Examination of Witnesses (Questions 9680
- 9699)
9680. CHAIRMAN: It is clearly before
the Committee anyway.
9681. MR GEORGE: The second issue we
raise concerns compensation for financial loss during the construction
of Crossrail. Can I make plain two points at the outset? First,
this has nothing whatever to do with compensation for the loss
of land and the delights of Lands Tribunal disputes with which
the Lord Chairman will be only too familiar from the past; this
is a different form of compensation. Secondly, it is losses during
construction—we are not concerned with losses incurred by
railway interests during the operation of Crossrail.
9682. We are concerned about the financial loss
which will be incurred by operating companies caused by the work,
and, in particular, by temporary speed restrictions and weight
restrictions and gauge restrictions which will be imposed during
the construction of Crossrail—necessary measures but measures
for which there will be no compensation payable to EWS or other
railway operators unless your Lordships' House intervenes.
9683. My second witness, Mr Nigel Oatway, has
unparalleled experience of the operation of what is known as the
Network Code, with which I am sure your Lordships are becoming
familiar and with which it would be unfair to expect your Lordships
to have total familiarity. That is the financial mechanism that
generally operates between railway operators. As he will explain,
the standard procedures provide for certain circumstances in which
no compensation is payable. But those procedures were never intended
to address the construction of a new railway and railway work
of the sort which will be involved in the construction of Crossrail.
It is very seldom, indeed, as the Committee will be aware, that
we have new railways in this country, and one would expect there
to be special provision made to ensure that all losses lie with
the Promoters rather than some of them being picked up by the
railway operators.
9684. In particular, we understood that it was
the philosophy of the Promoters to have a compensation system
of "no gain, no loss" and therefore if we did suffer
losses we should be compensated. In most recent examples of the
construction of new lines special provision has been made so that
the Promoter of the new railway works pays full compensation—no
more, no less—for loss in these circumstances. That is what
happened in connection with the CTRL and it is what happened in
connection with the East London Line.
9685. If I could ask for there to be put on
the screen EWS 33, your Lordships heard earlier today a mention
of the East London Line extension. It was constructed not under
a Bill but under delegated legislation, namely a Transport &
Works Order, promoted by London Underground. Its construction
might well cause losses to railway operators and therefore the
Transport & Works Order, which is the equivalent of the Bill
for a railway work to go through Parliament, contains in Article
19 of the Order, a provision, which is page 4 of our bundle.[53]
The first page of EWS 33 introduces what it is and at page 4,
Article 19, one has a provision governing the payment of compensation.
That is contained within Schedule 11, paragraph 19, and then that
takes us back to, on page 2, clause 1 of Schedule 11, which has
the definition of relevant costs, and the specific works and train
operator. It is unnecessary for your Lordships to familiarise
yourselves overmuch with the particular mechanism here, but I
can assure your Lordships that it was included at the request
of railway operators to make sure that they were fully compensated
for their losses which were likely to be incurred as a result
of the construction of the East London Line extension.
9686. What we are seeking is that the Promoters
bring forward measures to ensure that there are not uncompensated
losses suffered by railway operators, including ourselves. The
detailed background to this matter is set out in EWS-31, but I
am going to leave that to Mr Oatway to explain a little bit later
this afternoon or tomorrow. That is the principal matter we raise
under this heading of compensation for financial loss.
9687. There is also an issue concerning what
is known as Condition G9 of the Network Code and details of that
are contained in EWS-27. Again, I will leave it to Mr Oatway to
explain the detail of that point. I believe there is very little
between ourselves and the Promoters on that matter and I am hopeful
that some reassuring words from Mr Elvin at an appropriate moment
may satisfy Mr Oatway on that particular score. That is the second
heading which is the question of compensation for losses incurred,
financial loss during construction.
9688. The third matter is the matter upon which
I cross-examined on day 21 and the matter upon which the Committee
heard some evidence from others yesterday and that is the question
of the freight infrastructure works. The arguments here are becoming
familiar and your Lordships will recall Mr Elvin's somewhat polemical
submission to your Lordships delivered yesterday afternoon. At
the time I noticed that he categorised the stance of my clients
as ridiculous, which is strong language indeed. I leave aside
whether that be or not be offensive. My witness, Mr Smith, will
explain precisely what he is seeking and why, and will probably
be cross-examined on rather the same lines as several witnesses
from the Rail Freight Group were cross-examined yesterday.
9689. First, I identify to the Committee exactly
what it is that we are seeking. The undertaking which we would
seek appears in tab 26. It is as well that your Lordships know
exactly what we are seeking. If tab 26 could go up on the screen.[54]
It is that before Crossrail services be allowed to run on the
Great Western Main Line, the Promoter be required to construct
the following works set out in Schedule 1 to the Crossrail Bill
and then the numbered works are given and also the track modification
that the Environmental Statement states at paragraph 9.21.8 will
be undertaken. In due course Mr Smith will explain those particular
works.
