Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 380 - 399)



  380. Can you give us an example of what those issues may be? It is important the public know who is running our railway infrastructure.
  (Mr Bloom) Absolutely.

  381. Can you give me some examples of what you are responsible for and what Mr Marshall is responsible for?
  (Mr Bloom) Absolutely. Mr Marshall's team is responsible for running the day to day operations of the railway network. As a result of administration, examples would be issues like contractors, for example, who might be concerned as to the effect the administration is going to have on Railtrack's ability to continue to buy services from them, and those are representations which are made, for example, by the administration team as opposed to necessarily made by the Railtrack team.

  382. As a lay person it is difficult for me to understand how a company can maintain and operate our railway infrastructure when you are involved and deciding issues of a contractual nature with sub-contractors which seems to me to be extremely important and Mr Marshall and his team gets on with the rest of it?
  (Mr Bloom) I gave the contractors as an example. It has not been done in isolation. What happens is that it is a joint team effectively of administrator and the Railtrack team. If we are faced, for example, with a particular major contractor that has got issues, some of those issues would be dealt with by the management team, some of those issues would be dealt with by the administration team and we are talking to one another and meeting one another all the time. So we are not operating in two separate vacuums. I think you should take some comfort that that relationship is working very well. In fact, Mr Marshall has been kind enough to notify the staff that the relationship is working very well at the senior level.
  (Mr Marshall) Yes. If I maybe could be allowed to something. I would offer some comfort. The administrator and his team have not been intrusive. They have got involved but not in a way that confuses the running of the railway. That is not amongst my list of concerns at all. My principal concern in the area that you are clearly probing is that if the period of uncertainty is not brought to an end very quickly, and if the Government does not work out what it wants to do with the railway, our ability to retain and attract the quality skills we are crying out for, not least in engineering, will be severely impaired.

  383. My second question, very quickly, is about the West Coast Main Line. Mr Marshall, I was privileged to be on this Committee and equally privileged to ask you the question, you will recall. The question was if the Government did not agree to pay Railtrack £4 billion in grant, free, gratis, would West Coast Main Line go ahead? Your answer—it is on record—was no, it would not. Now, given that we have got estimates of the West Coast Main Line that vary from 6.3 to 7 billion, I have seen 10 billion, I would like to ask two questions. One, what is the estimated cost today of the West Coast Main Line improvement and given that the costs have escalated, whichever figure you come down on, is it going to go ahead in administration and, if so, when?
  (Mr Marshall) Perhaps if I could address the cost issues and the latest position and then obviously the administrators will comment on future funding.


  384. Yes, perhaps you can talk about your estimates.
  (Mr Marshall) We advised the market, along with many other matters, in our full results in May that the latest estimate, the updated estimate, for West Coast was £6.3 billion. We also said that there were some significant commercial issues that we needed to address with our key customers, not least Virgin, and that they were matters that we needed to agree by negotiation. The update cost of the £6.3 billion has not changed or we would have advised the market accordingly. We were in the process, immediately in the run up to the 5th October and the Government's action, of discussing with Virgin and made some progress as to how we might vary the West Coast agreement to de-risk and control the cost because there were clearly significant cost risks that we had flagged. Indeed, we were due to present those jointly as options to the Department on Monday 8th October, clearly we never got the chance. Now that we are where we are, and subject to the administrator's comments on funding, clearly what we now need to do is work with customers, with the SRA, now they are permitted to be involved in the process, and see how we can take the project forward in a sensible way.

  Andrew Bennett: How much more money did you want when you went to the Department?


  385. Was that your final final estimate?
  (Mr Marshall) What we had was a £6.3 billion estimate but still the need to have sought to resolve those commercial risks on areas such as journey times, whether 140 mile an hour was the right solution or not. We had a package of options which we had made progress with Virgin on which we were due to jointly discuss with the Department on 8th October, we never got there. We have to pick that up now and take it forward.

Andrew Bennett

  386. What was the price tag on them?
  (Mr Marshall) There was not a price tag because what it was—and it is commercially confidential so forgive me for being deliberately slightly vague—was a package of things that would have included some compensation to customers who were impacted and it was a package of things which would have reduced certain specifications and adjusted certain journey times. That, if you will forgive me, is why there is not a number. It was a package of things to adjust the project.


