Examination of Witness (Questions 640-659)
RT HON STEPHEN BYERS
WEDNESDAY 6 MARCH 2002
640. But you do accept that the SRA's strategic plan indicates very clearly that the Great Western Main Line up-grade, Crossrail, West Midlands capacity enhancements, Greater Manchester capacity enhancements and multi modal study schemes are proposed to be post Ten Year Plan?
641. Some of them we can bring within. I think the Great Western one is the one I have most concern about. On the multi modal studies, particularly in the West Midlands and the Greater Manchester areas, we will be talking to the SRA about progress that can be made; we are waiting for the reports; and I think we really should consider the reports when they come. A lot of work is going on to Crossrail at the moment, with some interesting ideas about how it can be funded. It may well be the case that, if progress can be made quickly, then it can come within the Ten Year Plan.
642. Finally, moving on to the comparisons between road and rail, the Highways Agency informs us that, in the Ten Year Plan, they are looking to lever in between 15 and 25 per cent of private sector investment, and much of that is accounted for by the Birmingham northern relief road. Yet when we compare that to rail the figure for rail is something like 65 per cent of the total investment. How do you square those two? Is that not a massive difference—well, it is, obviously.
(Mr Byers) It is looking at the risk that is attached and at the levels of investment that might be achieved from the private sector; it is looking at the extent to which public sector provision will underpin and lever in that additional private sector investment. Do not just hear it from me but hear it from Richard Bowker who is dealing with these issues every day and talking to people who will have to make these investment decisions, and his view is that, as far as railways is concerned, that level of private investment—£34 billion—will be achieved.
Chairman
643. Do you want to tell us how much front loading you have in mind?
(Mr Byers) Within the Ten Year Plan?
644. Yes. You now talk today about front loading and you have talked about bringing a couple of schemes back into the Plan that looked as though they were going to be pushed back. How much money are you talking about?
(Mr Byers) We have done some work on the profile of the Ten Year Plan and it might be helpful if I could send the Committee a note.
645. That would be very helpful. You are also going to tell us about the SPVs and the timetable, and you are also going to tell us what phasing you have got for your front loading, I think.
(Mr Byers) It will be a long letter, Chairman!
Chairman: I like getting letters from you, Secretary of State.
Mr Donohoe
646. Can I take you back to what you said about the length of the franchise, particularly on the East Coast, GNER? What effect was it to have that as a two-year extension against awarding, say, a ten year franchise in terms of attraction of private money? What effect would there be if you were to award all of those that were due longer terms, in terms of bringing in more private money?
(Mr Byers) I think it varies on the franchise itself. We have looked very carefully at the whole franchising regime, and the Committee will know I made some comments last summer about changes to the franchising regime which were slightly misinterpreted. The point I was trying to make—and the policy is I hope now one which people understand—is that it is really looking at the nature of each franchise, whether there needs to be a major up-grade in the line concerned, whether there needs to be changes to rolling stock and to reliability and so on, and on the basis of that deciding what would be the most appropriate period. The Strategic Rail Authority under Richard Bowker have given some very detailed consideration to the period of franchises to be awarded, and they are minded to go for a model which is basically a 15-year franchise but broken up into three sections of five years each, to be renewed after each five-year period. Now that has the benefit of having the security of a longer term, 15 years, but not tying the hands of the Strategic Rail Authority so they do not have any control during that 15-year period, because there will be the renewal periods after five and ten years, and I have to say that that is a model that, to me, looks very attractive and has the potential of both securing the longer term investment with rights and guarantees and so on, and also delivering gains very quickly. As far as the East Coast Main Line is concerned, the attraction I think of the two-year extension is we will see some quick gains as far as the East Coast Main Line is concerned, particularly an increased frequency to Leeds, and that will also take pressure off the line going through Newcastle up to Scotland, because there will be people at the moment who use that line to change at York or Doncaster to go elsewhere in Yorkshire who will go straight through to Leeds because of the increased frequency of the service, so there will be improvements in terms of capacity on the other part of the East Coast Main Line as well. But the real benefit of a two-year extension to the franchise is that will allow us to work out in detail the up-grade that will be needed on the East Coast Main Line. That had not been done before we had to decide whether or not to award the franchise last summer. That work is now going on: decisions will be taken about the nature of the up-grade over the next few years during the lifetime of the new franchise when it is awarded; and that will form an important part of the franchise negotiations, because what we would like is for the new franchise holder to be involved financially in the up-grade of the East Coast Main Line.
647. Is it going to bring about more investment from the private sector to have that type of arrangement as against the present situation?
