Britain's Rail Delivery Group, Comprising the Chief Executives of the Rail Owning Groups, Freight Operators and Network Rail T

Written evidence from the Rail Delivery Group (ROR 01)

1. This is the response of the Rail Delivery Group (RDG) to the Transport Select Committee’s call for evidence on the reform of the railways.

2. The RDG welcomes the Government’s support for the RDG contained in the Command Paper ‘Reforming our Railways: Putting the Customer First’, which was published today. The Paper calls on the Rail Delivery Group to provide leadership to the industry and to respond to the Government’s strategic challenges. The Command Paper lays out the Government’s vision for an expanding and efficient railway that meets the needs of passengers, freight users and taxpayers. The Government sees the Rail Delivery Group leading the industry in driving up efficiency and demand for the railway. This is a challenge that the Group accepts.

3. The Command Paper calls on the Rail Delivery Group to lead the rail industry in working together to deliver a more efficient, more affordable railway. The Rail Delivery Group is pleased that the Government has recognised that the Group is taking and shaping the industry’s agenda for a sustained programme of improved management and running of the rail network.

4. The Command Paper lists the six priority areas being addressed by the Group

• Asset, programme and supply chain management; • Contractual and regulatory reform; • Technology, innovation and working practices; • Train utilisation; • A whole-system approach; and • Industry planning

5. The Rail Delivery Group was created to unlock efficiencies that will improve Britain’s railways. In its first nine months the Group has identified opportunities for a range of savings, for example in asset management through earlier involvement of the operators in planning work on the network. The RDG has also identified efficiencies in major project implementation by involving operators in the early specification

6. The Rail Delivery Group shares the Government’s desire for an affordable and efficient railway. In bringing the industry together the Rail Delivery Group will provide the leadership to capture efficiency opportunities and ensure that the railways have earned their licence to grow.

7. The Rail Delivery Group brings together the owners of Britain's Train Operating Companies, Freight Operating Companies and Network Rail to provide leadership to Britain's rail industry. The Group was set up in May 2011 in response to the call by the Rail Value for Money Study, chaired by Sir Roy McNulty, for the rail industry to demonstrate leadership

8. The Rail Delivery Group is focusing on the recommendations contained in the Rail Value for Money Study for reducing the costs and improving the efficiency of Britain's railways. It is concentrating on industry-wide issues in the context of the need for improved services to rail users and value for money for taxpayers.

9. The priorities being pursued by the Rail Delivery Group are

• Improving the asset, programme and supply-chain management of the rail industry through closer co-operation between Network Rail, operators and suppliers;

• Encouraging contractual and regulatory reform that increases flexibility and allows the industry to respond to the needs of users and taxpayers;

• Embracing technology and innovation in the working environment to enhance the contribution made by one of the industry’s key assets, its workforce;

• Identifying ways to improve the utilisation of the train fleet by reviewing demand management, service specification and operating practices;

• Achieving a quicker implementation of major technical projects by removing blockages and resolving commercial issues through taking a whole system approach; and

• Making a full contribution to rail industry planning by guiding the production of the industry’s Strategic Business Plan in response to the High Level Output Specification.

10. RDG members are representatives from the owning groups of the passenger and freight train operators and Network Rail. The Chairman is Tim O’Toole, Chief Executive of First Group, the vice Chairman is Sir David Higgins, Chief Executive of Network Rail and the Secretary is Graham Smith. A list of the Member companies and representatives is attached at Appendix A

11. The Terms of Reference of the Rail Delivery Group are published on its website and an extract is attached at Appendix B

April 2012

Appendix B

Membership of the Rail Delivery Group

Membership Abellio Anton Valk Dominic Booth (alternate) Arriva David Martin Bob Holland (alternate) DB Schenker Alain Thauvette Nigel Jones (alternate) Directly Operated Railways Doug Sutherland First Group Tim O’Toole Vernon Barker (alternate) Freightliner Peter Maybury Lindsay Durham (alternate) Go-Ahead David Brown Charles Horton (alternate) National Express Dean Finch Andrew Chivers (alternate) Network Rail Sir David Higgins Paul Plummer Stagecoach Martin Griffiths Sir Brian Souter (alternate) Virgin Tony Collins Patrick McCall (alternate)

Secretary Graham Smith

ATOC Michael Roberts

The website of the Rail Delivery Group is www.raildeliverygroup.org

The Rail Delivery Group can be contacted at [email protected] Appendix B

Extract from the Terms of Reference (established in June 2011) of the Rail Delivery Group

RDG will focus on industry-wide issues in the context of the need for improved service to rail users and value for money to the taxpayer. RDG will not duplicate or over-ride the primary accountability for delivery in the UK rail industry (which remains with the passenger and freight train operators and Network Rail) or the need for much stronger collaboration between these companies at a local level.

