Memorandum by the Rail Freight Group (PRF
PASSENGER RAIL FRANCHISING
The Rail Freight Group (RFG) is the representative
body of the rail freight industry in the UK. Its objective is
to grow the volume of freight carried by rail.
RFG welcomes the Committee's Inquiry since,
although it is primarily directed to passenger traffic, many of
the issues affect freight as well. We confine our response to
The SRA has been formally in existence since
1st February 2001. Before that, it has been working in shadow
form for about 18 months.
In May 2001, following extensive consultation,
the SRA published its Freight Strategy, indicating how it intended
that the Government target of an 80 per cent increase in rail
freight be achieved. It set out proposals as to what, where and
how this growth will be achieved, by increasing the capacity and
capability of the network to enable longer, heavier, higher and
faster trains to be run, by the creation of a network that was
available 24 hours a day, seven days a week for freight, by the
development of new terminals and the upgrade of certain routes
This Strategy has been widely welcomed by the
industry, and it is considered that it has contributed significantly
to the current more positive view of future prospects for freight
growth, and that all four rail freight operators have announced
new services during the summer.
Freightliner announced the signature of a ten-year
contract with OOCL to provide a new daily container services between
Southampton and Manchester. EWS has launched a new high-speed
freight service from Motherwell to Inverness and intends to extend
the service from the west Midlands to Aberdeen later this year.
GB Railfreight and Johnson Stevens Agency have announced a new
dedicated intermodal service between Felixstowe and Doncaster.
Direct Rail Services has started a new service for W H Malcolm
from Grangemouth to Daventry.
Provided that the Rail Regulator and the SRA
are able to implement the proposed reduction in track access charges,
there is every expectation that the industry could achieve the
80 per cent growth by 2010, on top of the 40 per cent growth in
the last five years. Industry itself has invested over £1bn
in this time in facilities above tracks, including locomotives
and rolling stock, terminals, IT systems etc. We welcomed the
announcement in the Government's Ten Year Transport Plan of £10bn
for rail freight over the period.
Freight and passenger traffic mainly use the
same lines and with Government targets for a 50 per cent growth
in passenger traffic alongside the 80 per cent for freight, there
is now inevitably congestion on much of the main routes of the
network. The privatisation structure was designed to incentivised
Railtrack to invest in additional capacity ahead of demand, but
it has not happened; worse still, Railtrack has reduced maintenance
significantly so that capacity and reliability is probably worse
now than when Railtrack took over responsibility for the network.
This was set out in more detail in previous RFG submissions to
Thus, much of the slack in the network has already
been taken up. Although the £4bn over ten years for freight
will be of great benefit to the industry, there is also the need
for a policy, programme and finance for upgrades which are often
passenger-led but which significantly affect freight as well.
For example, the Felixstowe-Nuneaton gauge enhancement
project for freight, the first of the SRA freight projects, is
required to allow the passage of 9' 6" containers on standard
flat wagons, and has the potential to attract large volumes of
containers off the road onto rail. The project involves about
30 bridges being raised (or track lowered). Railtrack has been
involved in studying this for over a year. The process involves
five stages of estimation of costs and programme; each one funded
separately by the SRA. SRA funding stopped for several months
in 2001 at the time of the Railtrack/SRA/DTLR crisis announcement
in April on Railtrack's funding which resulting in rebudgeting
with much reduced funding for studies.
To add to this complex situation, there is also
a capacity problem on the Felixstowe Nuneaton route, so that,
to get the maximum potential for freight, work must be done at
Leicester and elsewhere to reduce conflicting train movements.
However, these are largely caused by passenger train requirements
and we understand that nobody can make a decision on these until
new franchises are discussed and let. As is well known, the DTLR
has put on hold the negotiations of new franchises.
All this will result in the gauge enhancement,
without capacity, taking some seven years to be achieved on this
line. Even then, the capacity is likely to be constrained, resulting
in the short term in reduced value for money which could put the
whole project at risk.
There are many other projects, both large and
small, in the same situation of process gridlock.
