Improving public transport in England through light rail (HC 1258-I) Public Accounts Committee 10 Nov 2004

Evidence given by Mr David Rowlands CB, Permanent Secretary, Department for Transport.

Q48 Mr. Gerry Steinberg (City of Durham): Mr Rowlands, I have to say that when I read this report I was very shocked and saddened by it because my view is that light rail schemes - and I have always thought this for years - should be the way forward, and reading the report frankly it seems that the government have made a half-hearted attempt to introduce them, and, frankly, your answers this afternoon substantiate that. I do not mean this disrespectfully but you seem totally complacent by the fact they have failed, or seem to have failed, and frankly it is your Department's fault for that situation taking place. The government has already funded these schemes to something like £1 billion and have promised another £1.4 billion. That is right, is it not?

Mr Rowlands: No. It says the central government contribution so far is £1.2 and there are other some other schemes around. We have not promised any more.

Q49 Mr. Gerry Steinberg (City of Durham): But you have committed another £1.4 billion according to my reading of the report - but that is irrelevant, to be quite honest. Mr Williams asked if you had abandoned your strategy. Frankly, if you read the report, you have never had a strategy, have you? If you look at the report and you look at the pictures in the report - and I am looking at pictures a lot these days because I have a grandson who is one and a half, and he even realised here that, if you look at the report and the pictures, all the trains are different?

Mr Rowlands: Yes.

Q50 Mr. Gerry Steinberg (City of Durham): If you had had a strategy, would you not have gone to the manufacturers and said "Look, rather than building them all different, build them all the same", could that not have cut down millions of pound?

Mr Rowlands: Yes, and that is why I said --

Q51 Mr. Gerry Steinberg (City of Durham): Thank you for answering honestly but that is pretty complacent, is it not?

Mr Rowlands: I do not think it is complacent. Following both this report and this set of problems, there is now a grouping called UK Tram which brings together Transport for London, the PTEs, the Federation for Passenger Transport and the private sector suppliers, and the intention is that it will produce best practice and standards and we will require them as a condition of grant for future schemes.

Q52 Mr. Gerry Steinberg (City of Durham): But you should have been doing that ten years ago?

Mr Rowlands: I quite agree.

Q53 Mr. Gerry Steinberg (City of Durham): So you cannot now abandon the project, particularly the ones that are reasonably successful like Manchester, and I read in here Manchester seems quite reasonably successful to me, and I get the impression you are going to abandon it?

Mr Rowlands: No, we are not going to abandon it. What my Secretary of State said was that in the face of escalating costs that we could not continue simply nodding through additional increases in cost. The original public sector contribution for Manchester was capped at £282 million plus £5 million a year for performance availability payments. It became £520 million plus £5 million a year, and we still said "Yes", a new cap. They came back and said £520 million and not £5 million a year but £17 million a year --

Q54 Mr. Gerry Steinberg (City of Durham): But that is just admitting your incompetence, frankly, because you should have been doing something about it and you were doing nought. You were just handing out money and doing nothing?

Mr Rowlands: No, we have not handed out money. We have said "No" --

Q55 Mr. Gerry Steinberg (City of Durham): You have said "No" now but it is a bit damned late to be saying "No" now when it is all planned, is it not? Let us move on, there is such a lot. Actually, this is one of the reports which you cannot believe when you read it. I will come to it later but you build railways where there is nobody there, that is incredible. You do not build them where the shopping centres are, you build them where there are no shops. You have allowed this to happen, and it is incredible. But never mind. Was the policy deliberate or was it just totally incompetent, because I cannot believe one department can be so incompetent. I think it is deliberate. I think the Department have decided not to do them, frankly, and have allowed them to get into the mess they have got into, and there has been a policy decision to say let them die?

Mr Rowlands: There has been no such policy decision.

Q56 Mr. Gerry Steinberg (City of Durham): So it is purely incompetence?

Mr Rowlands: No, it is not incompetence. We said there will not be 25 in the Ten Year Plan. There was money in the Plan for up to 25 more lines by 2010. We said it and we meant it in that sense; there is no decision to kill them. We have no wish to kill them. Light rail is clearly a sensible solution on some transport corridors but it is not God's answer to everything. A bus service might be better for many people.

Q57 Mr. Gerry Steinberg (City of Durham): A bus service integrated with the tram system which, again, you have failed to do.

Mr Rowlands: I am sorry. I thought I put my hand up and said that I accepted that.

Q58 Mr. Gerry Steinberg (City of Durham): Well, putting your hand up and accepting it - whoever was there at the time should be resigning. I do not know about putting your hand up and accepting it. If everybody in the government puts their hands up and accepts all the mistakes as being done and we let them get away with it, then - if you were sacked for putting your hand up and accepting it that would be that and it would be a different matter, would it not?

Mr Rowlands: The best I can offer you is we learn from our mistakes.

Q59 Mr. Gerry Steinberg (City of Durham): Very costly mistakes. You have kept your distance from the scheme; you have done no prioritisation, as you have just told Mr Trickett, and you have basically let down those schemes that are actually there, have you not?

