Supplementary memorandum by the Department
for Transport (DAR 01A)
EVIDENCE GIVEN BY THE SECRETARY OF STATE
AND PERMANENT SECRETARY AT THE HEARING ON THE DEPARTMENTAL ANNUAL
REPORT 2004
This memorandum responds to the questions put
to the Department following the oral evidence given by the Secretary
of State and Permanent Secretary on 17 November 2004. These questions
were set out in a letter dated 26 November from the Committee
Secretariat to the Department's Parliamentary Clerk.
1. The Secretary of State promised a note
on the penalties and incentives for train manufactures. (Q59)
Contracts for new trains usually include reliability
conditions. Their form varies but the commonest types are:
— a "miles per casualty"
target, that is, the distance the trains are expected to run between
breakdowns. Figures vary from contract to contract, but a requirement
that trains should achieve 20,000 to 30,000 miles per casualty
on delivery, rising to between 40,000 and 60,000 within two years
would be typical;
— an availability requirement, which
may be applied where the manufacturer himself maintains the trains.
The obligation is that he must provide a set number of trains,
sufficient to run the service, from the maintenance depot each
day.
Failure to meet targets of either type will
trigger contractual damages. These usually take one of two forms:
liquidated damages; or the withholding of a performance bond which
becomes payable to the manufacturer only once the relevant targets
have been met.
Details of the penalty clauses in individual
contracts are commercially confidential. The importance of these
provisions to manufacturers can, though, be gauged from the fact
that, since 1995, there have been 48 orders for new trains (comprising
4527 vehicles) worth, in total, £4.2 billion. Of that, some
£420 million is at risk if manufacturers fail to meet contractual
performance targets.
2. Mr Rowlands described the arrangements
for agencies to give the Department their workbooks on a monthly
basis. How long have these arrangements been in place? When does
the Department expect to produce monthly accounts?(Q88)
Agencies have provided the Department with monthly
workbooks since the introduction of Resource Accounting and Budgeting
in 2001-02 and with monthly cash-based information before then.
These workbooks provide details of expenditure and full year forecasts
against budgets.
The Department already prepares monthly management
accounts and expects balance sheet and cash flow information to
be produced quarterly from June 2005 and monthly from December
2005.
3. The Chairman asked about the Highways
Agency's target on non-motorised crossing points. The Committee
would like more information about why the target was missed. (Q112-113)
The target was to survey all non-motorised crossing
points on the core network and trunk road network for access,
safety and convenience. A five-year programme of improvements
based on the survey would be developed by 31 March 2003. The improvement
programme to be completed by 31 March 2009 and monitored through
the Highways Agency work programme.
By 31 March 2003, the Highways Agency completed
surveys of all non-motorised user crossing points on the trunk
road network and drew up a provisional list of improvements, which
would offer good value for money, for implementation by 31 March
2009. The list was not developed into a five-year programme because
of funding pressures. As a result an in-year target was not set
for 2003-04 and the Agency have since issued a correction to their
annual report.
Non-motorised user crossings are provided where
justified as part of major schemes. In addition, small free-standing
schemes are funded from the small schemes budget. Following the
recent spending review settlement, the Highways Agency is developing
its forward programme for small schemes, which also include high
value-for-money safety schemes and junction improvements, as well
as environmental improvement measures. The Agency is now unlikely
to be able to implement all identified non-motorised user crossings
by 31 March 2009 due to pressure on the small schemes budget.
However, in developing its Business Plan for 2005-06 to 2007-08,
consideration will be given to how best to meet the needs of non-motorised
users within the budgets available.
Non-motorised user crossing locations will be
identified in the Highways Agency's Route Management Strategies,
which provide a framework for considering all potential issues
affecting the management and operation of a route in an integrated
manner, so that forward programmes are developed on a comprehensive
basis.
Progress on delivery of non-motorised user crossing
improvements will be monitored by the Agency.
4. The Spending Review 2004 provided the
Department with £1.7 billion to cover "immediate pressures"
over 2005-06 and 2006-07. What are these "immediate pressures"?
