CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 95-ii

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Welsh Affairs Committee

Cross-border road and rail connectivity in wales

Tuesday 3 July 2012

Mark Hopwood and Mike Bagshaw

Mark Langman and Dylan Bowen

Evidence heard in Public Questions 63 - 131

Oral Evidence

Taken before the Welsh Affairs Committee

on Tuesday 3 July 2012

Members present:

David T. C. Davies (Chair)

Guto Bebb

Geraint Davies

Jonathan Edwards

Nia Griffith

Karen Lumley

Jessica Morden

Mr Robin Walker

Mr Mark Williams

________________

Examination of Witnesses

Witnesses: Mark Hopwood, Managing Director, First Great Western, and Mike Bagshaw, Commercial Director, Arriva Trains Wales, gave evidence.

Chair: Mr Hopwood and Mr Bagshaw, thank you very much for coming along today. I ask Geraint Davies to begin our questions.

Q63 Geraint Davies: I shall ask first about cross-border capacity-projections for growth and future demand, and whether the capacity is there. What can be done under the franchise agreements to increase that capacity, including frequency and linkages to the south-west economy?

Mark Hopwood: Good morning. Thank you for inviting us here. I shall kick off, if I may. Unfortunately, I need to preface my comments with a statement about where we are in the franchising process. Both my organisation and Mike’s parent organisation are bidding for the franchise that operates the Great Western route at the moment. Although we would like to talk about all sorts of things, we are slightly constrained by the agreements that we have signed with the Department for Transport, but certainly I will try to be as open as I can within the constraints of those agreements, if that is okay.

We have seen quite considerable growth in services from England into Wales in recent years, although it is true to say that the majority of the growth that we have seen in London to south Wales services has been in England. Actually, some of the strongest growth in services that we have seen is the services from Cardiff that head into Bristol. One relatively recent phenomenon is the growth of commuting traffic from south Wales into Bristol. The Bristol economy has attracted a lot of people who live in south Wales, so the amount of capacity that has come to serve that market has grown probably to a greater extent than virtually any of the other services that we operate around the Bristol and south Wales area.

Q64 Geraint Davies: If there was a more frequent service from Swansea to Bristol, and possibly on to Bath, do you think that it would further increase the flow, obviously stimulating the Swansea economy and the south-west economy as well?

Mark Hopwood: Clearly, any improvement to train services will drive growth. As you may be aware, all the services that we currently run into the centre of Bristol on First Great Western start at Cardiff. At the moment, we do not have any plans to extend services further west into Wales, but clearly that is something that could be looked at in future.

Q65 Geraint Davies: So, in your view, there probably is a market for services from Swansea to Bristol?

Mark Hopwood: There probably is a market, but I would not be able to say at this stage the extent to which we have looked at the absolute level of demand.

Mike Bagshaw: On our cross-border services, we have been seeing very strong growth, typically between 8% and 13% over the years of the franchise. Cross-border services are probably seeing the strongest growth across the Arriva Trains Wales network. The key routes are north Wales to Manchester, mid-Wales to Birmingham, and Cardiff to Manchester. We have been seeing very strong growth, particularly on the long-distance flows over the last few years.

We have been putting a lot of effort into seeing how much more capacity we can provide on those flows, using our existing resources. Because we have only a limited number of trains allocated to the franchise, we have been trying to provide more seats with the same number of trains. This May, for example, we revised our timetable and reviewed our seating capacity, and we provided 1,100 additional daily seats across the network to try to address that issue.

Q66 Geraint Davies: What are your thoughts on what is called the spark effect, in the event of electrification of the railway from Cardiff to Swansea?

Secondly, do you have a view on moving the franchise that is currently with Arriva to a sort of co-operative, self-standing thing run by the Welsh Assembly Government? Would that generate discontinuity in terms of cross-border activity? Would it be a good thing or a bad thing? Would you comment on that?

Mike Bagshaw: Our franchise at the moment runs until 2018. We have had some discussions with the Welsh Government about the future beyond 2018, and we would be happy to work with the Welsh Government or whoever in looking at different franchise models.

Q67 Geraint Davies: I am sure that you would, but do you have a view on whether it would be a good or a bad thing?

Mike Bagshaw: We would need to have a look at the detail and to have more detailed discussions.

Q68 Geraint Davies: That is a diplomatic answer. Mr Hopwood, what do you think?

Mark Hopwood: FirstGroup is a big player in franchising in the UK. We are familiar with working with franchises away from the Westminster Government; we operate the franchise in Scotland. We think that the current model, with private-sector businesses working to generate additional demand and meet the customers’ needs, is the right one, but ultimately we recognise that politicians will determine the model under which the railways are to operate, and we will be happy to work with them to make it work as effectively as possible.

Q69 Geraint Davies: Finally, on the spark effect, there is a view in the business community that you are either in or out when it comes to an electrified network. Certainly businesses such as Hewlett-Packard in Swansea think this. Have you found that electrification generates extra interest and demand?

Mark Hopwood: The evidence is clear that when routes across the UK-and, to be honest, elsewhere in the world-have been electrified, it generally leads to improved journey times and better journey experiences, and it helps to improve capacity. Where that has happened, there has been a considerable growth in demand. We would certainly support electrification.

On the Cardiff to Swansea example, there is obviously a debate on whether we have pure electric trains or what are called bi-mode trains. Technically, the bi-mode train offers an interesting solution, but I do not think that it will change the psychological issue for people who travel on a train to Cardiff, because when you are there, the diesel engine will be started up and you will carry on to Swansea. Although that might not make a huge difference to the journey time, it will probably have a psychological impact on people’s perception of the journey. It is certainly true that electric trains are more reliable than diesel trains. Although we have some quite reliable diesel trains these days, the most reliable trains on the network are generally electric.

Geraint Davies: Right. Sheep on board.

Q70 Mr Williams: I turn to the issue of capacity and overcrowding. You will recall that, in the previous Parliament, this Committee undertook an investigation of the cross-border provision of public services for Wales, including transport. In that 2008-09 report, we concluded that: "The severe overcrowding that is currently being experienced on many cross-border rail services is unacceptable" and that it was "the result of poorly designed franchises which paid no heed to industry forecasts for passenger growth. This has resulted in the need for significant expenditure on the part of the Welsh Assembly Government".

