Examination of Witnesses (Questions 40-59)|
WEDNESDAY 19 JUNE
40. Mr Garnett, you negotiated a two-year franchise
extension and you mentioned the possibility of a further three-year
extension. Would it not be better to proceed with 15 years as
a refranchising agreement under the SRA's new approach?
(Mr Garnett) Two things have changed since we appeared
before the Committee some time ago when talking about long-term
franchises. One is that the East Coast upgrade was stopped two
years ago and we went for the two-year franchise. I am not sure
where the SRA is in its plans on the East Coast upgrade.
41. Surely you must know. It must be absolutely
fundamental to the way you run your business.
(Mr Garnett) We are not involved in the process any
more. It is handled by the SRA, they are leading it and they are
doing it and we are not involved in any way in that process.
42. Do you not ask for some information?
(Mr Garnett) We ask permanently and we are told that
they will tell us when they are ready to tell us and they have
not told us yet. The other point which has changed is the SRA's
strategy to consolidate on London termini to reduce the number
of operators. That is something which I think is eminently sensible.
We see an ever increasing growth of people wanting to commute
into London. The rail industry cannot afford to run extra tracks
into London. Season ticket fares are capped at inflation. By merging
operators into London, I am sure we will get greater utilisation
and greater benefit. The Kings Cross wagon franchise Thameslink
comes up in 2008. There is an argument which says why not wait
until 2008 and go for a super franchise and you will also be very
much clearer where you are with the East Coast upgrade. If you
roll forward three years, we can bring in the new trains, exactly
the same as they have done with Midland Mainline. They know they
have permanence up to 2008 and quite a lot can be achieved quickly
on that basis.
43. A cynic would say you know you are not really
in a good position to go for the long-term franchise and therefore
you just want to spin it out for another three years.
(Mr Garnett) I would argue that we are in a good position
to go for a long franchise. We still have the best record of any
inter-city train operator. We continue to provide an excellent
service. Our punctuality in the last quarter figures was bad,
largely due to the problems at Dolphinston. It is better to go
for a franchise where you know what the future is going to be
and therefore the parties can go out to bid. Having gone through
the chaos with Chris Green on my left, bidding for two years for
a franchise when neither of us knew what it was, for heaven's
sake please do not let us make that same mistake again, let us
go for a clearly defined franchise.
44. Can that not be done in a reasonably short
(Mr Garnett) If the SRA are clear by then what the
East Coast upgrade is going to be, what it is going to cost and
when it is going to be ready, that is achievable. However, you
will still not get rolling stock in as quickly as you would if
we rolled forward now. You do not address the issue of how you
get consolidation of TOCs in 2008.
45. Why does the rolling stock keep coming up
as an issue. Surely the whole arrangement was supposed to be that
whoever got the franchise the rolling stock was a separate issue.
(Mr Garnett) The problem which exists is that a manufacturer
is only paid when the rolling stock is introduced into service.
If the person who orders the rolling stock may not be there when
the rolling stock is introduced, in spite of Government guarantees
of financial cover, that gives the manufacturer and the funder
no confidence that it is going to happen. You only have to look
round this country to see the amount of rolling stock that is
coming. There has only been one successful introductionthe
gentleman on my leftof new rolling stock in recent times.
The track record has not been good on introducing rolling stock,
so people would not be prepared to let us go out and order the
rolling stock to deliver to us if they did not know that we were
the operator to bring it in. That has come back from all the manufacturers.
46. It would be interesting for us to know just
about the business of one operator. If there is only one operator
involved in a special purpose vehicle (SPV) to upgrade the East
Coast Mainline, is that going to create a conflict of interests?
(Mr Garnett) I do not think under the SRA's new plans
that the operator will necessarily be involved in the SPV. The
plan is, as I understand it, that the SRA will fund all the development
work on the East Coast, will come up with a specification and
say what it is going to be. They will then go out and organise
the funding of that through a special purpose vehicle. The train
operator may or may not be involved, but one of the things the
Strategic Rail Authority have said recently is that they want
to try to differentiate upgrades and franchising. That again was
part of the problem on the East Coast, getting the franchise and
the upgrade into place. As I understand it, they are going to
define the upgrade and get it funded and let the franchise.
