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

Examination of Witness (Questions 80-99)



  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.


  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.


  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.


  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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