Examination of Witness (Questions 840
WEDNESDAY 6 DECEMBER 2000
MR T WINSOR
840. That is a question of some confusion to
which the answers might be multifarious and not necessarily non-libellous.
(Mr Winsor) As I understand it, things said in the
Committee are subject to absolute privilege but I have no intention
of saying anything I should not say.
841. I was not thinking of you, actually, but
the rest of us.
(Mr Winsor) There has been a lot of talk about restructuring
the industry as a result of the Hatfield accident. The former
chief executive of Railtrack set a hare running which ought to
be shot now in relation to the considerable restructuring of the
industry, putting everything back in the melting pot and putting
an industry, which needs to get on and run the railway and grow
the railway, back into the melting pot for significant restructuring
over two or three years. That would be extremely unhelpful. Railtrack
does need to consider its in-house maintenance issue and I believe
they are looking at that matter. What matters most is how maintenance
is managed and that is a matter for the chain of command. Whether
it is within one company or between two companies it appears to
me that the fundamental point is whether people on the ground
know what they are supposed to be doing.
842. Can you say in specific terms whether you
have heard from an individual operating company that the way forward
is to have the rails maintained by the operating company and unless
and until that does happen there is absolutely no possibility
in a practical sense of the actual operation running smoothly?
That is what I am hearing. You say you are having private meetings.
You must be hearing the same.
(Mr Winsor) EWS certainly believe that they should
be given the right to maintain the infrastructure because they
simply have very little confidence in Railtrack. I believe there
are other companies who would like to have a much greater degree
of vertical integration, at least in management if not in ownership.
Nevertheless we have the structure we have and it may very well
be that we are just going to have to live with it. There is a
great deal Railtrack could do to improve its relationships with
its dependent customers and I am pursuing an amendment to their
network licence in order to achieve that.
843. What are you going to do specifically if,
in the periodic review, it is clear that Railtrack have not been
able to commit themselves to what you have suggested they should?
(Mr Winsor) The process of the periodic review is
that after all the work we have done and all the documents we
have published I have now finalised my conclusions. Now that the
Transport Act 2000 has received Royal Assentand these provisions
come into force immediatelyon Monday 4 December this year
I signed the formal review notice and served it on Railtrack.
Railtrack now have a period of time, approximately 60 days,
in which to assess these conclusions and decide whether or not
they wish to accept that. If they do not, then I must refer the
matter to the Competition Commission for them to determine whether
or not the review should remain as I have announced it, or whether
it should be changed in some way. Railtrack is placed in the same
position in these matters as other network operators formerly
nationalised, now privatised and subject to independent economic
price regulation. Railtrack must decide whether or not to accept
the review. I am not going to change the review. The review is
final. If they wish to go to the Competition Commission that is
their privilege. However, from the information I have from the
perception of Railtrack's investors and Railtrack's lenders and
the City generally, they believe that it is a fair review, not
over generous and not excessively tough and that Railtrack should
accept it and get on with it. I hope they do.
844. You do not accept then that you are intimidating
them and in actual fact deflecting them away from what has become
a crisis as far as the railway network is concerned. You do not
believe that by virtue of putting the type of pressure you are
putting on them in many ways that means the continuing crisis
will be maintained for longer than it should be.
(Mr Winsor) Not through the periodic review; certainly
not. The periodic review is a timetable which was set way back
in 1995. Railtrack have participated constructively during the
review and there are many things in the review which I believe
Railtrack are happy with.
845. When you say "not through the review",
are there other areas where you have put pressure on Railtrack
which may well be deflecting them away from being able to improve
(Mr Winsor) No, I do not because the work I have been
doing in relation to Railtrack's response to the Hatfield accident
has been very much of the policy of keeping Railtrack under scrutiny,
but not putting them under very significant public pressure; they
have already been under a great deal of that.
846. Do you think the growth agenda you spoke
about earlier has been damaged by the recent events on the railways?
(Mr Winsor) It has been prejudiced. I do believe that
people will return to the railways quite rapidly when normal services
are resumed because people will see what may be thought by some
to have been an over-reaction by Railtrack in relation to gauge
corner cracking difficulties, but they will also see very significant
amounts of money going into the railway in the way of new investment;
investment in the network, track and signalling through the periodic
review and the enhancement framework and also very significant
amounts of money being invested in new rolling stock. Virgin today
have taken delivery of the first of their tilting train fleet
for the West Coast and Cross Country networks and that is very,
very significant innovative private capital.
847. You mentioned earlier a change of culture
being needed at Railtrack to deliver most of these things. Is
there any evidence that this culture is changing?
