Supplementary memorandum by RMT (RI 02A)
The National Union of Rail, Maritime and Transport
Workers welcome the opportunity to submit additional comments
on the rail industry to the Environment, Transport and Regional
Affairs Committee. In particular we wish to comment upon the question
outlined in the terms of reference on Railtrack's past performance
in renewing, maintaining and developing the national rail network
and the likely impact of its plans for the future.
As the largest rail union we are naturally concerned
about the future of the industry. RMT believe that the fundamental
problems with the rail industry will not be solved without public
ownership. This is most crucial in the case of the network provider.
However RMT has welcomed the Regulator's tougher stance and the
recent announcement by Government of a ten-year investment plan
Very recently we submitted comments on the Network
Management Statement and the proposed ten-year spending plan for
transport published by Government. In the pages below we repeat
many of our comments in respect of the proposed investment. Also
contained within the RMT submission is a critique of the current
regulatory system, which we hope you will find useful in your
consideration of this matter.
RMT has campaigned for higher investment in
our railways for many decades. Further, we have argued for a seismic
shift of investment away from the promotion of individual road
travel and towards public transport. Within this context we welcomed
the publication of Railtrack's Network Management Statement 2000
(NMS2000), which, unlike its predecessors, does at least outline
most of the railway schemes RMT has argued for over the past decade.
Perhaps of even more significance than the NMS2000
is the subsequent announcement by the Government of a ten year
spending plan for transport which substantially increases public
investment in rail and, to some degree at least, attempts to outline
how many of the projects suggested by Railtrack in NMS2000 will
Yet while we do not doubt the Government's commitment
to increase investment, RMT remains concerned about both Railtrack's
approach to investment strategy and about their ability to deliver
that increased spending. As we have stated already in this submission,
many of these doubts arise because of the fundamentally flawed
nature of the financial and regulatory structures of the railway
Until the publication of the Government's Ten
Year Plan, NMS2000 remained a wish list, albeit an improved, better
research wish list than previous years' Network Management Statements
which have represented a willingness by Railtrack to do only as
much as they could get away with before falling foul of what was,
at the time, largely ineffectual regulation.
Equally while the NMS2000 is an improvement
for a company, which frankly had plenty of improving to do, in
terms of actually committed spending as against what might be
it represents little of substance. The spending plans, outlined
for the period 2001-12 consists of two distinct sets of proposed
expenditure; committed spending and enhancement options:
RAILTRACK 12-YEAR EXPENDITURE (£ BILLION)
|Recommended capacity options||2.9
|Other capacity options||6.5
|SRA Incremental Output Statements||2.7
|New and re-opened lines||4.6
Our first key concern is the way that Railtrack continue
to treat routine maintenance and renewals, certainly when they
make their public pronouncements, as part of overall investment.
This is what leads to headlines proclaiming Railtrack's £51
billion spending plans. It is inappropriate and also misleading
to the public for routine spending to be labelled in this way
and RMT has had cause to complain about it on numerous occasions
RMT are concerned that recent reports in the press indicate
that the Rail Regulator may make a significant concession to the
company in negotiations on the Regulators five-year review of
Railtrack operations. The Regulator may increase the defined value
of Railtrack's asset base and agree with the company that renewing
the track has enhanced the network. RMT hope that these reports
turn out to be unfounded.
It should go without saying that Railtrack expenditure to
maintain track, signalling and stations and to replace materials
and plant as and when it reaches the end of its useful life. The
travelling public would expect as much in our view. New investment
is what counts, and despite all the hype, actual committed investment
in enhancements to the existing railway within NMS2000 amount
to, by our calculations, just £4.2 billion with almost two-thirds
of that spending on just two projects:
RAILTRACK COMMITTED SPENDINGNMS 2000
|West Coast Main Line Phase 1&2||1,940
|Aberdeen Freight Terminal||10
|TPWS cab installation||310
|Disabled access improvements||290
|Other unspecified schemes||634
We have no wish to decry this programme, containing as it
does many improvements that we welcome such as WCML, Thameslink
2000, disabled access and TPWS. However, given the parlous state
of the railway, it remains an insubstantial list of localised
projects, which in terms of an overall strategy to transform the
railway, speaks volumes about Railtrack's timidity and lack of
RMT conducted a survey of Railtrack signallers, supervisors
and associated grades. RMT asked these employees what they thought
of investment levels as proposed by their company. 69 per cent
stated that they believed Railtrack was not investing enough.
We suspect that, notwithstanding the Government's 10 year spending
plans, most rail travellers would agree with our members that
there is not enough investment, and that what there is, is not
necessarily in the right place.
