Examination of Witnesses (Questions 14400
- 14419)
14400. To quote one of the respondents to the
survey I referred to: "Any sign of unreliability and commensurate
increases in costs, and the Group's Board could very quickly decide
to close down or sell the business—not just the rail distribution!"[16]
Remember here that the board referred to may be in another country,
perhaps even outside Europe, and that arguably makes it a lot
easier for them to sell off or close a part of their business
that appears not to be performing, so the stakes are very high
for some companies. A further quote to note from a rail freight
customer about his freight policy is: "when reliability is
threatened we truck it". The point to get across here is
anything that inhibits or threatens reliability can have a very
serious impact on the rail freight industry. Aspects of the Crossrail
Bill that could threaten rail freight reliability will be referred
to shortly.
14401. However, it is also important to understand
the importance, the value of rail freight to those that actually
use it, many of which often rely upon rail freight. In response
to the Strategic Rail Authority's proposals back in 2003 to reduce
the level of maintenance and renewal work on rural lines, freight
only lines and so-called "other secondary lines", precisely
the type of lines that so much rail freight uses and crosses every
day, FTA felt it was necessary to convey exactly how damaging
this policy proposal would be to customers and the wider economy.
14402. FTA took a number of industry sectors
and took some case-studies to show the impact of reduced reliability
and service that would result if the SRA had had its way, which
fortunately it did not.[17]
The results can be highlighted as follows: the cost to the aggregates
industry in the Peak District alone was estimate at over £100
million per annum; costs from just one retail company that was
using rail freight at the time, and indeed still is, was estimated
at £1.7 million per annum; the Scottish coal sector could
lose £80 million per annum; and the waste sector could suffer
additional costs in excess of £10 million per annum. The
costs we are referring to here were attributed to a range of factors:
re-engineering the supply chain, new shift patterns and employment
costs, alternative distribution patterns, building in more stock
and inventory into the supply chain, all the sorts of things that
could be involved when switching away from rail freight services
in order to recover or, indeed, regain some semblance of reliability
into their supply chains. If you consider that for inter-modal
transport, a train load of containers being disrupted, delayed
or diverted is in effect equivalent to having 30 lorries being
disrupted, delayed, diverted, and you can soon understand the
scale of the problem that would result for the customer affected.
The chaos this would cause for the manufacturer would be almost
unthinkable: stock-outs, empty shelves, closed production lines,
the list goes on. They would only need to suffer such consequences
once, I would say, to begin to seriously reconsider ever using
rail again. It becomes clear as well—these are specific
cases—if you spread this across rail users you end up with
a very dim and depressing picture.
14403. Of course, it is one thing to have confidence
in the ability of one's service providers to deliver reliable
and cost-competitive services, it is quite another to have confidence
that the infrastructure will be able to support your business
and traffic. It is often a big strategic decision for companies
to fully capture the benefits of rail freight. It may mean new
distribution facilities, investment in handling systems, wagon
leasing, possibly even a change to other business units in the
company within the supply chain, new contracts, new logistics
partners and so on. Disruption and delay can be very costly, as
we have already shown, but discovering that there is no spare
capacity on the network to support your traffic and future business
strategy is something we would say few businesses could tolerate.
Therefore, business needs assurance that they are not throwing
their investment down the drain.
14404. That is why we became focused on the
need to determine accurately what network capacity there actually
was and where the potential problems then might exist. FTA consulted
its members, and particularly freight operating companies, to
try and identify where the problems lay and where investment in
the network should take place most urgently. We referred to these
as "Trade Routes", which is the picture you have on
the slide.[18]
Nevertheless, we were not convinced that these were sufficiently
robust to effectively argue the case for government investment,
nor were they sufficiently reliable to enable companies to commit
to the use of rail freight services in their distribution and
supply chain strategies.
14405. So FTA approached the Rail Freight Group
for help in producing some more reliable freight forecasts and
matching these to existing network capacity. It just so happened
that around the same time the Government were also minded to have
more robust forecasts of demand and the initiative took on new
importance since it became central to the case for investment
in the rail network to support freight services. The Committee
will recall from the previous petitioner, the Rail Freight Group,
details of these forecasts so I shall resist repeating them.
14406. Given this background, the Committee,
I hope, will understand why FTA became deeply concerned about
the aspects of the Crossrail Bill.[19]
Firstly, as we have heard, the Bill introduced powers that enabled
the Promoters of the scheme to effectively overrule the authority
of the Office of Rail Regulation. This has the effect of making
the future unpredictable. Unpredictability makes it difficult
to plan and in effect it introduces an element of risk to investments
associated with companies' increased use of rail freight.
