Examination of Witnesses (Questions 640
WEDNESDAY 7 NOVEMBER 2001
640. Would you suggest that Sir Alastair Morton
was mistaken in his belief that improvements are not possible
under the exiting franchises and in particular the East Coast
Main Line where you have just said you are waiting for a submission
from them? Is it possible to do that under existing franchises
or is Sir Alastair dreaming?
(Mr Grant) It depends which franchise you look at.
Clearly with Midland Main Line there was a positive subsidy available
for re-investment and that is available to be re-used on the franchise.
Where franchises and subsidies are falling away and they may be
in loss, then it is more difficult. If you were to ask for a two-year
extension and apply more funds to it, then a two-year extension
641. Can we go for the three main targets you
referred to earlier, the 50 per cent increase in passenger miles,
80 per cent increase in freight and the reduction in overcrowding,
with the short-term franchises?
(Mr Grant) In the preparation of the strategic plan
we have these three time periods and they feed into each other.
The answer is yes. It could be short-term franchises, it could
be additional funds in the short term leading into the ten-year
642. Will these short franchises have no effect
on the ten-year plan?
(Mr Grant) They should be positive towards the ten-year
643. Coming back to your original statement
and the first question the Chairman asked you, on a scale of ten,
how secure would you say your job is at the moment?
(Mr Grant) I do not think I could put it on a scale
of ten. Clearly a new Chairman coming in will want to review all
of the staff who work for him. We have not had the discussion
as yet. He has not started.
644. On the basis of the plans there are, and
your former Chairman has made a suggestion that it would be a
good idea to have vertical integration in Scotland, what are the
views of the Strategic Rail Authority and what is possibly going
to be in the review?
(Mr Grant) Vertical integration is an important topic
to be considered. I do not believe that vertical integration is
the answer for the network. We have had lots of discussions with
train operating companies and each of them will have the solution
to their particular problem. None of them has the solution for
the network. Vertical integration may work in some places and
if we believed it was beneficial and we talked to the Scottish
Executive and they believed it as well, then it might work in
Scotland. I do not think it will work for the West Coast Main
Line, I do not think it will work for the East Coast Main Line,
but at the same time I do believe that the infrastructure operator
has to be influenced by the train operating companies. That does
not necessarily mean the same ownership.
645. In terms of the streamlining of the industry
and in particular the streamlining of the regulation which surrounds
the industry, do you not foresee a possibility that the regulator
and Strategic Rail Authority will become as one?
(Mr Grant) That is certainly a possibility. At the
same time there needs to be an independent body to see fair play,
competition and to give reassurance to the private sector if they
are going to invest.
646. In real terms what is obvious, is it not,
is that if that were to happen you would be out of a job?
(Mr Grant) That is a possibility.
647. Do you think that is going to be to the
advantage or the disadvantage of the industry?
(Mr Grant) Me being out of a job?
Mr Donohoe: Either if you want to answer both.
648. If you take over all the powers of the
Regulator where is the line going to be drawn? It is all very
well saying of course we need someone who is independent, of course
we need some machinery. At the moment you have that independence
through the Regulator. You are being asked whether you are serious
when you say that the SRA want to take over some of those powers
and where would the line be drawn?
(Mr Grant) I am not saying that we want to take over
those powers. I do not think enough work has been done on the
whole industry structure to see where regulation fits against
whatever comes out of administration, against the funding position.
You cannot take any one of these things on its own and the work
is just beginning to put all these things together to make sure
that they do hang together. An important role for the SRA going
forward is consultation with the industry and corralling the industry's
views and making sure that those views are fed into the structure.
The worst thing to happen would be that if the same thing comes
out of administration and we have all the same problems, we will
have moved absolutely nowhere forward. We have to make sure that
the views of the industry are co-ordinated into any plan going
649. What section of the industry is going to
have the loudest voice in that sense? Is it going to be the train
operating companies? Is it going to be the rolling stock companies?
Who is going to have the strongest voice? Is it going to be your
own organisation? Is it going to be the Regulator or is it going
to be the Government? Who at the end of all this is going to make
it possible instead of passengers being packed like sardines into
trains in the early morning and dirty trains running over the
day? Who is going to bring about that change which means that
for the first time in a generation you can see the light at the
end of the tunnel?
