Examination of Witness (Questions 80-99)
MR RICHARD
BOWKER
WEDNESDAY 10 APRIL 2002
80. Why were Scotrail given the money that they
were in recent weeks—the money that seems to have transferred
the risk from the private sector to the public sector?
(Mr Bowker) Over the past 12-18 months or so, it has
become increasingly clear that the regional franchises were becoming
unsustainable in terms of the models that were assumed originally,
and the path taken thus far had been to put them into management
of what are called cost plus contracts. That had some sense around
it because the idea was to embark upon refranchising, get the
new long term contracts in place with much more robust models,
and then take them off those but it has not been possible to do
that for reasons the Committee will be well aware of. We are behind
on the refranchising programme.
81. All of this does not give any great confidence
that there would be any significant changes in direction. The
Strategic Rail Authority itself is thinking you are giving almost
across the board of the network very lengthy franchises now, which
the Government and institutions will not cover with the necessary
input of finance?
(Mr Bowker) No. The long-term franchises that we will
put in place through refranchising will not be on a cost-plus
basis but on a proper contract with the appropriate risk transferred
to the private sector. If I may just pick up on the Scotrail point
because that is very pertinent, my view around Scotrail was that,
together with Central, they were the last ones of the regional
franchises that had not been addressed and we decided to address
them. National Express have paid a very substantial amount of
money towards the restructuring cost: we have, on the Scotrail
franchise, been able to secure commitments to services up to the
end of the franchise which they had no obligation to do—they
were not part of the PSR—so that has been secured. We have
secured some other passenger benefits which were worth having,
and they are not on cost-plus contracts. They retain the cost
and revenue risk. I was adamant that, if we were to restructure
Central and Scotrail, they would not pass the cost and revenue
risk back to the public sector. It would stay with them, and it
has done.
82. On a different point, how many companies,
not franchises, do you think will run railways in ten years' time?
(Mr Bowker) I do not know.
Chairman: Did you bring your crystal ball with
you?
Mr Donohoe
83. If you cannot do that, then how many over
the next three years?
(Mr Bowker) I think that is slightly different. On
the appetite at the moment from the owners, I have no indication
that the current nine or 10 companies which own train operating
companies are in any way disinterested in being involved in railways.
It has been a difficult period but we are seeing, for example,
on the Wales and Borders process, a lot of interest in getting
involved in that bid—and from companies which are not in
the sector at the moment.
Chairman
84. Is this not governed, in effect, by their
feeling that, if they get into trouble, you will underwrite their
problems?
(Mr Bowker) No. I take the view that the past is the
past; it was a very rushed process—I was there at the time
and it was a very rushed process—and an awful lot has happened
between then and now which, even in the most negative depressed
downside scenario, you would not have thought was possible. The
other thing is we now know a lot more about what it takes to run
a franchise than anybody did, say, six or seven years ago. All
that can be factored into the new franchises with the appropriate
risk staying in the private sector.
Mr Donohoe
85. There is talk about piloting and vertical
integration and so on. If you awarded all the franchises over
a lengthy period, could you do a trial run?
(Mr Bowker) There is no particular reason why we could
not look at a trial in a franchise that had some period to go.
It would just involve looking at the terms of that franchise and
seeing if we could—
Chairman: We are going to come on to various
points now. Mr Bennett?
Andrew Bennett
86. What can you tell us about fares?
(Mr Bowker) We are in the process of putting together
a fares consultation strategy which will be available in the early
summer and that will be looking at fares, impacts, the mix of
regulated and unregulated—a wide range of fares issues.
87. Is that bad news in that fares are going
to go up and not going to go down?
(Mr Bowker) It is no news. It is a consultation
and it is seeking to inform our thinking. We have quite a lot
of analysis that we have been doing: we have some research under
way at the moment—that is how we formed this consultation.
So I am not pre-judging it at all.
88. Would fare increases make it easier to get
private sector financing?
(Mr Bowker) Not necessarily. I am not sure—if
one had fares increases you could argue that there would be more
cash but you could impact that in terms of volume as well, so
we need to understand that as part of the strategy.
89. Have you any idea whether the travelling
public would be prepared to pay more if they were getting better
services?
(Mr Bowker) We do have market research on both elasticity
of demand and on state preference.
90. Is demand elastic?
(Mr Bowker) Different markets have different elasticities.
Chairman
91. Have you looked at what the Rail Passengers
Council are saying about the increases, and the punch-up they
are having, not to put too fine a point on it, with some of the
companies? Some of the amounts of fare increases are very considerable
and that evidence is there. Have you talked to the Rail Passengers
Council?
(Mr Bowker) Yes, and they will be a very important
part of this consultation.
92. And we can take it that you will take their
views very strongly into account? After all, I still have a strange
old-fashioned idea that passengers are of some concern in this.
(Mr Bowker) We will, certainly.
Andrew Bennett
93. When is this document coming out?
(Mr Bowker) Our intention is to be able to get it
out early summer; I would say probably in two to three months.
94. What schemes are in and what schemes are
out? The multi modal studies suggested various things should be
done. Can they be put into the 10 Year Plan and how are you mediating
between the interests of commuters and Main Line? There are particular
problems on the West Coast, commuters into Manchester are getting
a poor deal compared to Virgin Trains coming into London, and
it is the same in the Milton Keynes/Bletchley area.
(Mr Bowker) We are heavily involved in the multi modal
studies. We are on all the steering groups, for example, and in
fact the Strategic Rail Authority relationship is quite strong.
One of the things I am intending to look at over the next nine
to 12 months in quite some detail is the relationship between
national transport planning and regional local transport planning
and, in fact, I have recently appointed a Strategic Planning director
who is a specialist in this area to take that forward.
95. So some of the money could be spent on implementing
the rail recommendations from the multi modal studies?
(Mr Bowker) At the moment the assumption is that there
is not funding within the 10 Year Plan to deliver the rail components
of the multi modal study, and if we were to divert resources,
there would be something else they could not do.
96. So they have to wait ten years?
(Mr Bowker) The point I make consistently is that
to the extent to which we can find and develop and communicate
a robust business case—not just in the financial sense but
in the social etiquette sense—then we would seek additional
funding.
Chairman
97. Have you still got the £4 billion in
for freight?
(Mr Bowker) The freight strategy is still deliverable
within the Strategic Plan, so we have the investment and the projects
to deliver 80 per cent increase in freight.
98. Who puts schemes that are excluded on grounds
of funding back into the 10 Year Plan? Is it your decision, or
the Minister's?
(Mr Bowker) Ultimately that would be a decision for
the Department of Transport in consultation with the Treasury
in terms of overall funding. I intend to be in a position where
the Strategic Rail Authority can present very robust business
cases for why additional funding should be included.
99. If for any reason money is taken away, as
it was, for example, in general terms because of the decisions
over Railtrack, where will that money be replaced from? From the
Treasury ultimately back into the 10 Year Plan?
(Mr Bowker) I am certainly working on the assumption
that I have £33.5 billion of public money in order to deliver
the output of the Strategic Plan and we were very clear in the
Strategic Plan and the assumption was that Railtrack would continue
to be financed in terms of quantum of finance in the way that
happened before, and I believe it is important that we continue
to protect the projects we have in the Strategic Plan to deliver
the output.
Chairman: Long may your optimism continue. Thank
you.
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