Examination of Witnesses (Questions 20-39)|
WEDNESDAY 10 JULY 2002
20. For the whole of 2001?
(Mr Woodcock) Yes.
21. And if the figures have gone up, which has
basically brought us up to date today, you would expect that to
(Mr Woodcock) We would. One of the difficulties of
it is that we do not know until the asylum seekers come out of
the system what our liabilities are. As there are more people
being caught the suggestion is that ultimately we will pay more,
which is further damage to our business.
22. Have you a calculation of how much lorry
movements have increased? Presumably freight has gone from rail
(Mr Smith) We believe that 70,000 additional lorry
journeys, certainly in Kent, have been on the roads, on motorways
and on the highways and byways. They will disperse further north
but it will still be 70,000 lorry journeys.
23. Are you surprised that it has taken the
Commission this long to come forward with the court action, bearing
in mind the disruption that has taken place since November?
(Mr Smith) The Commission have expressed mild interest
since November, like a lot of other parties in this process. They
only took an interest when we lodged the petition with the European
Parliament and the Petitions Committee, led by British Members
of the European Parliament from all parties, gave the Commission
such a thorough roasting that they actually woke up and took notice.
24. What about the damage caused to containers
by the illegal immigrants? How significant is that?
(Mr Smith) It is significant both in terms of the
damage to the fabric and the factand I beg the Committee's
pardonthat asylum seekers will regularly soil the inside
of containers because they could be in them for between 12 and
36 hours so that not only destroys the fabric of the containers
but destroys the goods as well. I will ask my colleague, Mr Woodcock,
to go into the detail of that.
(Mr Woodcock) So far this year it is about 10% of
the total number of units that we have transported that have been
25. Ten% of the total number of units that are
transported. Do you have a round figure?
(Mr Woodcock) It is broadly 1,100 up to the end of
June because we are running at a much lower level because the
service is at a lower level. That represents the physical damage
which has to be repaired, but also the disruption to the transport.
In a lot of the containers will be goods for supermarkets, DIY
shops. Once the goods arrive they cannot be used.
(Mr Blencowe) The actual damage to the product is
doing far more damage to customer confidence than the delays because
they can live with delays; they can build them into the supply
chain. What they cannot live with is 20 tonnes of pasta arriving
from Italy that has to be scrapped because they cannot sell it
so they have to get some more. That is doing far more damage.
26. What can you do to make access to the containers
(Mr Woodcock) There are several measures that can
take place which includes making sure that terminals that the
containers are loaded in are secure, trying to avoid delays in
transit. The main problem we have had this year has been caused
by the intrusion into the site in Calais Fréthun.
(Mr Smith) But in terms of the containers themselves
a lot of the containers are curtain-sided. That is the mode of
preference for many European customers. It is not too difficult
to slash a way into a container with knives and weapons that asylum
seekers will carry. Again, I repeat my concern about the security
of our staff. There are all-metal containers and asylum seekers
have been found with bolt cutters breaking seals, and in cases
where organised crime is involved those seals are replaced and
the asylum seekers are sealed inside all-metal containers. I fear
that we will see a repeat of that awful incident last year when
the Chinese citizens were found suffocated in a road vehicle.
In our case they could be sealed in and it would be impossible
to know that they were there because, to all intents and purposes,
because the seals had not been broken it was a secure container.
(Mr Blencowe) The British Government, in the form
of the transport security people, impose on us the 1994 Channel
Tunnel Security Act which is very exacting on security measures
on the UK site. They regularly spot-check us and we have to conform
and spend a lot of money securing our international terminals.
I would like to know if that regulation is applicable to the continent
and, if not, why not.
27. Who do you think should be responsible for
solving the problem of access through containers?
(Mr Smith) Initially a customer has to ensure that
their premises are secure and that the containers that they use
are secure from entry from asylum seekers, but we are not going
to single-handedly change the preferred method of operation of
curtain-sided containers throughout western Europe. Therefore
I think our attention should be much more focused on the security
at the site than the security of the container itself. If asylum
seekers cannot get at the container then however it is constructed
and made will not be a problem.
(Mr Blencowe) The curtain-sided containers that they
generally get into, because the continent operates slightly different
ways of loading products into boxes, they do not always have loading
bays similar to what we operate in this country. They are loaded
from the side, the top, so curtain-sided offers a great degree
of flexibility, so we will never move away from it. We need to
secure points of entry on the continent to stop them getting in.
