House of COMMONS









Wednesday 25 November 2009



Evidence heard in Public Questions 252 - 439





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Telephone Number: 020 7233 1935


Oral Evidence

Taken before the Transport Committee

on Wednesday 25 November 2009

Members present

Mrs Louise Ellman, in the Chair

Mr David Clelland

Rt Hon Jeffrey M Donaldson

Mr Philip Hollobone

Mr John Leech

Mr Eric Martlew

Mark Pritchard

Ms Angela C Smith

Sir Peter Soulsby

Graham Stringer


Witnesses: Ms Maggie Simpson, Policy Manager, Rail Freight Group; Mr Graham Smith, Planning Director, DB Schenker Rail (UK) Ltd; and Mr Christopher Snelling, Head of Rail Freight and Global Supply Chain Policy, Freight Transport Association, gave evidence.


Chairman: Good afternoon and welcome to the Transport Select Committee. Do Members have any interests to declare?

Mr Clelland: Member of Unite.

Mr Martlew: Member of Unite and GMB unions.

Graham Stringer: Member of Unite.

Ms Smith: Member of GMB and Unison.

Q252 Chairman: Louise Ellman, member of Unite. Would our witnesses please identify themselves?

Mr Snelling: My name is Graham Smith and I am the Planning Director for DB Schenker Rail (UK) previously known as English, Welsh and Scottish Railway.

Ms Simpson: Maggie Simpson, I am the Policy Manager at the Rail Freight Group.

Mr Snelling: Christopher Snelling, I am the Head of Rail Freight and Global Supply Chain Policy at the Freight Transport Association.

Q253 Chairman: The percentage of freight carried by rail has increased in recent years but still only 12% of surface freight goes by rail. Why is that figure so low?

Mr Smith: If I may say because the distance of most freight journeys is less than 50 miles and whilst freight can be competitive over short distances with an intensive use of assets and high volumes, we would not usually look to move traffic of less than 50 miles, and I think around 50% of surface freight or more is moving less than 50 miles.

Q254 Chairman: Does that mean that you are saying there is not much scope to put more freight on rail overall or are we just talking about particular types of journeys?

Mr Smith: There is significant scope to put more freight on rail, whether it consumer goods and international traffic where we see significant growth, or in the bulk material market where rail freight has always been strong, there is a significant opportunity. If you look at the freight forecasts that are contained in Network Rail's freight RUS or its long-distance scenarios, we anticipate a doubling of rail freight over the next 30 years and the rail industry's Planning Ahead document, put together by Network Rail, ATOC and the Rail Freight Operators Association anticipated an increase in market share from 11.5% to 20%.

Q255 Chairman: What needs to happen to enable that doubling to take place?

Ms Simpson: There is a whole number of things that need to take place. The first part is investment in the network to make sure we can run efficient rail freight services. Some of that is about providing capacity alongside the other users of the network. Some of it is about improving the efficiency of rail freight through enabling, particularly with the investment at the moment, modern high-gauge containers to be carried, for example, longer trains to get more boxes on each train, and this reduces the cost of rail relative to the cost of road. Particularly for the domestic traffic to which Graham has just alluded, particularly supermarket goods about having modern efficient terminals which can handle rail freight next to the warehousing which it is intending to go into anyway without the need for additional road legs, again this reduces the cost of rail freight so that it can compete fairly with road.

Q256 Chairman: Who should be providing the terminals?

Ms Simpson: I think there is an appetite in the private sector to provide those terminals, to build the warehousing and the associated facilities and there are various barriers to them doing that, not least the planning system and the tortuous process which many of them have been facing, certainly in recent years, to get planning permission for such facilities.

Mr Snelling: On the question of making more use of it, we seek to represent the customers of rail freight and the central issue that we are always looking at is cost. The environmental agenda is driving people to want to make use of rail. There is a lot of desire there on the part of British business, but it will only be used if it is at least cost neutral with road, and the route to that is some of the elements that Maggie has identified. If we can spend on the right infrastructure we can improve the size of the trains which reduces the unit costs and we can get the comparable costs that we need.

Q257 Chairman: What kind of investment is needed and what should be done by the private sector and what should be done by the public sector?

Mr Snelling: I believe the public sector needs to lead on improving the infrastructure for the open access network. Obviously there we are talking about gauge clearance and we are talking about increasing capacity, everything that can allow larger, longer trains more frequently to travel using lower cost equipment and that is used as standard rather than tailor-made to make a route work. Where the private investment should come in is in the development of rail freight terminals. That development should be led by the private sector as they can determine exactly where that is best needed. Those can be run as commercial concerns, albeit with some government support through grants, where there will be environmental benefits achieved, and that should be led by the private sector.

Q258 Chairman: Why has there not been more progress? Is this a failure of the private sector or the public sector?

Mr Snelling: I would say across rail freight and the network in general there has been huge progress. We have seen a massive increase in rail freight over the last ten years. There have been recent works done in the last four or five years to improve spending on the infrastructure generally across the network, and what we are seeing today with the SFN having started its work in April this year is hugely positive. Why we have not made more progress on rail freight terminals, the access to the network, I would put that down to the planning system. It is too slow and too cumbersome.

Q259 Mr Clelland: Realistically, what percentage of freight which is currently carried by road could be shifted to rail?

Mr Smith: The Planning Ahead document, which I referred to earlier, said that rail could easily get a 20% market share which will be nearer to 30% or 35% for long-distance freight.

Q260 Mr Clelland: What percentage do they have now?

Mr Smith: 11.5%.

Q261 Mr Clelland: So you are talking about another 9%?

Mr Smith: Yes, particularly in the long distance traffic from Europe through the Channel Tunnel and inter-modal traffic through the deep sea ports around the country. That is one of the reasons for example that the Port of Felixstowe has committed to invest in doubling the branch line from Ipswich to Felixstowe and to increasing the gauge of the network so as to enable more deep sea containers to move by rail from Felixstowe throughout the country.

Q262 Mr Leech: Just playing devil's advocate for a second, if we can only ever really expect to reach 20% freight on the railways, is it really worth all the extra investment that is required to move just another 9% on to the railways?

Mr Smith: Another 9% - that would be round about another 120 million tonnes. I think that would be approximately ---

Q263 Mr Leech: What is the equivalent number of lorries that would come off the road for that?

Mr Smith: I will just have to check my statistics. Have you got that figure?

Ms Simpson: I have not got that number to hand, but if we talked about carbon for a moment, the current volume of rail freight on the networks, we believe, saves about two/two and a half million tonnes of carbon a year, so if we double that we are saving another two/two and a half million tonnes of carbon a year. DfT statistics say that rail freight on average produces 70% less carbon than road freight. So even if we could only move another 10%, we are talking about taking 70% of the carbon out of 10% of the UK's logistics transportation, which given the targets that we have got to meet is quite significant. Road freight at the moment is 7% of the UK's overall emissions from all sources, and there is not yet a clear view on how that will be significantly decarbonised in the future. We talk about aerodynamics and low-rolling resistance tyres, and they have a place, but the DfT are struggling to find the magic answer to decarbonising road freight. So we would say that even if it is only 9% that is quite a lot of carbon that we could save.

Mr Smith: I have the figures here. It would mean another seven million lorry journeys saved and 1.4 billion lorry kilometres saved, and when you say "all that investment" the Strategic Freight Network investment for the next five years amounts to 208 million. That is less than 1% of the overall investment going into the railways in that period.

Mr Leech: I was not saying I necessarily agreed with it; I was putting the question.

Q264 Mr Martlew: Stobart are in my constituency and obviously with EWS they are starting the movement in from the Continent, but when you say about costs, does rail freight pay its way on the railways or is it very heavily subsidised? I am very conscious of it because unfortunately I live right next to the railway and big and often very old coal containers go by and the pounding that that gives the West Coast Main Line is tremendous. Are you really paying your way on the railways or are you highly subsidised by the fact that there is a lot of damage done to the track by yourselves?

Mr Smith: We receive no subsidy other than an environmental grant of 20 million a year. The track access charges that we pay are determined by the Office of Rail Regulation and the information from Network Rail, but we pay every penny of wear and tear that we cause to the railway.

Q265 Mr Martlew: Unlike the passenger side you are not subsidised?

Mr Smith: Not subsidised. We are on a franchise. We bought it for good or for bad. I think it is also fair to say that the 1962 coal wagons that you refer to, of very low capacity, are very near the end of their lives and all freight operators move coal in wagons with low track force bogies conveying 100 tonnes per wagon, so the amount of damage that freight vehicles do to the track is very much less than it used to be but it is all covered in the access charges that we pay to Network Rail.

Q266 Mr Martlew: On the issue of coal and taking coal to the power stations, as we go towards carbon neutral we accept that business is going to disappear to a great extent. Do you accept that?

Mr Smith: I do not accept that coal will disappear.

Q267 Mr Martlew: It will reduce considerably.

Mr Smith: It may well reduce depending on the success of the carbon capture programme that this Government has initiated. Coal and coal by rail has been written off many, many times in my 30-year railway career and it still keeps going, and it is the staple diet of all the rail freight operators. One anticipates that with the carbon agenda being what it is, then the demand for coal will reduce but could well be replaced by, for example, biomass and the need to move that kind of material to power stations, which has roughly double the volume that coal has.

Q268 Mr Martlew: I could get into an argument about where biomass should be changed into energy, but that is another one. You say that the traditional market may reduce, and I am suggesting it will: where is the new market for rail freight?

Ms Simpson: Just on the coal point, the forecast that Graham referred to earlier underlying that, if you look at the predictions for coal, it is basically level and tails off towards the end of the forecast period, so when we talk about doubling market share that is not coal. It is not even aggregates significantly, although depending on how the economy picks up in the construction world obviously aggregates goes up and down with that. The sectors that we predict can grow are continued growth out of the deep sea ports because every piece of analysis that is done suggests that we continue to be an import economy and there is market share to be had out of the deep sea ports, if the new developments at Tyne Tees and Bristol, for example, go ahead as planned from those ports as well as the conventional ones. In the movement of supermarket goods on their primary distribution haul between rail-linked warehousing up and down the UK. We already see that successfully on the Daventry to Scotland flows which were one train a day when I first came into rail freight a few years ago; there are ten plus trains a day now. There will also be growth through the Channel Tunnel from the Continent. In the last few months we have seen three new services start. There is more optimism in that market than there has been for a number of years now, so those three sectors are where we would expect the growth to come.

Q269 Mr Martlew: The other issue is about the speed of freight. We are talking about the electrification of some of the lines. Would that be of assistance to you in not only being able to use electricity but would it speed up the travel times?

Mr Smith: We have argued not only for electrification of the main lines, and we are very supportive of the electrification of the Midland Main Line, in part because of course electrification brings with it gauge enhancement as well, which is advantageous to us. We have also argued strongly for infill electrification such as the route from Barking to Gospel Oak in London because most electrified routes in this country are radial routes from London whereas freight flows tend not to be very compliant and just follow passenger trains, they will cross boundaries and cross routes, so there are many routes in London, in the West Midlands and in the North West where one could electrify just a mile or five miles and in so doing enable us to use electric haulage where we are not able to at the moment.