(Mr Grant) That is clearly the role for the Strategic
Rail Authority. It is not the only part of it because where we
are today the administrator has to be convinced that whatever
comes out of administration is the best thing and so does the
Secretary of State. It is the whole picture which needs to be
fully detailed to make sure it works.
650. How long do you believe Railtrack should
remain under the administrator?
(Mr Grant) I know lots of people have talked about
three to six months. What I would not want to see is that this
is rushed through and we lose the opportunity to put the industry
structure right. There will be lots of pressure to get it done
quickly but we must make sure that whatever comes out of administration
does improve the passenger and freight figures.
651. You think six to nine months is perhaps
too quick, if I can pick up on what you are saying. What do you
believe to be a reasonable period for Railtrack to be under administration?
(Mr Grant) From my very brief involvement, which is
two weeks, I think six months is going to be very difficult.
652. What do you believe should be the period?
(Mr Grant) The absolute minimum but I am telling you
I do not know what the time should be. It is very hard to judge
at the moment but six months looks tough and we want it to be
done as quickly as possible to try to get some stability back
into the industry.
653. We have heard from both you and Sir Alastair
that you have not been involved in the preparations for Railtrack
administration and beyond. Do you in your professional judgement,
given the fact that you are integrally involved in the industry
and given what you have seen since the administration order, believe
that the Government now has a coherent strategy for the future
of the industry?
(Mr Grant) The strategic plan will lay out the way
forward on a number of issues. Clearly there is a lot of work
to do to make sure that whatever comes out of administration is
fit for purpose.
654. That is not quite an answer. Do you believe
there is a coherent strategy there now or are we some way away
(Mr Grant) There is a lot of work to be done to make
sure our strategic plan can be delivered and that includes the
655. Looking at the ten-year plan, may I have
one point of clarification? Is it true that the Government instructed
you in the summer to downgrade the target of an 80 per cent increase
in freight traffic from a specific figure to an overall ambition
to increase the proportion of freight on rail?
(Mr Grant) I believe that the instructions and guidance
still say 50 per cent growth in passengers, 80 per cent growth
in freight and deal with the overcrowding.
(Mr Jenner) I am speaking from memory but I think
the draft instructions and guidance on the freight target replicate
exactly what was said in the ten-year plan.
656. Do you believe that it will be possible
to deliver on the network we have with the funding which is likely
to be available within that ten-year period to meet those two
objectives, the 80 per cent for freight and 50 per cent for passengers
(Mr Grant) On the network we have, no. If we enhance
the network, which is obviously the plan of the strategic plan,
there is a number of variables in preparation of the plan. We
have looked at different scenarios of projects, we have looked
at the franchising proposition, we have looked at macro economics
which by itself can move five or ten per cent. We shall provide
a range and certainly one of those ranges will say that we think
we can just about achieve the ten-year plan.
657. Based on your professional judgement today,
would you advise the Minister to stand up in the House of Commons
and say we will meet those targets?
(Mr Grant) I would say to him that depending what
assumptions you want to make it is possible to achieve the ten-year
Chairman: Get him to quote Ernest Bevin, "As
to that we'll have to think about it".
658. May I talk a bit about the franchises?
The South Central and South West Trains' franchises where you
have two preferred bidders. Is it your expectation that you will
deliver the completed agreements for those 20-year franchises
to time? In the case of South Central the target is next April;
I am not sure what the exact date was for South West. Will those
two 20-year franchises be let according to the originally agreed
(Mr Grant) That is going to be difficult. What I can
say about both of those franchises is that we are moving them
forward to meet the output dates which were in the heads of agreement.
In terms of both South Central and South West Trains, we are trying
to contractualise the benefits, the Mark 1 rolling stock for example,
in the current franchise. We are also looking at how we can help
the preferred bidders to move the design forward. In South Central
they have found it very difficult with the stance Railtrack took
on moving enhancements forward. I am not sure we shall sign the
agreements to the same date, but what we are doing is making sure
that whilst this administration process is in place, we do keep
the projects moving.
659. One assumes they will not be able or willing
to sign up to significant investments while the negotiations carry
on. How much of a delay will there be in your judgement beyond
the date when the agreements should have been signed to the point
where they will be signed.
(Mr Grant) They will sign up to significant investments
in terms of Mark 1 rolling stock, which is obviously the most