What is your assessment of overcrowding three years on?

Mike Bagshaw: It is very true that the franchise made absolutely no provision for passenger growth. When the franchise was let, it was let at a low cost and no passenger growth was envisaged. The reality has been very different since the franchise was let. We are now carrying 60% more passengers with broadly the same number of trains. That does present a challenge. We have been working hard to rise to the challenge by redeploying the trains that we have in the best way possible, so that we can cater for that growth as best we can.

Q71 Mr Williams: You alluded earlier to 1,100 extra seats across the nation as a whole. How much has that addressed the overcrowding difficulties? I can certainly testify to them on my regular journey here.

Mike Bagshaw: All of those extra seats have been allocated to trains that were previously crowded. We looked at some of the most crowded trains on our network, we did an extensive review of our train plan, and we allocated trains accordingly. For example, on some of the most crowded trains on the Cambrian route from Aberystwyth, we have been able to put on additional carriages over the summer period.

Q72 Mr Williams: Is that addressing the problem?

Mike Bagshaw: It is helping.

Q73 Mr Williams: It is helping with the problem rather than alleviating it?

Mike Bagshaw: It is helping. Clearly, some trains are always going to be crowded. We have a limited number of trains, and at busy times we deploy all of our trains. We suspend non-essential maintenance, but every single train that we have is deployed to our best ability. We are doing everything that we can with the fleet that we have, but with passenger growth continuing-in some ways, it is a good problem to have-crowding is unfortunately inevitable at some times.

Q74 Mr Williams: Do you feel that there are certain times of the year-I am thinking particularly of areas with a large student population or areas that are desperately promoting the tourist sector; you mentioned the summer service-when there is an added need to address problems of overcrowding given the presence of the student community and the tourist sector?

Mike Bagshaw: We would like to be able to provide more capacity than we do, and we need to take a long-term view on how we provide rolling stock to cater for those peaks in demand. We are doing all that we can with the resources that we have. We are talking to the Welsh Government and the DFT about taking a longer-term view, and looking at how we can find additional rolling stock, and fund that additional rolling stock to cater for further growth.

Q75 Mr Williams: What is the reaction of the Assembly Government to your discussions on this problem?

Mike Bagshaw: The Welsh Government recognise that we have growth, but there are obviously funding challenges. We as a company are willing to invest and do our bit, but we have a franchise that runs until 2018, and investing in rolling stock is obviously a long-term commitment. Yes, we are having those discussions.

Q76 Mr Williams: You are still committed as a company to the hourly service between Aberystwyth and Shrewsbury?

Mike Bagshaw: The infrastructure is now in a position to deliver an hourly service, but we need to talk to the Welsh Government about when those additional services might operate.

Q77 Mr Williams: When do you think that is likely? This has obviously been an issue of great concern for some years.

Mike Bagshaw: The reality is that, to run additional hourly services on the Cambrian route, there will need to be additional public funding, as the revenue generated will fall a long way short of the actual cost of running those services. We are talking to the Welsh Government about when that funding could be available. We are aware that it is a strong aspiration locally, but as you know public funding is clearly a challenge at the moment.

Q78 Mr Williams: Another aspiration locally-I am sorry, Mr Chairman, but I hope you will allow me this indulgence-was to re-establish a direct service between Aberystwyth and London. Arriva Trains Wales put in what I thought was a very good bid two or three years ago, but sadly the Office of Rail Regulation did not respond too positively. Have you any plans to relaunch that campaign? Many people locally would be supportive if you did.

Mike Bagshaw: We do not at the moment. The submission that we put in to the rail regulator for direct services to London followed a significant amount of work in securing additional paths through some congested parts of our network south of Birmingham and through to London. We were successful in securing those paths with Network Rail, but unfortunately the ORR did not grant us the right to run those services. The paths that we had secured are sadly no longer available, so it is not a realistic proposition for us to re-examine that.

Q79 Mr Williams: Please look at it again. It is a great part of the country, and it is designated by the Assembly Government as an area of strategic importance, yet we still have the spectacle of passengers crossing platforms at Birmingham International or Birmingham New Street, which is not acceptable.

Mike Bagshaw: Indeed. We recognise that, and if we could find available paths to get to London then we would, but unfortunately it is not looking like a reality in the short term.

Q80 Mr Williams: Mr Hopwood, I turn to your assessment of overcrowding on your services.

Mark Hopwood: We face similar challenges to those of other operators, in that we have seen more growth than was originally anticipated. If you put that into context, the route utilisation study that Network Rail published back in 2008 predicted passenger growth of 32% by 2019, but we have already seen, in the peak, growth of 41%. There has been a lot of growth.

In terms of what we have done about it, a number of the high-speed trains between south Wales and London are being strengthened from seven carriages to eight. The extra carriages are full standard class coaches, each with 84 extra seats. Those coaches have already entered service, and further vehicles are arriving this week. Indeed, the right hon. Member for Maidenhead is launching one on Friday in her constituency. They will be in use on the south Wales services as well.

As I said a few moments ago, we have also seen substantial growth on what we call our west services-the local network that we operate. To put that into context for you, if we were to operate the network from Cardiff, Bristol, Portsmouth and down to the west of England in the way that our franchise agreement originally described, we would need only 100 vehicles. Today, we are operating 145 vehicles on that network. That gives you a feel for the extent to which we have moved away from the original boundaries of the franchise agreement. I have to say that that was done with the support and the very considerable help of the Department for Transport, which helped us to put that package together. Those vehicles are making a real difference; the majority of services between Cardiff and Bristol in the morning and evening peaks are now extended to four or five coaches.

Q81 Mr Williams: It is difficult, and I appreciate the effort that you have gone to, but passengers boarding at Paddington are frustrated to find that there are no seats and they have to stand until Reading. That is the reality that many still experience. What hope can you give those customers? You have already gone beyond the bounds of the franchise.