Mr Rowlands: No, I do not think we should lose sight of the fact --

Q60 Mr. Gerry Steinberg (City of Durham): Because those schemes need expanding?

Mr Rowlands: We should not lose sight of the fact, as this report says, light rail schemes have delivered most of the benefits they were supposed to. They did not deliver everything; we got some of it wrong and the promoters got it wrong in patronage terms with the number of schemes. Some of them lost money but not at the expense of the public purse and --

Q61 Mr. Gerry Steinberg (City of Durham): I have such a lot to do I am going to move on. In any sort of policy, whether it is government or local government policy or parish council policy, you cannot make a promise to somebody that they can expand or whatever and then go back on that promise, and that is basically what you have done. That is the worse thing you can actually do in terms of delivering a service, and you have more or less promised, I think it was Leeds, Manchester, and all the others in the report, that they would be allowed to expand. Are they going to be allowed to expand?

Mr Rowlands: We told Manchester "You have final approval for something that will cost £520 million". We told Leeds "You have final approval for something that will cost £355 million". We told South Hampshire they had final approval for something that would cost £170 million. That hardly demonstrates a retreat from light rail systems. What we said was when they all came back and said "We need a lot more money" is "Sorry, we have to stop at this point. We need to talk to you about what you propose. You better revise your proposals".

Q62 Mr. Gerry Steinberg (City of Durham): So what action did you take, for example, when the costs were clearly spiralling out of control? What action did your Department take as a Department responsible? What did you actually do?

Mr Rowlands: We withdrew the final approvals to all three schemes in view of the cost escalation.

Q63 Mr. Gerry Steinberg (City of Durham): But you were handing out money willy nilly beforehand?

Mr Rowlands: And inviting them to come in and discuss revised proposals, and that discussion has started with Manchester and will do with Leeds once we have proposals.

Q64 Mr. Gerry Steinberg (City of Durham): The truth of the matter is you actually did nothing. You just sat back on your backsides and waited, and then when it got so far out of control you then started to do something. That is the truth of the matter, is it not?

Mr Rowlands: No.

Q65 Mr. Gerry Steinberg (City of Durham): It is. Then why did they get out of control so much then?

Mr Rowlands: That is a question more properly addressed to Manchester, Leeds and South Hampshire.

Q66 Mr. Gerry Steinberg (City of Durham): I do not think so; I think I should address it to the Department. I wrote down a quote you said, and I cannot remember who you said it to, that you did not need to take any action. Why did you not need to take any action?

Mr Rowlands: The Department cannot design the transport solution for Manchester or Leeds. That has to be the responsibility in Manchester of GM PTE.

Q67 Mr. Gerry Steinberg (City of Durham): It has to be their responsibility to do the initial planning and decide what they want, but it is up to the Department to decide whether it is cost effective. After all it is actually taxpayers' money that you are doling out left, right and centre and you should have some sort of responsibility, but let us move on because I only have a couple of minutes left. One of the things that I noticed in the report is, for example, that you just allowed the utilities to put a gun to these people's head and charge anything they like. They have just milked the system totally without you doing a damned thing about it. You just allowed the utilities to come in and milk them?

Mr Rowlands: We did not allow the utilities to come in. That is what the promoters and the concessionaires at the time agreed to. I think they were wrong to do so. I think the department should have taken a stronger position itself because I think there are two questions. One is, what do you need to divert and how do you minimise the cost, and then who pays? I think you are right in that it has too easily been the case that promoters have just signed up to what the utilities wanted without saying, "Come on; we are not doing that. We are not paying for that".

Mr. Gerry Steinberg (City of Durham): I cannot let pages 6 and 7 go by without making some sort of comment - page 6, paragraph 9; page 7, paragraph 12; and page 9, paragraph 16. The Chairman touched on this. When there was no strategy at all, and you have more or less admitted there was no strategy, and you look here and see the reasons why the system had not been successful, and then you look and see what has happened on the continent, it is no good saying, "Because the streets were wider in Paris". That is a load of rubbish.

Chairman: Say it in French.

Mr. Gerry Steinberg (City of Durham): [Mock French accent] Bol-locks'. [General laughter] They had actually planned it, had they not? You have no planning at all. As I said before, look at, "Light rail lines are usually segregated from, and given priority over, other forms of traffic at junctions" in France and Germany - not in this country; "Systems are fully integrated with other forms of public transport" - not in this country; "In France, street improvement is an integral part of any light rail scheme" - not in this country; "Light rail fares are heavily subsidised" - not in this country; "Larger patronage base" - not in this country because it was all bollocksed up to begin with; "Systems connect centres of social and economic activity" - not in this country; "The costs of diverting utilities are lower" - not in this country; "Promoters in France can draw on local transport taxes to help pay for light rail" - well, you might be able to do it in this country, but just; "In Germany, 'track share' is more common" - not in this country. The truth of the matter is that they were built without any planning, without any strategy, you have bunged them where the old lines were in the first place, and they were just allowed to get on with it. It was a deliberate strategy from your department.

Chairman: Do you wish to answer that?

Q68 Mr. Gerry Steinberg (City of Durham): I want him to answer it.

