Examination of Witnesses (Questions 300-319)
MR CHRIS
AUSTIN AND
MR DAVID
HIBBS
10 NOVEMBER 2004
Q300 Mrs Ellman: What are the route utilisation
surveys?
Mr Austin: The route utilisation
strategies are work that we do at the moment—not my team
but the Strategic Rail team—looking at the capacity and
capability of the current routes and how timetables can be restructured
to make the best use of that. It also covers things like minor
improvements in headways, platform occupation, deployment of rolling
stock and so on, it is about how you make best use of the railway
that is there today without major investment. We are undertaking
work on a number of those including the Brighton mainline, the
Great Western mainline; in a sense the West Coast strategy was
based on a route utilisation study for the West Coast Main Line.
There are lots of other routes to do, but they are likely to be
taken forward by Network Rail as a result of changes announced
by the Government in July in their White Paper. The work we are
doing on community railways, you could see if you like as a mini
RUS for each of these routes; they are route-specific, they will,
at the interface of the junctions where they share capacity with
the main lines, have an impact on the route utilisation studies
so they will feed into it in that sense, so there is a consistency
between the two approaches.
Q301 Mrs Ellman: Are you saying then
that looking at community rail strategies is part of the route
utilisation work, or could it be?
Mr Austin: It is not in the sense
that the route utilisation strategies are looking at the heavily
used, main traffic routes, where there are lots of capacity constraints.
Typically, there are not capacity constraints on the lines we
are looking at, but the work we are doing on our lines will feed
into the route utilisation strategies, yes.
Q302 Mrs Ellman: And that would include
community rail strategies?
Mr Austin: Yes.
Q303 Clive Efford: Can I just go back
on the National Passenger Survey, because I am left a little bit
confused—it happens quite easily but I would like you to
bear with me. You said that the community railways were included
in the National Rail Passenger Survey; why? What is the purpose
if you were not actually learning anything from it?
Mr Hibbs: We set up the National
Passenger Survey because there was a concern that we did not know
how passengers felt about individual train operating companies.
Q304 Chairman: Mr Hibbs, you must be
the only people in the world. Ignore that.
Mr Hibbs: When the railways were
privatised there was no National Passenger Survey, there was a
series of different surveys done by individual train operating
companies using different methodologies which were not comparable.
Q305 Clive Efford: Forgive me for stopping
you just there, but you have just said that that is not appropriate
in relation to community railways, so why were they included in
the National Rail Passenger Survey if they are not actually contributing
anything to it, if you actually need to do a specific survey on
each local service why were they included if you were not learning
anything from them?
Mr Austin: The purpose of the
national survey was to have a consistent basis of information
right across the network, and to be able to make comparisons between
train operators. What we are saying is when we come to looking
at community rail partnerships, because most of the traffic is
local and the whole operation is very locally focused, it makes
sense to look at the demands on an individual route basis and
to draw together the available information and look at it very
specifically on a line by line basis because we do not need to
make comparisons for that purpose between the various lines around
the country. There will be a different solution for each community
rail group because their characteristics and the markets they
serve are very different.
Q306 Clive Efford: I think I am right
in saying that in your initial answer you said that there were
responses as part of the National Passenger Survey on local community
rail routes. If there was nothing to be learnt from that, why
was it done? What purpose did it serve in including them?
Mr Hibbs: The research is all
about what question you are actually trying to answer; the question
we were trying to answer in the National Passenger Survey is what
is the perception of this train operating company, this train
operating company, this train operating company on a consistent
basis, so you can find out how many passengers believe the cleanliness
of trains is good on Central Trains, on Wales and Borders or Great
Western and compare the figures. That has to be done across all
of the services that the train operators are operating and that
is the basis of the survey; however, knowing the answer to that
question will not necessarily help you to plan the services
between Whitby and Middlesbrough or between Oxford and Bicester,
that requires a very different approach to the survey.
Q307 Clive Efford: It might tell you
whether there was satisfaction with, say, the age or standard
of the railway stock.
