Commons Gate

Priorities for investment in the railways (HC 1056-ii)

Transport Committee 11 Nov 2009

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Evidence given by: 3.45 pm Eurostar Richard Brown, Chief Executive Deutsche Bahn Dr. Andreas Hamprecht, Head of International Business France, Benelux, UK Greengauge 21 Jim Steer, Director 4.20 pm Association of Train Operating Companies Michael Roberts, Chief Executive Richard Davies, Head of Strategic Policy Virgin Group Tony Collins, Chief Executive Officer, Virgin Trains National Express Andrew Chivers, Managing Director, National Express East Anglia 5.15 pm Network Rail Iain Coucher, Chief Executive Paul Plummer, Director of Planning and Regulation Ed Wilson, Head of Public Affairs.

Q117 Mr. Eric Martlew (Carlisle): Mr Steer, you drew the comparison of the East Coast Main Line as an upgrade or a new line. If we go back to the West Coast Main Line, of course probably 50% of the money spent on that was for renewal and not for the upgrade. That would probably be the case on the East Coast Main Line, so you cannot let the East Coast Main Line rot while you build a new line. The other issue is that for many years we were dithering on a mixture of the two, is that not the case? You are building a new high-speed line perhaps to Birmingham and then on the classic lines up to Glasgow. So is it not a bit disingenuous to say, "Well, we'll just leave the East Coast Main Line and build a new one beside it," because that will not happen, will it? You will have to do them both up. You have to build a new one and do the other one up?

Mr Steer: Thank you for the question and the chance to clarify that. I am certainly not advocating that we just abandon expenditure on a classic route such as the East Coast Main Line. My point in the written submission was to indicate that there are potential savings by taking a long-term view, which I think is often overlooked. There are many arguments as to why we should not have a long-term strategy, flexibility and how difficult it is to plan for the future. I wish to draw to the Committee's attention one of the key advantages of having a long-term plan in place, even with some uncertainty about the exact timing and exact funding, because it enables you to look at the enhancement components of expenditure, and I accept entirely the distinction between that and renewal expenditure, which will no doubt have to continue. We are not abandoning the classic rail lines by arguing the case of high-speed rail. So I think there is genuinely the chance to get some efficiencies that will not be apparent unless there is a long-term plan, but I would accept the point and I think the renewals component for the West Coast was even higher than 50%, in my mind it is around 70%, and sometimes I think there is a bit of a false assumption, "Well, if only..." I have heard many commentators say, "If only we had thought about this 10, 15 years ago we could have saved all that money." You are absolutely right. If you want the West Coast Main Line you have to keep it going, but you do not need to make the additional expenditure on enhancement. I am now inviting you to think forward again to another route, the East Coast.

Q118 Mr. Eric Martlew (Carlisle): You would accept that for many years, especially if we are talking about going as far as Glasgow, the lines will be part the new high-speed line and part the classic line? I was reading, I think, in the FT today that the new trains which will run on the high-speed will actually be slower in the classic line because they will not have the tilt mechanism. Have you any comment to make on that?

Mr Steer: I think this is a critical choice and in Greengauge's report in September we pointed out that this is a key issue which has to be faced. We have a proposition that HS2 is in the West Coast corridor. The West Coast Main Line is the world's busiest railway. It is also the only busy successful tilting railway, I would suggest, of its nature in the world. There are a lot of questions about it, going back to the ATP and all the rest of it, but we now have a product which works and works very reliably, and of course it brings a journey time advantage. So the stark choice is really this, because you are right, one would probably have for a long period of time a mix of operation on new high-speed infrastructure and a continuation on the existing and the choice is between providing for a train type that can exploit both of those, which would mean running fast on the high-speed line, 300 km an hour, or whatever, and being able to tilt on an existing railway, or using a train which cannot have the tilt capability on an existing line. I think the article in the Financial Times today was suggesting - I do not know what the evidence was - that maybe HS2 was concluding, "No, we don't want a tilting train on our high-speed lines."

