Examination of witnesses (Question Numbers
TUESDAY 1 MAY
80. I think you are joining a long list.
(Sir Alastair Morton) May I say, I think the line
of route of the Central Railway may turn out to be very valuable
to this country because we are short of capacity heading north
out of London and south into London. What I find extremely difficult
to be enthusiastic aboutas Mr Gritten knows I have great
admiration for Mr Gritten's stamina but not necessarily for his
projectis the fact he is going to take the railway either
under or around London, currently around, and join up with, I
am not quite sure exactly where, the lines of the Channel Tunnel
and achieve in France what is beyond the wit of EWS and others,
which is unfettered access to freight routes in France, where
there seems to be a lack of capacity.
81. I am glad you picked on some of the cynical
things I was going to ask you. One of other interesting things
is essentially the central railway scheme is not linked to the
National Rail network. Do you see that as a difficulty?
(Sir Alastair Morton) It does not have to be.
82. Would you prefer it to be.
(Sir Alastair Morton) I think having a single, integrated
network is preferable. Railtrack is going to operate phase one
of the Channel Tunnel Rail Link and the recent announcement about
phase two made it pretty clear that Railtrack will operate phase
two as well, operate not own.
83. Many of us are very cynical about the financial
projections and the financial projected costs of Central Railway,
would you join us?
(Sir Alastair Morton) I do not think I will express
a view because I do not think I have seen them recently. I am
talking about practicality when I express scepticism.
84. Strategy, I would like to seek your help
and clarification on three particular areas of strategy. You mentioned
the strategy for the West Midlands, yes we did see that on the
television, it was very interesting, but the other important issue
for the West Midlands is the West Coast Main Line, could you confirm
that the £4 billion committed to Railtrack over the next
five years is coming out of the £7 billion railway modernisation
(Sir Alastair Morton) No, it is a grant sum available
in the Ten Year Plan of £4.5 billion, as published last summer,
and that is primarily those grants to the West Coast Main Line.
85. The anticipated costs for the West Coast
Main Line have been increased by Railtrack to £6.3 billion.
At the same time Railtrack are committed to find investment over
the next five years, and half of that is coming from the public
purse one way or another. What is your strategic approach to Railtrack
requesting more funds: (a) in the light of the increased costs
of West Coast Main Line and, (b) if they have difficulty raising
their share of the £8 billion investment.
(Sir Alastair Morton) If I may take the second, they
have abandoned ship on the 8 billion, they do not intend to put
any of it up.
86. I will come back to that.
(Sir Alastair Morton) This 8 billion is over and above
West Coast Main Line. West Coast Main Line was not part of that
8 billion. That is part of what has changed and has delayed our
ability to produce the plan.
87. We are talking about 12 billion, four billion
(Sir Alastair Morton) I think we were talk about a
lot more than 12.
88. 8 billion to Railtrack.
Chairman: Sir Alastair, you are going to have
time to communicate with Mr Grant because the Committee stands
The Committee suspended from 4.47 pm to 4.57
pm for a division in the House
89. That is a very interesting, the fact that
you say that Railtrack have walked away from the £8 billion,
where is that 8 billion going to come from in that event?
(Sir Alastair Morton) That is a very good question.
I am sorry to keep harping on about this. One of the reasons why
we take two steps forward and one step back from time to time
in our march towards a series of strategies that cover the network
as whole is questions like that. When the Ten Year Plan was published
at the end of July last year there was a statement that there
would be £63 billion, of which 29 would come from the public
purse via the SRA, including the four billion that you refer to,
and the RMF and other things. And 34 would come from the private
sector, including Railtrack. Railtrack going missing creates a
gap, a vacancy, as it were, and the question of where the private
sector investment will come from for rail is a question that now
has to be redeveloped around other methods of investment which
we are engaged on developing. The idea that you simply increase
the public purse if the private sector goes down is not automatic,
I am afraid. If it did go on for too long the Treasury at some
point would say, "This is back in the public sector now because
all of the money is coming from us", and that would change
all of the rules of the game and stop a strategic plan.
90. The figures that you are talking about are
way over your original budget. The Treasury have not said to you,
"Just a moment, before you proceed any further, where is
the money coming from?"
(Sir Alastair Morton) The Treasury are saying the
money is not there, except insofar as it has put the 29 billion
in the Ten Year Plan. Two things have developed since then: one
is the timing allocation of that into the next five years or the
second five years, and within the next five years into the first
two years that are the existing spending round, Spending Round
2000. The money was put in either at that time in one or other
and it was put either as capital or as resource funding. I am
sure you know all these terms far better than me.
(Sir Alastair Morton) The availability to us of funding
for the purposes that look to be necessary, particularly after
this defection, no longer fits all of this. It is going to have
to be rethought by the Government and we are confident they will
do that as we move towards the next spending round.
92. May I suggest, Sir Alastair, that is a fair
old hole in this strategy that has to be repaired.
(Sir Alastair Morton) Can I comment on that, because
I agree with you, if I may. The fair old hole is going to have
to be covered pretty largely from private sector sources, because
that is where it was coming from before, but in order to attract
neutral or independent third party private capital in large quantities
into the network, as opposed to Railtrack, whose business it is,
we are going to have to use public sector funds, our funding,
in innovative ways, which have been touched upon in the announcement,
to support and facilitate the entry of private sector capital
in sufficient quantities. The plans for the structures of this
have not yet been developed, this is a new departure.
