The Wider
Context
34. Inter-Capital and Regional Rail Limited is obliged
by its contract with LCR to maximise cash flow from Eurostar (UK)
Limited, and thus reduce the need for LCR to fund Eurostar services.[69]
It was the greater than expected losses on inter-capital Eurostar
services, currently running at £150 million per year, which
led to LCR's original financial difficulties,[70]
although it is now predicted that from 2005 the inter-capital
services will move into profit. Consequently Inter-Capital and
Regional Rail Limited is also required to seek only profitable
uses for the regional Eurostar train sets.[71]
We note that Eurostar (UK) Limited must be operated to maximise
the revenues flowing from it to LCR. We recommend that the Government's
review should recommend nothing that jeopardises the financial
position of LCR while it constructs the Channel Tunnel rail link.
35. The Fast Tracks to Europe Alliance argued that
this emphasis on profitability was itself flawed. The Alliance
made several points in support of its case. The first was that
£180 million had been invested in the regional Eurostar train
sets, and £140 million in clearing train paths, by the taxpayers
of the whole country, and that all of the country, not just the
south east, should expect to benefit from passenger services through
the Channel Tunnel. Councillor Stacey, from the Alliance, said
that the public had "already paid for these trains; they
just cannot use them because no-one is running them".[72]
Virgin Group agreed, claiming that it was "inconceivable
that the nation would abandon an investment of £320 million
to link the Midlands, the north of England, Scotland and Wales
to mainland Europe leaving only London and the south east as the
beneficiaries".[73]
36. The second point made by the Alliance was that
even the review of regional Eurostar services conducted by Inter-Capital
and Regional Rail Limited anticipated losses of only £12.1
million per year, and, with stops at Watford and Kensington Olympia,
that loss might be reduced to £4.9 million annually. Councillor
Stacey contrasted that figure with the losses experienced by the
inter-capital services, telling us that "the inter-capital
service is already losing £150 million [but] I have not heard
that they are proposing to stop running those trains".[74]
Thirdly, the Alliance pointed out that rail travel was more environmentally-friendly
than travel by air, and that, in the future, air travel between
European destinations might be restricted.[75]
37. Finally, the Alliance argued that regional Eurostar
services had, in effect, been promised during the passage of the
Channel Tunnel Act 1987. It claimed that "both the Channel
Tunnel and the Channel Tunnel Rail Link Acts were seen as national
projects providing an infrastructure to assist the development
of the whole country ... Members of Parliament from all parts
of the United Kingdom gave an easy passage for both these Acts
in the expectation of attaining such benefits".[76]
A decision not to operate regional Eurostar services would therefore
run counter to the promise implied by Section 40 of the Channel
Tunnel Act 1987.
38. Taken together, the Alliance argued that these
four points made "an unanswerable moral case for Eurostar
services to be provided at the earliest opportunity".[77]
Although the Alliance noted that Virgin Group had offered to operate
such services at its own risk, and believed that "the services
will be profitable at least in the medium term",[78]
the implication behind its argument was that such services should
be subsidised, at least in the short term, if necessary.[79]
39. In support of its case the Alliance stressed
the benefits which would be brought to the regions by regional
Eurostar services. There would be "real benefits both to
the populations served by it in the journey opportunities it will
give to them, but also in terms of bringing people into the regions
in terms of direct economic [activity] but also the development
of leisure tourism ... in regions other than London".[80]
In addition, the Alliance pointed out that the European high speed
rail network, or Trans-European Network, is expanding, and it
is "now becoming essential for cities and regions to have
an address on that network ... Regions are going to be disadvantaged
in economic development terms if they are not seen as important
enough to have an address on the network".[81]
That said, the Alliance was unable to provide precise information
about the social and economic benefits which regional Eurostar
services would bring.[82]
40. We recommend that, above all, the Government's
review should be conducted against the background of the promise
of regional Eurostar services implicit in Section 40 of the Channel
Tunnel Act 1987, and the investment of £320 million, by taxpayers
across the country, already made towards providing such services.
Regional Eurostars should operate, otherwise the regions will
continue to be short-changed. Whether the provision of regional
Eurostar services should be achieved through a small Government
subsidy or by accepting the proposal made by Virgin Group is a
matter for the Government's review to decide.
Conclusions
and Recommendations
41. Our principal conclusions and recommendations
are as follows:
(a) The regions have
been cheated. The acquiescence of Members of Parliament to the
Channel Tunnel Act 1987 depended on the provision of regional
services. We do not understand why the Government has not conducted
research into the economic and social impact on the regions both
that the Channel Tunnel has had, and that regional Eurostar services
would have (paragraph 3).