Mr Rowlands: A number of these schemes were developed and promoted by passenger transport executives whose job it is to properly plan the local transport system in the area concerned. It is not the department's job to plan it. Looking backwards, as I said, we could have made a better fist of it; I think they could have made a better fist of it. We have both learned some lessons. You can see the benefits, certainly in Nottingham, where even by continental standards it is pretty well integrated. Looking backwards, some of this is not as good as it should have been. Looking forwards, I think it will be a whole lot better.

Chairman: Thank you very much. We are very grateful to Mr Steinberg's one and a half-year old grandson for coming up with an ingenious solution that the trains should be the same throughout the country. Will we give him an OBE, do you think?

Normally excerpts on this website are limited to Mr Steinberg's contributions. In this session, many later speakers made much reference to points Mr Steinberg (and his grandson!) made, so all subsequent material is included.

Q69 Mr Jenkins: Mr Rowlands, unlike Mr Steinberg, I am sorry this session has not been videoed because I think it is a brilliant training opportunity for departments how to handle the PAC. You have done it very well. You have come along here and you have said to everything we have questioned, "Okay, guv, we were wrong", "We got that wrong", "Yes, we did not do that quite right", "We did not do this quite right". You have owned up to most things. I think it is very laudable. We always like to see people taking risks and if risks do not come off, as long as they are quantified and management is saving funds, we are very pleased with it. I want to carry on where Mr Steinberg finished off and talk through the scenario. I will take one of our better examples. On page 27 we have got an example between Grenoble and Nottingham. Talk me through this because then I might understand the situation. Grenoble has got 0.4 million population, Nottingham has got 0.8 million, so it is twice the size, I take it. It is probably over twice the area as well, being a larger city. In Grenoble they have got two systems, in Nottingham they have got one track. They have got 40 stations and in Nottingham there are 23. Therefore, Nottingham pro rata should have 80 stations and it has got 23. They have got 20 kilometres; Nottingham has got 14. Nottingham should have 40. They have got 53 vehicles; Nottingham has got 15. It should have over 100. They carry 13 million; Nottingham carries 11 million. Do you think that if the situation was such that in Nottingham (or other British cities) the light rail system connected hospitals, universities and commercial shopping centres, if it had a sufficient tracks to pick people up from the outer suburbs and bring them in, do you think if it had a totally integrated system with cross-ticketing Nottingham might eventually, with the extra track, get up to 60 million passenger journeys a year?

Mr Rowlands: I cannot hang my hat on 60 million but I cannot see any reason in principle why the Nottingham system should not be expanded. We have with us proposals from Nottingham for a second and third line in the Phase 2 project. We have given Nottingham £2.4 million to help them develop that proposal. There would still be, and I think some of your colleagues were not convinced, issues to do with the density of the population living near to even a well-integrated system, which is what Nottingham is. The line that opened in March is a success by any standards; it is well integrated with the buses, but I see no reason in principle --- I need to be careful. I cannot prejudge the outcome of their application, but I can see no reason in principle why Phase 2 would not be built and even taken further down the road which would in your terms make Nottingham more like Grenoble.

Q70 Mr Jenkins: So, accepting that Nottingham is a success story and accepting that the expansion will take place and maybe incorporate where people live to where they want to go, which would be quite novel for some schemes, may I suggest that it could go to 60 million? Did you look at any other schemes on the continent and draw some experience or ideas from them, and did you then transmit those ideas to PTEs so that they could balance these schemes?

Mr Rowlands: We have not specifically gone and visited continental systems but the PTEs themselves have individually and collectively. If we pursue Nottingham for a second, and you will have to forgive me; I cannot remember the details of every light rail scheme under the proposals, but looking at the map, this second phase of Nottingham will take the tram through the University of Nottingham, for example, so you will get to the same place that this report says helps the continental systems because you are linking up universities and so on in the same way that the loop proposed in the Sheffield extensions goes to one of your local universities, the Royal Hallam.

Q71 Mr Jenkins: So we are getting there slowly? It has been a long learning curve.

Mr Rowlands: I think there have been mistakes, though there will still be benefits from the investments that have taken place. There is clear evidence of how you can do it better and I think it will look like that going forward. May I say one other thing? This may cause the department to fall out with a future promoter who does not want to do this sort of thing, "Just give me the money please for my light rail system", and then they will complain about the department being dilatory over progressing their application, but I think that is the proper place for the department to be.

Q72 Mr Jenkins: I am sure you skin will be thick enough by then to wear it. Many years ago when we had different buses in different cities - you might not remember this - the bus engineer from each city used to go to the bus manufacturer (when we had bus manufacturers in Britain) and design a special bus. There would be a Leeds bus, a Nottingham bus, a Birmingham bus, a London bus, a Cardiff bus. They were all different and it did not matter how much it cost for this extra; the city picked the tab up. I am getting the same sort of feeling here, that it does not matter how much it costs; somebody picks the tab up at the end of the day. I know it is difficult to give these promoters instructions because they will not even take advice, but the PTEs will look at it closely and maybe -----

Mr Rowlands: I am sorry. I am anticipating going forward, as I touched on before, so that by the time we get into spring and summer next year and into the back end of next year we will have out of UK Tram a clear set of standard specifications for systems and we will require as a condition of future grant for a future scheme that those specifications are met. That will not stop the concessionaire having a different layout for his seating in a tram and you can always put a nose cone on which makes it look different but essentially it will be the same kit.

