Members present:
              Mrs Gwyneth Dunwoody, in the Chair
              Mr Andrew F Bennett
              Mr Brian H Donohoe
              Mrs Teresa Gorman
              Mr Stephen Ladyman
              Miss Anne McIntosh
              Mr Bill O'Brien
              Mr Bill Olner
              Mr George Stevenson
                       EXAMINATION OF WITNESSES
                 RT HON LORD MACDONALD OF TRADESTON, CBE, a Member of the House of Lords,
           Minister for Transport, and MR BOB LINNARD, Director, Railways
           Directorate, Department of the Environment, Transport and the
           Regions, examined.
        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
        (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 he
  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
                             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 stake holders, 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
        (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.
        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
        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
        (Dr Shannon)   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 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?
        (Dr Shannon)   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 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
        (Lord Macdonald of Tradeston)  Let me say that as at 11th 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 11th 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
        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.
        980.     Royal Mail are controlled by a regulator, they have targets,
  they are expected to meet certain commitments in the same way railway
  companies are and I have been talking to them since this began.  Does it not
  seem to you that they have contractual obligations, they have been working
  hard and they have been very badly treated?
        (Lord Macdonald of Tradeston)  Indeed.  It is clearly something that is
  of great regret to us because we are very concerned about the delivery of the
  mail, but I know it is of great concern to EWS as well.  They are working hard
  obviously to keep the relationship with the Royal Mail.  Railtrack tell me
  that they too are trying to ensure that the Royal Mail trains which
  predominantly travel on the main lines will be improved as soon as possible,
  but they have also got other priorities concerned with the commuter services
  particularly around London, so it is a job for them to try and find a balance
  in all of this.  Again, we have the freight companies, Freightline and EWS,
  with the Rail Action Group at this moment. 
                               Mr Olner
        981.     Can I ask how quickly this compensation will come through to
  these companies?  I have a company in my constituency, Links, which took over
  the old British Rail Red Star Parcels and it has failed because there are no
  parcels coming by train.  How quickly will that company be able to go through
  all the minefield of recovering compensation?  Will your recovery team be
  giving some direction in this?
        (Lord Macdonald of Tradeston)  I am at a disadvantage because the Rail
  Action Group is meeting at this moment and discussing the freight question. 
  But having brought it to my attention, certainly if there are issues like that
  on particular companies I will very happily take it up with the companies
        982.     Finally you mentioned changes in Railtrack's management.  I
  know it has been a few minutes since you said it but it sounded rather to me
  like certain sort of creatures jumping off ships.  Do you think the recent
  senior management changes at Railtrack give enough prominence to engineering
  and technical considerations? 
        (Lord Macdonald of Tradeston)  That is certainly a concern we have
  expressed and others have expressed publicly.  Railtrack moved to allay those
  concerns by bringing forward a number of engineers into higher ranks inside
  the company. 
                             Miss McIntosh
        983.     If I could remind the Committee of my interest declared.  Is
  there a crisis in the rail industry, Minister? 
        (Lord Macdonald of Tradeston)  There is a crisis, indeed I think it is
  a multiple crisis, as I tried to say unsuccessfully the other day.
        984.     In your view has the Government contributed to this crisis?
        (Lord Macdonald of Tradeston)  I believe that the Government has tried
  to manage the crisis.  As I said last week, it is a multiple crisis.  Part of
  the crisis is one we have inherited with the fragmentation of the railways and
  also the lack of investment in the railways over many years.
        985.     In your view would you support the separation of the track
  and the ownership of track from the operation of services on that track? 
        (Lord Macdonald of Tradeston)  What my priority is at the moment is to
  make sure the railway gets back and running.  I therefore am concentrating all
  my efforts on making sure that the system as it exists at the moment works as
  efficiently as possible because to contemplate any radical changes in that at
  the moment might be destabilising.
        986.     Are you prepared to review the role of the Regulator insofar
  as the performance targets such as punctuality that the Regulator is setting
  may conflict with the safety requirements? 
        (Lord Macdonald of Tradeston)  As you may have heard from Sir Alistair
  Morton, he has a number of working groups sitting at the moment and they bring
  together all sides of the industry to try and ensure that any perceived
  conflicts that there might be between efficiency, punctuality and safety are
  tackled and dispelled.  We do not believe, and I am sure Alistair and Mr
  Winsor have said to you that they do not feel it is incompatible to run an
  efficient company and a safe company.
        987.     When in your view did the problem of gauge corner cracking
  first become appreciated in this country?
        (Lord Macdonald of Tradeston)  My knowledge of it is only since the
  Hatfield disaster.  I am told that engineers were aware of it but not that it
  had spread so widely or indeed its propagation, as they call it, could take
  place in rails that were perhaps only a year or two old.  I think the
  assumption had been that the track would have to be much older than that
  before this phenomenon hit it.  We do have studies going on at the moment and
  we look forward to hearing within a matter of days just what the initial
  conclusions have been of those studies.
        988.     In evidence we took from Tom Winsor, the Regulator, last
  week, page 25, paragraph 879, I asked the Regulator what would happen if the
  franchised passenger operators cannot pay the amounts because the numbers of
  people and amount of freight do not materialise over a five-year period.  He
  told the Committee that they would get it from the Government, the Government
  would have to pay more.  Is there any provision for extra payment if by the
  end of this year or next year there are fewer passengers and freight
  travelling on railways? 
        (Lord Macdonald of Tradeston)  First I should say it is an anticipation
  shared by the industry that they can get back to the previous levels of
  passengers on the railway in a relatively short time, and I hope the same will
  be true of freight although that will need further inquiry.  Inside our
  ten-year plan there are unallocated provisions there which might be able to
  help fund any kind of unexpected shortfall of that kind, but at the moment we
  have not made any provision for it.
