Memorandum by The Railway Forum (IT 84)
A NEW DEAL FOR TRANSPORT (CM
A NEW DEAL FOR THE RAILWAYS (CM
1. As the representative body for the railway
industry as a whole, The Railway Forum welcomes the opportunity
to comment on the Transport White Paper and on Cm 4024. This note
is based on the conclusions of an Analysis of the White Paper
(attached) which was prepared for the Forum's Annual Conference
on 21 September, and draws out some key concerns which we wish
to bring to the Committee's attention.
2. Rail has a vital role to play in the future
transport provision for this country. It offers major environmental
benefits. To maximise those benefits it is essential that rail
grows to its full potential, which means delivering the services
that passengers and freight customers want. It also means that
its environmental benefits should be fully reflected in Government
policy. Thus the Forum's Analysis identifies five key requirements
to secure rail's future growth:
improved service standards;
equitable pricing between transport
equitable investment appraisal between
forward-looking regulation which
The Analysis considers how far the Government's
proposals meet those requirements.
3. The Forum welcomes the strong focus which
is given to rail, which is stated as being "at the heart
of an integrated transport system" and the emphasis on a
long-term strategic approach. Assessing future investment needs
and funding will be one of the new Authority's biggest challenges.
In the short run, we welcome the additional funding allowed by
the Chancellor for both local and centrally funded schemes. This
should make a useful contribution to the development of the network.
And we are pleased to see the direction of the Government's thinking
towards more equitable arrangements between modes in relation
to such matters as investment appraisal, taxation and law enforcement.
It is also stated that the Government will "make increasing
use of economic instruments such as pricing and taxation to send
clear signals about the wider social and environmental impacts
of travel decisions". Potentially this is one of the most
important statements in the White Paper. Our only regret is that
it does not say enough about how such "clear signals"
are to be sent and when.
4. Taken together, the measures proposed
in the White Paper have the potential to make a very real and
positive impact on the growth of rail passenger and freight traffic.
At this stage, however, many of them are limited to statements
of intent. Moreover, some of the proposalsparticularly
in relation to regulationcould potentially have a negative
impact on investment and growth, unless they are handled carefully
5. We are concerned that delay in taking some
of the positive measures identified by the Government could seriously
diminish their value. One major concern in relation to sustaining
the volume of rail investment is uncertainty over the terms and
conditions of franchise renewal, advice on which is to be "an
early task" for the new Authority. We consider this to
be inadequate. With the first franchises due to expire in 2003
and rolling stock lead times which can exceed two years, existing
franchisees need to be told quickly and clearly what criteria
they will have to meet in order to secure renewal. Negotiations
should begin as soon as possible. Without a clear view of
the options, both franchisees and rolling stock companies will
have increasingly little incentive to order new trains. This risks
a repeat of the disastrous investment hiatus of 1994-1996 which
cost some 10,000 jobs; and passengers and the whole industry will
6. We were encouraged by the remarks made
by Dr John Reid at our Annual Conference on 21 September that
the Government "wants to ensure that investment is a continuous
process and that the train manufacturing centres will never again
suffer the drought in orders created by privatisation".
Dr Reid referred to the possible use of powers in the Railways
Act to underpin investment beyond the terms of franchises. He
also referred to possible action to alleviate the "extreme
bunching" of franchises.
7. Building on these remarks we believe it must
be recognised that
residual risk has to be priced and
that continuing uncertainty over franchise renewal will, one way
or another, add to industry costs. The longer the uncertainty,
the higher the price and the greater the risk that, at some point,
new trains will simply not be fundable;
whereas use of powers in the Railways
Act to underpin investment is potentially of great value, there
powers have not so far been used, and do not in any event take
account of wider costs to a franchisee of introducing new rolling
stockmanagement resource, retraining costs, the need for
new facilitieswhich could not be recovered if the franchise
were not renewed;
the need to avoid bunching of franchises
is quite clear. Neither from an administrative nor an investment
point of view does it make sense for so many to fall in at the
same time. Nor do decisions on renewal or extension of individual
franchises all need to be taken at the same time. But some at
least do need to be taken quickly in order to maintain the necessary
planning and investment momentum.
