UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 76-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

TRANSPORT COMMITTEE

 

 

PERFORMANCE OF THE DEPARTMENT FOR TRANSPORT

 

 

Wednesday 2 December 2009

LORD ADONIS and MR ROBERT DEVEREUX

Evidence heard in Public Questions 1 - 126

 

 

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Oral Evidence

Taken before the Transport Committee

on Wednesday 2 December 2009

Members present

Mrs Louise Ellman, in the Chair

Mr David Clelland

Mr Jeffrey M Donaldson

Mr Philip Hollobone

Mr John Leech

Mr Eric Martlew

Mark Pritchard

Ms Angela C Smith

Sir Peter Soulsby

Graham Stringer

________________

Witnesses: Lord Adonis, a Member of the House of Lords, Secretary of State for Transport, and Mr Robert Devereux, Permanent Secretary, Department for Transport, gave evidence.

 

Chairman: Good afternoon and welcome to the Committee. I apologise for keeping you waiting but our business extended rather longer than we had anticipated. I am glad we can start the meeting now. Do Members have interests to declare?

Mr Clelland: Member of Unite.

Graham Stringer: Member of Unite.

Ms Smith: Member of Unison and GMB.

Chairman: Louise Ellman, Member of Unite.

Mark Pritchard: Nothing in addition to the Register.

Mr Leech: Chairman, since we may talk about aviation I ought to declare a non-pecuniary beneficial interest in a piece of land around Heathrow Airport.

Q1 Chairman: Could I ask our witnesses please to identify themselves for our records?

Lord Adonis: I am Andrew Adonis, the Secretary of State for Transport.

Mr Devereux: I am Robert Devereux, the Permanent Secretary at the Department for Transport.

Q2 Chairman: Secretary of State, do you want to make any initial comments?

Lord Adonis: You have heard so much from me recently, Chairman, I thought you would just want me to pitch straight into the questions!

Q3 Chairman: The National Audit Office has expressed concerned about the extent of contingent liabilities to which the Department is exposed. Could you give us any reassurance on that? Could you tell us why the contingent liabilities as reported are so large?

Lord Adonis: We think our position on contingent liabilities is sound but perhaps I could ask Mr Devereux to go into the detail.

Mr Devereux: You will have seen in the accounts that there have been some changes to the accounting treatments of contingent liabilities in the course of the current year right across government, the result of which is that we are now scoring three quite large contingent liabilities. In one sense nothing has changed from the past but they are being scored in a different way. If I could just run through what they are. There is a contingent liability in respect of the guarantees we have given to Network Rail's borrowing. There is a separate contingent liability in respect of the borrowings of London & Continental Railways, which is the company that built the first high-speed train. There are now also some contingent liabilities for Crossrail as well. I do not recognise the comment that says the NAO are concerned about them. They are large, they are large in relation to our annual spend, but they strike me as being entirely proper.

Q4 Chairman: We are told that they have increased by 19% from the last time that you reported.

Mr Devereux: 19% or 90%?

Q5 Chairman: 19%.

Mr Devereux: I suspect that is to do with the reclassification.

Q6 Chairman: It says that was leading to some concern. The exposure of Metronet to the taxpayer turned out to be, we are told, between 170 million and 410 million. Can you tell us what the actual cost to the taxpayer was?

Mr Devereux: You are quoting a number which the National Audit Office estimated in a report to the parliamentary Public Accounts Committee. What they tried to do was to assess the total amount of money spent through Metronet with the sum of money which the arbiter assessed as being economically and efficiently spent, and he concluded that 4,500 million was economically and efficiently spent as a consequence of the PPP, but they estimated that in the region of 170 million to 410 million had actually been incurred as a loss to the taxpayer.

Q7 Chairman: What was the actual figure?

Mr Devereux: That was their best estimate. It is slightly difficult to be entirely precise because it depends on estimates which the arbiter himself made as to what was economic and efficient, which itself had ranges in it.

Q8 Chairman: If a contingent liability cannot be quantified is there a way that its scale could be notified to the Parliament so that there was some knowledge about the Department's exposure?

Mr Devereux: The number you are now talking about of course is not a contingent liability because it is a cost that has been incurred and so it is not in the books as a contingent liability. You will find in the accounts the continuing comfort letter that we have issued to the company and the lenders for Tube Lines which is the remaining PPP infraco. It would take me a while to find it but I can point you to it if you wish.

Q9 Chairman: Yes, I think we would like to know about that.

Mr Devereux: Let me see if I can find it for you. Do you want to ask another one while I just find it for you because these are very long bits of paper.

Q10 Chairman: Following what happened with Metronet, there is an on-going concern about the implications of the PPPs and I think we do need to know what has happened. Has the Department set a maximum level of exposure to contingent liabilities?

Mr Devereux: No, Chairman. Perhaps I can explain. Basically for each sort of liability, governed by the accounting rules which the Treasury set, we score them according to whether they are remote possibilities or things that we believe there is a good chance of them maybe occurring and we treat them differently. In some cases it is impossible to put a maximum number for them simply because the circumstances in which they will arise are quite difficult to predict.

Q11 Chairman: What does all that mean? Does it mean the Department really does not know the extent of its exposure?

Mr Devereux: It knows the extent of its exposure. What is the best way to express this? I can tell you what the maxima are in some cases but where, for example, we have made promises - and let us take the International Maritime Organization - in the event that the building was partially or completely destroyed, we would be obliged to reconstruct it, we have made an estimate of that but I cannot promise you that I know exactly what that would be.

Q12 Chairman: This is a serious matter, is it not, and surely something that you should be a bit clearer about? The extent of the contingencies has increased quite significantly and you have explained some of the reasons for that and there is clearly an on-going concern about what the Department exposure might be.

Mr Devereux: Let me point you to pages 377 and 378 since I have now found the relevant page. In all of the tables there you will see individual estimates of what we believe to be the guarantees issued in each case. We have put down in the accounts the ones that we think we can quantify.

Q13 Chairman: But what about the ones you cannot quantify; those are the ones that are concerning us?

Mr Devereux: We have set out in section 32.2, pages 379 and 380, what each of those is and our explanation of why it is they do not come with quantification.

Q14 Chairman: Is this a matter of concern to you?

Mr Devereux: I fear you are asking the question in the sense that somehow this means that I do not understand what we might be getting into. This is to do with the accounting treatment. We have declared explicitly what some of these are. We have explained explicitly all the guarantees we have given and indeed we come to Parliament and ask for them, that is the way contingent liabilities are organised. I believe these are all well within our gift to manage properly. Your starting premise, which is they have all gone up, is almost wholly to do with a classification change, and therefore in one sense that is not different from what it was in the year before.

Q15 Chairman: So you can assure us then there is no cause for concern? You are saying the items that give us concern are solely a consequence of accounting changes and do not reflect real risk?

Mr Devereux: Let me give you an example. We had a letter of comfort in respect of the PPP for Metronet which was last year unquantified. That has been called and was paid by the taxpayer without detriment to the budget. I think you can assume therefore that was a real example and a large sum was paid out and between us and the Treasury that was paid properly, so we have not, in my view, been embarrassed by managing these; quite the contrary.

Q16 Chairman: Are there any other potential large liabilities?

Mr Devereux: We have listed every single one that is a liability in the accounts as we are obliged to do by the NAO.

Q17 Chairman: Are you satisfied with the situation? You seem very hesitant in answering this and it gives rise to some concern.

Mr Devereux: I am just trying to check the question but I am comfortable that these guarantees and indemnities have been properly listed and are properly under control. If they were not the NAO would have qualified my accounts and they have not qualified my accounts.

Q18 Mr Hollobone: May I congratulate the Secretary of State for giving up his ministerial car. Would the Secretary of State confirm that he has in fact done that and the reasons behind that decision?

Lord Adonis: I am happy to confirm that I have. I think I can get around perfectly well for most of the journeys I make to and from home without needing a ministerial car, from a combination of using the tube and cycling. I do have access to what is called the Green Car Service, which is the government taxi service which is part of Government Cars for journeys as and when I need them. I do use that. I am not entirely without ministerial transport for official engagements or engagements where I need to take official papers with me. I do make use of that service but I thought that that was a more appropriate mix of transport to meet my own needs and of course it also provides good value for money to the taxpayer.

Q19 Mr Hollobone: I think it is an absolutely splendid example for a senior politician, a Cabinet member to give up their ministerial car. Personally I feel that it is an example that other Cabinet members and other ministers should follow. Do you know what the extent of the saving to the Department for Transport is from you having given up your use of your ministerial car?

Lord Adonis: I cannot say at the moment because it depends upon what use I make over the year of the Green Cars service, the government taxi service, so you would need to net the one off against the other. Of course, having a ministerial car costs many tens of thousands of pounds so I would expect there to be a saving. Could I also stress, because I can see where this question might be leading, that this was a judgment about my own circumstances. I happen to live right next to a Victoria Line station so it is very convenient for me to come in on the tube. In fact it is often faster coming in on the tube than coming in by car. However, I would not wish to offer advice to my colleagues for many of whom this would not be suitable.

