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

Examination of Witnesses (Questions 960 - 979)



  960. In return for this massive amount of money, which I will return to in a moment if I might, you have said to the Committee today that the quid pro quo for that is to encourage Railtrack to be "better managed".
  (Lord Macdonald of Tradeston) Better managed.

  961. Is that the deal?
  (Lord Macdonald of Tradeston) It must be better managed and better regulated.

  962. Lord MacDonald, are you aware that the current capitalisation of Railtrack is between £4 and £5 billion.
  (Lord Macdonald of Tradeston) Indeed.

  963. You will also be aware then that the £4 billion grant that the Government has agreed through the SRA to be made is almost the total capitalisation of the company. Do you not feel it is a little strange and would not the public at large find it a little strange that here we have a Government giving as a direct grant to Railtrack £4 billion which is nearly the total capitalisation of the company without taking some direct involvement in that company?
  (Lord Macdonald of Tradeston) We are investing to try and build a better social railway and I think that that is entirely desirable as an aim. At the same time we obviously do not want to weaken the company in any way, but I do not think that the monies that are going in would be parlayed into its market capitalisation.

  964. I think it was last week when Mr Marshall, the current Chief Executive of Railtrack, was here that he was asked two direct questions on the £4 billion. He was asked what would happen to the West Coast Main Line project if £4 billion was not available and he said it would not go ahead. This is not encouraging better management. This is not having a perverse influence, as some of the newspapers and some of the people in the industry would have you believe (who have their own agenda, I suspect). This is the Government effectively financing a massive project that Railtrack should have financed themselves. The second question he was asked was if Railtrack have to finance this £4 billion on the capital market what would be the cost to Railtrack and his answer, I paraphrase slightly, is they would have to offer a rights issue of some £1 billion. So in effect the Government is giving Railtrack £5 billion. How can it be then that you are so reluctant to see your way clear to protect the public interest by making sure that that money is spent effectively rather than this wish list of "we hope they are better managed".
  (Lord Macdonald of Tradeston) We believe that with the influence of the Regulator and the Strategic Rail Authority that the public monies will be well monitored and well spent. I accept, as you say, that there could have been other ways of reorganising a railway after it was privatised, but we are where we are and rather than go for the possibility of restructuring, with all of the consequent upheaval that might go with it, we have gone for a strategy of trying to support the industry with investment, but under careful monitoring and regulation.

  Mr Stevenson: I think, Lord MacDonald, most members, if not all, would agree with that proposition. We want to support the railways, we want to see more investment. What is biting at my tongue, so to speak, is the notion that we can give a private monopoly company more than the capitalisation of the whole company, "Here you are, free, gratis, off you go, get on with it", and then at some stage in the future, not defined, we hope they will be better managed. That does not sound like a deal to me, that sounds like a one-sided arrangement that a private monopoly will benefit from.


  965. Mr Linnard, do you have the magic answer?
  (Mr Linnard) The figure of 4 billion, which is the cost of exceptional renewals, mainly for the West Coast, spread over a period of at least five years, probably needs to be compared with Railtrack's annual turnover rather than with the market capitalisation. The annual turnover is 2.5 billion, something of that order. It is perfectly true that if the money for West Coast Mainline and other projects was not coming from the Government then the project would not go ahead because Railtrack only has ultimately two sources of revenues, that is the Government or the fare box, via train operators. What the SRA are doing with the money that is going into Railtrack, either through access charges or through direct grants—it is not giving Railtrack the money—is purchasing enhancements, improvements to the railway, which otherwise would not be forthcoming.

Mr Stevenson

  966. Mr Linnard, that is very interesting but that is not the impression we are getting. Last week Sir Alastair Morton in evidence in response to a question described this 4 billion as, "It's a gift". You are saying, "We are not giving anybody anything". He is very clear in his mind it is a gift. It is free, gratis, it is a gift, and without it the scheme would not go ahead. Given the amount of Government money that is part of Railtrack's revenue, the centre of their revenue, and these capital grants 14.7, nine billion over ten years and four billion in the short-term, is it not effectively a Government agency?
  (Lord Macdonald of Tradeston) It is not a Government agency, it is clearly a public limited company. It is clearly the agent of Government policy, particularly at the level of, if you like, to paraphrase Sir Alastair, of its utility activities of selling track access to companies. Sir Alastair, as you know, goes on to say that it does have another area of activity, which is to try and enhance and expand the railways, and in that way it can have a double function.

  Mr Stevenson: Thank you.


  967. Do you think they have been carrying that out properly over the last three years and they need all of this money now?
  (Lord Macdonald of Tradeston) Clearly they have not been carrying it out properly when we see the extent of problems on the track and difficulties in the relationships with the maintenance sub-contractors. There have been management problems in the company and I hope that the new management will address those urgently.