Q119 Mr. Eric Martlew (Carlisle): The final question is somewhat in line with what Mr Clelland was saying. I can remember the Network Rail one stops at Preston and then stops at Glasgow. I actually think that Greengauge 21 does the same. I represent a city which is somewhere in between and there is a great fear that not only if the train does not stop in Cumbria - and you have got to have 90 miles of track through Cumbria and if it is not stopping it will be a bit difficult, I expect, to get acceptance - that the area will suffer because of it, and secondly the existing good service we have now will actually disappear because the Pendolinos would not be running because there would not be the customers for it. How can you square that circle of saying, "Yes, this is a new way of going, but we're not going to stop for 200 miles and people in between are going to get a worse service"? That does not seem reasonable and I do not think you can sell it to anybody.

Mr Steer: I think the short answer to it is that by careful planning you can achieve these things. You cannot serve every town and city in the country but you can serve the major places and the evidence from Germany, Spain and France - I have travelled on the TGV from Lille to Paris this summer and I was astonished how many connections there were for the line that Richard Brown's Eurostar trains travel every hour up and down. There is a lot of them and they are there to enable connections to be made from the fast line into Paris, in effect, into some of the second, if you will forgive me, not the first tier of large cities.

Q120 Mr. Eric Martlew (Carlisle): If they do not stop, they are never going to be first tier, are they?

Mr Steer: Well, they do not in general and only exceptionally, and I think even SNCF will say, "Well, we perhaps agreed to some of these things and we shouldn't have done." The stations are not on the high-speed line, they are existing stations, so these are connections from, if you like, a bypassing new line made into the existing railway to serve northern France, places like Amiens or wherever it is, in Cumbria's case Carlisle. So there is ample precedent that this can be done with proper planning.

Q121 Chairman: Mr Brown, can you tell us more about that from your experience, more about how other places not directly on the high-speed line stops can be connected and what lessons you would take from the experience of High Speed 1 for the development of High Speed 2?

Mr Brown: If I may take experience from our knowledge of what is on the Continent rather than High Speed 1, because High Speed 1 is still very young in terms of its impact. Just two points I would wish to make. One is, where you stop on high-speed lines to build the stations is always a very difficult choice because high-speed trains, let us be honest, are built to run at high speed and therefore not to stop often, but I think the pattern in most of Europe, certainly in Germany and in France, is that you run trains off high-speed lines either on a spur to a city like Carlisle or at the end of the route into Manchester, or wherever, and you need to design the network so that in phases it will link into the classic network. The other point I would make is, remember we are planning at least 30 years ahead here and the Government's own white paper of two years ago set a goal to double rail patronage in the next 30 years, or a broad forecast. With the rates of growth we have seen in the last 15 years we will at least achieve that, so we will need to be running a lot more trains anyway, which provides more trains to go on serving cities like Carlisle or anywhere else with a good service as well as the high-speed services. That is the bit where we have to get our minds forward. It will be a very different market.

Mr. Eric Martlew (Carlisle): I accept everything you are saying there with the exception, of course, that if you look at Network Rail, and I think Greengauge, the last stop is Preston and you have got Warrington, Manchester, Liverpool, and then you go for 200 miles without stopping at all, which actually means that southern Scotland will not be served, Northern Ireland will not be served, and the county of Cumbria will not be served and you will actually give us a worse service because we will either have to come to Preston or go to Glasgow to actually get on that train. Politically you cannot help building a line 90 miles across Cumbria and saying it is not going to stop.

Q122 Chairman: Mr Brown, can you give us the answer to that, from your experience?

Mr Brown: My mind is just using the analogy of Lille. We do not stop in Lille with all of our trains, but we stop there with sufficient frequency to give people in Lille a very good choice of services to London and the franchise is being networked to Brussels. I would find it really very surprising if on a London/Glasgow high-speed line going past or through Carlisle that some of the trains did not stop there. What I would be very sure of is that they would not all stop there.


Q149 Mr. Eric Martlew (Carlisle): How do you answer the environmentalists? I know they are all going to be electric trains, so you can say they are all going to run from wind power, but it is probably not the case, but if I am going down the motorway at 60 miles and hour and I increase to 90 miles an hour, apart from breaking the law I am using a lot more energy and is it not a fact that high-speed trains actually use a lot more energy than their slower counterparts? They use a lot more energy to do 300 km an hour than 200. How do you answer that case?