8. It is essential that the Government and
OPRAF should, as a matter of urgency, identify ways of reducing
current uncertainties over the approach to be adopted in franchise
extensions and in the next franchise round. The sooner that
uncertainty is removed, the better the prospects of avoiding what
the Minister described as the "sort of boom and bust which
leads to unemployment, inefficient production and reduced value
9. Rail has considerable environmental advantages
in relation to fuel efficiency, reduction of emissions, land use,
planning and quality of life, land take and noise and vibration.
It is essential that rail's wider social and environmental benefits
be given full weight in appraisal of investment and other expenditure.
It is said in the White Paper that these are matters on which
the Commission for Integrated Transport will be asked to advise.
We believe that the work needs to be advanced with considerable
urgency, not waiting for the formation of the Commission. It should
take full account of the regional and local development benefits
of rail, as well as its key role in, e.g., helping to reduce greenhouse
and other emissions.
10. Appropriate public support should then be
provided for those projects and schemes which are shown to be
justified by their social benefits. We would expect the requirement
to be substantial. However, as we point out in para 23 below,
considerable scope exists for the support of investment which
is seen to be in the public interest.
11. We also have concerns in relation to pricing
between modes. The basis of pricing for railways (at the point
of use) and for roads (where there is no current charge at the
point of use) remains highly detrimental to rail. It should be
made consistent between modes as quickly as possible, taking account
of external costs and benefits. The Government is proposing
to take steps in this direction, but they fall far short of establishing
a level playing field. Thus local authorities are to be empowered
to levy certain charges on road users, but will not be required
to do so. Likewise, the Department is to continue its investigation
into motorway charging, but the White Paper (paragraphs 4.100-104)
conveys no sense of urgency about this.
12. Against this background we have been encouraged
to read the European Commission's July 1998 White Paper "Fair
Payment for Infrastructure Use", advocating the early introduction
of common principles for infrastructure charging across all modes.
We strongly hope that the Government will contribute actively
to the development of the Commission's proposals, and take account
of those common principles in developing its own policies.
13. We think it important that the Government
should vigorously encourage local authorities to adopt road charging,
using all the instruments it will have available. These will
include the new national planning policy guidance, the Government's
participation in and approval of Regional Planning Guidance and
regional transport strategies, its role in relation to local transport
plans and individual schemes, and ensuring that authorities properly
carry out their responsibilities to deliver the National Air Quality
14. We applaud the Government's decision that
local authorities should be able to recycle the proceeds from
road charging into public transport provision and projects. If
local authorities make good use of this powerwith whatever
encouragement Government may offerit has the potential
to have a substantial impact on the quality of public transport
provision and the quality of life in many of our towns and cities.
It is however important that the legislation should be cast in
terms sufficient to allow authorities to undertake this role effectively.
They should be able to capitalise the value of revenue streams
and, as envisaged in paragraph 4.90 of the White Paper, should
be able to enter into appropriate partnership arrangements with
private sector firms to encourage integrated transport provision.
We agree with the White Paper (paragraph 4.111) that charges must
not become a general revenue-raising device. Indeed, it is
essential that the proceeds of each road charging scheme should
be additional to the resources which the local authority concerned
would otherwise have had available, since otherwise the beneficiary
would be the Treasury rather than public transport.
15. The White Paper (paragraph 3.38) states
that new major light rail schemes should "not be a priority"
for funding. We disagree with this emphasis. The Manchester Metrolink
and other schemes have shown the considerable benefits which they
can bring. Light rail schemes should be weighed fully and fairly
in the balance against other forms of transport provision, giving
full weight to wider social and environmental benefits.
16. We welcome the recognition by the Deputy
Prime Minister in his Statement to the House of the importance
for the industry of a stable framework to deliver long-term investment
and better services for passengers. That is critically important.
Investment in a higher-quality railway encourages passenger and
17. The industry is already heavily regulated,
and the volume of future investment is likely to be influenced
adversely if expectations develop that regulation may become yet
more intensive or detailed, or more time-consuming, or less predictable.
If the Rail Regulator is to become subject to statutory guidance
from the Secretary of State on his broad policy objectives (Cm
4024, paragraph 64), it is important that the terms of that guidance
should be constrained by Parliament in ways that allow it to be
understood and forecast in a predictable way. For example, it
ought not to be possible for the Secretary of State to issue guidance
which, if implemented, would have the effect of prejudicing an
investment that had already been committed. Guidance should
be strategic: the Secretary of State should not become involved
in detailed operation of the railway. The same applies to the
Secretary of State's guidance to the Strategic Rail Authority.
