Select Committee on Transport Written Evidence

Supplementary memorandum by the Strategic Rail Authority (FOR 97B)


  Thank you for the letter of 10 December to the Chairman who has asked me to respond to the Committee's requests for supplementary information. I am also grateful to you for extending the deadline from 9 January until today.

1.   What is the SRA's estimate of the likely annual rolling stock demand over the next 10 Years?

  There are 11,000 vehicles currently in operation. By 2005, the average age of GB rolling stock is expected to have fallen to 14 years (around half its typical 30 year life expectancy). If vehicle ages were evenly distributed, it could therefore be expected that around 370 vehicles would be required each year to replace old vehicles. Once any further possible improvements in asset utilisation had been exhausted, any new or additional train services would require new vehicles over and above that amount. In practice, the expected life expiry dates of rail vehicles are unevenly distributed and the required replacement profile will vary from year to year.

  The SRA's Rolling Stock Strategy considered whether there is a case for artificially "smoothing" the new build profile, but concludes it would not be value for money to do so. Manufacturers are increasingly able to manage peaks and troughs in the workloads from individual countries given the international nature of demand for rolling stock. Artificial "smoothing" would mean retiring stock early, or continuing to operate older stock where this uneconomic.

2.   What benchmarking was undertaken in preparing the terms of the new passenger rail franchises?

  The SRA used various sources when considering the new passenger rail franchise template:

  (i)   evidence of past delivery under the old franchise template;

  (ii)   evidence of delivery under different forms of franchise and concession model across the Government's range of PFI deals including the Treasury Task Force Guidelines; and

  (iii)  evidence from international experience about rail franchising structures.

  Once these had been synthesised the benefits and challenges associated with different models were reviewed to ensure that the new model addressed the shortcomings of the past and used up to date structures and forms to develop the new template.

  In particular, there are a range of specific benchmarks embedded within the new franchises all focused on delivery for the customer. These benchmarks are explained in detail below.

    —  Cancellations.

    —  Capacity.

  For both of these historic data was used and the target which was set was based on past performance.

    —  Service Delivery.

  Historic data was collated, dis-aggregated by cause of delay and a target set for each cause on the basis of the average of the previous best two periods of data. The target for each cause was to be achieved within a period of nine months if it was a staff related issue and within a period of two years if it was a rolling stock related cause. The targets by cause are then aggregated as an overall target. Thus we are requiring the TOC to achieve the lowest level of delay that he has ever achieved every day.

    —  Network Rail.

  This element and its improvement over time is bid by the potential franchisees and evaluated for deliverability as part of the franchise award process.

  Each benchmark has the following four performance levels:

    —  Target.

    —  Improvement.

    —  Breach.

    —  Default.

3.   What enforcement mechanism does the new franchise have where TOCs fail to meet agreed delivery standards?

  The Railways Act 1993, as amended by the Transport Act 2000 (the "Act"), and the Directions & Guidance issued to the Strategic Rail Authority (the "Authority") by the Secretary of State for Transport, require the Authority to ensure that Franchisees and Franchise Operators ("TOCs") comply with the terms of their Franchise Agreements.

  The Act contains specific provisions in relation to enforcement, whereby the Authority may issue compliance orders to TOCs and impose penalties on them.

  Enforcement is also addressed by the new standard form Franchise Agreement (the "New tFA"), which includes detailed provisions (in schedule 10.1) relating to the remedy of breaches of its terms.

  All new Franchise Agreements will be on the terms of the New tFA. The Authority may also require TOCs whose Franchise Agreement are based on the original standard form agreement to comply with the remedial process set out in schedule 10.1 of the New tFA, by requesting TOCs to amend their Franchise Agreements accordingly.

4.   What is the SRA's policy on bus substitution; and what role will bus substitution have in the new franchises?

  We have powers to provide franchised bus services, and are considering how they might be used. We do not at present have a policy of directing particular uses of buses but in the Greater Anglia Invitation to Tender (ITT) we gave guidance on long-term investment and included in the examples of such investment "total or partial substitution of certain train services by bus services where an enhanced service level could be provided for reduced cost or where the provision of bus services improves the overall capacity of the network or delivers other benefits". Please note the ITT has not been publicly issued but has been provided to bidders so it is in the public domain to an extent, but is protected to a degree by confidentiality agreements.

5.   An updated "Status of Franchising Programme" table as published in the Strategic Plan 2003; and a note of which franchises are being run currently as management contracts, would be helpful.

  This information is confidential.

6.   Are there any centralised, UK-wide arrangements for passenger refunds for poor performance, or is this left to each TOC? If so, is there any centralising work in prospect?

  Each train operator's passenger licence requires them to be a party to the National Rail Conditions of Carriage. The National Rail Conditions of Carriage set out the minimum level of compensation for passengers in the event of poor performance and states:

    "If your journey is delayed by circumstances within the control of a Train Company or a Rail Service Company and as a result you arrive more than one hour late at your destination station, you will be entitled to compensation in the form of travel vouchers which may be exchanged or used in part payment for tickets for any rail journey on the services of the Train Companies. If your journey involves more than one train service, you must allow at least the connection time shown in the Great Britain National Rail Passenger Timetable or five minutes at any other station.

