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

Memorandum by Rail Freight Group (TYP 25)

  1.  The Rail Freight Group is the representative body of the rail freight industry. Its objective is to achieve the maximum possible growth of rail freight.

  2.  We welcome this Inquiry as being timely, taking place some 18 months after the publication of the 10 Year Plan. This is a timescale which should be sufficiently long to determine whether policies and actions contained in the Plan have started to have an effect, whether the trends are in the right direction and what further action needs to be taken.

  3.  Unfortunately, since the Plan's publication in July 1999, we have had the post-Hatfield chaos and the demise of Railtrack, which happened this year but started many months if not years before that. We have had a period where there was evidence of a breakdown in relations between ministers and with top management at the SRA and ORR, and of course a change in the ministerial team after the General Election in June 2001.

  4.  All these have had an adverse effect on the railway industry, and on its ability to carry traffic reliably and effectively.

  5.  However, in spite of this, and thanks to strong efforts by much of the industry, rail freight was 8 per cent up in the quarter ending September 2001 compared with the same time the previous year, which was before Hatfield. So freight traffic has grown, and could continue to grow and meet the 10 Year Plan target growth of 80 per cent.

  6.  The Financial Statement accompanying the Plan allocated £4 billion to rail freight over the same period; £3.4 billion was to be from the Government, the remainder from the private sector. Rail freight would also of course benefit from investment in mixed passenger and freight projects in the 10 Year Plan.

  7.  We examine below, in relation to rail freight, some of the assumptions made in the Plan, whether policies on which the Plan was based have been followed or modified, and what action or changes must be made if the targets (or modified versions of them) are to be achieved.


  8.  The target for rail freight growth in the 10 Year Plan was 80 per cent. This was subsequently modified in the draft Instructions and Guidance to the SRA by adding the proviso "subject to the train operators improving their efficiency". This is an extraordinary statement to make in the context of Railtrack's total failure to operate the network efficiently, reliable or effectively. We would generally comment that the train operators have achieved their growth figures in spite of rather than because of Railtrack, and we have therefore responded to the DTLR consultation that this proviso is unnecessary and out of balance and should be removed. If this proviso is applied to freight operators, are we to assume that the less onerous 50 per cent growth target for passenger traffic can only be achieved if passenger train operators improve their efficiency?

  9.  However, a freight target figure of 80 per cent is a rather blunt instrument on which to measure achievement. It is based on tonnes-kilometres, and therefore the amount of coal traffic hauled in different years over long or short distances can have an effect on the figures out of proportion to achievements overall. Whereas coal traffic is good revenue for the railways, it is not one of the main growth areas of the Strategic Rail Authority.

  10.  RFG agrees with the SRA that, to have any significant impact on road congestion, rail freight must really break into new markets such as lighter, faster types of traffic, ranging from mail, parcels, food and drink, consumer goods, semi-manufactured goods as well as raw materials. Much of the imported goods in these categories already travels from major ports to inland rail terminals by rail and, with port traffic set to grow, on some estimates, by 10 per cent a year, rail freight to and from ports must increase by at least this amount just to retain market share, and by rather more to divert traffic off the roads, one of the Government's main policies.

  11.  We therefore believe that the overall target should be reviewed to reflect modal splits in different market sectors, while still keeping the same general level of growth. This work could be developed by the SRA with the industry in a comparatively short space of time.

  12.  The other target which is given much prominence in the 10 Year Plan is the statement that, if the Plan is implemented in full, then road congestion will reduce. There is no supporting evidence for this remarkable statement, and we have been unable to find any specialist in this field who believes it. We urge the Sub-committee to question the Government on it, since we believe that road congestion will continue to increase, even if the 10 Year Plan were implemented in full. There may well be an argument for increasing the growth targets for rail freight in order to ensure that freight can still move around and that the roads are not completely gridlocked by the congestion that everyone except the DTLR appears to believe is inevitable, unless there is a real and consistent change of policies.

  13.  The only way in which congestion would be likely to reduce is as a result of a severe recession, a major road building programme (albeit only a temporary reduction in congestion) or if much more radical policies were introduced compared with those in the 10 Year Plan, involving major curbs to road traffic. To make these acceptable, alternatives would have to be in place first. For rail freight, this would probably take well over 10 years, and would require maximum government commitment to all aspects of policy—something sadly lacking up to now.

