HOW TRAINS ARE PURCHASED
42. In general, Train Operating Companies lease the
carriages they require from one of the Rolling Stock Operating
Companies (ROSCOs) which emerged from the privatisation of the
railways. The three ROSCOs are Angel Trains, owned by the Royal
Bank of Scotland; Porterbrook Leasing, owned by Abbey National
Treasury Services; and HSBC trains, owned by the HSBC group. It
is notable that there has been no real new entrant to the market
since our predecessor Committee last took evidence from the ROSCOs
in 1997; the only non-ROSCO order has been placed for the Heathrow
43. At the outset, companies wished to identify themselves
through distinctive, customized trains. Although the ROSCOs have
made some speculative train orders, the bulk of their investment
has been to fulfil the requirements of particular companies. It
is notable that where ROSCOs have made speculative purchases,
they have readily found companies to lease the rolling stock.
It appears likely that shorter franchise periods will lead to
greater standardisation of rolling stock in the future. Mr Francis
of Porterbrook told us "I do not actually want 20-year leases
to require me to invest in trains, unless it is something of a
very specialist nature; and it comes back to the point about investing
in products that are evolved and are fairly versatile".
44. The SRA supported these developments, but was
reluctant to interfere too much in the market since "we are
in the business of specifying outputs, not the inputs required
to deliver them".
The Train Operating Companies "are the organisations which
have the facing against the customer, the passengers, they know
what the market requirement is, in terms of the kind of rolling
stock and the facilities on those trains, it is absolutely appropriate
that they are the ones that manage the process, carry out the
procurement, arrange the contracts, and that is what is happening."
45. This might have been tenable when the policy
was to award long franchises, and, within broad parameters, leave
TOCs to manage services as they saw fit. But in November last
year, the SRA issued a new franchising policy statement. Franchises
would be far shorter, and performance standards would be extremely
tightly specified and monitored. In those circumstances, TOCs
are unlikely to take much risk on rolling stock, particularly
as it was confirmed that leasing costs for short franchises are
proportionately higher than for long ones.
46. Mr Haydn Abbott, Managing Director of Angel Trains,
was entirely clear both that the SRA was, in reality, the guarantor
of contracts with TOCs, and that it was closely involved in the
leasing process. He told the Committee:
"the Strategic Rail Authority is actively
involved in each and every contract that we sign with each and
every TOC, because (a) we have a Direct Agreement which is in
parallel with the lease agreement, we have a Direct Agreement
with the Strategic Rail Authority, and the Strategic Rail Authority
sees and agrees, and indeed very often changes, every single lease
that we sign with a Train Operating Company".
47. It is entirely right that the SRA should take
a close interest in the arrangements its franchisees make to lease
trains. We believe it should go much further, and ensure that
franchisees order train types which can be widely used across
the network. This is already happening to some extent, as
the SRA has played a leading role in specifying the replacement
for the High Speed Train, even though it has left design details
to the final customers. As the Chairman said "it does not
make sense to buy three or four lots of replacement trains, it
does make sense to have a strategic review, and I do not think
anybody doubts that."
48. In the longer term, there must be a question
as to whether the SRA could or should take a greater role in train
procurement. The SRA explained that it devolved operational decisions
to the franchise holders because they were responsible for providing
the service and best placed to decide what they required.
However, the new franchises are to be shorter and far more tightly
defined than the old ones. Our witnesses were positive that it
was possible to obtain leased rolling stock even on short franchises.
They were guarded about the effect of short franchises on the
cost of leasing rolling stock, but the SRA eventually told us
that "generally lease rentals have fallen with increased
lease length." 
We take this to mean that short leases are likely to be proportionately
more expensive than longer ones. It may be easier to take a view
after some operational experience of the new franchises, but the
SRA should examine the extent to which it would be possible to
drive down costs by taking a more active role in train procurement.
49. The current fragmented procurement structure
leaves Train Operating Companies to take their own decisions,
but there has been no certainty that those decisions will produce
working trains. South West Trains and South Central each ordered
new rolling stock to replace their Mark 1 rolling stock. Modern
trains with air conditioning, heavier engines and more "redundancy"
require more power than the Mark 1s which they replace.
It is now apparent that the full complement of trains will not
be able to run until the power supply is upgraded. The problem
is being temporarily contained by delaying the delivery of trains,
but in the long term, it is entirely possible that the rolling
stock companies will be obliged to accept trains which cannot
run because the electricity supply has not been upgraded. At that
point, someone will have to pay.
The failure to identify the need for improvements involved all
parties; private companies failed to specify their needs correctly,
or to ensure that new trains could run on the track available;
it would be wholly unacceptable if the taxpayer had to pick up
50. The ROSCOs told us that although it was not their
responsibility to ensure the rolling stock they provided could
run on the network, they had discussed the need to strengthen
the network with the Train Operating Companies.
But, as Mr Francis, Managing Director of Porterbrook Leasing Company,
made clear, these discussions were taking place at the time when
Railtrack was still 'scoping' the size of the problem.