Mark Hopwood: The package that I have spoken about adds 4,500 seats a day on the Paddington commute. That will clearly affect people travelling to south Wales, particularly in the evening when they are trying to get the same seats as people heading to Reading. Our colleagues from Network Rail will talk to you separately about some of the challenges of the infrastructure, but it is certainly true that every timetable path in the peak between Paddington and Reading is taken by a train. The infrastructure work that is going on around Reading will help, but at the moment the strategy has to be to try to get extra seats into existing services, which is why we have gone for strengthening the high-speed trains. Clearly, the Government’s plans to introduce intercity express trains in the future will allow for some more capacity on the route.

Q82 Chair: One of the things that surprised me when I heard it is that most services would not operate without some form of public subsidy. Am I correct in thinking that?

Mike Bagshaw: That is certainly correct.

Mark Hopwood: It is slightly different with our business; I think that our intercity network could operate commercially, but certainly not the local network of suburban trains.

Q83 Chair: You say that it could operate commercially, but that it does not at the moment-that it still requires some form of subsidy to maintain the level of services outside peak hours? Is that correct?

Mark Hopwood: The finances of our franchise are obviously amalgamated into an overall position. Of course, one has to take a view on the payments that Network Rail receives directly from the Government, but overall I think that we could operate an intercity network without Government support. However, certainly for a lot of the services that we are operating regionally, and for commuter services, we do need that support.

Q84 Chair: I know that it is a bit complicated and that it does not lend itself well to this format, but in very simple terms, how does the subsidy agreement work? Do the Government come along to you, Mr Bagshaw, and say, "We estimate that this number of passengers will want to go from A to B, and we will give you this subsidy"? If the number of passengers grows, does the subsidy not grow? How does it work?

Mike Bagshaw: At the beginning of our franchise, the subsidy was effectively set for 15 years. We bid for a level of subsidy competitively, and that was agreed for the duration of the franchise.

Q85 Chair: In other words, you say that you will do it for X, and if it is lower than the next operator, then you get it the franchise?

Mike Bagshaw: That is correct. The reality is that we bid at a level of subsidy for the number of passengers who are travelling at that time. We are now carrying 60% more people effectively for the same subsidy, and actually, that subsidy is declining.

Q86 Chair: So the subsidy is not per head?

Mike Bagshaw: No, it is a fixed level, but the risk on revenue and the risk on cost is taken by us, the operator.

Q87 Chair: In other words, you have no particular interest in increasing the number of coaches if the number of passengers grows. Your shareholders will say, "We’re not getting paid to put extra coaches on, so why should we do it?"

Mike Bagshaw: The cost of running a train far exceeds the amount of revenue that we would receive, even if the train was full. Our average fare at the moment is £3.60; it is a low average fare and, you are correct that it does not pay for the cost of operating a train, certainly not when you take into account the cost of leasing the rolling stock.

Q88 Chair: Mr Hopwood, is it pretty much the same for your trains?

Mark Hopwood: From the perspective of First Great Western-our franchise was let in 2005 and started in 2006-we had an obligation to bring extra capacity on to the railway at the start of the franchise, which we did. Since then, we have had regular dialogue with the DFT about varying the franchise to bring in additional capacity.

Q89 Chair: In other words, you would go back to them and say, "Look, there are lots of extra passengers here, so give us some more money and we will put on a coach."

Mark Hopwood: Some of the capacity is being funded by the DFT, but some of it has been funded by the business itself.

Q90 Jessica Morden: Like the Chair’s constituency, my constituency covers the area from which the massive commuter growth to Bristol has come, and I have the Severn tunnel in my patch. What are the lessons that we must learn from the current cross-border franchise operations?

Mark Hopwood: One of the things that we need to look at as an industry-not any particular part of it, but the industry as a whole-is how we predict growth and how we plan for it. There is some evidence that we are doing that more effectively.

Severn Tunnel Junction is a good example of how a station has developed quite quickly; it has become a commuting point for people to get to Bristol. Of course, there is another pretty unique factor in that part of the world, which is the presence of the Severn bridge, which very much distorts the rail-road costs, because the train fare is very good value compared to driving across the bridge and paying the toll. The growth that we have seen has been quite considerable, and Bristol is one of the fastest growing cities in the UK, despite some of the economic problems of recent years. We need to look quite carefully at how we manage that in future.

Mike Bagshaw: I agree. Future franchises need to make provision for growth. Ours does not; we are already operating 20% more trains more than our contract stipulates. If we were to run to the contract, we would simply be leaving passengers behind-but we are not doing that. I think that it is important, when franchises are let, that they take account of the passenger growth that is likely and also the investment needed to accommodate that growth.

Q91 Jessica Morden: With the extra capacity that you have put on, have those problems at Severn Tunnel Junction been alleviated? I am certainly still getting feedback on that.

Mark Hopwood: In terms of my services, I do not think that the problems have been completely alleviated, but things are much, much better than they were. We are certainly not leaving people behind, which is something that did happen two or three years ago. We are accommodating everyone on board the trains, but we are still seeing growth and not everybody gets a seat, so we would obviously like to continue to add to the capacity that is there today.

Mike Bagshaw: I think that the majority of passengers at Severn Tunnel Junction would find a seat on our services, certainly going towards Cardiff and towards Cheltenham, which is the route that we serve.

Q92 Jessica Morden: Evidence from Passenger Focus has highlighted a number of areas where customer satisfaction on services between England and Wales is low, particularly on value for money, the provision of information, and certainly on things like delays. What is being done to improve performance in those areas? How do you build in what passengers say to you, and how can you tailor your services to what they want?

Mike Bagshaw: We look at the national passenger survey results very carefully, and if any areas are well below where they should be, we look at how we can improve. For example, several years ago, we had poor scores on ticket-buying facilities; since then, we have invested in 15 new ticket machines across the network. We have also been investing in customer information at stations, and we now have a programme to put automatic customer information at all our stations over a long period. A lot of investment has gone into those areas, based on the results that we are seeing. We have invested in additional train cleaning staff, who travel on our trains to remove litter, following scores on cleanliness that were not where we wanted them to be. We have put in a lot of investment to address areas where satisfaction has not been at the level that we would like, or that our customers would like, and we have seen improvements in those areas where we have invested.

