Supplementary memorandum by the Strategic Rail
Authority (FOR 97B)
FUTURE OF THE RAILWAYS
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;
(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
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.
For both of these historic data was used and
the target which was set was based on past performance.
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.
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
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
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
"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
Each train operator also has a passenger's charterthis
may provide more compensation than the minimum set out in the
National Rail Conditions of Carriage.
7. What workincluding 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"
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
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
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 passengerrailway 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?
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.
Parliamentary and Public Communications
19 January 2004