Q73 Mr Jenkins: Another point which was referred to earlier was with regard to the movement of utilities. When you request the gas or the water company to move its utility, what it does is dig another trench and put a new pipework system in, so it has got a brand new system in. Should the promoter or the taxpayer have to pick up the cost of that new system? Surely there should be a shared benefit because the company is going to benefit from that new track system?

Mr Rowlands: It was looked at back in 1998. That review led to the current split for diversion costs, 92.5 % for the tram scheme and 7.5 % for the utility. That was reflected in the fact that the utility did not need to move its system; it was being moved because of the tram. I do not think there is any real prospect that that is going to be reviewed again in the near future. What is more important is to get to the prior question, which is, what needs to be diverted and if it does need to be shifted how do you do it cheapest? One of the things promoters now are talking about, and we have also got with us Merseytram Line 1's TWA application and we will have their finalised business application, I should think, in a few weeks' time. They are quite clear, for example, that if utilities do need to be diverted, they or their sub-contractors are going to do it, not the utilities themselves, to get the cost down.

Q74 Mr Jenkins: On page 19, paragraph 2.9, at the bottom of that paragraph it says, "The Department therefore does not have a complete picture of what has been delivered for the significant amount of public monies invested in the schemes". Would you agree with that?

Mr Rowlands: Yes, and, if I may say so, it is why back in year 2000 we hired a consultant to produce for us what we wanted, which was a complete methodology to evaluate a tram scheme on a before and after basis, including regeneration aspects, for example. What we got was frankly a lemon and the view was that trying to develop an all-embracing methodology in a vacuum was too difficult, so we decided that we would do it in the context of Manchester Phase 3 and, as it stands, if that is going ahead then we will do a wide-ranging full evaluation and use that as the framework of future schemes.

Q75 Mr Jenkins: So basically this afternoon you have said, "Okay, yes. We got it wrong. We are going to do better in future"?

Mr Rowlands: Yes.

Q76 Mr Jenkins: Will you tell me why I should believe you because on your past record, which is all I have got to go by, the fact that the department does not know where it is, you have not got this evaluation in place, what guarantee have we got that you will improve?

Mr Rowlands: We have always had a partial evaluation of most schemes, as the report acknowledges. The issue is a full evaluation. At the risk of repeating myself I would like to offer you Nottingham as an example where it was got right. Nottingham is carrying 25,000 people a month, 5,000 coming from their park-and-ride schemes, because it was built for park-and-ride schemes on opening, because that is what the report says it should be, and that I think is evidence that it has come together and that is how we are going to go forward.

Mr Jenkins: If Nottingham is your best, look at Grenoble.

Q77 Mr Bacon: Mr Rowlands, how much does it cost to do an evaluation of a scheme?

Mr Rowlands: A full evaluation? We were bid by consultants numbers that suggest £10-15 million perhaps.

Q78 Mr Bacon: £10-15 million?

Mr Rowlands: Yes, a full evaluation.

Q79 Mr Bacon: To evaluate?

Mr Rowlands: A full evaluation, because of the regeneration aspects, is going to have to run for five to ten years. You cannot go to a light rail scheme 12 months on and say all the regeneration benefits are there. It takes time. It is not as simple as you might be tempted to think.

Q80 Mr Bacon: I appreciate that, but I am looking at paragraph 2.9 where it talks about how the evaluation does not always talk about the full impact on the local economy or social exclusion or all these other issues, but on the scheme itself, and I am really concentrating on paragraphs 2.8 and 2.9, it says the department has not evaluated the Midland Metro scheme or the extensions to the existing systems, which are referred to above, "on which the Department spent some £80 million and more than £55 million respectively". Why not?

Mr Rowlands: We do have some joint monitoring arrangements with Centro on Midland Metro. In the NAO's terms it did not count as an evaluation so we did not argue with them. I am not disputing what it says here but we do have some arrangements for looking on a continuing basis at patronage and passenger perceptions. It is not a full evaluation. You are quite right to point to the fact that we have not evaluated the extensions, though again one of those extensions was not funded by the department at all, which is the Manchester Phase 2 and nor did we fund the DLR extensions, because they were funded by LDDCs.

Q81 Mr Bacon: I must say I find it very difficult to believe that it cost £15 million to do a full evaluation. If you go out into the market place and ask the most expensive consultant you can find to do it, and of course your department has a record of doing that for the London public/private partnership for the underground, but I will not go there. It does not seem to me that one ought to have to spend £15 million to get a sensible estimate. Mr Bowker has already had an offer from Mr Steinberg to do some PAC training for £750 rather than the £1,500 that he paid. May I suggest you consider using Mr Steinberg when he retires from Parliament for some of your evaluations?

Mr Rowlands: I shall give it close consideration.

Mr Williams: You have got to have the grandson in as well.

