Examination of Witnesses (Questions 260-281)
MR PAUL
PLUMMER, MS
BARBARA BARNES,
MS LINDSAY
DURHAM AND
MR GRAHAM
SMITH
6 FEBRUARY 2008
Q260 Mr Hollobone: Not only have
you failed to meet targets, you also seem to do what you do quite
expensively. In evidence to us EWS has said that extensive research
demonstrates that Network Rail's costs are "more than double
those of world-best practice". Mr Smith, would you like to
expand on that?
Mr Smith: Certainly. As part of
the periodic review in 2008 on the future level of access charges
we undertook research, some jointly with Network Rail, some independently,
involving well-regarded ex-British Rail engineers and engineers
from North America looking at working practices in terms of track
maintenance and renewal and possessions for cost of freight only
lines and benchmarking the unit costs in North America with the
United Kingdom. We took out all of the geographical differences
between North America and the UK and still came to our view, which
was that the unit costs that Network Rail experiences are twice
those in North America. I understand since then the Office of
Rail Regulation has done further work looking at European comparisons
and whilst not finding that European unit costs are as cheap as
North America, they are still significantly lower than Network
Rail's. Paul can explain, I am sure, a number of reasons. We are
really rather keen on this because this goes directly to the level
of track access charges which we as freight operators will face
in the next control period. Access charges in the UK are the second
highest in Western Europe and if we are going to compete with
road then this is an area of our single largest cost which we
do not control ourselves which needs some attention.
Mr Hollobone: What is Network Rail's
response to these accusations?
Q261 Chairman: You are an expensive
fellow, Mr Plummer. Why?
Mr Plummer: We very much accept
the challenge and there is a big issue there in terms of comparison
with other countries. There is a massive need for us to continue
to improve efficiency. We will be quite up-front about that. We
very much want to use benchmarking of this sort and then bed it
much more into our business as to how we continue to drive improvements
in all aspects of our business in a way which I think has not
been the case in the past. The sort of work that Graham has referred
to is very welcome for that, but we need to do it within the business
as well much more. We do have some differences of opinion about
the precise numbers, and I shall not go into that now because
it is the subject of enormous debate between ourselves, ORR and
others. We do think as well there is a need to be realistic, but
at the same time challenging about how quickly you can achieve
improvements in efficiency, in reliability and in all aspects
of our business. It simply is not possible to do everything all
at once, but we do accept there is a long way to go.
Q262 Mr Hollobone: Is this not a
key conundrum in that the Government on the one hand is saying
it wants to see more freight on the railways, the freight operators
like EWS are saying that track access charges amount to something
like a fifth of their operating costs, EWS in evidence to this
Committee has said that if there is to be a step change in the
volume of freight carried by rail track access charges need to
come down, and yet the Office of the Rail Regulator is actually
looking at increasing track access charges by up to a quarter?
Mr Plummer: I agree it is a big
conundrum and we are seeking, in setting those charges, to take
a view not just as to the efficiencies today but where it will
be in future and what a realistic, challenging view of that will
be.
Q263 Clive Efford: What will the
effects be on rail freight of the termination of the Strategic
Rail Authority?
Ms Durham: I actually think we
have seen an improvement. It is much more integrated now everything
is within the Department for Transport. I think we are beginning
to see a clear vision. I do think it enables the Department to
look across modes rather than a body which is solely looking at
rail, because for us competition with other modes is real. The
only thing I would like to see is a more integrated system for
enabling new rail freight terminals.
Q264 Clive Efford: From what you
are saying then I think the answer to this is yes, that you believe
there is a more strategic approach to rail freight including at
interchanges?
Ms Durham: No, I am saying interchange
is the only bit which is possibly missing now, but I think generally
the investment which has been promised in the network and the
vision is much clearer now, all being under the Department, because
it can look across rail and look across road, whereas the SRA
could not.
