The Department For Transport Annual Report 2006 (HC 95-i) Transport Committee ddd 2006

Evidence given by Rt Hon Douglas Alexander, a Member of the House, Secretary of State for Transport, and Sir David Rowlands KCB, Permanent Secretary, Department for Transport.

Q42 Mr. Eric Martlew: On the West Coast Main Line, I am grateful to the Secretary of State's faith in it, but there was the report last week from the National Audit Office who said that there was a major capacity problem. Those who are cynical think that the increase in fares is not only to bring more money into the railway but to solve some of the capacity problems. Is that not the case?

Sir David Rowlands: Actually what the NAO report said was that they thought there would be capacity issues between 2015 and 2020, not that there are capacity problems today on the West Coast.

Q43 Mr. Eric Martlew: The reality is that it was a very good report, and what has happened on the West Coast Main Line has been very good. The National Audit Office was looking for a headline. However, the fact is that there will be capacity problems on that railway and, at peak times, there are capacity problems now. It seems as though you are allowing the railway to create a system of controlling capacity by increasing fares. It was put in one of the papers that you will have to be rich actually to travel on the railways. How do you answer that?

Mr Alexander: I am fully aware of the commentary, although I would dispute it. I would say that there are three elements to having a successful railway. First of all, you need to be in a position where there is sustained investment, because there was, under different governments - not simply the last Government - a serious investment drought. Secondly, you need effective management, and I would argue that the changes that my predecessor Alistair Darling made have brought a degree of stability to the railways. That again was indicated by the NAO report, which paid tribute to the work that the SRA did in bringing the costs under control, after they had been lost control of by Railtrack paying money to Jarvis and to other contractors. Thirdly - and this responds directly to your question - it needs to address the challenges of the future. That is why we have announced that we will publish next summer a White Paper which deals with the next control period. We will embed that White Paper within a context of what are the challenges that rail will face up to 30 years. So it is right for the NAO to identify that there are capacity challenges, but we had anticipated that in terms of the development of policy that we will advocate next summer.

Q44 Mr. Eric Martlew: In that White Paper will there be a target for moving freight from road to rail?

Mr Alexander: We have seen a very significant uplift in freight in recent years. If I recollect, I think that we have seen a 46 per cent uplift in the use of rail freight. In part that has been a consequence of the greater efficiency secured within the rail freight industry. We will address the issue of rail freight in the context of the High Level Output Specification, and also the work that we are doing longer term on the railways. However, I would not wish at this stage to be prejudging the terms of the White Paper I will announce next summer.

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Q63 Mr. Eric Martlew: Turning to rail franchising, the Conservative Party have apologised for the privatisation of the railways and have said that the privatised rail system does not work. Why does our Government persist in a system that is not seen as fit for purpose and certainly will not be seen as fit for purpose in ten years?

Mr Alexander: Let me make two very quick observations about the Conservative Party's position, and then of course I will take a longer time to describe the Labour Party's position. It seems to me that the Conservative Party are in an inordinately difficult position if, on the one hand, they are saying they are sorry for rail privatisation but, on the other, are now anticipating that they will further break up the network, by the break-up of Network Rail through their so-called "vertical integration" proposals. Secondly, it seems to me their principal objection to franchising seems to be that the public sector is being too tough with the private sector, and that the success of my department in securing significant revenue from potential operators of the rail network through the train-operating companies is prejudicial to the financial health of those companies. My starting point on franchising is to say, "What are the needs of the travelling public?". A key element of the needs of the travelling public is to make sure that we sustain levels of investment. If I recollect, we are putting in about £88 million a week into the rail network, but there are very significant sums also being contributed from the private sector. I do sense that, given the uplift in passenger numbers, the track and signalling work that is taking place, the replacement of the fleet that we have seen in recent years, and given the improved performance that has been achieved, we are in a stronger place in terms of the interaction between the private sector and the public sector than we have been for many years.

Q64 Mr. Eric Martlew: Does that mean that franchising will continue in the same form as we have at the present time?

Mr Alexander: I do not anticipate changing the franchising system. I am not making plans to change the franchising system at this point. Of course we keep all of our arrangements, in terms of governance and interaction with companies, under review. That is not to say that there could not be incremental improvements in due course; but if you are asking me am I sitting here anticipating that there will be a fundamental change in the franchising system in the months to come, I fear I will disappoint you.

Q65 Mr. Eric Martlew: Can I go specifically to the West Coast Main Line franchise? There have been press reports that there has been a major city law firm employed by yourselves to try and rescue this franchise. Is there any truth in that?

