Priorities for investment in the railways (HC 1056-i) Transport Committee 28 Oct 2009

Evidence given by:
2.45 pm English Regional Development Agencies Roger Allonby, Director for Infrastructure at Advantage West Midlands
The Northern Way Professor David Begg, Chair of the Northern Way Transport Compact
pteg (Passenger Transport Executives Group) Neil Scales, Chair of pteg and Director General of Merseytravel
Transport for London Richard Meeks, Network Development Manager, London Rail
3.45 pm Passenger Focus Anthony Smith, Chief Executive. Guy Dangerfield, Passenger Link Manage
ASLEF Simon Weller, National Organiser, Hugh Bradley, Executive Committee Member for District 2
4.15 pm Office of Rail Regulation Bill Emery, Chief Executive, John Thomas, Director, Railway Markets and Economics, Michael Lee, Director, Railway Planning and Performance

Q11 Mr Clelland: What is the London view on the importance of the high-speed rail link into Heathrow Airport?

Mr Meeks: Linking airports is really an issue about long-distance journeys within the UK, which is really outside our area of interest, so we really look to companies like HS2 to make the case for links to Heathrow Airport. We do not have a particularly strong view on that.

Q12 Mr. Eric Martlew (Carlisle): What about the link to the Thames Estuary Airport?

Mr Meeks: I am no longer sure if the Thames Estuary Airport is the Mayor's policy, if the London planners are required to listen to it.

Chairman: Let us keep to the question.

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Q26 Mr. Eric Martlew (Carlisle): I do not want to concentrate on high-speed lines because it has been done, although I have read Network Rail's proposals and I have read the Northern Way's and the indications are that you are going to put a 90 mile scar through Cumbria and not stop the high-speed line, but that is an argument for my successor to some extent. Can we concentrate and focus our eyes down a bit because there have been issues about capacity on the West Coast Main Line? The capacity is going to run out before the high-speed line is built. Surely the thing that we must do first is that we have got to get new signalling, in-cab signalling, on the West Coast Main Line. I disagree with the comment made, the indication that it was a waste of money building the West Coast Main Line. Most of it was renewable so it had to be done, but we need to get the signalling right so that we can run the trains closer together. We need to improve the rails north of Preston so that they can run at 135 miles an hour. The big worry is that we are all going to be talking about high-speed line and we are going to forget what we need to do in the medium term, otherwise we are going to have a major capacity problem. Is that not the case?

Professor Begg: Yes. I hope I did not say - and if I did I got my words jumbled up - I would not argue that the £9 billion spent on the West Coast Main Line was a waste of money. I would argue that maybe with the benefit of hindsight - and I was not arguing this at the time so I'm at fault too - that it might have been better to look at developing a new route. Maybe ten years that might have been a better strategy. On your question about Carlisle, we have not really got into a lot of the detail but we certainly would not rule out - and I am not just saying this to appease you - a high speed station in the vicinity of Carlisle. But where we totally agree with you, and this is the mistake the Italians made when they developed high-speed rail, they did it at the expense of the classic rail network, the existing rail network. That would be an absolute disaster for us in the UK. Keep your eye on what is going to happen in the next ten years to the East Coast Main Line, because there are plans to upgrade the East Coast Main Line and create more capacity, and I just have some worries when the spending freeze comes just how much of that work is actually carried out, and then you are spot on, we start to run into acute capacity problems.

Mr Scales: Yes, I think we have got capacity problems now. We have increased rail journeys by 41% from 95, 96, to where we are now, but 60% of commuter lines into Leeds are overcrowded now, 50% into Birmingham and Manchester are overcrowded now. So you are absolutely right, we need to start increasing the capacities on the local networks now, which means more and longer trains, it means the signalling system that you have just described, it means trying to get more people onto walking and cycling as well as the rail networks. So it is the whole integrated package.

Q27 Chairman: The Government is reviewing its rolling stock plan for the Northern railways in view of the electrification programme. Does that cause you concern?