RMT is a long-standing supporter of the electrification of
key routes. Electrification, as well as being the most environmentally
efficient form of railway investment, also allows train operators
to get away from reliance upon diesel, which is becoming ever
more price volatile.
Yet electrification of our network, while once a priority
of British Rail has slipped down Railtrack's agenda over the past
five years. At the start of the 90s, one-third of the network
was electrified. Now, a decade later, that figure remains unchanged.
Of even greater concern is that under NMS2000, Railtrack
propose to increase the proportion of the network electrified
over the next 12 years by only 0.3 per cent.
Compare this to the progress made in previous decades:
INCREASES IN ELECTRIFICATION1980 TO 1999
|Year||Route Kms open for traffic
|Increase||+22.3 per cent
|Increase||+13.6 per cent
Turning to the uncommitted elements of NMS2000, RMT broadly
support the schemes suggested for action. We are particularly
concerned about the need to bring forward schemes that will increase
capacity in and around London and the South East.
There is a desperate need to increase platform lengths across
the franchises, to upgrade the Waterloo routes to the South West,
and to begin work on modernising the Great Western routes into
RMT is attempting to be constructive about Railtrack's plans,
and the Government's commitment to provide consistent funding
over the next decade means that there is now little excuse for
the schemes not going ahead.
That said we remain concerned about two key questions. The
first is the ability of Railtrack to deliver investment in the
light of all known experience so far. The second is the demand
forecasts that appear to underpin both Railtrack's plans and those
unveiled by the Government as part of the Ten Year programme.
Turning first to delivery, Railtrack's stewardship of the
West Coast Route Modernisation, for example, brings into question
its ability to manage major projects effectively. This project
has been in Railtrack's hands since privatisation.
In December 1999, Railtrack announced that the costs of the
project had increased substantially from an original estimate
of £2.3 billion to a current projection of £5.8 billion.
Reminiscent as this is of the overruns incurred on some other
private sector rail infrastructure projects like the Channel Tunnel,
such a situation had been almost unheard of when the railway was
under the stewardship of British Rail. The East Coast Main Line
Electrification, for example, was completed in 1991, on time and
We note that the Government now intend to bail Railtrack
out by providing some £4 billion of state funding for the
modernisation of the West Coast Main Line, and that Railtrack
now believe that expenditure will be even greater than was envisaged
last December. It is our view that the West Coast Main Line must
be modernised. The line was last upgraded in the 1960s, and has
suffered since the mid-1980s from the unwillingness of Government
to finance upgrading.
RMT, like many other observers, remain concerned that the
bargain between the State and Railtrack is decidedly one way.
What incentive has Railtrack to get projects like the WCML right,
to deliver on time and to budget, when it knows thateven
under privatisationthe State will bail it out. Looking
deeper, it is difficult to see how the taxpayer is obtaining a
fair deal when the Government is paying for the line to be overhauled
yet Railtrack will still remain the owner upon completion.
We also remain concerned at the demand forecasts that are
implicit behind both Railtrack's plans and those announced by
the Government. In the document Transport 2010The Ten
Year Plan the DETR set out their key assumption for rail:
"On current forecasts rail passenger demand will grow
by 34 per cent over the next 10 years, but capacity constraints
on the network would limit actual growth to 23 per cent. Providing
additional capacity and improved services is forecast to increase
this to 50 per cent."
We welcome the Government commitment to increase use of the
railway, as measured in passenger kms by 50 per cent over the
next 10 years and note that Railtrack themselves believe that
demand may grow by as much as 64 per cent over broadly the same
Our problem with this analysis is that, in RMT's view, whether
demand rises in this way or not, the railway will still need modernising.
Yet, the Government itself is underpinning most of its hopes for
increased private sector investment on an increase in fare revenue,
with some 60 per cent of investment forecast to come from the
revenue generated by extra demand.
Indeed, there is great hype surrounding the current demand
upswing for rail travel despite the fact that growth has only
been sustained for five years following an immediate fall after
PASSENGER KMS ON NATIONAL
RAILWAY 1993-94 TO 1998-99 (BILLION)
Even with this substantial growth, rail demand remains only
slightly higher than in 1988-89 (34.3 billion), the last big peak
in traffic and this illustrates RMT's point well. New investment
can and will increase traffic, as the East Coast Main Line project
illustrates. However, a substantial part of rail demand remains
closely tied to economic growthparticularly on commuter
During the late 1980s' demand grew at significant levelswith
an increase of 15.4 per cent between 1985 and 1989. Yet by 1994,
demand had fallen back almost to its 1985 level:
PASSENGER KMS ON NATIONAL
RAILWAY 1984-85 TO 1993-94 (BILLION)
This indicates that rail demand is substantially more vulnerable
to recessionor even a lesser growththan either the
Government or Railtrack have taken into account.
