UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 584-i

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Transport Committee

the Work of the Department for Transport

Wednesday 12 September 2012

Rt Hon Patrick McLOUGHLIN MP and Philip Rutnam

Evidence heard in Public Questions 1 - 62

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Transport Committee

on Wednesday 12 September 2012

Members present:

Mrs Louise Ellman (Chair)

Julie Hilling

Kwasi Kwarteng

Mr John Leech

Iain Stewart

________________

Examination of Witnesses

Witnesses: Rt Hon Patrick McLoughlin MP, Secretary of State for Transport, and Philip Rutnam, Permanent Secretary, Department for Transport, gave evidence.

Q1 Chair: Good afternoon, Secretary of State, and welcome to the Transport Select Committee. I congratulate you on your appointment. We are pleased that you are able to come here so soon after you have been given this very important position.

Are there any comments that you would like to make before we ask you questions?

Mr McLoughlin: I would be grateful if I could just make a few opening comments; I won’t be very long. Can I first say, Madam Chairman, what a great honour and pleasure it is for me to be sitting here before you today as Secretary of State for Transport? I am joined by Philip Rutnam, who you will know is the Permanent Secretary at the Department.

I would like to set out at the start that, although there have been some ministerial changes at the Department for Transport, there is no change in what the Government seek to do in achieving our transport infrastructure. Our focus on growth, efficiency, affordability, passenger experience and safety remains as strong as ever.

Secondly, I feel particularly fortunate in being able to bring a degree of experience, although it has lapsed for some 20 years, but it is surprising that some of the issues are the same as they were when I left the Department. I hope that this perspective has taught me how important it is to think long term while not ignoring the challenges that we face today.

I look back with pride at the work that we did when I was last in the Department, on the channel tunnel and the channel tunnel rail link. They were very controversial at the time; there is no question about it, but I don’t think that anybody today could imagine our transport network without them. However, I also look back on schemes such as Crossrail, a project that has spent far too long in the pipeline, and it makes me determined to press on as urgently as possible with projects that I know will deliver massive benefits for our country.

Finally, I would like to say that I am grateful for this early opportunity to appear before the Select Committee-at least I think I am; perhaps I might hold that back for a little while. I had not expected it to be quite as soon as it has turned out to be. I am looking forward to working with you all in the months and years ahead, and I will be following your upcoming aviation inquiry and other work with great interest. Indeed, I note that you are making a statement-tomorrow, I think-on the aviation inquiry.

Both individually and collectively, the Committee has a tremendous knowledge and understanding of transport policies, and I very much hope that we can work together in some areas, although in other areas we may have disagreements, to achieve what I know we all want, which is an efficient, reliable and safe railway system in our country. Thank you very much for giving me that opportunity.

Q2 Chair: Thank you very much, Secretary of State. You have indeed been a Transport Minister before, between 1989 and 1992, and I understand that you have been in the Whips Office for 17 years.

Mr McLoughlin: Yes.

Q3 Chair: How will both sets of experience be applied to the problems in front of you?

Mr McLoughlin: The Committee will have to wait to see how that is going to hang itself out. However, I remember when I was first appointed to the Department by Baroness Thatcher back in 1989 being told that she thought it very important that we should have a spread of Ministers across the country in the Department because it is a Department that has importance to all areas of the country. That is very much in my mind. Obviously, London takes up a huge amount of resources; that is natural, because it is a capital city and there is a huge amount of public transport in London, but I don’t underplay the importance of the other major cities in our country as well.

Q4 Chair: One of the major issues in front of you, and a controversial one, is the award of the franchise for the West Coast Main Line. Are you asking for a pause in this while you look at this yourself, irrespective of the outcome of the application for judicial review?

Mr McLoughlin: No. As I said, although the Ministers have changed, the policy has not. There was an exhaustive procedure that was gone through. The two companies went through huge amounts of effort to try to win that bid, and it was judged fairly by the Department. It is our intention to proceed with the bid that FirstGroup made, and I am content with the way in which the Department exercised its review of that contract.

Q5 Chair: You don’t feel that you should be looking at it personally in view of the controversies.

Mr McLoughlin: It is slightly difficult at the moment for me to talk about it in too much detail, because there is a legal case between Virgin and the Department. That does put me in some difficulties, but I am satisfied that due diligence was done by the Department. Therefore, the intention is to go ahead with the contract when we can.

Q6 Chair: There are some concerns about how the Department measures risk in relation to the franchises. When we held a session earlier this week and spoke to FirstGroup, it appeared that they had been called in to the Department to discuss the assessment of risk and that the financial provision that they were asked to supply in relation to safeguarding the interests of the taxpayers and the passengers had been adjusted as a result of that conversation. We were told that this was clarification.