Q20 Mr Hollobone: The Secretary of State is being extremely modest because I think he has set a very good example and there will be lots of other ministers, Cabinet members and below, who actually live in London and who could easily commute to their places of work. I can understand the reason for the Secretary of State's modesty but I think it is an extremely good example. There was some speculation in the Evening Standard yesterday that there may be costs incurred from the Secretary of State having given up his car. Are you aware of that?

Lord Adonis: No, there are no costs incurred because we do not need to retain the ministerial car and driver that I previously had, so there will be a substantial saving from my new arrangements.

Q21 Mr Hollobone: One of the reasons often given for ministers having their own ministerial car, many of which are waiting outside the Palace of Westminster all day with their engines on, is that they need to have a car to get home in the evening with their red boxes and there is a security implication. How has the Secretary of State got round that?

Lord Adonis: Again, it is to do with my own personal working habits. I tend to come into the office early in the morning and I tend not to work late at night, so obviously I never take official papers on public transport but when I do take papers home in the evenings they are not classified papers. I can therefore read classified papers in the office when I get in in the morning. Let me stress again that for many ministers that would not be a suitable arrangement and indeed it would be seriously detrimental to their working practices and therefore to the efficiency with which they conduct their office if they did not have a car that was able to take official papers with them home in the evening and back again in the morning.

Q22 Mr Hollobone: I am sure that would be true for some of them but most of them would benefit from the example that you have set. In transferring this example to the Civil Service, are there senior civil servants in the Department who come to work through cars paid for by the Department?

Lord Adonis: Mr Devereux will speak for himself in a moment but not only does Mr Devereux not have a car as Permanent Secretary but he and I met on the Victoria Line this morning coming into the office, both of us coming in extremely early in order to prepare for our appearance before your Committee! In hushed tones we were able to consult on what questions you might ask and what preparation we needed to conduct, but I can assure you, Chairman, that we do not believe this conversation was overheard and therefore we do not believe any confidences were divulged to the wider public.

Q23 Ms Smith: Can I assume therefore, Lord Adonis, that you do not send your papers on to work by separate cover by car?

Lord Adonis: I can certainly give you that assurance.

Q24 Ms Smith: The briefing that we received from the National Audit Office on page 8 refers under paragraph 22 to "the need for the Department to maintain its contribution and that of the private sector to an ambitious programme of infrastructure investment during a period of public expenditure restraint and investor caution". I would like to hear any comments you may wish to make in relation to how we may fund High Speed 2?

Lord Adonis: We have been maintaining very significant contributions. To take a recent example, the DBFO for the M25 is one of the biggest infrastructure projects proceeding at the moment where there is a private contribution to it too. There is a very substantial up-front public contribution as part of this as well, so we have been maintaining that. In respect of a potential high speed line, our view - though of course we are awaiting advice from the High Speed 2 company at the end of the month - is that this would need to be a state-led project which would include the state taking the lead in the funding. However, we would expect to be able to forge effective public/private partnerships for part of the costs of any such programme and we would obviously seek to get the best possible value for money for the taxpayer.

Q25 Ms Smith: The other question I would like to ask in relation to budget is the need to look again at the Comprehensive Spending Review 2007. In that review there was a 2.25% annual real increase in the Department's programme budget. Is there any risk to that long-term spending plan because of the impact of the recession and possible public spending restraints?

Lord Adonis: The current Comprehensive Spending Review stands. That is the basis on which my Department is working, and indeed other departments are working too. It is of course true that we are seeking constantly to get the best value we can for public money and, as you would expect, we scrutinise constantly our programmes, both internally and in partnership with the Treasury, to see how we can get best value for the taxpayer. As you are aware, there is a programme of work across Whitehall called the Public Value programme which is seeking to maximise value from current spending programmes, but the next Spending Review has not begun yet and therefore I am not in a position to make any comments or judgments as to what is likely to happen then.

Q26 Ms Smith: In terms of the commitment made by the Department to procure new rolling stock, I think the initial promise was 1,300 carriages and, as far as I know, only 543 have been ordered so far. Of course those of us in the north are very, very concerned that the 186 promised are not going to materialise or at least that number is going to be scaled down dramatically. Could you comment on that?

Lord Adonis: I think actually we have been making very good progress. As you say, that is more than 500 out of the 1,300 and we have only just begun the five-year period to which that commitment applies. That was between 2009 and 2014. Much more than a third is already in the pipeline or actually procured of that 1,300 commitment. As I said when I last appeared before the Committee when this was raised, in recent months we have made very significant electrification announcements which have had a significant bearing on the rolling stock plan. One of the major lines for which we were going to be procuring new diesel rolling stock, the Great Western Main Line, we are now going to electrify; therefore it is not good value for a very short period of time to be buying large numbers of new diesel trains for the Thames Valley commuter services, and we have made a commitment instead that we will move high quality (and not particularly old in railway terms) electric trains from the Thameslink Line on to the Great Western commuter services when the electrification is complete. In the light of those electrification announcements, which also of course include Liverpool to Manchester, we need to revise the rolling stock plan. I gave a commitment at the time that we would do so by the end of the year and I will come forward with a revised proposal as to how we intend to take that forward.

Q27 Ms Smith: One of the indicators in terms of the Department's performance is of course reductions in overcrowding on trains. It appears that the Department is not doing too well on this indicator as compared for instance with reducing time taken to travel by those using the national road network. What is the Department going to do to relieve overcrowding and to improve its performance on that indicator?

Lord Adonis: The procuring of additional capacity is vital to the relieving of overcrowding so the two are clearly intimately linked - the rolling stock plan and the reduction in overcrowding. The commitment to the additional railway carriages was very much linked to our desire to see overcrowding reduced.

Q28 Ms Smith: There is going to be no scaling back of any commitment to try to achieve that indicator because of the current recession and the impact of the recession on passenger numbers overall?

Lord Adonis: To be very clear - and I have been entirely frank about this - the issue which we are having to wrestle with at the moment is the impact of electrification and how that affects rolling stock procurements. We are also, as you know, in the process of contracting for new Thameslink trains because of the significant upgrade that is taking place in the Thameslink Line. Since one of the major sources of new rolling stock will be for the Thameslink service, that is a factor too, but these are factors on which we are currently engaged and I hope I can update the Committee and the House on where we stand fairly soon.

Mr Devereux: If I might add, there is also expenditure that we have agreed as part of the regulated settlement for Network Rail which will improve the carrying capacity of the network as well. That is already part of a five-year settlement which has been agreed by the Regulator. For example, all the work that is happening at Thameslink.

Lord Adonis: Including longer platforms and so on which actually make it possible to put more capacity on.

Q29 Ms Smith: And the Manchester Hub or the Northern Hub as we prefer to call it in Yorkshire?

Lord Adonis: The Manchester/Northern Hub proposal will, I understand, come to me by the end of January and I have given a commitment to those who have been leading the work that I will meet them as soon as possible thereafter to discuss it. That will be a very important piece of work which will feed into the planning for Control Period Five, the period from 2014 to 2019, when we establish priorities for the next five-year period in rail investment.

Q30 Chairman: So you are giving us an assurance then there will not be any rephasing or reduction on dealing with the overcrowding problems?

Lord Adonis: I cannot give an assurance that there will not be changes in the rolling stock plan. I need to be very clear about that. Because of the decisions that we have made in respect of electrification there will need to be changes because the destination of a significant number of new carriages ---

Q31 Chairman: This is going to be changes required because of the electrification programme; it will not be an excuse to reduce effort in dealing with the problem?

Lord Adonis: As I said, electrification is one issue. Thameslink, about which we are in the final stages of contract negotiations, is another. I need to take full account of these factors in the revised plan that we have put forward but we do remain committed to the 1,300 target.

Chairman: Mr Pritchard?

Q32 Mark Pritchard: Welcome, Secretary of State. You mentioned your experience on the Victoria Line on the tubes. What is your Department doing to work with the Mayor of London to reduce overcrowding? There is a really serious issue of overcrowding on some tube lines and do you think that is likely to increase or decrease in the London Olympics?

Lord Adonis: It is the Mayor's responsibility to manage his budget and his programme. We have given him a 40 billion ten-year settlement. He then has the responsibility. There will be very significant additional capacity brought into play in the Underground as part of that 40 billion investment with the major upgrades that are taking place in the tube lines. However, the commitments that you seek are commitments you need properly to seek from him because I do not have responsibility for the direct management of the tube.

Q33 Mark Pritchard: But you will have a view as Secretary of State.

Lord Adonis: With the very significant additional capacity which is going to be brought into play, with the major line upgrades, I would expect overcrowding levels to reduce, but the management of that upgrade programme and seeing that it actually meets the real needs of passengers is a matter for the Mayor and TfL.

Q34 Mark Pritchard: Going to rail franchises and National Express and the nationalisation of National Express on the East Coast Line, is it likely we are going to see other rail companies being bailed out by the government in 2010?

