Examination of Witnesses (Questions 15340
- 15359)
15340. What do you anticipate in the future,
even without any growth in the aggregates business itself, in
respect of rail freight?
(Mr McLaughlin) We anticipate
a significant level of growth. I think my concern here in terms
of the discussions the Committee has already had is that I suspect
the assumptions which have been made in terms of the potential
growth in aggregates demand and the potential for rail freight
of aggregates in London are probably significantly understated.
If we start from the position that there is a process of Government
planning which involves forecasting the aggregate volumes, these
forecasts currently assume that aggregates demand in London will
increase from 13 million tonnes in 2003, the base year, up to
17 million tonnes in 2010. That forecasting process has not yet
taken account of the Olympics or the wider development plans for
Thames Gateway. I think we are looking at a steeper growth pattern
over a period of, say, 10 or 15 years. The difficulty we have
with the process to date is that as a customer of freight companies
we have not been directly involved in the timetabling work. We
are not timetabling experts but I am concerned that the assumptions
made for aggregate growth are significantly too low for a number
of reasons. The Crossrail assumption seems to be that the intention
is to leave other operators' access to the line really at a similar
rate to now when Crossrail is built. I think it has also been
pointed out yesterday by the Crossrail counsel that there is in
fact some scope for growth in the timetabling exercise. It has
been described to me as organic growth which I guess means 1 or
2 per cent per annum. It seems to me looking at the potential
for growth in the Thames Estuary, Thames Gateway and London that
that could be a significant under-estimate of the potential for
the growth of construction aggregates in the region. The knock-on
effect is that the demand for rail aggregates could be considerably
under-estimated I think. Our secondary concern is that this, in
effect, forecasting exercise only goes up to 2015 when Crossrail
starts. What we are interested in is what happens after Crossrail
starts, because it is after Crossrail when concern arises about
the potential expansion of Crossrail services and the effect on
other freight users. I think the process should take full account
of the longer term rather than drawing the line in 2015. The other
issue I am concerned about is that the process does not appear
to have included any sensitivity analysis about the forecast options.
It may well be assuming that there is so-called organic growth
in the increase in the demand for aggregates, but to the best
of my knowledge there has not been an assessment of what happens,
say, if aggregates demand for rail increases by 5 per cent instead
of one or 2 per cent per year. That is the kind of exercise that
one would expect in most forecasting processes. I am surprised
it is not part of the exercise we are dealing with here today.
The net result is I think the underlying demand for aggregates
to travel by rail could be significantly higher than is forecast
and hence we are extremely concerned about our long-term access
to the rail network.
15341. Mr Honey: I will ask you about
the other side of the equation now, if I may, which is whether
there are any limitations on the future supply of aggregates in
reality.
(Mr McLaughlin) There is a planning system
which determines the release of reserves. There is no particular
constraint at the moment. There is, to the best of my knowledge,
in the Mendip area, about 30 years' worth of reserves. That is
the principal source of aggregate into West London. So there is
significant capacity in terms of the existing sources of the rail
borne aggregates.
15342. Can you say overall what levels of aggregates
growth you anticipate there being beyond 2015?
(Mr McLaughlin) I think,
if we are looking at the development of Thames Gateway and London
as maybe currently anticipated, we should be looking at a long-term
trend growth which would lead to, certainly in terms of the rail
demand, a doubling over the levels we see at the moment, possibly
more.
15343. Can I ask you to deal with the apparent
approach of Crossrail, which is timetabling, and to say how you
consider the Crossrail proposals will affect the supply of aggregates
into London by rail?
(Mr McLaughlin) I think
what we are trying to do is bring this back to a kind of practical
proposition. What we are concerned about is if I am a rail aggregates
freight operator with a depot in West London and we fast forward
five years, and Crossrail is under construction, I think looking
at the Crossrail powers as set out in the Bill or subject to the
discussions with the Committee, as an operator I am going to require
infrastructure improvements to maintain my access to rail freight.
I need that access because the way the aggregates business works
it is supplying construction sites on very much a just-in-time
basis. Construction sites do not have stocks; they need materials
as and when they are required. Therefore, unless I have got a
reliable supply of aggregates—in this case by rail—then,
really, in business terms I have got real commercial problems.
Now, if we look five years ahead we could be in a situation, in
terms of the infrastructure proposals, where Crossrail have given
a commitment to supply infrastructure that is necessary to meet
demand, without being specific about the individual projects.
What concerns me about that is that that leaves the door open,
I think, for prevarication and delay in the provision of the infrastructure.
The way development and construction projects proceed, I think
what one needs to do is nail down those commitments as clearly
as possible. I think that is the fundamental concern we have about
our operating environments as the project goes forward. In addition
to which, of course, we have got the ongoing concern about the
difficulty in maintaining a long-term business when there is the
provision for Crossrail to supersede existing arrangements. That
is a very difficult process to manage in terms of the investment
the industry might like to put into London depots.
15344. Dealing with the effects of Crossrail
on aggregates businesses, can you outline the practical effect
that will arise given the nature of the agreements your members
have with freight providers?