Mr Aldridge, Mr Francis and Mr Abbott eventually agreed that Railtrack
was ultimately responsible - "it was their duty to provide
the infrastructure on which these trains would run, knowing full
well that the older trains, which consume less power, would have
to come out of service by December 31, 2004."
Mr Abbott made the point that this inability to see that new trains
would require infrastructure changes was not unprecedented.
However, the Train Operating Companies were also responsible for
the procurement; they cannot escape responsibility.
51. The SRA ultimately intervened over the power
supply for the Mark 1 rolling stock. Mr Bowker told us:
"when I did arrive I was appalled at the
state of this particular programme. We have set up a project team,
there is now cross-industry buy into it, there is a single plan,
which is managed very aggressively, and we are getting on with
it, to the point where I can tell the Committee that some 230
new vehicles are in service, I think the first power substation
has already been built and will be installed shortly".
It is notable that the SRA had to step in to resolve
this problem, rather than Network Rail itself.
52. The SRA has a duty to draw up a Rolling Stock
Strategy: it should do so as a matter of urgency. The United Kingdom
needs a modern railway fleet, which contains vehicles which can
be cascaded when necessary, and is large enough to provide the
service required. It is clear that the rail "market"
as currently structured cannot provide it without intervention.
The SRA must intervene to ensure the necessary stock is provided
where it is needed.
53. We were also told that the lack of network capacity
was making overcrowding worse, since it led to delays and service
disruption. Faced with a choice of an overcrowded train which
is standing on the platform and another train which cannot be
guaranteed to appear, passengers choose the overcrowded train,
which will at least get them home, if not in comfort.
54. As we have described in our report on Railways
in the North of England, the wish of some franchisees to increase
the services they offer has increased the load on capacity.
Virgin Cross Country's decision to introduce a new timetable which
offered an increased number of trains, shorter than those which
previously operated on the route is the most notable example.
Not only did the new trains lack the capacity needed for peak
travel, they attracted new customers who could not be accommodated.
The increased frequencies also meant a greater risk of service
disruption. The Chairman of the SRA explained that "adding
in services in the inter-peak period
was providing quite
a lot of disruption to the start of the evening peak. So by not
having these off-peak services we can ensure that the evening
peak, where overcrowding would be an issue, is served as well
as we possibly can."
The SRA's attempts to increase the system's capacity are welcome.
However, our support for rationalizing the timetable in ways which
ensure that journeys can be made more reliably, at the cost of
some service frequency, should not be confused with support for
major cuts in service.
55. The SRA failed by allowing timetable enhancements
which could not be delivered in practice. It is reasonable for
it to consider judicious pruning on congested lines to ensure
services can run reliably. When it does this it should ensure
that if new service frequencies are introduced the trains provided
are long enough to accommodate the passengers from discontinued
56. We were told that physical infrastructure could
also impact on overcrowding. Even if rolling stock is available,
train length may be constrained by the length of the platforms
on the particular route; some might be as little as two carriages
long. Mr Cameron of Arriva Trains claimed that while there could
be "grandfather rights" to run slam door trains longer
than the platforms at particular stations, the HSE was reluctant
to give permission for modern trains to use short platforms "if
you had a train which was longer than the platform and that was
the timetable you had many years ago, then you are allowed to
continue with that one. If you are trying to resolve a problem
and you produce a plan that would allow a longer train and a shorter
platform, that is not acceptable."
We were surprised at these difficulties, since it is possible
to lock the doors of individual carriages, and to tell passengers
for particular destinations to use the appropriate carriages.
57. In fact, it appeared that the HSE's entirely
proper concerns to ensure that trains longer than the platform
at which they have halted were operated safely was being used
as an excuse for inaction. The HSE made it clear that their position
was more complex; they did not absolutely prohibit the operation
of trains longer than platforms; they simply wished to be sure
that trains were run safely.
58. Arriva's unwillingness to explore ways of running
longer formations and eagerness to blame this on the HSE displays
shocking indifference to customers' experience. Mr Keith Ludeman
of The Go Ahead Group made it clear his company was experimenting
with GPS-based systems which would automatically lock doors which
were not opposite a platform.
Franchise holders should not use the Health and Safety Executive's
requirements that trains be operated safely as an excuse for not
making service improvements.
59. The most reliable way to increase capacity, particularly
in the South East, is to authorise new rail schemes, such as Thameslink
and Crossrail. We welcome the recent signs of progress on Crossrail,
and the East London Line. Our witnesses were convinced that these
would, if implemented, produce real improvements.
However, it is also clear that new capacity does not offer a quick
solution. While new rail infrastructure would reduce overcrowding
in the long term, much could be done by running the timetabled
services reliably and by lengthening peak hour services where
33 Official Report , 26 Jun 2003, c 929 W; detailed
figures deposited in the library . Back
Q 184 Back
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Offical Report 26 June 2003, c929W; accompanying table Back
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Transport Committee, _Fourth Report Of Session 2002-03, Railways
in the North of England, HC 782-I, para 59; see also
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HC(2002-03)782-I, paras 69-74 Back
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