    The value of the vouchers you will receive will be equal to 20% of the amount you paid for your rail journey. If you were using a season ticket, it will be 20% of the amount you paid for the ticket divided by the number of days for which your season ticket was valid when you bought it. This Condition does not apply to season tickets to which discount arrangements in a Train Company's Passenger's Charter applies. Also it does not apply if you are entitled to a refund in accordance with Condition 25."

  Each train operator also has a passenger's charter—this may provide more compensation than the minimum set out in the National Rail Conditions of Carriage.

7.   What work—including cost estimates— has been done to date by the SRA on a North-South high speed passenger rail line? Does the SRA see any practical prospect of an high speed dedicated passenger rail network being constructed in the UK in the foreseeable future?

  The SRA completed a detailed study into the need for and viability of a north-south high speed line in February 2003. The cost of the study is £1.3 million.

  The SRA's current budget does not cover the development or implementation of a high speed line.

8.   Do the SRA and Network Rail have different guidelines for implementing the Working Time Directive? If so, has there been any confusion?

  Network Rail decided late in the day not to be part of the consultative rail industry group which produced the Guidelines published by the SRA although they did accept the coordinating role of the SRA.

  We are not aware of any confusion or conflict in interpreting the Guidelines.

9.   On what basis do you appraise rail projects; does this involve cost benefit analysis; and, if so, are you content that the analysis produces accurate results?

  The SRA's approach to appraisal is set out in the "Appraisal Criteria" [published in April 2003]. The approach is based on cost-benefit analysis and the New Approach To Appraisal (INATA). It is consistent with the latest version of the Treasury's Green Book and was approved by the Secretary of State in accordance with the SRA's Directions and Guidance. The document will be updated from time to time.

  The SRA has processes in place to undertake ex-post evaluation of projects through Value Assurance Reviews.

  In addition, ex-post evaluations have been undertaken for Freight Track Access Grants. The review confirmed that, on average, returns were in line with expectations. A review of Passenger Rail Partnership and the Rail Performance Fund is being undertaken this financial year.

10.   What are the figures for train delays attributable to: infrastructure, individual TOC; and "knock-on" TOC?

  Network Rail were attributable to 54%, individual TOCs 32%, TOC on TOC (ie knock-on) 12% with 2% of delays attributable to poor wheel/rail adhesion during the leaf-fall season.

11.   Does the SRA have a policy to promote a "whole journey" concept for the passenger as part of the future of the railway?

  One of the primary, high level, purposes of the SRA is to contribute to the development of an integrated system of transport. The SRA must also exercise its functions in a manner best calculated to promote measures designed to facilitate through journeys by rail (including, in particular, through ticketing). The Secretary of State's Directions and Guidance to the SRA are also relevant. For example, they say that in examining proposals for new or replacement franchises, the SRA should give weight to the extent to which bidders' proposals will seek to improve the complete door-to-door journey experience. Good physical interchange facilities, appropriate timetabling, joint travel information and through ticketing all make integration easy for the passenger.

12.   What is the current total budget for the West Coast Modernisation Project? What changes in the total budget have taken place over the last 12 months?

  The WCML Strategy in June 2003 envisaged a maximum cost of £9.9 billion. Further work on efficiencies and further reviews of scope led by the SRA have been able to deliver further savings of around £2 billion.

13.   Who is funding the Centre for Skills; how much is it costing; how will it operate; what skills and training will it offer; and how will its success be measured?

  The Centre for Rail Skills is a company limited by guarantee, owned by the industry itself.

  Its mission is to "assist the industry to equip itself with the right number of people, with the right skills in place at the right time, in a cost effective way".

  Its overarching strategic objectives are that:

    —  It will be a Champion of, and for the Industry, and include all of the Industry within its membership from trackside to boardroom.

    —  It will recognise that there is such a thing as a "rail industry" and that while its component parts are autonomous, they are also interdependent.

    —  It will provide the "cement" for information and training across those interdependencies.

    —  It will develop and provide a strategic framework for the provision of current and future skills delivery with, and for the Industry.

    —  It will identify and grow appropriate suppliers to deliver an quality outcome on a Value for Money basis.

    —  It will seek to make the rail industry amongst the "best in class" of British industrial sectors in skills and training provision.

    —  It will be the Sector Skills Council (or the equivalent) for the Rail Industry.

    —  It will be the catalyst for enhanced performance of the Industry through its people.

  When employers in the Industry were consulted about the form they wanted the Centre for Rail Skills (CfRS) to take, they were adamant that there was no requirement for more bricks and mortar training establishments, or another training supplier. Rather what they sought was an organisation which would co-ordinate and facilitate provision for skills enhancement, and ensure that there were coherent and common benchmarks established within an agreed skills and training strategy for the industry. They were also concerned about problems surrounding recruitment of new, high calibre staff, and the difficulties of manpower planning. So these are the three areas on which the CfRS intends to concentrate in the first instance.

