Examination of Witnesses (Questions 60
- 79)
WEDNESDAY 23 FEBRUARY 2005
MR KEITH
HOLDEN AND
MR STEWART
LINGARD
Q60 Chairman: The 70% did not just
come out of the Alps, did it?
Mr Holden: We cannot audit the
French systems and we cannot audit the German systems.
Q61 Chairman: No. I think you would
be very rich, Mr Holden, if you found a way of doing that.
Mr Holden: Absolutely, yes, I
would, I agree.
Q62 Chairman: You would be an unmitigated
success and offered jobs all over the world.
Mr Holden: We did not drill down
to find out what impact that has on local taxpayers but obviously
we do flag up and give an indication of the extent to which there
is that subsidy abroad compared with the Department's position
which is that these systems should be self-financing and require
no operating subsidy.
Chairman: I think we want to ask you
about some aspects of that.
Q63 Miss McIntosh: Can I just declare
my interest, it may be relevant. I am doing a placement with Network
Rail with the Industry and Parliament Trust, and I have interests
in First Group. You gave some responses to Mr Lucas as regards
the density of population and I think you do conclude that one
of the reasons for the success, particularly in France and Germany,
of light railway is specifically because they do have more densely
populated areas where they have chosen to put their light rail.
Obviously you stand by that conclusion.
Mr Holden: Absolutely, it is in
the report. If there are more people in your particular area,
densely populated, then you have got a greater chance of attracting
higher patronage figures. I think what I was saying to your colleague
was that it is not necessarily the case that you actually need
that. It does not necessarily mean that if you have an absence
of highly densely populated areas that light rail would necessarily
fail.
Q64 Miss McIntosh: You go on to say
that: "Poor financial performance of some existing light
rail systems is discouraging interest in supporting light rail
and the costs of new systems are increasing partly as a consequence".
Presumably that is a feature that has been ongoing for some time?
Mr Holden: Yes. One of the key
issues here is that the industry recognises, for example, where
operators are generating financial losses, so they therefore consider
whether or not they want to be part of future light rail systems,
and if so what sort of premium they would want to build into their
costs to take account of the risks that they may be operating
systems at below break even.
Q65 Miss McIntosh: You also say:
"It takes too long for local authorities to be granted the
necessary legal powers for light rail systems and whether schemes
will be funded is uncertain." Do you have any solutions to
speeding that along?
Mr Holden: There are two things
there. We point out in the report that on average it has taken
about two and a half years for a new light rail system to be granted
powers by the Department after a public inquiry. They have all
gone to public inquiry and generated an inspector's report. It
has its own target to turn these decisions around within six months
and has not achieved that. We do know the Department has taken
action by trying to beef up their team and increase the number
of people that they have got working on those applications. At
the same time, I think the report also fairly points out that
there are issues there for the promoters themselves to make sure
that their cases do stack up and do stand up to scrutiny so that
when they do provide their proposals to the Department they are
giving the Department exactly what they want. The other issue
more generally is about lack of a strategy. The Department envisaged
back in the 10 Year Transport Plan in 2000 that there might
be an extra 25 new lines running by 2010. That was its vision
but it did not have any strategy whatsoever to help achieve that
particular vision. It has had a very arm's length approach to
light rail and what has come along with that is a degree of uncertainty
on the part of the promoters in terms of whether or not, for example,
their proposals are likely to be received positively by the Department
and whether or not after a very long period of time, where promotion
can take perhaps 10 years, plus a great deal of money—I
think we have a figure in the report of something like £1
million a year to develop their proposals—and going through
all the steps that are required, at the end of it they will satisfy
the Department and receiving the funding they want to build their
systems. There is clearly a lack of strategic leadership by the
Department and we make recommendations to address that particular
problem.
Q66 Miss McIntosh: I understand at
the moment there is no specific commitment from the Government
to develop energy efficient light rail savings and you do make
a recommendation that: "The Department should bring this
report to the attention of the Department of Trade and Industry
and the Energy Savings Trust, for them to consider the case for
including the developers of light rail technologies as eligible
recipients of grants for energy saving technologies". Has
there been any further development since you published your report
because it seems to be happening very slowly?
Mr Holden: After we publish our
report we then have a PAC hearing, and that happened back in November,
and the PAC report will then be published, and I understand that
is likely to be published quite soon. We are then in a position,
armed with both our report and the PAC report, to go back to the
Department to find out exactly what they have done against our
recommendations. This report was obviously published back in April
last year and it is round about now, about a year later, that
we are wanting to go back to the Department, and we will be doing
this, to find out what action they have taken against this set
of recommendations and how they are proposing to take this forward.
Q67 Miss McIntosh: You say that it
is for the Department to adopt a more strategic approach. They
seem very wedded to the concept of regional transport policies
now. Do you believe that they should be using the Regional Development
Agencies for developing this kind of strategic thinking?
Mr Holden: That may be one way
through. We did not consider that within this report. Whether
it is national or regional or a mixture of the two, or one or
the other, the key thing is to have a clear strategy coming from
central government so that it is closer to the industry, closer
to promoters, and it can actually strip out some of the uncertainty
and, therefore, some of the risks associated with promoting the
scheme or for a private sector consortia to actually be involved
in that scheme where there is uncertainty as to when, if ever,
it is likely to bear fruit.
Q68 Miss McIntosh: You say in your
final recommendation: "The Department should indicate the
types of area, in terms of transport need, population density,
likely usage, and urban layout where it would be most receptive
to local authorities' proposals . . . ." What you have written
there seems to be coming very close to setting departmental policy.