Q265 Clive Efford: Where do you think
the future strategic responsibility should lie? Do you think it
should stay with the Department?
Ms Durham: Yes.
Q266 Mr Leech: I would just like
to come back to the question which Mr Plummer was answering before
in relation to the excess cost that Network Rail seem to pay for
repairs, or whatever it might be, as opposed to other countries.
I listened very carefully and you did not give a single explanation
as to why things were more expensive when Network Rail did them.
Can you go into a bit of detail about why it is that things are
more expensive? You talk about you needing to be more efficient.
In what way do you need to be more efficient? What efficiency
savings can be made to bring down those costs?
Mr Plummer: Okay. There are many
things we are doing, I think, which will take us way beyond anything
which is happening in other countries. For example, what we are
trying to do in terms of modular switches and crossings, that
will take us beyond other countries both in terms of the cost
of doing that, replacing those things, and also in terms of the
time which it takes to do it and hence the disruption we impose
on users of the railway when we do that. So that is a very major
fundamental transformation and we have learned from the best practice
of elsewhere and we are trying to go beyond that. It is not something
that will happen overnight, but over the next few years we will
be doing things very, very differently in that area. So that is
an example of what we are trying to do. In terms of the specific
differences, one of the issues we are concerned about in terms
of comparison with Europe in particular is that actually in this
country over the last decade or so we have sought seriously to
address what we regard as a serious backlog in investment which
has arisen over many, many years in this country and I think there
is a very serious question, on which we are doing some further
work to really understand and to quantify, as to whether actually
many of those other countries are at a very fundamentally different
stage in the cycle and that actually they have been creating -
Q267 Chairman: Mr Plummer, I think
the philosophy is fascinating, but we do not have the time. I
am going to ask you very quickly to tell me about the Sustainable
Distribution Fund. Does it actually shift freight off the road
onto rail?
Ms Durham: Yes, it does. It is
a very good system, both for the operators and for the Government
because when it buys the benefits it always ensures it gets the
congestion and environmental benefits.
Q268 Chairman: So it is good value
for them?
Ms Durham: Yes, I think it is
good value. The budget at the moment is very constrained. This
year it reduced from £24 million to £18 million for
rail freight.
Q269 Chairman: Was it sensible for
the Department to combine funding for rail and water freight infrastructure
with funding for road freight improvements in the Sustainable
Distribution Fund?
Ms Durham: I think we would like
to see a separated out fund just for rail because rail operators
have to make a lot of investment in order to grow.
Q270 Chairman: So the answer is actually
no, it was not very sensible?
Ms Durham: Yes.
Q271 Chairman: I want to ask you
about the Transport Innovation Fund and some strategic freight
schemes. Are the schemes which have been identified under the
productivity strand of the TIF going to produce significant improvements
to capacity?
Mr Smith: Yes, they are. They
are going to produce improvements from the ports on the East coast
and the South coast, but that is not just where the money is being
spent. It will also improve connectivity to Liverpool, it will
improve connectivity to Immingham and Grimsby and I think the
most exciting bit of the TIF fund is the one which is hidden away,
which is the improvement to the line between Gospel Oak and Barking,
which is quite busy during the peaks but a key part of London's
freight network. If the Mayor means what he says, that he wants
to move freight from road to rail in London, then we have got
to find a way of getting into and through London which means that
we can cohabit with the passenger railway. Something like Gospel
Oak to Barking, and other little routes around London, should
be enhanced for gauge, electrification, and capacity, and there
is a really, really good return for the investment being made.
Q272 Chairman: So is there enough
money going into schemes like that?
Mr Smith: There are a lot more
schemes which Lindsay and I have identified -
Q273 Chairman: No, are you getting
enough money for the schemes that you would prioritise is what
I am asking you?
Mr Smith: We are looking at whether
the £200 million in the strategic freight network, which
is a development of the Transport Innovation Fund, is going to
be sufficient to meet the growth demands that we have. That £200
million has got to last until 2014. We believe there are strong
arguments for increasing that sum of money but one step at a time.
