Examination of Witnesses (Questions 165-179)
MR JOHN
WEIGHT AND
MR TERRY
MORGAN
8 DECEMBER 2004
Q165 Chairman: Good afternoon, gentlemen.
Could you please identify yourselves for the record?
Mr Morgan: I am Terry Morgan.
I am Chief Executive of Tube Lines.
Mr Weight: My name is John Weight
and I am the Executive Chairman of Metronet.
Q166 Chairman: Thank you. Do either of
you have anything you want to say before we begin?
Mr Weight: Madam Chairman, I would
like to thank you for inviting us here today to address your meeting
and to answer your questions. We have put before the committee
the report for the first 12 months of our operations and we submitted
a further report on our last six to seven months and I hope that
has been of use to you.
Q167 Chairman: It has been very useful.
Mr Morgan?
Mr Morgan: I will avoid repetition.
I say the same.
Q168 Chairman: Metronet is spending £2.5
million and Tube Lines £1.6 million every single working
day. What can passengers see for that money?
Mr Weight: If I may refer to our
report for the last six or seven months, we have seen a significant
improvement in train reliability across the fleets. We have had
a 150% improvement on the Central Line. We have something in the
order of 125% on the Circle Line and 30% on the Bakerloo Line;
that is on train fleets themselves. The maintenance regimes are
being maintained across the system. We are now working virtually
every night somewhere on the network. There is work going on across
the whole system. We are now well into our track renewal programme
with a lot of work being done on the Victoria Line and you may
be aware of the weekend closures that we have been operating for
some time now on the south side of the District and Circle Line.
All of that is investment that is going into the system in accordance
with our plan.
Mr Morgan: The first thing I have
to say in terms of where the money is going is that clearly there
is a massive programme in terms of capital expenditure. What we
inherited was a profile of about £12 million a month. In
the month that we have just closed we have invested £34 million,
so there is a tripling of investment going into the infrastructure.
What passengers will see is that over the period that we have
been operating there has been a significant reduction in the number
of incidents. We did promise that we would put a high priority
on trying to improve the ambience of the trains in particular
and we have done that. Tim made reference to the fact that on
graffiti it would be very rare today if you saw a train in service
which had graffiti on it. Also, we had a strong determination
that passengers should expect to have the same cleanliness on
trains at six o'clock in the morning and at nine o'clock at night
and we have put a lot of effort into trying to standardise the
condition. We have a much higher quality of trains for passengers
to use. The other thing I would say in that regard is that investment
is coming through. We have been prioritising our increased investment
into safety. I can point to many examples where, because the funds
are now available, we have been able to address long-standing
safety issues that London Underground never had the funding to
resolve and that is where our money is going.
Q169 Chairman: I will ask you both what
proportion of your performance targets have you met over the past
year?
Mr Weight: Over the past year,
the first 12 months, because there is a definitive report on that,
so far as the sub-surface company is concerned I think we have
beat all of our performance targets as per the contract.
Q170 Chairman: All of them?
Mr Weight: Yes, and we showed
a positive trend in the availability and other scores. It is not
quite the same for the Bakerloo and Central and Victoria Lines.
The performance there was flat, given our inheritance. We have
put a lot of energy and effort and attention into recovering the
Central Line service from the Chancery Lane incident which happened
just before the contracts were signed, but nevertheless we had
the inheritance of that so a lot of work went into that to get
that back up to an acceptable standard. So far as the last six
or seven months are concerned we have seen a continuing improvement
in sub-surface. I wish I could see more improvements on Bakerloo,
Central and Victoria. Much of it I think is the condition of the
Victoria signalling systems and that is an early part of our investment,
albeit that it does not come on stream until around 2009.
Q171 Chairman: Before I come to Mr Morgan,
you would not agree then that there have been problems with performance,
derailments, lost cost customer hours above your benchmark and
similar rates of rolling stock failures as before the PPP?
Mr Weight: My measure is from
the day we took over. We trend those lines and the performance
in each of those measures from that time. My trends are positive
for sub-surface. They are not so positive for the Bakerloo, Central
and Victoria.
Q172 Chairman: Mr Morgan, why has there
been a dispute on performance scores between you and London Underground?