Q82 Mr Bacon: He might throw in a free train for his grandson. It does say here, and this is what I would assume to be a rough definition of a basic evaluation, "The Department has yet to evaluate, for all schemes, whether the expected infrastructure and vehicles have been provided at the cost agreed, and whether the schemes are delivering the anticipated benefits". So far the department has not evaluated for each of the schemes that were referred to, these seven different schemes, whether the vehicles were delivered at the cost agreed. That is a pretty basic thing to do, is it not?

Mr Rowlands: I think it is a pretty basic thing to do. It is not that people did not build the lines we had funded or opened the stations they had proposed but there was not a comprehensive evaluation that formally established that, no.

Q83 Mr Bacon: Is there going to be for each of these things?

Mr Rowlands: Yes.

Q84 Mr Bacon: When will that happen?

Mr Rowlands: If you make the assumption that Manchester Metrolink Phase 3 or some version of it is proceeding, that is where we will run the first comprehensive evaluation.

Q85 Mr Bacon: Will there be an evaluation for Midland Metro, which was opened in 1999? It has been going for five years. It would be possible to send in Mr Steinberg within no time at all to find out whether it is working.

Mr Rowlands: As I say, we do have a joint monitoring arrangement with Centro so we do know what is going on, the patronage levels and so on, and we can physically establish how many stations were built against the number proposed, and the report acknowledges that only 23 were built out of the 26 in order to keep the cost down.

Q86 Mr Bacon: The schools PFI looked like that. They were getting fewer and fewer schools for more and more money. In paragraph 2.9 it talks about the evaluation method and it appears that the department did not "assess benefits achieved against what was expected of the systems when the Department agreed to fund their construction". Am I to take it from that that the department knew what benefits should be achieved were when they agreed to fund the construction?

Mr Rowlands: Yes, it did. Actually, paragraph 2.9 does acknowledge that the evaluations that did take place focused on things like patronage levels, travel patterns, passenger perceptions and congestion relief. It is not that there were no evaluations and it is not that they did not know it did not deliver things it was supposed to do; it was just that they were not comprehensive.

Q87 Mr Bacon: How you measure the impact on social inclusion in one area compared with another is obviously a lot more difficult to do than some of these other things which you did not do. "They did not, however, compare the systems' tangible assets, such as vehicles, track and stations, or other quantifiable measures, such as the frequency of services, with what was expected". If you are trying to formulate a model for evaluating something would you not start by focusing on the things that were easiest to measure and compare one to another?

Mr Rowlands: Yes.

Q88 Mr Bacon: And yet you did not do it?

Mr Rowlands: And it was not done.

Q89 Mr Bacon: Is it going to be done?

Mr Rowlands: It will be done and indeed it should have been done.

Q90 Mr Bacon: "Each evaluation used different evaluative criteria". That sounds like they reinvented the wheel each time they did the evaluation. Is that a fair description?

Mr Rowlands: That is a fair point and that is why you need a single methodology.

Q91 Mr Bacon: And that is what you are going to have?

Mr Rowlands: That is where we are going to go.

Q92 Mr Bacon: When are you going to have it by?

Mr Rowlands: As I keep saying, assuming Manchester Metrolink 3 goes ahead or some version of it, that is the framework for developing a full evaluation methodology for that and then -----

Q93 Mr Bacon: And then you will retro-fit that on other systems?

Mr Rowlands: I think some of it you cannot retro-fit because a full evaluation has to do a before and after. It is now too late to do the before on the schemes that are open because I am afraid you will have lost some of the evidence base. You did not gather the information. You cannot get it back once it has gone.

Q94 Mr Williams: You referred in one of your earlier comments to the massively different population densities on the continent. They were very significant at 4,000 and in some cases within a mile down to 500, I think was the lowest.

Mr Rowlands: Yes.

Q95 Mr Williams: Were these factors fully taken into account? It does not come out in the report. Was this very fundamental factor properly reflected in the evaluation?

Mr Rowlands: The genuine answer is yes in the sense that the patronage forecasts and so on need to derive from the available population events based on background and journey patterns. What you see it flow through to is the point in the report that, for example, stations on light rail schemes are much further apart than they are on the continent. From memory, I think it is about 500 metres between stations on the continent. It is more like 900 over here. That is a reflection of a thinner population base that we are serving. That reflected in the scheme characteristics and therefore in the appraisal.

Q96 Mr Williams: The projects referred to cover quite a period since this started in 1980. How early did the department realise that the assessments were going wrong - or were they not on the early schemes?

Mr Rowlands: I fear I have to hazard a guess because I do not have an evidence base for this. Manchester originally opened in 1992 and was a success. In 1992 nobody would have been worrying about how schemes were being put together and appraised. By 1995 into 1996 you will have seen the problems with Sheffield but I think at the time people were comforting themselves with the fact that the local authority had gone and demolished most of the high rise flats and turned them into low density housing, so there was a problem with the scheme but there was not necessarily a problem with the methodology and it was only when you get to the back end of the nineties, with Midland Metro in 1999, Manchester Metrolink 2 in 2000 and Croydon in 2000 that it began to dawn that there was a problem here.