14407. Secondly, the Bill will reduce the capacity
of the network to carry freight, giving priority of course to
Crossrail services. Most notably this will affect freight services
on the eastern side of London to a greater degree than that on
the west, because we have forecasts which predict substantial
growth in inter-modal traffic generated by the existing ports
and new port developments. The Promoters dispute this but the
Crossrail Timetable Working Group report on 22 June 2006 has concluded
in the text: "Crossrail worsens the availability of paths
available for freight between Stratford, Forest Gate Junction
and Shenfield." This is, as you probably already realise,
a key section of the rail freight network that supports inter-modal
rail freight services. Industry needs to await the final Access
Option to see just how great this impact will be and the case
has already been put to the Committee that the Timetable Group's
work is far from complete.
14408. The Promoters claim, however, that any
loss will be compensated, but this excludes any compensation for
the freight customer, except those who lose freight facilities
and premises to the Crossrail scheme directly. Those others that
have committed their supply chains to include rail freight logistics
will receive nothing. They will potentially lose their investments
and incur further costs re-engineering their supply chains, as
I was describing.
14409. Faced with such uncertainty, many companies
could walk away from using rail freight or, at best, reduce the
scale of their involvement and turn to alternative strategies
which are most likely to manifest themselves in the form of road
freight alternatives. FTA has forecast recently that for international,
intermodal and roll-on roll-off journeys between Felixstowe and
the London area, that is using the A12 and the eastern/northern
quadrants of the M25 motorway, some 300,000 to 400,000 additional
journeys are likely to be generated between now and 2015.[20]
This is basically a response to the growth in demand for goods
being imported through the Haven ports. This is on top of the
growth in domestic lorry movements on this route, estimated itself
to be in the region of somewhere between 200,000 and 300,000 additional
lorry movements compared with 2005 figures. If rail freight demand
predicted by the FTA and Rail Freight Group forecasts is constrained
this will just exacerbate the problem further. The A12 in the
north and eastern quadrants of the M25 will suffer further congestion
to the detriment, we would argue, of the local region and the
economy as a whole, but it is not been estimated how many extra
lorries would be added to this particular route if they were unable
to move by rail since it really is impossible to predict how many
would actually choose this route. They could, of course, choose
the A14 but that is an already heavily congested route and one
which in itself we expect to see in the region of another half
a million road movements being generated on it by 2015 anyway.
14410. In summary, we have a situation where
shippers, actual and potential rail freight customers, are unsure
whether there will be enough capacity to accommodate their traffic
and even though they may have services today or in the future
they remain unsure whether these will be altered or taken away
completely. The situation is far from ideal if you are a company
wishing to develop your use of rail freight within the logistics,
operation and supply chain.
14411. Solutions. In the Government's review
of port policy, recently published, it has established the principle
that developers should enhance the transport infrastructure the
specific development will actually effect, and I put here a quote
on the slide from that discussion document that was issued in
May 2006.[21]
"In essence, new developments, which by expanding the amount
of port traffic trigger a need for expanding role or rail infrastructure
capacity, should be expected to pay for such expansion through
developer contributions. Where developers' proposals will create
a need for new infrastructure that is not envisaged by these plans,
the Government expects them to meet the costs of providing this
infrastructure."
This principle is being applied to the port
of Felixstowe, for example, which is expected to contribute towards
the costs of enhancing the rail infrastructure between Felixstowe
and Peterborough and also, beyond that, on to parts of the East
Coast main line. Now, FTA believes the same principle should therefore
apply to the Crossrail scheme. Rather than divesting themselves
of any obligation or responsibility for impacts felt beyond the
western and eastern extremities of the Crossrail project, the
Promoters should practise what they preach to others and contribute
resources to those schemes in and around London and even outside
London that would resolve the capacity problems that are being
forecast. In relation to identifying the location and scale of
those capacity problems, I respectfully suggest the Committee
await the evidence to be given later by further Petitioners and
witnesses appearing today.
14412. What I would advocate to the Committee,
however, is that they seriously consider amendments to the Bill
that would build in the obligation on the Promoters to consider
the impacts of the Crossrail project on the transport infrastructure
beyond the Maidenhead, Shenfield, Abbey Wood boundaries of the
scheme, and to contribute towards the costs of those schemes that
would ensure capacity shortfalls did not arise as a consequence,
directly or indirectly, from Crossrail.[22]
14413. FTA reminds the Committee of the consequences
on business from uncertainties over the rules of granting access
to the network shared between Crossrail and other services, in
particular the effects on freight services. The powers given to
the Promoters to effectively overrule the decisions of the ORR
in cases where the access rights of others conflict with those
the Promoters wishes to have for Crossrail, represents an element
of uncertainty that restrains development of rail freight services.
FTA recognises and welcomes the recent move by the Promoters to
accept the authority and jurisdiction of the ORR in respect of
determining access rights once the access options have been determined.