Mr Morgan: In the earlier two
sessions, reference, for example, was made to the Camden Town
derailment. There was a full inquiry. I must admit that when the
derailment occurred there was a great deal of anguish about the
fact that we had a gang of people working down there the night
before and it was not surprising that some people made the linkage,
that there must be something happening down there which made the
railway unsafe. We took risk with the transfer of the assets to
us from London Underground but the inquiry absolved us of any
responsibility for the occurrence of the derailment. We have got
abated seven million pounds for that. It is in dispute only because
I want to make sure that Camden Town cannot be repeated, so I
will pay the money but I want to get to a position with regard
to that issue that gives me confidence that that type of derailment
cannot occur again. There are issues like that where we are learning
from these things to make sure that they are not forgotten about.
Q173 Chairman: So you are not suggesting
that the dispute resolution process is unfair?
Mr Morgan: Not at all. I think
we are in a very similar position to how Tim described it. I have
five issues in dispute and when I think about the range of assets
and the things we are trying to do, that is not a big issue for
me.
Q174 Chairman: What proportion of your
performance targets did you meet over the last year?
Mr Morgan: Over the last year
I am particularly proud of the Piccadilly line. We have seen a
significant improvement and over the last 13 periods we have hit
our target each month. The Jubilee Line has been improving. In
fact, in the latest TfL report it reported that in the last period
we have just had the best month ever since the JLE was commissioned
five years ago, so I see that as being very positive. There is
no doubt that our biggest challenge is on the Northern Line. It
has hit some targets in some of our periods but, to be frank,
I am still not satisfied that we have the consistency in our performance
which would enable me to be confident that we know and can ensure
that the assets are performing every day.
Q175 Chairman: Then perhaps both of you
gentlemen would not worry if I asked you to give me a written
note on those so I can have accurate performance measures.
Mr Morgan: Of course.
Q176 Clive Efford: How have the financial
incentives contained in the contracts influenced your work?
Mr Weight: Over the 30 years of
the contract, if I look at the model that I am running to—and
forgive me because I might refer to the model in the financial
plan on a number of occasions and it reflects the nature of this
contract—I will be at risk on around 20% of my revenues
for the abatement reward schemes, so it is significant and certainly
would absorb profits that my shareholders are expecting to get
out of this business.
Mr Morgan: I think I am in a similar
position to John. Performance in terms of the financial performance
is directly linked to the performance of the network, so there
is a linkage. I have heard a number of references this afternoon
to engineering overruns, for example. The cost of a train service
failing during the rush hour can be as high as £700,000 in
an hour. What happens in the very short period at night we have
is that we might find a cracked rail. It might be safe to run
with a speed restriction. One of the decisions we have to make
during the night is, do we take longer to repair it so that we
can offer a full service for rush hour or by taking an engineering
overrun or do we put a speed restriction on and delay the service?
That is a conscious decision that we have to make and the weighting
between taking a delay at five o'clock in the morning and 8.30
in the morning is a multiple of 15-20 times in terms of abatement.
These are considerations that I believe are driven to ensure that
we offer the fullest services when customers need them.
Q177 Clive Efford: There are a number
of incentives but is the system one of the reasons why you give
so much attention to ambience over another target such as availability?
Mr Weight: I do not think the
two are necessarily competing. I think they are all important
and you have to look at these measures in the round. We do pay
attention to ambience because it is something that we are at risk
of. If we fail to keep stations clean or trains free from graffiti
our scores will go down and the abatements will kick in, so it
is in our interest to use cleaning crews, mobile crews, people
at depots in order to maintain that service. It is a different
regime that is looking after, say, the engineering work that is
done each night on the train service. Can I make one further point,
which is one that Mr O'Toole made? The whole proportion of abatements
and rewards increases dramatically as the new assets come in.
We are at risk for the delivery of the new assets to improve the
service of the system. That is the measure, and if we fail to
deliver on that score then these abatements really do kick in.
That is where the companies have to show commitment and delivery.
Q178 Clive Efford: Do you have anything
to add, Mr Morgan?
Mr Morgan: I do not think it is
a compromise between ambience and asset reliability. The reality
is that doing ambience is very resource intensive but you can
do it immediately. You can recruit cleaning crews and you can
put them on the trains, and we have. We have increased the frequency
of cleaning on some of our network by a factor of 10 to 12 times.
Asset reliability takes time. There is a very limited window of
opportunity at night and it does take a lot longer to go down
there and improve the service from a reliability point of view
compared to ambience.
Q179 Clive Efford: So why have Tube Lines
been fined £8.1 million for poor performance?
Mr Morgan: You may find this very
surprising. We inherited a very unreliable network. The number
that you refer to was based on a performance which was similar
to the network that we inherited. It is incentivised to reduce
the abatement that I paid to London Underground as a result of
my performance.
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