Examination of Witnesses (Questions 460
WEDNESDAY 15 NOVEMBER 2000
460. It is, of course, the ROSCOs that are taking
these decisions, is it not, Mr Brown?
(Mr Brown) The ROSCOs are closely involved in the
process. They are financing the trains.
461. It is their bankers that are taking the
decisions, is it not?
(Mr Brown) I am not quite sure what decisions you
are talking about. They are a key party in the process, that is
absolutely right. To answer the first part of the question. The
working group that has been set up under the overall auspices
of Sir Alistair Morton and the SRA is due to report to John Prescott
next month, so it is very imminent. The purpose is to highlight
some of the key issues that we can then deliver over the coming
months in terms of changing the performance of these trains. I
do think it is a question, when further train orders are placed,
we get those contracts right in association with the companies,
as you say, that we actually set out in advance what performance
we are expecting from the trains, and how those manufacturers
deliver that, and we give them proper opportunity to ensure that
they can deliver that before the trains come into service. We
must not rush into new contracts. We have to get those new contracts
462. Forgive me, I think that is a load of rubbish.
You know the real thing, Mr Brown, is that what is happening is
that the train companies want to run the trains, you are being
asked to do so but the ROSCOs are in the middle and having problems
with the people who are financing the deals, because they will
not take control of the trains until every single problem has
been ironed out of it.
(Mr Brown) What is happening between the ROSCOs and
their financiers I cannot comment on because I am not aware of
463. Surely the train operating companies have
an interest in that? Do you not ever ask them, "Why is it
that we are sitting here waiting for these new trains that we
need so desperately?"
(Mr Brown) What we are working with is both manufacturers
and the ROSCOs as the owners of the train to actually find out
what it is that is causing the unreliability and what we can do
working together to put all those things right as far as possible.
464. Are you getting compensation for trains
lying around doing nothing? What is the level of compensation?
Is it higher than it would be for the operating costs?
(Mr Brown) I wish I were about able to say that is
the case. It is not the case. By keeping older trains in serviceas
very many train companies are having to do, whilst they wait for
new trains to arrivethe costs are actually rather higher
than they would be with the new trains arriving. I think everybody
is incentivised to get new trains in service. It is a practical
real issue of getting what in some cases are actually complex
new trains to operate reliably. I think we were wrong as an industry,
to be quite open, in not building enough time into the procurement,
manufacturing and testing process with the contracts that have
been in place for the last three or four years.
465. How much have your members lost in the
last few weeks as a result of the disruptions?
(Mr Brown) We honestly do not know the answer to that
question yet, because we do not yet have the revenue results for
the previous accounting period. It only ended last weekend. Every
company is looking very closely to work out what the position
466. Is it going to be millions or tens of millions?
(Mr Brown) I think you can be assured that because
of the disruptions from weather and the line speed reductions
following Hatfield, it has caused a very substantial reduction
in passenger numbers for a number of companies. So we are talking
about a lot of money, and it is very important to us to get the
system back up and running as fast as we can. We are putting a
lot of pressure on Railtrack to recover the situation as fast
467. Assuming we blame the big man up-stairs
for the floods, who is responsible for the other disruptions?
Do you blame Railtrack for that?
(Mr Brown) We hold Railtrack responsible for both
Hatfieldand they have admitted responsibility for what
happened at Hatfieldand also for the speed restrictions
that have come on in wide parts of the network since then. It
is their responsibility to manage that and sort that problem out.
We cannot do that for them.
468. Let me just play back to you the evidence
we have heard from you so far today. We have a company that is
costing its major customers, the train operating companies, a
fortune in an industry which is fragmented, wrongly structured,
chaotic, needs to be completely reformed. Given this scenario,
what are the chances that Railtrack are going to be able to borrow
the £8 billion over the next five years that they have to?
(Mr Brown) I am honestly not sure that I can answer
that question. I think they do have to improve their performance
quite substantially and quite extensively to be able to go forward
469. Without that £8 billion does the 10
year plan that the Government has put forward work or not?
(Mr Brown) I think there are a considerable number
of elements to the 10 year plan, and I think one of the strengths
of it must be that given those number of elements, if one element
does not come fully through there is enough there in the rest
to see success coming forward. It is clearly important that that
is funded and financed, and I think that it is in the industry's
rather than the passengers' interest that we work with Railtrack
to help that through.
470. The Government has talked about a railway
modernisation fund of £7 billion and the DETR has said that
is the most innovative and efficient way of directing money in
to efficiency. Do you think that is correct?
(Mr Muir) May I add an answer to your previous question?
These are black days for the industry. There is no doubt about
this. These are unparalled circumstances and the points you are
making are well understood. The key that we have to see is how
do we dig ourselves out of this? Of course it calls into question
how things have been managed in the past, but we will take encouragement
from how we move forward in the next three to six months. If Railtrack,
the train operators and the industry pull things together well
and effectively in the next six months, then we can come out of
this having won something.
471. Mr Muir, if you do not, you might as well
say goodbye to your companies, because already large numbers of
people are deserting the railways, large numbers of people who
are forced to use it are going through even worse trauma than
they do normally, and the ill will and general irritation with
the rail companies must be reaching an unprecedented high. So,
frankly, to come here and say, "If we pull together it will
all be much better in three or six months" is a waste of
breath, because you have a major task in re-establishing some
form of dialogue, any form of dialogue, with your customers, do
(Mr Muir) That is true, but it still comes to how
do we respond to the present crisis and we recover from it, how
we recover the track
Chairman: I agree with that. Did you want to
go on, Dr Ladyman?