        989.     Mr Grant, on the other hand, said he would accept it if
  companies went bankrupt.
        (Lord Macdonald of Tradeston)  Indeed, I think Mr Grant and Sir
  Alistair would accept that if a train operating company was not viable then
  it could indeed get taken over or go to the wall in the normal course of
  business, but, as you know, Sir Alistair has powers of last resort were a
  company not taken over but there does not seem to be any shortage of interest
  in those companies that have been less than financially robust in the past. 
                              Mr Bennett
        990.     How much is this unallocated money?
        (Lord Macdonald of Tradeston)  I will let Mr Linnard come in here.
        (Mr Linnard)   I have not got the figures with me but it is quite
  significant in the latter period of the ten-year plan for unallocated
  transport capital. 
        991.     I would like to get to the bottom of how much money there was
  that was not allocated.  Presumably you had to fight Treasury to get the money
  so there must have been some vain hope that it would be spent on something. 
  Are we losing something in order to get the money for this purpose?
        (Mr Linnard)   There is a sum of money in the ten year plan, largely in
  the years five to ten, which is allocated to transport capital but not
  allocated as between road or rail or the other spending programmes within
  transport.  That is simply because it is impossible to set with total
  precision the allocation of capital spend across the different modes and
  across the different programmes.
        992.     Are we going to get a by-pass in order to get us out of this
        (Mr Linnard)   That does not follow.
        993.     What does follow?  Can you give us some clear information? 
  Presumably you did argue fairly strongly with the Treasury that that money was
  needed for something.  If it was needed for something and if it is going to
  be spent in a different way, we are not going to get what it was needed for.
        (Mr Linnard)   Out of the total expenditure provision in the ten year
  plan there is a total of about nine billion which is unallocated.  One would
  expect, anyway, that railways would get a proportion of that when the spending
  priorities and the investment cases become clearer.
        994.     Investment as opposed to reimbursement for losing passengers
  and income.
        (Mr Linnard)   Yes.  I think that is a distinction that we need to keep
  very clearly in mind.  What Mike Grant was saying, I would imagine, is when
  he is awarding franchises there is no total safety net that stops a private
  sector train operator from ultimately going bust.  What Mr Winsor, I imagine,
  would have been saying in the evidence that he gave is that what he has set
  in his periodic review is the amount, in his judgment, which Railtrack needs
  to maintain and renew the core railway over the next five years.  That is
  money which is due to Railtrack and has been settled by Mr Winsor on the
  periodic review.
        Chairman:   To increase its payment in dividends.
                             Miss McIntosh
        995.     Would you agree, Minister, that safety on railways over the
  last ten years has been infinitely greater than safety on the road?  What are
  you doing to boost confidence in the railways and to encourage people to go
  back on to the railways?
        (Lord Macdonald of Tradeston)  I, of course, agree that railways are a
  far safer mode of travel than on the road.  It is true too that over the past
  ten years there have been some significant area of progress in terms of better
  safety on the railways - signals past at danger have been coming down steadily
  across the last decade.  If you look at the numbers of serious incidents in
  terms of collisions or derailments, there is a downward trend there too.  We
  always have to bear in mind that inside those generally encouraging statistics
  there is the possibility of the awful disasters we have seen at Paddington,
  Southall and most recently at Hatfield.
        Chairman:   Mr O'Brien.
                              Mr O'Brien
        996.     Minister, my interests are heightened when you talk about, if
  some of these operating companies do not do well there is plenty of other
  people lining up to take-over; is that correct?
        (Lord Macdonald of Tradeston)  From the limited experience we have
  there has not been a shortage of interest in people looking to take over
  companies that might have been weakened.  There have not been too many
  companies, as I recall, in that condition.
        997.     It is a fact that shares in GB Railways and Anglia Railways
  franchises have fallen to an all time low and some of the companies are saying
  that if they do not increase their income, their profits, then they will go
  to the wall.  This is happening.  What contingency plans are the Government
  operating to ensure that any new bidders will take over the consequences of
  safety and other issues without further subsidies.
        (Lord Macdonald of Tradeston)  The Strategic Rail Authority are 
  deferring penalties that they might have been collecting.  I also believe that
  Railtrack's board have taken a decision to try and stand behind companies that
  might be in temporary trouble for cash-flow, and so on.
        998.     Would you agree that, perhaps, some of the problems that are
  causing a reluctance to invest in rail are because of the fact of the shortage
  of skilled staff?
        (Lord Macdonald of Tradeston)  I think there has been a problem of
  de-skilling across the railways. We saw it, and also skills shortages created
  in some areas after privatisation, when, for instance, train drivers were paid
  off and then there had to be an attempt to recruit them back very quickly
  after that.  We can see too, just on the increase in salaries, for instance,
  that the shortage of staff there has lead to an increase in salary to try and
  attract more people into those grades.  More broadly it was judged a couple
  of years ago to be a developing problem and, indeed, the mechanisms were set
  up to try and increase training in the railways.  The comments made by the
  Department for Employment and Education showed that the take-up, for instance,
  of some of the vocational qualifications inside the railway are very low. 
  There is a real problem with training in the railways.  Of course the  ten
  year plan with that 60 billion extra investment could exacerbate that.  At
  least the comfort we can take is that if you have a ten year commitment to
  investment and expansion then companies should be able to begin to recruit and
  train with greater certainty than in the past.
        999.     Is there any matter or any issues involving the new
  franchises where they have to apply skills training and there has to be an
  upgrading of skilled staff in the companies?  Is this written into the
        (Lord Macdonald of Tradeston)  I am not entirely clear, maybe Mr
  Linnard would know.