  Success will be determined initially by an improved profile of the industry as a good career, a decrease in skilled staff shortages, and an increase in the proportion of the Industry holding nationally recognised, and externally validated qualifications. These factors, in turn, should improve performance on the railways.

  Since then CfRS has been trying to negotiate an arrangement whereby it will be a "strategic partner within the Skills for Business network", requiring £500k annual funding from SSDA for fulfilling that role for the rail industry. However, although SSDA are content for CfRS to represent the interests of the rail industry within the Skills for Business network they currently appear either unable or unwilling to meet the vital level of core funding for CfRS to play the co-ordinating role so badly needed by the industry and its customers.

14.   What is the SRA's strategy for rural rail?

  Rural railways can fulfil a key role in the local economy, supporting local tourism, providing school transport, or as a key freight link for local industry, and in some cases they are the only form of public transport on offer to isolated communities. Whilst most serve a local function, some are important feeders to the strategic network of main lines. All require Government support to operate, and will never be profitable, but the principle of support is justified by the economic, social and environmental value of these lines. So, the task is to find ways to increase earnings and reduce costs to provide a sustainable future for these lines. It is also to look at greater local accountability and control, with greater local involvement in specification, and the opportunity for top-up funding to make them of greater use to the communities they serve, and less reliant on Central Government for funding.

  We do not believe that retrenchment is the answer. Closure of rail infrastructure is not consistent with Government policy nor the Secretary of State's Directions and Guidance set to the SRA. Railways represent a long life fixed investment, and closures leave huge residual liabilities which have to be managed. Most rural routes are run with few resources and their avoidable costs are relatively low. So cost savings on closure are limited (and offset by the cost of providing alternative bus services) and cost escapement takes time to achieve.

  The SRA is drawing up a strategy for Community Rail Development for rural and local lines. Its purpose is to increase the social utility and value for money of these lines by increasing ridership and income and reducing costs through appropriate specification of services and standards. It is also based on greater local involvement in defining, promoting and funding the services provided and particularly in harnessing the enthusiasm and drive of the local community in the development of their railway.

  There are some impressive examples of local management in mainland Europe. Several loss-making lines with limited residual services have been dramatically transformed and ridership has grown enormously. A good start has been made with the establishment of Community Rail Partnerships over the last 10 years, and these have recently expanded to cover a total of 48 lines around Britain. Without exception, passenger volumes have increased on lines supported by a Partnership. The Bittern Line in Norfolk has seen a 134% increase in demand over the last six years.

  We believe that this can be extended to other lines, and that we can draw also on the experience of light rail operators as well as some of the smaller independent lines like the Wensleydale and Dartmoor Railways. We shall be setting out a range of proposals in a consultation paper at the end of this month, and after considering the responses, intend to publish a strategy on community railways in the summer. The characteristics of the lines vary significantly, and there is no template solution for their future. There is, however, much good practice both at home and abroad, and drawing on this, as well as developing new ideas, from better marketing to microfranchising, there is considerable scope to enhance the value of many rural lines.

15.   The Committee heard evidence that a "mixed"—freight and passenger—railway carried with it severe limits on potential performance train enhancements; that the relatively small amount of rail freight might be transferred to road thereby freeing the passenger railway to make performance gains; these gains would, in turn, increase the rate of passengers transferring from road to rail. What view does the SRA have of this argument? Has the SRA done any work on this?

  The majority of the UK railway network is classified as being used for mixed purposes, be that a mixture of freight and passenger. High-speed passenger and slower speed stopping passenger services, or even a mixture of different speeds of both passenger and freight trains. The presence of freight on a mixed-use railway is no different to a mixture of just passenger trains on a route. In all cases the railway works effectively through proper planning of the timetable and management of the operation on a daily basis.

  Transferring freight from rail to road is not consistent with Government policy, nor consistent with the SRA's Strategies and as the vast majority of freight services are communally operated there would be no logic in attempting to switch these and grant-aided services.

  Through the SEA Capacity Utilisation Policy and Route Utilisation Strategies we are working with Network Rail and train operating companies (passenger and freight) to improve the utilisation of neutral capacity. This is to ensure that more optimally loaded passenger trains run and freight use is improved through better take-up of planned capacity and reduction in differential speeds between passenger and freight.

16.   In the financial year April 2002 to April 2003, what proportion of the railways budget was sourced to tax payers and what proportion to fare payers; what were these figures in £ sterling in each case; does the SRA have targets or estimates for these proportions in the current financial year, and in 2004-05; and, if so, what are they?
2002-032003-04 2004-05
Taxpayer47%51% 52%
Fares/freight/property53% 49%48%

  The subsidy of 47% equates to c £2.8 billion and the fares/freight/property of 53% equates to c £3 billion.

17.   As of 1 December 2003, what is the total subsidy commitment of the SRA arising from all franchises to the current end point of each current franchise?

  See Appendix 3 of the SRA's 2002-03 Annual Report.

James Watson

Assistant Director

Parliamentary and Public Communications

19 January 2004

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