Q270 Mr Martlew: That would speed it up?

Mr Smith: It would speed up the train. We would not need to change the locomotive and with the change in the nature of fuels used in electricity generation would also enhance our environmental credentials.

Q271 Graham Stringer: You mentioned the access charges and paying your way. The last time we did an inquiry on the freight industry we took written submissions that said that Network Rail's access charges for freight were twice the level of the industry's best practice internationally. Is that correct? Are you satisfied with the level of access charges?

Mr Smith: The access charges were reduced at the last periodic review following considerable research by the ORR ourselves and Network Rail into international best practice. Network Rail's costs (which drive the level of access charges) are still higher than you would find particularly in North America, South Africa and Australia. Arguments are made that they are not good comparisons with the United Kingdom because of topography and intensity of service but even comparisons with mainland Europe have Network Rail's costs somewhat higher. That is why the ORR has been confident to set the efficiency improvement target on Network Rail during the next Control Period. We will continue to work with Network Rail to identify ways they can reduce their unit costs.

Q272 Graham Stringer: So how much were they reduced and are you satisfied with the levels now?

Mr Smith: They were reduced by about 35% compared with the last Control Period but they still represent the single largest external cost incurred by a rail freight operator, so any reduction would be welcome, but that will be very much driven by Network Rail's costs because, as I responded to Mr Martlew, there is no other charge that we face other than the wear and tear that we impose. As our resources impose less wear and tear on the track, they will reduce, but the fundamental cause of reduction comes from Network Rail's lower costs.

Q273 Graham Stringer: If the charges were reduced by another 35% or down to the level that is best practice in North America, would that help modal transfer of freight from road to rail, and could you put any figures on that?

Mr Smith: It would be a significant help but it is difficult to say it would be exactly that amount of tonnes or that amount of tonne miles. There is not a direct correlation between one penny off costs equals another tonne on the railway, but when we talk about increasing our market share to 20%, then reducing our own costs as operators is as important as Network Rail reducing its costs. It would make a difference but it is difficult to quantify.

Q274 Ms Smith: A couple of comments have been made about the planning process. I have been on a local authority before and I know how planning applications can get bogged down for various reasons. Are there any patterns or themes emerging from the difficulties that you have experienced in terms of getting new terminal plans through the planning process?

Mr Snelling: I think the main thing we always see coming out of planning inquiries is just about the length of time that they take. To us it is purely a procedural issue in the way planning inquiries are set up and that they are allowed to take an inordinate amount of time.

Q275 Ms Smith: Are you talking about planning applications at board or are you talking about appeals and inquiries?

Mr Snelling: The whole process, everything to get through to a final decision.

Q276 Ms Smith: But there must be specific reasons why these applications get bogged down because there are deadlines set on planning applications. Local authorities are supposed to stay within guidelines and there has to be good reason for breaching deadlines for getting planning applications through the process.

Ms Simpson: Just in general terms, let us talk about where things are now. Obviously the planning system is changing with the Planning Act 2008 and the Infrastructure Planning Commission, but what has been happening is that even those local authorities who have good intent find it difficult to balance local disbenefits against benefits which are measured regionally or nationally, and that is always the case with a rail freight terminal because it is industrial, it has locomotives and engines coming in, it has lorries coming in and going out and it is visually intrusive to many people. Because a successful rail freight terminal has to be located near to a main railway line (part of the Strategic Freight Network, to use the current phraseology) and also close to the trunk road network, the sites for it are quite difficult to identify. Many of the ones that have come forward are in green belt, albeit that they are on former brown field sites, so there has generally been a lot of local opposition to those and many local authorities have found it, frankly, difficult to come to any decision and have often therefore waited until a period of time for non-determination and they have gone to appeal.

Q277 Ms Smith: Does the opposition tend to be organised? Are there any specific lobbying groups that get involved in fighting proposals, particularly when they are in green belt?

Ms Simpson: I think if you wanted to set up a consultancy thinking up good acronyms for groups to oppose rail freight terminals, you could make good money on it because it is inevitably organised. However, that is fine. People have a right to object to things that happen in their area.

Q278 Ms Smith: Sorry for interrupting but I am talking about nationally recognised lobbying groups not ones that are formulated locally - you will always get those in any planning application - but are there any big national organisations that tend to get involved in this?

Mr Snelling: For the most part it is local. As Maggie has outlined, the problem that you have is that locally there are very few benefits from it and there are a lot of issues. Nationally people can see that it is an environmentally good thing if you can build rail freight terminals and get freight onto the railways. That is why there is perhaps less of a national dimension compared to other controversial planning areas.

Q279 Ms Smith: So you do not get CPRE for instance intervening on the proposed terminal?

Ms Simpson: I am not aware that they do so on an organised basis.

Q280 Chairman: Are there any other national organisations who automatically get involved?

Mr Smith: I cannot think of any, for the reasons that Christopher said, which is someone like CPRE, whilst perhaps taking issue with the effect of a local site, is very supportive, for example, of moving freight by rail because of the reduced impact on the environment that it will cause everywhere else. They are somewhat torn and, by and large, they tend to keep out of the inquiries.

Q281 Ms Smith: Do I take it from what you have been saying that you are broadly in favour of the changing arrangements for determining applications that relate to a national interest?

Mr Smith: We are certainly in favour of national policy statements. I think the absence of national policy statements is one of the reasons that there had been issues in rail freight terminals in the past because local authorities have not been sure whether they are for it, against or stunningly neutral. The NPS when it is issued, although it will directly relate to rail freight sites in excess of 60 hectares, is very likely to say, as does the DfT's recent document on the Strategic Freight Network that rail freight and rail freight terminals are a good thing and it would be helpful for all levels of local administration to support it. In terms of the Planning Commission, we do not have any experience of that, but a process, whether it is a planning commission or whether it is a private bill in Parliament or a hybrid bill which enables something to be dealt with democratically but quickly and effectively, has got to be welcomed for something of strategic national importance.

Q282 Ms Smith: You referred earlier to the tendency for freight to be thought of in terms of routes in and out of London and north-south. Is there an argument for building more freight capacity east-west so, for example, from Immingham, which is one of the biggest container ports in the country, and a deep water port as well, to Liverpool? Is there a strong argument for trying to shift some of that traffic east-west?

Mr Smith: East-west via the one of the trans-Pennine routes or north-east south-west via the cross-country service. Both of those have heavy freight flows whether it is steel or coal or containers. The Strategic Freight Network, to which I referred earlier on, one of its schemes in the next five years will be to gauge-enhance the north-east south-west route between Birmingham and Doncaster and therefore link into other gauge-enhanced routes. There is a scheme within the high-level output specification to create a grade-separated junction to enable coal trains from Immingham to access the Aire Valley power stations without travelling on the East Coast Main Line. One of the basic philosophies of the Strategic Freight Network is to separate freight and passenger services where that is practical and sensible. In the end this is a mixed use network in this country so we will be sharing tracks with the passenger railway, but if it can be separated that would be a good thing.

Q283 Ms Smith: In terms of achieving what Mr Stringer was referring to earlier, getting freight to some extent off the roads and on to rail, would improved east-west freight capacity deliver some of that agenda as well?

Ms Simpson: Freight wants to go to centres of consumption. The exception to that is coal because power stations are where power stations are and they are driven by demographics of rivers and what have you. In terms of the market that we are seeking to attract at the newer sectors, they go into the city regions - Manchester, Liverpool, Leeds, Birmingham and such like. One of the issues is that is also where the passengers want to go and that is why we are coming up against capacity constraints in certain places, but certainly there is no more reason why the routes that you referred to should not be used for the movement of goods into the cities of the North West and the Midlands than there is coming from the South East and up that way. Certainly it is not an area where there has been much inter-modal traffic in the past but I think we can all see that there are opportunities to grow that in the future.

Q284 Chairman: In the written evidence you have given us from the Rail Freight Group you say that companies are not involved in investment decisions on rail taken by Network Rail. How would you want the process of decision-making to be changed?

Ms Simpson: I think if you talked to people who wished to build rail-connected terminals, for example, one of the issues that they face, both in terms of what they get out of the planning inquiries but also in terms of getting their own boards to release money and what have you, is if you spend all this money building a rail-linked site here, can you guarantee that there will be rail paths available in the future to serve it at the levels which you are predicting. There is no real way that those developers can get surety of that through the systems and processes which exist. Network Rail does a very good job on consultation but its group with which it tends to consult traditionally has been rail freight operators, quite reasonably, and groups like ourselves. I think Network Rail are beginning now to widen the scope of that, particularly to those deep sea ports who have investment commitments such as Hutchison Ports.

Q285 Chairman: When you say "widen the scope", what do you mean? Is the consultation process changing?

Ms Simpson: Yes, I think so, because Network Rail are an infrastructure manager, they are not an international logistics company, with all respect to them, and so to expect them to understand where the optimum site for locating warehouses would be unreasonable, so I would think that it would be reasonable for them to consult those people who do perhaps more than they have done in the past.

Mr Snelling: Just on that I would say that, alongside my colleagues, we are part of the Strategic Freight Network's Management Group that Network Rail has set up and we have had a very positive experience as being part of that in helping direct the in-principle shape of the SFN, which has been very positive to us. It is also worth noting that we are in dialogue with Network Rail working on a project to help brief their staff across the board about the needs of freight in general rather than simply railway-specific actions, as they want to increase the level of understanding of the needs of the logistics industry. I think we are seeing very positive signs from Network Rail at the moment about their engagement with freight.

Q286 Mr Leech: I would like to move on to High Speed Rail. Has there been any consultation from High Speed Two with the different rail freight organisations?

Mr Smith: Yes, we have met High Speed Two on two occasions in a formal consultation and had a number of bilateral meetings with the senior team - Professor McNaughton, Alison Munro and their support team - and we have argued that we would like to see freight on HS2 for its gauge capability. We do not anticipate running freight during the day on HS2 but to have a high-gauge European-gauge facility into the Midlands would be very important. Equally important is for freight to be able to use the capacity that would be released by HS2, particularly on the West Coast Main Line, given the large number of distribution terminals that you will find in the West Midlands and the North West.

Q287 Mr Leech: How do you react to the reports that suggest they are not going to suggest that rail freight should be able to run on the new high speed line?

Ms Simpson: I think that it will be a disappointing outcome because I think that the high-gauge opportunity is a good one for freight. I think what we need to see, as Graham has alluded to, is what it will mean for freight in terms of the conventional network, because ultimately what freight wants to do is get up the country, and if it is not going to be able to do that on High Speed Two then it would be good if it could do it on released capacity on the conventional network.

Q288 Mr Leech: Can you see any reason why rail freight should not be run at night on high speed lines that are going to be used for passengers during the day only?