Lord Adonis: Very unlikely I can say to the Committee. No other train operating company has indicated to me any intention to default on their franchise obligations. I cannot say for certain that it will not happen because of course who knows what might happen in the future, but we are now a good part of the way through the recession and no other train operating company has indicated any intention to default. On the contrary, the others have all told me that they intend to stick by their obligations. As I say, given the stage that we are in through the recession the fact that they have made that commitment I take to be an extremely positive sign. Obviously I cannot give a categorical assurance but on the basis of the information that is available to me it looks to me very unlikely that any other train operating company will default. If I could also say that in my whole handling of the difficulties surrounding National Express - and this has been a very difficult period managing it because of course our expectation was that National Express would stand by the franchise and continue to meet their commitments - I have sought at every stage to act in a manner that would not give any incentives whatsoever to other train operating companies to walk away from their obligations. If you look and see what has happened since 1 July when National Express indicated that they were likely to default on their franchise, the fact that we have now had that franchise moved without disruption into the public sector, and that of the other two franchises that National Express hold, one is to be terminated in 2011, the other was to be terminated in 2011 anyway, so National Express will not be operating a rail franchise by mid-2011, I think that has given a very strong signal to other train operating companies that if they do not stand by their obligations to the travelling public then there will be very serious consequences.

Q35 Mark Pritchard: The second half of your reply, Minister, is very revealing because in the earlier part of your reply you suggested that the recession might be the primary factor in the decision by National Express and the circumstances that followed thereon. In the latter part of your answer are you suggesting that the recession was not entirely the reason for the demise of that franchise and therefore the recession point that you made in your earlier remarks may not also apply to any existing other operator?

Lord Adonis: I was simply giving the explanation which is the one that National Express itself gave as to why they were not able to continue, as they saw it. My view was that they could and should have stayed by their franchise. The explanation that they gave was the impact on their revenue from the East Coast Main Line of the recession.

Q36 Mark Pritchard: What new early warning systems has your Department put in place to ensure that it does not happen again? You say that you were not aware at an early stage so what lessons have been learned and how can we ensure that if there are some problems with operators that your Department is able to go in early and discuss these issues rather than they knock on your door and say, "I am sorry, this is the franchise" and they hand it back?

Lord Adonis: We do monitor - and in previous sessions you have gone into the way that we monitor - franchises closely. There is a whole team in my Department of franchise managers.

Q37 Mark Pritchard: So was there a failure on the National Express franchise?

Lord Adonis: No, I do not believe so. There was not an absence of monitoring. It was a decision by National Express East Coast they were going to withdraw from the franchise. We had been aware that they regarded themselves as in a vulnerable state on the franchise before they made the announcement. They had made that very clear. The Chief Executive of National Express made it clear to me personally that they regarded their position as difficult to sustain. It was not an absence of information, and indeed if you look back on the events of the last few months I believe that we acted absolutely appropriately, both in the monitoring that we undertook and in the action we took when they announced that they were withdrawing. However, it is not the absence of monitoring of the franchise that led National Express to take the decision that they did. It was the judgment that they made that they believed that their best commercial interests were served by leaving the franchise.

Q38 Mark Pritchard: So do you think the original protocols of that franchise agreement, which no doubt have been replicated in part with other franchise agreements, are robust enough to sustain existing franchises?

Lord Adonis: I do believe it is and I take the fact that no other train operating company has indicated to the Government any intention to default to support that view.

Q39 Mark Pritchard: At what point did National Express indicate the fact that they were going to default? Did they give you a month or several months' notice, a week?

Lord Adonis: They did not indicate that they were going to default until the publication of their financial results on 1 July, which was the reason why I took the steps I did on 1 July. What they indicated before was that they regarded themselves as in a position of very great commercial difficulty in maintaining the East Coast franchise.

Q40 Mark Pritchard: So are you saying we would not necessarily know about any franchise in trouble until they published their own financial accounts?

Lord Adonis: I can tell you that no other train operating company has indicated a similar state of affairs.

Q41 Mark Pritchard: But they, on the best or worst practice of National Express, would not have done that until they published their financial results.

Lord Adonis: No other train operating company has either indicated any intention to default, and of course as soon as they do that, proper procedures follow, nor have they indicated to us that they believe themselves to be in a position of great difficulty in sustaining their franchise, so neither of those eventualities has arisen. In the case of National Express East Coast, as I explained a moment ago, first of all they explained to me and to my officials that they regarded themselves in very great commercial difficulty in sustaining the franchise and then of course came the formal notification of a likelihood of default. Neither of those has happened. If I can also say, because it is very important we reflect on this experience, I do believe that there are issues to do with the nature of the penalties which train operating companies face if they do default. It is very important that we learn constantly the lessons from experience, and my officials are looking very carefully at this issue and whether there should for example be more immediate financial penalties that apply and whether or not a more significant acceptance of risk should take place on the part of the train operating company. I would not wish the Committee to think that the regime at the moment gives any encouragement to other train operating companies to default. On the contrary, looking at the experience of National Express over the last six months, all of the signals that have gone to the other private sector companies have been very robust that they will pay an extremely high penalty in terms of their dealings with the government on behalf of the taxpayer if they walk away from their franchise agreements.

Q42 Mark Pritchard: I have got that. I am conscious of the time and I just want to ask you about the point of principle of nationalisation. Is that something philosophically you are relaxed about or perhaps uneasy about?

Lord Adonis: I have a duty to see that the train service is properly provided to the public and therefore after National Express walked away from their East Coast franchise I had a duty to exercise my powers to provide the service. However, my view is that the best deal for the taxpayer and the travelling public does come from having a competitive regime amongst private sector operators, but of course with a proper public specification of the franchise in the first place. The issue which I need to reflect on in respect of the experience of the East Coast is how we improve the public specification of the franchise so that we minimise the prospect of any recurrence.

Q43 Mark Pritchard: I am grateful. A final point and I am glad you mentioned that element because coming to public service agreements I note that reliability and punctuality have been excluded from the new PSAs and they were previously in the PSAs and I would be interested to know why that is the case.

Lord Adonis: We are under constant pressure to reduce and to streamline our targets, but we actually had targets in the Rail White Paper of 2007 for increasing the public performance measure (PPM) of railways. I am glad to say it is at the highest level of over 90% of trains running punctually that there has been since the measure was devised. I am not complacent about it. I do wish to see improvements. Either myself or one of my junior ministers chairs a performance review meeting every month where we go through train operating company by train operating company their performance in the previous month, and where there are not improvements we probe very hard as to why they are not taking place. I do not believe the train operators could be getting any stronger messages than they are from the government as to the importance of continuing to improve their performance in respect of punctuality.

Q44 Chairman: The Supplementary Winter Estimates show an additional 588 million from rail premia. How has that come about? This seems a little strange in the current circumstances.

Mr Devereux: I am afraid again this is more apparent than real. We have shown separately for the first time the income from those franchises paying premiums and those actually receiving subsidies. Previously there was a net number; we are now showing the two numbers separately. That does not mean that the change from the previous regime to the new regime is that we now have half a billion pounds more than we previously had. It is a transparency point so we are now showing you something you previously did not see on the face of the estimate.

Q45 Chairman: We thought you might have had a windfall and we were looking at ways of spending it!

Lord Adonis: We would love to have a windfall or two so if that were going we would certainly welcome it but, alas, that is not the case.

Q46 Mr Clelland: Secretary of State, when you were last before the Committee on 4 November you were asked by Mrs Ellman if you had been consulted on proposals for reductions in the transport budget and your reply was: "We are not at the moment looking at reductions in the budget ." Does that remain the case?

Lord Adonis: It does remain the case, yes.

Q47 Mr Clelland: It is interesting that the Winter Supplementary Estimate includes a transfer of 350 million to the Department for Communities and Local Government for affordable housing under the government Building Britain's Future programme. 300 million has been taken from the railways capital programme which was previously provided as part of the fiscal stimulus and 50 million from unallocated funds. What impact is this going to have on planning capital funding?

Lord Adonis: That was from uncommitted funding.

Q48 Mr Clelland: 350 million?

Lord Adonis: We made a contribution from uncommitted funding. When I say "uncommitted funding" it was uncommitted at the point at which we made it, but this was in the context of a decision we made including a decision not to proceed with the order for diesel trains which was part of the decision on electrification, so there was a whole set of interlocking decisions that took place but the decision on electrification, which is what made it possible for us not to proceed on the order for diesel trains, of course involves very significant new investments in the railways. This was not, as we saw it, a reduction in the committed budget.

Q49 Mr Clelland: You do not regard that as a cut?

Lord Adonis: It was not a reduction in the committed budget.

Q50 Mr Clelland: So we can be assured that there will not be any impact on capital programmes, particularly in the northern region, as Angela Smith said earlier, there is going to be no danger of the additional rolling stock or anything being threatened by this?

Lord Adonis: I can give you an assurance that that transfer of funds in respect of social housing has not led to any change to the commitments of the Department after taking account of the decisions that have been made on diesel trains and electrification.

Q51 Mr Clelland: It seems a huge amount of money to have been able to save quite simply from the way you are describing it.

Lord Adonis: Well, it was a very important priority for the Government as a whole to be able to proceed with additional social housing.

Q52 Mr Clelland: Yes of course.