Q274 Chairman: So you do not believe,
for example, that Government should keep all the money and put
it into one completely new project, something like, say, a major
new freight line?
Ms Durham: No, we do not. We think
the best thing is to enhance the existing network. The existing
network gives us connectivity between the port and entry to Britain,
and the inland terminals, and one route will not give us that
connectivity. I think there is a real issue about whether rail
freight can really afford to pay for a brand new route.
Q275 Chairman: So have you got ideas
for a new strategic freight network?
Ms Durham: The operators are working
together with Network Rail at the moment to develop the actual
routes that we think should be the priorities.
Mr Smith: There are a number of
schemes that we could put in place. There is enabling trains to
be longer and heavier and therefore using the network more efficiently
than we are at the moment. There are arguments for re-opening
certain routes. We certainly support the re-opening of the line
from Stourbridge to Walsall, which will avoid the major commuter
route north/south in Birmingham, and working with the DfT on re-opening
from Oxford to Bletchley. We think there are arguments there.
From the EWS perspective, we would like to see the start of work
to accommodate European gauge. Now that we have a resolution to
the economics on the Channel Tunnel and if we can ever get an
agreement with London & Continental about affordable charges
on the Channel Tunnel rail link then that opens up the whole of
the UK for European gauge freight, which has been missing from
this country for the last 150 years.
Q276 Chairman: Heavier trains are
not going to do a lot for Mr Plummer's network, are they?
Mr Smith: Heavier trains per se—well,
it depends on the infrastructure, it depends on the spacing -
Q277 Chairman: I know what it depends
on, Mr Smith, but all I am saying to you is that heavier trains
have a cost?
Ms Durham: I think heavier axle
loads actually have a cost. The whole train being heavier does
not actually, I do not think, cost Network Rail any more.
Q278 Chairman: There you are, Mr
Plummer, nice light, heavy trains, yes?
Mr Plummer: Clearly, everything
else being equal, lighter trains are nice, but actually what we
need to be doing is planning for it in a way where we know what
is coming and we can design and develop the infrastructure to
meet the requirements. It links, if I may, to another point as
well as agreeing with what Graham and Lindsay have said, the question
about new lines as well. We do, as you know, wish to look much
more seriously at whether there should be new lines built in this
country. We do not see it likely that that would be a freight
line, but if there was new capacity built to deal with the growth
that we see across the whole railway you would then consider how
you would re-use the existing capacity, including freight, to
get more out of that available capacity, including how you would
renew it for heavier axle loads.
Q279 Chairman: That sounds admirable,
but at the moment most of your plans are really direct London
to other cities, are they not? They are North/South. Most of the
planning in Network Rail at the moment is concentrating on speeding
up movement of trains on the North/South axis. Very few of them
are running East/West. You have a sort of Chinese People's Republic
commitment to simplicity of transport planning?
Mr Plummer: I do not see it quite
that way, but I can understand where you are coming from.
Q280 Chairman: No, you do get paid
rather more!
Mr Plummer: Yes, we do need to
look much more at the East/West players as well and part of that,
for example, is taking traffic away from London and the issues
we raised earlier about the East/West in the north of England.
Q281 Chairman: Finally, is it a good
time to talk about connecting the United Kingdom's airports to
the rail network, because although some airports are really quite
imaginative, some others are not and yet the growth in air travel
will mean that this will be a continuing difficulty, will it not?
Mr Smith: The primary reason for
connecting airports to the rail network is to convey passengers,
but as rail becomes more competitive on consumer goods and supermarket
goods I think there is definitely a case for ensuring that the
major airports are connected to the rail network in such a way
that we can move supermarket goods as easily from an airport as
we can from the Channel Tunnel or from ordinary ports.
Chairman: Ladies and gentlemen, you have
been extremely helpful. Thank you very much indeed.
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