I wonder whether you, Secretary of State, or perhaps Mr Rutnam, could explain how the Department measures risk, and what kind of negotiations there could be with a potential franchisee about what that risk is and how the taxpayers’ interests should be safeguarded.

Philip Rutnam: May I comment on that briefly? As the Secretary of State said, this is a matter that is subject to a legal challenge at the moment, so perhaps you will forgive me if I don’t go into too much detail of what may be the subject of some court proceedings.

The first point to make is that, in relation to the award of the West Coast franchise, and indeed the whole conduct of our franchising programme, we have been through quite an exhaustive consultation process in which all interested parties, including potential bidders, were able to take part.

The process that we are adopting in this round of refranchising has developed from the process that was used by previous Administrations in franchising, in that we are trying to take a more sophisticated and more evidence-based approach to the assessment of risk. That involves more detailed financial models being supplied by bidders and a more detailed scrutiny of those financial models by the Department. Critically, it involves an assessment, which is never going to be entirely free from some element of judgment, but, in so far as we can, we have sought to make an assessment of what level of financial risk a particular bid involves, and then adjusting the amount of capital that the bidder has to put at risk as part of its bid to us to reduce the risk to the taxpayer.

This is all explained in the documentation, but, broadly, for a bid that involves a higher element of risk, perhaps because it includes more aggressive assumptions about revenue generation or cost reduction, the bidder will be asked by the Department to put a larger amount of capital at risk if the bid is to proceed.

That is what happened in the case of the West Coast. The process as described in the documentation was followed. We made an assessment of the level of risk involved in all the bids, and we made an appropriate request from the particular bidders to put additional capital at risk, through what is known as a subordinated loan facility, which is essentially just a technical term for additional capital at risk, to ensure that, on a risk-adjusted basis, we can assess which of the bids is the strongest.

Q7 Chair: How concerned were you that the additional premium offered by FirstGroup would not materialise until eight years into the franchise-a long time away?

Philip Rutnam: Again, I do not want to get into too much of the detail about the bid, because some of this is commercially confidential; it is also, as I say, subject to legal proceedings. We looked at the profiles for all the bids and made an assessment of the level of risk involved for the taxpayer that was attached to those profiles. We also made a judgment overall as to which of the bids offered the best value for money for taxpayers, and the judgment on that was very clear-very clear by a significant margin.

Q8 Iain Stewart: Leaving to one side the detail of the judicial challenge, are you concerned that it might become so protracted that the possibility of handing over to the new franchise in December might be in peril?

Mr McLoughlin: Obviously, I would not want it to be protracted. I shall keep a very close eye on it, but there will be contingency plans that we can make. I am determined that the trains will not stop running: they will continue to run, and powers are vested in the Secretary of State under the Railways Act to ensure that that happens.

There is one point I would like to make. I think that Sir Richard Branson has made a fantastic contribution both to the railways and to aviation in this country. I am very sorry that we seem to be in disagreement with him, because anybody who has seen him operate and has seen what he has done for the transport infrastructure in this country would respect him and take their hat off to him.

Q9 Iain Stewart: Have you had any indication of how long the judicial review process will take?

Mr McLoughlin: If you talk to different lawyers, you get different lengths. The point that I would make, Iain, is that we are determined to press ahead with the award that we have made, but we have to act within the law. There are powers are available to me as Secretary of State, if I need to exercise them, to ensure that the West Coast Main Line is maintained and run after 9 December.

Q10 Chair: Is it correct that you have changed the basis on which you assess risk, or the financial requirements that you have been asking for, in relation to the Great Western franchise?

Philip Rutnam: Not specifically that I am aware of. The way in which we assess risk in franchises has developed significantly for this round of franchising-this process for franchising awards-which includes the West Coast, Great Western, c2c in Essex and a number of other franchises.

We are always looking to make sure that our methodology is absolutely the best that we can make it, but the most significant change of which I am aware is between the process that was adopted, say, in the first half of the last decade, where there was essentially no process for adjusting the amount of capital that bidders had to put at risk to the Government in order to reflect different levels of risk, and the process that we have adopted now, in which that amount of capital does vary, depending on the best assessment of risk that we can make.

Q11 Chair: Are you saying categorically that you have not made any changes in relation to the assessment of risk, or the financial provision required of the bidder, in relation to the Great Western franchise compared with the West Coast Main Line?

Philip Rutnam: I would have to do a detailed comparison of the invitation to tender for the Great Western franchise compared with that for the West Coast to be able to tell you categorically what differences there are. I would observe that the invitation to tender for Great Western was issued some time ago, long before the decision, let alone the legal challenge, in relation to the West Coast. These are processes that are essentially very similar, as far as I am aware.