Mr Steer: We answered that - and Richard may want to come in on this - by commissioning some work and we looked first of all at the question of what is the energy consumption per seat or per passenger of an existing train, which is the West Coast train, the Pendolino train, for instance, against various types of high-speed train, the TGV, ICE, the Japanese bullet train, and so on, and what we found was that the energy consumption of those two types of train, the existing Intercity train and the high-speed train, were about the same. You could say high-speed trains looked in some cases to be up to 10% higher, but they are within the same ballpark. If you ask, "Well, why is that?" there is a number of reasons. High-speed trains are purpose-built and they tend to be higher capacity, you can get more people on them, you are sharing the burden of creating the motion, the energy consumption across a greater network. You have purpose-designed infrastructure which does not require the train to speed up and slow down and dodge and weave around the network, which counts for a lot, and these are known, established verifiable facts. So if you took the same train on the same line, which is rather the way I think you were describing your road example, yes, of course, if you ran it faster it would consume more energy, but that is not actually the choice we have. The choice we have is, do we continue trying to run more trains at existing speeds on a congested network or do we build a new line and get the efficiency gains of that? You will find that in relation to the carbon consumption per passenger at high-speed and conventional speed there is no significant disadvantage at all.

Q150 Mr. Eric Martlew (Carlisle): There is the environmental impact of actually constructing the line, though?

Mr Steer: There is, of course, that and that has to be considered and I have to say I think we are in the early stages of understanding exactly what the carbon impacts of those will be.

Q151 Chairman: Mr Brown, would you like to add anything to that?

Mr Brown: Yes, two or three points, if I may? Of course, going faster uses more energy, but a high-speed train is significantly lower carbon than the alternative travel modes of both car and certainly air. In our case we produce more than ten times less carbon per passenger actually travelling, not per seat, than flights between London and Paris and London and Brussels. So you get a lot of the benefits by mode shift. The embedded carbon or the carbon that is created as a result of building lines, we have tried to do some work on this on HS1 and our estimate was that if you amortised that over 40 years, which is probably quite conservative because you are really building these things for at least a 100 year life, it would add about 10% per annum onto our annual carbon footprint. Even the RAC Foundation published a report, I think it was the week before last, and even they admitted that high-speed rail would reduce the carbon footprint of travel in Britain, I think they estimated by about a million tonnes a year, which I would have thought was quite a lot actually. I think the key point is the argument for high-speed rail is not just about reducing carbon and it being greener, it is about rail capacity and economic development, but the good news is it will also help you reduce the carbon footprint of travel generally in Britain.

Q152 Chairman: Dr Hamprecht, is there anything you want to add on the environmental benefits of high-speed rail or otherwise?

Mr Brown: Yes. Thank you, Chairman. I would first of all fully subscribe to what Richard Brown just said that if we manage to gain a significant care of the air market or the market that is today server by aeroplanes, then we have first of all a big reduction in greenhouse gases. I see the specific relevance of the question which was just asked. It is becoming relevant again if you have to decide now, after having principally decided for high-speed, whether it shall be trains at a maximum speed of 175 mph or maybe up to what is today's highest commercial speed, 225 mph. You can have the question once again because the incremental benefit of this additional speed gain - you buy at very high cost and also at very high additional energy consumption while the additional journey time savings at this distance of 300 km are rather five, six, seven minutes. It is maybe not worth that spending.


Q184 Mr. Eric Martlew (Carlisle): Can we go back to rolling stock because I have a number of questions there. The word ROSCO has never passed any of your lips. My understanding is that when they were privatised the idea was the ROSCOs would own the rolling stock, they would buy them, they would then take a risk and decide what they are going to order and lease it to the TOCs. Why have we got this problem now where it is dependent upon Government? Is it Government interference or is it a lack of risk-taking by the ROSCOs?

