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

Examination of Witnesses (Questions 947 - 959)




  947. Good afternoon, my Lord. Thank you for joining us today. We know you are very busy, even though you do not think there is a lot going on! Would you be kind enough to identify yourself.
  (Lord Macdonald of Tradeston) Madam Chairman, my name is Gus Macdonald and I am Minister for Transport at DETR.

  (Mr Linnard) I am Bob Linnard, Director of Railways at DETR.

  948. Thank you very much. My Lord, did you want to say anything to begin with?
  (Lord Macdonald of Tradeston) Just perhaps to clarify your quip there. I do think there is a great deal going on. In reply to a journalistic question last week I said "I think there is a crisis in the railways that has to be managed." Unfortunately that was not reported. I then went on to suggest that it was indeed a multiple crisis. Be in no doubt, we believe it is a crisis and we are trying to deal with it by the day.

  949. Thank very much. Has Railtrack over-reacted to the Hatfield accident?
  (Lord Macdonald of Tradeston) There is a concern (which we share) that people perhaps feared that not knowing the extent of gauge corner cracking or the dangers involved in it, they took their speed limits back to 20 miles per hour, which has been the traditional fall back position there, and it was done on such a scale because of the nervousness that was involved that it did perhaps have a disproportionate effect, but it was an understandable reaction and we have tried to deal with that.

  950. It was understandable if you did not know what state the railway system was in. Is that right?
  (Lord Macdonald of Tradeston) Understandable since they were unaware of what the phenomenon of gauge corner cracking might mean.

  951. Why was that since it had been well-known for some years, not only in this country but elsewhere?
  (Lord Macdonald of Tradeston) I have not had the impression from the railway industry that it was well-known to them just what forms that might take. They certainly knew of its existence but it seems to have come through in a new form, particularly in what they call the "rate of propagation" and they have certainly got many experts working on it now to see what the comparative experience has been between countries such as the UK, Germany, France and Japan and so on. I think Sir Alistair Morton has said that he felt that there was an over-reaction—his word—and that people are thinking they had been spooked a bit by it. We have tried to counter this by ensuring that the industry can get round the table on a regular basis. Indeed, we started off on a daily basis with our Rail Recovery Action Group and that was simply to try and help the Railtrack management with responses coming from all quarters, from HSE, from regulators, from government, from passengers.

  952. I do not want to stop you because we all support the idea of having this Committee which is excellent, but are you not implying that Railtrack were not doing the job properly because otherwise they would not only have known there were problems but they could have been seeking to deal with them in a balanced and programmed way and they would not need to have been panicked in the way they have been?
  (Lord Macdonald of Tradeston) Indeed, I think Railtrack have said that their relationship with their maintenance sub-contractors is unsatisfactory.

  953. What does that mean? Who is responsible for a legal relationship with a contractor except the person directing the contract in the first place, that is to say Railtrack?
  (Lord Macdonald of Tradeston) Indeed, and I think they concede that they have a management responsibility there and that the practices in the past have been inadequate. Certainly it is for the people on the ground to be under quite clear command from above and that does not seem to have always been the case. That is a matter that Railtrack tell us they are investigating with some urgency and, clearly, it is one of the reasons why people on the ground may have perhaps over-reacted.

  954. How are you going to ensure that this sort of thing does not happen again because there are literally hundreds of thousands of people out there who are unable to get to work in the normal time, unable to get home, unable to get about their normal business. The total cost of this chaos to the economy of the United Kingdom must be absolutely astronomical. How are you going to ensure it does not happen again?
  (Lord Macdonald of Tradeston) In two ways. By ensuring that we encourage Railtrack to be better managed inside a more supportive architecture for the industry with more involved regulators and with the Strategic Rail Authority in place and with considerably larger sums of government money being invested in the railway.

  955. Why should large sums of money be invested in somebody who patently cannot do the job.
  (Lord Macdonald of Tradeston) We believe Railtrack can do the job if it is better managed and that is the emphasis we have had to put on this because we are where we are.

  956. You are satisfied that the recent changes have ensured it is so well managed that there will not be a problem?
  (Lord Macdonald of Tradeston) No, we are not yet satisfied. We have to see the evidence of the effectiveness of the new management. From what we have seen in recent weeks, they are trying very hard and they seem to have made a good start. We know that further board changes are in prospect with the Chairman intending to stand down and we have heard, too, about the belief that they must strengthen the non-executive side of their board.

  Chairman: I think Mr Stevenson wants to come back on various aspects of this.

Mr Stevenson

  957. Lord Macdonald, why has the Government rejected the notion that in return for the massive amount of public grants and money that have been made available to Railtrack in the medium and long term that an equity shareholding should be acquired in Railtrack in return for those massive amounts of public money?
  (Lord Macdonald of Tradeston) In the belief that in a public limited company having a minority stake would not buy influence over policy. The board members of a PLC are under a fiduciary duty to ensure that they serve the interests of all shareholders and therefore a minority shareholder is not able to go into the board of a PLC and try and pursue their own interests.

  958. Are you aware—I am sure you are—that in evidence to this Committee in July the then Chief Executive, Mr Corbett, gave evidence to the fact that in his view (backed up by Mr Marshall, the then Finance Director) the SRA on behalf of the Government taking a preferential share option in Railtrack was "the best possible option for levering in private money"? Are you aware of that?
  (Lord Macdonald of Tradeston) I am indeed. I can see the attractions from Railtrack's point of view where you would get government money in there but, as I say, the government even with board members would have no authority over a board of a PLC by putting that money in. However, it would in a sense make the Government complicit with the decisions made by the management of the company and I do not think that would be desirable given our relationship with the regulators.

  959. It may be interpreted as making government complicit but could it not also be interpreted that it would allow government to be influential?
  (Lord Macdonald of Tradeston) I do not believe inside the structure of company law that a minority shareholder could have the influence that you ask for. It just would not be allowed.

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