Q93 Chair: Is it not really the case, to be perfectly frank, that you are not really working for the customers, because they are not really paying you? You are actually working for the DFT or, to some extent, the Welsh Assembly Government, as they are the ones making these services happen. In a conventional business, my customer is the person who pays my bills. That is not the case for the railway passenger, is it?

Mike Bagshaw: Customer satisfaction is important to us. Our contract is let on the basis of improving train performance, which we have done, or improving customer satisfaction. Actually, if we can grow revenue, then we are incentivised to do that. If more people travel and we can find space for them, that is a commercial incentive for us, so it is very important that our customers are satisfied. It is also important that our clients, the Welsh Government and the Department for Transport, are satisfied with the work that we are doing.

Chair: I am unusual. With all the problems, I travel on both your trains, and they are quite good most of the time-with a few famous exceptions.

Q94 Mr Walker: One of the areas of low customer satisfaction has been connections with other services. Our predecessor Committee reported that it felt that the way in which the contracts were set up did not really encourage the train operating companies to deal with that problem effectively. Do you share that opinion?

Mike Bagshaw: Not really. The contract does not specify a lot about connections, but as an operator we work very closely with First Great Western to make sure that our services connect as well as they can with its services. We recognise that people making through journeys to London need to connect to the various parts of Wales. That is very important, but it is not always possible to get the perfect connection on every train. We have lots of constraints with infrastructure and the other connections that we need to make, but we regularly review the timetable to make sure that the connections are as good as they can be.

Q95 Mr Walker: Could you talk us through-I am happy to hear from you on that as well, Mark-the process when a connection is missed? Are there fines for the operator? Is there some form of compensation in place for one train operating company to work with another?

Mark Hopwood: I would endorse what Mike says. The train planning departments in the two businesses talk regularly to each other about making sure that the timetable works, and we also try to improve journey times by scheduling each other’s trains in appropriate places. For example, I was at Swansea recently and we had a slight delay on a train from London and we had passengers wanting to connect with the Arriva service to Fishguard; and we made sure, between the two businesses, that that connection worked. There are examples of it working well.

The issue with connections, as I see it, is not really anything to do with the fact that there are two different companies. I operate a number of services within First Great Western that provide connections from one First Great Western service to another, and we face the same dilemma there. Although the customers making the connection would very much like to see a train held, if we were to hold it, we would be delaying customers already on the train who may have their own connections further down the line. The train has a slot in the timetable and if it misses that it will often incur further delay, and if it arrives late, the return working will start late. Sometimes that very difficult decision means that we reluctantly choose to inconvenience some people now in order to protect the journeys of people further down the line and further on in the day. Obviously, when we do that we need to look after those customers, to make sure that they have the information that they need to continue their journeys. If we are looking at services towards the end of the day, we may arrange road transport if there are no connections available. Of course, we do not like doing that, but it is sometimes the best option to try to protect the journeys of the rest of the customers who are using the network.

Q96 Mr Walker: I have one more question on the subject of connections. I am aware of the campaign to get a connection to the Great Western main line from Heathrow. Would you comment generally on the connectivity between rail and airports? Obviously, our Committee has been looking into trade and investment for Wales. How important a role will the rail-to-airport link have in that?

Mark Hopwood: It is very important. We have struggled for a number of years with the dilemma that, although he is held in great esteem, Isambard Kingdom Brunel did not predict in 1835 that the world’s busiest international airport would be four miles south of his main line. It is frustrating for people that we pass so close to that airport but do not serve it. From the west, of course, there are links to London-the high-speed Heathrow Express and local services-but there is clearly a demand from people in the Thames valley, and particularly in places such as south Wales, to see a link developed.

Local authorities, some Members of Parliament, Network Rail, Heathrow and ourselves have been looking at the opportunity to build a railway from the terminal 5 station, which was luckily built with the foresight that this might happen, and to link it up with the Great Western main line. That would get you to Slough in seven minutes and Reading in 22 minutes, and then beyond to Bristol, south Wales and other places. It would clearly reduce the journey time into Heathrow, and we would obviously welcome that development. It is good to see Network Rail working to take that scheme to the first stage of appraisal.

In terms of other airports, the fastest-growing airport on our patch outside London-Heathrow and Gatwick-is Bristol. We carry people from south Wales into Bristol who connect into that airport. Currently, we provide a bus service from Bristol Temple Meads into the airport. The railway does not pass as close to Bristol airport as it passes to Heathrow, but in the very long term one can imagine that it would be possible to link Bristol airport into the railway network, but it would be quite an expensive piece of investment. In the short to medium term, the focus is on improving the connection. We are currently looking jointly with the airport at whether we can put an airport lounge into the station, with things such as airport departure screens and automatic check-in desks, so that people travelling from Cardiff and Newport to Bristol can, while waiting for the bus, experience the information and other facilities that will be available at the airport.

Q97 Jonathan Edwards: I have some more questions on infrastructure. When talking about links to airports, what consideration has been given to improving the rail links, or creating a rail link to Cardiff airport?

Mike Bagshaw: We currently run a service to Rhoose, which is close to Cardiff airport, and there is a connecting bus that takes you there. It is a fairly long route from Cardiff to the airport; it is not the most direct route. We are aware of various schemes to try to improve it, but they would all require significant investment in new lines.

Q98 Jonathan Edwards: What sort of figures are we talking about?

Mike Bagshaw: I am not party to the figures, but I know that it is something that has been looked at by people in the Welsh Government. Again, there is potential to encourage more people to travel by rail to Cardiff airport, but it would need significant investment. Whether that investment would be justified is a decision that people would need to review.

Q99 Jonathan Edwards: During our inquiry, the Committee has heard a lot about the need to improve infrastructure investment, with a particular focus on electrifying the western line. We have already touched on that today, but what do you think are the key infrastructure improvements that we need? Is electrification at Swansea a key investment that we need to pursue?

Mike Bagshaw: We have worked closely with the Welsh Government on the case for electrification of the Valleys and electrification to Swansea, and what that means in terms of rolling stock and performance. There are clearly efficiencies to be had with electric rolling stock. As we heard earlier, there is evidence of a spark effect and how you can generate extra demand, so we are very keen to work with the Welsh Government to develop those schemes and make them really successful.