        (Mr Linnard)   It is certainly one of the things that the SRA look very
  carefully at when they are judging between different bidders and when they are
  taking decisions on who should be allowed to qualify for bids.  I am not sure
  whether they look specifically at training, but they certainly do look at
  technical and managerial competence in some detail.  What the SRA have also
  done as a cross-industry initiative is to participate, I think they are
  actually one of the main movers, in setting up the Institution of Railway
  Operators to provide a much clearer focus on training and links with the City
  University, and so forth. 
        1000.    This uncertainty that you inform us of, this is not going to
  help the railways to get back to where they were before Hatfield and to
  advance upon that.  One of the strategies in the ten year plan is to increase
  the amount of passenger and freight on to rails.  We are 25 per cent below
  Hatfield now, what is going to be the position or what do you envisage the
  position will be post-Hatfield, are we going to reach the targets?  How long
  will it be without skilled operators?
        (Lord Macdonald of Tradeston)  I should say that the SRA, the
  Government and the Health and Safety Executive are planning to have
  discussions to see what extra action, in addition to what Mr Linnard has
  described, would be needed to try and develop skills and training.  There is
  no doubt there is a developing shortage in the railways, as there is, of
  course, in many other industries.  With the expansion that we have and the
  prospect of 50 per cent growth in passenger travel over the next ten years it
  is vital that we try to get recruitment and the training up to the necessary
        1001.    What is the Government doing about this?
        (Lord Macdonald of Tradeston)  As I said, we have given them a ten year
  plan, which should allow them to begin to recruit and train with much greater
  confidence.  We have the discussions planned for the SRA and with the Health
  and  Safety Executive to say, "What more do we have to do?" The initiative
  described by Mr Linnard and the Institution of Railway Operators came after
  the 1998 Rail Summit.  I think it is time to go up a gear or two on that.
        1002.    When do you anticipate that there will be some results of the
  training coming through so that we can see growth?  Do you consider that there
  will be conflicting pressures upon the network with safety performance and
  growth and that without skilled workers this will be exacerbated?
        (Lord Macdonald of Tradeston)  Running a railway is clearly very
  demanding and the companies involved in it have to be quite clear that we need
  the level of skills and experience that perhaps was there in days past and we
  hear has been too easily lost - in some areas of track maintenance, for
                              Dr Ladyman
        1003.    Lord MacDonald, before you became a Minister you were a very
  successful private businessman at a very senior level in those businesses. 
  What, in your judgment, was the right balance on the boards of the companies
  with which you were involved between industry specific knowledge and general
  business knowledge?  
        (Lord Macdonald of Tradeston)  There has to be a balance particularly
  in a regulated company like Railtrack, so you do want people who understand
  the pressures of public life and the political demands but you want, too,
  people with experience of industry, experience of perhaps heavy engineering
  in particular, experience of systems as well as the kind of financial
  expertise and corporate legal expertise that you would look for in a FTSE 100
        1004.    Out of the 13 board members were you aware that there were
  only two members of the Railtrack board that had any experience of the
        (Lord Macdonald of Tradeston)  I understand the weakness of the board
  which has been discussed publicly in recent months and I think Sir Alistair
  has drawn your attention to that, Madam Chairman.  In the creation of the
  company taking it over into the private sector, the board membership may not
  have evolved to the kind of levels demanded by a FTSE company in the time that
  it has been in existence.
        1005.    So you accept that there are weaknesses in the board? 
        (Lord Macdonald of Tradeston)  From my business background I would say
  it is a board that could be strengthened.  Since we anticipate an incoming
  Chairman in the months ahead I am sure that would be a priority for that
  incoming Chairman or Chairwoman.
        1006.    Would you like to comment on the fact that the Safety
  Committee on the board did not have a railwayman on it? 
        (Lord Macdonald of Tradeston)  Again if that implies a lack of
  expertise in the areas of safety that it is dealing in, that would clearly
  seem to be an omission, but I know that there are considerable changes going
  on inside the safety regime in Railtrack.
        1007.    When you were in business and you went to your financiers for
  money for investing in your companies, did you expect them to make comments
  about the way the company was managed or did you not regard that as any of
  their business? 
        (Lord Macdonald of Tradeston)  Since many of the financial analysts
  that you meet represent major institutional stake holders, then of course you
  anticipate that there is a very detailed grasp of your business and a very
  sharp critique of it.  That is indeed the way a PLC should work since in the
  end it is owned by its shareholders and those shareholders can feed in their
  views.  As I said earlier, the board itself has a fiduciary duty to all
  shareholders and therefore cannot act on the instruction of any single
        1008.    Did you ever when you were borrowing money for any of your
  businesses write to your financiers and tell them that you were an independent
  business, "keep your nose out"?  
        (Lord Macdonald of Tradeston)  I would never have been in a position to
  do that because I was in an industry regulated by the ITC.
        1009.    You would be horrified if anybody did that? 
        (Lord Macdonald of Tradeston)  I would certainly be surprised.  It
  would not have been inside my business practice.
        1010.    What did you say to Railtrack when they did that?
        (Lord Macdonald of Tradeston)  It is not something I would have to say
  I am immediately aware of.  I would have to look at the text and context of
  what was said.
        1011.    It was quite public, was it not, Lord MacDonald?
        (Lord Macdonald of Tradeston)  As I say, I have not seen the context or
  detail of it.
                              Dr Ladyman
        1012.    Following up Mr Stevenson's remarks about the amount of money
  that the Government has put into Railtrack - and I accept at the present time
  the Government is only a very, very tiny shareholder in Railtrack because of
  the way that the industry was privatised - the fact of the matter is that the
  Government is putting a huge amount of money in.  If you are not prepared to
  go down the road that Mr Stevenson was perhaps trying to take you down in
  taking a stake in the company again, would it not at the very least be a
  reasonable thing for the Government to do to insist on having a veto over who
  becomes Chief Executive and Chairman? 
