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

Memorandum by the Shadow Strategic Rail Authority (RI 12)


  Pending Royal Assent to the Transport Bill, the shadow Strategic Rail Authority (SRA) derives its authority from the British Railways Board and from the Franchising Director's powers under the Railways Act, 1993. The two are drawn together and supplemented by Objectives, Instructions and Guidance set by the Secretary of State to the Franchising Director in September 1999 and by objectives set to the Board in February 2000. In practice, however, the SRA already works as a single organisation and members of the British Railways Board as well as the management team will formally transfer to the new authority when the Act comes into force.


  The renewal and maintenance of the rail network are funded through access charges, paid by train operators, managed by Railtrack and subject to regulation through licence conditions by the Rail Regulator. The safe and efficient development, or enhancement, of the network is a matter which involves the SRA. The objective is a "bigger and better" (more capacity and higher service quality) network.

  The SRA's role is shown diagrammatically below:

2.1  Passenger

  SRA support for passenger services is one element, along with fares and other TOC income, which funds the payment of track access charges.

2.2  Freight

  Once the Bill is enacted, the SRA will take over responsibility for freight facility and track access grants which will provide a contractual basis for strategic support and direction for rail freight. The SSRA is currently developing a combination of strategies designed to deliver the Government's policy.

2.3  Infrastructure

  In future Railtrack should work in partnership with the SRA to ensure enhancement of the network proceeds at a sufficient pace with adequate resources. The SRA's Strategic Plans, to be published at intervals, and Railtrack's annual Network Management Statements will express that partnership.


  The principal sources of investment funds in the railway will continue to be in the private sector, but the SRA will support this with public funding where there are benefits to be gained for passengers and taxpayers. Funding sources will include:

  3.1  Train Operating Companies. Replacement franchises are being designed to encourage stronger TOCs with a longer-term commitment so that they can raise investment capital.

  3.2  The City. Structured finance deals and equipment leases will provide sources of investment funds. The rolling stock leasing market is starting to work well, and this approach can be extended to fixed assets. "Special Purpose Companies" can be constructed to involve partners in financing enhancements to the network which must form part of the Railtrack network operationally, even though remunerated separately.

  3.3  Public/Private Partnerships. The SRA will use PPPs as a way for it to fund major projects in partnership with Railtrack, TOCs, other private sector partners or local authorities, where this is appropriate.


  4.1  The SRA has led the development of incremental outputs, chairing the train user groups which have assessed proposals and prioritising those to be developed and implemented.

  4.2  On larger projects, the SRA assures payment of the regulatory return on projects which it agrees should be "bought" and added to Railtrack's Regulatory Asset Base (RAB). Currently this is achieved through track access charges which are set at a level to remunerate the investment.

  4.3  Across the network, the SRA will seek to prioritise investment in infrastructure development. This will be achieved through detailed discussions on the content of the SRA's Plan and Railtrack's Network Management Statements, and through negotiation on major schemes. The latter should be structured within "Joint Project Boards" with Railtrack to ensure an "open book" approach. The SRA must agree outputs and a target price for the enhancements.

  4.4  The SRA will promote feasibility studies and develop schemes, such as the West Midlands capacity study and the development of the East London line. There will be others.

  4.5  The development role of the SRA is aimed at reaching a point where the conditions precedent for including a scheme in the network are specified in an agreement with Railtrack and the price of adding it to the RAB is agreed. The next step is to determine with Railtrack the most sensible funding package. Implementation of the project will be subject to competitive tender, after which the SRA will be a non-operating investor partner, with implementation driven by Railtrack.


  In evaluating proposals for franchise replacement, we have said we will consider criteria including:

    —  Projects that will encourage modal shift and the achievement of the Government's overall integrated transport objectives

    —  Provision of greater capacity on commuter services

    —  Improved safety standards

    —  Increased services and reduction of overcrowding on inter-urban/inter-city routes

    —  The total journey experience offered to passengers

    —  Improved station facilities and customer services

    —  Better access to the network, particularly for those with disabilities

    —  Provision of high quality, reliable services to all customers

    —  Improved quality of information to customers/potential customers

    —  Better integration with other transport modes, particularly through combined bus/air/rail interchanges and car parking and cycle facilities

    —  Consistency with local development and transport plans

    —  Provision of enabling infrastructure to allow expansion of freight services on a national and, increasingly, an international basis; and

    —  Making the most of opportunities provided by co-investors, which include franchise owners, to develop funding packages to improve railway services.

  The new franchise agreement will also contain new provisions for:

    —  Driving up safety standards

    —  Better operational resilience

    —  Enforcement of punctuality targets

    —  Better Passenger's Charter standards.


  The principles of franchise replacement were outlined last summer, and proposals were invited for the first batch of replacement franchises last November.

  The focus has been on the shorter-term franchises initially, but proposals are also being considered for longer-term franchises, where there is the potential for delivering further benefits to passengers and taxpayers.

  Of the 25 franchises:

    —  Seven are already of 10 to 15 years duration

    —  Six are in the replacement process already

    —  A study into a franchise for Wales and the borders will allow a decision to be made following consultation, at the end of July

    —  We are about to seek bids for the franchise to operate (enlarged) Thameslink services

    —  In five cases (franchises owned by Arriva and Prism) there are agreements in place allowing us to proceed to replacement of certain franchises

    —  We announce the franchise map on 20 June, enabling bidders for the remaining new franchises to make their plans.

  In summary,

    —  Two thirds of the franchises are in a process that will provide more investment and longer-term commitment; the other third may follow on by mutual consent to negotiate.

    —  The process will be largely complete by late 2001.

  The competitive process has already drawn out some very imaginative proposals and some big potential benefits for passengers, to which the franchisee must proceed to commit itself. The SRA will continue to apply competitive pressure to raise the benefits for passengers and taxpayers. If the offer is not acceptable, the existing franchise will run to expiry.


  Following the first round of franchising, seven[3] franchises included options for extension based mainly on commitments to provide new rolling stock, together with route upgrading in the case of Virgin West Coast.

  The result of this, together with commercial orders placed by other operators of shorter-term franchises, has been the ordering of 2,350 new passenger vehicles since privatisation, over 20 per cent of the national fleet.

   Other investments by TOCs have included station regeneration, improved security, better access for disabled passengers, car parks, cycle storage and passenger information systems. Some companies have also invested in additional staff for station and car park security, better staff training, and bus/rail ticketing schemes.

  Emerging plans from initial replacement discussions have been more ambitious. Apart from new rolling stock, they have included new lines, stations—particularly park and ride stations—substantial increases in service frequency on key routes, and investment in additional infrastructure capacity. Staffing principles, training—especially in safety-critical posts—will also form part of new franchise agreements.

June 2000

3   Connex South East, First Great Western, Gatwick Express, LTS, Midland Main Line, Virgin Cross Country and Virgin West Coast. Back

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