Q12 Chair: If you are able to look at that, and if you are able to tell us, we would like to know whether there was any difference in the approach in relation to risk and the financial provision that you required from the potential franchisee.

Philip Rutnam: We can obviously look at that and let the Committee know.

Chair: Thank you.

Q13 Mr Leech: First, Secretary of State, may I welcome you to your position? I also welcome your comments about a northern MP being Secretary of State. It is welcome news that we have a northern voice for transport.

Mr McLoughlin: Those in the north are usually more inclined not to regard Derbyshire as north, but I take that as a compliment.

Q14 Mr Leech: You are certainly more northern than recent Secretaries of State. If I recall correctly, our previous Secretary of State was in post two days before she turned up in front of the Select Committee.

Mr McLoughlin: Yes, indeed.

Q15 Mr Leech: So you have had a relatively long period of acclimatisation.

Mr McLoughlin: It doesn’t quite seem that way.

Q16 Mr Leech: I have three very quick questions. When we had Virgin and First in front of us earlier in the week, I asked whether or not the Department had seen First’s bid as being five times more risky because it was expected to have put £200 million aside as opposed to £40 million. Would it be a fair assessment to suggest that the bid was considered to be five times more risky?

Mr McLoughlin: I shall refer to Philip on this, because I have come to this late; the decision had already been taken by the time I got to the Department.

Philip Rutnam: I don’t think that the measurement of risk works in that way, with respect. You can say that the Government reached the view that the level of the subordinated loan facility that should be sought from First was of the order of £200 million and that the level of the subordinated loan facility to be sought from Virgin was of the order of £40 million. Those, I think, are the figures that you have been given, but that does not mean that the bids overall were five times more risky.

There are other elements in the whole bidding process that deal with risk. For example, bidders are required to put up bonds for season tickets; they are required to provide assurances to Government in a number of different ways. It would not be a fair comparison to say that one was five times more risky than the other. They are all quite complex, interconnected financial calculations.

Q17 Mr Leech: If Virgin’s legal challenge is unsuccessful, there is some concern that, when future franchises come up for renewal, there will be fairly speculative bids by some operators that perhaps might lead to further legal challenges by existing operators of future franchises.

Has there been any discussion within Government about the potential for trying to get the franchisee in position earlier? If there is a long, protracted period for legal challenge, making a decision in August and the company taking over in December is not a very long period of time.

Mr McLoughlin: That is one of the questions that I have asked. We have set out a very clear timetable, and one thing that the industry would not welcome is if we were to start changing that timetable. A lot of very substantial work goes on, but, yes, I will look at when these particular dates fall because that is an issue on which I would want to satisfy myself a little more.

Q18 Mr Leech: My final question is in relation to franchising in general. One of my concerns is that I am not convinced that we can have a fair franchising and tendering process but at the same time make sure that the fact an operator has done a good job is taken into consideration. Yes, if someone has done a bad job, they can be excluded from the process.

I think, generally, Virgin has done a very good job on the West Coast Main Line, but that very good job cannot be taken into consideration. Have you thought about whether there is any way to change the franchising system so that good performance can be taken more into consideration than it currently is?

Mr McLoughlin: I can answer that in two ways, John. I don’t demur from the service that Virgin has provided and the satisfaction that it has provided, but the Government have put a huge amount of investment into that line; £9 billion on the West Coast Main Line is a huge amount of public investment. We have to judge that. The franchise runs from December 2012 to March 2026. That is a huge time. There was a lot of pressure previously to extend these franchise periods, deliberately so that companies could make proper investment and get returns, and we have to judge all that too.

This is not a decision for the short term; it is a decision for the long term. You know better than most-you use the line, as do a number of members of the Committee-that it is a very important line in the national rail infrastructure. As I say, a huge and significant amount of investment in it has been made by the Government.

Q19 Kwasi Kwarteng: I wanted to pick on a point about the risk, but we have strayed away from that. This is probably addressed to the Permanent Secretary. It is true that £200 million is bigger than £40 million, which suggests that the implied risk in the FirstGroup bid was greater than in the Virgin bid. Am I right in suggesting that?

Philip Rutnam: Obviously the reason for asking for larger subordinated loan facilities reduces the risk to the taxpayer.

Q20 Kwasi Kwarteng: Where do you see the risk to the taxpayer lying with the FirstGroup bid?

Philip Rutnam: We made a set of judgments that underlay the decision that was made to award the contract to FirstGroup. If you look at it in the round, we are very clear that the judgment that we made was the one that was in the interests of taxpayers as well as passengers.

Q21 Kwasi Kwarteng: Where are the risks, specifically?