Unfortunately, the SRA has not so far produced
an overall strategy for the railways and passenger services. It
has also contributed, with the Rail Regulator, to a situation
where it appears that Railtrack is given a blank cheque on projects
such as the West Coast Main Line; detailed scrutiny of Railtrack's
costs and the need for them has not so far taken place.
Thus we were not surprised that, at the end
of June, the DTLR issues new instructions and Guidance to the
Strategic Rail Authority, as allowed in the Transport Act 2001.
These concentrate mostly on passenger issues, now requiring or
encouraging the SRA to do what many thought they should have done
already and to a large extend already have for freight.
We note that the SRA must act in the way best
calculated to contribute to the achievement of sustainable development.
It confirms the Government's transport policy, Ten Year plan and
targets to achieve a "significant increase in rail freight
market share resulting with an 80 per cent increase in rail freight
by 2010, provided that the rail freight companies can deliver
improvements in performance and efficiency". We are concerned
at the apparently less firm commitment to freight than passenger
growth and, since the majority of problems in performance and
efficiency are caused by Railtrack, it is surprising that the
DTLR document confines its qualification to the operators.
Outcomes expected include improved levels of
customer satisfaction, more competition and efficiency, and an
increase in rail freight's market share to around 10 per cent,
equating to an additional 15bn tonnes-km of rail freight each
The Government instructs the SRA to provide
leadership for the rail industry and ensure that the different
parts work co-operatively towards a common goal. "It will
need to set priorities for action by itself and others".
The SRA should work "consistently and purposefully with the
Rail Regulator and the HSC to strengthen and support the railway
and establish close working relationships with them".
The SRA "must publish a first overall strategy
in November 2001, addressing the full range of objectives set
out for it in these Instructions and Guidance".
The document supports the new proposals for
rail freight grants, and requires the SRA to "secure increases
in the capacity of the railway to accommodate the expected growth
in passenger and freight traffic" and "to develop a
policy for the allocation of capacity among users".
"The Authority will need to address vigorously
the blockages which currently affect the delivery of new trains
by their manufacturers". It must achieve a significant improvement
in resilience of the railway operations.
The SRA is now required to advise Government
Offices and regional planning bodies on rail proposals for incorporation
into Regional Transport Strategies, and should comment on and
participate in regional planning documentation and multi-modal
On railway land, the Government confirms the
current policy of the SRA, and confirms that it may retain its
land for future rail use. Since Railtrack land is also "railway
land", it is a pity that there is no mention of this in the
The SRA is to encourage and, where appropriate,
commission research, as well as compile and publish statistics
on national rail trends.
RFG welcomes this document in general terms,
although we have concerns about the Government's commitment to
the 80 per cent growth figure for freight. It is clear that the
SRA has much to do in the fields which it has not so far seen
as a priority; rolling stock and other technical issues, delivering
network capacity, sorting out capacity allocation, to name but
a few. What there is on freight is positive, and may reflect the
existence of a freight strategy.
However, the document reveals a serious loss
of confidence in the SRA, with the DTLR apparently taking over
much of the control and decision making processes.
The SRA, under a new Chairman, will need to
catch up on two lost years; a full Strategy by November will take
some work (except for freight), to describe how it is going to
deliver more capacity (but within its budget), provide leadership
and demonstrate a new positive relationship with Mr Winsor, the
Rail Regulator as well as with the new ministerial team.
We trust that, when the new team is installed,
the Government will then let go and allow the SRA to get on and
do its job without continued interference on policy, on accidents,
One objective of the draft Directions and Guidance
is to ensure the long term investment in the industry. This is
certainly essential. The private sector will invest if it sees
an appropriate return, if it sees a policy and stability from
Government, and if the bureaucracy is not seen to be too Byzantine.
At present, the railways fail on many of these counts.
As mentioned earlier, the rail freight industry
has invested over £1bn above the tracks since privatisation.