RMT make this point not to talk rail down. We believe that
substantial investment and better pricing policies can and will
increase traffic. Rather, we are concerned at the effect even
a mild recession may have on an investment programme that even
the Government admit is heavily dependent upon the private sector.
It seems that the Government and Railtrack have ignored this fact.
Similarly, whilst we note that the Government has stabilised
revenue support to the train operating companies (and hence to
Railtrack) at an average of £1.13 billion a year for the
next 10 years it remains the case that this is substantially below
the average subsidy provided in the five years immediately following
PUBLIC SUBSIDY 1994-95 TO 2011
|Average Annual Subsidy||94-95 to 95-99
|Average Annual Subsidy||2000-2010
Subsidy has reduced during the past two years, but this has
been against a backdrop of buoyant demand and even with the increases
in public subsidy agreed by the Government for the next 10 years
our concern is, again, that a deterioration in economic conditions
will lead to a dramatic hiatus in private sector rail investment,
as well as an unwillingness of train operators to bring forward
schemes for partnerships with Railtrack. In short, such companies
will be under the type of commercial pressures that have not been
seen since privatisation and their reaction will be unpredictable.
We note that the SSRA's solution to this scenario is to seek
franchise partners who are "big enough to withstand a recession
and keep investing". Our experience is that under poor economic
conditions it is always the major infrastructure projects that
are put on hold first, and a good example of this would be the
ill-fated private involvement in the Jubilee Line extension.
The Network Management Statement has set out a wish list
of possible investment in the rail network. Railtrack have made
it quite clear that significant levels of funding will have to
be forthcoming if all these schemes are to go ahead. With the
total level of potential investment at £51.5 billion over
12 years this is not unexpected. What is disappointing is the
fact that the state of the rail network has declined since Railtrack
became its guardian.
The Office of Rail Regulator is of course well
aware of the problems. The company have been the subject of record
numbers of complaints. Last year the Rail Regulator voiced his
concern over the numbers of broken rails and a critical report
from Booz-Allen and Hamilton on the state of the network.
It has been hard to determine the exact state
of the network, not least because Railtrack has been unable to
provide accurate information. The above report still represents
one of the few proper studies on the state of railway assets.
The report analysed track quality across the whole network between
1995-95 and 1997-98 and found that more of the track was in a
"poor" or "very poor" condition by the end
of this period. They also found that track assets have aged across
The report also compared the rate of track renewals
by Railtrack with those on other rail networks in Europe. In the
UK track renewals averaged around 1.3 per cent during the control
period whilst other European railways averaged around 2-3 per
cent per annum. In addition this rate of renewal was significantly
below the estimated renewal rate of 2.2 per cent quoted in the
Railtrack 1995 Business Plan.
It has also been the policy of Railtrack to
extend the life of existing signalling assets and the report expressed
concern that the company may not have sufficient knowledge of
existing signalling assets for this not to cause a backlog of
work in the future. The station regeneration programme has been
concerned with maintenance rather than renewal. The report states
that the current renewals expenditure on stations may need to
be expanded if customer expectations are to be raised. In addition
RMT remain concerned that much investment in this area has been
concerned with creating shopping havens that of course generate
additional revenue for Railtrack but do little to enhance the
operational capacity of the railway.
The report concluded, "Overall, it appears
that the physical programmes have in aggregate been below those
which were envisaged at the time of determination. It is likely
that there has been a decline in the underlying quality of the
network assets as a whole".
The deteriorating state of the network has also
meant redundancies for many maintenance and renewal workers. In
1998 infrastructure companies advised RMT that Railtrack were
concentrating most renewals work on the West Coast Main Line.
Maintaining the life of existing assets was the preferred policy
of the company, and this was confirmed by Railtrack in comments
in 1998 to the trade journal New Civil Engineer. Since Railtrack
has become the custodian of the rail network there has been a
significant reduction in the number of track workers employed
on maintenance and renewal work. 
Earlier in the paper we referred to the high
levels of Government support to the railway in the years immediately
following privatisation. Public subsidies for rail in the last
two years immediately before and after privatisation were as follows:
RMT are concerned that the additional Government money that
will now be made available to Railtrack will be used to fund the
backlog of maintenance for which they have already been paid.