Philip Rutnam: With respect, I don’t want to get into too detailed an account of a decision that is right at this very moment the subject of a legal challenge and given that the precise set of steps we went through to reach that judgment may be the subject of court proceedings.

Q22 Chair: I accept the point that you make in relation to the legal challenge, but could you tell us if it is correct, as Sir Richard Branson claimed, that, for First to be able to make their premium payments, in the last years of the franchise every seat on every train, every day of the week, would need to be filled? Does that fit with your assessment?

Philip Rutnam: I would be very surprised if that were true. I cannot tell you categorically because I don’t have the facts in front of me on that precise point, but I would be very surprised if it were true.

Q23 Chair: Would you also clarify the nature of the commitments being made by First? They promised to introduce new services in relation to Blackpool, Bolton and Shrewsbury. We questioned them on that in the Committee, and they said that that would be a contractual agreement rather than an aspiration. Last week, however, Simon Burns, the new Transport Minister, answering a parliamentary question, said that First were required only "to actively consider and use all reasonable endeavours" to introduce those services. That is far from the contractual commitment that First told us they were willing to enter into on this. Would you clarify that for us?

Philip Rutnam: My understanding is that what First have offered is indeed a contractual commitment to operate those services. I am afraid that I cannot give you here and now the precise letter of that contractual commitment, but that they are proposing contractual commitments is my understanding of the position.

Q24 Chair: Why then did the Transport Minister, Simon Burns, say something different? A contractual commitment is very different from being required "to actively consider and use all reasonable endeavours".

Philip Rutnam: It depends, perhaps, on the wording of the contractual commitment. Rather than giving you yet another answer now, it might be easier to respond to that point in writing.

Chair: That would be helpful.

Mr McLoughlin: It may well be subject to the Office of Rail Regulation approving those services, but we don’t see that there would be a problem with that happening.

Q25 Chair: That point was indeed made to the Committee, but it is rather different from a Minister talking about using best endeavours. It is not quite the same.

Mr McLoughlin: We will check it out.

Chair: We will await your clarification, if you are able to give it to us.

Q26 Julie Hilling: I join others in welcoming you to your position, Secretary of State.

Mr McLoughlin: Long may it continue.

Q27 Julie Hilling: It is frustrating that transport seems to be reorganised fairly regularly, as it makes it difficult for us as a Committee. We think that we have made progress and then suddenly there is a change in personnel, so I hope that you are here for somewhat longer as a Secretary of State.

I want to talk not specifically about the Virgin bid or the West Coast bid but about the wider implications of franchising. As we know, millions and millions of pounds are wasted by companies that are unsuccessful in the bidding process. It is clearly an expensive process. Virgin have told us that they raised concerns very early on about the bidding process. I wonder what has happened to those concerns, and what is going to happen going forward, with the things that this round of bidding seems to have thrown up.

Mr McLoughlin: I would hope the Department will always learn if things have gone wrong. It is very important that we have the confidence of the industry. It is very unfortunate that, at the end of the day, there is a row and a legal dispute over this particular contract. You say that the companies spend a lot of money. They do spend a lot of money on preparing these bids, but they are also very valuable bids, and they would not spend that money if they did not think that there was a proper return for them thus to do so. There has to be an element of competition involved in that for the sake of the passenger, for whom we are trying to get the best deal as well.

Q28 Julie Hilling: That may be an argument for renationalisation, Secretary of State.

Mr McLoughlin: I am not sure that it is one that the Labour party is yet willing to make.

Q29 Julie Hilling: I have another question about fares in relation to franchising. One of the concerns that our constituents have raised with us is the enormous cost of travelling on the West Coast. As I said last week, I could have a holiday in Benidorm and £80 of spending money for the cost of a peak return ticket. How much does the fare box come into franchising decisions now and how much in the future? Where do you stand in terms of these ever-increasing fares that keep people off the railways?

Mr McLoughlin: My understanding is that part of the benefits is that First will be reducing the standard anytime fares by an average of 15% over the first two years of the franchise. So fares and fare levels are something that is very important. Train operators themselves want to maximise the number of passengers on the trains, to make sure that they are utilised to their full capacity. Yes, fares are very important, but I come back to the point that there has been significant public investment, indeed, on this particular line.

Q30 Julie Hilling: Indeed, but your last-but-one predecessor said that he believed that the railways were a rich man’s toy. What are you going to do to ensure that that situation doesn’t continue and that ordinary people have access to our rail services?

Mr McLoughlin: I am not going to try and answer for what previous Secretaries of State have said. What I would say is that the train, at peak times, is a very expensive mode of travelling, but then getting in a car at peak times is also very expensive because you are likely to be held up in road congestion and be burning fuel at the same time.