Equally important is the capacity on the network. For example, we are making investment in Cardiff. The area resignalling scheme will provide the opportunity to put more trains into Cardiff and to provide better commuter services. That, together with electrification, should enable us to provide a much better service, certainly in the longer term, with potentially reduced journey times and reduced operating costs. In general, it is about capacity, but it is also about line speeds, not just on the line to London but elsewhere in Wales.

We are working with Network Rail and the Welsh Government to look at how to improve journey times between north and south Wales, and how we can get those fast trains to operate as well as the stopping services. One of the challenges is that you can run a fast train but if it catches up with a train in front that is stopping, it makes no difference. We are looking at things such as signalling and line speed improvements as well as high-profile projects such as electrification.

Q100 Jonathan Edwards: We have a high level output specification statement coming out soon, perhaps before we break for the summer. What more can be done in this short period to push the electrification project to Swansea?

Mike Bagshaw: A lot has already been done by the Welsh Government. We have certainly given our input, which is to identify the benefits that it can bring in the longer term. It is important to keep highlighting the growth that we have seen in south Wales, particularly on the Valleys network, and also between Cardiff and Swansea, where we have seen substantial growth. There is a lot of demand for rail, and it is about looking forward to the future to make sure that we have enough trains and enough capacity to provide for that demand, which is important to the Welsh economy. It is also important to encourage people to leave their cars behind and travel on the train.

Q101 Jonathan Edwards: What happens if the current plans are not amended? We were talking about the hybrid train switching to diesel when you get to Cardiff. Is there a difference in capacity and passenger numbers between fully electrified trains and these hybrid trains?

Mark Hopwood: Not because they are diesel or electric, no. The current design of the intercity express trains that are bi-mode is that they would have the diesel engine under the floor, so that does not affect the passenger-carrying capacity of the train.

Q102 Jonathan Edwards: The initial industry plan, which suggests projects for the period between 2014 and 2019, reported in September 2011, according to my notes. What input did you have as train operators into that service plan?

Mark Hopwood: First Great Western is represented on some of the groups that have worked on that, and the investment that we are already seeing on the Great Western, both in England and in Wales, is a really good start and we are keen to build on it. In particular, we have been looking at capacity around Bristol, where we think there is a need for additional capacity to help cope with the demand that is expected.

In fairness to Network Rail, a start has already been made. We have an additional platform in place at Severn Tunnel Junction, and a new track layout there is helping. The section of route that we use twice a day for our Carmarthen service from Swansea to Llanelli is to be double tracked in its entirety, with the section that is single track being developed this summer, which is good news. The resignalling scheme at Cardiff Central, which effectively improves a 1960s layout designed for a very different railway, will help capacity and give a much more flexible layout. The £850 million investment at Reading carries on into the next control period, delivering some benefits as well. If we add to that what we would like to see announced this summer, hopefully with some improvements around Bristol, there should be some real benefits.

Q103 Karen Lumley: I apologise for being late; I was in another Committee. You obviously work quite closely with the Welsh Assembly Government and the Department for Transport on cross-border services. Do you think that they share common goals on that aspect?

Mike Bagshaw: Certainly, the Welsh Government and the Department for Transport meet regularly between themselves, and meet regularly with us. We have a regular quarterly meeting at which we discuss the franchise. We share our business plan with both parties. Both Governments are aware of the challenges that we have in accommodating growth against the funding constraints that we have; and both Governments are supportive of our drive to do the right things in terms of improving performance and customer satisfaction, and in running an efficient rail network.

Mark Hopwood: I have not seen anything that would make me say anything different from Mike. There is clearly evidence that the organisations do talk to each other. Our franchise agreement is managed through the DFT in London, but we do meet the Welsh Assembly Government regularly to talk about transport matters around our franchise. We feel that the arrangements work reasonably well.

Chair: Thank you both very much. Thank you for coming here this morning. We really appreciate it.

Examination of Witnesses

Witnesses: Mark Langman, Route Managing Director, Wales Route, Network Rail, and Dylan Bowen, Public Affairs Manager, Network Rail, gave evidence.

Chair: Good morning, Mr Langman and Mr Bowen. Thank you both very much for coming here this morning. I ask Jessica Morden to begin.

Q104 Jessica Morden: Network Rail has recently opened the Wales route. Would you start by explaining its significance, and what changes it has brought about for operations?

Mark Langman: Good morning, everyone. It is good to be here, and thanks for the invite.

Yes, you are right; it was a really significant event, which occurred on 14 November last year. It was the first time that the infrastructure for Wales, as an entirety, had been devolved to Cardiff, in terms of decision making and funding. All decisions about investment, renewals and maintenance, about how we operate the railway, and about the local relationships between the Welsh Government and the train operators are now made in Cardiff, for the first time in the history of the railway.

Q105 Jessica Morden: On the budget that you inherited from other parts of Network Rail, have you had enough to do what needs to be done since you opened the Wales route?

Mark Langman: I was appointed to this role in August last year, so I had the benefit of making sure that I got a fair share of the pot for the new devolved route. Our annual expenditure, I am happy to tell you, for operations and maintenance-the daily operation, paying our people, and operating and maintaining the network-is around £70 million a year. On renewals of the infrastructure, when it becomes due for renewal and enhancement, in the current year we are spending around £200 million.

What outputs does that translate into, and what does that give us? Let us look at our key measures, which are our regulatory outputs as set by the ORR-track condition, for example is something that we are measured on; we are funded to do it, and we have an output that we have to meet. In fact, Wales’s figures for track geometry, the condition of the track and our signalling and how it operates, are far outperforming both the England and Scotland figures. We are adequately funded for that, certainly, and you could argue perhaps that we are over-maintaining it, but that is a good position to be in because it makes things more reliable.

What does that translate into? It translates into a safe railway-we have really good safety figures-and, more importantly, a reliable and punctual railway. Mike did not mention earlier that the Arriva franchise is currently running at around 94% PPM-public performance measures-on average punctuality compared to the national average of about 91.6%. Yes, we are adequately funded in terms of maintaining the infrastructure in a state to deliver the train service.

