Examination of Witness (Questions 880
WEDNESDAY 14 NOVEMBER 2001
Mr Brian H Donohoe
880. Would you make your Department notes available
to the Committee?
(Mr Byers) If the select committee would find it useful
in their inquiry, of course we would want to be helpful. The issue
I face is that I want to look at how we can create a railway for
the future. As I think I said to Mr Grayling, the point about
the 25 July was it was the beginning of a process but obviously
if the Committee would find it helpful we want to be helpful.
881. Have you at this stage received a writ?
(Mr Byers) No, I have not.
882. Do you expect to receive a writ?
(Mr Byers) Time will tell. It is an occupational hazard
of being a Secretary of State.
883. On the basis of the evidence that I am
presuming you must have read, given the answers you have given
to date, you will have heard the proposals being made about vertical
integration and the possibility of a pilot scheme. One of the
areas that you are talking about is Scotland as an area that would
be best suited to the idea of trying out this vertical integration.
Do you support that as a possibility in terms of having it as
a pilot or not?
(Mr Byers) Vertical integration becomes an option
which is now available which was not there perhaps under Railtrack.
I would like to see the detail of any such proposal, to be honest.
I am not an enthusiast of vertical integration but I do see that
it could have merits.
884. You do not accept the idea that there should
be a pilot?
(Mr Byers) I would be interested in seeing proposals
come forward. I have not closed my mind to the idea. I think there
are difficulties which would be there but I would certainly be
interested in looking at any such proposals that might come forward.
885. One of the difficulties, is it not, is
that if there were to be a pilot scheme you could not then award
franchises that you are talking of in the area of 20 years because
if it were to be the case that the pilot were successful it would
take 20 years to introduce it?
(Mr Byers) There are a number of practical consequences
which would flow from such a fundamentally new regime being introduced.
There would have to be clear clarification, clear protection for
other users of the track. There would be difficulties in terms
of possible priority being given to trains belonging to the person
who is running the track. All of those details would need to be
accommodated in any such arrangement, which is why I think we
should look at it, why we should not rule it out and why we should
give it proper consideration if such a proposal comes forward.
886. Do you think that Mr Robinson could have
failed in his fiduciary duty in how he did or did not relay information
about Railtrack's financial state to fellow directors and to shareholders
from 25 July onwards?
(Mr Byers) I honestly do not know the information
that he gave to his fellow directors. I would have assumed that
Mr Robinson would have been getting legal advice pretty much continuously
during that period and I would have assumed that he would have
acted in accordance with it.
887. You are not aware of what information he
actually gave his fellow directors?
(Mr Byers) No.
888. When the regulator gave evidence to this
Committee last week, he told us he was very surprised that Railtrack
had bypassed the normal procedures, had not approached him for
financial support for new settlement and instead had gone directly
to the government. Why do you think Railtrack did that?
(Mr Byers) I honestly do not know. I think that has
to be a question that you need to ask Railtrack. All I do know
is that they approached the government.
889. A number of witnesses, including Mr Winsor
and by implication the SRA and others, informed us that they felt
that Railtrack was essentially the architect of its own misfortune.
They spoke about managerial incompetence. What was your experience
of Railtrack's management ability?
(Mr Byers) I think we can probably look at it in two
main ways. The first was in relation to their management ability
to run and operate the licence. The select committee has done
the House a service by producing your report towards the end of
March of this year, which was a catalogue of criticisms of Railtrack's
stewardship of the system. It was as a result of a thorough investigation
which this Committee had carried out. In a sense, that stands
as a very good example of the management of Railtrack in terms
of how the licence was being operated. Secondly, in terms of financial
control, it was quite clear that it was a company facing financial
melt down. The scale of that became clear during August and September
and that is why, based on financial advice, in my petition to
the High Court, I referred to these sums of £700 million
deficit by 8 December and £1.7 billion by the end of March
next year, figures which were unchallenged by Railtrack. Clearly,
there was a lack of financial control as well as a lack of effective
management control of the operating licence itself.
890. Were you aware that, prior to Railtrack
going into administration, discussions had taken place between
Virgin and Railtrack where agreement was being reached, or attempting
to be reached, on an award of compensation to Virgin of something
like £300 million plus in addition to fares increases for
passengers because Railtrack had admitted they had failed to modernise
the west coast main line in the way they had promised Virgin they
(Mr Byers) It is quite clear that the agreement in
relation to west coast main line and the enhancement was not being
delivered on time and in line with the undertakings which Railtrack
had given to Virgin. There was a series of discussions which had
taken place before Railtrack went into administration. The important
thing now is to try and conclude negotiations between the administrator,
between Virgin, between the Strategic Rail Authority, so that
we can finally conclude a deal for the west coast main line and
get it implemented to a timetable that can be made publicly available.
