Examination of witnesses (Question Numbers
TUESDAY 1 MAY
140. In effect what you are saying to us is
all that has gone before is no use to you at the present time
because of the major changes that you have set out?
(Sir Alastair Morton) I think no use is altogether
too far. We are able to proceed with some things and not able
to proceed with others pending the resolution of the queries we
have been discussing about long-term funding.
141. What is your view of the concordat between
HMG and Railtrack?
(Sir Alastair Morton) Which document is that?
(Mr Grant) The Statement of Principles.
(Sir Alastair Morton) The 2 April document? I think
it makes the best of a pretty bad job. I would like to congratulate
my colleague, Mr Grant, on the leading role he played in putting
it together out of some very disparate and disconnected pieces.
142. We are delighted to pay tribute to Mr Grant
and that is all very pleasant, but what is your view of a Public
Interest Director for Railtrack?
(Sir Alastair Morton) I have been called many things
in my life but I have never denied the word "capitalist",
although I do believe that capital can work in the public interestsame
143. Self-knowledge is a wonderful thing, Sir
(Sir Alastair Morton) The Public Interest Director
has a duty to keep certain matters before the board but his fiduciary
duty is to the shareholders known as the company and to the stakeholders,
such as users, of the company's product, railways. The Public
Interest Director has no authority, no position, no ability, to
force upon Railtrack conduct that his colleagues on the board
are unwilling to adopt, but he has the duty and the ability to
keep the subject in front of them.
144. So what influence does the Treasury have
over the franchise replacement programme?
(Sir Alastair Morton) They are concerned that we should
get value for money. They are concerned, as they always are throughout
history, to defer away from the current year and the next year
whatever it is going to cost; it is an automatic reaction on their
part. They are aware that this is a very costly area of Government
policy, like health and schools perhaps, and, therefore, they
are alert to any sign that there may be, as it were, the development
of uncontrolled or uncontrollable costs.
145. So they have already approached you about
the difficulties that have arisen because of Railtrack backing
(Sir Alastair Morton) I do not think they got a chance
to approach us before we approached them.
146. Ah, mutual speed, how endearing. Can I
ask you about the whole question of the franchises. What has apparently
happened is that some of the franchises that should have been
granted were opened, there was discussion, and then for one reason
or another nothing further has happened. In the first batch Chiltern
seems to have been preferred bidder last May. There is East Coast,
South Central. In the second batch we have got TransPennine, we
have got the whole business of Central, which has already been
mentioned. What is happening, Mr Grant? Is it that you are going
ahead with what you perceived to be the simpler franchises without
tackling the ones like the East Coast Main Line? Is it that you
decided that you could grant them for 20 years irrespective of
what the SRA is going to want in the long-term, or is it simply
that you are following the dictat that we have heard this afternoon
from Sir Alastair that whatever happens you will have to accept
that certain changes are a given and, therefore, must be accepted
in whatever you put forward as part of the franchise?
(Mr Grant) I can certainly go through the list, Chairman.
On the Chiltern front, it was felt that
147. Can we start first with the principle.
Are you going for those franchises which are straight forward
and, if that is not the case, why is it that something like the
East Coast Main Line has been started, stopped and started again?
(Mr Grant) We are not just going for the ones that
are the simplest.
148. You have an overall plan so you know exactly
where you want these franchises to fit otherwise you would not
be talking to people about 20 year franchises.
(Mr Grant) We took the view that there were a certain
number of franchises when we came into existence that needed to
be done more immediately than others and those were to deal with
149. Is that batch one that you are talking
(Mr Grant) Overcrowding was certainly a South Central
issue and East Coast Main Line was in batch one, so we had an
InterCity TOC and we had a South London TOC where overcrowding
was a major problem. On Chiltern it was an easy one to cut our
teeth on and there were things that were needed on Chiltern as
well. That was batch one. On batch two we took South West Trains,
which was an overcrowding issue,
150. You will understand, Mr Grant, that for
most people if Stagecoach is the answer it must have been a very
(Mr Grant) The Stagecoach bid on the criteria put
forward was the best bid and was value for money. On the second
part of batch two, Central we suspended on 7 February for the
reasons we stated.
151. And on the East Coast?
(Mr Grant) On the East Coast, we have obviously gone
through some of the history, that we did lay our preferred bidder
to Ministers on 8 December, the position of Railtrack changed
in that intervening period and we are now reviewing the proposals
put forward to us again.