Q106 Jessica Morden: With the Welsh route, to whom are you accountable? How does the balance work out between the Welsh Assembly Government and the train operating companies-your customers?

Mark Langman: We are devolved within Network Rail. I still report, as one of 10 route managing directors, to the centre of Network Rail, to Robin Gisby, the national director of operations, who is my boss, and to the chief executive. The funding for Network Rail in the current control period-CP4-comes from the DFT via the ORR. That is an England and Wales settlement, and the Wales settlement that I have mentioned already comes out of that.

Our relationship with the Welsh Government is a good one. We have always had a good relationship, and they have been big supporters of rail. They have discretionary powers to fund enhancement schemes in Wales, but they do not directly fund us for day-to-day operation, maintenance or renewal.

Dylan Bowen: It is fair to say that we recognise how much they are willing to invest in rail over the years. We encourage engagement with them. At the route launch, we had the First Minister along to help us, and we went to the Senedd, and had a big event down there just to make ourselves better known. We have a good formal meeting schedule with Ministers and officials at all levels.

Q107 Jessica Morden: Does the Wales route make it easier or harder for funders to make the case for investment in rail improvements in Wales?

Mark Langman: I think that it makes it easier. One of the things that I went out of my way to do on the build-up to the launch of the new route was to get out and meet stakeholders-not just the Welsh Government and the train operators but local authorities and key business groups such as the CBI and chambers of commerce in south Wales. First, I briefed them about the changes that are happening, and tried to convince them that it was not a faceless organisation so huge that you just do not know where to start, when you want to talk to us: there is now a door open to us. That makes it easier for private investors and other potential investors, whether Government or local authorities, to talk to us in the early stages. We are out there selling the message that we believe that capacity is available on the railway, particularly in south Wales-including for freight, which we may talk about later-and that we can now look to working with them to develop these cases much earlier on.

Q108 Jonathan Edwards: The high level output specification report is out this summer. What are the key improvements in the Welsh context that you would like to see included in this statement?

Mark Langman: We have put our bid together, as you mentioned already, in the initial industry plan that we were involved in developing. That initial industry plan was developed before the concept of the Wales route was formed, so things have moved on since then. We are now working with figures that the initial industry plan thought would be required for the railway in Wales. The good news for us, now that we have local attention and local focus on the infrastructure, is that we can look closely at what is going on with the railway in Wales rather than at the broader England and Wales settlement. We can probably squeeze more value out of that.

We are looking locally at line speed improvements and bringing forward some of the resignalling schemes that we have planned for later, beyond CP5 and into CP6. We are really looking, now that we are a focused Wales group, at how to modernise the network to improve capacity through line-speed improvements and resignalling. Separately to that, there are the enhancements, about which you have said a lot already, that include electrification of the Valley Lines and potentially to Swansea. Accessibility at stations is a big thing for us, and we had a lot of funding for that during CP4 to improve it. As you rightly say, we are hoping for an announcement in the next few weeks.

Q109 Jonathan Edwards: How confident are you that electrification of Swansea, the Valleys and even maybe the north Wales coastal line will be included in CP5?

Mark Langman: We have worked really closely with the Welsh Government to help them make the business case. It is broadly agreed that there is a good business case for both the Valley Lines and the Swansea electrification, but that is in the melting pot with lots of other schemes across the UK that also have good business cases. The lobbying that has been done in south Wales on electrification for the Swansea and Valley lines has been excellent. I have taken the opportunity to meet stakeholders and some of those business leaders that I have already talked about, to make sure that they fully understand the business case for electrification and what benefits electrification could bring in order to help with that lobbying.

Q110 Jonathan Edwards: To change the subject a bit, our predecessor Committee found that there needed to be close working relationships between the Welsh Government and the DFT in terms of cross-border services. How do you interact with both Governments?

Mark Langman: We interact with the DFT more at the level of specific projects. You have already heard about the Cardiff area resignalling scheme, which is just kicking off, and we recently completed the Newport area resignalling scheme; and, of course, we receive our HLOS settlement for the ops, maintenance and renewal of the railway from the DFT, so we have that interaction. With the Welsh Government, I now meet civil servants and the Minister once a month, and we look at enhancements and additional funding. We have a good relationship with them.

Q111 Jonathan Edwards: Are there any joint meetings between both Governments and yourself?

Dylan Bowen: We sit on what is called the cross-border forum, which is a forum with the Welsh Government, the DFT and the border counties. That meets a couple of times a year, and we go to report and then take any questions from the local authorities in those areas and from the DFT and the Welsh Government.

Q112 Jonathan Edwards: Do you think that Welsh rail and cross-border services get their fair share of funding in a British state context?

Mark Langman: It is probably worth explaining, and putting some context around this. Parts of the Wales route are in England; that is the route from Newport up through Hereford and Shrewsbury to Chester. We made a deliberate case to have that included, because we believed that the route would benefit more from being part of the Wales route, as the key north-south link, than it would do if it was at the end of a line from London, where all the investment might go to the London end of the route. That has proven to be the case. If you look at the investment that we are making at the moment, in Hereford and Leominster and so on, and at some of the money that has gone into Shrewsbury area, that has proven to be the case. In the context of the UK, I guess that it is all about economics, where people live and the amount of population that there is to serve. There are about 3 million people in Wales, with 1.9 million around the Cardiff city region if you include Newport and Swansea. The investment is going into the right place, with Cardiff renewals for instance.

Q113 Chair: Mr Langman, what do you think the impact of High Speed 2 will be on Welsh routes?

Mark Langman: At its broadest level, any speeding up of the journey between London and Birmingham, as it will be in the initial stage, will be beneficial to both mid-Wales and north Wales. Any improvement in journey time to get you to that link will help, albeit that you will be changing trains at Birmingham. As we heard, you do that today. If you can get to Birmingham quicker, that will be an improvement in overall journey time.

Q114 Chair: It is an improvement, but it comes at quite a cost. I understand that it costs about £130 million a mile to build High Speed 2. Is that roughly correct?