Mr Smith: It would perhaps depend on the maintenance renewal regime that is adopted by High Speed Two but we anticipate running freight trains on High Speed One from next year once we have modified electric locomotives to be compatible with HS1 signalling, for two reasons: one, because HS1 offers the same gauge as mainland Europe so for the first time since the railways were built in this country we can bring mainline European-gauge wagons from the far side of Europe into east London, and it is a more direct route into London rather than via the congested routes south of the river. However, if HS2 adopts a maintenance and renewal regime which blocks the entire line all night every night then clearly that would present some difficulties for us.

Q289 Mr Leech: Have you made any calculations as to what additional capacity could be available for freight on the conventional existing network with the High Speed Two network?

Mr Smith: We have asked HS2 to do that because we do not yet know what their service specification will be and therefore what passenger services they would then remove from the conventional network. They will want to retain some conventional services to serve destinations such as Milton Keynes which will not be served by the high speed line, but I imagine that would release quite a lot of capacity for services to Northampton as well and a significant number for freight, but exactly what that number is we do not know until HS2 make their report.

Q290 Mr Leech: Is capacity the major reason why you cannot get more freight onto the railways or are there specific parts of the network where capacity is the particular problem about getting additional freight onto the railways?

Mr Smith: There are no routes at the moment that have been declared congested in accordance with European Directives and, by and large, we can get all the trains we want to on to the network, albeit not necessarily at exactly the time that we want it, but if the growth in passenger and freight is going to be as anticipated in various industry planning documents, we can certainly see routes such as the East Coast Main Line getting congested. There is a lot of demand for services on the East Coast Main Line, which is why investment is being made in the route that runs from Peterborough to Doncaster via Lincoln, and the West Coast Main Line will be popular as well. The Midland Main Line is busy but I think it can absorb more traffic in future.

Mr Snelling: Just to follow up on that. As Graham has identified, there is obviously some potential capacity and I would go back to what I said earlier, the factor keeping people off the railway at the moment is the cost of using it. That is where the SFN comes in as that seems the best mechanism for reducing the cost for the customer of using rail freight.

Q291 Chairman: Are you satisfied with the current plans for a Strategic Freight Network?

Mr Snelling: Yes, we think the current SFN that is underway and the DfT's long-term planning document for the SFN are both excellent. We think it is exactly the right mechanism. It is working very well. The two things we are really looking for are for the existing funding for SFN to be protected and not taken but then also we are looking for funding for what you might call SFN2 in the following five-year period, hopefully at roughly a similar level for a relatively small amount of money, but it could deliver an enormous benefit to freight.

Q292 Chairman: Has there been any indication that the funding might be cut back or delayed?

Mr Snelling: From what we see in the macro political and economic climate.

Q293 Chairman: Nothing has been said or indicated to you to make you believe there is any rowing back?

Mr Snelling: No.

Ms Simpson: No.

Mr Smith: The Strategic Freight Network funding, though, is part of the settlement for Control Period 4. That could be changed by an interim review. I am not aware that anybody has said that an interim review of Network Rail's costs and charges would be implemented - there are very high hurdles - but that is a mechanism by which funding for the railways could change in this Control Period.

Q294 Chairman: Who has informed you that it could be changed?

Mr Smith: I know that by my reading of the rules relating to the regulatory review of the railways. Nobody has said to me that we are going to have an interim review or not going to have an interim review. I am just pointing out that is the mechanism for how funding for the railway could be changed.

Q295 Mr Martlew: I have listened very carefully. One thing you seem to have given up on is the traditional parcel traffic, the mail. What is happening now is more and more people are buying through the internet, it is put on from the depot into a large arctic, it is taken up to an area and split up and white van man takes it about. Basically you are saying you cannot compete in that particular market?

Mr Smith: I am delighted to say, on the contrary, DB Schenker will be operating services for the Royal Mail from next year, and we hope that we can agree with Royal Mail an expansion of the existing small number of services, so whilst mail was lost to rail a few years ago, it is now coming back on to rail, and if we can demonstrate that mail can be moved effectively by rail again, then parcels companies will be interested, whether that is domestic parcels traffic or international parcels traffic, from using rail once more.

Mr Martlew: That is good to hear, thank you.

Q296 Chairman: Do you have any initial comments on the draft National Policy Statement report that has now been published?

Ms Simpson: It is very early days and certainly we have not had a chance yet to speak to any of our members about it. I do not think it is the most exciting document I have ever read and I think it takes mode neutrality into an art form. I would have expected, given the type of carbon reduction targets we are talking about for Copenhagen, for it to have been slightly stronger in its support for modal shifts out of the major ports. I would imagine that it could be read as a fair document, but it is perhaps an opportunity missed.

Q297 Chairman: I assume you will be submitting your comments in the consultation?

Ms Simpson: We will.

Q298 Graham Stringer: We have had evidence again in previous inquiries, and I guess when we look at ports in some of our next inquiries we will be told that 60% of the freight landing in sea ports in the south of England ends up being transported by road north of Birmingham. Do you have a strategy or would you recommend a strategy to government as to how you could get, say, half of that freight off the roads? As opposed to what Mr Smith said at the beginning, and I am sure his figures were right, that is a lot of freight travelling a long way which must be becoming economic for the railways to deliver.

Mr Smith: It is important for the ports to treat rail and road equally in terms of the charges that they levy on handling freight within the ports. It is important that those ports also ensure that the rail facilities can maximise the use of rail and do not present a bottleneck. Ports of course are now governed by open access regulations so that they have to be fair in the way in which they allocate capacity between operators and fair in the charging that they levy. I think the ports - and I am not going to mention any by name - could help by having a stronger focus on rail and then I think it is for investment in the network to ensure, whether again that is funded by government or funded by the ports through existing commitments, that the routes from the ports can take the nine foot six containers and have sufficient capacity to move freight to the major centres of consumption.

Q299 Graham Stringer: So are you saying that really this is about investing in bigger gauges and more capacity generally in the rail lines from sea ports? Is that the answer?

Mr Smith: It is in part but it is also about ensuring that ports themselves can handle freight by rail quickly and effectively and that trains are not held or delayed by any shortcomings in port facilities.

Ms Simpson: If we looked at the gauge clearance that happened for Felixstowe, the only port that has it today via London, it is now hitting record levels of movements on rail. They are getting 10,000 containers a week out on rail despite the recession. That is a demonstration of how gauge clearance has helped. I would just like to add that when we talk about investment here for the ports, gauge clearance is an expensive business, and we know that, but there are lots of other things that can help improve capacity and capability out of port that are not expensive. There are some of the train lengthening programmes that incrementally add wagons here and wagons there. There is a 40 million budget allocated in CP4 for that that will get longer trains out of Felixstowe and Southampton. If Network Rail can organise its engineering work so there is always a route open from the deep sea ports, there is an appetite in the industry to run trains on Saturdays and Sundays, which does not happen now. That gives us an extra day and a half's capacity essentially for free. There may need to be modest investment to get single-line working up and running, for example, but it is nowhere the scale of investment that we are having on major schemes. If we are going into a period where spending is likely to be restricted, and we do not know the extent of that but let us not pretend that it will not be, protecting schemes like that, pots of money which enable longer trains to run and pots of money which enable weekend operations/overnight operations to happen, deliver capacity for freight almost for free, and I think that that is an area where we have got to keep the pressure on.

Q300 Graham Stringer: Is the prohibition on weekend running just Network Rail maintaining the track?

Ms Simpson: Principally, yes.

Q301 Ms Smith: Just briefly, you mentioned earlier the pinch points in terms of freight carried, particularly in northern England and you mentioned the trans-Pennine link. Could you briefly elaborate on that and the importance of developing trans-Pennine links for freight?

Ms Simpson: Gauge clearance is obviously more difficult when you run through hills, bluntly, because the tunnels are smaller and tighter, so it is a more expensive proposition than it is to do it through the fens. That is obvious. One of the things that has always been slightly difficult for the ports on the north east corridor is that they tend, because they are what we call "short sea", they are coming from the Continental ports, to be slightly different-sized containers to what is coming up deep sea, that is from Asia and the Far East and the Americas, so it has been a slightly different gauge profile. Also the volume is spread between a number of different ports. It is not consolidated like it is at Felixstowe, so the operating models have sometimes been a little bit more difficult to get going. I do not believe any of that is insurmountable.

Q302 Ms Smith: Immingham is a very major port, surely?

Ms Simpson: It has the biggest volumes of rail freight coming out of it of any place in the UK. It is just the majority of that is bulk and not containerised.

Q303 Ms Smith: But you did not refer to the trans-Pennine link and how that could help potentially.

Ms Simpson: There are issues that need to be resolved but it is a vitally important corridor for the growth of freight. Gauge is one issue. There are capacity issues as well. The Hope Valley route, the south trans-Pennine, is one of the candidate routes for looking at train lengthening at the moment to try and get more per train out, but it is a very busy route, as is the north trans-Pennine so I think that there will be some infrastructure works needed there. There are studies like the Manchester hub study as well looking at how you get into the city regions as well that will all help.

Chairman: Thank you very much for coming and answering our questions.

Witnesses: Chris Mole MP, Parliamentary Under Secretary of State, and Mr Bob Linnard, Director, Rail Strategy, Department for Transport, gave evidence.

Q304 Chairman: Good afternoon. Would our witnesses identify themselves for the record, please.

Chris Mole: Chris Mole MP, Parliamentary Under Secretary of State.

Mr Linnard: Bob Linnard, Director of Rail Strategy at the Department.

Q305 Chairman: Thank you. Minister, do you want to make any initial statement or just to answer our questions?

Chris Mole: The kindest thing I could say would be that the rail ministers face the sorts of problems that I think ministers like to have. The challenges of growing demand for rail services, particularly increasing passenger ridership to 1.27 million passengers, gives us the sort of challenges we would rather have than the sort that perhaps some of my predecessors have faced in terms of declining numbers.

Q306 Chairman: Could you tell us clearly how firm your commitment is to the spending programmes that have been announced. Let us start with the Control Period 4 settlement. Is that binding?

Chris Mole: My understanding is that control Period 4 is contractualised in our relationship with Network Rail and cannot change.

Q307 Chairman: There is no possibility of that changing.

Chris Mole: I think it would be extremely unlikely.

Q308 Chairman: Is there any prospect of any change in plans for the Thameslink Project?

Chris Mole: Any aspects that are funded through Control Period 4 should be in place, yes.

Q309 Chairman: Should be.

Chris Mole: Should stay in place, yes. I can see no reason why they would not.

Q310 Chairman: Is there any possibility of a change to the current plans?

Chris Mole: No.

Q311 Chairman: No?

Chris Mole: No.

Q312 Chairman: Could you say it a bit louder?

Chris Mole: I am sorry?

Q313 Chairman: You said no.

Chris Mole: I said no, yes.

Q314 Chairman: Crossrail?