Q97 Mr Williams: And yet they got it abysmally wrong over such a wide range. In the case of South Hampshire, Leeds and Phase 3 of Manchester Metrolink, you were expecting to contribute £806 million and at the latest count they are asking for £478 million more than that. That is over 50 % wrong.

Mr Rowlands: Yes.

Q98 Mr Williams: That is an unbelievable measure of incompetence and inaccuracy, is it not?

Mr Rowlands: I think it is a reflection still of over-optimism in terms of putting a scheme proposal together though, to go back to an earlier set of questions, it is also a reflection of the much heavier price. Potential private sector concessionaires now want to shoulder all revenue risk because they had looked at Midland Metro and Croydon just as I guess the department at the time had and they had seen that there was a problem here. They were being asked to take all of the revenue risk on Manchester 3, on Leeds and they were playing it back on a very expensive basis to the promoters and that flowed through into the sorts of numbers we began to look at.

Q99 Mr Williams: Who paid for the evaluation? The department or the individual project contractors? Who paid for the evaluations that were carried out before approval was given for the projects?

Mr Rowlands: For Manchester, Leeds and South Hampshire?

Q100 Mr Williams: For all of them.

Mr Rowlands: Those costs fall to the promoter in terms of putting together and evaluating the proposal for Leeds and Manchester and then to put it to the department.

Q101 Mr Williams: So in a way they might have been predisposed to find that the promoter wanted --- were you as a department carrying out the independent evaluations or any monitoring of the private evaluations to make sure you were not going to be taken for a ride, unlike your predecessors?

Mr Rowlands: There were independent evaluations. Much of it was contracted out by the department at the time to outside consultants and I think there was an element of, "If the department has got it wrong as well it is not our fault; it is the consultants we hired". I think that was a mistake and it is one of the reasons why we are now putting into place in the department, as I said earlier, our own local transport major projects division with people in it who have been there before and have done it before, so that we have got the expertise in the right place. That does not make us geniuses. We will still make mistakes but we want to do it better.

Q102 Mr Williams: Could you provide us in writing with a list of the advisers who advised the department on each project and who advised the private contractors?

Mr Rowlands: The promoter, Greater Manchester PTE, for example, would have used advisers. The departments concerned would have used advisers. It may have to be incomplete. I have tried to work out how many departments had been involved in all of these schemes and I reckoned it was the old Department of Transport, the old Department of the Environment, DETR, DTLR and DFT. I do not have a complete set of records for everything but we will put together as much as we can.

Q103 Mr Williams: That sounds like a rather messed-up history. During that process do we take it for granted that while the Civil Service body to which they were affiliated changed the actual units involved were virtually the same over the period?

Mr Rowlands: No, they will not have been. You can see in the report that a couple of the DLR extensions were funded by the London Docklands Development Corporation. They would have used their own people for scheme appraisal and they paid grant to an awful lot of infrastructure projects in docklands, so that was a different team. When we dug back into it and we looked at Manchester Metrolink Phase 2 where this report says that about 11 % of the capital cost was met by central government, that was actually the DoE with an old scheme called City Challenge back in the mid nineties, so I am afraid I cannot say that this was always handled by the same unit. It was handled across the piste by a number of different departments and units, I am afraid. In putting together who advised whom we will try to be as comprehensive as we can.

Q104 Mr Williams: It all sounds a bit of an administrative mess but we will wait and see the list. What happens in the end? Suppose these fail financially. They are failing financially. What is going to happen? Are they just going to be allowed to go to the wall or is the taxpayer going to have to come in and bail them out?

Mr Rowlands: If one or more of these concessions held by private consortia eventually fail then in round terms the contractual provisions allow return of the assets to the promoter and for the department, if the promoter then disposes of it, for example, to recover its grant as well, so there are contractual provisions to deal with the failure of the private sector consortium.

Q105 Mr Williams: So the public sector body will end up collecting the dead white elephant and that is seen as being a benefit, is it?

Mr Rowlands: I have to admit that the contractual detail of all of these schemes is not known to the department because to some extent it is between the concessionaire and its bankers, for example. What I can say is that were this to happen - and I am not suggesting it will - the public sector does not get a dead white elephant. It may well get a quite lively creature where the equity has been wiped out by the private sector consortium and the banks have taken a haircut. We get something back where the private sector concessionaires and their backers have taken the write-off and the public sector may get something back.

Mr Williams: Congratulations. You make it sound as if it is a devilishly clever plot.

Jon Trickett: It sounds like nationalism.

Q106 Mr Williams: I am deeply impressed.

Mr Rowlands: I am not saying that it is necessarily a satisfactory outcome but I believe that is how it play through. Can I stress that I have no reason to believe necessarily that at any private sector consortium is going to withdraw from one of these contracts. They are heavily incentivised to make a success even if, as you can see from these figures, one or two of them have already incurred substantial losses.

Q107 Mr Williams: Someone has to make up for those losses.

Mr Rowlands: Those losses will be borne in the first instance by the private sector concession holder and when their equity is burned up they turn and talk to the banks who provided the debt.

Q108 Mr Williams: But not the public sector?

Mr Rowlands: I see no reason why we should bail this out.

Mr Williams: I am reassured. Thank you.