Mr Collins: I think, to be fair, I said earlier that one of the sources of funding is to get the ROSCOs to start taking residual value risk again. I think the decision on railway procurement or rolling stock procurement has come from the Government. The decision to procure IEP was a Government decision. The decision to procure the additional vehicles for the Pendolino was a Government decision. The train operators would be delighted to have given back to them the ability to go and procure rolling stock and I guess it would be worth asking the ROSCOs if they are prepared to take residual value risk again. I think the way we have arrived at the situation with the rolling stock is not by the ROSCOs' design or by the TOCs' design.

Q185 Mr. Eric Martlew (Carlisle): The situation is that obviously the ROSCOs ended up being owned by the banks and we all know that they are not particularly anxious to lend money at the present time, so that could be the purpose, but what you are saying is that really Government should get out of procurement?

Mr Collins: Yes.

Q186 Mr. Eric Martlew (Carlisle): They should leave it to the ROSCOs, and you believe the market will work?

Mr Collins: I think it will now because what we are looking at - and I am no financier - is assets that have a very long life and in reality given the potential growth in this industry it is a very low risk asset, so it is a safe investment now for investment funds to get involved in. So I think the timing is probably right now, with the environmental issues, with the need to develop the rail network, where the ROSCOs would be prepared to start getting involved again, if they were allowed to. So I think the timing is right to at least try.

Mr Roberts: If I could just complement what Tony has said, I think the model for the railways is going to be a partnership between the public sector and the private sector. The Government should do what it does well, which is to set the broad expectations for the network and to say how much funding they will provide to do that, so what they would expect in terms of the environmental performance for the network, how much capacity they would like to see to meet the doubling in demand we are going to see over the next 20 or 30 years in what is still a growth industry. The private sector, as train operators, brings nous and expertise in running trains, in procuring them jointly with ROSCOs. We have the expertise in terms of the financing and the provision of that rolling stock. That is the partnership we want to see restored where the balance is more appropriate and the Government actually gets less involved in doing the stuff that actually train operators, and indeed Network Rail are best placed to do.

Q187 Mr. Eric Martlew (Carlisle): Can I come back to Mr Collins? We have been talking about the high-speed line and everybody gets gooey-eyed about it, but it is going to be a long time in the future. At the moment you are running a good service on the classic lines. Is it correct that you could actually speed up the Pendolinos without any major investment?

Mr Collins: Yes. The investment in the scale of things would not be that significant, but yes, we could improve the journey times, for example, between Glasgow and London. We could get a lot of those trains below four hours.

Q188 Mr. Eric Martlew (Carlisle): You can cut it down to less than four hours?

Mr Collins: Yes, which then would compete directly with the air market, so there is a potentially big market. We are back to the point about the fact that one of the ways of funding investment is to drive the passenger revenue. So there are opportunities. We are seeing, since we stepped the timetable up in December, new markets developing. Preston, Carlisle, Glasgow is a market which really has appeared which we did not anticipate, so I think there are lots of opportunities to improve what everybody is now calling the classic network. My personal view is, if we were to go for a high-speed line and the decision was taken today, we would be looking at around about 2025. As I said earlier, I think as an industry we will run out of capacity in about 2015/16, so we have to keep investing, but it is not a question of investing in the classic lines or a high-speed line. Actually, as a country, I believe we need both, but we need to make sure we integrate the two together properly.

Q189 Mr. Eric Martlew (Carlisle): My final question. Is it a priority to extend the length of the franchises? Say, for example, we have franchises for 20 years. How does that work if you are going to have a five year break in the contract? Would it actually mean that the rail companies will actually spend more on those lines if we give you a longer franchise, or is that just an argument we will hear now, but once you get the franchise will be forgotten about?

