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

Memorandum by PTE (Passenger Transport Executive Group) (RI 16)


  Railtrack's Network Management Statements (NMS) have become more comprehensive and each annual NMS is now backed up by an Incremental Output Statement (IOS) which details the more minor schemes which are proposed. The extent to which individual PTEs feel comfortable with Railtrack's detailed performance will depend upon the local relationships and reporting methods.

  The delays Railtrack is responsible for have been reduced although as the Rail Regulator has been keen to point out, more action in this respect is required.

  Whilst the NMS and IOS will not meet the aspirations of all parties they do provide a clear statement of what is committed, what is proposed subject to agreement with other parties and some ideas of future possibilities. This was particularly evident in the NMS published earlier this year (2000) where less than half the proposals were firm with the remainder dependent upon the outcome of the refranchising process. The blueprint for future investment cannot become clear until refranchising has been completed and the means of funding the various proposals is clarified.

  There are good examples of Railtrack taking a commercial risk on investment. The Leeds 1st project is one where Railtrack are investing £165m to increase the capacity of Leeds Station and its approaches by 50 per cent without any future commitment to additional revenue. On the other hand there are some schemes which do not appear to meet the future requirements. The Manchester South resignalling scheme is linked to the West Coast upgrade proposals and there is doubt locally about whether the scheme will provide for the existing local services, never mind the anticipated growth which will be needed to meet increased demand.

   Increasing track capacity between Coventry and Birmingham was left out of the West Coast upgrade proposals altogether. There is now an acceptance from Railtrack and the sSRA of the need for this investment, although sources of funds are unclear.


  The Rail Regulator has recently adopted a more interventionist policy in respect of Railtrack which is welcomed in respect of improving performance in terms of reliability and punctuality. His openness in specifying what is expected of Railtrack and the consequences of non-performance is to be commended.

  He has conducted the review of Access Charges in an open manner and no stakeholder can complain about lack of consultation. PTEs have co-operated in providing responses during the consultation process and one of the key themes of their responses has been the need to take account of social benefits as well as financial considerations in setting a new scale of access charges. This is because the network of services supported by PTEs tends to require more than average subsidy but is vital in the local context for providing access to employment and reducing road congestion which are key aspects of the Government's Transport policies. In addition, local rail services are vital feeders to main line services on the strategic rail network. The extensive consultation process does not mean necessarily that he will successfully balance the views of the relevant parties to obtain the optimum output. Only time will show whether he has used his judgement well. There is a real danger in some areas that the marginal costs of increasing rail services to meet demand in some conurbations may become prohibitively expensive.


  sSRA are currently in the process of franchise renewal which is seeking to create franchises with a relatively long life to encourage investment and to ensure that franchisees will be in position long enough to obtain the rewards from investments made. This process is still in its infancy and no signs have emerged as to the type of bids which will be successful.

  The programme for the order of franchise renewal has been determined by sSRA without any systematic consultation or justification. PTEs have general concerns with this new process. By seeking offers for the GNER franchise and carving Transpennine out of the current North East franchise there are fears that any spare capacity which currently exists may be utilised in these new franchises and not be available at the time the PTE franchises are due for renewal.

  There can be little doubt that if current, let alone future, demand is going to be met in conurbations the cost of replacement franchises will increase. Already it is well known that some current franchisees are making very substantial recurring losses and Lord Macdonald has been quoted as recognising that additional funding will be required. There is a fear that if conurbation franchises are left until last the funding required will not be available at that time.

  Typically for local services in a conurbation the revenue barely meets the direct operating cost, if that, let alone the Railtrack charges or the rolling stock leasing charges. Typically subsidy per passenger is of the order of £3 per passenger for the 20Km trip. It is most unlikely that substantial investment can be secured from a new operator given this position. Hence any substantial improvement in service quality and quantity can only come from public subsidies via the sSRA and PTAs. As already stated, the Regulator's review of access charges may exacerbate this.

  At the present time the criteria which sSRA will be using to decide between conflicting bidders for replacement franchises is not clear. As co-signatories to Franchise Agreements PTEs will be keen to ensure that the new agreements provide incentive/penalty regimes which incentivise the operation in the way intended, make provision for meeting demand, and provide for quality improvement.

  The Local Transport Plan (LTP) Guidance states that Authorities should act as facilitators with the rail industry to progress schemes contained in LTPs. It appears to suggest that Rail Passenger Partnership (RPP) funds should be sought to fund investment in the railways although block LTP allocation is also permitted. The implication is that for large projects sSRA will become the source of funding for rail schemes. The reasons for this are not clear (even to the sSRA) particularly when capital investment is being considered.

  For capital schemes the presence of an alternative additional funding source is an advantage but only if the system allows funding to be committed by sSRA in advance of which are often time-consuming procedures involving a number of public and private sector organisations, particularly in major schemes. The presence of another public sector funding body can only add to the uncertainty surrounding a project's funding.

  The allocation of funding for public sector investment is inevitably political and it is difficult to see how the sSRA are equipped to carry out this function. PTEG would argue strongly that major schemes included by PTAs, PTEs and their Metropolitan Districts should be considered as an intrinsic part of the LTP Bid and funded as such and not filtered through funding available to the sSRA although, clearly, where the scheme is of strategic importance the involvement of the sSRA will be essential.

  The fundamental problem for PTEs wanting to improve service levels (for example to meet increasing demand) is that urban commuter networks require high levels of revenue support. These costs are relatively high in comparison with other items of PTEs revenue expenditure and this means that continuing support is vital, either through franchise commitments or on a case by case basis.

  However RPP funding is currently available until March 2002 only and no assurances can be obtained from sSRA about any continuation. Hence it is suggested that the quantity of funding available (£120m) is insufficient and that the length of support is absurd. For PTEs to feel comfortable with the proposed system there is a need for the system to be extended in capacity and in timescale so that there is no prospect of schemes provided for by revenue grants having to be undone at the end of the grant period.

  The rail system has an important role as part of the integrated public transport system in most areas. The importance of achieving wider social, economic and environmental objectives needs to be recognised and achieved through the new franchise and investment processes now being developed.

  In particular PTEG feels that the current way in which franchise replacement is being driven, principally by commercial considerations which, in turn, will affect Railtrack's expenditure plans, makes it more difficult for those schemes which have a major social cost benefit return to receive sufficiently high priority. Whilst the sSRA's strategic rail plan may address this issue there are concerns that this will be too late allowing for the pace of replacement franchising and expected announcements in relation to the Government's 10 year funding plan.

  PTEG, therefore, feels that there is a need for the Government to signal the extent to which it is proposed to support socially desirable (not necessarily commercial) investment in the rail network in collaboration with the sSRA and the PTAs/PTEs.

June 2000

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 27 April 2001