Q109 Mr Allan: We have talked a lot about the continental comparisons and have tried to work out what is different here. I have been back to my childhood in the socialist republic of South Yorkshire where I could get the bus anywhere for 2p and the system was -----

Mr Williams: Do not swear in this committee.

Q110 Mr Allan: ----- massively well used. We had cheap buses and no tram and now we have got expensive buses and expensive trams. When I look at what is happening in London bus use is going up because the fares are cheap. I look at this and wonder whether the statement, "The department expect the operation of the system to be self-financing and not require any operating subsidy from the government", is not the killer sentence which means that these systems are never going to get the passenger numbers because they are just too expensive. Have you looked at this? That policy is set. Presumably that is a central government policy that says, "Wherever we build a tram system we will not give revenue funding to it".

Mr Rowlands: The policy is quite clear. We expect in the long term any tram scheme not to require operating subsidy. That is not to say that it does not need an operating subsidy in its early years as the system builds up and that is built into the overall arithmetic, but you are quite right: that is the policy. What we also say is that in effect 75 % in general terms of the capital cost of this scheme comes free because that is what the government provides by way of capital contribution.

Q111 Mr Allan: Grenoble is something that is successful. They are planning that they will always put some revenue subsidy funding into that, are they not, and that is why they are getting 30-odd million passengers a year using it, not 12 million like Sheffield?

Mr Rowlands: As a matter of central government policy we are not going to pay an operating subsidy. That does not stop a passenger transport executive or local authority themselves subsidising and it does not stop them introducing revenue-raising schemes like congestion charging or work-based parking levies. We are not even contemplating helping to fund their second and third lines. That does not stop them using those monies -----

Q112 Mr Allan: You mean they can use that to keep the fares down?

Mr Rowlands: They can if they want.

Q113 Mr Allan: And on the new model, the impact of this straight economic design as well, if it is going to look at the Sheffield tram system, is that it goes to both out of town shopping centres and neither hospital. It seems to me that because it was designed to be self-financing that predicated a design which is not ideal.

Mr Rowlands: No, we have not modelled it.

Q114 Mr Allan: You do not model those?

Mr Rowlands: No.

Q115 Mr Allan: Because of that policy that is it?

Mr Rowlands: Yes.

Q116 Jon Trickett: I used to be the leader of Leeds when this was first conceived more than 12 years ago now and we are no further forward. I now represent an area outside Leeds which is still suffering from economic problems. The point is that the big cities are the engines of regional economic growth. It is entirely wrong, it seems to me, to have a national policy and a culture within your department that these decisions are entirely local, because the engines of economic growth eventually will seize up as a result of inaction in terms of congestion unless we do something about it. Therefore solutions have to be found and this is a national policy because of the regional economic effect and the national economic effect of these big cities. Your answers say, "We have made mistakes in the past", and maybe the report will reflect that, but I think you are indicating a culture within your department which is saying, "Even now and in the future it is nothing to do with us, guv". Are you prepared to say clearly that you stand behind these schemes where they work financially and you are committed to work as a partner with local providers in the private sector to make these things happen?

Mr Rowlands: Could I say two things? One is that where a scheme stands up in terms of its value for money there is no reason to believe that it cannot go ahead. What I cannot say is that all schemes will go ahead.

Q117 Jon Trickett: That is a completely negative expression. "There is no reason why it cannot go ahead" is two negatives. On the question of the tens of millions of pounds' worth of risk which are being added to this because of the department's indolence, frankly, you could help to give guidance to local government and PTEs. Why can you not simply say, "We are determined to solve the big city problems and this is one of the weapons in our armoury and where we can make it happen we will make it happen"? Why do there have to be double negatives?

Mr Rowlands: Could I say the one more thing? I do not know whether you will find this helpful or not, but when we brought out the Future of Transport white paper in July one of the things that that said was, "We propose, and we need to consult on this, round about Budget time maybe next year to set out outline regional transport budgets going forward ten years, so that if you are Yorkshire and Humber there will be an outline guideline transport budget for ten years showing you how much money is available by year for the next ten years. Those can be brought together with regional transport strategies and you can sort through the priorities and decide". The department cannot go around saying, "You can get a tram scheme and you do not", because they will burn our headquarters to the ground if we tried that and we should not be doing it anyway. We do not have that deep understanding of local transport needs. What we are trying to do is say, "There is the money for the next ten years", on a guideline basis.

Q118 Jon Trickett: It is just a strategy, it is just a tactic of, "Keep out of the fray, lads, keep in the centre. Let them scrap it out on the ground and we will just not take any responsibility for the kind of mess that cities are going to get into", as everybody can see. Those regional engines eventually will simply seize up because of your failure to act.

Mr Rowlands: I do not think that is true. We are genuinely trying to set out, "There is the budget for the next ten years. You have got to produce a regional transport strategy. Bring it together with the numbers. You help us decide the priorities".

Chairman: This point about Leeds was specifically mentioned in this report at paragraph 3.29, and it says, "In Leeds, for example, proposals for a light rail system were included in the city's transport strategy as early as 1991," - under the brilliant leadership of Jon Trickett -----

Jon Trickett: Thank you very much.

