Examination of Witnesses (Questions 240
- 259)
WEDNESDAY 9 MARCH 2005
MR TONY
MCNULTY
MP AND MR
BOB LINNARD
Q240 Mr Stringer: You say that you
will give the go-ahead to light rail schemes if they are part
of a fully integrated transport system. The Secretary of State
has also explained that that does not have to involve charging
for road use. Can you explain to me what an integrated transport
system would look like for a city like Manchester or Leeds—one
of the major metropolitan conurbations?
Mr McNulty: I think there would
probably be three or four key elements. One would be apropos
our statement last July on buses;[1]
one would be the bus service operator grant will pass to the Authority
so it could more readily control in a strategic fashion its bus
services, north and south Manchester (we think that is one of
the key quid pro quos for an integrated strategy), but
it would also be how those bus services then fit in with what
Greater Manchester would seek to do with its road network more
broadly, including bus priority measures and those sorts of things,
but more generally too, how bus and roads bed in with heavy rail
and light rail in an integrated and sustainable way. It is not,
as you rightly say, a code for road user charging, workplace levies,
congestion charges, but they may or may not be a feature of it.
Every time you seem to say it people assume that it is absolutely
central to it, it is all code for congestion charges. It is not
meant to be that at all, it is just about what works best in terms
of relieving congestion and having an integrated transport model
in our cities and towns. The one caveat I would add is that increasingly
we may move towards either city/regional basis, even something
wider than simply a Merseyside area or the equivalents in West
and South Yorkshire, or combine them in some way. Again, in the
first instance that is a matter for the local areas concerned.
Q241 Mr Stringer: You say that it
would probably incorporate traffic restraint or constraint.
Mr McNulty: It may.
Q242 Mr Stringer: Do you not accept
that if one of the city's objectives is to have urban regeneration
they may want to increase the number of people going into the
city centre and traffic restraint would restrict that?
Mr McNulty: It would vary from
town and city to town and city. I know, from the work we have
done on light rail and other matters, that simply the pathways
going into the centre of Manchester, for example, are very constrained
and very congested. In other cases it may well be a mixture of
both restraint and other elements of road and traffic management.
You will know that Liverpool, for example, given the relative
affluence and significant regeneration there has been over, perhaps,
something like the last eight years has, from a very low base,
significantly increased its car ownership and car rider-ship,
which needs to be put in the balance. That is not the same issue
or problem that Manchester or Leeds face, in those terms, so it
is really about what works in each context for each city.
Q243 Mr Stringer: Has there been
a change in the Government's policy in relation to light rail
and trams?
Mr McNulty: No.
Q244 Mr Stringer: How many people
work on trams within the Department for Transport?
Mr McNulty: In terms of light
rail issues generally it is about the equivalent of 10 full-time
posts working on what are now new and fairly new major projects
in the light rail division. Previously, that was all just under
local regional transport and was part of the team that worked
just on transport, but it has clearly become a more significant
issue. That does not include, clearly, those working on TWA orders
and other aspects of the whole process in terms of light rail.
Q245 Mr Stringer: The National Audit
Office is critical of the Department's response time. Is that
related to the number of people working there? Should there be
more people working in that section? What are you going to do
to improve the response time?
Mr McNulty: Part of their retrospective
criticism was about the TWA element of the process and they recognised
in the report that we had pretty much doubled the staff in TWA.
Certainly in terms of the specific light rail projects to do with
TWA the last two or three have gone through—I think two
have been done well within time and the third was just over time,
I think, in the case of Birmingham. So we have dealt with that
element of it. Beyond that, their concerns were about, I think,
focus, which is why we have drawn out, from local transport major
projects, a light rail team which we think is sufficient to deal
with the workload.
Q246 Mr Stringer: When did you alert
Leeds and Greater Manchester to the fact that there was a likelihood
that these schemes would not be approved?
Mr McNulty: If you go through
the whole phase and chronology, in the first instance you will
know they were alerted to difficulties when we met both of them—I
think fairly soon after I came into the Department. It was almost
a second iteration. In both cases, before I got to the Department,
the cap had been increased—Manchester from £282 million
to £520 million and for Leeds and South Hampshire I cannot
remember exactly the figures. So, in the first instance, they
came to the Department saying there were difficulties in terms
of costs, can there be an increase in the cap, which there was.
I think soon after I got to the Department I met with them again
to confirm those caps and see what they could do in that regard.
If you are referring directly to when were they notified about
the decision in July, as I understand it they were not until Alistair
made a statement, because these were key commercial decisions.
Q247 Mr Stringer: That was the reason
for not alerting them to the fact that there was a problem?