Chris Mole: Again if there are aspects that have been funded through CP4, then those funds are the Network Rail for the foreseeable future.

Q315 Chairman: Are there any other aspects that are not funded through CP4?

Chris Mole: We can talk about Control Period 5, but that is a matter for future negotiations.

Q316 Chairman: On the current plans for Crossrail, is there a possibility of any change, any delay, any downgrading?

Chris Mole: Not in any of the works that are currently underway. We have started work on stations and planning for where the tunnel boring equipment will go and that sort of thing.

Q317 Chairman: You said "currently underway." Is anything currently promised? Are there going to be any cutbacks?

Chris Mole: There are works that are underway. Those works will be delivered through the resources that are there for that purpose. We have no plans to change them.

Q318 Chairman: So there are no changes.

Chris Mole: No.

Q319 Chairman: Definitely not.

Chris Mole: No.

Q320 Chairman: Because that does not accord with some of the stories flying around.

Chris Mole: Well, I think we all face media speculation on all sorts of fronts all the time, but we have no reason to want to suggest that there is any change of heart from the Government. The Government is completely committed to Crossrail and Thameslink.

Q321 Chairman: There are no discussions taking place in the Department about reductions in planned expenditure.

Chris Mole: No.

Q322 Chairman: No.

Chris Mole: No.

Chairman: Mr Clelland.

Q323 Mr Clelland: I take it from what you have said, Minster, that you believe that the balance between government investment in London and other regions is fair and appropriate.

Chris Mole: If you look at the fact that something like 70% to 80% of rail journeys start or end in London, you can understand why an awful lot of investment goes into the infrastructure to enable those journeys to get people to and from other parts of the United Kingdom.

Q324 Mr Clelland: In the past five years transport spending has risen by 57% but by 25% in the Midlands and the North. Do you think that is appropriate?

Chris Mole: I look at the comparison between the different regions By and large they all lie somewhere between 200 and 300 per capita.

Q325 Mr Clelland: It is 836 in London.

Chris Mole: That is not the figure that I have.

Q326 Mr Clelland: That is something like three times as much.

Chris Mole: The figure I have for London is 781. If you compare the North West with my own region, which is Eastern, the North West gets 276 and Eastern gets 211, so they are all broadly in the ball park, but London obviously is special. It is the capital, it has significantly more public transport needs than other parts, and those needs meet national requirements.

Q327 Chairman: Minister, if you just look at one of our recent reports, you will see there that we record quite clearly, taking our figures from published statistics, that London receives more than three times the amount of funding for transport that goes to the North and to the West Midlands. Those are very strong figures. The Committee expressed great concern about that differential. It would be of great concern to us if we were to feel that ministers thought that was a satisfactory situation. Are you telling us that you think it is?

Chris Mole: We try to ensure that the investment goes to meet the needs of all the regions appropriately, to ensure that the outcomes in terms of service for all of the regions are balanced.

Q328 Chairman: You think it is appropriate that three times as much is spent in London than in the North - and the gap is widening. Do you think that is appropriate to meet the needs of the whole country, including the needs of the regions which are part of the whole country?

Chris Mole: If you look at the pressures that are on the rail network and, indeed, the transport network in general in the capital, then you need a serious amount of investment to ensure that our capital is able to function in the way that people expect public transport systems in capitals to function but, also, to provide that interconnectivity and through-connectivity that is so much of a part of the role of the transport system in London.

Q329 Mr Clelland: We can all accept that London is a special case, but it is a question of whether the balance is right. For instance, there have been no new carriages delivered to northern trains in the last five years, whereas the southern train operating companies have received 500. There is a complete imbalance in the treatment for the regions and London in this respect, is there not?

Chris Mole: We have a very high commuting demand in London - with a peak that lasts for three hours - in comparison with peaks in other parts of the country. There is much longer-distance commuting into London than in other parts of the country. But the reason we had the high level output specification via the White Paper in 2007 was to ensure that we get additional capacity across all parts of the network, in order to address the growth in train ridership in all regions of the country.

Q330 Mr Clelland: When can we expect to receive new carriages in the North?

Chris Mole: That high level output specification is a commitment to 2014 to additional carriages. The arrangements by which additional capacity is delivered is quite complex and depends, in a lot of circumstances, on the cascading of rolling stock that might be in use in one part of the rail network that, for example, can be freed up by the developments in Thameslink or the electrification of the Great Western Main Line, all of which change the requirements for rolling stock in some parts of the country, that allow some of those vehicles to be used in other parts of the country.

Q331 Mr Clelland: Would the North perhaps fair better if investment decisions were taken regionally? If the power was devolved to the regions to take investment decisions.

Chris Mole: I am trying to think how you would do that in a practical sense and still have the capacity to be able to manage exactly what I have just described to you, which is the complexity of the use of the rolling stock around the whole of the United Kingdom. I am not sure if you had that devolved arrangement you would be able to manage that in the same way.

Q332 Chairman: One way could be to change the process of consultation. The ITAs say that they are not involved in franchises; that the whole process cuts them out. That could be a start.

Chris Mole: I am quite surprised if the ITAs have given evidence to you to suggest that they are not involved in the next round of the preparation of high level output specification. The next round is designed to have deeper engagement with all of the stakeholders, to ensure that we have a clearer understanding in terms of what people think the growth in demand is going to be in different parts of the network and how that can be met. It is not just about carriages. The requirement of new rolling stock can also be that new network capacity is required as well as length of stations. You cannot just say, "We'll bolt on an extra carriage or two to a train and all the problems will go away."

Q333 Angela Smith: The statement "London is special." It may be special to you, Minister, and to some extent it is very important to the country, but our cities are also special to us. It is hard not to be insulted at such London-centric statements being made in terms of how investment should be distributed. Does it not follow that if we continue to focus on an investment strategy that is so London-centric, we will worsen and deepen the disparities in terms of the economic development between London and the South East and the rest of the country? Is it not the job of government to tackle that and to use investment to challenge that?

Chris Mole: It is interesting that you lumped together London and the South East, because if you look at the funding for the South East on the basis that we were comparing like with like, it is 258 per capita whereas the North East is 204 - so broadly the same ball park - and I gave the figures for the East at 211 earlier on. Those are regions that have what might be considered to be differential economic performance with some of the other regions in the country, but they are getting the same order of magnitude of investment in rail infrastructure. Nobody says, "Let's invest in London because we have a London-centric view of anything." We are looking at saying, "Where are the serious capacity problems that exist now and how can we ensure that they are addressed as swiftly as possible?" Bearing in mind, as I have said, that something like 70% to 80% of journeys start and end in London, those needs, providing appropriate terminating capacity in London, are as important to the people who start their journeys elsewhere in the regions and nations of the UK as they are to the people in London.

Q334 Angela Smith: Is that not the point I was making, Minister? The point I was making is that the DfT has traditionally reacted to demand and has not tried to develop a proactive approach to investment which would help to develop economic performance elsewhere in the country, thereby taking perhaps some pressure off a place like London. Although it may be true that 80% of journeys begin and end in London, is it not time to start challenging the North/South structuring of transport connections in this country and to start thinking a little more about East-West? Is it not unhealthy that 80% of journeys begin and end in London for a country as densely as populated as the UK?

Chris Mole: If I thought that London was any different from Paris or Berlin or Rome in that context, I might have some more sympathy with that view. If we try to move it on, what is important for the future is that we provide the connectivity between the regions through capacity. One of the things that I said at the beginning was that we have had fabulous growth in the number of people using the railway, and one of the challenges that that gives us is in capacity. We are doing what we can to get the most out of the existing infrastructure, whether that be rolling stock or whether that be track and signalling capacity, but we know that we are going to unavoidably - to use a rail metaphor - hit the buffers at some stage in terms of how much we can squeeze out of the existing infrastructure. That is where things like high speed do give us a dual solution in terms of providing additional capacity. Also, one would not conceive of building a major interurban connection for rail in the future without making it high speed, thereby shrinking the distances between our major cities and providing the enhancement to those cities that arises from them being better connected to each other and to the capital.

Q335 Angela Smith: Do you agree with Network Rail that the Manchester Hub should be a priority in the next Control Period?

Chris Mole: We are waiting for the work that the Department has commissioned with the Northern Way, the coming together of the three regional development agencies in the North, who have set, if you like, a model of how rail can contribute to the economic performance of those three regions, and it is very interesting to see that they have come together across those three regions and identified rail connections within Manchester (broadly given the label of the Manchester Hub) as a key component of providing that interconnectivity, because there are capacity issues in and around central Manchester. Those proposals are now being worked on by Network Rail in terms of what each of the solutions will look like. We will then want to see what the cost benefit and value for money of those is going forwards into Control Period 5, but it would seem to me that they are very strong candidates for some major investment in the next Control Period.

Q336 Angela Smith: That will be a priority?

Chris Mole: Yes.

Q337 Angela Smith: Unfortunately, a statement was issued yesterday which made it clear that the East Coast Main Line will be returned to the private sector in 2011. Can I assume from that that assumptions are being made in terms of future investment and future availability of funds to DfT, that large premiums will be required of the new franchise when it goes back out to contract?

Chris Mole: When the Government seeks to negotiate new franchises it will obviously look at the whole package, both at the quality of what is on offer - the business case, if you like, for the extent to which we believe the company is going to be able to deliver what it has said it is offering during the franchise negotiations - as well as whatever the subsidy or premium might be. The more that is available in premiums, the more we have to reinvest through the DfT in rail and in those franchises which do require a heavy degree of subsidy.

Q338 Angela Smith: I can take it from that that a fairly heavy premium is being considered now. The possibility of fairly high premiums being in place on the new franchise is now being actively considered, even though National Express defaulted probably because they were required to pay high premiums to the Government in return for running the service.

Chris Mole: Given that the Southern franchise was recently let with a reasonably premium associated with it as well as a range of investment commitments from Govia to improve stations and parking and ticket machine availability and a whole range of other improvements for passengers, we believe there is still a healthy market out there that will deliver us a good franchise going forward.

Q339 Angela Smith: That does not answer the point about whether or not a high level of premium is going to be built into the contract when it is put back out.

Chris Mole: We do not build the premium into the franchise.

Mr Linnard: It depends what bids we get.

Q340 Angela Smith: You are making assumptions.

Chris Mole: No, the franchisees come to us. It could be that they come to us requiring subsidy.

Q341 Angela Smith: In accordance with the documents that you put out to them, inviting them to bid.

Chris Mole: We set out what we want from the franchise, but that does not include, "We want a premium of x." They will come to us and say, "We can deliver what you have laid out, your specification," and then they could offer us premium or they could say, "But this will require subsidy."

Angela Smith: Let me put it another way: Is there a commitment from DfT to ensure that a realistic assessment of the possible premium will be put in place and that there will be no temptation to build too high a level of premium into the new contract, thereby undermining possible future spending commitments?

Mr Clelland: Could I follow up on that, Chairman? It is the same point.