93. I think we do agree it is very significant
information you are giving to the Committee and I do not think
we would underestimate what you are saying. Could I ask you a
further question about that to try to understand how the strategy
hangs together, given than it has had a very severe mauling, by
your own admission: that is that the four billion for the West
Coast Main Line was announced middle of last year, something like
that, approximately, your document on the strategic agenda was
published 1st March, the changes to Railtrack's involvement were
announced by the Secretary of State in April.
(Sir Alastair Morton) 1st April.
94. How does the granting of £4 billion
of public money, which you described, I clearly recollect, to
the Committee as a giftgift was your word, not minehow
does the granting of that enormous amount of money to Railtrack,
as a private monopoly funding, as it then was and still is, fit
in with the strategy that we now see of Railtrack withdrawing
from stations; Railtrack fading out of the scene of the East Coast
Main Line; Railtrack walking away from its £8 billion commitment?
Do you see the point I am getting at, a decision taken to grant
them four billion on one strategy and now we have, by your own
definition, Sir Alastair, a radically changed strategy, how do
the two hang together?
(Sir Alastair Morton) That is a good question. At
the time the four billion, and still, because it still applies,
was granted and under the instructions or the guidance of the
Rail Regulator, who accepted the definition of major investment
works on the West Coast Main Line as being renewals. The legislation
says that the Regulator must provide Railtrack, under certain
outlined conditions, the funding via the ability to charge sufficient
to cover its reasonable operation, maintenance and renewal costs
so if it is an efficient company it can make enough money out
of that to support its general business, at that time thought
to include enhancements. This was what the Regulator says is renewal
money, to renew the West Coast Main Line and, therefore, was not
optional money, was not an investment project reviewed by us and
decided by us. It was simply to be paid through the medium of
us, through our bank account to Railtrack, because Railtrack's
revenue consists of money flowing from us direct in grants or
indirectly through subsidies to operators which blend with their
farebox income and pay track access charges to Railtrack. We now
have a new situation. There has been no decision known to me to
pull back from the upgrade of the West Coast Main Line; therefore,
unless the definition were to cease to be renewal of the West
Coast Main Line we consider ourselves still bound, from where
we sit, by that obligation to pay 4 billion when the Regulator
stays it is due. You then get to-is that the best use of public
money? Which is where your question was headed, if I may say so.
95. And the strategy? I am seeking to understand
(Sir Alastair Morton) I have said already, and I will
confirm that this applies here too, that the use of taxpayers'
money, you might say including that four billion, but then you
have got the Regulator point, has to be positive, innovative and
I would say strategic, if I may. In other words, it has to be
used in alliance with, in conjunction with, private sector capital
from global capital markets to create the biggest possible investment
fund to pay for the huge bills of expanding the network, enhancing
it, and I would also say replacing it or renewing it, whichever
word you would like to use. What I am saying is it is not a very
efficient use of moneythis was what I had in mind when
I said "gift"to pay a pound of taxpayers' money
for one pound's worth of work, it is much more useful to pay a
pound of taxpayers' money, to link it up with two, three or four
pounds of private money to get whatever that is.
96. I think we all understand that and many
of us would support that, but I am still at a loss to understand
how the strategy hangs together when last July, or whenever it
was, granting £4 billion to Railtrack entirely of public
money as a grant, as a gift as you put it, and about ten months
later we are talking about a completely different strategy emerging,
not just marginal stuff. Out of the issues that you have raised,
of the eight billion that Railtrack were then committed to, and
they were very committed to it at that time, one could see the
logic of it hanging together even though there were some questions
about it. But now they have walked away from that eight billion
and now they are walking away from stations, they are walking
away from the East Coast Main Line and so on and it seems to me
we are talking about an entirely different situation. What I am
seeking to understand is how the granting of that four billion
ties in with the present day strategy?
(Sir Alastair Morton) It does not, it is part of the
West Coast Main Line upgrade strategy, which is a given. That
is not under discussion as to do or not to do, it is in progress,
it is a given. Therefore, that was committed last year, going
ahead from last year. I have criticised it, you are wondering
about it. But actually the real question is the eight billion
question, if I may call it that, which is looking forward at other
projects, starting with the East Coast Main Line. Where is the
money going to come from, and I have made my point about linking
up with public sector capital.
Mr Stevenson: In the interests of time can I
move on to the next area?
97. Before you do that, who is it that sets
the conditions of the application of public money?
(Sir Alastair Morton) At the end of the day the Treasury
in my experience.
98. What part do you play as the Strategic Rail
(Sir Alastair Morton) We are the paymaster for grants
to Railtrack and for our subsidies to train operating companies.
We actually handle the money. We receive it from the Treasury
and pay it to the appropriate parties. When we come to enhancement
of the network and various things that are our judgmentrail/passenger
partnership matters would be one examplethen we are the
parties who take decisions, subject always to certain limits that
are set out in public documents or in the legislation where we
have to get the Secretary of State's consent before we can
99. When would you get to the point, Sir Alastair,
that you would say to the Government "This is all just falling
apart. All of what was intended in the first place is not stacking
up and we really do feel that we are in a position where you would
be best to take the railway infrastructure back into public control"?
(Sir Alastair Morton) I do not think I personally,
starting there if I may as Chairman of SRA, would ever say that
last part. If you do so you place the entire expenditure under
the Treasury, where it was before, with the results that we are
trying to cope with.