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

Examination of Witness (Questions 880 - 899)



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.

Mrs Ellman

  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 would?
  (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 and when?
  (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 legal responsibilities—

  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.

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