What I would like to see is fare prices eventually being a bit more accessible and more understandable, which is one of the great problems at the moment. Indeed, we are doing a review on the whole aspect of ticketing and fares so that it becomes a bit more understandable. Certainly on my own line you can spend a huge amount of money to catch a train before 8 o’clock, but if you wait until 20 minutes past 8 it is a lot cheaper. The trains before 8 o’clock aren’t so busy as those after 8 o’clock, and we all know the reason why.

We need to work with the rail operating companies to see the way forward on this particular issue. Some of the recommendations of the McNulty report, which will hopefully reduce the cost of running the railways, can then be reflected in fair passenger prices as well.

Q31 Chair: This is my last question I want to ask you on the West Coast Main Line. Would you confirm who will be running that line if the legal issues are not resolved by the due date in December?

Mr McLoughlin: If the legal issues are not completed by that date, there are powers for the Department to act through Directly Operated Railways under section 30 of the Railways Act.

Philip Rutnam: There are contingency arrangements under which the Department can ensure continuity of service through a public body that reports to us, which is known as Directly Operated Railways.

Q32 Chair: Is that what you intend to do?

Mr McLoughlin: If we get to that situation, that is what we will have to do.

Q33 Chair: I turn now to High Speed 2. Are you committed to delivering the legislation for the first part of the HS2 network by 2015?

Mr McLoughlin: I would certainly like to see the legislation delivered by 2015, yes.

Q34 Chair: Are you committed to ensuring that the line goes beyond Birmingham to the north on the agreed timetable at least, if not quicker?

Mr McLoughlin: As I said right at the start of my evidence, I know from my own experience that rail planning and infrastructure planning takes a very long time, but it is our intention to complete the Y link. That does take a bit longer, but we have to get the first section up to Birmingham operating, and it is our intention to do so.

Q35 Chair: Will you be recalculating the business cost ratio of the scheme?

Philip Rutnam: May I comment on that? We keep the business case for this investment under review of course. We published a revised business case on the basis of the most up-to-date information that we had earlier this year. We continue to keep the business case under review, and we take into account the most recently available information-for example, on GDP, passenger numbers and other evidence that we have available. We will be publishing a further revision at some point in the future, but I’m afraid that I cannot tell you exactly when.

Chair: Are there any other questions on High Speed 2?

Q36 Iain Stewart: We have the aviation capacity review coming up. I wonder whether you would be willing to look at some of the details of high speed rail in that context so that, if a decision is made on a particular expansion at an airport or a new airport, the HS2 route detail might be amended to take account of it.

Mr McLoughlin: Well, gosh. I am going to stand by the fact that, at the moment, the route has been published. It is the route that was published by the previous Government, and we intend to stick by that route. If you are talking about Heathrow, there is an intended stop at-I can’t remember the exact name-

Philip Rutnam: Old Oak Common.

Mr McLoughlin: It is at Old Oak Common. However, I am not going to prejudge other questions that may come later about what the Davies Commission may or may not say.

Q37 Julie Hilling: When will you be publishing the route of the Y?

Mr McLoughlin: We have announced that we would like to do it before the end of the year, and it is still my intention to try to do so. That, at the moment, is the intention, but I wait to see more papers on it.

Q38 Chair: This Committee took a great interest in the issue of Thameslink rolling stock and the difficulties that arose there. I understand that no contract has been signed with Siemens at the moment for Thameslink rolling stock. Is that correct? If so, could you tell us why it has not been signed and what is going to happen?

Mr McLoughlin: We are working closely with Siemens to conclude the contractual arrangements. We certainly hope to sign the contract by the turn of the year. There were some procedural issues that had to be gone into. I know the close interest that the Committee took in it; I too took a close interest in that contract but from another stance.

Q39 Chair: Can you give us a clue about what these procedural issues were? This contract was supposed to have been signed many months ago and then there were delays, but we have never had a proper explanation for the delays.

Philip Rutnam: The first point to bear in mind is that this is a very large and complex contract. The most important thing from our point of view is to get the right commercial terms in it in order to generate as much value for money for the taxpayer and for passengers as possible. We are focused on getting it absolutely right, with every "i" dotted and every "t" crossed. It is a very complex and large transaction, and that is what we are focused on. While it has taken a few months more than we expected, there is no risk that I am aware of to the entry into service of the Thameslink trains to deliver the full Thameslink service.

Q40 Chair: Shouldn’t these commercial considerations giving the best deal have been explored fully before it was announced that the contract would be awarded to Siemens?