  14.  For rail freight,the need for regional targets would come out of particular characteristics of an area or region, alongside considerations of the suitability of freight to be carried by rail and the possibilities of terminal and other facilities. This could, for example, apply to London, where the provision of suitable terminals, and the exemption of rail freight connecting road services from congestion charges or night time lorry bans could play a major part in reducing overall levels of road freight.


  15.  Following the launch of the 10 Year Plan, the rail freight industry had expected that Government would work towards its implementation, encouraging participation and providing leadership to enable the industry to deliver the target.

  16.  In many instances, the opposite has happened. For example:

    —  The Fuel Duty Escalator for road freight was cancelled, and Vehicle Excise Duty on lorries was reduced, benefiting the road freight industry by some £800 million per annum, and rising. Since road freight is rail freight's main competitor, rail freight might have expected to receive the same amount pro-rata, about £80 million based on rail freight having a 10 per cent market share of land freight traffic. Over 10 years, this loss of competitivity to rail freight is about £1 billion. There has been no comment from Government as to why they made such decisions in complete contravention of the policies on the 10 Year Plan, and there has been no offer of matching funds even to maintain a level playing field between the two modes.

    —  The promotion of Channel Tunnel rail freight is specifically mentioned in the 10 Year Plan, the SRA's Freight Strategy (published in May 2001) and in the draft instructions and Guidance to the SRA. Firstly, the Government introduced Regulations to impose a Charge on the train operators of £2,000 for every illegal immigrant who gets in on a freight train, even though the industry told them that this would be impossible to implement and would likely cause the cessation of services. Then in November 2001, because its workers started being attacked, SNCF suspended all rail freight through the Tunnel. This has now restarted at about 30 per cent of the already low traffic levels but, unless major change is made, it is unlikely to survive many months, resulting in some 8,000 job losses, businesses going into liquidation, and an additional 6,000 lorries a week on the M20 and other motorways. It is also worth noting calculations by Lord Bradshaw (Lords Hansard 5 December) that the Government has invested £500 million in Channel Tunnel rail freight facilities in the last 10 years. Perhaps the Public Accounts Committee or NAO will wish to consider the reasons for such a large sum having to be written off on account of Government action (or inaction). It is clearly Government's duty to police and protect out frontiers, and an EU requirement on them to maintain free movement of goods. At the moment, the lack of action or urgency on the part of the Government is very distressing to the industry.

  17.  Implementing the relevant parts of the 10 Year Plan also needs the acceptance and/or adoption by the Treasury of the need to review values attributed to road congestion, environmental pollution, road and structure damage and social/quality of life, time lost both personally and corporately, whether for people or goods. Whereas it is right that new projects or traffic flows should be subject to tests for Value for Money, it is essential that the Treasury and DTLR agree up-to-date values for the costs to society of road congestion, environmental and structural damage etc and that the differences between, for example, a heavily congested motorway and a heavily congested urban road need urgent review.

  18.  For example, for rail freight grants, the current values of "lorry miles saved" are £1.50 for urban roads, £1.00 for other roads and 20p for motorways and dual carriageways. The latter figure takes no account of regular and widespread motorway congestion. The Rail Freight Group recently calculated that, if freight were excluded from the West Coast Main Line and all capacity allocated to Virgin Trains, an additional 400 lorries an hour would be transferred to the adjacent M1 and M6, requiring dedicated lorry lanes and one less lane for cars, or the construction of additional lanes. Either way, this illustrated the need for up-to-date values to attribute to lorry, car or other traffic, and to people/passengers across both modes of transport. This should at least enable a proper debate to take place as to the costs and benefits of each mode.


  19.  The recent problems of Railtrack have undoubtedly reduced the likelihood of private sector finance playing such a major part as originally envisaged. However, it must be noted that the private sector has already invested over £1 billion in rail freight in the last five years, in wagons, locomotives, other equipment, terminals and many other items. There is no reason why this should not continue for the period of the 10 Year Plan, only provided that those investing see better and continuing evidence that the Government is putting in place policies to enable the Plan to be achieved, rather than the opposite (see above). This of course includes the ability of the rail infrastructure to accommodate the growing volumes of freight.