We can do it over here; we should be able to do it over there.
28. Why is it not happening over there?
(Mr Blencowe) Our security measures are imposed on
us by our internal security within the Government. It needs similar
security levelsthe fencing, the cameras, the spot-checks
that we have to do. It should be the same over there.
(Mr Smith) The 1994 Channel Tunnel Security Act was
aimed at the primary problem of unwanted persons getting into
the tunnel from the UK end and, as a result, all rail freight
facilities are surrounded by very high, very secure, metal palisade
fencing and have cameras and infra-red equipment to protect the
29. Who pays for that, Mr Smith?
(Mr Smith) We paid for that. The British Railways
Board paid initially when the international business was owned
by British Rail. We have to pay over three million pounds a year
to maintain that security. The view of countries in continental
Europe is somewhat more relaxed. There is not the equivalent of
the Channel Tunnel Security Act and therefore terminals and yards
that handle international traffic do not have anything like the
kind of security that we are obliged to have in the United Kingdom.
30. Are you saying that the French Government
should do more?
(Mr Smith) I think the French Government and the French
authorities have responsibility for the security of sites in France.
We have argued that the French railways have some responsibility,
which they have taken on in putting up fencing. But fencing is
not the only answer. As we have found, even the toughest fencing
can be broken down eventually. It is absolutely essential that
there are security forces with the powers of arrest available
at sites, so it is not just an internal security force but is
actually policing in France, the gendarmerie or even the special
policing squads that are allocated to the Eurotunnel site.
31. Could I ask you about the situation with
France, given that SNCF operate on this same route? You have a
whole variety of concerns ranging from loss of business to security
of staff. Are they suffering the same?
(Mr Smith) Yes, because, although we are not actually
allied in commercial terms, essentially a train that we haul through
the tunnel to Calais will be taken up by SNCF and taken through
France and vice versa, the French will bring the train through
the tunnel to Folkestone and we will take it over, so we work
very closely with them. The problems that we have, they have.
The losses that we have, they have. I think the French railways
share our concerns that they are not able to market what was a
successful and growing freight link. The French railways are very
much in this with us.
32. There are rumours around that the French
are trying to let this prolong itself in order to take over the
(Mr Smith) I do not believe that is the case. If the
French wanted to take over the business there are probably somewhat
quicker and less public methods of doing it. No; I believe in
this case that the French authorities have perhaps not agreed
with the French railways. I think there have been problems between
what the Transport Ministry wanted in France and what the Home
Office in France wantedshades of what we find over hereand
the French railways sometimes found themselves in the middle of
33. Do you feel that the Transport Minister
in France has been supportive even if they may not have been getting
the support they wanted from there?
(Mr Smith) They have become increasingly supportive
and colleagues of ours have met the recently appointed French
Transport Minister who is appearing to get a grip of the situation.
The fence is being built. Barbed wire has been purchased. As I
have said before, the previous fence might look okay in your garden.
The fence that is going up now I think would probably overshadow
the garden a bit. The French Transport Ministry have been very
supportive. The French Interior Ministry, who deploy the gendarmerie,
have taken a little while to come round, perhaps because they
have seen this as part of a somewhat wider issue relating to immigration
policy and asylum seekers, a subject on which we choose not to
comment. There are many other people who will.
34. Can I take you to the question of track
access charges and talk about track access charges through the
tunnel? Clearly they are a very significant part of your business.
What do you believe the consequences would be on your business
if we started to see modifications to track access charges as
a result of an interim review? My concern is that you may find
yourselves faced with track access charges against which you are
not protected and that makes the situation worse.
(Mr Smith) That would be a concern of mine as well,
but fortunately, in the small print of the Rail Regulator's final
conclusions on the freight track access charges, he stated in
print that any interim review of Railtrack's income, be it related
to Hatfield or any other issue, would only impact on the passenger
business. It may impact on the structure of freight charges but
it would not affect the overall level. We take that written assurance
from the Regulator's office that any interim review of track charges
as a whole will not impact on the freight business. Clearly, if
by some misfortune they did, then yes, that would be a further
burden that we would struggle to bear.
35. But you do not have any guarantees to that
effect. You only have the word of the current Regulator.