Lord Adonis: And a number of departments made contributions to make that possible.

Q53 Mr Clelland: I appreciate that. What we are concerned about as the Transport Select Committee is whether this is going to have an impact on the capital programme for the Department for Transport and you can assure us that it will not?

Lord Adonis: It does not have an impact on any of the commitments that we currently have.

Q54 Mr Leech: Briefly on the East Coast Main Line again, has the Department made an assessment of how much it is going to cost the Department because of the renationalisation?

Lord Adonis: We are in the process of making that assessment. The reason we cannot make the full assessment yet is that now that the government is responsible for the franchise we need to set our own detailed budgets and our estimates of likely revenue and passenger numbers, and we are in the process of making that. What we know of course is that we are foregoing large premium payments which we would have received over the next year. What the levels of operating costs will be and what revenue we are able to project for the franchise over the next year we are not yet in a position to finally determine. Let me be clear there will be a significant loss as a result of the franchise not proceeding as against what we would have received had National Express stayed and made the previously agreed premium payments.

Q55 Mr Leech: If you have not made an assessment of the overall cost and the cost of sending it back to the private sector, why has a decision already been made not to keep it in public ownership?

Lord Adonis: We do not believe that it would offer value for money.

Q56 Mr Leech: How can you know whether it offers value for money if you have not made the assessment of the costs?

Lord Adonis: As I have just said, we are certain that there will be a significant loss. I could not be clearer than that. What I do not want to do is to put a precise number on it yet because these are calculations which are still being finally determined, but many tens of millions of additional costs will fall to the taxpayer as a result of this. We are starting from a position where we know that as against the franchise that was previously operating the cost to the taxpayer will be significantly higher by us being obliged to manage it in the public sector. We do not have a precise figure for the calculation you are seeking but I will give the Committee the figure when we have determined the precise figure.

Q57 Chairman: Have you an estimate of it?

Lord Adonis: It is in the many tens of millions of pounds. It is in that ball-park. If I said it will be in excess of 50 million that is how we calculate it at the moment. Given that in two years' time we will be seeking to have a competitive franchise, and of course we only let franchises where we are confident that they deliver value for money, our judgment is that the right thing to do in terms of value for money is to have another competition for the franchise to start in two years' time.

Q58 Mr Leech: Do you think given the action that has been taken against National Express in relation to their other two franchises, they would have still taken the decision to hand the franchise back if they had known what action you were going to take against them?

Lord Adonis: It is impossible for me to answer that question because of course I am not one of those who was taking the decision, but I think that we have sent the clearest possible signal to other train operators that the consequences will be very serious if they were to behave in the same way.

Q59 Chairman: Do you think they were surprised by your actions?

Lord Adonis: I do not know. I hope not because I hope that they would expect that the Government would be absolutely robust in defending the taxpayer, but if there was any doubt in their mind that the Government might have been robust in defending the taxpayer, I hope (and I believe I have) I have dispelled any such doubt over the last few months.

Q60 Mr Leech: Has the Department made any assessment on the potential loss of revenue from a reduction in the growth of passengers on the railways?

Lord Adonis: At the moment given that the recession is still in play, and we are still dealing with numbers which are very hard to predict, we do not have a settled view on the long-term passenger growth rate in the industry. However, what I can report to you is the judgment that train operators themselves have made recently, of which the best indication is the South Central franchise, which began only two months ago, where the operator, Govia, projects passenger traffic growth of 5% a year from next year for the following three years under that franchise. Thus they are still projecting significant growth, which I take to be a positive sign. On the basis of that 5%, they are also making premium payments for that franchise of over 500 million over the nearly six years that the franchise operates. This comes back to your previous question, Mr Leech. The judgment that we have made on why it is right to refranchise is that our most recent experience of franchising, which was South Central, which was let right in the middle of the recession, produced a very hotly fought competition with a large number of train operating companies bidding for the franchise and it produced a very healthy premium payment, which is of course vital for meeting the on-going costs of operating the railway and, as I say, it was based on what are still healthy passenger growth numbers for the period coming out of the recession.

Q61 Mr Leech: Some franchises are doing considerably better than others. Northern Rail for instance, their franchise that they have had since 2003 was based on a no-growth estimate and as a result of very significant growth, including I think 258% growth at one of the stations in my constituency, it has led to a significant amount of money coming back to the Department. Is there a case for putting the money that comes back to the Department back into the region that it has come from to improve transport and add an additional incentive to increase passenger growth?

Lord Adonis: That is a very kind invitation but, as we were saying just a moment ago, alas, because of the recession and because of National Express's default, I also face very significant additional pressures on other parts of my budget. I wish I were in a position to be able to give you some benefit from the higher passenger numbers.

Q62 Mr Clelland: Would this not be an incentive though for the regions, which we have all argued do very badly out of the transport budget in comparison to London and the South East? Would this not be a good incentive for franchisees within the regions to increase growth?

Lord Adonis: There is a strong incentive on them to do so anyway because of course the train operating companies, because they receive a share of the additional income, have a very strong incentive to maximise revenue and to grow passenger numbers. The regions have a strong incentive too, partly because of course the local authorities support modal shift. Virtually all local authorities have as an avowed policy aim moving passengers from road and, where appropriate, air on to train to reach the policy objective and of course because more people use the trains when it comes to respecifying the franchises the case for an improved service level in new franchises increases too. So I think there is a win/win but, unfortunately, I cannot offer to give you back the regional gains because I need them to meet big pressures we have got in other parts of the rail budget.

Q63 Chairman: You will continue to include services required by passengers in the franchises in the way that you did in the Southern franchise?

Lord Adonis: Sorry, we will continue?

Q64 Chairman: You will continue to include services required by passengers in the franchise conditions as you did in the Southern franchise. Is that your policy? So you will look at passengers' overall requirements?

Lord Adonis: Yes and we set detailed - the industry thinks too detailed but I think it is absolutely appropriate detail - service level obligations in the franchises. In the case of the South Central franchise to which I referred to a moment ago, there is a significant increase in the capacity required in the new franchise that has just started as against the last one, so much better services to passengers are resulting from the new franchise as well as more than 500 million in premium payments coming to the government.

Q65 Graham Stringer: In the section in the Annual Report on the Underground, you use a real Sir Humphrey word about Tube Lines, you say "their biggest test is coming up" when you are talking about resignalling the Jubilee Line, I think it is. Does "biggest test" mean that you are worried about them? Are they going to go to the same way as Metronet?

Lord Adonis: Since you said that these are Sir Humphrey words I think I must ask Mr Devereux to answer!

Q66 Graham Stringer: Your own Sir Humphrey!

Lord Adonis: I think he may well have written it.

Mr Devereux: I would be grateful if you could tell me where you are because I do not recall that.

Q67 Graham Stringer: It is on the London Underground part of it, the city and regional part, page 42.

Mr Devereux: I made perfectly clear to the PAC when we had a long afternoon talking about Metronet and the merits or otherwise of PPP that there are some very good things you can point to about what Tube Lines has achieved under the PPP but it is the case that a very substantial task, which is the Jubilee Line upgrade, which is a really important thing for them to deliver, is clearly having some difficulty. It is a subject which both the Mayor and Tube Lines are engaged in seeking to resolve at the moment. That is a question which the Mayor is very clearly exercised about and engaged with the company about. The company is engaged I trying to sort it out, too. I think that is a subject to do with when the Jubilee Line will be delivered. I am not sitting here thinking that of itself has an implication for the health of the company.

Q68 Graham Stringer: To go back to the question, you do not see Tube Lines going the same way as Metronet? Do you see that there will be an extra call on the public purse if Tube Lines run into difficulties, because I think you are acknowledging there are difficulties in the next seven and a half year part of the contract?

Mr Devereux: Let us go back to what the Secretary of State said earlier. We have reached a 40 billion ten-year deal with the Mayor of London which includes the financing for the tube. There are choices to be made depending on what the arbiter says the price of the second review period will be, but those are choices which the Mayor will have to make. I am not saying that because I think he will make choices different from what he has previously talked about but that is the nature of the devolution arrangement.

Q69 Graham Stringer: Are you saying there will be no extra call on Exchequer funds or, if there is a call from the Mayor, you will not be paying any extra over and above the agreement?

Mr Devereux: We have reached an agreement with him as to the funding for the next ten years.

Q70 Graham Stringer: There were press reports that, after a Treasury value for taxpayers' money look at Thameslink, three-quarters of a million was going to be taken out of the contract.

Mr Devereux: Three quarters of a billion, I think it was.

Q71 Graham Stringer: A lot of money, 750 million. That is right. Is that report accurate?

Mr Devereux: What the report was saying was that, somehow or other, we were seeking to reduce the budget for this programme by 750 million. That is not correct. We are aiming to deliver this project for the budget we set.

Lord Adonis: We are in detailed contractual negotiations at the moment over the Thameslink programme and we are seeking to deliver the outputs that were specified at the outset.

Q72 Graham Stringer: Is that a way of saying the opposite then, that the Thameslink programme is over-spending and you are trying to get its spend back on target?