Mr Roberts: If I may, our firm belief is that longer franchises, 15 years normally, perhaps 20, particularly where there is a major investment programme needed, would make the economic terms, the commercial terms for investment by those operators much more favourable than they are now. But a longer franchise is not the only way in which those terms have become much more favourable. Longer franchises have got to be actually smarter franchises in the sense that over longer term there will be additional risks involved in an operator taking on that amount of franchise. So as well as looking at the length of the time period we have also argued, for example, that we need to ensure that the balance of risk, for example revenue risk, over the longer term is shared more equitably between Government and the private sector, not in the free lunch sort of way but in a way which recognises that, for example, operators are not in control of what happens to the economy and if the economy fundamentally changes, either for better or for worse, in a way which is not anticipated when they put in their bids, then the impact that has on demand for customers should be shared, the risks of that should be shared with the Government. So it is not just about longer franchises, which we do think would help and actually would genuinely incentivise the train companies in a way which is different to now to bring forward investment. It is not just about the length of the franchises, it is about the overall terms of those franchises, as we recently reported and as I am sure you will be aware from our recent report.


Q234 Mr. Eric Martlew (Carlisle): I want to just touch briefly on the job losses. Is it not a fact that the Office of the Rail Regulator thinks that Network Rail is not very efficient and they are actually cutting your money and that is the reason some of these redundancies are taking place?

Mr Coucher: The Regulator sets us an efficiency target. We have never disagreed with the amount of cost to be coming out of the railways. The disagreement we had with the Regulator is the speed at which it can come out. There are people around the world who do the same bits of work on a like for like basis a lot better. They tend to be smaller countries and they tend to be where there has been a sustained level of investment from government for many decades, so we have got a period of time to catch up. Our argument was not how we can save money but how quickly it can come out, but we simply do not need all the people we have got. In 2002 when we took over Railtrack we inherited a 4,000 mile backlog in track renewals so for the last five years we have been removing that backlog. That has now gone, so we do not have the same level of work that we need to be getting on with.

Q235 Mr. Eric Martlew (Carlisle): We can take it from that that what you are really saying is that the redundancies are being made over a shorter time than you would like, the Office of the Rail Regulator is insisting on that?

Mr Coucher: No.

Q236 Mr. Eric Martlew (Carlisle): Are they supporting you then?

Mr Coucher: No, at the end of the day we accepted the periodic determination. If we genuinely believed that we could not do what was expected of us safely and reliably, we would have rejected the determination by the Regulator, but we were satisfied that we could meet everything that was required of us in terms of building a bigger, better, high-performing railway for the amount of money we have got.

Q237 Mr. Eric Martlew (Carlisle): Can I come on now to rolling stock and the need for new rolling stock? I think you have commented there is no sense in having a good railway line if there is nothing running on it. Do you think the Government should have a major role in the involvement in rolling stock?

Mr Coucher: Somebody needs to take a lead on working out precisely the rolling stock that is required, not just in the short-term but in the long-term. Rolling stock is a capital decision which will last 40 years, so you have got to be quite clear about the markets you are going to serve, the route it is going to serve, and when you do buy it how it is going to fit with the infrastructure and meeting future needs. That is a long-term planning decision that needs to be taken. Increasingly, Network Rail is getting involved in helping the DfT decide those types of priorities and making sure that we end up having the right rolling stock in the right location with the right infrastructure to meet the passengers' needs, but it has got to be planned and it probably cannot be left to the Train Operating Companies, who will tend to buy stuff which serves local markets and you end up having surplus capacity in the wrong location and driving cost into the industry.

Q238 Mr. Eric Martlew (Carlisle): A final point, totally separate. There has always been a case for dedicated freight lines. Can you see a time when we will actually build one?

Mr Coucher: Perhaps I will ask Paul to say something about this because Paul has looked at this from having a strategic freight network and what it might mean.

Mr Plummer: We have been working very hard with train operators and freight users to develop what we do call a strategic freight network, which is not about purely dedicated freight lines but it is about being clearer on how we are going to use the overall capacity we have to better serve both freight users and passenger users. So we have £220 million of funding in the current Control Period and we will make a case as part of that for further funding in the longer term to move towards that vision of a strategic freight network, which is not, as I say, quite dedicated but it is more intensively used for freight and has the capability in terms of gauge works to enable us to get all of the freight we would need on those routes, but you would not see developing a major purely dedicated freight route in the way you imply.

Mr. Eric Martlew (Carlisle): Thank you, Chairman.

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.

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