  20.  The problems of private investment remain with the infrastructure, where the Rail Freight Group has warned over several years, not only of the inefficiencies of Railtrack, but of its aversion to risk, its attempts to transfer as much of this as possible to others, and its generally high cost structure, which made both maintenance and enhancement work several times more expensive than when British Rail was in charge. In addition, there is more and more clear evidence that maintenance and renewal work has been delayed.

  21.  Ministers have also made commitments to introducing automatic train protection on most if not all of the network. We understand that some finance has been allocated to this, but it is nowhere nearly enough. The needs and value for money for such widespread introduction must be addressed but, in the mean time, the cost will yet again eat into the amount of Government funding allocated in the 10 Year Plan and the much needed network enhancements.

  22.  We do not find that the multi-modal studies have generally been very effective. In few cases have the options for rail freight been seriously considered; for example, a study on the M6 between Birmingham and Manchester or across the Pennines might conclude that, since rail freight was uneconomic over that distance, none would transfer to rail. The fact that much of the freight on the adjacent motorway travelled a much longer distance overall and therefore might well be capable of economic transfer to rail appeared difficult to grasp.

  23.  We were also told that, since the parallel rail line was at capacity anyway, there was no point in considering transferring more freight from road to rail. We commented that the studies should then consider the costs and benefits of increasing rail capacity as an alternative to increasing road capacity. We conclude that, in general, these studies are being used to provide independent support for more road building.

  24.  Finally, the additional costs of maintaining Railtrack in Administration must be added to the financial needs to implement the 10 Year Plan.

  25.  Thus the 10 Year Plan envisages a modestly growing role for the railways; the consequences of Railtrack's failure to maintain the network, failure to operate even as efficiently as British Rail, failure to invest in enhancements to the extent needed to meet growing demand, and now its Administration, means that virtually all finance must come from the Government, at least in the short term and until a restructured infrastructure company has demonstrated competence.

  26.  The financial provisions in the 10 Year Plan are therefore totally inadequate to achieve its objectives. A new, efficient Company Limited by Guarantee could be the drive for this new approach, and the initial high level appointments, both of John Armitt and Jim Cornell to Railtrack in Administration, and Ian McAllister and Adrian Montague to the CLG bid team, are both welcome.

  27.  Beyond that, Government must accept that putting right the disaster that was Railtrack is going to be expensive and will need long term commitment to funding. The outcome, however, could be positive and lay the foundations to achieving an infrastructure that works efficiently and effectively, and allows the train operators to achieve the growth that they and their customers desire, and offering better value for money than the equivalent for road when the calculations are done in an up-to-date and objective manner.


  28.  RFG has welcomed the European White Paper on Transport, particularly in connection with matters relating to railways and rail freight on the continent. Most of the proposals are already allowed for or in place in the UK, but the importance of achieving open access for rail freight across the European Union, for interoperability of equipment etc are vital for the future of European rail freight, assuming that the present serious problems relating to cross-Channel rail freight services are solved.

  29.  We regret the lack of a clear policy on road tolling or congestion charging for freight. Such a policy framework would give a clear signal that the full costs of the damage caused by heavy lorries must be paid by those who cause the damage. However, we welcome the proposals that revenue from such charges could be applied to expenditure on rail or water transport. This is already provided for in Switzerland and we believe that it should become possible throughout the EU in pursuit of a sustainable transport policy.

  30.  In welcoming the open access arrangements for freight, we are conscious that, in may member states, financing of local or regional rail services is frequently being transferred to regional devolved governments. Not unnaturally, these bodies do not always see the importance of long distance freight or, for that matter, passenger services. The difficulties of finding or enhancing train paths for international freight trains is therefore increasing.

  31.  We believe that a solution must be found to this if reliable, cost effective rail freight services are to be achieved, and we urge the Government to press the Commission to introduce measures so that, at the regular timetable planning meetings of international and national train services, a reasonable number of international freight train paths are put into the timetable first, along with international passenger trains, and that national and regional trains are timetabled around them. As for all freight trains, the paths must be preserved whether the train runs every day or not—that is the nature of freight business.

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