  387. Just forgive me, what was your original estimate of that upgrade?
  (Mr Marshall) Originally because this—a very brief history—was a project conceived as part of the privatisation package—God help it—it was then adjusted by a new agreement that was signed in 1997.

  388. I think we remember how we got there, Mr Marshall, what was your original estimate?
  (Mr Marshall) I was going to come immediately on to that. The original estimate to my recall was of the order of £2.5 billion.

  389. And your last estimate?
  (Mr Marshall) The last estimate was £6.3.

  390. You believe that the package you were going to put to the Department was in itself negotiable, possibly upwards as well as downwards?
  (Mr Marshall) It was a package of measures that was not just a cost issue, it was adjusting outputs.

  391. The cost could have gone upwards or downwards?
  (Mr Marshall) It could have been either but net was unlikely to change.

Mr Stevenson

  392. The administrators have costs, what are your estimated costs?
  (Mr Rollings) We have been obviously looking through the company's costs to date and that assessment is still underway. The figure of £6.3 billion is a familiar one and that is the number that has come through the costs to date.


  393. Familiar in the sense we have heard it recently?
  (Mr Rollings) Familiar in the sense that, yes, it is the most recent cost level. There are, as Mr Marshall has said, clearly commercial risks attached to that because there are development levels at which these things are priced and this has been priced at a development level which is not, if you like, finally reached.

  394. It could just drift a little, could it, Mr Rollings?
  (Mr Rollings) I think it would be fair to say that there is scope. I think that is what Mr Marshall has acknowledged.

  395. There is scope for driving, yes, I think that we have taken on board.
  (Mr Marshall) As we set out in May.

  Chairman: Oh, yes, we remember your evidence, Mr Marshall. Indeed, we have committed it to heart.

Helen Jackson

  396. Mr Marshall, do you feel your normal direct style, as you put it, was actually a factor in the Government's patience running out with Railtrack earlier this month?
  (Mr Harding) I think Mr Marshall's style was not a factor in that at all.

  397. Do you feel it is helpful now for you to be particularly public in your criticism of other aspects of the Government's administration in helping Railtrack to get through this difficult hiatus?
  (Mr Marshall) I am unashamedly, if I can be frank, wearing two hats. I am concerned, of course, at the way in which shareholders have been treated, and may I say 90 per cent of our employees is something that the Government one way or another will have to address. But, my second hat, and the one I am going to wear every single day for the next five and a half months, is I am desperately concerned that the company and the industry is able to hold itself together effectively while we have got the uncertainty. I am also concerned that the solutions that appear to be being set out by Government, sketchy as they are, are ill thought out and I do think it is appropriate if I think that to say it.

  398. Can I ask a question of Mr Bloom. I hark back to the time when Yorkshire Water failed to deliver its public responsibility by not supplying the public in Yorkshire with water and after a public inquiry undertaken by Professor Uff they only came back round to create a company that actually addressed the problem with a completely new board and management. Do you feel that in the long term that is going to be necessary in order to make any progress in New Track/Railtrack, whatever it is called in the future?
  (Mr Bloom) I think Railtrack and its successor company are clearly only part of the solution here. I think what I would have said in my closing remarks but I will say it now is that I think in a strange way administration actually presents an opportunity to get Railtrack positioned right going forward and in the context of both the regulatory environment and the structure in the industry which a lot of people have commented on in the past months and years indeed. I think so far as the management team is concerned, we already know we have to replace Steve Marshall as Chief Executive, so we know we have got one major change to make there as well. I think management teams constantly evolve over time and whatever the structure is going forward it will have to have a strong and robust management team to take it forward.

  Chairman: I think the question was not about individual executives, it was about the board of directors.

Helen Jackson

  399. It was about public confidence which has been shattered, basically. There is generally public approval of the Government having acted to do something about that. It does seem to me that your job is to help restore public confidence. How do you propose to do that?
  (Mr Bloom) We are working very hard indeed and with the existing management team to keep business as usual so far as the travelling public is concerned. Our commitment to safety and our commitment to smooth running of the operation is absolutely paramount. It is the number one priority for the administrators. Indeed, the transfer, albeit absolutely critical to get into good ownership going forward, is secondary. The paramount obligation is to keep things running as smoothly, safely and properly as we can. That is our absolute commitment.

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