        (Lord Macdonald of Tradeston)  No, I do not believe that would be
  consistent with the governance of a PLC.  I think that must be something for
  the shareholders in the end to decide.  If they are interested in the stakes
  that they have in a company, they must ensure that they have got the right
  board which will appoint the right management.  If the management is wrong,
  the board should act.  If the board is inactive, the shareholders should act.
        1013.    We have a situation here where we have an entire industry in
  chaos; not your fault, you were not responsible for privatising it, and a
  structure that everybody agrees is entirely failing; not your fault, you were
  not responsible for that structure.  It is industry which everybody now agrees
  is poorly managed and is letting down its customers and its main investors
  (which I would suggest is the Government, not just the shareholders) and
  within all of this chaos you do not think that there is a role for the
  Government to insist on being able to at least appoint or to veto members of
  the Safety Committee on the board or the Chairman of the board?  You think it
  is entirely down to ordinary shareholders to influence that?
        (Lord Macdonald of Tradeston)  But you will recall that within recent
  weeks we have just passed a Transport Bill and made it an Act which embodied
  in it the Government's thoughts about the architecture that is required for
  the railways.  Indeed, when it was a Railways Bill before it was a Transport
  Bill your Committee, I believe, gave it a very thorough going over and tried
  to put in place the kind of architecture that the railways would need for the
  future.  As I recall, I was coming into the job at the time, the Government
  very readily accepted the good work you had done in trying to create that
  architecture.  Had there been something else that might have been done, I feel
  it might have been spotted at that time when there was a Transport Bill that
  could have taken it into law.
        1014.    So you have never at any point considered since the Hatfield
  incident that maybe the time has come to insist, in return for the money that
  you are putting into the industry, on a golden share or some other mechanism
  whereby you would have more direct influence over the day-to-day decision-
  making of Railtrack? 
        (Lord Macdonald of Tradeston)  My approach has been to try to focus on
  getting the railways running again and working with that management to ensure
  that it gets more miles rerailed every week and more speed restrictions
  lifted.  I do not think it would help were I to speculate about what the
  options might be if that in any way destabilised the company or in any way
  demotivated the management or the workforce.
        1015.    Finally then, you said to Mr Stevenson "We are putting this
  money in and we are expecting better management out."  That was your bottom
  line.  Do you accept that the ethos within a board, the way the board thinks
  does permeate all the way through a company and has a direct influence on the
  way managers, middle managers and junior managers implement the decisions of
  the board and therefore manage that business?  
        (Lord Macdonald of Tradeston)  I do indeed, but I think it is also true
  that a company made up of 12,000 individuals which has the unique
  characteristic of having been a nationalised railway company which is taken
  into the private sector, is still in a state of change and it is therefore a
  very difficult culture, I would imagine, to try and manage.  So I have got
  some sympathy with those managers who were trying to sort out all those
  dilemmas that they inherited inside a very difficult structure, a very
  complicated structure of that new privatised railway, but at the same time it
  should not be beyond a company with the resources of Railtrack to ensure that
  those issues are addressed urgently and the right people are recruited and the
  right board is in place.
        1016.    But that ethos that those 12,000 people are working within is
  set by a board which was made up, until 12 months ago, of the Chairman of a
  supermarket, a number of people who have extensive experience in the property
  industry and the ex-Chief Executive of the Dome.  Under what circumstances is
  the ethos they are setting within the board going to permeate down to those
  12,000 people who are trying to run a railway?
        (Lord Macdonald of Tradeston)  That must be a judgment for the Chairman
  and the Board of that company, informed by their stakeholders.  I accept that
  the Government does have a stakeholding in it.  All I can say is that you have
  the opportunity now, with the chairman having announced that he is standing
  down, to get a strong chairperson in there.  I am sure the body will be very
  much seized of its responsibilities and, perhaps, need to extend the range of
  its experience in the light of what it has gone through in recent times.
                              Mr Donohoe
        1017.    Have you happened to have read today's Herald?
        (Lord Macdonald of Tradeston)  The Glasgow Herald?  Sadly speaking, for
  my old newspaper, it arrives a day late, so I will not see it until tomorrow.
        1018.    You will not have seen the headlines to suggest there is
  another problem looming, out of 690 new trains only three are going to run
  before May of next year?
        (Lord Macdonald of Tradeston)  No, I have not seen that report.  I was
  talking earlier today with Richard Branson who was very enthusiastic about the
  new trains that he hoped to bring on to the network.
        Chairman:   Have you ever known Sir Richard when he was not enthusiastic?
                              Mr Donohoe
        1019.    He has made an announcement about 14 times that these trains
  were going to run, maybe that is 15 times.  In Scotland itself, have you seen
  yesterday's Herald which identified a problem with the new rolling-stock in
  Scotland?  You must have read that by now if you get it one day late.  That
  is magnified by every company across the whole network.  What the Herald are
  saying today is that only three trains out of 690 are to be delivered and are
  going to run before May of next year, which is going to impact immensely on
  the industry.  If you thought you had a crisis, as far as the industry itself
  is concerned, with Railtrack, the operating companies are going to have a
  major, major problem.  The article does mention, in fact, that only one of
  Richard Branson's trains will run on time, the rest will not.
        (Lord Macdonald of Tradeston)  Sir Alastair Morton is chairing various
  groups that are trying to push through the use of the new rolling-stock.  I
  believe that if you look at the categories, if you like, the diesel and the
  electric rolling-stock, on the diesel side they have had quite a success in
  managing to get more into service, but there are continuing problems with some
  of the electrical units.  One of the problems we have in this country is a
  lack of test track.  I believe we are in a position  where some of these
  trains have to be tested elsewhere on the continent.