It is our view that Railtrack should be able to not only clear
the backlog of maintenance referred to above but also fund substantial
levels of investment before any further claims are made on the
The last annual report published by HM Chief Inspector Of
Railways (1998-99) on the safety record of the railways in Great
Britain gives further cause for concern. The report looked at
three quarters of the rail network, based on route miles, with
latest data from mid 1998. It concluded that track quality on
Britain's national rail infrastructure, at sample date of June
1998, was getting worse. 45 per cent of the network was judged
to be static, 33 per cent was in decline whilst 22 per cent was
getting better. The report advised that this was bound to affect
safety at some stage if this was not reversed.
Concern was also expressed over the role of contractors in
keeping the track in a safe condition. Significant numbers of
derailments have been investigated by HMRI where the condition
of the track was a major factor.
In the last few months the Rail Regulator has expressed further
concern over the state of the network. In August 2000 he decided
to order a team of professionals to sort out the problem. The
significant increase in the number of broken rails confirms RMT's
evidence. In the four years between 1994-95 and 199899
there was a 42 per cent increase in broken rails. Railtrack promised
to reduce the number of breaks to less than 450, but in the last
two years the number has been well in excess of 900.
RMT is also aware of the critical submissions that have previously
been made to the Rail Regulator by other rail companies on the
performance of Railtrack. In submissions to the Rail Regulator
made last year the freight company English, Welsh and Scottish
Railways, and numerous train operating companies were highly critical.
Train Operating Companies complained of the network provider's
very loose definition of replacing parts of the network in a "modern
equivalent form". Central Trains sited the company extend
the lift of signalling systems rather than replacing them. The
Managing Director apparently stated that "The new policy
of expanding the life of existing signalling installations in
preference to large scale renewal may well inhibit the possibility
of improvement in the capacity and capability of a number of routes"
(Sunday Business, 19-9-99).
Connex South Central complained that they had been waiting
since 1996 for the replacement of a broken wheel lathe in their
maintenance depot at Selhurst, South London. Wheel lathes play
an important part in helping train companies avoid delays caused
by leaves on the line. Apparently the dispute revolved around
Railtrack's insistence that a 17 per cent return be earned on
the new lathe while Connex wanted to pay only 8 per cent.
Railtrack are only responsible for one part of London Underground's
network; the northern end of the Bakerloo Line. The experience
of train operating companies has been replicated here. LUL had
to threaten to suspend the track agreement before they could persuade
Railtrack to take their concerns over track quality seriously,
and start the planning process for restoring the line to the higher
standards of maintenance inherited from British Rail.
Recent reports have indicated that these problems are still
occurring. The Financial Times recently reported that Connex
South Eastern was going it alone in plans to revamp southeast
commuter stations after Railtrack stated that it was unable to
provide funding. The Connex commercial manager for Chatham and
Medway told local council members that the £5 million plan
announced last year had been indefinitely suspended, and that
Connex would now go ahead with the scheme but the initial planned
investment would be cut by £2 million. While RMT does not
accept it is necessary to turn stations into mini shopping centres,
this continues a disturbing trend.
The previous Government considered a number of options for
the structure of the newly privatised rail system. In the event
they opted for the worst of all worlds. The privatisation options
placed before the Secretary of State had recommended that if the
track authority and train service providers were to be separated
ownership of the network should be with a publicly owned company
which could then charge private companies for the right to run
on the network, as for example happened in Sweden.
The regulation of the network was also split. The Rail Regulator
was charged with overseeing Railtrack, determining their track
access charges and ensuring they properly invested in the network
whilst protecting the interests of users of the network and the
passengers. The Health and Safety Executive oversaw safety, whilst
OPRAF were responsible for securing the rail passenger services
through franchise agreements with train operating companies and
liaison with Railtrack. The duties of OPRAF have of course now
been taken over by the (Shadow) Strategic Rail Authority established
in July 1999.
In addition to the former functions of OPRAF, the SSRA has
a wider strategic brief for the rail network, seeking to bring
in investment and improving the overall quality of the network
for the benefit of the consumer. The SSRA also has the residual
functions of the British Railways Board and following the enactment
of the Transport Bill will take over consumer issues and freight
grants from the Rail Regulator and the DETR respectively.
RMT have welcomed the setting up of the (Shadow) Strategic
Rail Authority and their strategic view over the network. However
the structure of the rail industry set up for privatisation in
1994 remains intact. The rail industry was fragmented into over
100 companies overseen by a complicated yet often largely ineffectual
regulatory structure. The fragmentation of the industry inevitably
has implications for health and safety when so many different
interfaces have been created.