891. It has been suggested that part of that
deal could mean that the Railtrack of the future will not be required
to upgrade line in the way that had been envisaged. Would you
think such a decision acceptable and do you think it would be
appropriate to take such a decision?
(Mr Byers) I think it would be very disappointing
if that turned out to be the case. What we have to try and do
is to make sure that we achieve as much of the original upgrade
as was originally proposed. Clearly, given the cost over runs,
being very honest with the Committee, it may well be difficult
now to achieve all of those enhancements, but that is because
of the problems created by Railtrack's mismanagement and their
failure to deliver on time, on schedule, in line with the original
undertakings which they had made to Virgin.
892. Where will the decisions on what is to
happen to the west coast main line in terms of upgrade be taken
(Mr Byers) Discussions are going on at the moment
and I am acutely aware of how important this is for many members
of this House and for many members of the travelling public. This
is one of the major Intercity routes, if I can still use that
expression, going up along the west coast into Scotland and it
does need to be resolved. I know the Strategic Rail Authority
recognise the importance of getting the matter resolved. The administrator
is aware of its importance as well. I would hope that it could
be resolved within a matter of a handful of months. I mean two
or three months at the most and that would then be something which
would then at least introduce a degree of certainty as far as
the upgrade is concerned. Clearly, we want to make sure that we
can retain as much as possible of the original proposals. It is
too soon to say whether that can be achieved. I think it will
be difficult, given the cost over runs, but we do need to reach
a conclusion within two or three months.
893. Will the regional development agencies
or regional assemblies be involved in those discussions so that
proper consideration is given to the regional impact of decisions
that could be made?
(Mr Byers) I am a great believer in the importance
of the regions of England in particular. This particular line
goes up into Scotland. I think it would be difficult to involve
those bodies in the detailed, commercial discussions but what
I think they could usefully be involved in is a discussion about
the importance of the upgrade to economic regeneration and the
renewal of regions within England. There is a principled discussion
that can take place, alongside detailed, commercial negotiations
that clearly will need to take place as well.
894. Can you give the Committee any assurance
that the northern regions in particular will not lose out on modernisation
and the impact on their economies because Railtrack failed them?
(Mr Byers) I can give that assurance. I am committed
to delivering the ten year plan. When one looks at the detail
of the ten year plan, it is clear that passenger numbers have
to be increased in the northern regions of England, in Scotland,
as well as in other parts of the country. It is not part of my
job or my objective to just concentrate on one or two major, key
routes. The franchising regime that I want to introduce, which
is one of the reasons why I have introduced changes, is to ensure
that all of those franchises, wherever they are in the country,
will benefit from the investment that we are making.
Dr John Pugh
895. Can I first of all ask you to enlighten
me about the mysteries of railway administration? You said that
a recommendation would be made by the administrators but that
you will have the final say. Can you foresee a situation in which
the administrators recommend one thing and you overrule it? I
am not suggesting you should threaten or pressure in any way.
(Mr Byers) I am grateful for that. In considering
the recommendations from the administrator, I have to approve
his scheme to take it out of administration. That is provided
for under the Railways Act 1993. I would not want to fetter my
discretion, using a good legal expression, so I will simply need
to consider whatever the facts are presented to me by the administrator
alongside the guidelines which I have laid down.
896. It is conceivable that you could overrule
the recommendation of the administrator?
(Mr Byers) It is conceivable that I do not approve
his proposed scheme.
897. You have made your guidelines quite clear
to him, have you, because it would be pretty barmy if we went
through all of this and it cost the taxpayer a small fortune in
administration and we finished up with another private company.
If it is on that basis, I will make a bid myself.
(Mr Byers) The prospect of Dunwoody Rail has a certain
appeal. The guidelines are clear but it is important that the
administrator himself, bearing in mind that he has a range of
898. Has he in his mind the guidelines that
you have made clear to Parliament?
(Mr Byers) The guidelines are clear and the administrator
is aware of them.
899. He will be aware of that when he is estimating
what is brought forward to him as a suitable solution?
(Mr Byers) He will but we have to be mindful of the
administrator's legal obligations as well.