Chairman: Can it be very quick.

Q342 Mr Clelland: Minister, you have just said that the Department would need to be assured that the company can deliver on the franchise. Obviously with GNER and National Express, the Department grossly underestimated the ability of the companies to deliver. How can they be confident next time that they will get it right?

Chris Mole: I do not think that is strictly true. In the case of GNER it was what happened to the change of ownership of the parent company which undermined the position of GNER In the case of National Express, I think everyone has been surprised that that group was not prepared to see through the commitments that it made. Knowing that it is a major transport business, we would have thought that it would have wanted to stick with it.

Q343 Mr Clelland: How can we be sure it is going to be right next time? How can you be confident of that?

Chris Mole: We can only make an assessment of what the position of the business looks like, as we do in every other franchise. We have had a lot of other franchises which have happily gone along where this has not been a problem.

Chairman: I think we will be returning to this topic on future occasions. We will turn to other issues now.

Q344 Mark Pritchard: Minister, I will try to give you some respite from your colleagues. I do not know whether because of your previous existence in the Whips' Office you are getting a rough ride today. Despite the onslaught from the North, clearly as former Deputy Chairman of the East of England Development Agency, the former Leader of Suffolk County Council and somebody who went to university in Kent, your heart may or may not be in the North - now obviously Member of Parliament for Ipswich. I want to touch on what has just been mentioned. Do you think your Department, on reflection, in retrospect failed in due diligence with regard to the aforementioned companies?

Chris Mole: To an NEx-EC franchise?

Q345 Mark Pritchard: Yes.

Chris Mole: I do not think there is any evidence to suggest that. Indeed, the National Audit Office has the view that the franchising process that the Department runs is robust and offers value for money for the taxpayer.

Mr Linnard: What hit the East Coast franchise was a recession of a severity which few people would have predicted in 2007, but we do take a lot of trouble when we are awarding franchises to make as sure as we reasonably can that we are putting in place an operator which will be able to perform robustly and which will stick with the business, but obviously we can never guarantee totally, and nor should we, that there will never be a failure.

Q346 Chairman: What is going to happen to the other companies held by National Express?

Chris Mole: We are still reviewing the position with regard to cross-default, but we would clearly be of the view that if this was a business that was applying for franchises today, it would be unlikely that they would pass our pre-qualification requirements for a new franchise bid.

Q347 Mark Pritchard: Clearly your Department failed to spot the weaknesses of that particular case. Mr Linnard, you have mentioned recession. We are still in recession. There is the possibility of a double-dip, perhaps from March next year. Some pundits are saying that. If that is the case, what guarantees, given the pre-scrutiny of these franchises before awarding them, can you give the travelling public around the country that this is not going to happen again? If you are unable to give those guarantees to the best of your ability, then perhaps there needs to be a review of the due diligence, in which I think your Department failed?

Chris Mole: As I have said, we can never provide 100% guarantee that any particular franchisee is going to see its way to the end of the franchise. We can give as a guarantee to the travelling public that we will ensure there is minimum disruption to train services - and, indeed, you will have seen us step in pretty quickly to make it clear that we would put the business in place, a company wholly owned by the Department, in order to ensure that those services can transferred and be sustained.

Q348 Mark Pritchard: Forgive me, I understand that. I have that message. What lessons have been learned from the East Coast experience, so that you are going to change the awarding of franchises? Have you changed anything?

Chris Mole: The primary thing that we will do differently in the next franchise will be to take into account much more the passengers' interests, as we have done with the last franchising that we let by involving passenger focus in the development of the franchise much more. In terms of the business, we can increase the size of the bonds and things like that that are available to help us through the transitional period if there is a future failure, but I do not think anyone is going to sit here and guarantee to you that any particular business is going to see a franchise through. We hope they do.

Q349 Mark Pritchard: I have got that, but it is not a passenger focus to dig deep on the financial strength and integrity of organisations ---

Chris Mole: No.

Q350 Mark Pritchard: -- it is your Department's. I do not see whether their involvement to a lesser or greater extent impacts on the substantive issue of the affordability by companies to deliver these services and products they agreed to in any particular franchise. As far as other companies are concerned, is there anything you want to say today, ahead of this important travelling period over Christmas and the New Year, with many people moving around to see family and friends over the festive period? Is there anything the public has a right to know about other companies that are in financial difficulties? Are you currently in discussions with other companies who are in financial difficulty? To quote Lord Myners, are there any covert deals going on within the Association of Train Operating Companies?

Chris Mole: No, we have made it very clear we never negotiate on franchises. We may have access to information about the performance of the businesses that are running franchises, but that obviously is commercially sensitive and therefore something I could not share with you today. We have no expectation that there is any difficulty with any other franchises at the minute.

Q351 Mark Pritchard: The final question of mine is completely different. It is to you with your generic transport hat on, and you can kick it into touch if you want to. It is on the Maritime & Coastguard Agency - because ports are part of our brief, as no doubt you will have been informed, as part of new inquiry. Is it true that there was a recent and successful cyber-attack on the agency which basically took away information through that virus on the patrol patterns of offshore vessels guarding our ports and coastal areas?

Chris Mole: I have absolutely no idea, and I will ask my colleague Mr Clark, the Minister with responsibility for the Maritime & Coastguard Agency, to write to Mr Pritchard, and, indeed, the Committee, if you would all like the answer.

Q352 Chairman: Would you write to the Committee. I think this is something we would all want to know.

Chris Mole: Okay.

Q353 Mr Martlew: Minister, I have some sympathy with you today. First, you have inherited the flawed franchise system from the Conservative Government, and you would have been under serious attack if you came here and told us today that you had decided that National Express had offered too much and instead of taking over 1 billion it had only taken 850 million. You would have been rightly criticised for that. I think at that point I will stop being nice. There are two issues you have mentioned. One is the point that Mr Clelland has mentioned of the rolling stock cascades. The problem for those of us in the North of England is that by the time it cascades to us on Northern Rail it is clapped out, so we do not really appreciate the system with us getting all the poor stock. To give Northern Rail its due, it has done an excellent job of working to the present time, because the only way through into the towns is by the rail route. The second point, again, Mr Clelland made, is about whether decisions can be taken at a regional level. You did not seem to say how this worked. When you compare what is happening in Scotland with what is happening in the rest of the UK, we seem to be coming off second-best. They are opening up new lines in Scotland: the Waverley line is opening up, the Alloa line is opening up. Does that not prove that on a smaller scale - if you talk about the North West region, for example, it has twice the population of Scotland - this could be done on a regional basis?

Chris Mole: I thought there was a bit of contention about the fact that the Scottish Executive had just cancelled the Glasgow Airport line.

Q354 Mr Martlew: That is internal politics, because if we had had a Labour Scottish Government we would not have cancelled it, but you are right.

Chris Mole: Just to come back to your point about the stock, it is not the anticipation necessarily that the HLOS process will deliver stock which is clapped out. Indeed, whilst it would not be new, the anticipation - and the secretary of state was indicating that it would be his expectation - is that that stock would be refurbished and fitted with air-conditioning and all those sorts of things before it went to the North. Apart from that, I do not think your caricature is entirely fair. Whilst Mr Pritchard might like to try to paint me as somebody who has never been north of the Watford Gap, I can assure him that not only do I have a plaque with my name on it at Watford Gap since being a Transport Minister, I did journey into the North during my summer holidays in order to visit various bits of the rail network, including Sheffield, Manchester, Liverpool, Leeds and York. Indeed, one of the things I was most struck by was the quality of the new trains that the TransPennine Express operate and maintain out of their Ardwick depot in Manchester. They were absolutely fabulous. I can only say that I have never seen a facility looking more like a Ferrari garage at a Formula 1 racetrack than the Siemens depot at Ardwick and the quality of the maintenance of the rolling stock that they operate.

Q355 Mr Martlew: I would not disagree with you, but, of course, for those of us like Mr Clelland and myself who live up in the North of England, the cities you have mentioned are almost in the Midlands.

Chris Mole: I cannot win, can I, really!

Q356 Chairman: Minister, just for the record, you are here today as a minister and that means it is about the whole country.

Chris Mole: Indeed.

Chairman: Mr Donaldson - and welcome back to the Committee.

Q357 Mr Donaldson: Thank you very much. Mr Mole, high speed and, in particular, the concept of a second high-speed line. What is the Government's approach on that at the moment? Have you developed any further new thinking on the route of the second high-speed rail?

Chris Mole: We are very pleased with the success of High Speed One, which was delivered on time and on budget, and which is now running, for the first time in the UK, high-speed domestic services. That has given us confidence - where, in the past, people had become very sceptical about the whole notion of high speed - in the positive position in which rail in the UK is currently - and I am sorry, but I cannot comment on the situation in your own part of the UK.

Q358 Mr Donaldson: Devolution has been good for investment in our railways. It could help my friends from the North!

Chris Mole: That was an own goal, I think! On the back of that positive future, as the Government sees it, for rail in the UK and the need for additional capacity, with every other major European nation and, indeed, many other countries around the world - I think President Obama has made commitments on high-speed rail recently as well - we really want to ensure that, if we have that additional capacity, it is offering the quickest connectivity between the cities of the UK. So we have asked HS2 Ltd to set out for us the first leg of that in some detail, which is connections between London and the West Midlands, but we have also asked them to set out for us how that would be financed and what the broad shape of a future development to that high-speed network might look like.

Q359 Mr Donaldson: Heathrow has been mentioned as a possible hub for another high-speed line. I suppose I should declare an interest, as someone who travels regularly into Heathrow. What is your view about a French-style high-speed network, with Heathrow Airport rather than Central London as the primary focal point?

Chris Mole: There are different ways in which the access to London can be delivered. There are some advantages to having connection to Heathrow. Obviously we want to improve the surface access to Heathrow itself. The major causes of pollution at Heathrow are not aeroplanes: it is cars getting to and from the airport. That is why we asked HS2 to look at the feasibility of a link to Heathrow. But we will wait and see what their recommendation is on that rather than holding a view ourselves at this point in time.

Q360 Mr Donaldson: It is a link to Heathrow you are looking at rather than Heathrow being a focal point.

Chris Mole: That is the way we have asked them to consider it, yes.

Q361 Mr Leech: Following on with high-speed rail, is there a danger that the Government is putting all its rail eggs in one basket on high-speed rail, and that, at a time when money is going to be tight there is a possibility that the existing network will suffer if there has to be so much money invested in high-speed rail?