152. So, in other words you have not reached
any conclusions on that at all simply because of the changes that
took place in the interim?
(Mr Grant) That is one of the major reasons, yes.
153. On some of the others, Wales and Borders
and WessexAre there problems with Wessex?
(Mr Grant) On the Wessex franchise we have yet to
go to shortlisted parties but we will be doing that in the near
154. It is difficult for the Committee to work
out exactly how you are deciding, firstly, your priorities and,
secondly, what you are asking of your preferred bidders.
(Sir Alastair Morton) Can I attempt a philosophical
rather than a detailed answer?
155. Of course, Sir Alastair, I am always delighted
to hear your philosophies.
(Sir Alastair Morton) We set out in a process back
in 1999 to consult very widely with users, with community leaders,
be they local authorities, regional planning agencies or whatever,
served by franchises with owners and operators of franchises,
a long list of stakeholders in other words, as to what they foresaw
themselves wanting by way of rail services. We got answers and
we got no answers. In other words, it was not an overwhelming
response but there were a lot of responses. Rail passenger users
were a very important part of that consultation. At the end of
it we devised an initial list of which ones we would start with,
partly for practical reasonswe only have the resources
to do so many of these at onceand we embarked on it. We
have taken on more and more and there are a number in progress
now. What worries people is that they seem to spend a long time
emerging. If you take Chilternthis is getting away from
philosophy nowwe at no stage said "we, sitting around
a table in our offices, know exactly what every franchise should
look like down to the last detail, including the commuter car
parks", we said "We want to hear what people think they
want. We want to hear what bidders believe they can make money
156. This degree of sensitivity is welcomed
by everybody but you will understand that when people see a franchise
is awarded to Stagecoach they may find a little gap between the
philosophy and the reality.
(Sir Alastair Morton) The competitor that finished
closest to Stagecoach, and we said so at the time, was the First
Group in partnership with Dutch State Railways. Tempting as it
was to introduce Dutch State Railways into the British system
157. Yes, it would be nice to have somebody
running railways who knows about it.
(Sir Alastair Morton)we nevertheless had to
compare the bids. We also had to ensure ourselves, as we did,
that we were in a position to enforce the performance of those
bids, which we are; we were not under the old franchises. That
is one of the strongest reasons for having new franchises. Stagecoach
have made us promises, which they have started to deliver already
with the new rolling stock, that they are going to deliver on
or they are going to suffer quite severely.
158. On this question of franchises, there are
other areas of the country other than the south, and I am thinking
now of the northern region and the Yorkshire region that you touched
on in the question of the TransPennine Express. When can we expect
to have some decision on the franchise applying to the northern
(Sir Alastair Morton) The decision is hardest to forecast.
It will be launched, because it has not been launched yet, after
we have a general accord, a meeting of the minds, with the Passenger
Transport Executives and authorities through whose area it goes,
and those are Mersey, Greater Manchester, West Yorkshire, South
Yorkshire and Tyne & Wear. They all have to sign off on that
franchise. We have said we want to understand each other and we
are not going to have a 1997 situation. My saying that, as you
probably know, provoked a certain amount of uproar because I said
it in Birmingham. I was quite pleased with the uproar, frankly,
because it proved that I had touched a nerve worth touching. Since
then the reactions have been very positive, everybody is saying
to everybody else, including us, "we are all going to work
together, aren't we?" Mike had a meeting with most of these
people just the other night and we intend to press on with this.
When we have a meeting of the minds about who is going to do what
within the franchises, then we will go ahead and launch invitations
for the northern franchiseyour questionand the process
will take the same course as other franchises are currently taking.
159. I understand that all the authorities that
you have referred to, passenger franchises, have all published
their local transport plans which would obviously involve some
of the strategy that you have been referring to. My concern is
that we do have overcrowding in our area and when we approach
the operators they are saying "before we can invest in new
stock or before we enter into new contracts, we want to know where
we stand with the franchises", so it is a vicious circle.
The question is when can we expect to get out of that vicious
circle? I know you are saying that these authorities have got
to be involved but when are we going to put some rockets behind
(Sir Alastair Morton) The rocket has been put, that
was my speech in Birmingham, and I got reactions in a most satisfactory
fashion. Bricks they may have been, but the fact they all stirred
themselves to focus on throwing the bricks was a good thing.