472. Let me come back to the modernisation.
Given all the chaos we are experiencing, I can understand why
you are sitting here saying we have all got to pull together and
get ourselves out of this now, I think you have no choice but
to take that positive view of looking forward, but if you were
being asked to put £7 billion into a modernisation fund,
which is effectively what the Government is saying it is prepared
to do, would you not be asking for guarantees in return for that
£7 billion? Would you not, perhaps, as Mr Knapp told us in
his evidence earlier, be saying, "We are not prepared as
a Government to hand over £7 billion to an industry which
has so lamentably failed, and we are going to take a share in
the industry back for that £7 billion"? Given that Railtrack,
for example, has capitalisedI think it is £5.25 billiona
£7 billion investment, therefore, should get the Government
more than half of Railtrack if it wanted to take that back. Do
you not think that the Government ought to be looking positively
at what it is getting now in return for further investments in
the railway industry?
(Mr Muir) It certainly should. The £7 billion
rail modernisation fund has not been committed yet. It will only
be committed in bits and the SRA will only commit it in exchange
for guarantees for what it will get for that money. It is not
presently committed. Personally I would not use the money to buy
back shares in Railtrack. I would use it as seedcorn to lever
in much larger sums of money in exchange for guaranteed investment
473. So you are effectively saying a continuation
of the existing arrangements that appear so badly to have failed?
(Mr Brown) I think, if I can support Mr Muir, the
£7 billion Modernisation Fund is an entirely new fund and
new mechanism within the 10-year transport plan. It has a number
of advantages in our view, one being that it actually allows the
Strategic Rail Authority, which is a government agency, to choose
what it wishes to invest in. As Mr Muir has said, it will not
invest unless it is satisfied that what Railtrack will deliver
for that is what it wants as specified outputs. Secondly, it allows
the Strategic Rail Authority to channel investment alongside the
replacement franchises as they come on, so that you can see route
by route a mixture of public and private investment going forward,
and it allows the investment to be much more closely targeted
on outputs that the Strategic Rail Authority overall is looking
together to achieve.
474. One final question, and it may be unfair
to ask it of you, but I will ask it any way. Given that dire position
that your companies are now innot entirely your own responsibility,
but largely the responsibility of another company, that is Railtrackdo
you come to this Committee to tell us that the Railtrack Board
were right or wrong not to accept Mr Corbett's resignation?
(Mr Brown) I think we come to you, as we have said,
saying that we do believe that there needs to be change in the
structures within Railtrack, particularly around the way it manages
its maintenance, and that is how it manages it assets, understanding
what it has out there. We have said for several years that there
needs to be an asset register. The Rail Regulator fully recognised
that as part of the new settlement. So, it understands the condition
of the track and signalling out there, and it has a planned renewals
programme. Those things clearly have not been happening adequately
and we believe there does need to be change. What that change
is has to be a matter for Railtrack, but there has to be change
to improve their delivery.
475. So a change in structure rather than a
change in management? You said to us earlier that you had 24 years
in the rail industry, and as I said in the previous evidence,
Railtrack has only two people on its board that have experience
of the rail industry before they joined the board, and I am not
sure either of those would extend to 24 years.
(Mr Brown) I think one of them does.
476. One of them does, one of them does not.
(Mr Brown) The point we are making is that it actually
goes further than just a change in management. A change in management
may well be required, but we would not wish to think that that
is the solution to some of the problems. Another point we have
made to Railtrack is that we believe they need to substantially
strengthen their engineering and technical resource. We believe
that they should have an engineering director on their board,
somebody who really understands how the track and signalling out
there work, who will be setting the standards and setting the
processes. The fact that they have not is a major weakness, and
their technical experts are fairly low down the organisation.
That is a fundamental flaw. That is not just achieved by management
changes, it is achieved by rather more substantive changes right
across Railtrack as an organisation.
477. Have you made that clear to them?
(Mr Brown) We have made that clear to them, Madam
478. Did you express support for Mr Corbett
immediately after the crash when he offered to resign?
(Mr Brown) We said immediately after the Hatfield
crash that we did not think that management changes at that time
would be helpful. There was a far bigger task to be got on with.
Chairman: I would not have interpreted what
you said at the time quite like that.
479. Earlier in the question Mr Knapp said it
was his opinion that pressures of deadlines and penalties led
to companies taking risks and short cuts with safety in order
to escape penalties. What is your view on that?
(Mr Brown) Speaking from the train companies' point
of view, we do not accept that position, because a significant
source of delays to trainstrains that arrive lateis
quite often where there is some doubt about the safety system
on a train or the method of dispatch of the train from the station,
which causes delays to trains, and that is because companies put
safety first rather than punctuality first. We see absolutely
no conflict between safety and punctuality, they are both similar
sides of the same coin, because passengers rightly expect both
a safe and punctual service, and an unsafe service, or one where
you are concerned about the safety systems on a train or at a
station, is not one that you can deliver a punctual service with.
We do not agree with that viewpoint.