Philip Rutnam: The way that the process operates is that, back in the summer of 2011, we identified the preferred bidder for this process. It was always clear, whoever had been the preferred bidder, that there would need to be some months of detailed negotiation and to ensure that the private-sector financing needed to fund the capital cost of the trains was all lined up. We need to be achieving financial close as well as commercial close.

I mention here the Intercity Express Programme, which is an even larger rolling stock transaction. The contract, you will probably recall, was awarded to a consortium led by Hitachi. That is a similar scale of project and a similar sort of process. We announced in July that we had achieved the financial and commercial close on that very large transaction. Following identification of the preferred bidder, it then took quite a few months of detailed negotiation to generate the right conclusion.

Q41 Chair: Is there any date beyond which you are not going to go, when you might decide that you can’t conclude this?

Philip Rutnam: We are focused very clearly on concluding this transaction. We are confident that we will be able to conclude it. The Secretary of State has already identified when we hope to do that.

Q42 Chair: Thank you. I now turn to aviation. Secretary of State, there has been an announcement of a new commission to look at airport capacity. What is that going to achieve that has not been achieved before?

Mr McLoughlin: These issues are not short-term ones; they are for the longer term. I hope that, when we are ready to announce the full membership of the Davies Commission, we will be able to show that it is a body of respected people who can come forward with a detailed investigation into future aviation capacity and what the best answers are for the United Kingdom to keep its importance and status in the aviation field. It is no bad thing to have a completely independent commission addressing some of the complications on whether a new estuary airport or expansion at some of the other London airports is the right way forward.

I met Sir Howard earlier this week. Obviously, an announcement was made within a few days of my arrival at the Department. That should indicate that it was not something new that had been thought up completely by the Secretary of State but that it was work that had been going on within the Department for some time as the proper way to move forward.

Q43 Kwasi Kwarteng: The issue of south-east aviation capacity was raised when you were Parliamentary Under-Secretary in 1990, and, as far as I can make out, in 22 years we have done nothing on aviation capacity in the south-east. How surprised are you about that?

Mr McLoughlin: I am not sure. Am I surprised? To say that nothing has been done on capacity is wrong. There have been capacity increases. The ATMs-air traffic movements-at Heathrow are substantially bigger than they were 20 years ago. To say that nothing has happened is a slight exaggeration.

Q44 Kwasi Kwarteng: Forgive me, Secretary of State, but the issue raised in 1990 was that a new runway to cater for demand arising in south-east England would be needed. With regard to that runway, I don’t think that we have made as much progress as perhaps was envisaged in 1990, and I want to know what your thoughts are about that coming back to your role in a more senior position.

Mr McLoughlin: My thoughts are that it is a very difficult and complicated subject to address. You have been keen to call for a third runway, but even if we have a third runway it would take some considerable time to plan it and get it through the planning process. It is very controversial, and I think it is right to set up a commission to give us that advice. There have been commissions in the past, but not for some time, going into the kind of detail that the Davies Commission will go into.

Q45 Chair: Are we doing enough to support regional airports? Could the Government do more either to expand their capacity or use better what we have now?

Mr McLoughlin: I am trying to set the Department a task, and I very much hope that the Committee can help me with this. I do not regard Manchester airport as a regional airport. I do not regard Birmingham airport as a regional airport. These are very big international airports; they are not regional. Manchester airport has more passengers than either Stansted or Luton. The term "regional" almost puts them into a different category. They are not regional airports; they are very important international airports, and I am going to try during my tenure to stop calling them regional airports. Perhaps we can have a concerted effort on that, because they are part of the overall infrastructure; they are vital infrastructure and they provide very important services to our constituents.

Q46 Chair: Does that mean that the debate will move away from concentrating solely on capacity in the south-east?

Mr McLoughlin: The south-east and the connectivity that Heathrow has is very important and I don’t think that it will move away from that, but we should also bear in mind what capacity we have elsewhere in the country. It is up to the operators what services they wish to operate. Manchester has seen huge growth.

I remember a long time ago being a member of Staffordshire county council, and we were interviewing a new planning officer. The then chairman of the county council asked the planning officer, who came from the south-east, what he thought of Manchester airport. He said, "Well, it’s not that important. It’s far more important that we concentrate on the south-east and south-east airports." I remember that, after about five minutes of the interview, the chairman of the county council at the time said, "The interview is now over. I don’t think that you are suitable for this job." There is a different approach on what we need to do as far as aviation is concerned.

Q47 Mr Leech: You said at the beginning of your comments on aviation that you were looking at all the options in the south-east.

Mr McLoughlin: The Davies Commission will look at all the evidence.