Lord Adonis: We are in detailed contractual negotiations. It is our policy to seek to bring this programme in on the budget that was indicated before.

Q73 Graham Stringer: That is not quite answering the question I asked. Are you worried that it is over-spending at the moment?

Lord Adonis: We are seeking to ensure that it does not over-spend.

Q74 Graham Stringer: I am pleased to hear that. I shall take it that you are worried about the spend on that matter. Are there any implications in your worrying for the cascading of train sets around the country - it is an odd phrase, is it not? Some of the train sets will come from Thameslink and be used in other parts of the country. If you are worried about the expenditure, does that have any implication for increasing the capacity in other parts of the country?

Lord Adonis: As I say, we are in the detailed stages of negotiating the contract. Our policy remains unchanged. It is to secure the contract on the lines that we previously announced which would make it possible to cascade the stock as you have described. That remains absolutely our policy and we are working to that end.

Q75 Graham Stringer: If I can turn that question over the questions John Leech was asking previously, in phase one of the extra stock for the Northern rail franchise, will the contracts be signed within the next three months?

Lord Adonis: For obvious reasons, because these are very sensitive commercial matters, I cannot give you a precise time frame. As I say, we are seeking to secure those contracts, and I have a team that is in day-by-day negotiation on these very issues.

Q76 Graham Stringer: I understand you cannot tell us the details of the contracts and I am not asking that, but I am asking, because it is important to a lot of people who use the Northern franchise, that those contracts are signed as soon as possible, and I would not have thought an indication of three weeks, three months, six months was terribly commercially sensitive.

Lord Adonis: I share all of the concerns which you share as to the importance of the project and seeing that the cascades do follow from the signing of the contracts. All of the concerns that you have are absolutely four-square at the heart of government policy but, because these are commercial issues, I cannot make any comment on precise time frames. Indeed, in my experience now of doing these jobs, the indication of definite time frames does not help your negotiating position ,because it simply leads those with whom you are negotiating to think that they can now play it a bit longer if they think you are going to come under political pressure because you cannot meet a time frame you have already announced. I do not think it would be in the public interest for me to specify the time frame we are working to. However, let me reiterate, because I know it is very important to you and to colleagues who depend upon the follow-on consequences of Thameslink, that our policy remains unchanged; we are seeking to secure the outputs that we specified when we published the Thameslink contract, and that is the basis on which we are negotiating.

Q77 Graham Stringer: Can I ask you a couple of questions about things that are absolutely in your control in terms of targets: why do you not have a target for transferring freight on to trains as opposed to lorries at ports? There is no target to increase the percentage of freight arriving in ports going by train as opposed to road.

Lord Adonis: It is our policy to increase the proportion of freight going on to trains, and indeed, the Strategic Rail Freight network has a large budget attached to it which is---

Q78 Graham Stringer: I understand that this is a government that has not been shy of targets over the last ten or twelve years and it is very important, because a large amount of freight comes into ports in the South of England and goes on to the roads all over the country. I would have thought it would have been worthy of a target.

Lord Adonis: I was not, I am afraid, around when the targets were negotiated so the historical reason why there is not one I cannot explain, though Mr Devereux may be able to. However, I can say that the transfer of freight on to rail is an important government priority, which is why we are spending hundreds of millions of pounds on the Strategic Rail Freight Network, including, as we speak, gauge clearance enhancement on the lines going north from Southampton and west from Felixstowe, so it is possible to get much larger container trains to the big logistic centres to which they go from the ports.

Mr Devereux: Just to be clear on the numbers, there was a target originally put out in the ten-year plan to increase share and also to increase the amount of freight kilometres on rail. The total amount of freight kilometres since 1997 has risen by---

Q79 Graham Stringer: Can I be specific, because our briefing note said that was not the case? There is a target for transferring freight at the port from road to rail as opposed to generally?

Mr Devereux: I am sorry, no. The target that was in the ten-year plan was a generic rail freight one, not a freight at ports one. The point I wanted to make is that the total amount of freight being carried by the railway has gone up by 40% since 1997.

Q80 Graham Stringer: Would you consider looking at a target for transferring freight on to rail at ports?

Lord Adonis: I would certainly consider it for the next Spending Review. It is an important government priority.

Q81 Graham Stringer: One of the Government's successes which I am pleased about is the concessionary bus fare scheme. Passenger numbers on buses outside London have been falling since the Second World War effectively. The concessionary fare means that numbers are increasing. Do you have any plans to separate out those targets so that we can compare fare-paying passengers over the last 40 years with fare-paying passengers now? Otherwise those figures will get lost in concessionary fare figures overall.

Lord Adonis: That is a very interesting question, on which I think I need to reflect further. Our targets, as you rightly say, refer to bus passenger use, full stop. They do not break it down into concessionary fares.

Q82 Graham Stringer: It is such a success that it is going to obscure what is happening in the fare paying side of the business.

Lord Adonis: That is a very interesting issue, as to whether or not we should have targets which relate to those who are paying fares as opposed to those who are on concessionary fares. I am certainly prepared to look at it further.

Q83 Chairman: Bus ridership has increased, has it not, significantly?

Lord Adonis: Yes.

Q84 Chairman: But that is mainly within London. It has not increased outside London.

Lord Adonis: It has outside London as well.

Mr Devereux: No, that is not true. These are still additional passengers. I agree it is another question about who is paying for these passengers but if you hypothesise that otherwise they might have been in a car or not travelled, this is still consistent with wanting... It is a case for buses. I understand the question. Let us go away and ask.

Q85 Graham Stringer: They are additional passengers and it is a good thing. It gets a lot of elderly people out of the house who otherwise would not have been but it does obscure the sort of private commercial side of the business. You have said you will reflect on that. Last time we talked about buses you said you would consider using the Bus Service Operator Grant for greater incentives. There is already an environmental incentive within that. I understand the PTE Groups are asking for the BSOG to be transferred in their areas so that they can deal with through-ticketing more easily. Would it not be a good idea to transfer that money to them so that they could direct the money to incentivise the buses in their areas?

Lord Adonis: Yes. We are, as you say, reforming BSOG to make it much more effective at driving worthwhile improvements such as fuel efficiency. There is a significant element now in the reformed BSOG for fuel efficiency, and also smart ticketing, which is another important priority we have too. We are looking at further changes beyond that and I am happy to consider any suggestions that the Committee might wish to make in terms of further changes that we might make in due course, but I cannot make any commitments at the moment.

Q86 Graham Stringer: This, I suppose, is a question to Mr Devereux. During the passage of the 2008 Local Transport Bill, now an Act, we had a lot of discussion about bus monitoring. How many resources does the Department expect VOSA to use for monitoring buses at the present time?

Mr Devereux: That is a question which I would like to reply to in writing. I know what the VOSA budget is; I am not sure I know exactly how much of that is being spent on looking at buses. It is a smaller part of the operation than looking after HGVs and overseeing the whole of the MOT element for cars. It is not at the top of my head. I am sorry.

Q87 Graham Stringer: Maybe you will write to the Committee.

Mr Devereux: I will.

Q88 Graham Stringer: Thank you. My final point is the section about the London congestion charge in the Report. You point out that there is less traffic coming into the centre of London since the congestion charge was introduced. You do not point out that congestion is almost at exactly the same level as it was when the congestion charge was introduced, but I just want to add that - unless you want to disagree with that?

Lord Adonis: I think our best response to that is, that is a matter for the Mayor.

Q89 Graham Stringer: I was leading into a question. What I was going to ask was, what have you learned from both the London congestion charge within the responsibility of the Mayor and the debate about the Greater Manchester congestion charge? What is your response to those, one scheme up and running and one completely rejected by the population?

Lord Adonis: Perhaps if I could deal with London first, because, as a Londoner, I lived through the whole experience. It is not clear to me that, if you had had a referendum before you introduced the congestion charge in London, it would necessarily have been won. There were acute concerns about a whole range of issues: whether the technology would work right through to the principle of having a congestion charge at all, which would have been very hotly debated and it might not have proceeded. However, I think once the political leader, Ken Livingstone, had taken the decision and introduced it, a consensus was quite quickly developed that this was the right thing for London, so much so that at the last mayoral election both of the principal candidates supported the congestion charge; the issue was whether it should be extended, and of course, the new Mayor has decided not to extend it. In explaining why that is the case, I think it is because the benefits quite quickly became apparent to Londoners. As you say, there is a debate about what has actually happened to congestion itself but there was a significant decrease in numbers of cars coming in, and certainly most realistic observers think the congestion would have got a lot worse had the congestion charge not come in. It also, of course, released funds for the improvement of public transport and was part and parcel of a very significant new investment in London public transport. So it was seen as part of a wider package. My reflection on Greater Manchester and the referendum there is that clearly, the residents of Greater Manchester were not persuaded that the benefits would outweigh the costs as they saw it. Part of the reason for that is that the benefits were clearly prospective whereas the costs which they faced were going to be immediate. The issue which then needs to be faced is whether or not, first of all, the trade-off of benefits and costs was an appropriate one for that particular scheme, but also there is a commentary on political leadership, whether it is appropriate to hold referenda in such circumstances, where it is difficult to project the benefits. That is something on which I think councils will wish to ponder in future cases.

