Delivering a Sustainable Railway: A 30-year Strategy for the Railways? (HC 219-iv) Transport Committee 5 Mar 2008

Evidence given by
2.45 p.m. Office of Rail Regulation (ORR) Chris Bolt, Chairman Bill Emery, Chief Executive Michael Lee, Director, Access, Planning and Performance
3.20 p.m. Passenger Focus Colin Foxall, Chairman London TravelWatch Brian Cooke, Chairman Unite - The National Federation of Royal Mail and BT Pensioners Roger Turner, General Secretary The Guide Dogs for the Blind Association and the Joint Committee on Mobility of Blind and Partially Sighted People Sue Sharp, Head of Public Policy and Campaigns at The Guide Dogs for the Blind Association
4.05 p.m. Campaign for Better Transport Stephen Joseph, Executive Director Transport-Watch Paul Withrington, Director Jim Russell Sustrans Don Mathew, Policy Adviser, Sustrans Martin Bright, Rail Liaison Officer

Q539 Mr. David Clelland: I just want to come back to the point which was being made earlier about who feels the pain when a fine is imposed on Network Rail. Mr Bolt seemed to want to avoid the obvious answer and said something about how it might affect end-of-year bonuses. I assume he is talking about bonuses to directors and senior management. Who is it who decides whether bonuses will be paid and what the level of those bonuses will be? Does your office have any influence over that whatsoever?

Mr Bolt: The decisions are taken by Network Rail's remuneration committee. The management incentive plan which they operate has to meet certain criteria which are set out in the licence, including reflecting regulatory targets. So that has got to be a key part of what determines bonuses. We do not get involved in taking the decisions, but we do draw the attention of the remuneration committee, we write to the chairman of the remuneration committee every year and meet him to set out our view of Network Rail's performance, and clearly where there have been licence breaches - and we have said there has been a serious licence breach on this occasion - that is a factor we will make very clear to the remuneration committee and we expect them to take account of that.

Q540 Mr. David Clelland: So we will all just have to wait with bated breath to see just how seriously Network Rail takes this problem?

Mr Bolt: We believe they will take it seriously. I am not going to predict what effect that will have on bonuses, but I would expect a serious breach of licence to have an impact on the bonuses paid to Network Rail's senior managers.

Q541 Clive Efford: Just to follow on, on that, because I think anybody listening to you would be astonished that there is an assumption that there will be bonuses. Can you explain just how this process works and, if you know the criteria by which their bonuses are set, whether they have already breached it so far that you can be confident there will not be any, because I do not think the public is going to accept that?

Mr Bolt: I think what we have to recognise is that Network Rail is outperforming some of the regulatory targets. The target for delays on the railway, which was set at the last charges review in 2003, Network Rail is outperforming that, and within the management incentive plan that would point towards a certain level of bonus. Where there has been a serious licence breach, we would expect that to result in a reduction, a significant reduction, in the bonuses which would otherwise be payable, but the precise decision is for the remuneration committee.

Q542 Mr. David Clelland: But how do we know what the bonuses were in the first place to know whether they have been considerably reduced?

Mr Bolt: I think there are questions about the transparency of that process, and that may be one of the issues which we want to pursue as part of the review of the licence conditions relating to governance which I referred to earlier.

Chairman: It may very well be one of the things we shall encourage you to review, Mr Bolt!

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Q553 Mr. David Clelland: Gentlemen, your office welcomed the longer term strategy for the railways which was contained in the White Paper, but do you think this White Paper is visionary enough? It takes a long time to plan and build rail infrastructure. Does the White Paper provide the kind of long-term vision which will be necessary to develop a railway fit for the middle of the twenty-first century?

Mr Bolt: The White Paper, for example, talks about a possible doubling of the number of passengers over the next 30 years and says "but the growth may be more". I think what we do not have at the moment is a clear view of how that sort of increase in passenger numbers could most effectively be handled. What we are expecting - and this is a point we reflected in our evidence and which we have discussed with both Network Rail and the chief executives of the franchise-owning groups - is how the industry can look at those challenges, and that is Network Rail with operators representing the interests of passengers with the supply industry running stock companies and others, to come up with its own plan which can be delivered so that for the next five year period the next time the Government produces a high level output specification it is doing that on the basis of a proposal from the industry as to what is achievable, and then it can take the view about whether it wants to spend money on railways to deliver that capacity or some other mode. That, I think, is the right role of Government. It is not for Government to say what should be done in detail. The industry needs to take more responsibility. There is not enough detail there at the moment. The industry is starting to work on issues like infill electrification and it is entirely right that they should take the lead and put proposals to Government of that sort.