RDG will co-ordinate the objectives for key cross-industry groups including National Task Force (NTF), Planning Oversight Group (POG) and Technical Strategy Leadership Group (TSLG).

A key initial priority for RDG will be to review and sponsor cross-industry work by POG in preparation for the Initial Industry Plan (IIP) which [was] published in September 2011 including the scope for improvements in Value for Money and overall industry costs.

RDG members will be representatives from the owning groups of the passenger and freight train operators and Network Rail.

RDG attendees will be nominated Chief Executives or Board Directors from each of these groups - alternates will not be accepted without prior agreement of the members. The Association of Train Operating Companies (ATOC) will attend the meetings but will not be a member of the Group

Support for RDG will be provided by the Members and by the cross industry groups which RDG steers. The Association of Train Operating Companies (ATOC), the Rail Freight Operators’ Association (RFOA) and the Railway Industry Association (RIA) would also provide support to the cross-industry groups and provide input to RDG as appropriate.

The Chairmanship and vice-Chairmanship of RDG will be from the group’s membership and would rotate on an annual basis. The initial Chairman of the Group will be Tim O’Toole and the initial vice-Chairman will be David Higgins. The role of the Chairman will be to chair meetings of the group, establish its agenda and represent the views of the group as appropriate. The role of the vice-Chairman will be to deputise for the Chairman when necessary and to represent the views of the group as appropriate.

A part time Secretary will be appointed potentially on secondment from one of the industry members. The initial Secretary will be Graham Smith. The role of the Secretary will be to coordinate support required by the group and transmit its views to cross-industry groups about their objectives and priorities, making use of resources from member organisations as appropriate.

Government and ORR will not be members of RDG but they will be invited to provide input to the group on key issues as appropriate and representatives from RDG will engage periodically with Ministers on key cross-industry issues or on progress with industry reform.

It is recognised that the suppliers to those with a primary accountability for delivery as well as trade unions have a critical role to play and RDG will consider further how their input can be formalised.

Written evidence from Angel Trains Ltd (ROR 02)

Angel Trains Ltd owns, leases and maintains trains for Train Operating Companies. We are the largest Rolling Stock Operating Company (ROSCO) in the country and make a significant contribution to the UK economy.

Angel Trains Ltd owns and maintains more than 4,450 passenger vehicles and 280 freight locomotives in the UK, about 37% of the nation’s rolling stock. Its customers include all 19 franchised train operating companies (TOCs) and two open access operators. Since 1996 we have invested over £3.5 billion in new trains and the refurbishment of existing trains, and are one of the largest private investors in UK Rail.

Our workforce consists of over 100 individuals who are specialists in many aspects of train leasing, from finance and engineering to commercial and customer service. From our offices in London and Derby, Angel Trains Ltd provides expertise in the procurement of maintenance for our leased trains and know-how on the purchase of new rolling stock. In addition to our own resources, we have a network of suppliers and contractors, from large companies through to specialist SMEs, who are sustained by the work we generate for them. Every year we channel over £60m through our supply chain.

One of the roles of the ROSCO is to act as a conduit between the international capital markets and the UK rail industry. The ability to secure financing against a diverse portfolio of assets also offers Angel Trains Ltd, and other ROSCOs, a significant degree of choice in determining the optimal sources of finance to arrive at the most cost effective solution for the industry.

More information about our company is available on our website: www.angeltrains.co.uk

Question - What should be the Government’s vision for the railways in 2020, taking account of likely spending constraints?

Figures released last year by the Association of Train Operating Companies (ATOC) show that passengers are increasingly choosing to travel between Britain's major cities by railway. The organisation also predicts that rail is set to replace air travel as the most popular choice for long-distance travel in the UK1. This modal shift is occurring partly because of road congestion, increased petrol prices, concern about carbon emissions, and increase in security at airports. However, it is also a function of the improvements made in terms of quality of service and customer satisfaction since privatisation.