(Mr Winsor) I believe that in the boardroom of Railtrack
there is evidence that the culture is changing. Last week I went
to a meeting of the board of Railtrack; it was an invitation to
come along for just under an hour to talk about the new relationship
we should like to establish between Railtrack and the ORR following
the appointment of the new chief executive and the other management
changes that they have been making. I believe that they are perhaps
for the first time taking sufficiently seriously the customer
focused agenda. It is an enormous company and it is a significant
management challenge for the senior management of Railtrack to
ensure that cultural change permeates right down through the organisation
so that the people who have to deal with Railtrack at all levels
are getting that better attitude. That is a harder thing for them
848. Do you think that your requirement that
Railtrack reduces its costs by 17 per cent over the next five
years could adversely affect the safety and performance of the
(Mr Winsor) No, because I am not requiring them to
reduce their costs by 17 per cent, I am requiring them to improve
their efficiency by 17 per cent. In fact the amount of money Railtrack
is getting is going up by approximately £1 billion. In the
first control period 1995-2001 they were getting in the region
of £2 billion a year for maintenance and renewal. Under the
periodic review from 2001-06 they are going to get in the region
of £3 billion. Their costs are not going down but what we
are requiring is better efficiency. We are requiring the pound
notes to stretch further. There are many areas in which Railtrack
can improve its efficiency.
849. I have to say some of us who come from
the world of industry know what efficiency targets are, having
been on the sharp end of one or two efficiency targets ourselves.
Do you think Railtrack will be able to achieve this efficiency
target when much of the savings will have to come from their suppliers
and they would say they are working on unsustainably low margins
(Mr Winsor) Yes, I do. I believe that there is substantial
scope for improved efficiency. We have done a very significant
amount of work with our consultants in relation to Railtrack's
prospects for efficiency improvements. We have looked at the performance
of other privatised network industries, what is called the top-down
analysis looking at other industries and seeing how well they
performed in the years immediately after privatisation.
850. Such as what? What is comparable to Railtrack
in this country?
(Mr Winsor) There are significant differences but
there are also significant opportunities. This is a very general
judgement to be made.
851. I think Railtrack has had a lot of general
(Mr Winsor) We can assess the efficiency improvements
as a percentage of their costs in the electricity industry, in
the gas industry, where they had an old style public sector culture,
a lot of difficulty in terms of asset knowledge, communication
of instructions, labour practices and so on, things of that kind.
That is not the only way we assess it. We also assess it bottom
up. We look in great detail at the assets they have to maintain,
how well they do it, their contracting strategy and so on. We
make those assessments and we put the two together and come to
a judgement. There are examples I could give you of where they
could improve their efficiencies: in their project management,
in their contracting strategy, better forms of contract, better
management of the supply chain, improvements in technology, spreading
best practice, improved knowledge of their asset condition. Goodness
knows, if they had had good asset knowledge the network would
not be in the condition and the operating state it is today.
852. But it might be.
(Mr Winsor) Railtrack is finding poor quality assets
in a number of places in the network.
853. But these assets were only replaced 12
(Mr Winsor) Some were. Gauge corner cracking is not
a new phenomenon but Railtrack's understanding of gauge corner
cracking is improving by the day.
854. You really should volunteer for a job in
the Clerk's department: you have a way of using the English language
which obfuscates practically everything.
(Mr Winsor) I am not trying to obscure things.
855. I am sorry, I did not mean that: none of
our Clerks ever obfuscates anything. May I point out that you
mentioned the contractors but the relationship between Railtrack
and their contractors is precisely what we have taken evidence
about, about their constant desire to drive the overheads down.
Now you are saying to us that they should be looking for efficiency
savings. I have to tell you that is the phrase which was always
used in the Health Service when you were going to cut a few million
off the budget. Really when you are talking about things like
the relationship with their contractors, what the passengers are
looking for are contractors who do the job to the standard and
the safety level that means they do not have to wonder what is
going to happen to them when they get on a train and are not even
sure whether it is going to arrive. Do you take that into account
when you are talking about efficiency savings in relation to contractors?
(Mr Winsor) Yes. There is no question that Railtrack's
performance must meet necessary standards and of course safety
must never be compromised. There are things which Railtrack's
contractors can do which can significantly improve their own efficiency.
I make it a policy to go out as much as possible on the network
to visit Railtrack zones, train operators as well and also Railtrack's
856. Forgive me, but you do not have an engineering
degree, do you?
(Mr Winsor) No.
857. Your knowledge is of the legal system.
(Mr Winsor) That is true.
858. Which is why you were appointed in the
(Mr Winsor) Not the only reason I think.
859. No, I am sure. This is my day for making
friends and influencing people. However, the reality is that I
frequently go out on the tracks but I still rely on railwaymen
to tell me what I am looking at.
(Mr Winsor) Yes, I make it a policy to take my specialist
engineering advisers with me so that they can tell me.
1 Note by Witness: 42 days. Back