Rail fares and franchises - Transport Committee Contents

Examination of Witnesses (Questions 80-99)



  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 is.

  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 at all.

  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 that.

  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 revenues?

  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.

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