Q48 Mr Leech: I am sorry. The Davies Commission is looking at that, and that includes the option for, potentially, a new hub airport in the Thames estuary. The Committee is consistently told by people in the aviation industry that you can’t create another hub airport, Heathrow is the only hub, and that’s the end of it. If we can consider the Thames estuary as an alternative hub to Heathrow, why aren’t we looking at one of our other international airports as a potential hub airport-perhaps Manchester or Birmingham, whichever one it might be?

Mr McLoughlin: The London airport issue is something that we have put separately to the Davies Commission, and that is the right way to go forward on that particular area. As for the connectivity that might be available at other airports, it is something that I am willing to talk to those airports about. I have not yet had the chance to visit Manchester; I hope to do so in the not too distant future.

Q49 Mr Leech: The point that I was trying to make was that considering the Thames estuary as an additional or alternative hub suggests that the argument that you can only have a hub at Heathrow is not accepted as being the case. My question is that, if we are saying that there could be another way of dealing with aviation and airport capacity, surely we should be looking at the scope of other international airports and not just the south-east.

Mr McLoughlin: What I am not prepared to do is to prejudge what the Davies Commission will say. We have asked it to make an interim report by 2013. That may give us some signposts as to certain areas that we may want to travel down. You can take it from me that I am very keen to talk to the other airports-Birmingham, Manchester and the like-as to this whole issue of services offered to constituents from the midlands and the northern area. That is something that I will be doing.

Q50 Chair: When in 2013 is the interim report expected?

Philip Rutnam: By the end of the year.

Mr McLoughlin: By the end of 2013, but I can’t give you a date at this stage.

Chair: I just wanted an idea of what the plan is.

Q51 Iain Stewart: Leaving aside the debate about long-term aviation capacity, I would be interested in your thoughts on what else we can do in the short term to improve capacity at airports. I am thinking particularly of what lessons we can learn from the Olympic period. Again, there were prophecies of doom and transport chaos, but Heathrow coped admirably with a very high intensity of demand. What plans does the Department have to capture some of the lessons learned there in the short term?

Mr McLoughlin: As a new Secretary of State, I would like to pay great tribute to all those people in the Department who worked so heavily on ensuring that public transport worked so well during the period of the Olympics. A huge amount of work was done by the Department, and, despite the doom and gloom that we had before the Olympics took place, the Department made a great contribution. I have asked the Permanent Secretary to communicate this to those members of staff; it was absolutely fantastic.

There are lessons to be learned from it, not only in what we did with regard to public transport but also, as you say, at the airports. I am sure that I shall be getting many reports on how we can build on that-build on it working with the UK Border Agency and the Home Office too, which had the lead on border control. It was very successful, and we need to make sure that we try and carry through the points that we can learn from it and the improvements that can be made.

Q52 Chair: The Prime Minister has said that the Government want to spend more on infrastructure or want more infrastructure development to take place. When do you expect to be offering financial assistance to transport providers under the new Infrastructure (Financial Assistance) Bill?

Mr McLoughlin: Philip, can you answer?

Philip Rutnam: There is the new UK Guarantees programme that the Treasury have announced, for which they are seeking legislative provisions. We are already exploring possibilities under that. There are discussions in relation to some of the big local authority projects, and the Mersey gateway bridge is one example. We are looking to see whether we can find ways of using this significant programme that the Treasury has announced.

Q53 Chair: When should we expect announcements about building new roads or perhaps bringing rail investments forward? When should we expect to hear about a construction programme?

Mr McLoughlin: The Bill was published last Thursday, so it has to go through its proper process in this House and another place if that is necessary. We will keep you and the House up to date in the usual manner, through written ministerial statements or statements to the House, when we have something to announce on those issues. You can take it very much that the Prime Minister is keen to ensure that we make the most use of this availability. I am very keen that the Department does so as well.

Q54 Chair: Do you want to build more roads?

Mr McLoughlin: There are some areas where more roads are very important because they can relieve congestion and help us move. Do I want to build more roads? In some areas there are road improvements that can be made. Yes, where we can and where it is sensible to do so, but it is not something that can be done overnight.

Q55 Chair: How are you going to decide which projects to take forward?

Mr McLoughlin: I will give that some consideration in due course.

Q56 Kwasi Kwarteng: On the issue of roads, do you have any particular views on road pricing?

Mr McLoughlin: No, not developed enough to share with you this afternoon.

Q57 Chair: I want to deal with road safety next if there is nothing else to raise on infrastructure.

On road safety, the Committee is very concerned that there was an increase in road deaths in 2010, apparently reversing a long-term trend. Is this of concern to you, Secretary of State? Is road safety an area that you will be looking at nationally?

Mr McLoughlin: I am very concerned about road safety but not just road safety. In fairness, the Department has an important role as far as safety is concerned. There is aviation safety, marine safety, coastguard safety-there have been some horrendous incidents we have heard about over the summer as far as our coastguards are concerned-and there is also road safety.

