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


Examination of witnesses (Questions 120 - 133)

WEDNESDAY 9 DECEMBER 1998

MR W WHITEHORN and MR M FURLONG

  120.  Yes, but you have also said very clearly in answer to Mr Bennett that if in a short period of time you cannot make it pay you will be coming back here asking for precisely the sort of treatment he has talked about, in other words access to the train sets.
  (Mr Whitehorn)  I did not say we would be doing that. What I quite clearly said was that he was making a logical assumption that if he assumed that it is something that generally would be a good idea. That is a very different thing. If we were not to make this business work then the trains would not be owned by us anyway. They are currently under the management of the Consortium.

  121.  It was not the ownership of the assets which Mr Bennett was talking about.
  (Mr Whitehorn)  There are no assets involved in this business apart from the Eurostar trains themselves. There is no risk to the public sector, there is no risk to the taxpayer, there is no risk to anybody but ourselves if this business were not to work. The reason we are sitting here today is because we are confident that this business can work and we are confident that there is a marketplace there sufficient enough to make these Eurostars pay within three years.

  122.  There would be a risk to the Consortium of course if you took their train sets away.
  (Mr Whitehorn)  No, no risk whatsoever. I cannot walk off to Mongolia with those train sets, they have to stay in the country. Therefore if the business did not work they would——

  123.  Believe me people have been known to remove train sets.
  (Mr Whitehorn)  That is very true.

  124.  People have been known not only to remove train sets but engines and lord knows what else from right under the noses of all sorts of people.
  (Mr Whitehorn)  Indeed, but they do not get very far with them.

Chairman:  That is a matter of opinion too.

Mr Stevenson

  125.  That does worry me. When you say no public subsidy, no risk to the public, no risk to the public purse because they cannot whisk the train sets away, so the only losers if it did not work would be you.
  (Mr Whitehorn)  Correct.

  126.  I wonder whether that is correct. One of the arguments for regional Eurostar which is being put to us which many of us can recognise is that it has the potential to attract investment.
  (Mr Whitehorn)  Correct.

  127.  I am an investor from Outer Mongolia. I am seeking to invest in north Staffordshire. One of the things I am taking into account is the transport infrastructure. One of the things which would impress me is if there were regional Eurostars operating through that area. I should also want to be pretty sure that when I took my investment decision, those services were going to continue to operate. When you say that if your plans do not work the only loser is you, I do not think that is entirely correct, do you?
  (Mr Whitehorn)  Yes, I do think it is entirely correct.

  128.  You do think it is correct. What would happen then to the credibility of people seeking investment into the regions, the Midlands, the north west and so on? They would be saying they have Eurostar services now, which helps to put the investment package together, they can make it more attractive, and we have heard from other people today about how important it is for an investment, but Virgin operating this are saying they are going to have to pull out next year if they cannot see their way forward. Can you see the question I am putting to you? It is absolutely vital that if these services are to operate, with the wider criteria and considerations taken into account, the mindset of companies like yours is not simply "Look, so if it doesn't work, so what, we are the only ones who have lost".
  (Mr Whitehorn)  That is not our mindset. Our mindset is that we believe that the business can work, we would not be sitting here today if we did not. We also know from the point of view of Staffordshire and their customers from Outer Mongolia who are visiting them to set up a business, that if there are no regional Eurostars, they do not have that to offer to the investors from Outer Mongolia at all. Therefore the alternative to going forward and developing regional Eurostars is having nothing to offer of that nature. What we are offering is to undertake the business on the basis of the plan, details of which we are quite happy to give to this Committee. What we are saying is that the risk to the Committee and the risk to the public and the risk to the taxpayer of this not working is zero financially. I totally agree with you that it would be a great shame if the regional Eurostar services were started and then had to be terminated at a later date. The whole basis of our approach to this business and approach to looking at the business has been to create a viable operation and a viable service. However, I cannot sit in front of a Committee like this with any honesty and guarantee for 100 years that we will always run regional Eurostars.

Chairman

  129.  You would expect this to be a profit-making business within a certain amount of time. Do you expect it to be subsidised by the rest of the Virgin Group during the opening years?
  (Mr Whitehorn)  In no way whatsoever. We have a specific business plan and capital will be raised specifically for those first three years of operation.

  130.  You would not expect, even though yours is a very interesting holding company, any subsidy from any other section.
  (Mr Whitehorn)  No, after being an investment in the business to start with it will have to be capitalised. We reckon it will take about £10 million; £10 million is the startup capital required.

  131.  You are quite confident that you would find that without any difficulty at all.
  (Mr Whitehorn)  Absolutely.

  132.  Why do you think you would be so much more successful than say LCR?
  (Mr Whitehorn)  In what sense? Why do we believe we could operate the business?

  133.  Yes.
  (Mr Whitehorn)  One of the reasons is that we already have an operation whereby we can create some quite significant economies of scale in terms of things like telesales of tickets and a number of other areas and that would be helpful.

Chairman:  I see. They would enjoy the high standard of service that we enjoy from the other bits of Virgin Rail. That is excellent. It is quite clear. Thank you very much, we are very grateful to you both and we will await your business plans with some interest.





 
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