Chris Mole: The point that I made earlier on was that we have seen growth in passenger ridership: huge success in terms of the Government getting more people on to trains over the last ten years. There are some things that we can do in terms of improving signalling, improving the maintenance and reliability of the track assets. We hope, for example, that the new intercity express programme of trains - the Super Express trains, as we are going to be calling them - will offer additional capacity. All of those things allow us to squeeze a bit more out of the current network, but we know we are going to hit the limit at some stage and we are going to need additional capacity. If you are going to have additional capacity, why not make it high speed? It is what everybody else is doing. They are showing that it can be done and be done successfully in Spain, in France, in Germany. It does not make sense not to think about building a high-speed network. The secondary benefit that it gives us is that it frees up capacity on the existing network for more local and regional services where those might be needed. I believe the Committee was just talking to colleagues from the freight industry. It frees up capacity on the classic rail network for additional freight, which has, we hope, led to the sorts of success they have had. Britain has had the fastest growing use of freight on rail over the last decade or so. We anticipate there is going to be additional demand for freight capacity on the network as well.

Mr Leech: I accept entirely the argument for high-speed rail. I am not clear, if the Government goes ahead with it, if there is going to be enough money in the pot to pay for high-speed rail but then still look at other rail priorities on the existing network?

Q362 Chairman: That is in the background of this perception of the problem. Are you confident?

Chris Mole: Yes, but, also, you would tend to find that a lot of the big expenditure on the high-speed network would be coming further down the timeframe, as well, towards the end of the next decade. I am not sure that that conflict is necessarily going to be there, but until we get a report from HS2 and we have some idea of what their expectation of costs are and what the funding mechanisms might be - because they might not be competing for the same resources ----

Q363 Chairman: What do you mean when you say that you are not sure that the conflict will necessarily be there? Is it not something you have thought about ahead of getting the report?

Chris Mole: Until we get the indications from HS2 as to exactly what the costs are going to be and the timeframe in which those costs might fall, whether front-loaded or back-loaded to the development of the high-speed network ----

Mr Linnard: It is probably worth bearing in mind that we have in HLOS and the core rail investment programme a very big programme of expenditure, both by Network Rail and by the Department through train operators, to put extra rolling stock in. On top of that, roughly at the same time we have a huge project like Crossrail going ahead, so it does not necessarily follow that a big project squeezes out others.

Q364 Chairman: "Does not necessarily follow" - again it is strange language. Is this not something that you should think about ahead? You have big projects and you have existing lines which need continuing maintenance and renewal. Surely in the whole thinking ahead you should be thinking of how to keep existing lines operating properly and to adequate standards, at the same time as developing bigger projects to which you are committed. Is that not something which you should be planning for?

Chris Mole: We do not start from the position where we anticipate that we will be creating a high-speed network at the cost to the classic network.

Q365 Chairman: Should you not have a policy decision that one is not going to be at the expense of the other? Is that not something that you should incorporate into your thinking? Or is it not there?

Mr Linnard: No, it is certainly something that we will take into account when we respond to HS2's report, which we will be doing early in the New Year. They are advising on how it might be funded. There are different mechanisms. It involves different scenarios for what government money is needed over what period. In looking at that, clearly we need to take a view on what other priorities will be around at the time.

Q366 Chairman: What are you doing about costings? High Speed One took 56.4 million per kilometre - the most expensive railway there has ever been.

Chris Mole: There you have put your finger on a key issue. When we look at the costs of the construction of high-speed networks in other European nations, our assessment is that they are not as high as that and, therefore, there are some opportunities, we would hope, to deliver a high-speed network at less cost than that, but I think we do recognise that, by virtue of it being high speed, there are some costs that are greater than just if you were building a duplicate of the existing network.

Q367 Mr Leech: Do you have a view on whether or not freight should be allowed to run on the High Speed Two network?

Chris Mole: We do not have a particularly strong view. There is a conceptual conflict, if you like, between the notion of high-speed trains and freight trains using the same track at the same time. Whether there are some opportunities for a high-speed line to be used overnight by freight trains, which I think is the arrangement that exists on HS1 at the moment. There are some freight trains using that when there are not passenger services running. In general, however, it is not likely that you would want to have a train moving at 70 miles an hour pulling a lot of freight on the same path that you have a high-speed train whistling up behind it.

Q368 Mr Leech: What about at night?

Chris Mole: As I said, we are open-minded about that.

Q369 Mr Leech: My other question was completely unrelated and it was to do with tram trains. We have a trial that is going to go ahead. How will you measure the success of the tram train trial? If it is measured as being successful, will tram trains become a priority for investment?

Chris Mole: The things we are looking for are what are the complexities in operating vehicles on both the heavy rail network and on the tram network, because there are some features which are not ideally suited to running a tram on a heavy train network. We want to be able to have worked through those and be confident that it can be operated cost-effectively and safely.

Q370 Graham Stringer: What features do you have to work through when Karlsruhe have been doing that for more than 20 years?

Chris Mole: We have to work through those features of our rail network which are unique to the United Kingdom.

Q371 Graham Stringer: What are they?

Chris Mole: All sorts of safety and similar sorts of standards, that are probably different from those they have in Karlsruhe, but I would start from saying that we share the perspective that we want to get in the same space that others clearly have been able to.

Q372 Graham Stringer: For decades.

Chris Mole: For some time, yes.

Q373 Graham Stringer: Do you think you could write to us specifically about what the safety issues are, what is different about our signalling systems compared to Karlsruhe?

Chris Mole: I am certainly more than happy to do that.

Q374 Graham Stringer: In answer to Mr Pritchard, I think you said that there were no franchises that you knew of that were in difficulties. Does that mean that there are no amber lights in your scheme of green, amber and red light assessment in the franchises?

Chris Mole: I have not seen a recent update on that.

Mr Linnard: I have not seen a recent update.

Q375 Graham Stringer: Is that not rather surprising? As the Rail Minister are you not looking at whether there is an amber light on a franchise when the East Coast has disappeared twice?

Mr Linnard: I do not think we are going to get into the territory of giving a commentary on what are ----

Q376 Graham Stringer: That was not quite what either of you said. You said you had not seen one. Does that mean you are not watching carefully?

Chris Mole: We have franchise managers who stay in contact with the franchisees on a continuous basis and we would anticipate that they would alert us if there were concerns that they wanted to bring to our attention.

Q377 Chairman: Is this a question that you ask them? Is it something that is high up on your radar, that you would ask your officials to look out for?

Chris Mole: We have a regular report from franchise managers as ministers of any issues to do with a franchise at any point in time. I think I get that fortnightly and I would expect to see an indication of difficulties with a franchise if there were any.

Q378 Graham Stringer: Has there been a value for taxpayers' money study done by the Treasury on the Thameslink investment?

Chris Mole: Projects such as that cannot go ahead without being tested against the Treasury's capital investment criteria.

Q379 Graham Stringer: What does it say?

Chris Mole: I cannot give you detail on that.

Q380 Graham Stringer: That is surprising as well, because it has been reported in the press that it is saying there should be 750 million cut out of the Thameslink scheme on a cost‑benefit analysis.

Chris Mole: I think that is press speculation, is it not?

Q381 Graham Stringer: I do not know. You say there has been a cost‑benefit analysis done, but you are not prepared to tell us what it is, and then you say the press are just speculating. I am trying to find out whether we are going to get better value for taxpayers' pounds on that scheme and whether you know about it, and if you know about it, whether you are prepared to tell us about it.

Chris Mole: We are very confident that we are going to get value for taxpayers' investment from the Thameslink programme because of the significance of the volumes that it carries and the need to be able to provide through-connectivity from the North of London to the South of London.

Q382 Graham Stringer: I know what it is doing. I think it is a significant increase in capacity, but I want to know whether 750 million is going to be taken out of that - or any other figure for that matter, because the press might have it wrong - because of a cost‑benefit analysis that has been done. I cannot see why that should be confidential.

Chris Mole: I am not in a position to comment.

Q383 Graham Stringer: If you are not in a position now and you do not know the facts, will you tell the Committee the facts in a letter?

Chris Mole: We will certainly take that away and look at it.

Q384 Graham Stringer: I would like to know whether a cut at that level you would consider to be confidential, or fit to be given to the Committee either in private or public.

Chris Mole: I am not even certain that it has any substance, Mr Stringer, to know whether there is anything to write to the Committee about or not.

Q385 Chairman: We would like a response to that question in the context of a reply you gave to me much earlier on that there were not going to be any cutbacks. We would like a response to the point Mr Stringer is making.

Chris Mole: You would like a response on ---?

Q386 Graham Stringer: I would specifically like a response on the cost‑benefit analysis that the Treasury have carried out on value for taxpayers' money and whether that is going to lead to a reduction in the overall money allocated to Thameslink. I understand, Minister, that you are in a position where you cannot prejudge what is going to be in the Chancellor's statement later on. I completely accept that. I do not accept that if there are going to be cuts because of value-for-money studies, the Committee should not be told that.

Mr Linnard: What I could say is the priority for Thameslink is to get the programme delivered as quickly as possible within the budget that is being allocated for it. There are obviously discussions that we have, particularly with Network Rail, about the cost of some of the infrastructure work, but this is nothing to do with cutting the scheme.

Q387 Chairman: Nevertheless, we would like a response to Mr Stringer's question.

Chris Mole: We will try to do our best to answer that.

Q388 Graham Stringer: Can you explain to me what this means: "Welfare is generally based on people's willingness to pay for an enhancement, irrespective of whether a payment is made, and is therefore a broader measure of the benefits of a scheme than GDP."

Chris Mole: I am sorry, what was the first part of that?

Q389 Graham Stringer: It is a quote, as far as I am aware, from the Department's submission to this Committee.

Chris Mole: I am sorry, I missed the first word.

Q390 Graham Stringer: I will read it again: ""Welfare is generally based ----

Chris Mole: Welfare?

Q391 Graham Stringer: Welfare - economic welfare, I think it means. "Welfare is generally based on people's willingness to pay for an enhancement, irrespective of whether a payment is made, and is therefore a broader measure of the benefits of a scheme than GDP." Can you explain what that means?

Chris Mole: I think that means that we take into account a wide range of assessments of any transport scheme of the benefits to the community in a range of ways.

Mr Linnard: Without that, we would be trying to capture the whole cost of the railways with the fare box. We are saying that there is value in railway investment that cannot, and, indeed, should not, be captured through the fare box but is nevertheless worth paying for through government subsidy.

Chairman: Is that an acceptable answer. Does that make sense?

Q392 Graham Stringer: That makes slightly more sense, explained like that, but the logic then of this piece I do not quite understand. As I have been trying to understand the argument in here, it is a case for not relating rail investment to gross domestic product, even though within that document, you say, you want to increase the economic competitiveness of the country and increase GDP. We are a wealthy country and a much more competitive country, why is that rather strange sentence there rather than relating investment to GDP?

Chris Mole: That is just one component of the assessment of any investment that we make in any transport infrastructure.

Q393 Graham Stringer: What is?

Chris Mole: The contribution to the economy.

Q394 Graham Stringer: I will read another sentence, which makes sense but directly contradicts what you have just said: "Because the effect on GDP is an incomplete measure, the extent to which a rail scheme might affect GDP is not used as the basis for selecting projects."

Mr Linnard: We are saying that there is more to investment simply than contributing to GDP. There are other things that we are trying to capture and subsidy captures that do not simply translate into an increase in GDP.