Nevertheless, we feel in the interests of instilling business
confidence and not setting a worrying precedent for any future
projects, the Promoters should go further and make it impossible
within the Bill for the Promoters to override the normal functioning
of the ORR in considering and awarding access rights to the network.[23]
14414. Business needs predictability. It enables
better planning, reducing the elements of risks associated with
business strategies. The reliability of the logistics elements
within a supply chain are crucial to maintaining business control,
reducing costs, increasing efficiency, keeping customers happy
and growing the business. The road network is under considerable
pressure from increased demand and, as we have seen, traffic is
forecast to grow even further over the coming 10 years and this
will reduce the reliability of road freight services. Business
is looking for reliable alternatives to road freight transport;
they are looking at rail freight. If we introduce Bills such as
this one that seems to ignore or fails to fully understand the
impact of such schemes on businesses, we will effectively be limiting
the freight transport options that are available to them. I put
here a quote from Professor Goodwin of University College London
from the report on The Future of Rail Policy that he gave to the
All-Party Parliamentary Rail Group in November 2003. "It
seems very likely that demand growth both of passengers and freight
markets would have been higher if capacity had been there".[24]
14415. The point here is clear, I think, that
if you put in the capacity, the growth in rail freight will be
larger than without it. So if you, or the Government, want to
see more growth, then you must cater for it. The numbers may be
disputed, but the principle should be upheld. The country cannot
afford to remove capacity from the rail network where reliable
forecasts, the best we have available today, suggest there will
be demand from industry to use that capacity. The Bill in question
today should be amended appropriately, establishing the principle
that ensures the Crossrail Promoters contribute towards the infrastructure
schemes and maintain the availability of much needed capacity
to support rail freight services and future growth.
14416. Thank you for your time.
14417. Chairman: Mr Elvin?
14418. Mr Elvin: Sir, can I just firstly
remind the Committee in respect of page 8 of Dr Traill's presentation
that he has significantly misunderstood the position of the TWG.
We see on page 8 that Crossrail worsens the availability of paths.[25]
If we look at page 8 of exhibit P106, which is the actual paragraph,
you will see that that is acknowledged but it is in the context,
under the heading of "Freight Services", that that is
against the Group agreeing that the capacity has already been
constrained before Crossrail comes on-stream, so there is insufficient
capacity with or without Crossrail.[26]
Yes, Crossrail will worsen the situation but it has already gone
beyond the point of being free capacity prior to that stage, and
one of the oddities of this presentation is that although he mentions
Felixstowe, which is only a port expansion, of course an entirely
new port is under consideration at Shell haven. A decision has
yet to be announced but there has been a "Preliminary minded
to" letter from the Secretary of State, but it remains to
be seen whether the industry puts it money where its mouth is,
and makes equivalent contributions to upgrading the Great Eastern
line to take away the capacity which they will undoubtedly impact
upon in terms of freight and, indeed, apply the principles that
Dr Traill says ought to apply to Crossrail. The problem here is
that this Petitioner, like others, expects Crossrail, and that
is opposed to other aspects of the DfT absent its role as Promoter,
to correct capacity issues which already exist.
14419. I have already given a general assurance
to the Committee at Day 48, paragraphs 13682-13685, as to infrastructure
improvements. As I have already said, we cannot give specific
ones because the detail is likely to change but they are matters
which will be looked at as part of the conditions on the access
option, and we have already given the Committee a general assurance
about ensuring that capacity is not worsened as shown in the report
by Crossrail. So I hope that at least gives the Committee assurance
that we accept, up to a degree, reasonable requirements to ensure
that Crossrail does not make capacity worse than the Group's report
already says it will be at the relevant time, but to go as far
as this Petitioner is suggesting is both unrealistic and, given
the principles this Petitioner espouses, is somewhat perverse.
16 Committee Ref: A164, Freight Transport Association-Perception
(LINEWD-19705-005). Back
17
Committee Ref: A164, Freight Transport Association-The value
of rail freight (LINEWD-19705-006). Back
18
Committee Ref: A164, Freight Transport Association-Business Confidence-Trade
Routes (LINEWD-19705-007). Back
19
Committee Ref: A164, Freight Transport Association-Threats from
Crossrail (LINEWD-19705-008). Back
20
Committee Ref: A164, Freight Transport Association-Road Congestion
(LINEWD-19705-009). Back
21
Committee Ref: A164, Freight Transport Association-Solutions
(LINEWD-19705-010). Back
22
Committee Ref: A164, Freight Transport Association-Solutions
(LINEWD-19705-011). Back
23
Committee Ref: A164, Freight Transport Association-Solutions
(LINEWD-19705-012). Back
24
Committee Ref: A164, Freight Transport Association-Conclusion
(LINEWD-19705-013). Back
25
Committee Ref: A164, Freight Transport Association-Threats from
Crossrail (LINEWD-19705-008). Back
26
Crossrail Ref: P106, Crossrail Timetable Working Group, Freight
Services (LINEWD-GEN13-008). Back
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