All the new rail companies are seeking to operate as efficiently
as possible and make a profit in an industry that had previously
operated as an integrated whole for the benefit of all. The focus
of performance can override more important factors. For example
Railtrack were last year threatened with a fine of £10 million
for failing to reduce train delays. It is of course right that
Railtrack must be made to ensure that the infrastructure is in
good condition but a fine of only £1.5 million was imposed
on Great Western for an offence under the Health and Safety at
Work Act following the Southall train crash, (see evidence already
Separating the infrastructure of the network from the operations,
leasing the track to private sector companies, and selling the
whole network to a private sector company where commercial considerations
are also to the fore has created an unwieldy regulatory systems.
Planning for the whole industry, and accountability has been
made more difficult by the fact that the public subsidies assimilated
into the charging regime of the industry are determined by two
regulators. The Rail Regulator sets the track access charges that
the Train Operating Companies pay to Railtrack whilst the SSRA
determines the level of government subsidies and incentives to
the Train Operating Companies through the franchise agreements.
In addition under the new Rail Passenger Partnership Fund the
SSRA also now invests certain sums of money for the improvement
of local rail services. The level of public subsidy to the railway
and the benefits that are returned to the taxpayer are therefore
Despite the fact that increased levels of subsidy have been
pumped into the railways, the newly privatised industry has not
delivered. OPRAF reported that more than £1.2 billion was
given by the taxpayer in public subsidies to the passenger train
operators in 1996-97. In the same financial year over £2
billion in public subsidy was given to the industry as whole.
The National Audit Office reported that the rail industry still
received £1.8 billion in overall public subsidies in 1997-98.
The level of subsidy going into passenger services has increased
significantly in the years immediately following privatisation.
The Train Operating Companies awarded the franchises to run passenger
services were usually those with the lowest bids for public subsidy
and therefore the initial levels of public subsidy were actually
determined by the prospective operators and the demands of their
shareholders and not Government.
The increased levels of public subsidy have not guaranteed
decent levels of services on all routes. Many train operating
companies have made rail workers redundant in an endeavour to
deliver higher levels of profit. South West Trains laid off so
many drivers that numerous timetabled trains had subsequently
to be cancelled. However the most serious problem is the actual
state of the network. For Railtrack commercial considerations
have consistently received priority, and it is only now following
welcome pressure from the newly installed Rail Regulator that
the company have started to talk about the sort of investment
that the rail network so desperately needs.
The present regulatory structure, and the part played by
the SSRA (previously OPRAF) and the Rail Regulator has so far
determined the level of public subsidies. The amount of Government
money going into the railways has now been reviewed and it seems
likely that far more money than originally envisaged will go into
the network in order that Government plans for greatly increased
capacity can be achieved. However at the time of privatisation
the taxpayer was promised declining levels of public subsidies
(£0.9 billion in 2002, until the recent review by Government)
with still further reductions in subsequent years.
Any reduction in the level of track access charges would
make Railtrack's cost recovery very difficult without a significant
increase in business. Increased business will not be generated
without substantial investment and this will not be forthcoming
from Railtrack if their guaranteed income stream is reduced. The
levels of track access charges are the most crucial factor in
helping to determine the subsidy needed by train operating companies
for running passenger services. That said we are concerned about
the attempts by Railtrack to railroad the Regulator into allowing
higher track access charges, and we remain sceptical about Railtrack's
claim of borrowing difficulties for investment under the current
The structure of the railway industry is incapable of delivering
the efficiency gains spoken of at the time of privatisation. It
is the view of RMT that public ownership of the network provider
would enable higher levels of investment. Instead the convoluted
and inefficient structure of the industry will mean indefinite
levels of subsidy and state funded investment at least as high
as those made to British Rail, irrespective of funding for additional
We have constantly argued that Railtrack has a clear conflict
of interest between its duty to provide a safe, efficient and
modern railway system and its obligations to its shareholders.
There is real concern that at least some of the extra Government
grant will be diverted to Railtrack shareholders. In total Railtrack
has so far diverted £750 million to shareholders, of which
£175 million was paid to the Treasury in tax. This revenue
could have been used for maintenance and renewal of the network.
Given the spending commitments now provided by Government
to the railway on behalf of the taxpayer, we find it inconceivable
that the state should not seek something in return. Our immediate
preference is for the Government to take an equity stake in Railtrack
equivalent to the money that is to be spent. This way Government
can have far greater influence in co-ordinating investment for
the overall benefit of all users and passengers on the rail network.
RMT wrote to the Deputy Prime Minister, and Sir Philip Beck,
Chairman of Railtrack, in September of 1999 expressing serious
concern over the lack of maintenance and renewals spending on
the rail network. Back