  968. Because we know they cannot manage, because we hope they are going to get better, we are going to give them a whole lot of money and say, "Here you are".
  (Lord Macdonald of Tradeston) We believe that with the crisis in the railways at the moment the best course is to try and give as much support as possible to all of the parties who are trying get the railroad back and running again. That is the priority, to make sure that their promise that there will be significant improvements by the end of January is, in fact, delivered and that, as they see it, the tail-ends of the problems will be sorted by Easter of next year.

  969. The tail-ends, is that the day-to-day running, most trains being about an hour or two hours late?
  (Lord Macdonald of Tradeston) They said to us—and there is a meeting going on at this moment—they will be able to deliver a significant improvement by the end of January. There will be then a tail of work that has to be done. We said that we hope that is a short tail and not a long tail and they have assured us that it should be completed, with the railways back to normal by Easter.

Mr Bennett

  970. As long as it does not snow.
  (Lord Macdonald of Tradeston) As long as it does not snow or flood or do anything else.

  Chairman: Which normally happens in the winter, I understand.

Mr Olner

  971. I would like to ask the minister how confident he is that those predictions, that things will be mostly back to normal by the end of January, are accurate?
  (Lord Macdonald of Tradeston) We have put our trust in the effort that we see being made by the week. There were around 20,000 people out at the weekend and I was told just before coming here that approximately 28 miles of track were re-railed last week.

  972. I do have to say, Lord MacDonald, and I travel by train every week, since this crisis started my journey from Nuneaton to London, which is just over 100 miles, has got later all the time this crisis has gone on, even with the new timetable. When it should take two and a half hours, it is taking two and three quarter hours. I put it to you that the public out there are losing confidence very, very quickly in your ability to ensure that Railtrack and the rail companies do deliver what they promise.
  (Lord Macdonald of Tradeston) Would it help, Madam Chairman, if I told you what had been promised to us today by Railtrack and what the situation is said to be on the railways?


  973. Was that before or after you read the article in The Mirror saying that a man who had never been on railways before was made the supervisor for the day of a gang, when he was colour-blind and inexperienced?
  (Lord Macdonald of Tradeston) It was actually after I had held a meeting with Railtrack and the Health and Safety Executive on that very matter. You will see that Railtrack have made a statement about that article in The Mirror. It is something that we have said that we will pursue. I did hold that meeting and then I got the information about the action group.

  974. Give us the figures, Lord Macdonald, anything is manna in the desert.
  (Lord Macdonald of Tradeston) Let me say that as at 11 December the number of speed restrictions is down from a total of 553 to 538 over the week. It has to be remembered that the work on assessing the damage inside the network is still going on. The number of 20 mile per hour speed limits has been reduced from 451 to 379. The 40 miles an hour down from 69 to 45. The number at 60 miles an hour up from 83 to 114. The number of services running normally in percentage terms as at 11 December, of the normal services running, this is trains leaving—leave aside their punctuality—is inter-city 78 per cent are running, and of London commuting trains, 93 per cent.

  975. Can we agree the definitions? The definitions is as they leave. Can we have some indication of where they go or whether they get to wherever they are supposed to go?
  (Lord Macdonald of Tradeston) That is my next line. The percentage of normal services which are running is 78 per cent intercity, 93 per cent London commuting and 96 per cent elsewhere in the country. Of the percentage running punctually, 64 per cent of inter-city trains, 65 per cent of London commuting and 76 per cent elsewhere in the country.

Mr Olner

  976. Are these percentages on the new timetables?
  (Lord Macdonald of Tradeston) These are on the current timetables and these are figures that come from the train operating companies.

  977. I do not think those figures are correct because even on the new emergency timetables they are still not delivering. This is what is causing the frustration, where people plan on an emergency timetable and still cannot get there.
  (Lord Macdonald of Tradeston) These are compared to the current timetables. That is figures given to us by the train operating companies.


  978. We are agreed this is the United Kingdom, are we?
  (Lord Macdonald of Tradeston) I should say that as far as the train operators are concerned, in terms of the percentage of normal revenue they took for the weekend of 9 December 87 per cent of their normal revenue.

  Chairman: It just shows what piracy leads to, does it not?

Mr Olner

  979. Do you think the Post Office, given what some people would say are reasonably good efficiency figures, over-reacted in moving most of their Christmas mail off rail and on to plane and road?
  (Lord Macdonald of Tradeston) I had a meeting with the Royal Mail people, with EWS, the freight company, and I had a chance to discuss these matters with them last week. They had a percentage of first class mail going by EWS and that has been transferred to road and plane. There will be, I understand, compensation paid by EWS on a contractual basis to the Royal Mail and they in turn will have a contractual relationship with Railtrack, but there was an interesting article, too—you may have seen it—in the leader article in The Times yesterday about the other problems inside the Royal Mail that may be delaying some of the post.

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