Mark Langman: I shall take your word on that; I do not have that figure in front of me.

Q115 Chair: Okay, my clever researchers tell me that. They also tell me that it costs about £30 million a mile to build a dual carriageway, but that is obviously not something that you have to worry about. Broadly speaking, High Speed 2 is going to cost 10 times as much to build as a dual carriageway. Do you think that the business case can be justified?

Mark Langman: You need to look at the context in which it is being built. A lot of people have got hung up on the high-speed element, but the reason why we need High Speed 2 is that there is a capacity issue between London and the midlands, the north-west of England and north Wales. We cannot run any more trains on that route. We have done everything possible. It is only recently that we completed an £8 billion scheme to improve the west coast main line, and we are now running that at full capacity. There isn’t anything else that we can do. That is primarily driving the case for a second line; it is to release capacity on that classic route. High speed is a great thing. It will speed up journey times, and if you are going to build a new railway you want to build it for high speed.

Q116 Chair: Indeed, but I am now getting some interesting looks from other members of the Committee, who may want to come in on that.

Karen Lumley: You are.

Chair: Just to be clear, is it going to be commercially viable? We have just heard that most of the railway routes that we are interested in require a Government subsidy in order to operate. This may be outside your immediate expertise, but can we be certain that High Speed 2 would be run on a commercially viable basis?

Mark Langman: I have to be honest: I do not know the answer. It really is outside my scope.

Chair: I am more than happy to have any other contributions from other members of the Committee who have something they want to ask on this subject. If not, I shall call Mark Williams.

Q117 Mr Williams: Network Rail’s written evidence states that rail freight demand is expected to increase by 140% in the next 30 years. What consideration have you given to the importance of rail freight between England and Wales? What efforts are you taking to ensure that freight matters are incorporated into Network Rail’s plans for the future?

Mark Langman: That is tremendously important to us. Already, with existing freight flows, it is one of the biggest freight flows in the UK, particularly on the south Wales main line between the steel works at Port Talbot, Llanwern and up to Shotton. For us, it is a big player, and it is really important to me.

As I said earlier, there is capacity still available for us to run more freight in south Wales. We are anticipating some growth. In fact, we have recently seen the start of a new train between Daventry in the midlands and Cardiff-a daily train that is run on behalf of Tesco, which is bringing dry goods down to south Wales on a daily basis. There is lots of capacity there, and one of the arguments that we have been making when we have gone out to meet stakeholders, particularly businesses, is that there is room on the south Wales main line, and indeed elsewhere on the railway in Wales, to put more freight traffic on rail. It has been out of fashion, particularly since British Rail wound down its freight operations, as being just a bit too inconvenient and expensive to operate. The message that I have been giving to business leaders is that it is time to relook at freight on rail, particularly with medium distances of more than 200 miles.

Q118 Mr Williams: What do you perceive as being the main barriers to that development? We received evidence from the Rail Freight Group, which is in "railspeak". It said that container gauge clearance improvements were the key to the development of intermodal cross-border freight services. Is that a big problem? If so, how is it being addressed?

Mark Langman: That is W10 gauge. That enables you to run the new, larger-style containers that you see on the huge lorries that you see on the motorway and on the railway. There is a W10 gauge enhancement project across the UK, but it has not touched us yet in Wales. The good news is that on the roll-out of electrification between London and Cardiff we will get W10 gauge through the Severn tunnel and as far as Cardiff. The Cardiff freightliner terminal at Wentloog will be able to handle those W10 containers.

Q119 Nia Griffith: May I ask a question about the Loughor bridge? We understand that you are about to undertake repairs in order to restore the dual track and also to allow heavy freight to use the bridge. As it is a Brunel structure, I understand that you are having to dismantle it. Will you confirm that, when going ahead with these improvements, you will be making a display or exhibition of parts of the original structure, which the public will be able to see?

Mark Langman: You are right. That project is costing about £21 million, as we are not only replacing the Loughor viaduct-it replaces it, not repairs it-but redoubling the line between Swansea and Llanelli and putting a new platform in at Gowerton, which relieves one of the biggest bottlenecks we have in south Wales. It is a great project. As for the bridge itself, the piers that Brunel built are the only part of the current structure that is original. It was actually rebuilt in 1905, and we are replacing the structure in a way that leaves the original piers in place. We will leave them behind; we are not going to build on them or over them. Our new structure will be completely independent of them.

Q120 Guto Bebb: May I take you back to the question of freight and the fact that you anticipate an increase of 140%? Would that be based mainly in south Wales, or do you see opportunities for north Wales?

Mark Langman: There is potential anywhere in Wales, as I have said already, but the demand needs to be there. For instance, it is some years since we lost the freight flow along the north Wales coast to Holyhead, but I saw an announcement earlier this week about the growth of the freight terminal there. As for whether there is potential there commercially, the freight operators and the Rail Freight Group will want to have a look it, I am sure, but the capacity of the railway infrastructure to run the trains is available.

Q121 Guto Bebb: I question that, because one of the key private sector initiatives for rail freight is the idea of transporting slate waste from Blaenau Ffestiniog using the Conwy Valley railway. My understanding is that the Conwy Valley line should be kept to the standard of route availability RA7, but a report on that scheme stated that, because the railway line in Conwy valley could not be maintained to RA7 levels, the plan for a slate waste terminal in Blaenau Ffestiniog was not viable. Would you care to comment on that?

Mark Langman: In terms of route availability, the infrastructure, even at RA7, was not capable of operating those trains. It would need a major upgrade, which made it commercially difficult to start that service without significant capital investment in the line itself. Several structures along that route would require an upgrade to handle the weight of the trains.

Q122 Mr Walker: Going back to evidence that we heard from the Rail Freight Group, we know that there is a Wales Freight Group, but that it has not met for a number of years. Network Rail would obviously be a member of that. Do you know why it has not met, and is there anything that you can do to get it going again?

Mark Langman: I am certainly aware of the group. It last met about two years ago, but I do not know why it has not met since. We are not chair of the group; I believe that the chair is the Welsh Government. We would happily go to those meetings. As you have heard, I am an advocate of rail freight and I believe that there is capacity available, so the more we talk about it, the more likely it is to happen.