9690. I just want to correct, if I may, though,
five what appear to us to be either misrepresentations or misunderstandings,
to use kinder language, in Mr Elvin's submission to your Lordships
yesterday afternoon. First of all, EWS is not seeking in any way
to " ... override the industry regulator ... ", those
were the words he used in paragraph 30 of his submission yesterday.
Not content with that, he repeated it in paragraph 33 and in paragraph
34, sub-section 5 "It was entirely for the ORR whether he,
the ORR, sought guarantees of particular infrastructure provision.
He chose not to do so and EWS accepts that the ORR's output measure
is a useful control", but what we say is that if the Promoters
give the undertakings we seek, the output measure will still be
needed. We are seeking additionality and those undertakings will
not in any way interfere with the ORR's jurisdiction.
9691. CHAIRMAN: Those works are inputs,
are they not?
9692. MR GEORGE: They are at present
inputs to his outputs and what we say is that they will simply
achieve certainty at an earlier stage for everyone, but no question
of us seeking to override the ORR's jurisdiction.
9693. Secondly, it is Mr Elvin's case that if
Crossrail cannot meet the output measure they will necessarily
lose their track access option rights. What is significant about
the ORR's wording in the final sentence of paragraph 80 of his
decision is that what he said is: "Crossrail rights could
be lost from the track access option". He did not say they
would be lost. This is because the ORR might decide that Crossrail
should keep all its rights and either operate at a lower public
performance measure than 92 per cent or Crossrail might be enabled
to achieve 92 per cent PPM by a reduction in the paths allowed
to other freight and passenger operators beneath that assumed
in the track access option.
9694. That this is possible appears from three
answers to questions given by Mr Berryman on day 21. I am going
to ask if those could be put on the screen. The first is paragraph
8187. One can see there the question which I asked him at 8187,
"If, at the end of the day, the 92 PPM figure cannot be achieved
then the rail regulator will have to make a decision as to whether
actually he cuts down further on the paths for Crossrail or whether
he cuts down on the paths for everyone else. Is that not right?
That is, if the situation were to be reached". Mr Berryman,
"Yes, that is correct, broadly speaking ".[55]
9695. If I could then ask that there be put
up paragraph 8201 at page 29, which was dealing with the answer
to a question from Lord Young to Mr Berryman, the question at
the end of 8201: "I am now trying to address Mr George's
concerns who said, well, if you did not, are there any circumstances
where EWS would be disadvantaged as a result of that?" The
answer, "Yes, my Lord, if we did not do some of the works
it is possible that EWS and/or the freight operators would be
disadvantaged".[56]
He went on then to say why he thought the reliance could be placed
on the ORR, but he was accepting that there could be a circumstance
in which freight operators would be disadvantaged.
9696. The third passage is 8236, please, at
page 34 in answer to a question from a Lord Snape.[57]
I have just made the point in 8235 about the danger that freight
paths be taken away, Lord Snape says: "That, Mr Berryman,
if I can turn to you, is not an unreasonable fear surely? Given
your experience of these projects, is not the temptation likely
to be in the event of any budgetary overrun let us chop something
to do with the freight side because it is neither as apparent
nor as controversial as reducing something on the passenger side?"
Mr Berryman, "That certainly was my experience on the West
Coast Mainline".
9697. MR ELVIN: I am afraid, Mr George
is looking at the uncorrected transcript, there was a "not"
which is fairly critical, omitted from Mr Berryman's answer.
9698. LORD SNAPE: I thought that is what
he said. That is my recall of the incident.
9699. MR GEORGE: I am quite positive,
my recollection of what he said was that certainly was my experience
on the West Coast Main Line and that is why Lord Snape said, "We
have all learnt a few lessons from that". If corrections
are made to the transcript, it is always my understanding that
other parties were consulted in advance. I was given no notification
of this correction and, in any submission, it is simply a miscorrection.
I am glad to say that I think the Tribunal of your Lordships—
53 Committee Ref: A57, The London Underground (East
London Line Extension) (No. 2) Order 2001 (SI 2001/3682) (SCN-20080430-053
and-054) Back
54
Committee Ref: A57, Undetaking in relation to key railway infrastructure
works (SCN-20080430-055) Back
55
Para 8187, Uncorrected Transcript, 22 April 2008 [Mr George QC;
Mr Berryman] Back
56
Para 8201, Uncorrected Transcript, 22 April 2008 [Lord Young
of Norwood Green; Mr Berryman] Back
57
Para 8236, Uncorrected Transcript, 22 April 2008 [Lord Snape;
Mr Berryman] Back
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