Examination of Witnesses (Questions 780
WEDNESDAY 29 NOVEMBER 2000
780. Can I just interrupt. Sir Alastair, it
is quite helpful when you nod but we need to get it on the record.
(Mr Grant) From the taxpayers' point of view, what
we have done is made sure that the train operating companies get
what is rightfully theirs from either Railtrack or their insurance
or anyone else, so we minimise the actual hit on ourselves. If
there are arguments to be had between train operating companies
and Railtrack, that is for them. Certainly as far as we are concerned
we obviously want to minimise the payment from the taxpayer.
781. Obviously I have got a considerable interest
in Greater Manchester but what information can you give us about
helping to improve the integration within metropolitan areas,
particularly the influence of local transport plans?
(Sir Alastair Morton) I was in Manchester very recently
for the publication of a process of study of the options for development
of rail services in the Manchester area. I will be there again
quite shortly for the second stage of that discussion. Basically
what I am trying to do is to raise the profile of a lot of hard
work that is going on, using outside advisers as well, to determine
what mix of light and heavy rail, what investment in heavy rail,
because that is what concerns us, we are not light rail, seems
optimal within reason to supply the services that the Greater
Manchester area would like to have. Where is the demand, or prospective
demand, and how best to carry it? Central within that is the projected
development of Manchester Airport with the second runway which
ought to see, and plans to see, or wants to see, a very large
increase in people arriving and departing from the airport by
train. That is part of our ideas about the TransPennine Express
franchise basically, if you like, connecting the East Coast Main
Line and places on that route with Manchester Airport and on to
the West Coast Main Line, through Central Manchester. It is a
mistake to think of it as connecting Central Manchester with Central
Leeds, which is the way a lot of people think of the TransPennine
782. I was going to suggest it was the great
cities of the North, Newcastle, Sheffield, Leeds, Manchester and
Liverpool, that really need linking up.
(Sir Alastair Morton) This is the TransPennine Express
concept, to give them high speed train services, regular services
per hour, but going through Manchester Airport. If you go from
under 20 million passengers a year on one runway at present, last
year or whenever, to something approaching 40 million in a reasonable
number of years' time, and you raise the percentage that goes
by train to and from the airport from one-sixth or something to
one-quarter or one-third, you increase the number of train passengers
by a quite remarkable number, you create a lot of business for
that train service. Therefore, that becomes the core of the connecting
of the great cities, if you like.
783. But at the same time day in, day out there
are a lot of people who work at the airport, are there not, so
there is a large number of people who want the local service to
get in and out and the competing one? How do you balance those
two needs, particularly getting through that bit of Piccadilly
(Sir Alastair Morton) I am not going to try to be
the technician and explain that to you, but broadly speaking you
come at it from the north through platforms 13 and 14 and go off
to the south-west from there, from south of Piccadilly.
784. You have got the problem that you have
got trains going through that platform at two minute intervals
already, it is not really easy to get trains through much quicker.
(Sir Alastair Morton) Now you are taking me into territory
where I cannot keep up with you, I am afraid.
785. You said that you are not responsible for
light rail. I accept that, but on the piece from Newcastle to
Sunderland there is going to be sharing between light rail and
heavy rail. Do you see a role for sharing heavy and light rail
in a conurbation like Greater Manchester?
(Sir Alastair Morton) I would think so. Do you have
any views on that?
(Mr Grant) We have obviously had a lot of discussions
with the PTE in Manchester and I know they have got certain aspirations
to look at joint running. I do not think we have got any inherent
problem with joint running. Clearly there is a safety issue but
we will work closely with PTE to try to see the best use of the
786. I want to ask you one or two things before
you go. Do you think that the Regulator should have proposed a
fundamental restructuring of Railtrack in a periodic review?
(Sir Alastair Morton) No. I am not sure that he can
set out to consider that possibility. He can set out to consider
his mandate, but you must ask him this, which is to ensure that
Railtrack is properly remunerated, and no more than properly,
for an efficient task supplying infrastructure. In other words,
that is not restructuring.
787. Has anybody looked at the whole question
of whether you have a series of mini Railtracks?
(Sir Alastair Morton) I am aware that commentators
have written about it but if you are asking have any of the official
bodies looked at it, no, not that I am aware of.
788. Should Railtrack seriously consider this,
for example, when they are talking about maintenance? We do come
back to the fact that British Rail was able to comment when there
was an accident of any sort because of the integration. It is
very clear even now that Railtrack do not have people who are
capable of judging the quality of some of the contractors' work
and hitherto they have been concerned very much with negotiating
contracts which are based on a different quality of service.
(Sir Alastair Morton) I think it is important to keep
this in order. Railtrack must be fit for purpose. The purpose
is to supply a network to the users that is fit to be used safely,
efficiently, punctually and so on with enough capacity on it.
Railtrack, therefore, has a task which involves maintaining, operating,
renewing and enlarging, enhancing, improving. Railtrack has to
be up to that task. The task must not be too big for Railtrack,
Railtrack's management, their arms have to get around that task.
It must not be too big for Railtrack's balance sheet, they have
to fund it. It is possible that in both cases the answer will
be that it is too big for them to get their arms around or their
balance sheet around.
789. So they are quite likely to ask for even
(Sir Alastair Morton) Take the case of the balance
sheet, that was where for quite some time I was telling Mr Corbett
that he would have to be in partnership with us and with others
in the matter of financing enhancements to the system.