These pressures result predominantly from the
rail industry—a peak in renewals expenditure by Network
Rail following the Hatfield accident, as well as rising passenger
franchise support costs. For future years, infrastructure costs
will reduce, both as the current renewals peak passes and as Network
Rail work towards the stretching efficiency target set by the
Office of the Rail Regulator in the recent Interim Regulatory
Review. Nevertheless, financial discipline across the railway
will remain essential. The reforms set out in The Future of Rail
(Cm 6233) and embodied in the Railways Bill currently before Parliament,
will form an important element in the maintenance of future cost
control
In addition, changing assumptions about the
Highways Agency's private finance programme have created further
public spending pressures. At the time of the original 10 Year
Plan in 2000, it was assumed that approximately a quarter of HA's
total capital investment programme would be delivered through
off-balance sheet Private Finance Initiative contracts, with these
spread evenly across the years in proportion to conventionally-procured
spending. The experience of HA's first phases of DBFO schemes
has, however, shown that these are best suited to the larger investment
projects. As these fall in the later years of HA's Targeted Programme
of Improvements (TPI), this means that the public expenditure
impact of delivering the TPI is higher than anticipated in the
earlier years.
Furthermore, the working assumption is now that
most strategic roads PFI projects will be accounted for on the
Government's balance sheet. Whilst this does not affect the overall
economic cost of the projects, it brings forward the impact on
DfT's Departmental Expenditure Limit, giving a further pressure
on overall spending.
5. Staff numbers at the DVLA increased by
22% between 2000-01 and 2003-04. Do you still expect to reduce
DVLA staff by 500 by 2007-08? Will the DVLA be able to operate
effectively with 500 less staff given its full work programme?
The 22% increase in DVLA numbers in the four
years 2001-02 to 2003-04 was a result of a mixture of volume growth,
which averaged some 7% in each year over this period, and a range
of new statutory and policy initiatives. During this period, the
DVLA managed to achieve an improvement of 11.4% in efficiency.
DVLA has undertaken a great deal of work over the last 12 months
in terms of assessing the full positive impact on productivity
of its introduction of new systems and processes, building in
continuing growth assumptions and factoring in its planned resources
to further policy and statutory changes. On this basis, as it
has reported in its response to the Gershon Review, it is confident
that it can continue to provide its services to existing standards
with the estimated 500 less posts.
6. The Committee would be grateful for a
copy of the review of the bus subsidies referred to in the Department's
memorandum on significant changes and developments since the publication
of the Departmental Annual Report 2004.
The review of bus subsidies started in April
2002 and the Department published a consultation paper at an early
stage, in August 2002, to seek views from interested groups. The
outcome of the review of bus subsidies was published on page 70
of the White Paper "The Future of Transport" (Cm 6234)
in July 2004. Nothing else was published or issued by the Department
as a result of this review. The key elements of the outcome of
the review are:
— Guidance will be issued by the Department
to help local authorities and bus operators assess whether Quality
Contracts are appropriate in their area. The Department has already
issued a draft of this guidance for consultation.
— The Department will streamline the
statutory procedure for Quality Contracts by reducing the minimum
period between making and implementing a scheme from the current
21 months to six months. The Department's guidance will make clear
that use of the minimum period will only be appropriate for schemes
with a limited impact on bus operators.
— The Department considered a number
of options for replacing or modifying Bus Service Operators' Grant
(BSOG), such as relating subsidies to the number of passengers
carried or to the distance travelled. The Department concluded
that the benefits to be gained from any change are not certain
enough to justify the costs and disruption at a time when we want
operators to focus all their energy on improving services for
passengers.
— The Department will no longer pay
BSOG, for any routes that are procured under a Quality Contract
but instead transfer a parallel sum to the local authority for
procurement of bus services.
— The Department will also consult
Transport for London on implementing this change for the existing
franchised service in London.
— The Department will review the case
for a further round of funding for Kickstart projects, aimed at
pump-priming patronage growth, in light of progress with the 18
pilots already being funded.
— Rural Bus Subsidy Grant will be retained
beyond April 2006 to give continuing support to local authorities
in promoting rural accessibility.
— The Department does not propose any
changes to concessionary fares entitlement, but will look at streamlining
the administration of concessionary fare schemes.
December 2004
| 