Mr Scales: I think on that we were looking at 1300 new carriages first, Chair, and I think Northern were going to get 182 of those 1300 carriages, but if you take investment in the railways now I think over the last five years Northern Rail have had zero whereas there has been over 500, I think, in the South East. The electrification will allow us to get different rolling stock into the North. The electrification from Liverpool to Manchester is a case in point, so I think the Government is right to have another look at that, but we are still struggling to understand how the 1300 carriages is worked out, why it has been reduced and where it is at the moment, so some clarity from the Government on that would be most welcome.

Professor Begg: I think the Government is right to review the situation in light of the electrification proposals because that changes your requirements in terms of rolling stock. Diesel rolling stock going forward is going to be incredibly expensive because not many of the manufacturers are making it, everyone is electric. It is a huge incentive for us to go electric and buy purpose-built rolling stock. I think what the Government has to avoid doing is to continue to look at this in a relatively short-term time period. It tends to look at railway investment over a five year timeframe, so it will look at what the capacity problems are going to be at the end of this control period, which is 2014. The trouble with that short-term analysis is that it is far too prone to variations in public finances that are available and it does not look at what the capacity problems are going to be 15, 20 years down the line, which are going to be very acute. So again, I think one of the things this Government has done well is to try and get transport investment into a longer term strategic timeframe, but there is a bit to do on that yet.

Q28 Mr. Eric Martlew (Carlisle): If we can go to the Manchester Hub and look at Crossrail, we know what is going to happen there and we know how much it will cost and we know how it is going to be funded. Is there any such plan for the Manchester Hub? Do we know how much it is going to cost, who is going to pay for it?

Professor Begg: No. We have actually just completed this study in terms of what the economic benefits are going to be, which are currently £16 billion. We are waiting for Network Rail to complete their study, which they will do by the end of January, and then we will get a feel for what the costs are and the best engineering solutions. What intrigues me on the Manchester Hub is why did it not happen 20 years ago? I am intrigued by this. Why do some projects get right to the front of the queue? Crossrail is a fantastic project for London, but it took an awful lot of lobbying and collective support from the business community in London to get it there and I think the point I make to you is that we are starting to get our act together in the North of England but we have got a lot to do yet in terms of arguing the case for investment in projects like the Manchester Hub. So the earliest it is going to happen is the next Control Period, which is Control Period 5, beginning in 2014, and I don't have to tell you how challenging that Control Period might be in terms of funds available.

Q29 Mr. Eric Martlew (Carlisle): Can we talk about funds because when the railways built they were built with private money. There is a feeling now that it has all got to be public sector and we look towards the future and we think there isn't going to be a lot of money about. Is there not a case, if we build a high-speed line to Birmingham or Manchester, for saying that the business rate payers of those cities should make a contribution? Are people thinking about other ways of bringing investment into the railways?

Professor Begg: Yes, that is what has happened with Crossrail, although it is the part of the funding for Crossrail which is probably the most susceptible and it is the most difficult to try and secure. The big question mark about how much public sector and how much private sector money will be available, say, for high-speed rail - we know the bulk of it is going to be private sector, but the reason why we can't be too precise is because we don't know, 10, 15 years down the line, how we are going to be pricing for carbon. Is public transport going to be in the Carbon Trading Scheme? What impact is that going to have on the competitiveness of rail versus aviation? Is there going to be national road pricing? Is there going to be motorway tolling in 15, 20 years' time? We just don't know how the world is going to change and how that is going to impact on the amount of private sector funds that will be available.

Q30 Mr. Eric Martlew (Carlisle): My final question is, do you think longer franchises for the rail companies will bring extra investment? We are talking about the rolling stock. I think Virgin are arguing for 30 or 40 year franchises.

Professor Begg: I am a strong advocate of longer franchises.

Mr Scales: Yes, we have got a 25 year concession on Merseyrail Electrics and it has allowed our private sector partners to make significant investments that they wouldn't have done on a shorter franchise. Two years on the railway is just a heartbeat.