Mr Holden: I think what we are
trying to say there is in terms of implementing policy you can
be clearer. At the moment there is no strategy or implementation
plan to deliver against its policy, to deliver against its particular
vision set out in its 10 Year Transport Plan. What that
recommendation is doing is taking that particular policy and that
vision and saying how it can be implemented better.
Q69 Miss McIntosh: I understand there
are no specific safety legislation requirements specific to light
rail, and infrastructure and rolling stock safety are assessed
for light rail through the same process as used for heavy rail.
Do you believe that there should be separate standards for light
rail?
Mr Holden: I think that is an
area in which the Department should work closely with the HSE
to assess whether or not that would be appropriate and the extent
to which you could gain economies. We do point out that there
is an anomaly between segregated and non-segregated light rail
systems which also needs to be ironed out.
Q70 Miss McIntosh: An anomaly?
Mr Holden: Yes.
Q71 Miss McIntosh: Are your conclusions
that it is less safe when it runs on the streets mixing with other
traffic?
Mr Holden: There is an issue as
to whether or not a light rail system which is running on an existing
cutting segregated from traffic has to meet heavy rail standards
but another light rail system which is running on-street with
pedestrians and other vehicles does not, which commonsense might
suggest to question where the risks would lie in those two different
ways of delivering light rail.
Q72 Chairman: I am interested that
you think there was no policy. By default there was a policy if
you look at the extraordinary story of the Sheffield Supertram
because it was the Government's insistence on privatisation which
raised £1.15 million instead of £79 million. It made
a material difference there, did it not?
Mr Holden: I am not too sure that
the policy itself made the difference. I think the issue was all
around the over-optimistic forecasting and certainly changes in
the patronage base in Sheffield. It might have been that that
particular policy could have been successful if they had got their
sums right in the first place.
Q73 Chairman: Forgive me, Mr Holden,
I am not an accountant but it would seem to me that if I have
an asset and I am forced in effect into a fire sale, which does
not get the sum of money it had been assessed as being worth,
it gets me 1% almost of what it is actually worth, then that must
be someone insisting on a particular policy otherwise why am I,
as the owner, being forced to get rid of assets at what is an
unacceptably low rate? Put it the other way round, in what private
industry would somebody be forced into that kind of a fire sale
by a bank and not be raising Cain?
Mr Lingard: I am not here to defend
this particular policy.
Q74 Chairman: I am not asking for
an opinion, Mr Holden, I am saying that you are saying there was
no strategy. You specifically said that one of the things you
had drawn to the attention of the Department for Transport was
they have not got a strategy.
Mr Holden: Yes.
Q75 Chairman: I am saying to you
that by default they have got a strategy because they said, "You
will take responsibility, we will assist you with the capital
costs and when it comes to the crunch we will insist on you following
certain tenets, one of which is a fire sale of your assets",
leaving everybody, the taxpayer and the ratepayer, with one hell
of a debt. Stagecoach got all of these assets for £1.15 million
for a 27 year concession, £79 million less, and after all
this the Executive has got an outstanding debt of over £100
million, £12 million a year to service. Is that not a policy
or are you telling me it just came out of the air?
Mr Holden: I would agree that
it is a policy but it is not necessarily a strategy. If you have
a vision to develop light rail over 10 years and to see more light
rail systems in place you really want a strategy to achieve that
particular vision. I think there is a distinction to be made between
policy and strategy.
Q76 Chairman: £79 million worth
in this instance.
Mr Holden: I do not think there
is any suggestion in this report that the Sheffield Supertram
was a fire sale.
Q77 Chairman: What would you call
the sale of something worth that amount for £1 million? A
bargain!
Mr Holden: The requirement for
the concession to be sold once the system was built and up and
running was obviously taken at the time of approval based upon
what they considered were patronage figures which would build
up over a time which would generate revenues and, therefore, valuing
that particular concession. That was all very clear at the time.
There was a sort of fire sale after that in terms of something
has required that this be done which was not previously known.
The key problem with the Sheffield system was that they got their
sums wrong in the first place, over-optimistic forecasting and,
in addition to that, subsequent events, for example, with regard
to housing in the city centre had a major impact upon the patronage
base. There were some early operational problems as well which
obviously did not help the reputation of the system.
Q78 Chairman: You still come back
to the fact that the privatisation was expected to write off vast
amounts of debt for the ratepayer as well as the taxpayer. You
are saying because right at the very beginning they took a decision,
therefore that decision was maintained all the way through even
though it was manifestly not really in anybody's interests. All
I am saying to you is that may not be a strategy but it most certainly
is a policy.
Mr Holden: Yes, I agree with that,
Chairman. Because it is a policy we cannot question it.
Chairman: I am beginning to be filled
with admiration for you, Mr Holden. You are almost coming up to
the David Rowlands' school of how not to answer. No, I must not
be unkind. We are very grateful to you for coming.
Q79 Mr Donohoe: In the report you
say that the whole question of light rail had not brought all
the benefits expected. What ones did it not bring?
Mr Lingard: It has not delivered
the patronage estimates that each proposal was required to deliver.
There are substantial shortfalls in the numbers of people using
the systems. That has been the main shortfall but it is not realising
the rest of its benefits in terms of reducing pollution, reducing
accidents, reducing congestion. It all follows that those have
been less than they might have been had the original patronage
estimates been met.
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