(Mr Smith) I believe something written in a document
published by an independent Rail Regulator is something I am willing
to regard as a fairly firm guarantee.
36. Could you tell me how potentially profitable
is this activity?
(Mr Smith) I will start and let Steve carry on. When
this business was operated by British Rail it was not profitable,
in part because of the charges levied by Eurotunnel. We have been
able to turn it around. We have been able to introduce more efficient
working practices, greater productivity and as a result the business
is now worth doing. As we are a private sector company not a public
company, I am not going to go into the detail. What is so good
about this business is its massive potential. At the moment there
are 60 million tonnes plus moving between the United Kingdom and
western Europe and vice versa by shuttle, by ferry and by rail.
At our normal level of service we are moving three million tonnes.
We are currently moving 1.4 million tonnes. There is huge potential
in this business that we wish to take advantage of and it is my
view that when service quality is restored it will be possible
to move traffic with high yields and higher returns. At the moment
the only people using Channel Tunnel freight trains are customers
who do not mind whether the traffic arrives next week or next
month. Not surprisingly, they are not willing to pay that much
to use the service.
(Mr Blencowe) Obviously we are on the receiving end
of the freight operating the terminals that offload the freight.
Quite honestly, at this point in time it makes no commercial sense
whatsoever. The level of investment that is required, the contractual
commitment from the railway industry to the private terminals,
are non-existent, so if you were going to do it it does not make
any commercial sense. It makes a lot of sense to our customers
for their strategy; it makes a lot of sense to us for our strategies,
and this is the reason why the private companies are sticking
at it. However, if you look through the SRA strategy, it calls
for a lot of private investment in terminals and the interchanges.
Quite honestly, at this point in time the commercial sense is
just not there.
37. So as far as EWS is concerned you do not
really need all that much money from the state in some form to
relaunch the business because potentially it is pretty profitable,
is it not? If you got the service back toa reliable service surely
you should be putting the investment in to attract people back.
(Mr Smith) We have put significant investment into
this business in terms of locomotives, wagons, control centres
and systems. The rail freight industry overall has invested a
billion and EWS £750 million in all of our activities. The
problem we face is that in the last 10 months we have lost over
£10 million in revenue and that is £10 million in profit
because we have kept the resources on the books. What we are asking
for is essentially a helping hand in the same way that the SRA
gave the passenger business post-Hatfield to launch a marketing
campaign to get the service relaunched and to enable us to get
over the transition, over the next12-18 months, 15 or 18 trains
and, hopefully, because we all want to achieve growth, significantly
more. We have put a lot of investment in. We have so far taken
the losses on the chin.
38. What about containers? Are they roughly
in balance, the number of full ones going out with the full ones
coming back in, or is there an imbalance?
(Mr Smith) There is an imbalance in that there is
much more traffic imported by rail than is exported. That risk
is taken by the shipper essentially. We just provide the train,
Tibbett & Britten will provide the terminal service, but yes,
there is an imbalance in trade.
(Mr Blencowe) The majority of the imbalance is caused
by the amount of non-UK hauliers that are bringing product over
and taking the exports back for the cost of a tank of fuel, to
put it in its bluntest terms, so the export market is driven down
by the amount of non-UK hauliers that are currently operating
in the UK, arriving on a Monday, working with a tank of cheap
diesel for the week and then going back on a Friday for the cost
of the diesel to get home.
39. You put your faith in solving the security
of sites. Is there not a danger that if those sites become secure
some of the gangs are pretty determined and it will merely be
that people are put into the containers at an earlier stage, putting
your business at risk still and lives of individuals even more
(Mr Smith) Your concerns are very valid. Unappreciated
by many, but I think it has been discussed at this Committee before,
this problem actually started about two years ago when criminal
gangs were putting asylum seekers into containers at terminals
in Italy, particularly in the Milan area. By improving security
in that area the number of people getting put in there has reduced
but yes, the risk of either being put in further back in the journey
or even further back in France at less secure yards is still there.
It is the sort of business where you have to tackle one issue
at a time and then ensure that there is proper searching of trains
when possible. We already search the trains in the United Kingdom
because we have an obligation to do so, and also we do not want
to run unsafe freight services with people on them. Our argument
is that customers, terminal operators and rail operators should
be applying the same level of search and security on continental
Chairman: On that note, Mr Smith, can I say
thank to you and to your troops. You have been very helpful.