We believe that the Government’s vision for railways in 2020 should be focused firmly on customer satisfaction, just like any modern service industry.

From a passenger’s perspective this would require Train Operating Companies to maintain their strong performance on punctuality and reliability, for the whole transport industry to work together to ensure passengers see value for money and efficiency from end-to-end integrated transport journeys, and for the customer experience to be maintained and enhanced by continuing investment. Focusing on rolling stock because it is our area of

1 http://www.atoc.org/media-centre/latest-press-releases/shift-from-air-to-rail-heralds-turning-point-in-how-people-travel- between-uks-main-cities-100571 expertise, we know that passenger vehicles have improved since privatisation, leading to measurable, positive changes in passenger satisfaction2 as a result.

Over the course of the next decade Angel Trains Ltd plans to invest in innovation and technological improvements to reduce emissions and energy usage, further improve fleet reliability and performance, and to modernise interiors to meet passenger expectations and to meet the challenge of increasing capacity on the UK rail network.

As such, Angel Trains Ltd was delighted to see the government’s commitment to continued investment in rail enhancements, including rolling stock, in their Rail Command Paper.

Question - How are the targeted efficiency savings (£3.5bn by 2019 on a 2008 / 09 base) to be delivered?

Again, in answering this question we intend to focus solely on rolling stock because it is our area of expertise.

Rolling stock cost the UK rail industry £1.9bn in 2009 / 10, which is 11% of whole industry costs as identified by Sir Roy McNulty.

In the conclusion to his report, Sir Roy recommended that the ROSCOs engage in strategic partnership with the Department for Transport. Angel Trains Ltd has begun discussions with Ministers and officials to establish what strategic partnership would mean in practice, and what benefits it might bring to the taxpayer.

In addition, following the publication of the report Angel Trains Ltd has worked constructively with the Rail Delivery Group and ATOC on its eight point plan. If implemented this would place commitments on the industry (including TOCs, the DfT and on ROSCOs) to:

• Publish a high-level, industry-wide rolling stock strategy. (This should provide greater visibility of supply / demand forecasting, the availability of classes of rolling stock and the underlying requirement for new trains. This may contribute to ending the stop-start nature of the rolling stock procurement process, which McNulty suggests adds approximately 20% to the price the UK pays for its trains, and thus would help to lower capital costs. In addition, a steady order flow should improve the core suppliers’ ability to continually develop their products, thereby improving reliability and reducing whole life costs.).

• Allow franchise bidders greater flexibility to find the best value options for rolling stock.

• Ensure TOCs and ROSCOs consider the standardisation of train designs and /or components to ensure trains can operate on several different routes and in conjunction with several other train classes.

• Permit TOCs to introduce an option into their contracts with ROSCOs to allow rolling stock to be re-leased on the same terms for an initial three years into a new franchise.

• Ensure the industry provides transparency of data including the remedies set out by the Competition Commission in its review of the rolling stock leasing market.

2 National Passenger Surveys (2005-2010), published by Passenger Focus, http://www.passengerfocus.org.uk/research/nps/content.asp?dsid=496

• Encourage TOCs and Network Rail to develop more commercial relationships through alliancing and, in conjunction with ROSCOs, identify better value for money solutions in the train / track interface (the way that rolling stock works with railway infrastructure).

• Ensure the industry is flexible to permit different maintenance solutions to be applied to trains depending on the specific circumstance facing the TOC.

In addition to the above, we would recommend the DfT and the rail industry pursue the following to achieve efficiency savings:

1. As recommended in the Rail Value for Money Report, Angel Trains Ltd believes that it is possible to provide lower cost rolling stock solutions through continued service operation of existing fleets (this will require some additional investment to ensure compliance with accessibility legislation.)

2. We fully recognise that each and every train operator wishes to customise their rolling stock to reflect local operating and marketing requirements. However, a move towards adopting standard European and UK designs could reduce costs for the railway. In addition to the potential savings in capital costs, procuring common platform trains can also bring about a range of benefits relating to the reliability and operating cost of the train.