Mr McNulty: No, there had been
at various stages in the process, all the way back from the initial
provisional approval, iterations and to-ing and fro-ing between
officials about cost base, and various aspects of the projects
that were on the table and their cost base. Was there a definitive
meeting with either or both of them to say: "These are in
trouble and we would like to withdraw funding approval in July"?
The answer is no, because they were on-going commercial processes
and something like that we felt would have impacted on the promoters,
their commercial considerations and everything else, and it was
not something we could share with the authorities and, hence,
the promoters.
Q248 Mr Stringer: Of the increase
in costs, how much would you apportion to the different headings
that the National Audit Office report recognises in terms of the
financing costs, the costs of moving utilities and non-standardisation?
Where do you think the majority of the extra costs of those three
schemes came from?
Mr McNulty: I think, in one sense,
it would be very, very difficult to apportion, not least because,
say in Manchester's case, the project that we had initially for
£282 million changed in some regards by the time it got to
the £520 million cap, and by the time they came back to us
on the run up to July, saying anything from £800 million
to £900 million million for the three lines, again, the nature
of the project under all those suspended headings changed considerably.
Certainly since July, with the working group that I chaired between
Manchester and the officials, quite rightly Manchester explored
a whole host of areas where things could change—revenue
risk, and all those sorts of areas—to the stage where what
is on the table now, the various components of it, is completely
beyond recognition of what we started out with £282 million.
So it is very difficult to apportion in a mechanistic way, under
all those headings, where the majority of the cost increase comes
from.
Q249 Mr Stringer: Can you give us
a rough order of magnitude of how much extra costs are attributable
to the change in the attitude of the city? Fifty million, 100
million, 200 million? On the Greater Manchester scheme or the
Leeds scheme.
Mr McNulty: It would be difficult
for me, beyond what limited expertise I have, to apportion that,
to be perfectly honest. That is probably one to ask the city and
the bankers, but they—
Q250 Mr Stringer: Do you not think
the Department should have some idea of what those figures are?
Mr McNulty: If it was as scientific
as that then perhaps they should, but it is not a science. Throughout
these processes, as and when we have discussions with many of
the project promoters—and this is part of the delay, I guess—there
are on-going arguments, disagreements and discussions about why
and what proportion, and cost-base, is appropriate for each element.
So it is very, very difficult to pass all that down and say what
comes from which direction.
Q251 Mr Stringer: The National Audit
Office criticised the Design, Build and Operate process. What
would be the Department's favoured method of procurement, at the
moment?
Mr McNulty: I think there is no
favoured option, and certainly, given where we are at now, with
the three extant schemes that we withdrew funding approval for,
and the other schemes going through, of all the various elements—design,
build, maintain, finance, operate—whatever mix works and
works appropriately for any given project, when it goes through
all the various new appraisal techniques and all the assorted
other elements, the value-for-money, the affordability, the benefit-to-cost
ratio—are all other things that are most important. I know
there is a view abroad that says DfT have some fixed procurement
model and it all has to be public/private, it all has to be PFI-dominated,
and all that (and that is part of the problem). We have said,
clearly, to Manchester and others: "Come up with a procurement
scheme that works for you with all those elements and we will
look at in the context of—".
Q252 Mr Stringer: Does that mean
you would allow a wholly public sector scheme?
Mr McNulty: Potentially, if it
worked. In some of the cases where there has been a lot of work
done over some of these extant schemes, part of the process has
been simply to shift that private risk element to the public sector,
and in some cases that may mean, as you work through the figures,
no adjustment or increase in the costs in terms of the upfront
element for the public sector, but down the line, in some five
or 10 years' time, a fairly substantial hit if the risk revenue
formulae and speculation does not work. So it is about balance.
If shifting all that risk revenue back to the public sector means,
in cash terms, upfront and beyond upfront, significant increases
in costs, then that is not achieving what we want any more than
adjustments to the—
Q253 Chairman: You do not think that
there are private finance initiatives where the risk, when it
gets shifted in theory to the private sector, actually results
in estimates which are just absorbing all of that money at a cost
to the taxpayers?
Mr McNulty: Again, I have heard
that suggestion but I would not have the expertise or knowledge
on every aspect—
Q254 Chairman: We must send you several
reports, Minister, and you must study them carefully. They will
explain it to you.
Mr McNulty: I have certainly read
a number of them but they are not necessarily germane to the various
procurement models for light rail.
Q255 Mr Stringer: If I can just finish
on two fronts: I think the difficulty for those of us who are
interested in Manchester's model (I think many people are interested
in this from a public transport point of view) is that three schemes
have been sought and it is very difficult to understand the ideal
scheme the Department would have. It is easy for the Department
to criticise, and I have failed to get out of you here, Minister,
and on other occasions when we have debated the matter, exactly
what hurdles would have to be got over for schemes to be approved.