        1020.    Railtrack is demanding that somebody builds a test track.
        (Lord Macdonald of Tradeston)  Various options are being looked at as
  to how we could improve the testing on track before they are put into service.
        (Mr Linnard)   One of the things that the SRA were asked to do about a
  month ago was to set up a group, which became five sub-groups under a steering
  group chaired by Sir Alastair Morton, to look at various structural problems
  within the industry, not in terms of whether Railtrack ought to be split up,
  or anything like that, but what has been described as the sore points,
  contractual, regulatory problems within the industry. One of those groups has
  been looking specifically at vehicle acceptance and reliability and the fact
  that a lot of the new rolling-stock is not---
        1021.    It is a little late, is it not, Mr Linnard, because these
  problems have existed for, certainly, the last two years, to my knowledge?
        (Mr Linnard)   The problems have existed.  The Strategic Rail Authority
  were asked about 18 months ago to set up a group with rolling-stock
  manufacturers, leasing company train operators, which they have done and which 
  has produced some good results in terms of speeding up delivery.
        1022.    Has it got any more rolling-stock on to the rails that are
  producing good results?
        (Mr Linnard)   It has speeded up the delivery of some rolling-stock, yes,
  but there are still problems.  One of the problems, as the Minister said, is
  the fact that when the stock does come out of the production line it does not
  operate reliably enough.
        1023.    Everyone in the rail industry operates existing rolling-stock
  on the assumption that the way to find out if there are any problems is to run
  the equipment over the first year before they accepted delivery, deal with the
  manufacturers, put them into operation and when they are only working properly
  then to accept delivery.  This is not a new problem, it has existed in the
  rail industry since the original George Stevenson was at the game.  Now
  suddenly it is being extended by Railtrack.
        (Mr Linnard)   If I can respond to that, I do not think it is a new
  problem that has been discovered.  What is, undoubtedly, true is because of
  the intensity of use on the network, with the growth that has happened over
  the last three or four years, the effect of a breakdown is much more serious
  on a lot of crowded commuter lines than it  used to be.
                              Mr Donohoe
        1024.    When you were talking to Sir Richard did he indicate to you
  that All Star, who have something to do with these trains, have been granted
  a variation order to defer the delivery of these trains? Were you aware of
        (Lord Macdonald of Tradeston)  No, I was not, no.
        Chairman:   Perhaps you would like to talk to the Italians, who deliver
  them without any trouble at all.
                              Mr Donohoe
        1025.    The figure is something like a four month delay.  In private
  conversation with train operating companies I am sure you get a different
  response than you will probably in public.  As far as the service that they
  get from Railtrack is concerned there seems to almost be intimidation in terms
  of the way that Railtrack almost coerces the rail operating companies into
  lying.  Can you just confirm that some of the operating companies themselves
  have made representations to you to suggest that Railtrack is broken up and
  they, in fact, as franchisees will be given the responsibility of the
  maintenance of the Railtrack?
        (Lord Macdonald of Tradeston)  Some of the work that we did after the
  Paddington disaster was looking at the relationship between the train
  operating companies and Railtrack.  We had heard about concerns that Railtrack
  were less than  responsive to the needs of the talks.  The work that we did
  showed no conclusive evidence of that.  In reading what the Regulator had to
  say when he came to see you, he too had not had complaints of intimidation,
  as I recall him saying.
                              Mr Bennett
        1026.    He did make a pretty firm statement about the need for a
  change of attitude.
        (Lord Macdonald of Tradeston)  It was very much a change of attitude,
  because we do believe that Railtrack has to focus much more on its customers,
  the train operating companies and their customers and the passenger.  So, yes,
  it does need a change of culture, and from everything we hear from the new
  management they are intent on delivering that.
                              Mr Donohoe
        1027.    The problem is that this crisis is almost open-ended as to
  when it is going to come to a conclusion.  Are you saying it is going to be
  by Easter?
        (Lord Macdonald of Tradeston)  I am saying that very significant
  changes are promised by the end of January.  There will be a post
  Christmas/New Year schedule brought in on 8th January and then another
  schedule on 29th January, according to the last information I was given by
  Railtrack.  At that point we will have had, "A very significant improvement",
  I quote their words.
        1028.    The problem is that in using your statistics, as you did when
  asked the question, they are almost fundamentally flawed.  You are using
  changed timetables to come to the conclusions that you have.  These changed
  timetables have added as much as an hour or two hours on to a journey.  The
  airlines have done that for years, it is the oldest trick in the game to
  extend the period between A and B in terms of time and then to suggest to the
  travelling public that things are improving when in actual fact they are not.
        (Lord Macdonald of Tradeston)  Please let me be clear, these are not my
  statistics, they are statistics delivered by Railtrack and by the train
  operating companies.  The levels of punctuality that we were talking about,
  the percentage of normal services running are percentages of that original
  timetable.  The punctuality is compared with the current timetable.
        1029.    That is a problem, because if you are dealing with the
  current, which has been elongated over a period of time, you are not dealing
  with a situation that was invoked six months ago, where the timetable was much
  adjusted to what it is today.  That is the problem with your statistics.
        (Lord Macdonald of Tradeston)  Again not my statistics, these are the
  TOCs' statistics.
        1030.    But it is fundamentally warped by virtue of the fact that it
  is not looking at it on the basis of like for like.