790. And what was his reply?
(Sir Alastair Morton) His reply was that in principle
he was in favour of that but in practice he wanted to be in control
of it and he would rather it was done with his funds under his
control without bothersome outsiders getting in the way.
791. He did not mind the money but he did not
want them to control?
(Sir Alastair Morton) That is right. Secondly, in
the management one you either have to bring in management to meet
a bigger task or reduce the size of the task. That is a question
that we do not face until we know what the potential of the company
is, which we cannot judge at this time, except this far: there
has been discussion with Railtrack that they should bring in outside
project management contractors to assist them in doing their work.
They have brought them in from West Coast Main Line, for the East
Coast Main Line proposed upgrade and for Thameslink 2000. They
have brought in major international firms who will strengthen
their project management. We are saying they will have to do more
of that. There will be more of bringing in outside project management
contractor capability to enhance the capability that is inside
Railtrack. Whether we are reducing the scale of the Railtrack
task or increasing the combined strength of the team available
with Railtrack is an unnecessary debate. We are trying to encourage
them that the financial structure and the management structure
of what they do should be up to the task.
792. I do not think anybody would doubt that
but do you not find it a little bit frightening that three years
after this situation was created we are still talking in these
(Sir Alastair Morton) Yes, I do. We have a culture
in this country that I used to comment on when I was at Eurotunnel,
Chairman, which is that we back into the future grumbling, we
do not look forward, plan what we are going to need in three years'
time and put it in place during the three years. We wait until
the pressure is unbearable and then we do something.
793. That is fine, as long as we define who
"we" are, and "we" is a firm given a lot of
money, a lot of control and still some years down the line do
not seem to be capable of doing the task they were given.
(Sir Alastair Morton) I think it is necessary to look
back about two years, before Mike Grant and I were around, at
what was published as a network management statement for Railtrack
in 1998, to take an example. The enhancement content of that NMS
was really quite small. At that time it was not perceived that
the task would be as big as it is now perceived. The reason it
is now perceived to be so much bigger is that the network as we
have it is more worn out, the growth that we have got already
is greater than was expected, and the growth that we are predicting
for the future is out of all recognition from what was thought
in 1997-98. Railtrack can stand accused of failing to lift their
eyes fast enough to the future horizon but the common attitude
at privatisation was no serious growth was foreseen, so Railtrack
did not foresee serious growth. The pace at which they have realised
there is going to be a lot more growth can be criticised perhaps,
and part of our role is to say "think strategically, there
is going to be a lot more growth" and now we have got to
do something to meet it. To say that they should have done more
in 1997-98, I do not think anybody was thinking that.
794. I do not want to argue with you but the
idea that people took over a large amount of assets at a very
low price because they thought somehow or other they were not
going to provide from it seems to me mildly unrealistic, but then
I do not have the advantage of a business background. Could I
just ask you about members of organisations pre-qualified for
the South Central franchise. Were you disappointed that there
were only three of them?
(Mr Grant) We actually short listed three. Pre-qualified
was a bigger number.
(Sir Alastair Morton) It makes for more competition
if you have a bigger number but it does something else that is
in the present circumstances not entirely useful. Each and every
one of the short-listed parties has to go out and prepare a pretty
massive plan at a cost of at least hundreds of thousands of pounds,
if not a million or two, and they use a lot of consultancy resources
to do that because they have got to commit themselves to it and
it is a long-term commitment. This is taking up a lot of the resource
available to the industry. Ideally we want enough to have competition
but no more. That is more than two at the initial stage, if you
like. If you only get two you have still got a competition. We
have seen competition, for example, on the East Coast Line producing
remarkable progress in terms of commitments being made by the
795. We will wait and see, I think, what it
(Mr Grant) There were five pre-qualifying parties:
Stagecoach, First Group's joint venture with Dutch Railways, Great
North Eastern Railways
(Sir Alastair Morton) That is South West.
(Mr Grant) Yes, South West.
(Sir Alastair Morton) You said South Central.
796. I did say South Central.
(Mr Grant) I beg your pardon. South Central, in fact
there were three pre-qualifiers.
797. Yes, that was the point I was making. Sir
Alastair said if you have two you have a competition. You are
not disappointed if you only get three?
(Mr Grant) On South Central, in the resulting discussions
there was a very competitive bidding process for the last two
and we were not dissatisfied with the conclusion.
798. These are very long franchises. You assured
us that there are break points but, in fact, they are walking
away with very considerable guarantees for the future, are they
(Mr Grant) They are. They are also committing to £1.5
billion of upgrade as part of that franchise replacement.
799. So, supposing by some mischance there was
some other major disturbance that led to large numbers of people
fleeing the railways, as there has been in the past, and let us
take as an example, heaven help us, that we are hit by a bad recession
where numbers immediately drop quite considerably, would you then
expect those companies to come back to you and say they are facing
very real financial pressures and say "the difficulty we
face is we might go bankrupt"? What would be your attitude
(Mr Grant) We have to look at the specific circumstances.
There are three phases to franchise replacement: committed outputs,
which they are committed to deliver; primary aspirations, which
they are committed to work up for delivery later; and then secondary
aspirations. We would expect the committed outputs to be delivered
and then we would look at the situation on the primary aspirations.