Chairman: It might have been simpler if the document had said that.

Q395 Graham Stringer: It actually says that it is not used as a basis. I do not want to exhaust the Chairman's patience, but I think that piece of gobbledegook, saying you are not relating something to GDP, relates back to the basis on which you did make investment decisions, which means that you end up with a ratio of infinity when it comes to new rolling stock over the last few years between the regions and London. That is a statement: that you do have that ratio, which you do not seem to be very concerned about. But are you happy that you end up with this sort of statement being submitted to the Committee, investing in rolling stock in the South East at a ratio that is infinitely more than into the regions? If you divide zero into 500 or any other figure, it comes out at infinity.

Chris Mole: If I would have sought to improve that sentence in the Department's submission to the Committee, it would be to say that it is not 'solely' based on contribution to GDP.

Q396 Graham Stringer: I do not want to interrupt you, but it says "is not being used as the basis for selecting projects".

Chris Mole: It is not 'solely' used as the basis is what I am saying should perhaps have been in there.

Q397 Chairman: There seems a lack of clarity about what this document is saying. How do you select projects? Perhaps we should have a note on that.

Chris Mole: Perhaps we should have a clearer note on the methodology, because I think this rather badly written submission leads to what is at best a passive and what is at worse a reactionary policy for deciding on investment decisions which follow where the money goes - which is where it already is, in London - and so you subsidise congestion rather than relieving congestion. I would ask you another question: Will you not only look at re-writing it in clearer English but will you look at the investment policy in rail so that it becomes much more dynamic, so that it tries to affect the whole economy by using all the country and improves the whole economy?

Mr Linnard: Perhaps I could just say something about how rolling stock decisions are taken and how we judge value for money in a much simpler way than that document - which, I agree, could probably have been better written.

Q398 Graham Stringer: Even better.

Mr Linnard: Yes. We look at the extra costs of leasing the rolling stock and those are quite straightforward. The train operator pays them. Ultimately they can add to the subsidy that the Department pays - so the monthly leasing costs of the extra rolling stock. We look at the extra fare box revenue that is generated by having more trains on. Where there is a gap, as there usually is, we look at the non fare box benefits that the rolling stock provides. Typically that is relief from overcrowding which people value. We know from surveys that they value that. People put value on it, but it is not something that you can easily capture through the fare box for obvious practical reasons. We look at other benefits that new rolling stock will bring; for example, road decongestion if there is a shift from car use to more public transport use. Clearly one of the things that is obvious from that is that the greater the value from new rolling stock you are going to get is going to be on lines and routes where there is heavy overcrowding and where, therefore, you get people leave.

Q399 Graham Stringer: That really is my point, which is why I am asking that both that methodology and the other methodology should be looked at. If you just put investment where there is already investment, you end up with more congestion and not using the economic potential of the region. I would ask the Minister if he would look at that. One last question on the economic issue and the investment in rail issue. David Clelland made the point really: London is special. We know it is more expensive to invest here. It is my capital as well as of the people who live here. It is an important city. I would be interested in why it has been government's policy to increase the ratio of investment into London over the regions. Education and health have higher investment in London because it is more expensive, but the only large public spending block where the ratio has increased has been transport. Why? Why is that government policy?

Chris Mole: The difficulty in answering these questions, Chairman, is that they are posing questions of government as if that is the way that government thinks about them, and it is not.

Graham Stringer: It is what the Government does. The Government has changed the ratio between the English regions and London by a large factor - roughly, it used to be double and now it is treble, in the round. Why? You are a government minister, explain to me the policy. That is your job.

Q400 Chairman: The question is about what the situation is, whether it was done deliberately or not. It is a very valid question. It is about what happened.

Chris Mole: The policy is to meet the challenges of the railway as they are and where they are, because that is where the demand is. If 70% to 80% of journeys are starting and ending in London, it is almost inevitable that a large proportion of the investment is going to have to support those waves of passengers wherever they start their journey from if they are ending up in London.

Chairman: Thank you.

Q401 Sir Peter Soulsby: You will know from the earlier questions that Members of the Committee in general have considerable enthusiasm - shared with the Department, of course - for another high-speed line, but you have also expressed concern about the potential for investment in the conventional network to suffer as a result of a commitment to new high-speed line. One of the areas for investment in improving the capacity and the efficiency of the existing network is undoubtedly electrification. That has been reflected in your commitment to the Great Western electrification, but, as yet, not beyond Great Western -and particularly the prospect of the Midland Main Line electrification has not been brought forward. Do you have any views as to when that might be brought forward and whether you share Network Rail and ATOC's enthusiasm for the continuation of electrification of the Midland Main Line?

Chris Mole: I am sure the Chairman would not want to let the opportunity go by without pointing out that it is not just the Midland Main Line but it is also Liverpool to Manchester via Newton-le-Willows which the Government announced in July.

Q402 Sir Peter Soulsby: Nor is it just the Midland Main Line that remains beyond that. I am talking about the two Main Lines most affected.

Chris Mole: There are plenty of other bits of network which could benefit from further electrification. We have to look at each route on a route-by-route basis, because it is not just the electrification that we have to take into account in the equation but also what rolling stock might be operating on the line currently, and the issue for us with Great Western Main Line at this time is that the intercity rolling stock was coming towards the end of its life and would have to be replaced by new diesel intercity rolling stock - diesel IEPs, in principle, I think that would have had to have been. Rather than get locked into another generation of new diesel trains, the opportunity was there to say, "Right, let's electrify that line and then we can run services to the West with and into Wales with cleaner, more reliable, cheaper electric vehicles." We have to apply the same sorts of tests to all the other opportunities that might exist, and it will depend to an extent on what the age and condition of the rolling stock is on any route as to whether replacing those with electric trains adds up to an affordable proposition, so we are continuing to look at the Midland Main Line and others.

Q403 Sir Peter Soulsby: But the Midland Main Line, in particular, has precisely the same considerations as the Great Western, in that it too is running HSTs, it too is partly electrified as far as Bedford, and it too has the opportunity to cascade existing rolling stock onto other lines where it were it to be electrified.

Chris Mole: I am sorry, my understanding is that a significant part of the rolling stock are 222s.

Q404 Sir Peter Soulsby: They are indeed.

Chris Mole: Which are much newer and therefore the economics of change are not necessarily the same. As I have said, we are continuing to look at it and we hope to be able to resolve it sooner rather than later.

Q405 Chairman: How will you make the assessment on what new rolling stock is required, given that there is going to be electrification? How much overcrowding do you think is acceptable and for how long?

Chris Mole: I am sorry, I am trying to relate overcrowding to the question of electrification.

Q406 Chairman: Yes, because there was a rolling stock plan of agreement on additional replacement of rolling stock on a number of lines. That has now been put into abeyance pending a new review caused by proposals for electrification. How are you going to judge what is required? Are you going to decide that people have to suffer a lot longer before electrification is an effect? How are you going to make that judgment?

Chris Mole: We have made the judgment that it is sensible to electrify the Great Western Main Line.

Q407 Chairman: No, not on that; the judgment on the new rolling stock that is required ahead of electrification.

Chris Mole: We hope to publish a new rolling stock plan this autumn which will set out what we think will meet the challenges of the high level output specification to 2014, in the context of the changed set of requirements based on the need for more electric rolling stock and the ability to re-use electric rolling stock, for example, on the Liverpool to Manchester line.

Q408 Sir Peter Soulsby: To return to the Midland Main Line, do you accept that it would be sensible to take a decision with regard to the electrification of the Midland Main Line in advance of decisions about new rolling stock, and at a time when it is possible to look at the programming of the Great Western electrification with the electrification of Midland Main Line as something that would follow on?

Chris Mole: I think the opportunities to follow-on are very sensible. There are questions about whether Network Rail would have the capacity to do two at once, and so we would be wanting to hear from Network Rail at some stage, as they progress with the electrification of the line to Swansea, whether they would be saying to us, "And, following on from that, we have teams in place, we have got costs down." It might have changed the economics of doing some additional lines.

Q409 Sir Peter Soulsby: Given that both Network Rail and ATOC have submitted evidence in favour of the electrification of the Midland Main Line, would it not make sense to do it together and to take into account the fact that the Midland Main Line would be following on when looking at the economics of the Great Western electrification?

Chris Mole: If I thought it was that simple, I would say yes, but I do not think you can separate it entirely from the rolling stock question, which is why I drew attention to it in the first place.

Mr Linnard: On the question of which comes first, the electrification decision or the rolling stock decision, you need to take them both together. You need to look at the benefits you can get from electrification by way of cheaper rolling stock both on that line and the opportunities that it creates to cascade existing diesel stock elsewhere. We would need to look at them both together. We said in the document that we put out in July about Great Western and Manchester that we were looking at a document with Network Rail at the Midland Main Line as potentially a further high priority.

Q410 Chairman: Network Rail may be making 1,500 people redundant in order to meet its efficiency targets. Does that concern you in terms of safety?

Chris Mole: We have received assurances from the Office of the Rail Regulator that they are confident that Network Rail can improve its efficiency in line with European and other comparators in order to deliver better value for the taxpayer in terms of the costs associated with maintaining and renewing the rail network, and they have a programme of inspections which creates the opportunity to ensure there is no additional risk to the travelling public.

Q411 Chairman: Have you asked specific questions about safety?

Chris Mole: Yes. We have asked the ORR to assure us that they have no concerns that the safety of the rail network will be compromised. Indeed, we continue to have the objective for the network of a 3% reduction in fatalities and serious injuries occurring to passengers as a result of travelling on the rail network, and ORR have not suggested to us that we should not be able to continue to meet that target as we go forwards.

Q412 Chairman: You are fully confident that safety is not a problem.

Chris Mole: That is the assurance we have been given, yes.

Q413 Chairman: How do you see the document Connecting Communities going forward? In connecting communities which do not have access to rail now, how soon is progress likely to be made?

Chris Mole: Progress on connecting communities?

Q414 Chairman: Yes.

Chris Mole: We are talking about routes of local and regional significance. We anticipate that those routes that were identified in the ATOC report should be considered by the local authorities in the area, to see whether reopening one of those particular routes in their area meets their local transport needs best. If it does, we anticipate that they would, where they perhaps need additional resources, look to the regional funding allocation - as a number of small schemes have already done in that sort of area. We would anticipate that they would ensure that any subsidy costs that are necessary are in place for three years. If we could see with some confidence the predictions that were being made about ridership and use of a particular line were being met, then we would consider taking them into a franchise.

Q415 Chairman: What is the timetable?

Chris Mole: The timetable will be driven by whatever the local priorities are for their local transport solutions.

Q416 Chairman: When does this discussion start?

Chris Mole: I would assume that they would be able to start on them as soon as they had seen the report, but if they are going to need funding through RFA, they are probably going to have to look to the next round of that, which I think is about 2015.