(b) It is apparent that there are no significant
technical obstacles to operating regional Eurostar services on
the West Coast Main Line and the East Coast Main Line by early
2000. All seven regional train sets could then be ready for use,
the train paths are already cleared, and the necessary modifications
to the infrastructure on both lines should have been completed.
However, we expect those conducting the Government's review of
regional Eurostar services to confirm our assessment of the matter
(paragraph 15).
(c) In the absence of any firm decision about
regional Eurostar services we recommend that Eurostar (UK) Limited
should consider leasing the regional train sets to domestic rail
operators for use elsewhere on the rail network, in order to relieve
the existing shortage of available rolling stock (paragraph 16).
(d) We recommend that the Government's review
should examine closely Virgin Group's business plan for regional
Eurostar services, and, in addition, should conduct its own research
into the potential market, costs and revenues of regional Eurostar
services (paragraph 20).
(e) We recommend that the Government's review
should examine the effect that a stop at Kensington Olympia would
have on the regional Eurostar market, and the revenue that such
a stop would generate. It should also consider what works would
have to be carried out to make it possible for Eurostars to use
Olympia (paragraph 21).
(f) We believe that Watford is well-placed
to become an integrated transport hub, and we recommend that the
Government's review should consider what benefits and costs would
be associated with (a) direct services from Watford, and (b) through
services on the West Coast Main Line calling at Watford. Subject
to the review's findings, we recommend that services from Watford
to Paris should commence as soon as possible (paragraph 23).
(g) We agree with Mr Child [of Inter-Capital
and Regional Rail Limited] that it does seem unlikely that many
air passengers will opt to change at Heathrow on to a Eurostar
in order to complete their journey to Paris or elsewhere. We recommend
that the Government's review should examine the proposed Heathrow
to Paris service, to discover the size of the market for such
a service, especially in comparison to services to Paris from
other possible centres, to ascertain the impact that operating
from Heathrow will have on the provision of other regional Eurostar
services, and to evaluate its impact on traffic flows on the roads
around Heathrow. We also recommend that the review should consider
what additional benefits might be gained by British Airways, one
of the partners in Inter-Capital and Regional Rail Limited, as
a result of the introduction of a Heathrow to Paris service, and
whether those benefits should be allowed to affect the decision
to operate such a service at the expense of wider regional Eurostar
services (paragraph 26).
(h) We recommend that the Government's review
of regional Eurostar services should consider what technical constraints
there might be to the operation of a Heathrow to Paris service
(paragraph 27).
(i) Nevertheless, we recommend that the
Government should as part of its review examine the possibility
of regional Eurostar services carrying domestic as well as international
passengers. In doing so, it should assess what extra revenue might
be brought in by domestic passengers, how security could be maintained
on the trains, and at what cost. We do not accept that the obstacles
to maintaining security are insurmountable. The review should
also consider the effect of competition from regional Eurostars
on existing services, and the attitude of the regulatory authorities
as well as the companies potentially affected (paragraph 30).
(j) We recommend that the Government's
review should take due regard of the impact of phase two of the
Channel Tunnel rail link on the journey times of, and the demand
for, regional Eurostar services, and should make clear in its
report what the impact will be. In assessing the viability of
regional services, the review should assume that phase two of
the rail link will be built by 2007 (paragraph 33).
(k) We note that Eurostar (UK) Limited must
be operated to maximise the revenues flowing from it to LCR. We
recommend that the Government's review should recommend nothing
that jeopardises the financial position of LCR while it constructs
the Channel Tunnel rail link (paragraph 34).
(l) We recommend that, above all, the
Government's review should be conducted against the background
of the promise of regional Eurostar services implicit in Section
40 of the Channel Tunnel Act 1987, and the investment of £320
million, by taxpayers across the country, already made towards
providing such services. Regional Eurostars should operate, otherwise
the regions will continue to be short-changed. Whether the provision
of regional Eurostar services should be achieved through a small
Government subsidy or by accepting the proposal made by Virgin
Group is a matter for the Government's review to decide (paragraph
40).