Q90 Chairman: You have a target of increasing bus passengers by 10%. It has been achieved but it has been achieved because of increases in London, not elsewhere. What action is going to be taken to change that? Does that give you concern?

Lord Adonis: That is correct; it has been achieved because of the huge increase that we have had in bus passenger numbers in London, and we are keen to see bus passenger use increase outside of London. That is part of the reason, for example, why we passed the Local Transport Act, which gives local authorities enhanced powers to be able to give priority to buses, to forge partnerships with bus companies, and we hope that that will lead to a significant increase in bus passenger numbers.

Q91 Chairman: Have you any other proposals to help that?

Lord Adonis: We are looking, as I say, at reforms to BSOG which might also encourage more passengers to use buses. I believe that could have a role to play, and smart ticketing, which we are also rolling out, so that it is much easier for people to use buses using electronic tickets. We want to give further big incentives to authorities besides London to use smart ticketing. Of course, the Oyster card has been a phenomenal success in London. If we could introduce similar integrated ticketing arrangements in other cities, that would be likely to increase patronage too. So there are a number of areas where we believe policy can further increase bus passenger numbers.

Q92 Chairman: What are the barriers to achieving similar systems in other cities?

Lord Adonis: In terms of the application of technology, I do not believe that there are barriers. It is simply a case of local and national government giving strong encouragement, and the bus companies themselves, when they engage in fleet replacements, making the necessary changes. In terms though of promoting stronger partnership between bus companies and local authorities, the Local Transport Act makes it easier to set up new integrated transport authorities and, of course, it gives a number of other powers for local authorities to forge partnerships with bus companies with the intention of promoting bus use.

Q93 Chairman: When are you going to assess how far the integrated transport authorities have been successful in achieving this?

Lord Adonis: We are still at a very early stage at the moment because, of course, the Local Transport Act only became law a year ago and a lot of the regulations flowing from it are still being framed. It would be too soon to do so now but we would wish to do so fairly soon. I would have thought within another year or two we would want to start looking at what the concrete results have been from the implementation of the Local Transport Act.

Q94 Ms Smith: Following on from that, it is reassuring to hear that West Yorkshire voted unanimously to pursue the quality contract route, which means all three main parties have voted in West Yorkshire to support quality contracts. It is all contingent on how quickly the Government can establish the Quality Contract Board, as well as putting together the regulations that will guide the development of contracts. When will this process be started?

Lord Adonis: We are well advanced on the regulations at the moment, so I would hope that all these changes can be brought into being fairly soon. I cannot give a definite time frame.

Q95 Ms Smith: On the Quality Contract Board, the establishment of---

Lord Adonis: It is the regulations which are the first stage and we then proceed afterwards but, like you, I take great comfort from the fact that all political parties in local government are seeing virtue in having integrated transport authorities and we, of course, wanted to make that option available to them precisely so that they can promote greater bus use, more public transport, and more effective co-ordination between different forms of public transport.

Q96 Ms Smith: Could I ask your view on the make-up of the Quality Contracts Boards? Traditionally, it has been a mix of bus industry experts that have taken up places on these panels. I think there is a view out there that there ought to be more variety, a more diverse mix of people sitting on the Quality Contract Boards. What is your view on that?

Lord Adonis: I do not have a view at the moment. I am happy to reflect on this further. My colleague, Sadiq Khan, has been leading on the quality contract work but I am happy to reflect further and give you our emerging thinking on it.

Q97 Ms Smith: I am happy to receive submissions on that.

Lord Adonis: I would be happy to provide them.

Q98 Ms Smith: Just moving back to rail, the Department said some time ago that it wanted to move towards a seven day a week railway. How does the Department intend to do that? I think the media reports are that progress is rather slow.

Lord Adonis: A key issue in providing a seven day a week railway is how the rail industry plans possessions and the engineering work which of course takes place while possessions are taken. I personally, as Secretary of State, and previously as Minister of State, brought the industry partners together to say that I thought the previous possessions planning regime was not adequate. There was a celebrated incident earlier in the year when the East Coast and West Coast main lines were both closed over two successive weekends, meaning there were no inter-city connections between Scotland and London. One of those weekends England and Scotland were playing rugby at Twickenham. This was a totally unacceptable situation. I made it very clear to Network Rail and the train operating companies that this was unacceptable. I have myself chaired a succession of meetings with the industry partners to hammer out a new set of arrangements in respect of possessions, which were in fact, fortuitously, published today. There is an article about them in the Guardian today. Part of that is an undertaking that, save in exceptional circumstances, they would seek to keep all principle inter-city routes open, and this goes hand in hand with the target which the Office of Rail Regulation has imposed on Network Rail to reduce by 37% the disruption caused by possessions and engineering work over a five-year period, which is also concentrating minds in Network Rail very seriously. Those two together, the new planning regime in respect of possessions which has been announced today plus the 37% target, I hope will mean that there is less disruption to passengers. However, the situation at the moment - I will be quite frank - does need significant improvement. I do not think it is acceptable that as much disruption is being caused to passengers as is the case, and I think the rail industry has not been sufficiently focused on passenger requirements, for example, on whether or not to put buses in as substitutes for trains when alternative train services could be offered at less inconvenience to the passenger. To ensure that the passenger voice is much louder in this process, one of the elements that has been agreed in the new possessions planning regime announced today is that Passenger Focus, which is the passenger watchdog, will have a direct right of appeal to the Office of Rail Regulation where they wish to dispute the taking of a possession, and not only will they have the right of appeal but we are providing them with the expertise - because this is a very technical area, possessions planning - we are providing them with resources to secure the expertise so that they, Passenger Focus, can themselves engage with the train operating companies and with Network Rail at an early stage in the planning of possessions so that they can see that the passenger voice comes through loud and clear, and so that, if necessary, they can appeal to the ORR when they believe decisions have been made on line closures which are unnecessary and unnecessarily disruptive to passengers.

Q99 Ms Smith: I am very glad to hear all of that. I wonder whether you would accept that the broader context of that very welcome statement is that in fact, passengers not only resent disruption on Sundays and at weekends but also, actually, many passengers would appreciate seeing a better Sunday network all round. They would like to see a much better service on a Sunday, never mind disruptions to timetabled services.

Lord Adonis: I completely agree. I think moving to a seven day a week railway is both about reducing the impact of disruption on weekend services but also about improving weekend services. However, if we could reduce the impact of disruption, I think that would be a very significant step forward, because at the moment, of course, it is very largely weekend services that are affected by engineering works. When I looked at the issue of possessions planning after the debacle on the London-Scotland services, a senior rail manager sent me a copy of the British Rail alternative timetable in respect of engineering works for the Easter of 1978. That did not involve one single bus substitution of a rail service. There was a lot of engineering work taking place but all of the substitutions were by rail. Now, it may be that in this day and age, with new safety requirements and it being more difficult to do single-line working, you cannot eliminate the need for bus substitution. Nonetheless, I think the industry could do a great deal better than it has been doing in recent years.

Q100 Ms Smith: Finally, the Transport White Paper in 1997 made a big commitment to progressing towards an integrated transport network. What is your assessment of the performance of the Department in achieving that ambition, which for me is the most worthwhile ambition?

Lord Adonis: I believe we are making progress but we have a great deal more progress to make. Just to give you a few recent examples, last week with the Mayor of London I announced what I think is actually a milestone in national transport policy, which is the Oyster card being used across underground and overground services in London, so a single, integrated ticketing system, the dream of transport planners in London for a generation.

Q101 Ms Smith: And everywhere.

Lord Adonis: I would like to see it spread elsewhere too but it is the first time in the history of transport in London that one single ticket can be used on tubes, buses and overground within the Metro zone. Indeed, I agreed with the Mayor a new map - I should stress, a map with the Thames back in - which is called the World of Oyster. I hope it will replace the existing Tube map and the overground map in London. It is a single map of all the stations covered by Oyster card from 2 January. I have also, as you know, placed great store on making stations much more accessible. In the Stations Report by Chris Green and Sir Peter Hall which was published two weeks ago one of the big themes is the need to promote station accessibility. That included, for example, recommendations to double the amount of car parking at stations over the next 15 years, 10,000 extra car parking spaces a year; to double the number of cycle parking spaces at stations over the next five years so that we get to a target of 5% of journeys by rail being completed to their ultimate destination by bike; and also to promote bus interchange at stations, including initiatives which I applaud, such as for example in Leeds, where I was recently, but this has been done elsewhere too, of having free city buses which link the station with the city centre and in that case also the university. Those sorts of initiatives I believe can and will make a transformational difference but we need to see them pushed forward across the country.

Q102 Ms Smith: Progress has been made. Clearly, there is a lot more to do before we can even think about achieving anything close to the standard we see in some of the European countries. There are all sorts of other issues involved, such as the timetabling of bus services as compared with the timetabling of train services and so on. What lessons would you say have been drawn so far by Ministers in terms of the experience so far in developing an integrated system and what we may do in the future to get there?