Mr Hibbs: It might do, yes.
Q308 Clive Efford: So what arrangements
are there for helping rural rail services to reduce overhead costs
for leasing rolling stock?
Mr Austin: The lease costs are
set by the ROSCOs; it is an unregulated market, so what we are
interested in doing is seeing what the likely effect of that market
is going to be in the short term. Because of the introduction
of a lot of new trains onto the network, we know that a number
of vehicles, particularly the Pacers and probably the Class 158
type vehicles, will be coming off lease over the next couple of
years and we believe that that should have a downward effect on
lease costs which will tend to help the community railways. The
other opportunities are in the use of existing off lease locomotive-hauled
stock, most of which is in reasonably good condition, it is air
conditioned, it is very comfortable, both mark 2 and mark 3 vehicles.
Some of it has been used over the course of the last couple of
summers to supplement on routes with high seasonal demand, usually
to and from seaside resorts, so there are opportunities there
as well where the lease cost of the vehicles might be quite low
but because they are hauled by a diesel locomotive which has to
be hired in, the operating costs can be quite high; it is a balance
between operating costs and lease costs. That, coupled with the
general downward pressure on leases for the small DMU (diesel
multiple unit) vehicles that work local and rural rail services,
we believe will help over the next two to five years, and that
is what we are focusing on.
Q309 Clive Efford: That sounds to me
very much like a suck it and see approach to the market. Is there
anything specific that you as the SRA could do to intervene to
assist the small rail networks?
Mr Austin: I do not think there
is, because the market is unregulated and deliberately so.
Q310 Clive Efford: So it is basically
up to the TOCs and the ROSCOs.
Mr Austin: Yes, and it is up to
the sort of deals that the TOCs can negotiate in the course of
their development of these routes, yes.
Q311 Clive Efford: Do you think the regime
that exists in terms of access charges to these networks is fair
at the moment in terms of the—
Mr Austin: Do you mean the lease
costs?
Q312 Clive Efford: Lease costs and access
charges.
Mr Austin: In terms of lease charges,
we have looked at it on the basis of economics rather than equity.
When looking at lease charges there are two key issues, one is
what the book value of the vehicle is and, secondly, the heavy
maintenance costs for which the ROSCOs are responsible, so those
clearly have to be covered and the market will determine the price.
We found just one or two examples where the market clearly is
not working, and the obvious example was on the Isle of Wight
where the physical constraints of the system limit the ability
of the market to work, so we do have questions there over whether
the vehicles, given their age, are being properly charged, but
that is the exception rather than the rule.
Q313 Clive Efford: What about the TOCs
themselves, do they have any bargaining power, are they strong
enough to be able to force these prices down, given that they
have very little as it were in terms of stock to actually barter
with?
Mr Austin: There is nothing to
stop them adopting a different approach if they want to and, as
I mentioned, some of them have leased in vehicles and locomotives
from other niche operators like Fragonset Railways, to help out
with meeting peak seasonal demand. There is actually nothing to
stop train operating companies owning the trains either, if they
want to, but in fact they have all found it advantageous to finance
them through train leasing companies, so maybe that is the answer.
Q314 Mr Stevenson: Could I very quickly
press you a little further on the questions that my colleague
Mr Donohoe was asking about the rail passenger partnership grant?
As I understood your response, Mr Austin, to the questions of
my colleague Mr Donohoe it was that you were very disappointed
that this cut had to be made, but you had no option because of
the overall budget and the demands of what might be called compulsory
expenditure for franchises as against discretionary expenditure
which these grants fell into. Given that there is a pre-emptory
call on the resources of your Authority in terms of the contractual
obligation under the franchises, is this looked at in terms of
overall strategy? I will tell you why I ask that, because recent
reports indicate that First Group, for example, have seen their
overall profits go up by 9% in the last quarter. They increased
their dividend by 10% and Mr Lockhead is reported as saying that
similar dividend increases are going to be made available for
the foreseeable future; in other words they are doing very well.
Have you any idea how much subsidy First Group gets for their
rail operations, for example?