1 First Report of the Transport Committee, Channel
Link, Session HC (1985-86) 50. Back
2
Taken from the foreword to International Rail Services for
the United Kingdom, British Rail Board, December 1989. Back
3
See International Rail Services for the United Kingdom,
British Rail Board, December 1989, figure 5. Back
4
Q.56. Back
5
RES 11, paragraph 6. Back
6
RES 04, paragraph 2.1. Back
7
Twelfth Report of the Environment, Transport and Regional Affairs
Committee, The Departmental Annual Report 1998 and Expenditure
Plans 1998-99, Session HC (1997-98) 844. Back
8
Q.21. Back
9
RES 04, paragraph 3.1. Back
10
A consortium comprising Ove Arup and Partners, Bechtel Ltd, Sir
William Halcrow and Partners, National Express Co. Ltd., Virgin
Group and S G Warburg and Co. Ltd. Back
11
HC Deb, 28 January 1998, col.461. Back
12
See HC Deb, 3 June 1998, col.368. Back
13
See HC Deb, 3 June 1998, col.368. Back
14
See RES 04, paragraph 1.2. Back
15
HC Deb, 3 June 1998, col.369. Back
16
See Q.169 ff. Back
17
Councillor Stuart Stacey and others from Fast Tracks to Europe
Alliance, and Mr Will Whitehorn and Mr Mark Furlong from Virgin
Group on 9 December 1998; Mr Colin Child and Mr Richard Goldson
from Inter-Capital and Regional Rail Limited, and Mr Roy Griffins
and Mr Mike Fuhr from the Department of the Environment, Transport
and the Regions on 16 December 1998. Back
18
HC Deb, 8 December 1998, col.135w. Back
19
QQ.243 to 245. Back
20
RES 04, paragraph 2.1. Back
21
RES 04, paragraph 2.2. Back
22
RES 07. Back
23
RES 04, paragraph 2.2. Back
24
See RES 04, paragraph 2.1, and RES 11, paragraphs 6 and 18. Back
25
RES 11, paragraph 18. Back
26
RES 04, paragraph 2.2. Back
27
See RES 11, paragraph 18, and RES 04, paragraph 2.2. Back
28
Q.51: see also Appendix 1 of RES 04. Back
29
RES 04, paragraph 2.3. Back
30
See RES 04, Table 2. Back
31
See HC Deb, 8 December 1998, col.135. Back
32
See Review of Regional Eurostar Services, 13 November 1998,
p.4. Back
33
Review of Regional Eurostar Services, 13 November 1998,
p.5. Back
34
RES 02, paragraphs 1.5 and 3.8. Back
35
RES 02, paragraph 3.1. Back
36
Q.130. Back
37
Q.66. Back
38
RES 02, paragraphs 6.1 to 6.6. Back
39
Review of Regional Eurostar Services, 13 November 1998,
p.5. Back
40
QQ.58 and 62. Back
41
See Review of Regional Eurostar Services, 13 November 1998,
p.5. Back
42
Review of Regional Eurostar Services, 13 November 1998,
p.30. Back
43
See, for example, RES 2, paragraph 3.1, and RES 04, paragraph
3.7. Back
44
RES 02, paragraph 3.1. Back
45
Review of Regional Eurostar Services, 13 November 1998,
p.6. Back
46
See Review of Regional Eurostar Services, 13 November 1998,
p.30. Back
47
HC Deb, 3 June 1998, col.369. Back
48
HC Deb, 3 June 1998, col.369. Back
49
RES 04, paragraph 4.1. Back
50
Q.160. Back
51
See Q.160. Back
52
Q.160. Back
53
QQ.161, 162, and 191. Back
54
Q.94. Back
55
Q.95 and RES 02, paragraph 5.4. Back
56
Q.184. Back
57
See RES 04, paragraph 3.8, and RES 02, paragraph 3.7. Back
58
Q.96. Back
59
Q.98. Back
60
RES 04, paragraph 3.8. Back
61
Q.99. Back
62
See RES 04, paragraph 3.8. Back
63
RES 04, paragraph 3.6. Back
64
RES 04, paragraph 3.6. Back
65
Special Report from the Select Committee on the Channel Tunnel
Rail Link Bill, Session HC (1995-96) 204, paragraphs 10, 37 and
39. Back
66
HC Deb, 3 June 1998, col.369. Back
67
See, for example, HC Deb, 3 June 1998, col.374. Back
68
Q.21, and RES 05, paragraph 4.0. Back
69
RES 04, paragraph 1.4. Back
70
HC Deb, 28 January 1998, col.461. Back
71
Review of Regional Eurostar Services, 13 November 1998,
p.4. Back
72
Q.49. Back
73
Q.56. Back
74
Q.4. Back
75
Q.30. Back
76
RES 05, paragraph 3.5. Back
77
RES 05, paragraph 3.5. Back
78
RES 05, answer to Q.2. Back
79
See Q.9. Back
80
Q.8. Back
81
Q.5. Back
82
See Q.22, and QQ.41 to 45. Back