Mr Meeks: Just to be controversial, I would actually argue the opposite. I think the franchises should, if anything, be shorter. The model we have for the London Overground network which is what we call a gross cost contract whereby TFL keeps the revenue and specifies the services. The operator merely incurs the operating cost, which we then pay. So we take the revenue rather than the operator taking that, and that introduces a lot of efficiencies within an urban network because it leaves ourselves better placed to manage risks around demand or economic changes which under a normal franchise would be priced in up-front and usually ends up being more expensive to the taxpayer. It is partly an issue of efficiency, cost-efficiency, and making the most out of the current investment that we have, but we think this gross cost model is the way forward in the long-term for urban areas. That sort of leaves you independent of the length of term of the franchise because it leaves really ourselves as the PTE, if you like, as the specifier, to be able to look at issues like social benefit which are outside the remit of a train operating company. So a TOC can only consider matters from a revenue perspective, whereas we can take a wider view of benefits to society and therefore specify those services, which I don't think a longer term franchise would particularly help.

Q31 Mr. Eric Martlew (Carlisle): London is in a sort of unique situation by its very size, though, is it not? So you do have buses that are not de-regulated, which does help.

Mr Meeks: I think it is a model which could apply to any dense urban network

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Q45 Mr. Eric Martlew (Carlisle): If we go back 50 years to the motorways, the first part of the motorways to be built, if I can remember correctly, was the Preston by-pass, the M6. We know, for example, that Stafford is a bottleneck on the West Coast Main Line. Can you see a situation where the first part of the high-speed line will not be built in London or Birmingham but will actually be built to get rid of a bottleneck somewhere on the classical line?

Professor Begg: The question has been set by Lord Adonis, has it not, to High Speed 2, which is, "We want a high-speed route. Look at a high-speed route from London to Birmingham, tell us if that stacks up, and then where does the network go from there?" So in a way the train is up and running now, isn't it, in terms of they are starting at London. If you have got bottlenecks in other parts of the classical rail network like we have in the Manchester Hub, the best way is to deal with investment in these bottlenecks.

Q46 Mr. Eric Martlew (Carlisle): What I am saying is, if you are going to get rid of these bottlenecks by building a new line, you are going to build it to high-speed specification. You are not going to build it to the classic and then upgrade it, are you?

Professor Begg: No, but it depends on the level of investment that is required because sometimes you don't need a huge amount of investment to deal with a specific bottleneck.

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Q69 Mr. Eric Martlew (Carlisle): Mr Smith, I heard you say what passengers want, but I go back to the campaign for the upgrade of the West Coast Main Line. When you talked to passengers there, they said, "Well, we don't want a faster line, we just want more punctuality." Why can you not have both? I think sometimes your passengers, because they have got the day to day grind of travel they do not have the vision and there is a danger in that, is that not the case?

Mr Smith: Yes, I think that's right. I think current passengers have already made the trade-offs about the journey time, that it's fine to get from Liverpool to London in two hours, or whatever, but that there may well be a whole tranche of new passengers who might come to use the railway if there was a high-speed line who aren't being attracted at the moment. But I think there is a couple of issues there which are worth dwelling on, one of which is that all of the talk at the moment about the high-speed line is about the technology and about the kit. There is very little talk about the passengers. Is this going to be part of the National Rail Network? Is it going to fit in? Is it going to be a reservation only railway or are you going to be able to walk up and go? I think there are some quite interesting passenger questions which haven't really been unpacked yet and I think it is very important those are unpacked before the business case is finalised and it's agreed that we will have this type of railway, because what we don't want to end up with after all this money is a rich man's railway.

Mr Weller: There are two things we are beginning to see, which is the loss of the walk up and one of the railway's biggest strengths is that you can turn up and go. When the standard fares are so expensive as to make them utterly useless and the only way you can have a reasonably priced fare is by booking weeks in advance, you have just taken one of the big advantages of the railway away. For so many years we, as staff or passengers, have been so used to the railways just simply being managed decline that we could miss the opportunity of actually expanding and having a railway system that is going to sort a lot of our climate commitment problems out but also a railway to be proud of. If you just look at what happened at St Pancras when that was refurbished, people actually realised we can do good projects, we can do them well and we can be impressive. This is an opportunity for the railways to be impressive and we need to sort of raise our sights and our aspirations a little higher.