Mr McNulty: Part of the difficulty
is understanding the entire chronology. Part of the thing that
we are not doing, at the moment—and we should once it is
all settled—is that at the moment we are trying to move
things forward with Manchester, with Leeds and there are still
talks and discussions with South Hampshire, so it is not appropriate,
at this stage, when we are trying to resolve those elements going
forward to go right back to the beginning. It may well be—I
do not know—that the real question is: was there really
any substantive chance of Manchester delivering three extensions
to Metrolink for £282 million and the model that was approved
in the first place? I do not know the answer to that, and I am
not knocking those who made that decision; I am just saying that
is a question of some validity that is worth looking at—and
the same in terms of South Hampshire and the same in terms of
Leeds. We are trying now to get in place a far more robust analysis
that tries to ensure, by the time you get to provisional approval
level for a project, that we feel far more confident about the
robustness of the numbers than we have done previously. So there
is not any template or blueprint, either now or then.
Q256 Mr Stringer: If you put the
finance on one side, do you accept, as we have had evidence this
afternoon, that buses simply cannot provide the same capacity
as trams can?
Mr McNulty: In some of the more
crowded corridors in urban areas (I have read the PTEG report
and everything else) that would seem to be the case but I would
not accept the starting notion that somehow buses do not work
as robustly as light rail in all cases; it is about—going
back to the integrated transport—the links between—
Q257 Mr Stringer: Do you or do you
not accept that there is a limit, as we have just heard, of about
3,000 passengers an hour, I think, on a bus corridor, and it is
considerably higher on trams?
Mr McNulty: I do accept that,
in some instances and on some corridors; I do not accept it as
a generality.
Q258 Mr Stringer: Final point, and
a very specific question because you have said publicly, in response
to the refurbishment of the Manchester scheme, that there will
be a quick response: when is that response going to be?
Mr McNulty: Without being facetious
it will be as quick as we possibly can. That element of the Metrolink
project was always one of the elements of the 282 to 520 and the
scheme that is on the table now. I have said time and time again
that that was part of the element, and if you unpicked everything
and go forward with the three lines with, maybe, a Transport Innovation
Fund (TIF) project element and all those sorts of elements, then
you did have to uncouple the refurb, which is necessary and necessary
soon. I will make every endeavour to have that decision with Manchester
at the earliest possible opportunity. We have had the paperwork
now for about three weeks; we got it, literally, the Friday before
I was up in Manchester for three days for ODPM's urban summit,
which was the end of January—so perhaps a bit longer, maybe
four or five weeks—but I am cracking the whip on that one
to try and get that element of the project determined sooner rather
than later. Whatever happens long-term, we are going to have phase
III, the refurb, the modernisation of Bury-Altrincham, and all
that does need to happen and happen soon. I fully accept that.
With the politics, watch this space because I am trying to get
that done as soon as I can.
Q259 Miss McIntosh: Could I ask you,
Minister, about the new railway safety regime coming out from
the Railways Board and, eventually, in the European Urban Rail
Directive. Do you accept that it is going to be more costly for
the companies operating those systems to adhere to?
Mr McNulty: Firstly, I certainly
hope not because the whole thrust of the Directive is to get costs
down rather than otherwise. Secondly, I think there is a bit of
a misinterpretation of the Railways Bill and putting light rail
and tram schemes with all that migrates from the Health and Safety
Executive to the Office of Rail Regulation. In essence, under
the Health and Safety Executive the entire rail safety division
was autonomous, separate and worked within its own terms, which
is why it is easy, having made the policy decision, to lift that
out of there and put it in the Office of Rail Regulation. It had,
within its terms inside Health and Safety, light rail and trams,
and if you take everything out and put it over to the Office of
Rail Regulation it seems absurd, really, to leave light rail and
trams back at HSE and not move them over as well. How the Office
of Rail Regulation works with the light rail and tram element,
in the context of their regulatory duties, economic safety and
everything else, is a moot point and one that they are still discussing
now as part of the transition and post-Railways Bill, post-SRA
scenario. I am not entirely sure, even with light rail coming
under a national heavy rail standards regime, that the argument
that that somehow imposes greater costs and, somehow, means the
gold plating of safety should be uncoupled from heavy rail stands
up to much judgment. I have certainly not seen much evidence of
that, although we are looking into that as part of our overall
review of all light rail projects.
1 Note by witness: See Chapter 5, The Future
of Transport: a network for 2030, Cm 6234. Back
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