Examination of Witnesses (Questions 80-99)|
4 FEBRUARY 2009
Q80 Mr Martlew: The final point,
and I think this is probably the most important one, is that we
are going into a recession. You, gentlemen, won your franchises
when there was growth predicted in the business and in fact, if
you look at all your models, it is all growth and those models
may be looking a bit sickly at the present time. The franchising
agreements that you have with the Government actually allow you,
with a small financial penalty, to walk away from those franchises
if they are not making the money that you predicted they would
do and if you are making a loss, and we saw that with Sea Containers
in actual fact. Is that the fault of the franchising system? Should
we have a system whereby, when you are making more profits, then
you pay more money to the Government other than through taxation
and, when you are hitting hard times, you actually pay less? Should
the franchises be more flexible? How many of you are predicting
that you will not have to go back to the Government within the
next two years?
Mr Morgan: I cannot go back to
the Government because Hull Trains is not a franchise.
Q81 Mr Martlew: But National Express
Mr Morgan: Yes.
Q82 Chairman: Just to pursue Mr Martlew's
question a little more, there have been reports that a number
of you have actually been back to the Government, complaining
that you think the recession is going to impact on your passengers
and on your revenues, so what did you ask the Government for and
what did you get?
Mr Mapp: Certainly collectively,
and I cannot speak for individual train companies clearly, we
have not asked for any kind of financial services-type bail-out
Q83 Chairman: You have not been part
of a delegation to meet ministers and spoken about the concerns
you have to do with the recession and the impact on your passengers
and your revenues?
Mr Mapp: Well, if you are referring
to the meeting with the Secretary of State on 20 January, is that
what you are referring to?
Q84 Chairman: I am referring to the
meeting that was in the press. Has there been such a meeting of
the nature I am describing?
Mr Mapp: Yes, in what is a fairly
regular series of meetings with the Secretary of State towards
the end of January.
Q85 Chairman: Did you make the points
I am suggesting you made? Did you talk about your concerns about
the impact of the recession on your passengers and your revenues?
Mr Mapp: That meeting covered
three areas. It covered a discussion on
Q86 Chairman: Did it include what
I am talking about?
Mr Mapp: No, it did not include
Q87 Chairman: You are denying that
you made representations to the Government about your concerns
relating to the recession?
Mr Mapp: We provided an update
on trading conditions for the Secretary of State and we made it
clear to the Secretary of State that the train companies were
willing to play their part in measures to re-stimulate the economy.
We did not ask for any kind of bail-out of the industry.
Q88 Chairman: Did you express concerns
about the impact of the recession on your passengers? Let me ask
the individual companies. Virgin, did you express concerns?
Mr Leech: No, we did not, and
we have not had any bilateral discussions of that nature either.
Q89 Mr Martlew: The question I asked
was: could the franchising be more flexible, ie, if you are doing
well, you pay more and, if you are doing poorly, you pay less,
and, two, do any of you think you will be going to the Government
within the next two years, threatening to hand back your franchises?
Mr Leech: We certainly do not.
Mr Furze-Waddock: There is already
a mechanism in the franchise agreement that, as I have said, there
is a revenue share, a revenue support
Q90 Mr Martlew: But is it big enough,
is it good enough?
Mr Furze-Waddock: That is arguable,
and it will remain to be seen, but I can confirm that we have
not been back to the Secretary of State, asking for any bail-out
for our franchises. We continue to monitor developments, keeping
an eye on what is happening to revenue this year, and we will
continue to do so. We would not be managing our businesses properly
if we did not do that.
Q91 Mr Martlew: So you do not expect
to go back to them?
Mr Furze-Waddock: We do not expect
to go back to them.
Q92 Mr Clelland: Are any of you on
the Government's red light list? No one has any idea about that?
Mr Leech: Not that we know of.
Mr Mapp: Well, we were interested
to hear about the red light system in the press last week. The
DfT did not make it clear which, I think it was, five train companies,
they said, which were categorised as being red light, they did
not actually specify which train companies those were, and we
honestly do not know which five train companies those are.
Q93 Chairman: Can I just get this
clear. Were you present at that meeting?
Mr Mapp: I was not, no.
Q94 Chairman: Are you aware of what
ATOC said at that meeting?
Mr Mapp: I have been debriefed
on the content of the meeting.
Q95 Chairman: Are you saying that
there were no representations made to ministers concerning the
impact of the recession on passenger growth and revenues?
Mr Mapp: Well, we presented an
update on trading conditions and we highlighted the fact that
passenger growth was slowing, which it is.
Q96 Chairman: And was that expressed
as a concern?
Mr Mapp: Well, I think it would
be rather strange, in the context of a very severe recession,
if we did not express some concern about
Q97 Chairman: Well, why then can
you not answer the questions in a straightforward manner instead
of my having to get it out of you in this roundabout manner? You
are now agreeing that there were concerns expressed at that meeting,
and possibly subsequent meetings, to do with the impact of, what
you call, a "deep" recession on passenger growth and
Mr Mapp: Well, let me be clear.
I was not present at the meeting, but my understanding of the
exchange of views was that we provided an update on trading conditions,
pointed out that growth was slowing and clearly said that economic
prospects were extremely uncertain at the moment, but that was
not in any way the precursor to requesting government support,
it was not the precursor to asking for any kind of bail-out of
the rail industry and it was not the precursor to asking for any
other specific initiatives.
Q98 Chairman: Was there a request
to reduce services
Mr Mapp: No.
Q99 Chairman:which had been
prescribed in the franchise
Mr Mapp: No, there was not a request
to reduce services.