We believe that the rail passenger industry, particularly the
ROSCOs, have invested large sums as well. However, little has
been done on the infrastructure and, even if one ignored Railtrack's
current inability to invest. A structure that requires freight
infrastructure investment to be paid directly to Railtrack and
passenger investment generally being paid to Railtrack via the
Train Operating Companies is itself very confusing and of course
open to endless debate as to who is responsible for what.
Add to that, the inability of the TOCs, the
SRA or the Regulator, or the private sector terminal operator
(who is faced with a "take it or leave it" approach
from a monopoly supplier), to ensure that Railtrack delivers Value
for Money, it is hardly surprising that even the smallest project
can take several years to achieve, and the larger ones rarely
There have also been many statements by Railtrack
recently about the lack of signalling resources preventing them
from undertaking new works. Some RFG members have been told by
Railtrack that they can have no new terminal connections involving
signalling until 2004-05. We have investigated whether this shortage
is so serious as to justify such delays. We find that many of
the signalling contractors can provide signalling staff to work
on any contract provided that it is not for Railtrack.
Furthermore, the contractors say that they can
always fit in small projects between the peaks and troughs of
work of larger ones. We conclude that Railtrack's statements about
lack of signalling staff precluding further works is more likely
to be because they do not want others to do them and therefore
lose control and, possibly ownership of the new assert.
An example is the Stirling-Alloa-Dumfermeline
line in Scotland, which the Scottish Executive wish to see reopened
for passenger and freight traffic. Railtrack has recently stated
that it will not invest in this project, so the Executive and
others are seeking funding from other sources. If the work is
completed and connected to the network not at Railtrack's expense,
then the question should be askedwho owns that line on
There is no reason why Railtrack should and,
furthermore, since it will gain additional capacity and therefore
revenue on the alternative route of the Forth Bridge without any
investment, then we would argue that the Regulator should reduce
Railtrack's Regulatory Asset Base or Efficiency Targets by the
amount of investment that Railtrack should have made but did not.
We conclude that we are not surprised that the
Government has sought to take greater control of the SRA and to
get action on many issues which should, in our view, have been
done by the SRA without waiting for instructions.
However, we do not believe that, as they are
drafted, they will ensure the "rapid improvements to the
safety, punctuality, reliability, comfort and frequency of services",
certainly for freight unless and until the Government addresses
the real cause of the problemsthe unmaintained and underinvested
infrastructure, operated by a monopoly supplier whose costs, plans
and general management appear to be largely out of control or
jammed in a gridlock of bureaucracy.
The same comment applies to investment, for
reasons which we have stated above. Investment above the rail
will not continue unless the Government demonstrates an intention
to achieve an infrastructure that is efficient and effective 24
hours a day seven days a week.
Investment in the rail infrastructure itself
is now largely coming from government anyway; it would appear
very much preferably to pay this directly to Railtrack, for small
schemes, and directly to contractors for larger schemes, rather
than through passenger train operators. This requires a level
of quality and quantity of expertise and experience in managing
major contracts in the SRA. We do not believe that Railtrack has
yet fully accepted that their future role is confined to the maintenance
and renewal of the existing network. We note that there are still
many delays, much lack of information and continuing ridiculously
high prices quoted; this again requires urgent action to resolve.
As things stand, the railway industry is in
a state of process and investment gridlock. We believe that the
new draft Directions and Guidance to the SRA are a necessary step
in achieving the Government objectives. They are not, in themselves,
sufficient. The DTLR is probably considerably less capable of
undertaking the work of the SRA itself; it should not try to second-guess
every move or payment made by the SRA. Rather, it should ensure
that the SRA is staffed by people in whom it has confidence to
deliver its outputs and policies and then start delegating authority
to the new SRA.
Secondly, it is time that the Government removed
its blind spot about discussions about Railtrack. The present
structure of the company and its ownership is, we believe, incompatible
with the growth targets and other Government policies. We are
already more than a year into the Ten-year Plan; it is time for
the Government to take action both on the SRA and Railtrack if
it wants the targets achieved.
17 September 2001