        (Mr Linnard)   Could I explain what I understand Railtrack to be saying
  when they say services will be "substantially back to normal by the end of
  January".  What they are saying is that compared with the normal timetables,
  the pre-Hatfield timetables, well over half the services will be running to
  these timetables, ie, within the normal tolerances, and for the remaining
  services, on the Anglo-Scottish inter-city routes all the services will be
  running within 45 minutes of the normal timetable, and on the inter-city
  routes all the services will be running within 30 minutes of the normal
        1031.    But they already are much longer.  The point Mr Donohoe is
  making is very straightforward.  Originally the line between Crewe and London
  ran trains at one hour 50 minutes.  Of course that was under British Rail. 
  Then it went to two hours.  Last Friday, for my sins, it went to three and a
  quarter hours and somebody went from London to Crewe yesterday was and it
  three and three-quarter hours.  Frankly, coming and saying we are within X
  degrees of getting somewhere near the present timetable is a load of nonsense,
  is it not?  There are vast numbers of people travelling in every day and
  travelling into areas where there are vast numbers of problems who will not
  recognise that as any kind statistic at all.
        (Lord Macdonald of Tradeston)  The speed restrictions are there because
  engineers have found cracks in the rail.  It is not, surely, for government
  or a select committee to put pressure on the people at the rail level to say
  "lift those restrictions and get us running on time" if there is a safety
        1032.    Not one member of this Committee has suggested that to you. 
  You gave us the figures and you said, "This is what these kind gentlemen have
  told me.  This is how it is all going to be alright.  This is the future. 
  These are the figures."  All I am saying to you is unless we can agree the
  baseline there is absolutely no point in saying by Easter (which is what we
  are talking about) we ought to be back to a timetable.  Whose timetable and
  under what circumstances and how many hours are we talking about?
        (Lord Macdonald of Tradeston)  Madam Chairman, we have round the table
  a number of times a week the Health and Safety Executive and Railtrack and the
  other bodies involved in this to try and ensure that we find the quickest
  route to run a safe railway.  We want to lift the speed restrictions as
  quickly as possible but we have to be aware that they are there because rails
  are said to be cracked and dangerous.
                              Mrs Gorman
        1033.    Lord MacDonald, you have heard of the expression "it will
  never get better if you pick it."  Do you think that the rail industry, over
  and above all the other industries we have privatised, has been subjected to
  an extra special set of standards and complications, that is to say is it a
  political football and is that the problem?  
        (Lord Macdonald of Tradeston)   I suspect that one of the problems is
  that the railway was broken into too many pieces and therefore for all those
  pieces to be put together again you need more complex structures than might
  have been the case if it had been done in a different way.
        1034.    Do you accept that it must be one of the most heavily
  regulated of the so-called deregulated industries.  After all, we deregulated
  many inefficient public industries, the car industry, British Airways, and all
  the rest of it but without setting these impossible standards for them.  Do
  you think the railways are subjected to something over and above what might
  reasonably be considered acceptable?  
        (Lord Macdonald of Tradeston)  I do not think they are impossible
  standards but they are standards of service that can only be reached with a
  considerable investment from the government.  The aim that you could eliminate
  all subsidy from the railway was incorrect.  The belief that railways were at
  best static and probably in inexorable decline, which was the basis on which
  many judgments were made, turned out to be wrong and therefore the subsidies
  put in place at privatisation have had to be enhanced because of the
  increasing demand and because of our belief that there should be an expanding
  social railway in this country and that fares should be at an affordable level
  against other comparative forms of travel.  So for all those reasons I think
  we have to have regulation in place to say that public money is well spent or
  better spent than it has been.
        1035.    But there are so many bodies regulating with a finger in the
  pie.  Under your description of the Rail Recovery Action Group, we have a list
  of half a dozen or more organisations who all have a finger in the pie of
  whether or not the railways are considered to be operating satisfactorily. 
  How do you run a business with all these public bodies constantly coming in
  and poking their noses into what you are trying to run? 
        (Lord Macdonald of Tradeston)  That is the nature of trying to run a
  business in a regulated environment and that has been my particular business
  experience.  I am sure that you would welcome the fact that, for instance, the
  Rail Passengers' Council has some say now in how the railways are run and that
  has been strengthened, I am sure, through the good works of this Committee in
  its preparation of the railways part of the Transport Bill and I am sure, too,
  that a Strategic Rail Authority is something that this Committee endorsed
  because of the direction it could give to the expansion and development of the
  railway.  I believe, too, that the Health and Safety Executive has a role
  round that table because of the concerns, which again I am sure have been
  echoed in this Committee, about safety on the railways in the last two or
  three years.  I do not see that one would willingly exclude any of those
  parties from the discussion of how best to run a railway, but I agree with you
  that there should not be too many distractions for a management.  The reason
  we have got this group is to get people round the table so that they can all
  talk without having separate meetings and in that way distracting Railtrack's
  management from the real job which is getting the railway running again as
  quickly as possible. 
        1036.    Do you think you should judge an industry partly on the
  degree to which the public is willing to patronise it, in which case the
  railways are  doing a good job because they have added to the number of people
  using their services over the period of four years since they were privatised
  or semi-privatised? 
        (Lord Macdonald of Tradeston)  I agree it was very encouraging to see
  the number of passengers using rail before Hatfield at the highest it had ever
  been since 1947.  You can see in our ten-year plan our political decision to
  invest in that welcome change by taking the increase up from the 25 per cent
  or so that we have had since privatisation in terms of an increase up to
  another 50 per cent beyond that.
        1037.    Do you believe it is the public that is making this fuss or
  the opinion formers? 
        (Lord Macdonald of Tradeston)  I think it is a very understandable
  shared concern and clearly the public, those involved in travelling by the
  railway, will have every right to be very frustrated and vocal about it, and
  it is not surprising at all that the media should echo that.