It is fair to say that, although there was an increase in fatalities in 2011, the annual total in 2011 was below that of 2009. The Department has been very good over a number of years in seeing an improvement in road safety. It is not just the Department; it is also working with the local authorities. Sometimes, small changes can make a difference to the safety of roads and road surfaces. It is an area where, of course, we must never, never give up our fight on that particular subject. I know that you have done a report on it; I have not yet had time to read it, but I will look at that report.

Q58 Chair: The Committee has also been concerned for a long time about the high rate of deaths and accidents among young people on the roads. Will you be turning your attention to that area as well?

Mr McLoughlin: Going back to my earlier days in the Department, I remember that we were seeing the number of road deaths coming down and we had an incredibly good record compared with our competitor nations on road safety. One of the areas where we weren’t very good was the number of child deaths. That was higher than perhaps some of our European neighbours, and I shall want to look at that. The whole issue of safety and the devastation wreaked on a family as a result of a fatality in a road accident is something that we have all had to deal with as Members of Parliament, and it is very difficult indeed.

Q59 Julie Hilling: Particularly on road safety, we expressed some concern last year about the drink-driving campaigns and the fact that it was put on the internet rather than being a more public-facing television campaign on safety at Christmas. Will you overturn that this time and put some of that information back on the television? I am aware that within this-let me set the framework-that the Government have cut their marketing budget. That means that safety campaigns are actually not publicly available to everybody. That is the context of my question.

Mr McLoughlin: I would like to give you the assurance that I shall look at these particular issues. I also want to look at the best way in which we can communicate it, because the television adverts that we used to run may be right at certain times and in certain areas, but I am not sure that they get to the number of people that we want. There are other media aspects these days that we can use to try and get that particular message across. I am prepared to look at it, and to look at the whole system in the round, to really get that message across.

This morning, Stephen Hammond was on one of the TV programmes-"Daybreak", I think it was-talking about people using their mobile phones and texting while driving, and the incidence of death that that has caused. People don’t do it thinking that they are going to cause a death. They do it just because they think it is safe to do so. It is not safe to do so. It is not safe to drink and drive; it is not safe to use your phone and drive; and it is not safe to text and drive. Because people get away with it, we have to think more about it.

Q60 Julie Hilling: Will you also be looking at being safe to drive in terms of sleep apnoea, eyesight and all those other issues that we have raised as a Committee, and our concerns about whether we are rigorous enough in establishing that people are physically safe to drive?

Mr McLoughlin: Yes, but you also have to rely on common sense. The Secretary of State for Transport cannot be a guardian angel of the 22 million sitting people behind their steering wheels driving their cars, but we have to try and get that message across. There was a case in the papers not so long ago where the judge was quite critical about the availability of the sentences that were available to him. Actually, we have changed the law on that and new sentences will become available next year for the courts to use for dangerous driving and the like. We need to get those kinds of messages across. The trouble with driving sometimes is that drivers become complacent. Sometimes they forget that they are in charge of a vehicle that could cause mass damage and kill people.

Chair: Are there any further questions from members?

Q61 Julie Hilling: Can I tackle a slightly different subject? There are two areas that I would like to ask you about. One is about the question of devolution in rail franchising. There are bids in from the north in terms of them running a new Northern franchise, whatever that is-perhaps a conglomeration of Northern and TPE. The PTEs have bid to run that, and I know that there are some others. I wonder what your view is, or do you not yet have a view on that?

Mr McLoughlin: At this stage of the afternoon I don’t think I have a view on it, but give me a bit of notice next time and I will.

As somebody said, I have done it for longer than Justine did when she first appeared before you; I have done it for seven days rather than two. It is a huge Department, and I need to meet a number of organisations, including the northern passenger organisations, and I will be doing that over the next few months.

Q62 Julie Hilling: The other thing is a more general question on rolling stock. The Government have announced a lot of electrification, but the Thameslink cascade of vehicles is not going to satisfy them all. I wonder what the plans are for new electric rolling stock to fulfil all of that electrification, otherwise we will have the nonsense of running diesel under wires. I wonder what the forward planning is for new electric rolling stock.

Chair: Are you able to answer that or is that something you would like to think about, Secretary of State?

Mr McLoughlin: I have had discussions about that, but I am not sure that I have an answer for you at this stage. No doubt we shall be returning to the subject in future hearings of the Select Committee, and I shall come back with a much better response, Julie.

Chair: Thank you for coming so soon after your appointment. We thought that it was important to ask you a number of questions, but I am sure that all of the issues that we have raised will be returned to in the future. Thank you very much for coming here today.