Q417 Sir Peter Soulsby: That sounds a rather disappointing response, Minister. Do you not accept that many of these re-openings, particularly the re-use of freight lines, have in the past proved to be very successful - indeed, in many cases far more successful than was anticipated by any of those involved - and that the potential there is more than something that ought just to be left to local authorities but is something that your Department ought to be encouraging.

Chris Mole: There is some evidence that community rail schemes can perform very well, which is why we are happy to support the groups that encourage volunteers to come in and promote the railway. I visited the Severn Beach Line a month or two back and could see how people there had strongly supported the use of rail link, but its function is primarily of local and regional significance, which is why we want to see, quite appropriately, local communities taking the lead on this.

Q418 Sir Peter Soulsby: It is quite clear that some of them are more than of just local significance. Some of them have the potential to be of regional and even of national significance. I would have thought, Minister, that your Department ought to be looking very closely at them and looking at opportunities for the Department to promote some of these schemes and to encourage local authorities. Otherwise, they may look rather parochially at their own local authority area rather than at the larger context which, in some of these cases, could significantly benefit.

Chris Mole: We do encourage local authorities and local communities to give leadership on community rail partnership schemes. We see the benefits of those. I think you have to be very careful about over-claiming for the potential of some of these links.

Q419 Sir Peter Soulsby: I think the evidence would suggest that, rather than over-claming, in the past assessments of the potential of these have been significantly under-estimates, and the suggestion from ATOC particularly was that would be the case were some of these to be looked at as closely as we would wish them to be. I will leave that as a comment.

Chris Mole: That is an opinion, I think.

Q420 Graham Stringer: Two or three green questions, if I may. We have all on the Committee received letters, and letters from one airline, I think KLM, saying that the environmental case as far as savings in carbon dioxide and other effluent gases is not made for high-speed rail against air travel. Have you seen those figures? Do you feel robust in saying that there is a green case in terms of carbon dioxide and other gases from high-speed rail?

Chris Mole: We are confident there is a green case for high-speed rail. Whilst it is clearly the case that the faster you go, the worse your fuel efficiency gets, the benefits come in looking at this strategically as a government and recognising that, alongside the introduction of high-speed rail, with electrification we will be looking to change the mix of our energy supply to ensure that that is increasingly green.

Q421 Graham Stringer: Do you have robust figures that will say exactly how much carbon dioxide or noxious this would save?

Chris Mole: I am just trying to think whether it will be in the HS2 report.

Mr Linnard: The HS2 report will have this. It will look at both savings from aviation - which in the case of London to West Midlands will be almost negligible because there is so little, if any, direct flights - but also at the environmental case if the high-speed network were extended further, potentially as far as Scotland and, also, at the relative carbon advantage of rail over road transport. Because part of the case for building a new line lies in a judgment about, if you have to expand transport capacity in a corridor, say London to the West Midlands and beyond, what is the most efficient way of doing it.

Q422 Graham Stringer: I accept that air is not even the main competitor to rail in these areas. I do not want to put words into your mouth, but what you are saying is that it is work in progress. I do not expect you to say London Road or New Street, but if there were a high-speed network that went to major cities - and I do not want to get involved in the East/West line - to both Leeds or Manchester, where would the stations be?

Chris Mole: Again that is something we are anticipating we will get some guidance from HS2 on, although we did suggest to them that they might want to say something to us about interconnectivity with the classic network, because we know that as some of the high speed networks have grown in European nations very often they have been ... I am trying to think of the word. Ambidextrous or --- They have been able both to travel on the high-speed network and the classic network in order to reach some of the stations that they might want to.

Q423 Graham Stringer: I find it difficult to imagine, knowing all those cities pretty well, exactly where you would put a new high-speed station if you were to take them into the city centre. And if you were not to take them into the city centre, I would be interested in whether you had any generalised thoughts - either between those two things and tell me I am wrong - on where we would put them.

Chris Mole: These are exactly some of the questions we have to wrestle with when we get the report from HS2, because the general sense is that people will want to be able to be delivered as near to the city centre as they possibly can.

Q424 Graham Stringer: We were talking to the witnesses who were in before you about the 60% of all the freight that lands in the sea ports in the South of England that ends up going on the road north of Birmingham. They told us that with gauge enhancements and some investment in extra casting, in extra tracks, they thought they could reduce that dramatically. Do you have any environmental benefit analysis or cost‑benefit analysis on increasing the gauge and capacity out of the South of England ports so that you could get that considerable amount of freight off the roads?

Chris Mole: The whole of our strategic freight network vision is to do just that. It recognises that, really, if you look at the Haven ports and Southampton with the destinations in the West Midlands, the warehouse of the UK, those are the principal flows, and that is where a lot of the bottlenecks are. That is why the investment is going in signalling, gauge enhancements and all those things on those routes. Southampton's tunnel is going to be blockaded this Christmas in order to provide a gauge enhancement very similar to the one I experienced on the Ipswich tunnel for just that purpose a few years ago.

Q425 Chairman: Do you have plans for any other strategic freight routes?

Chris Mole: We see the strategic freight network as a kind of dynamic network and the resources need to go wherever the next bottlenecks are identified. We have 200 million going into the strategic freight network to take exactly these things out that you have described.

Q426 Chairman: Do you have any plans about what you are going to do next?

Chris Mole: Yes, there is a vision document The Longer Term Vision. Is that still out to consultation?

Mr Linnard: No, it was published in September. This is a long-term view of where we think the priorities are for rail freight investment.

Q427 Graham Stringer: There are two questions that follow from that answer. One is why there are no targets then for changing freight at ports from one mode to the other. There are no government targets on that, which, if that is what you want to do, I would have expected there to have been. The second question is: Do you have a time when you expect that figure of 60% going North of Birmingham - which I think is an agreed figure within the industry - to be taken down by 25% or a half?

Chris Mole: We certainly have a resource in the freight facilities interchange grant which can be used by bodies like ports to meet the costs associated with additional infrastructure that allows more freight to be carried by rail. They could come to us and ask us for those grants as and when it is useful to them.

Q428 Graham Stringer: That does not quite explain why no targets. The Government is often criticised for it, but some of the targets the Government have had have been very successful in achieving its objectives. If the objective is to get freight off the road on to rail, why no target at the dockside? Is there an answer to the question of when those figures of 60% going north of Birmingham might be reduced?

Chris Mole: I do not think that is a target that we have looked at to date.

Q429 Graham Stringer: The question for the Committee is why.

Chris Mole: We are quite pleased with the growth rate of freight on rail in the UK. In many European countries they have continued to see a decline until very recently. Some have begun to improve their freight performance. We have seen a 50% increase in freight since 1995 on rail, until the economic downturn. We accept that there have been some very immediate challenges over the last period, and our anticipation is that they will return to that trajectory of growth in the long term. This links back into High Speed Two again because the same capacity constraints that are on the network in the longer term for passengers are constraints in the longer term for freight, so HS2 is as much about capacity on the rail network as it is about anything else.

Q430 Chairman: There has been growth, but it is still only 12% of surface freight. Are you satisfied with that figure?

Chris Mole: We would be pleased to see that share continue to increase.

Q431 Angela Smith: Is it fair to say that the Department, looking forward, would always seek value-for-money deals, if you like, when franchising and that the investment offered by the bidding companies would be a key factor when making decisions about who to award franchising contracts to?

Chris Mole: Passenger rail franchisees?

Q432 Angela Smith: Yes.

Chris Mole: We would always want to see value for the taxpayer, yes. We would always want to see commitment to improving services for passengers. That is one of the reasons why I drew attention to the Southern franchise, which has a whole host of enhancements. That is why I made the reference to involving passenger focus in the development of future franchises. They have just produced reports on Essex, what is currently the c2c franchise. I think they may have done one on the East Coast Main Line as well, which will help inform the re-franchising process as to what passengers want from their future rail service.

Q433 Angela Smith: The company that is now running the East Coast Main Line services has committed itself to a number of improvements, including an additional Saturday evening service to Leeds and removal of the seat reservation fee and a review of onboard catering with a view to introducing improvements. If the performance record of this new company is such that they would, to any reasonably informed person, look fit to bid for a future franchise, would it not be dogmatic to stop a company like East Coast being one of the companies which would want to bid for a franchise in 2011?

Chris Mole: We would have a problem with the law.

Q434 Angela Smith: Why?

Chris Mole: Because currently the 1994 Act requires us to re-franchise.

Angela Smith: This is a company. The staff have been treated as a company. If they perform well, if they outstrip expectation and increase passengers numbers - and I accept that is not a given - why should they not bid as part of the bidding process for the 2011 contract if they have the potential to promise a value-for-money deal for the DfT?

Q435 Chairman: Minister, can you exclude?

Chris Mole: I am going to have to ask Mr Linnard on that one, because I am not sure of the detail of the Act.

Mr Linnard: Under the legislation, a government-owned company, which is what this is, cannot bid for franchisees.

Q436 Chairman: Is that explicitly rules out?

Chris Mole: I thought that was the case.

Mr Linnard: Yes.

Q437 Mark Pritchard: The danger here is of being seen as dogmatic. Would it not be possible to change legislation in order to make it possible for highly performing arm's-length companies to bid for contracts like the East Coast Main Line franchise, given that value for money for the taxpayer and passengers is at the heart of all this?

Chris Mole: That is a different question, and it is one which is not currently government policy.

Q438 Chairman: Clearly, if the Government ruled it, it would happen. One final question: Could you tell me what proposals you have to integrate rail with other modes of travel?

Chris Mole: If you look at the initiatives around things like Smart ticketing, there is some good use coming shortly - I am sorry, it is in London - around Oyster card, with an extension to the overground. The standards and the technology around what is known as ITSO, a standard for electronic ticketing, will make transferring journeys, for example, from bus to train, in the future much more straightforward, but, also, we are putting into franchises additional expectations around things like car parking. The Station Champions suggested we should have an additional 10,000 car parking spaces close to stations a year going forwards, and we have been able to deliver some of that. Coming back to the Southern franchise, that has additional car parking as one of the offers from the train operating company in their franchise. Also, the work that the secretary of state has done in promoting cycle interchanges at railway stations is very positive. We have 14 million investment in approving cycle access at stations. We have looked across the North Atlantic at what can be achieved in Holland, where you have fabulous amounts of people cycling to railway stations and leaving their cycles. Leeds is going to have a cycle hub which will be a facility which will be much valued by people who want to take their bike and leave it at the station, but, also, across some of the smaller stations around the network as well.

Q439 Chairman: What is the Government doing to promote Smart cards outside of London?

Chris Mole: It is something we hope to build into franchises as we go forward. I think some have had ITSO requirements. For example, ticket gates at stations may have to be compliant with those sorts of standards.

Q440 Chairman: You said "may promote" and "may have to". Should this not be something that you make a requirement?

Chris Mole: I think we have done in a number of franchises. As old franchises come up for renewal, that will certainly be a feature going forward.

Chairman: Thank you. Thank you very much for coming and helping us with our questions.