18. Clarity is also needed on the development
of competition policy. The Rail Regulator is to continue to exercise
his competition powers concurrently with the Director General
or Fair Trading. However, we also learn that the new Authority
is to "set the longer term policy framework" (paragraph
2.38), which the Regulator is to be required to take into account.
Policy on rail competition needs to be determined clearly and
as quickly as possible, and then not shaken around again.
It critically affects the service and investment plans of existing
operators and the commercial judgment of prospective new entrants.
Uncertainty and delay is bound to blight individual companies'
19. We support the broad strategic remit of
the Authority as set out in the White Paper and in paragraph 23
of Cm 4024, including the requirement to ensure that freight operators'
plans are taken into account in the planning of the network as
a whole. We see it as being a proponent of new investment schemes
in line with the general thrust of Government policy.
20. It will be essential for the Authority to
concentrate on the strategic issues that set the framework for
the industry. Given its huge workload, it should from the outset
adopt a structure which distinguishes between strategy and day-to-day
franchise management. Otherwise the former will be submergedor
at the very least blurred and bluntedby the pressures of
21. As we see it, the Authority's key tasks
at the strategic level should be:
target setting (which is a key
part of strategic vision);
assessment of the national strategic
priorities for rail, and requirements of public funding in support
strategic advice to the various
public sector bodies involved in rail transport planning, and
resolution of disputes between them on rail priorities.
22. If the Authority is to carry weight with
the various regional bodies, it will need to demonstrate that
it has a full grasp of the value of rail to national and regional
economic development, and how this can be delivered. In carrying
out its business the Authority must also be well informed of the
practical consequences of its activities and imbued with the pragmatic
approach adopted by the Government. To that end, we think it
essential for a number of the members of its Board to have business
experience, including some with first hand commercial experience
of the railway business. Unless the business dimension is properly
represented, the Board will inevitably be unbalanced, and risk
reaching unbalanced decisions. The same applies to the Commission
for Integrated Transport.
23. We set out this and other recommendations
in the Analysis, which also addresses the quantum of public support
which will in future be:
(b) available for the railways.
The Paper points out that by 2003-04, public
support will have fallen from £1.7 billion in 1997-98 to
some £650 milliona reduction of over £1 billion
on an annual basis. By 2003-04 franchise payments received by
Government from the industry will total some £140
million (1998 prices). Considerable scope therefore exists
for support of investment which is seen to be in the public interest.
24. To summarise, our main concerns are as follows:
the time it will take to establish
the Strategic Rail Authority and in particular the risk of loss
of investment momentum through delay in the formulation of policy
on franchise renewal, with potentially grave effects on the supply
delays in the formulation of policy
on rail competition leading to a blight in individual companies'
the risk that the day-to-day pressures
of regulatory activity will blur the strategic focus unless that
is built into the Authority's organisational structure from the
the need for the Authority's "pragmatism
with a strategic view" (paragraph 4.20) to be reinforced
by business experience, including experience of railway operation.
This applies equally to the Commission for Integrated Transport;
the need for mechanisms to promote
the resolution of disputes on rail priorities between regional
and local transport planning bodies, and the role of the SRA in
the need to avoid bureaucratic
delay on proposals to improve rail services;
the risk that the various measures
to encourage a fairer basis of pricing and appraisal between road
and rail will be insufficient, or delayed, or not adequately implemented
by regional and local authorities, or other public bodies who
may be involved;
that resources should be made
available to fund rail projects where justified by their wider
environmental, social and regeneration effects.
25. We strongly hope that our apprehension over
the possibility of damaging delays will be mitigated by early
legislation and evidence that the Government do not intend issues
such as franchise renewal or extension to remain on the backburner
until the new Authority has been fully established.
26. The Railway Forum intends to participate
fully in the consultative process surrounding the detailed developments
of the Government's proposals, reflecting the approach summarised
27. The Forum would be glad to expand on any
of these points in oral evidence to the Committee if required.
4 See Railway Forum Brief on "Rail and the Environment"
(May 1998). Back
Some of the possibilities have been illustrated in a report by
the Greater London Group at the LSE entitled "A Fourth Way
for the London Underground?" (June 1998). Back