Lord Adonis: The lesson that I draw from my own experience as a Minister dealing with this over the course of the last year is that it needs very strong central direction. It does not happen spontaneously. If you look at those countries which have made a success of integrated transport policies - and Denmark, the Netherlands and Switzerland come to mind as three countries which have made a great success of integrating different modes of transport - it has been as a result of sustained planning and a strong exertion of government authority to oblige the parties to work together. I am only too well aware, to take, for example, the issue of the Oyster card, which was a fairly straightforward issue in many ways, because the technology was not a problem in terms of making it possible to use the Oyster card across underground and overground - there were very fraught and difficult negotiations, because money was at stake, simply to get the train operating companies to accept the use of the Oyster card on their networks. If I and my officials had not been engaged in this in a sustained way, including a lot of banging heads together over a period of quite some months, this would not have happened. It was first announced, I was told, by Douglas Alexander years ago, I think in 2007, so it has taken us two years for what is in fact a fairly straightforward reform to be brought about. Elsewhere, as I know only too well now from my own experience, bringing about integration requires strong governmental action - that is not necessarily central government; it could be and often will much more appropriately be local government, hence integrated transport authorities and the important role that they play, but it will not happen spontaneously, nor is it likely to happen simply by specifying things in contracts. That can get you a certain length of the way but in fact there has to be a public authority which is responsible, which takes integration seriously and has the necessary powers to bring it about.

Q103 Ms Smith: In other words, central government must acknowledge the role, perhaps an increased role, for integrated transport authorities in terms of the knowledge and expertise they have at their level to deliver that very crucial integrated network within city regions, for instance?

Lord Adonis: Yes, I would agree with that but it has to be done over time, and of course, one should aim to bring all the partners in the private and public sector with us as that happens.

Q104 Mr Clelland: Are there any plans to extend the strategic road network?

Lord Adonis: No, on the contrary. Through the process which goes under this wonderful word "de-trunking" - I did not know what de-trunking was until I entered this Department. I thought it was a rather horrible operation but in fact de-trunking is the process of transferring roads from the strategic road network and responsibilities of the Highway Agency through to local authorities. A substantial part of the road network has been transferred to local authorities, largely with an enthusiastic response from them because they believe that they can manage it with more local sensitivity than we do nationally, but I know that there are differing views on this.

Q105 Mr Clelland: Yes. Much of that enthusiasm will depend on the state of the road when it becomes de-trunked, obviously, because that can have cost implications for the local authorities concerned. People express surprise to me when I tell them that the A1, which is the only road which directly links the great cities of London and Edinburgh, is in fact not a trunk road for the whole of its length and once you get north of Newcastle it has been, as you say, de-trunked, which has led to a situation where, of course, because local authorities do not have resources, the road is not kept up to the same standard as the rest of the 300 miles or whatever it is. Is that not something which concerns you?

Lord Adonis: I have answered more Parliamentary Questions on the issue of the status of the A1 north of Newcastle than probably any other stretch of road in the country, and I do understand the very strongly held views on this by many parliamentarians in both Houses, which of course is directly related to the issue of upgrading it. It is not its status; it is whether its status could lead to it being upgraded. The issue though for my Department is that the A1 north of Newcastle - it is not that it does not meet the requirements in terms of traffic flows for being part of the strategic the road network; it does not come close to meeting them so the judgement we had to make was, given that it does not, would it be appropriate to go against the policy that applies everywhere else in the country?

Q106 Mr Clelland: One of your objectives as a Department is to contribute to better safety by reducing the risk of death and injury. This stretch of road is notorious for serious injury and deaths. Surely that must be taken into account?

Lord Adonis: That is an issue but, of course, that is an issue for the local authorities that are responsible for the road.

Q107 Mr Clelland: But they do not have the resources.

Lord Adonis: The issue for them, of course, is how they prioritise projects within their region and again, I know that that is a fraught issue too because there are more projects that people want to fund than there is funding available. To make the point that I have made in our previous exchanges on this, we are investing a large sum of money on upgrading the A1 south of Newcastle, 327 million on the current work on upgrading the A1 from Dishforth to Leeming, and then the Leeming to Barton extension south of Newcastle will be a further 342 million, so there is a significant investment coming from the government directly into the upgrading of the A1.

Q108 Mr Clelland: I accept and acknowledge that, and that is gratefully received in the North. It is not before time that we were linked up to the rest of the motorway system, but coming back to the road north of Newcastle, are you aware that the North Northumberland Coroner, presiding over yet another inquest when two drivers were killed because of the nature of the road north of Newcastle, has described the A1 north of Berwick as the weakest link in the road between London and Edinburgh and has predicted there will be more preventable deaths in future unless the road is given a higher priority for upgrading and duelling. It is all very well to point out to us that this is the responsibility of local authorities, but the point is that local authorities, as you have just outlined yourself, do not have the resources to spend on this road alone, in isolation from the rest of the regional demands for transport spending. What can be done to overcome that? People are going to die as a result of the state of this road unless something is done about it.

Lord Adonis: I simply have to say that this is an important issue which the region needs to way as it makes its own priorities on spending.

Q109 Mr Clelland: Yes, but the point is it has not got the resources. The local authorities cannot do it on their own.

Lord Adonis: There is an issue whether the road should be part of a strategic road network or the local authority network. For the reasons I have given, it is part of the local authority network, not the strategic road to work. However, I have to say that if it did become part of the strategic road network, it would also go into a very intense competition for resources and it would be unlikely, given competing pressures, to receive early investment in any event, even if it did move, so I would not want people in the North East, for whom this is an important issue, to believe that the pot of gold lies in transferring the road from the local authority network to the strategic road network. It would be facing very stiff competition and, of course, the fact that we are spending such a large sum of money on upgrading the A1 south of Newcastle means that there are already very big public commitments to this road in any event.

Q110 Mr Clelland: Perhaps you can find another 350 million worth of savings that could contribute towards doing something about the A1 north of Newcastle.

Lord Adonis: We will look hard.

Chairman: We will have to see if that can be achieved.

Q111 Sir Peter Soulsby: The Department has adopted a number of measures to deal with traffic congestion, including a programme of managed motorways, but it has actually turned its face against a national road user charging scheme. How do you see the increased growth in the use of roads being dealt with in the future if no road user charging schemes are introduced?

Lord Adonis: There is, as you said, St Peter, very additional capacity going into the most congested parts of the strategic road network. On pages 11, 12 and 13 of the programme for the 6 billion strategic road network investment programme for 2009, to be published in January, it sets out all of those projects. They will provide a lot of additional capacity which will ease congestion and that will make a contribution to that goal but, of course, there will continue to be congestion pressure.

Q112 Sir Peter Soulsby: To what extent do you perceive there to be scope for the additional use of technology to enable users of the roads to have better information about the conditions that are ahead of them, and thereby to be able to make informed decisions about how to avoid congestion?

Lord Adonis: A great deal of scope. Indeed, the Highways Agency is already doing a good deal in this area. There is the Highways Agency's own radio station, which gives real-time traffic information; the National Control Centre in Birmingham of the strategic road network gives information to all broadcasting outlets; and real-time congestion information on the Highways Agency's own website; and of course, there is increasing use of visual display units on motorways which give messages to motorists about congestion ahead. So there is significant scope for improving the quality of information which is given to motorists and, in doing so, to help ease congestion because it enables motorists to take better informed decisions about how they plan their journeys before they start off and how they conduct their journeys if they know that congestion is going to be coming ahead. I can give you a real example of this myself, because it is an experience very closely on my own mind. It took me six hours to do a journey that normally takes one hour on Sunday involving the Blackwall Tunnel. The Blackpool Tunnel was closed, unavoidably, because there was a fire on a vehicle but proper information was not given to motorists before. There is the means available to give that information and, had that information been given, many hours would have been saved by many thousands of motorists on their journeys. It is important that the Highways Agency does raise its game in the provision of information.

Q113 Sir Peter Soulsby: How significant do you think it will be for the development of technologies that can cope with this sort of information in the UK being inter-operable with other European countries?

Lord Adonis: I think it is significant because there will be an international market for these technologies. So it is a significant factor that we seek to have standards which are common. How far the schemes and different solutions countries adopt will be inter-operable I am not sure but, of course, the more uniform the standards, the greater the likelihood that the actual solutions that they adopt will be inter-operable.

Q114 Sir Peter Soulsby: With your permission, Chairman, I would like to return to a couple of questions about buses, provoked by the questions from Angela Smith about the seven-day railway. People certainly do not have a seven-day bus service. To what extent do you think the Department is doing enough to promote off-peak buses and to get the local transport bodies, integrated transport authorities and others, to focus on the need to provide services for people in many parts, not just in the rural areas but in towns and cities, who have very little outside the peak period, in the evenings and on Sundays.

Lord Adonis: This is, of course, the proper role of local authorities to promote a wide range of services meeting passenger needs in their localities and the additional powers they have under the Local Transport Act will, I hope, give them a stronger position to promote such services.

Q115 Sir Peter Soulsby: What about bus punctuality? We have heard complaints from the Traffic Commissioners that they do not have the funds to monitor punctuality and the quality of services provided. First of all, are they right in their complaint that they do not have those resources? Is it indeed their role to do it and, if not, who should be monitoring punctuality?