(Mr McLaughlin) As was described
yesterday, there is a process whereby an aggregates business will
have a supplier and access agreements with a freight operator,
and under the powers of the Bill these can be cut back as Crossrail
requires, or perhaps, in terms of a new arrangement, the capacity
cut back. That creates huge uncertainty. It is very difficult
to plan a long-term supply business in London if you have not
got a guarantee within the normal commercial environment of a
supplier. The concern is that if that is not the case, and bearing
in mind the potential supply of aggregates and other sources,
such as marine material and such like, which is limited, you will
then effectively force the companies to look further at road movements
rather than rail movements. That is the bottom line.
15345. If the Bill powers remain as they are
at the moment, what certainty can your members have that those
powers will not be used at a later stage, no matter what is said
now?
(Mr McLaughlin) I do not
think we can have any certainty. I think it creates a huge area
of uncertainty which will be very difficult to deal with commercially.
15346. So is it only the actual exercise, as
it were, of the Bill powers about which the QPA is concerned?
(Mr McLaughlin) No, I think,
even if they are not exercised, if there is a threat of them being
exercised it has a material effect on investment intentions.
15347. How likely do you think it is that there
will be a deterrent effect arising simply from the mere presence
of these Bill powers?
(Mr McLaughlin) I think,
given the very significant investment that could be required to
enhance and develop the depot capacity and the supply infrastructure
around it, it would clearly have a negative effect on the investment
intentions.
15348. What does that mean in the real world?
What will actually happen?
(Mr McLaughlin) It means
more trucks and less trains.
15349. I would like to move on now to deal briefly
with the environmental effects that might arise as a result. Please
can you tell us what effect a reduction in rail capacity would
have for aggregates businesses in terms of the environment?
(Mr McLaughlin) I will not
dwell on this because I know that the Committee had a presentation
yesterday from Mr Knapman which went into detail. The observation
I would make is that we commissioned the Centre for Sustainability,
which is part of the Transport Research Laboratory, towards the
end of last year just to do a very simple analysis of what would
happen if there was significant transfer of aggregates being delivered
into London from rail to road. We did ask them to look at the
worst case, and the worst case has some very significant effects.
In particular, bearing in mind the current concern about carbon
emissions, that transfer from rail to road would generate an additional
230,000 tonnes of carbon annually, as well as the significant
traffic effects that one would have in the vicinity of the quarries
along the motorways in West London, particularly. I do not think
I will say any more than that, as I am sure the point was put
across yesterday. There is a very significant potential environmental
impact.
15350. Was there an exercise within that research
to attempt to quantify in financial terms what those environmental
costs might be?
(Mr McLaughlin) Yes, there
was an exercise looking at established means of environmental
costing, and that suggested the costs would be in a range of between
7 and 10 million pounds per annum.
15351. I am going to move on now just to deal
with the last main topic, which is to ask you to sketch out what
the QPA wants, and begin by asking you what is the Quarry Products
Association position on whether these Bill powers that are sought
are really necessary?
(Mr McLaughlin) We struggle
to see how they are necessary, in terms of the powers, if only
because, as Crossrail intend to produce an Access Option, if there
is a satisfactory conclusion to that process I am not entirely
sure why the Bill powers are needed. I think we are also concerned
that in going through that process, because there is the threat
of enacting the Bill powers that perhaps makes it difficult to
have full confidence, shall we say, that the Access Option would
give us, as a freight user, the same consideration as it would
to Crossrail. So we are concerned about what we see as potentially
inequitable treatment of our interests compared with those of
Crossrail.
15352. Given that everything seems to be moving
in the direction of an Access Option, what does that mean for
whether it is reasonable or not to retain the Bill powers?
(Mr McLaughlin) We can see
no reason why the Bill powers should be retained.
15353. Looking at things in operational terms,
given what you have heard of the Promoter's case on capacity and
timetabling, do you think there is any operational need to retain
these Bill powers?
(Mr McLaughlin) Not as far
as I am aware.
15354. What then is your position on how the
various interests, particularly those of aggregates and those
of Crossrail, ought to be balanced in this case?
(Mr McLaughlin) Our view
is that the interests should be treated in an equable manner,
and as an existing user of the rail network, and a very significant
user of the rail network, that our access to the network should
not be subsidiary to access from Crossrail. I am just asking,
really, for a fair crack of the whip in terms of access to the
rail network in the same manner that is currently the case.
15355. What does that mean as far as Crossrail
is concerned in order for them to be subjected to that normal
process?
(Mr McLaughlin) I think
we feel that the Bill powers should be removed and we feel that
there should be an absolute commitment to proceed with the infrastructural
improvements that are specified, certainly, in the timetabling
work rather than have a sort of rather loose proposal that work
will be done as and when is necessary. I think infrastructure
improvements absolutely need to be nailed down.
15356. Who, in your view, should be responsible
for seeking to strike the balance between the competing interests
in this case?
(Mr McLaughlin) It just
needs to go through an independent process. I would not really
add to the comments made by Freightliner and EWS in that respect.
15357. What are your ultimate fears if there
is not that independent process?
(Mr McLaughlin) That we
will be commercially and practically disadvantaged and we will
be prevented from making reasonable use of the rail network.
15358. Can you see any justification for that
in this case?
(Mr McLaughlin) No, absolutely
not.
15359. Mr Honey: Thank you very much.
Examined by The Committee
| 
