition
from new entrants."
3.8 As yet the Government has made no direct
response to this recommendation, the White Paper simply indicating
that franchise renewal issues will be for the Strategic Rail Authority
to consider. However, the formal establishment of the Authority
and the outcome of its subsequent consideration could be two years
away or more. The problem is much too urgent for such a delay.
Early action is needed.
to give the existing franchisees
clear guidance on the criteria they will have to meet if they
wish to renew their franchises, and to launch negotiations, so
that the franchisees can plan the future with more confidence,
commit service improvements and expenses where appropriate, and
to stagger the re-letting of future
franchises to avoid bunching, so that we are not forever in a
seven-year cycle of boom and bust.
3.9 It is essential that the Strategic Rail
authority is formed on a shadow basis as quickly as possible and
addresses these problems with OPRAF as a matter of high priority.
Railway Industry Association
10 "Fair Payment for Infrastructure Use"
European Commission July 1998. Back
"Review of the Rolling Stock Market-Report to the Deputy
Prime Minister", Office of the Rail Regulator, May 1998,
para 1.28(v). Back