47. Mr Green, do you have any comment on that?
Can you see a conflict of interest where the operator is also
the person providing the finance for a special purpose vehicle,
even though Mr Garnett says the SRA would like it not to be so?
(Mr Green) It is certainly interesting. It has been
said that the rolling stock manufacturers should not be part of
the SPVs so that you keep the competition between the manufacturers
outside the SPV. The cleaner it is the better.
48. The suggestion is not that it is wrong that
there should be people involved in the industry, but that whichever
particular division it is should be clearly seen before it starts.
Is that what you are saying?
(Mr Green) And a second point is that running the
railway is a full-time job and you do not want us distracted for
two or three years helping to set up a SPV and manage the financial
side. I do not have time to be involved in the renegotiations
on the West Coast.
Chairman: I know you are a very busy man.
49. Could you tell us what the current position
is on the West Coast Mainline upgrade?
(Mr Green) The work which has been done already is
of high quality and is proving highly successful. There is an
awful lot of work to be done still and that is the problem. The
latest statement from Railtrack is an independent review from
Bectel says it is going to take longer than we want and we are
not going to see the full high-speed running until May 2004.
50. What exactly will we see then?
(Mr Green) That means the trains will start coming
into passenger service this autumn, replacing old trains and running
without tilt. So you will have a conventional train, but it will
be modern. At some stage next year it will have sections of the
line where it can run and tilt and then in 2004 you get the timetable
51. How confident are you that will actually
(Mr Green) I am now highly confident that with the
new Railtrack management and Bectel we will be getting a much
more positive reaction and we are much more involved in their
52. How much disruption is there going to be
on the line while the changes are made?
(Mr Green) I fear it is going to be great. It is going
to be at weekends. Monday to Friday you will see a good railway
running and perhaps an accelerated railway. The pain is going
to come at weekends and the amount of work to be done is greater
than people thought. We seem to have lost the art of doing it
in the way we used to do, where we kept two tracks for passenger
trains and the engineers had the other two tracks. We seem to
need to give all four now to the engineers.
53. How many weekends?
(Mr Green) It means 18 weekends starting from 10 August
will get us about one quarter of the work done south of Rugby.
Mrs Ellman: Is there any alternative way of
54. You just raised the question of the way
British Rail used to do it. You presumably discussed that with
Railtrack and presumably will discuss it again with whoever takes
the place of Railtrack.
(Mr Green) Yes. It is an ongoing discussion. For this
year it is a fact of life that we must get the work done and that
means that the plan we have set, which is only going to start
in one month's time, has to happen. For next year Railtrack, Bectel,
ourselves, are all having a look at it to see whether there is
a better way of doing it.
55. The passengers might not be there while
you are taking a look at it, might they? They might oddly enough
get mildly bothered with your arrangements.
(Mr Green) This is the big worry. Sunday happens to
be our busiest day of the week.
56. I can tell you plainly that I and many of
my colleagues on this Committee already travel up and down every
weekend and I only travel now on Virgin between Monday and Friday.
On a Saturday or Sunday I fly.
(Mr Green) We will lose a large base of our leisure
business if that happens.
57. You are actually talking about six months.
(Mr Green) Yes; and for next year and possibly the
58. Yet your answer to me is that you will have
to look at it because there does not seem to be any other way
of doing it except starting it quite soon. I should have thought,
forgive me, that was a council of despair. I like you, Mr Green.
(Mr Green) I am more confident than I may sound. There
is a massive re-think going on that we do want the work to happen.
The worst scenario is to drag the work out over ten years.
59. We all want the work to happen, believe
me. What happens to the West Coast Mainline is of absolutely fundamental
importance to large numbers of Members of Parliament if to nobody
else. Are you still arguing with the Strategic Rail Authority
about the sense of closing a major rail system every weekend up
(Mr Green) Yes, of course we are, but I think it really
does have to happen this year. There is no quick fix for this
year, the logistics are too big. Maybe for next year.