(Mr Byers) I have no doubts and I think the issue will be whether we use SPVs to support a big up-grade like the East Coast Main Line or a more traditional form of funding, but I do believe—and this is in conversations I have had with the train operating companies—that they recognise that they have a financial and commercial interest in putting their own money behind an up-grade in the line for which they have the franchise and I think, increasingly, we will see train operating companies and people who want to take over the franchise being very interested in being involved in investing in the improvements—
648. So what you are saying is that there is potential for vertical integration, is that right?
(Mr Byers) No. I think vertical integration is a different issue and, as I think the Committee will be aware, the Strategic Rail Authority is now looking and talking to the industry about the benefits or otherwise of vertical integration. The difficulty we have when we talk about vertical integration is that it means different things to different people. For some people it does mean controlling wheel and track: for others it just means taking a financial interest in the track rather than controlling it themselves and there is a whole variety of different types of vertical integration which are around. What has to happen, and this is why we welcome very much the initiative taken by the Strategic Rail Authority, is we have to find out exactly what people mean by vertical integration and then try and identify the benefits, if any, that can come from such an approach. It may well be that a pilot project somewhere with one franchise might be an interesting way forward. The Chairman may not agree!
Chairman: Mr Donohoe will want to know which one.
Mr Donohoe
649. I think I know which one it could be, but can I move on. The effects of Paddington and Hatfield were enormous on the railway structure, and the way that the railways were organised beyond that. Statistically it is now overdue that there is a major accident on the railways. What effect would that have if there were to be, and it is overdue on the Ten Year Plan?
(Mr Byers) To be honest I think it would depend on the nature of any accident that might occur and the circumstances or the reasons for the accident occurring, so I think it would not be helpful and would be scaremongering to try and respond in a definite way to that question. It would depend on the nature of any accident that might happen.
650. Can I move you away from railways, if I may, to the highways? There are proposals afoot from the Highways Agency that they put out to tender not only the maintenance and repair but the management of the motorways system and the highways system in England and Wales. That has already happened in Scotland and been quite disastrous. What is your view on that?
(Mr Byers) I saw these reports and I think they do not accurately reflect the situation. What the Highways Agency is looking at at the moment is the idea of effectively almost parcelling together a number of road improvements within a geographical area and asking a contractor to tender for that work, so rather than have individual roads going out to tender, one might do it on a more geographical basis so that you get better co-ordination, you get work being done at different times on different roads so you do not have some of the problems we have witnessed over the last few years where one contractor begins work at the same time as someone else begins on a road that you would normally take to get round the problem which is being caused by the works being carried out—
651. That is not what is happening in Scotland, with respect, where two major contractors have taken on the responsibility for the day-to-day maintenance as well as year-to-year maintenance, and everything within that. Is there any proposal you know of south of the border that would mirror that?
(Mr Byers) At the moment, the plan that the Highways Agency has got—and this is not going to start until 2004 - will be to co-ordinate the work more effectively. It is not a question of the Highways Agency somehow privatising the road system, which was a headline I saw in a newspaper two weeks ago. That is not the proposal that the Highways Agency has got. It is better management, ensuring better co-ordination, and also getting better value for money for the taxpayer by dealing with it in a co-ordinated manner.
652. So you do not believe the system in Scotland is right for England and Wales?
(Mr Byers) I think the system we are developing with the Highways Agency is one that I am perfectly relaxed and happy about.
Chairman
653. That means you are not happy with the one they have in Scotland!
(Mr Byers) I did not say that—
654. I know what you said; I am trying to get at what you mean.
(Mr Byers) That is far more difficult!
655. Are you saying you have looked at the Scots scheme, seen the disadvantages, and you are recommending something different south of the border?
(Mr Byers) I think we are developing, and the Highways Agency is developing, an approach which I think is one which will bring benefits to motorists because it will reduce disruption and also to the taxpayer because it will achieve better value for money.
Mr Donohoe
656. That, with the greatest respect, is not answering the point because all of that was argument that was presented when they introduced the system in Scotland. Again I have to ask you and press you, if you can, to give me some indication as to whether or not there is any potential for a similar system to that which has been introduced in Scotland being introduced in any part of the remainder of the UK?
(Mr Byers) We always look at programmes and initiatives that take place elsewhere within the UK and see if we can learn from them. I am sure in relation to what has been happening in Scotland we will learn from that, and it will inform any decisions that we take as far as England and Wales are concerned.
657. It is possible you will learn from some of the bad elements of the Scottish experience and go along with them?
(Mr Byers) I think we will learn from the Scottish experience, from the benefits and disadvantages that might be there.
Dr Pugh
658. The Ten Year Plan is a project I think you would agree could not be allowed to fail really. It would be disastrous, would it not?
(Mr Byers) It certainly would not be helpful.
659. Following on from that, it depends to some extent on a combination of public finance with the expensive public partnership arrangements. Given that, would you not be a happier person if you can persuade the Treasury to embrace continental styles of public finance and ordinary public sector borrowing arrangements as the main elements for achieving the local transport plan, rather than more exotic vehicles like the SPVs?
(Mr Byers) Specifically on the local transport plan, we have put in significant additional resources, much of it coming from the public sector, to really boost the amount of money going into our very important local initiatives, and I do not think there is a particular problem as far as the local transport plans are concerned where we have seen a big injection of public money going in.
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