        1038.    We do not all go mad if one aeroplane falls out of the sky
  and impose the standards that we are now doing with the railway and check
  every single aeroplane causing chaos for so many individuals.  My point is are
  we not trying to make the railway do something which we do not expect of other
  aspects of travel? 
        (Lord Macdonald of Tradeston)  I hope our reaction is not
  disproportionate.  We know the public concern there was after Paddington and
  there has been after Hatfield and we will try to respond to that, I hope in
  proportionate way, but there is no doubt at all that the public concern that
  has been expressed in Parliament and in the media has contributed to the
  concern that Railtrack rightly have about the dangers of gauge corner
  cracking.  One hopes that they will be able to get reassurance from the expert
  studies that are being delivered and from the closer relationship with HSE
  under they aegis of government and regulators and that they will be able to
  make judgments about the balance of risk involved.  There is always a balance
  of risk.  I do not think anybody would expect to run anything as complicated
  as a railway with 24,000 miles of track and 75,000 trains running on it
  without accidents, but it is our job obviously to try and minimise those
        Mrs Gorman: Can I say one thing to compliment you on the fact that
  recently you made a very sensible remark about the railways and the reaction
  of people.  You implied that this industry was not so much in chaos but that
  people were panicking about it, that is the big difference.  Is it not true
  that in the four years since privatisation two of them have not had a single
  accident involving rail where more than five people were injured or in any
  other way harmed by it?
        1039.    We can be kind to you, Lord MacDonald.
        (Lord MacDonald)           Of course it was a cause of great satisfaction for the
  railways when they had those years with no accidents at all but, of course,
  we have had three very serious accidents in recent years and we have to be
  concerned about any reoccurrence of that, particularly if there is any
  suggestion that bad maintenance or management of the railways is in any way
  contributing to that.  I think what we found after the accidents at Southall,
  Paddington, and now at Hatfield, is that safety on the railways does repay
  greater investment and greater scrutiny.  You will be aware that we are
  committed to putting new train protection systems across the network.
                              Mr Bennett
        1040.    On the West Coast Mainline, are you really confident that the
  Government got a good deal with  Railtrack about the modernisation?
        (Lord Macdonald of Tradeston)  That is a judgment, of course, that has
  been made by the Regulator, whom I know you have interrogated at great length
  on this.  The Regulator assures us that he has gone very thoroughly through
  all of the figures and the calculations made here and we have accepted his
        1041.    It is a blank cheque, really.  What guarantee is there that
  this management that you have just described is going to deliver the West
  Coast Mainline modernisation on time and to budget the very substantially
  increased budget?
        (Lord Macdonald of Tradeston)  I would hope that the Regulator would be
  involved in a much more rigorous way than would have been the case in the
  past. The strategic role of Sir Alastair and the SRA gives us the reassurance
  that, perhaps, was lacking in the past. I am grateful for the work this
  Committee has done in setting up that new architecture for the railway.
        1042.    Are you also confident that the Government has not been hard
  done by, by Virgin and by Railtrack over the West Coast Mainline?
        (Lord Macdonald of Tradeston)  We, of course, were unhappy with the
  very significant increase in the cost of work that was going on on the West
  Coast Mainline.  In view of the analysis made by the Regulator we felt that
  in the interests of getting a more effective and more efficient railway that
  was a price that should be paid.
        1043.    In modernising the railways, generally, do you see more of a
  role for third parties rather than Railtrack?
        (Lord Macdonald of Tradeston)  It is something that is being explored
  through the rail modernisation fund and the special purpose vehicle that Sir
  Alastair has been talking about.  We hope that Railtrack will play a central
  part in joint ventures or other financial constructions that were put together
  in there.  Of course the train operating companies, through the franchising
  process, are being encouraged to invest in developing their own services
  alongside Railtrack, alongside the SRA and, perhaps, other financial
        1044.    In the metropolitan areas are you happy the Strategic Rail
  Authority is going to take the lead? Would it not be more logical for local
  transport experts to be having much more say on modernisation?
        (Lord Macdonald of Tradeston)  I believe that the SRA and the PTEs will
  work well together.
        Mr Bennett: Are you sure about that?
        1045.    Why do you think that, my Lord?
        (Lord Macdonald of Tradeston)  From the contact that I have had with
  PTEs I do not hear a great volume of concern about it. There was a time when
  the Transport Bill was going through that people were particularly concerned
  to lose the aegis of the Department over the grants.  I feel that that concern
  has lessened.  Mr Linnard has been more involved with the PTEs in some of
  these areas.
        (Mr Linnard)   Yes, I think that is right.  Clearly there has to be a
  balance struck.  It is very difficult for the Government and Parliament to set
  up a Strategic Rail Authority and not give it a purview which extends across
  the country.  There will be discussions, particularly between the SRA and the
  PTEs, when franchises involving the PTE, or which will cover PTE areas, come
  up for replacement or renegotiation.  The test will be whether those
  discussions and those negotiations can be concluded successfully.  We have no
  reason to think they will not be.
                              Mr Bennett
        1046.    The franchise replacement programme is going pretty slowly,
  is it not?
        (Lord Macdonald of Tradeston)  It is going at a pace that Sir Alastair
  and Mr Grant judge to be appropriate for it.
        1047.    Do you think that is appropriate?
        (Lord Macdonald of Tradeston)  At the moment we have no complaints
  about the pace of it.  It delivers the kind of investment and improvement and
  services that are  required.  We have to keep in mind that many of these
  franchises would not be expiring anyway until 2004.
        1048.    The second phase of the Channel Tunnel link, is there going
  to be some more money from Railtrack?