Q119 Chairman: ----- "yet the Leeds Supertram is still under development. Excluding the time spent on initial feasibility and design work, the seven systems currently running in England took an average of eight and a half years ..." These planning systems are far too long, are they not?

Mr Rowlands: I do not disagree, and I think that is why it is important to get out, "That is the money for the next ten years. Now sort out with us how best to spend it".

Q120 Mr Bacon: I was listening with interest to your answer to Mr Williams' question about what would happen if things failed, and the rapid fluency of your last answer was in marked contrast to your answer to him when I counted seven "um's" and "er's" before you got to your first comma. It sounded to me like you were saying that the public sector might get something back on the basis of little more than a meander down Speculation Boulevard.

Mr Rowlands: Oh no. It is my fault then if I did not express myself properly.

Q121 Mr Bacon: At least you did not "um" and "er" between the "oh" and the "no", but you did say that you did not even know what was in the contract between the promoters and the banks. If that is the case how can you possibly know whether or not the public sector is going to get something back from them?

Mr Rowlands: What I think I said was that we did not know what was in the contracting arrangements between the concessionaire and their banks, and there is no reason why we should. I hope I said, and if I did not perhaps I should try and say it more explicitly, that in the case of all of these privately financed light rail schemes there are sufficient arrangements in place to ensure that in the event that the concessionaire exits the contract the assets return to the promoter so that the light rail scheme goes on.

Q122 Mr Bacon: That sounds a lot more definitive.

Mr Rowlands: And with no "um's" and "er's" either.

Q123 Mr Jenkins: Can you explain this to me please? If you have a dense population in the city centre or the town centre, you could probably have about 40,000 people in a square mile of the town centre. These people tend to live there, work there, shop there, eat there, go to the cinema there, and that would be 10 % of the population of a town like Grenoble. Why would they want a tram ride? A high population in the centre would not create extra passengers surely? It is the ones on the periphery that are going to come in to work on a park-and-ride system from where they live. Can you explain why I am wrong on those figures?

Mr Rowlands: No, I do not think you are. There is a danger in trying to lay down a general, "This is the answer in terms of all light rail schemes". The successful scheme I think will vary. The original Manchester Phase 1, which beat its traffic forecasts, did not have any park-and-ride sites because it did not need them because it was running from the suburbs into the centre of town. I have not managed to do a trailer which I thought someone might ask a question on. Can I do it anyway because in part it is an answer to your question? What about small areas which cannot sustain a quite expensive but conventional light rail system? What about something that is smaller and costs less? The report touches on one or two so-called ultra light rail schemes which are much less expensive, smaller cars dealing with smaller numbers of people, and one of the complaints has been that they are too cheap to get through the gateway, through our local transport capital schemes because there is a floor. It has to cost more than five million at the moment to get funded by the department. What we will be doing, in the jargon, for the next generation of local transport plans which will run from April 2006 is lowering the barrier and we are going to specifically say that we are prepared to talk to a local authority about a pilot or a demonstration scheme and we will appraise it on that basis so that we will look at it as a pilot or demonstration and that can be used to show that these ultra light tram schemes work and for other promoters to go and look at.

Mr Jenkins: I would be very interested in that. You can contact me on that I would be very grateful.

Q124 Chairman: Mr Rowlands, you have been with the Department for Transport for a long time, have you not, since 1980? Mr Steinberg was in short trousers then. Let your hair down a bit. Do you ever meet your opposite number in France? We have heard the familiar excuse that of course France is a much less highly populated country with broad avenues and all the rest of it. You must talk to your French colleagues. Why have they been so spectacularly more successful in their transport infrastructure there than we are here?

Mr Rowlands: I was in Paris two or three Fridays ago for a day-long meeting of secretaries-general, as we get called, so it was me and my opposite numbers in France, the Netherlands, Belgium and Germany as an opportunity to compare notes. This arrangement has only been in place for 12 months. We have not yet talked light rail schemes but we have begun to talk heavy rail, which is a problem everywhere, I tell you. You are quite right and it is one I can certainly pursue. Why are they more successful? I will not revisit the earlier conversation and I will stop talking about density patterns. It really is important; we have got to integrate this problem with the local bus service, see Nottingham, and it really is important that you get proper through-ticketing arrangements. There is actually a power in the 2000 Transport Act for local authorities to put in place a ticketing scheme with their local bus companies. It is not yet used as far as I know and, again, in looking at fresh proposals they are going to have to show us how they integrate it, how they through-ticket it, how, if they need to, they are putting in place the park-and-ride system and, if they need to as well, a demand restraint for motor cars. I do genuinely believe that Nottingham shows us a successful way forward. Even the dummies in the Department for Transport cannot but notice the success and try and build on it.

Chairman: Thank you very much, Mr Rowlands, for dealing in a very relaxed and charming style with what is a very difficult report for you because clearly in the brave new world of the 10-Year Plan for Transport 2000 there were promises of 25 new lines built by 2010 and it is nowhere near realisation. There has obviously been the lack of a spirit of evaluation, so we shall return to this in our report. In the meantime we are very grateful to you.

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.