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

Examination of Witnesses (Questions 260 - 279)



  260. It is rather longer than what you told us in the first place.
  (Mr Bloom) We did when we were last here say that March was tight, and indeed it turns out that March was tight. One of the reasons why the timetable is longer than we had thought is the very business planning process that John Armitt has described which only commenced in earnest in about November and was already planned by the company at round about that time. That is setting the critical path for opening a data room for interested parties to view what the business is all about. We do not anticipate that that is going to be available in its final form until some time in March.

  261. So potential bidders are not going to get access to the data room until March?
  (Mr Bloom) Until March/early April.

  262. You have got a lot of experience in administration. Tell us what is the likely time period for the bids to be brought forward after that.
  (Mr Bloom) A formal timetable will be developed by ourselves and Deutsche Bank which will go out when we issue a notice that we are opening up the data room. We will set out the timetable from there over the next few months. I expect that some time between early April and round about June, July would be when we would expect bids. I expect that there will be more than one round of discussions and negotiations. It is a complicated business. The contracts that govern Railtrack's business are complicated and need people to guide them through, which is what the data room is all about. When people put their first proposals together I have no doubt that we will need to have a second round at least of discussions, so that process is likely to take a few months.

  263. Can you envisage any particular grounds that would cause the Secretary of State to overturn any suggestion that you might make about a successor to Railtrack?
  (Mr Bloom) It is not for me to second-guess what grounds—

  264. Oh, come on, Mr Bloom. Everybody second-guesses everybody else in government.
  (Mr Bloom) The Secretary of State has laid down his criteria that he would expect any successful applicant for a licence to satisfy. Those are being used as guidelines by us as part of the data room and the information memorandum that we send out. I expect that if parties are able to satisfy those guidelines they have got a reasonable prospect of satisfying the Secretary of State's criteria. They then have to satisfy our criteria which are to achieve the best we can possibly achieve for the creditors and the shareholders. As long as parties recognise what each of the Secretary of State and the administrators are trying to achieve then they have a good prospect of success.

Helen Jackson

  265. I wondered if setting up your data room by the end of March has helped Railtrack establish the state and condition of all its assets, which was one of the criticisms of our earlier report.
  (Mr Armitt) The quick answer is no, because that was an ongoing process beforehand. It had started before the company was put into administration. There is a long term plan over the next couple of years to achieve a complete register of asset condition. We have a register of what we have got. What we do not have is a register of asset condition. That is a continuous process. It will be at the point that it is at at the end of March but it is not one which is being accelerated simply because there is a requirement to have documentation available. There are major resources applied to it and it is an ongoing process.

  266. But bidders will need to have this information.
  (Mr Armitt) The bidders will have access to that information as it stands at the time.


  267. So you would not agree with one of your predecessors who said that anyway it would be nonsense because it would not mean anything? I paraphrase mildly.
  (Mr Armitt) Whatever my predecessor may have said, my own view is that what information is there must be of value because it will give a level of information about the state of the network as it is today.

Mr O'Brien

  268. In the 10 Year Plan it is anticipated that there will be £15.9 billion worth of private sector investment and £3.6 billion of public investment expenditure between April 2001 and April 2004. Is this achievable?
  (Mr Armitt) The private sector investment is a matter for individual schemes. Levering in private sector investment will depend on the individual scheme, it will depend on the risk profile applied to that scheme, and one will have to take each scheme on its merits. That is a matter for the private sector at the end of the day. It will not be easy; I do not think anybody has ever pretended it would be easy, but I am sure it is possible to get private sector money into the railways. It has clearly already gone into the rolling stock and in the right circumstances I am sure it can be put into infrastructure development.

  269. Do you think you will require more public money than the £3.6 billion?
  (Mr Armitt) That depends clearly on how much comes from the private sector. The mix of the two will very much depend on the individual schemes.

  270. The Strategic Plan has been published by the Strategic Rail Authority and does envisage 80 per cent of expenditure in the south, therefore denying a lot of expenditure in the north. I come from the north of England. When we put this to the Chairman of the Strategic Rail Authority he said it was for Railtrack to distribute the resources. What have you got to say to the people in the north of England who are being denied the resources? We still have trains running late, we still have problems with stations, we still have difficulties that exist there.
  (Mr Armitt) Railtrack at the moment has a primary objective, which is to maintain the existing network and to renew the existing network. That is our fundamental task on a day to day basis, and to take forward, in addition to that, the new projects as and when they are funded. There are half a dozen of those which are going on at the moment in addition to the first two elements of work I described. There is an enormous amount of work done in every zone, as it is called, of the Railtrack business and I am sure there are people in the south of England who would complain as bitterly as those in the north that the condition of their stations could be better and their trains are being delayed. I have not seen anything which suggests to me that there is a significant bias towards any part of the network in the level of expenditure and resources that Railtrack are applying today.

  271. You are advising the Committee that the programme for the improvement of stations, including Wakefield Westgate Station, is on target? Leeds has been completed.
  (Mr Armitt) Leeds is almost complete. I would say yes to that.

  272. Wakefield was in the pipeline for the next improvement. Is that on target?
  (Mr Armitt) Station improvements which are in the programme will be taken forward according to the programme. There is no intention at the moment of changing the current programme. The reference in the Strategic Plan is to the suggestion that there were a lot more people travelling in the south east and therefore there was potentially an argument for applying resources in a bias towards that. At the moment we are following our current plan as it was previously set and we will have discussions ongoing with the SRA about any particular areas that the SRA may wish us to focus on.

  273. But the programme that was set previously: you are assuring the Committee that that will continue on target?
  (Mr Armitt) Yes.

Chris Grayling

  274. Mr Armitt, the Secretary of State told the Committee a few weeks ago that Railtrack would be expected to live within the budgets put in for control period two regardless of anything else. Is it your assessment, based on your initial work with Railtrack, that your obligations under the 10 Year Plan and the SRA Plan can be achieved within the budget set for control period two?
  (Mr Armitt) We cannot meet it within the budget set by control period two and it is our intention to go back to the regulator and argue for more during the next few months.

  275. How much, roughly?
  (Mr Armitt) That is what we are working on at the moment in terms of putting a business plan together. Clearly we are also going to have to provide the necessary information and arguments and evidence as to why we should be entitled to more money and that also we are working on at the moment and we will be working on over the next two or three months before we are ready to go to the rail regulator and argue for more.

  276. So you will be asking for a formal review?
  (Mr Armitt) An interim review, yes.
  (Mr Smith) Could I add to that? That was anticipated by the regulator in January last year when he issued a policy statement and said he would consider sympathetically an application when we were in a position to understand the ongoing implications for network stewardship of the events at Hatfield.

  277. And you cannot give us a sense of how much roughly that is likely to be in extra needs?
  (Mr Armitt) I think it would be inappropriate to just pluck a figure out of the air today.


  278. That is part of the tradition of Railtrack, is it not?
  (Mr Armitt) Perhaps it a tradition which has not borne us well in the past. When we have calculated properly a figure as best we can we will be happy to tell people what it is.

  279. Mr Bloom, it has been said that since you took over as administrator of Railtrack you have, as the work has gone by, uncovered more and more financial difficulties within the company. Is that true?
  (Mr Bloom) When we arrived at Railtrack on 7 October we had had no access to Railtrack before that date. Any information that we had about Railtrack was from a desktop from a distance, so we had no prior expectations as to what it was that we would see and the numbers that would be required, etc. We produced, with the help of the Railtrack management team, a forecast for funding initially for the first six months of the administration to 31 March of £2.9 billion. It is our full expectation that in the period to 31 March we will come inside that figure.

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