Sir David Rowlands: This is the Virgin West Coast franchise?

Q66 Mr. Eric Martlew: Yes.

Sir David Rowlands: The present position is that that franchise is operating under a so-called management letter agreement on an annual basis, largely because the original franchise was let on the basis that Railtrack were going to deliver the West Coat Main Line upgrade, including trains running at 140 mph against a timescale which----

Q67 Chairman: For which, of course, Virgin were very handsomely compensated, I believe, Sir David.

Sir David Rowlands: Part of this is an issue between Network Rail, as it now is, and Virgin. What is happening is that the discussions are taking place as to whether that particular arrangement could come back, off the annual basis on to a proper franchise basis.

Q68 Chairman: Why do you need a legal firm to do that? Is there no one within the Department who can negotiate?

Sir David Rowlands: Because Richard Branson will hire an army-full of highly paid lawyers, and we need people who can match those.

Q69 Chairman: Do you always do that when you are faced with a businessman who hires armies of lawyers?

Sir David Rowlands: I am sorry, my department's lawyers are public law specialists; this is commercial law we are talking about. We would be very foolish not to use similar fire power to some of the companies with whom we deal.

Q70 Chairman: I think that you are enunciating an interesting policy here, Sir David. You are saying that, when faced with someone who has commercial expertise, even though your department is required to negotiate commercial franchises, you will only be able to do so by employing large numbers of lawyers from the commercial field - simply because there is no one in the government service.

Sir David Rowlands: Lawyers do not negotiate; lawyers just document the contract. My department is full of people who can negotiate franchises, and we have some commercial law expertise; but we also need, for particular franchises, to supplement our own commercial legal capability.

Q71 Mr. Eric Martlew: Could you give us more indication of the terms of reference that this law firm are using?

Sir David Rowlands: I am sorry, we do not give law firms terms of reference in that sense. We hire them to assist us in the negotiation, whether it is a railway franchise or some other commercial negotiation.

Q72 Mr. Eric Martlew: Could you give us any idea of the costs of this law firm?

Sir David Rowlands: I will have to write to you on that.

Mr Alexander: Perhaps I should declare an interest at this point.

Q73 Chairman: You have an interest in a private law firm?

Mr Alexander: Since I am myself a recovering solicitor. It might also assist you to place on record - I know that before----

Q74 Chairman: You are not telling us that you have a part-time job, Secretary of State?

Mr Alexander: Before this Committee previously, my predecessor stated an aversion to hiring consultants. If it is of any assistance to the Committee, equally I have no interest in my department in hiring any more lawyers or any more consultants than is absolutely required; but I do think that the point that Sir David made is well taken. If you are running an efficient operation, in which you have inevitably a limited number of lawyers within the Department working on the day-to-day business of franchises and the other responsibilities that our legal department cover, there is absolutely nothing inappropriate in saying that, in the face of a potentially litigious adversary, we deploy the right number of lawyers in those limited circumstances.

Q75 Mr. Eric Martlew: Can I ask what probably is an easier question? When do you expect this matter to be brought to a conclusion?

Sir David Rowlands: I cannot give you a date, but I would expect, one way or the other, the current discussions with Virgin will be concluded in, I should think, two to three months. It is that sort of timetable.

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Q115 Mr. Eric Martlew: On road safety, I am very conscious that this country has a very good record, that we have the lowest number of fatalities anywhere in Europe, and that is very good, and it continues to come down. But I am concerned that there has been an increase of accidents, fatalities on rural roads, especially a single driver, especially amongst the young. Looking at the figures for the last five years there has been a 20 per cent increase in young people between 17 and 25 killed on rural roads. Do you think that there is a need to adjust the licensing and the training of young drivers?

Mr Alexander: Let me make a general point and then a specific point. In terms of our general approach I think it can be captured by the three Es: engineering, in terms of road design; education in terms of the information that we publish and encourage drivers to receive; and the issue of enforcement. It is on those three pillars that we have seen the kind of improvements that you describe. I am very aware indeed of the campaign that Brake has been running as a result of their concerns in terms of the number of younger drivers involved in both serious accidents and fatalities. I would simply say that we are working very hard, looking at not just their recommendations but a range of other concerns that have been brought to our attention, and we will report that in the review that we are going to be publishing in the timescale that Sir David suggested, next year.

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.

On behalf of Eric Martlew, 3 Chatsworth Square Carlisle Cumbria CA1 1HB