Q554 Mr. David Clelland: But should ministers, who are responsible for drawing up these White Papers, not be more proactive in shaping developments rather than just reacting to them?

Mr Bolt: It is the role of ministers of government to set out the strategy. It is not, in our view, the role of a government department to say what investment should be carried out to deliver that sort of strategy. That is what the industry needs to come together and propose, and we have not yet had an industry plan for the longer term. Network Rail's plan for the next five years is, for the first time, more of an industry plan. We required them to work closely with train operators to validate the proposals there, so it is not just an engineering plan. We need to extend that looking at the longer term.

Q555 Mr. David Clelland: Is Network Rail best placed to be innovative and come up with exciting new ideas, or are they just managing what they have got?

Mr Bolt: What is clearly important is, as you say, that there are new ideas which are looked at as part of that longer term planning. We have certainly taken a review as part of this price-setting round on some of the things which are done elsewhere in the world which allow railways to operate more efficiently which Network Rail could adopt. Network Rail itself, working with its train operator partners, with the supply industry, are best placed to -

Q556 Chairman: Mr Bolt, I am going to stop you there, because I am going to ask some quick questions and then, with any luck, we will allow you to escape.

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Q599 Mr. David Clelland: Do you think the White Paper provides the kind of long-term vision necessary to develop rail infrastructure which would be suitable for the middle of the twenty-first century?

Mr Cooke: I think the simple answer to that question is, no. The vision talks about it being a vision for 30 years, but in fact there is very little in the White Paper beyond the next control period or looking at the control period after that. We believe, and in fact in some of the responses we have recently made to other documents, particularly the South London Utilisation Strategy, is that there needs to be a much more longer term view because some of the problems, particularly over longer trains and where those trains can stop, can only be undertaken if you did have a much longer term view about it. That may apply for high speed rail as well.

Q600 Mr. David Clelland: If you were given the responsibility for developing the 30 year plan for the railways, tell us what would be in it.

Mr Cooke: I think we are looking at capacity on the higher end of the predictions people are making. I say that on the basis of history because, as Mr Foxall said earlier, every time it has been predicted in the past it has been way out. I am looking at it probably over a 30 or 50 year timeframe for those predictions and looking at capacity in that way, fully accepting that capacity does not necessarily equate to seats, because certainly in London we actually understand that it is an unrealistic ambition for everybody to have a seat on the quarter past eight train, but there is a difference between having a seat and being crammed in like sardines.

Mr Foxall: Can I just join in the comment on that, because I think when you are looking at the White Paper clearly it is light on the kind of strategy you are talking about. However, when we were talking to the Department and making representations to them, we did not want them to produce a paper which was all strategy and no action. A 30 year strategy is great, but 30 years to wait for a train is a long time and you cannot ride to work on a strategy. So the strategy is important given the time the railway takes and given the slowness of the railway actually to react to some of the issues the other witnesses earlier today have been remarking on. We wanted to press on them the need to get on and do things. There are passengers waiting on platforms who need to get onto trains. Trains need to run on time now, not in 20 years' time, and we need, therefore, to see that action taken. So I am in some senses less disappointed than some people, because frankly if I go and talk to passengers on platforms they do not really want to discuss what it is going to be like in 30 years' time. They want to know that they can actually complete their journey today, not in 30 years. It is not a reason for not planning, but I want to put that in context. It is important we keep the railway focused on passengers' needs now as well as on doing these great and important things which no doubt deserve doing on a longer timescale.

Mr Turner: I agree with Mr Foxall. It is very brave of any government to forecast for the next 30 years, because we do not know what is going to happen to the economy in the next five years, and a lot of it will be driven by the economic circumstances. We have seen it with pensions. But I think what is important is to put a platform in and an understanding of the needs so that you can move that platform forward as time goes on, but everybody knows the direction in which you are going.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

The full transcript may be read here.