Mr Austin: I do not. Chairman,
this is going well beyond my remit on community railways because
these are long distance intercity services.
Q315 Mr Stevenson: I understand that,
but I want to make it clear to you. We are faced here, are we
not, with cuts in the RPP which were described to us as "disappointing"
and we have heard from questions by my colleagues that this is
a very cost-effective grant and it is very short-sighted to pull
it. I think you accept that, but you have no alternative. At the
same time, the franchisees have seen their profits go up by double
digits, so we are faced with a situation in the public interest
where you are faced with RPP cuts—and you have no idea when
they may be restored, you have that impression—and at the
same time your authority is handing out subsidies to rail operators
that have seen their profits go up by double digits. Do you see
the point I am making?
Mr Austin: I think the sections
of rail we are looking at, which are not served by main line operators
like First Great Western, are very different. None of these make
money, by and large they are heavy loss makers.
Q316 Mr Stevenson: I am simply focusing
on your answer that it was overall budgetary pressures that forced
this decision on you. I am not questioning that, I am simply looking
at what strategy you are adopting as an authority to try and look
at all areas whereby these very viable grants can be restored
within the budget you have got as quickly as possible. It seems
to be incongruous and possibly unacceptable in the public interest
that we have the RPP being cut, with no real prospect of being
restored, and yet there are millions and millions of pounds paid
to companies like First Group in subsidy for operating their train
franchises whilst they are making double digit profits. Surely
there is a question to be asked here by us as a committee as to
what strategy your authority is adopting in those circumstances.
Mr Austin: There are two things
to say: one is that the schemes on community rail routes that
typically Rail Passenger Partnership funding was used for were
not those that generated lots of fare box income and therefore
boosted the profits of train operators; the grant, the subsidy
itself, through the partnership fund was to recognise external
benefits such as reduction of traffic congestion, improved journey
times for non-rail users, so it did not come back to the industry
in terms of profits, it went to society in terms of general benefits.
Q317 Mr Stevenson: I am not labouring
this, but I think I have made the point and it would be interesting
for us to find out, when companies are making double digit profits—and
the chief executive has guaranteed the shareholders for the foreseeable
future these double digit increases—that are being funded
in part by the taxpayer, I wonder how your authority is then counter-facing
that with cuts in these vital grants that could mean life or death
for a community railway. That is the point I am making.
Mr Austin: I think the second
point is that the support levels, whatever they are, are (a) contractual
and (b) as a result of a competitive tendering process, so that
competition for those has come beforehand.
Mr Stevenson: Thank you, Mr Austin, but
it is a point I think we are going to have to pursue.
Q318 Chairman: I know, Mr Austin, that
you told us basically that the cuts came across those things which
we all happen to think are quite important and which have a direct
effect upon rail freight grants and grants for your community
railways—what was the third one? They are all of them very
important.
Mr Austin: Project planning.
Q319 Chairman: All of them are absolutely
essential, and you are talking to a committee that has just returned
from looking at Korean Railways and Japanese Railways, which are
not only hyper-efficient, everything to do with the trains, the
staff, the linesides, the stations was absolutely immaculate,
where trains appeared on time and where the cost of a first class
equivalent from London to Crewe was £33 return. You will
not be surprised that this committee may view some of the problems
that have been put to us today as being really rather depressing.
Indeed, we did not feel that the Japanese industries were light
years ahead of us, we had the distinct feeling they were not in
the same century. Do you think we ought to abandon the passenger
service requirement?
Mr Austin: I think in respect
of community railways the answer is probably, yes. It would be
good to move away from that, it does act as a constraint on service
planning at the moment and it does prevent us making best use
of the rolling stock and delivering the best service for customers.
What we would like to do in the context of community railways
is have an agreement in relation to an overall service level for
which we are paying the public subsidy in support, but to allow
the individual train timetables to be developed by the partnerships
with the train operating company, so they would have a degree
of flexibility to develop that without any nationally imposed
constraints.
Chairman: Mr Lucas?
| 