Q123 Mr Walker: Would you encourage the Welsh Government to convene that group?

Mark Langman: I would have expected the invite to come from them.

Q124 Chair: We are used to not being invited-but I won’t go there.

I want to raise another issue, which is the whole nature of rail freight. Putting it in simple terms, in the old days you would have had vast amounts of coal, lead or whatever, and it made sense to build sidings and send it by rail, but these days the growth in freight is actually with road companies, and not even those with big lorries but those with small vans-the DHL and Palletline vans that transport small amounts from door to door. Does not the switch to just-in-time logistics systems mean that the old-fashioned idea of sending hundreds of tonnes by rail belongs to the last century?

Mark Langman: I agree and disagree. It depends on the flow. Where we have seen growth and success in the rail freight market in the past few years and currently is through bulk hauls between major hubs. I talked earlier about the daily train between Daventry and Cardiff Wentloog freightliner terminal for Tesco. That is a distance of about 200 or 250 miles. It is economically viable and it takes about 40 lorries off the road. You then use those two terminals as the hubs for the local lorry deliveries. It is bulk over a certain distance that makes it economically viable. I agree with you that having a yard at every single station, with a few wagons dropping off goods here, there and everywhere, is not economically viable. Indeed, that is the reason why British Rail closed that network.

Dylan Bowen: We have seen growth of about 46% in the transportation of consumer goods over the last six years, so the market is growing. We compete pretty well with the roads. We are reliable and cost-effective; it is an area where we see important growth going forward.

Q125 Guto Bebb: Going back to the Conwy Valley line, is it currently maintained to the RA7 level, as it is supposed to be?

Mark Langman: Yes. We are regulated to maintain the network at the start of each control period, and are funded to do so.

Q126 Guto Bebb: You would say that the line has been maintained to that standard?

Mark Langman: Yes, I have no reason to believe that it is not.

Q127 Guto Bebb: What would be the challenges of using it for the transport of freight, whether it was slate waste or commercial waste? Another proposal envisaged by councils across north Wales is to use the rail service to transport commercial waste. Would that be possible with the RA7 level, or would you require an upgrade to the line?

Mark Langman: I do not have the detail to know the possibilities in terms of the weight of the trains when they run, but I know that we would have to upgrade several of the structures to handle that weight. Then, of course, you have to factor in the capital cost of the upgrade into the commercial viability of the scheme in the first place-where is the waste going and over what distance? If it is over a particular distance, as I said, with a bulk flow, that might be viable. If it is a lesser distance, perhaps somewhere else in north Wales, it is probably better keeping it on a lorry.

Q128 Guto Bebb: I have a final question on north Wales-I am being parochial on this. Can you give me any feedback on the position with regard to the signalling system on the north Wales coast main line? My understanding is that the main line is of a very high standard, but that its use is restricted by the signalling system currently in operation. Is that the case?

Mark Langman: We maintain the network, as I mentioned, and we have above UK average levels on the availability and service ability of the network. However, there is no doubt that the signalling along the north Wales coast-and, to be honest, across many other parts of Wales-is old. Most of it predates 1900, particularly on the north Wales coast, and part of our CP5 plan, the initial industry plan for 2014 to 2019, would see the vast majority of that resignalled and replaced with modern equipment.

Q129 Guto Bebb: Would replacement of the signals result in the ability to run trains on a more frequent basis?

Mark Langman: Yes. We are at the feasibility stage at the moment, and I do not know what the outcome will tell us, but we are obviously taking the opportunity, where we can, to make sure that we have the infrastructure in the right place to run the maximum number of trains that we can at the highest speed.

Q130 Karen Lumley: Comments on value for money suggest that efficiency needs to be improved. How do you see that happening in Wales?

Mark Langman: I talked about the funding level that we had, and I fought to make sure that we had our fair share of the funding in Wales. We are already seeing some very early demonstrations of that. There is a good example, if I may indulge for a second. We reopened the station at Fishguard and Goodwick in Pembrokeshire. We worked with Pembrokeshire county council and, initially, we were quoting, prior to devolution, a significant six-figure sum for the works that Network Rail would deliver. The project would have to go through several layers of Network Rail bureaucracy at our headquarters to get approval, and we would employ a third-party contractor to do the work. As you can see, lots of costs were being added in.

We came along, we looked at the scheme-it was something that I was quite passionate about, and I know that other train operators were-and we were able to get the approval process down to a single meeting with my own investment panel in Wales. We held the budget; by doing the work ourselves, we got the figure down to a reasonable five-figure sum, and we delivered that scheme. The money that had been allocated by Pembrokeshire county council went much further, and delivered a much better station building, because we reduced our costs. That local focus demonstrated that we can make the money go further and then reinvest what we have left from our existing settlements to do more.

Q131 Nia Griffith: You talked about the possibility of some sort of alliance of train operators, but you are not going to have any further ones apart from the Wessex and South West train companies in this particular control period. For the future, perhaps, would there be a possibility, particularly in respect of the Wales franchise and the Wales route, to do something similar? Is it a future option?

Mark Langman: Yes, you are right in that the alliance that we set up with South West Trains and the Wessex route-my colleagues there say that we are going to see how it goes-is what is known as a deep alliance. There is a single management structure, which enables the train operator and Network Rail colleagues to work together and see each other’s issues in terms of delivering the railway, and we should see efficiency come out of that.

In Wales, we are not sitting on our hands. We have had very close and really fruitful discussions with Arriva Trains Wales on working more collaboratively, now that we have a more devolved route that is aligned to its franchise. At the moment, we do not think that entering into an alliance on a contractual basis will mean that we get anything more out of our current discussions. We think that by working more collaboratively on certain subjects-for instance, improving train performance, how we manage possessions and keeping people off buses at weekends, which we are working on now-will certainly deliver all the benefits that we would like to see in the early days. Is there potential in the future? Yes, there may well be, particularly around the franchise change.

Chair: Good. If there are no further questions, then I formally draw this meeting to a close. Thank you both very much for coming along today.

Prepared 21st November 2012