Q70 Mr. Eric Martlew (Carlisle): I don't disagree with St Pancras, it is beautiful, but High Speed One, of course, was the most expensive high-speed line anywhere in the world. If we have to build it on that sort of model or that sort of efficiency, then we are not going to go very far, are we? We need to get efficiency down to the sort of European cost before we really start to build High Speed 2?

Mr Smith: I think St Pancras is an interesting example, though, because if you look at St Pancras on a day to day basis it has got a lot of platforms that aren't used very much by the international services. The East Midland services are crammed into one corner. The Kent domestic passengers are going to be crammed into another corner. I think any debate about high-speed rail has got to keep in mind this has got to benefit as many people as possible.

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Q84 Mr. Eric Martlew (Carlisle): I have got a feeling we have created a monster with the rail regulator. What basically I thought you would be saying is if there are going to be cuts then it is up to the Secretary of State and he will then say, "That is what we're going to do," and you will continue to regulate the railway, not to argue with the Secretary of State about where these cuts should or should not happen. I understand what you are saying about the need for efficiencies in Network Rail and I am not disagreeing with you. I understand the need for regulation, but what I do not understand is that we have a quango which is going to go out and argue with any Secretary of State about where the priorities should be on the railway and that confuses me and worries me.

Mr Emery: I think it is very clear that the regulator does not argue with the Secretary of State or the Government in Scotland on the priorities. What he says is he wants to make sure that the Secretary of State is fully informed of all the ramifications and what the implications of these things are so that they can take a properly informed decision. That is our role. At the end of the day there isn't an easy answer. Things are going to have to be sacrificed and there will be choices that will have to be taken. The information is there. This has been a very transparent process to get to the HLOS and get through that. There is clearly within our determination, within Network Rail's delivery plan, clear information as to where projects are and in a sense if the Secretary of State changed the requirements for the output profiles of works that had not been started, then they would be looking at those areas, that information. What we would be saying is that there is a trade-off here and articulate that.

Q85 Mr. Eric Martlew (Carlisle): To be honest, Mr Emery, I was actually surprised that you put in a paper on priorities because I thought that would have been the job of the Secretary of State and not yourself. So what you are saying is that the Secretary of State decides to take decisions. We will then have a very transparent process where you tell him that this is suicidal or it is not the right decision to take. That doesn't seem the way forward in a democracy, to be honest.

Mr Emery: I think the way the whole process and in fact all the discussions and lead up to the 2007 high level outputs - there was a tremendous amount of dialogue between the Department and the regulators in the industry to tease out what was the information base and what were the likely costs of various options but leave the decision with the Secretary of State.

Q86 Mr. Eric Martlew (Carlisle): That was an easy option because we were talking about growth, were we not? If we were talking about severe cuts, and hopefully we are not and I do not disagree with you, but what I am really saying is that I question the role of the rail regulator having priorities for future investment and I question the way that if a Secretary of State takes a decision to cut then he is going to get into an argument with yourselves?

Mr Emery: I am not saying that we are going to get an argument, I am saying that we would want to make sure the Secretary of State understood the implications. If they took it, then there is a process.

Q87 Mr. Eric Martlew (Carlisle): Not only the Secretary of State, everybody else as well?

Mr Emery: Yes. Yes.

Q88 Mr. Eric Martlew (Carlisle): Which is the difference between giving the Secretary of State your advice and saying publicly, "That's what we think is going to happen, Secretary of State," is it not?

Mr Emery: Well, I think everything that is driven in the regulatory circles in years has been to make the process transparent, open and where we are, an independent regulator, that my board would want to make sure that the views were set out.

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.

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