Lord Adonis: I think it is important that there is an improvement in service on the buses. I think is hard to generalise because, of course, in London TfL does play a significant role in monitoring buses and bus services directly. Elsewhere local authorities in some cases do so and have the means to do so. The provision of much more information to passengers on bus punctuality is of course enabling passengers themselves to exercise a much louder voice in this too. On the specific question as to whether the Traffic Commissioners should play a role, I would need to think further about that. I am not sure how far the Traffic Commissioners are directly engaged in monitoring quality.

Q116 Sir Peter Soulsby: If I could just quote to you while it is being looked at the words of one Traffic Commissioner who said to us that "the funds and resources allocated to bus monitoring are woefully inadequate and there is a complete failure on the part of the Government to address this."

Lord Adonis: Actually, Mr Devereux has just pointed out to me paragraph 365 on page 36 of the Annual Report, which says that "the Local Transport Act gave Traffic Commissioners enhanced powers so that local authorities can be held to account for their contribution to poor bus performance and bus operators can be required to invest in specific improvements or provide compensation to passengers rather than or in addition to a penalty being imposed." So there clearly are stronger powers here. I have not myself spoken to the Traffic Commissioners so I am not aware at first hand of their view as to whether their powers are adequate.

Sir Peter Soulsby: I think the point that was being made to us was not so much the lack of powers but the lack of any resources to do anything with those powers.

Q117 Chairman: They made those points very strongly. I think it is a matter of resources.

Lord Adonis: I am perfectly happy to look at that issue further but it appears that the powers are there. As to how they exercise them, that is largely a matter for them but if there is a resource issue, we should look at it.

Q118 Sir Peter Soulsby: I understood that the Department had set up a bus punctuality working group. I do not know whether that is indeed the case and, if so, do you know anything of its progress?

Lord Adonis: I certainly am not a member of it. I do not know whether my Permanent Secretary can help us.

Q119 Chairman: Mr Devereux, are you a member of the working group?

Mr Devereux: We have a lot of working groups. It is quite possible I am not a member of it either. I can well understand what it is, but there is a concept which has been used for a long time on the railways of joint performance improvement plans, which have worked very well between Network Rail and the train operating companies. The essence of the punctuality stuff is that increasingly now, as I understand it, that sort of arrangement is being worked so that the local authority and the bus operator can identify what it is that may or may not be causing problems with punctuality and both sides can record what it is they are going to do about it. Coming back to the Act, my memory is - and we can check this for you - that previously it was the case that the Traffic Commissioners could only do something on unreliability if a member of the public said something about it. We sought to frame the Act, I believe, in such a way that it was an obligation on the part of the bus companies to make sure that consistent data is available. We will go and check what the Traffic Commissioners have said but we sought to put this into a position where actually routine information is available for people to scrutinise and act on in the context of those scrutiny powers.

Sir Peter Soulsby: I think it would be helpful to know what powers they have but also whether they are satisfied with the resources that they have to use those powers.

Q120 Chairman: Lord Adonis, you wrote to us recently in answer to questions we put you about road safety issues, and in your answer you said that there had been a deterioration in the behaviour of drivers and riders in the period between the late Nineties and 2004 but that this had all improved after 2004. Can you enlighten us on why things deteriorated and why they have now improved?

Lord Adonis: I actually went on to give what further views we could on this issue later in that paragraph. I said, "It may be that there remain a core of near unsurvivable accidents less affected by the general factors which are reducing casualties, so that where, for example, cars leave the road at high speed and collide with static objects, the change in velocity is more than the human body can withstand regardless of the safety features of the car. The most recent research based on 2007 data has however concluded that this decline in driving standards has ceased, which is consistent with the death and serious injury trends coming together once more as they appeared to be doing in 2007 and 2008." That is the view of my expert advisers.

Q121 Chairman: It was just trying to work out why everything went so much worse in those years and then suddenly improved.

Lord Adonis: It was for the reasons, in the view of my expert advisers... the best enlightenment they could offer is set out in my letter but the reassuring point is that in the past two years we do seem to seen an improvement again.

Mr Devereux: If you look at the picture on page 269, you can see there is something happening in 2004 but in the grand scheme of things, it is fairly substantially still on the dotted line. You can see the small adjustment which Lord Adonis is talking about. It is not a very substantial one, particularly in the light of the later years' data.

Q122 Chairman: What lessons has Department learned from recent events in Cumbria in dealing with extreme weather conditions?

Lord Adonis: Obviously, the extremity of the conditions was hard to prepare for, because they were so extreme that it would not have been possible for local authorities to have been able to make contingency plans for the rapid building of new bridges and so on that has proved to be necessary. I am reassured by the fact though that the relevant agencies have worked well. They have worked well together and they have worked very fast indeed. Network Rail within a matter of days had got the second station built on the north side of the River Derwent. I am very pleasantly reassured that Network Rail can move this fast and I hope that this can be repeated elsewhere as needed. The MoD has provided sterling assistance to the local authority in the construction of the new crossing of the River Derwent, and they started that process only days after the serious floods. The inspection of the bridges: the county council moved as fast as they reasonably could to conduct those inspections. There was a high level of co-operation between the Highways Agency and Cumbria County Council in taking forward that work, as there was between Network Rail and the relevant authorities, as there was also between the other agencies and the MoD and the county council. So though, of course, none of us would wish to see any repetition of these events, the emergency services and the public authorities concerned appear to have dealt with the situation as well as they reasonably could in the circumstances.

Q123 Chairman: Do we have a national strategy for dealing with extreme weather conditions?

Lord Adonis: Of course, every year at some point we face very serious conditions on the road because of snow and ice. Your Committee looked at this issue after the events of last January, and again, there was a more mixed picture. The Highways Agency in fact kept almost the entirety of the strategic road network open during extreme conditions. My reflection on that is that their contingency planning had been effective. What the experience of last January in those extreme weather conditions also brought out though was a high degree of variability in the performance of local authorities, and one of the lessons that we in the Department drew from that was the need for us to provide stronger co-ordination and the capacity to help local authorities much more rapidly in terms of the Highways Agency being able to help them where extreme conditions apply, and we have put in place processes that would bring that about.

Mr Devereux: There is a strategy, in the sense that the government has got us to ensure that at local level and regional level there are arrangements in place for people to know who to talk to. Take the Maritime and Coastguard Agency, which perhaps surprisingly was also involved in the Cumbria floods, are a so-called category one responder to these sorts of events and are called upon at such point at which local government and regional government bring them in for whatever the crisis is, whether it is Boscastle or Cumbria. So there is essentially a devolved arrangement for managing these sorts of crises based on drawing together the sort of people you would expect to see there, whether it is through the police or transport agencies.

Lord Adonis: I should note that in fact the strategic road network and its bridges remained intact during the floods in Cumbria. The Highways Agency bridges which were inspected were open and the A66, the major strategic road in the region, was after a short period of delay brought back into operation again. So in terms of the agencies for which we are directly responsible, they in fact, by the nature of the investments that had been made in their network, bore up fairly well.

Q124 Mr Clelland: There I might make the point that where these bridges and roads are in the control of local authorities, they are less able to keep them up to standard than the Highways Agency is.

Lord Adonis: I note that point.

Q125 Chairman: We may well return to this issue on another occasion. Are you satisfied with the Department's performance in relation to its contribution to CO2 emissions? Emissions have actually increased in the transport sector, have they not, while they have decreased generally?

Lord Adonis: They have increased in the context in which the Government has met its overall targets on carbon reduction over 1990 levels but it is a fair point that transport emissions have increased, and we have put in a whole series of measures which we hope will reverse that trend, including, in the case of one of the fastest-growing areas of emissions, which is cars and vans, intensive work with our European partners on new emission standards for cars, which we confidently expect will start to bring down emissions in air transport, including the promotion of biofuels, including negotiation for an equivalent standard for vans as currently applies for cars at a European level, including the setting of a new target when we made the decisions in respect of Heathrow in January that aviation emissions should be no higher in 2050 than they were in 2005, and including significant investment to incentivise technological developments and also the take-up of electric and plug-in hybrid cars. Geoff Hoon announced earlier in the year 250 million worth of investment both to provide a re-charging infrastructure for urban areas, and there is a competition taking place at the moment between urban areas to set up such infrastructure, but also to provide direct consumer incentives from 2011 for the take-up of the first mass-market plug-in hybrids and electric models, because the advice that we received was that if there were not significant incentives given the high cost of cars powered by batteries, you would not get early take-up. That was a very significant new investment in our low carbon strategy and we hope it will lead to a significant decline in road transport carbon emissions.

Q126 Chairman: How significant will that decline be? What do you expect to achieve by 2020?

Lord Adonis: Our overall objective is to stabilise emissions by 2020 and for them to reduce thereafter, so to stop the growth in transport emissions that has taken place over recent years, to stabilise them and then thereafter to be able to reduce them but, of course, this does depend upon us being able robustly to take forward the sorts of measures that I have described.

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