        (Lord Macdonald of Tradeston)  That is obviously an option that
  Railtrack have open to them up until 2003, to be involved in the financing and
  purchase of the Channel Tunnel rail link part two.  Preliminary work has
  already started there and we should be able to press on with that,
  irrespective.  We will be looking for meaningful discussions in the early New
        (Mr Linnard)   They have told us very recently they would like to come
  and talk to us.
        1049.    How much money are you going to give them?
        (Mr Linnard)   I do not know.
                              Mr Bennett
        1050.    Are you feeling generous, entering the Christmas spirit? 
  When you shake your head we need it for the record, you are definitely saying
  no to the Christmas spirit.
        (Mr Linnard)   We are not feeling generous.
        1051.    We are told that Railtrack is going to produce an efficiency
  saving of 17 per cent over the next five years, that is a bit of nonsense, is
  it not?
        (Lord Macdonald of Tradeston)  The Regulator has looked into this in 
  great depth we are assured.  It is not 17 per cent of present costs, of
  course, because the Railtrack revenues will go up very significantly.  What
  we are looking at there is an improvement in efficiencies across the board,
  which the Regulator will argue in comparison to other formerly publically-
  owned companies is not overly demanding.
        1052.    Until Hatfield we did not know how inefficient they were, did
        (Lord Macdonald of Tradeston)  The Regulator believes that this will
  not put undue pressure on the company.
        1053.    It may be that there are others of us who think that a little
  undue pressure on the company might produce some results.
        (Lord Macdonald of Tradeston)  Indeed.  As Mrs Gorman says, this is a
  company that is under pressure from many different angles, that is
        1054.    That is not very accountable, is it?
        (Lord Macdonald of Tradeston)  We believe that it is clearly
  accountable inside its regulatory regime.
        1055.    Are you satisfied that is a tough enough regime?  It is your
  money, our money, that they are walking way with.
        (Lord Macdonald of Tradeston)  I am sure Mr Winsor will have assured
  you that he is running a much tougher regime than previously.
        1056.    You will have seen from the questions, the last thing I asked
  him was why it was that he talked tough but gave more money that he intended
  in the first place.
        (Lord Macdonald of Tradeston)  He has done that after a very thorough
        1057.    I do not doubt that.  The reality is that he, in fact, has
  given more money.
        (Lord Macdonald of Tradeston)  That is because we are finding out the
  true cost of running an efficient and expanding railway.
        1058.    That is how you were able to "up" the dividends they were
        (Lord Macdonald of Tradeston)  It was a very marginal increase in their
  dividend. In presentational terms it was not something I would have done had
  I been in the chief executive's or the chairman's position.
        1059.    You do not think they are very accountable.
        (Lord Macdonald of Tradeston)  I think the declaration of dividend is
  something that they do in the light of what they hear from their shareholders
  and from the City generally. Some of those factors may go into the financial
  strength of the company on which it will borrow for the future. It may be that
  it is looking for that strength to try and expand and develop the railway. 
        1060.    They obviously do not know you have this sum of money tucked
  away in the ten year plan and they are going to be able to get their hands on
  it, do they?
        (Lord Macdonald of Tradeston)  If they read the plan it should be very
  apparent to them.
        1061.    They obviously do not know that you have got this sum of
  money tucked away in the ten-year plan which they will be able to get their
  hands on.
        (Lord Macdonald of Tradeston)  If they have read the plan it should be
  very apparent to them.
        1062.    Finally, my Lord, will you report back to us on the question
  of electric trains.  Can we have a written note once you have seen this
  article.  It would also be helpful if you could give us one or two up-to-date
  reports on how many of the rolling stock problems are going to be solved
  within the next six months.  Do not worry, you are not going to escape without
  me asking something about aviation.  You are foolish enough to come and I am
  foolish enough to ask you the question.  There are a lot of people who will
  be very dismayed when they arrive at the stations this Christmas with a valid
  ticket (which in most cases is costing them a considerable amount more than
  it used to) and they discover that they are unable to get on a train because
  GNER has insisted that all the trains are booked in advance.  As you know, in
  aviation it is quite common for companies to overbook and insist on people
  booking beforehand and many of the rail companies would like to move to that
  system.  Would you make it quite clear to them that the passenger comes first
  and it is not for the convenience of the companies and would you also be
  prepared to ask them what they intend to do for those passengers who are left
  at Christmas on the stations unable to find a train to take them to their
        (Lord Macdonald of Tradeston)  I will certainly put that on the agenda
  of the next Rail Recovery Action Group meeting.
        1063.    Will that be before Christmas or after Christmas?
        (Lord Macdonald of Tradeston)  It will be this week.
        1064.    I am sure we will be delighted to hear the results.  Of
  course you will tell us?
        (Lord Macdonald of Tradeston)  I shall indeed.
        1065.    Could I say one thing to you in passing.  This Committee is
  very concerned about not just the future of transport in this country but that
  the passengers should receive the highest, the most comfortable, and the
  safest form of transport.  We believe this is a Government that is investing
  for the first time for many, many, many years in a way that will make that
  possible, but it is absolutely vital to us to know that there are not people
  benefiting from the public purse without performing their duties responsibly,
  sanely and, in the ultimate, to the comfort of their passengers.  May I ask
  you to keep that very much in mind not only when you come to see us but when
  you go to one of these many working groups.  Finally could you tell us why the
  aviation consultation document was given to everybody except the Transport
        (Lord Macdonald of Tradeston)  Madam Chairman, I think it is being
  published today and I hope it is on its way to you.
        1066.    Perhaps, my Lord, you would enter every member of this
  Committee as a member of the press and then we can ensure we get copies of
  documents coming from your Department in the future. 
        (Lord Macdonald of Tradeston)  I shall certainly take that on board,
  Madam Chairman.
        Chairman:   How kind.  Thank you very much for coming.