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

Examination of Witnesses (Questions 640 - 659)



Mr O'Brien

  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 might work.

  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 period.

  642. Will these short franchises have no effect on the ten-year plan?
  (Mr Grant) They should be positive towards the ten-year plan.

Mr Donohoe

  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 forward.

Mr Donohoe

  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.

Chris Grayling

  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 from it?
  (Mr Grant) There is a lot of work to be done to make sure our strategic plan can be delivered and that includes the industry structure.

  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 by 2010?
  (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 plan.

  Chairman: Get him to quote Ernest Bevin, "As to that we'll have to think about it".

Chris Grayling

  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 timetable?
  (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 important element.

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