3. Angel Trains Ltd considers whole life costs in our rolling stock procurement and upgrades. As such we continue to support industry efforts to procure rolling stock on a whole life cost basis. In taking such an approach, items such as maintenance, energy, and staff operating costs need to be considered in addition to infrastructure costs such as variable track access costs.

28 March 2012

Written evidence Angel Trains Ltd (ROR 2A)

In responding to the Select Committee’s call for evidence on the Government’s High Level Output Specification (HLOS) for rail for 2014-19 we intend to focus solely on rolling stock and investment, because these are our areas of expertise. While rolling stock only accounts for a small proportion of whole industry costs, we are very conscious of the need for the whole UK rail industry to work together to reduce the overall unit cost of the sector.

Electrification

1. Angel Trains Ltd wholeheartedly supports the government’s commitment to electrification as evidenced by this HLOS, and agrees with the Department for Transport’s statements that “electric rolling stock has lower purchase, maintenance and fuel costs” and that “Released diesel trains can …… be used to lengthen peak trains and displace older diesel trains on the remaining un-electrified routes.”

2. This support is based on recent experience in, and our long history of, purchasing, financing and maintaining electric units. Almost 60% of our current portfolio is made up of electric multiple units. Furthermore, earlier this year we signed contracts to procure and finance 20 new Class 350 Desiro electric multiple-units worth a total of £131m. Angel Trains first invested in the Desiro class in 2000, and now has a total fleet of 1,017 vehicles. Angel Trains also owns a fleet of 53 Pendolinos which operate on the West Coast Main Line as well as a mix of mid-life electric multiple units.

3. In addition to savings made in the medium term by the purchase and maintenance of new stock, Angel Trains would like to emphasise the benefits of upgrading existing stock in reducing the cost of the UK rail industry. As an example, we have just signed a £7m contract with Bombardier for the re-traction and interior re-design of a

Class 317 unit. This trial should confirm the anticipated benefits of reduced energy usage (including regenerative braking), lower maintenance costs and improved reliability and establish if the whole Class 317 fleet can be developed in this way: a partial alternative to manufacturing new electric trains which would also have an impact on UK rail costs in a shorter time scale.

4. It is important to remember that the ‘bread and butter’ business of the rail supply chain is maintenance and upgrade work, rather than the construction business which tends to make headlines. We would therefore like the committee to note that the diesel trains replaced by new electric vehicles, as well as increasing capacity across the network, will also provide employment for the rail industry, as the displaced stock is refurbished and upgraded for their new role. This is an additional benefit, spread across the UK, which should not be ignored in the current economic environment.

Sustainability

5. Angel Trains also welcomes the Secretary of State’s emphasis on energy and carbon reduction. The rail sector has long been recognised as an environmentally friendly means of transport and the sector will need to further encourage a modal transfer from road to rail (passenger and freight) to help meet the UK’s CO2 emission targets. In conjunction with TOCs and manufacturers, Angel Trains is supporting improvements in regenerative braking, which ensures that surplus energy from the vehicle is not wasted in the form of heat, but is recycled and returned to the supply rail or overhead wire as electricity. We have financed and introduced driver advisory systems, which inform train drivers how they can achieve more fuel-efficient driving. Finally, we have commenced installing energy metering on trains that allows the train operators to measure more accurately the power which they draw down from the over-head line, permitting improved understanding of the trains’ energy usage (and reducing charges).

6. However, in terms of manufacturing and maintenance, Angel Trains Ltd believes that the industry can go even further to use more environmentally friendly materials, more sustainable refurbishment activities and greener disposal methods for obsolete trains or materials. We would be happy to discuss this in more detail with the Committee if that would be helpful.

7. The statement also encourages the rail industry to “set out plans for embedding the rail industry’s Sustainable Development Principles and measuring and reducing the carbon embedded in new infrastructure, throughout the lifecycle of programmes and projects.” Angel Trains Ltd believes that an agreed method of measurement and reporting would be extremely valuable, but would urge Government that the guidelines, when established, be easy to understand, and simple to implement, and do not over-burden industry.

Encouraging private sector investment

8. Angel Trains agree that the electrified spine linking Southampton, the Midlands and North is a major step forward. However, as a significant investor in the UK rail industry (since 1996 we have invested over £3.5 billion in UK Rail), we believe that stable, long term political support for freight (including appropriate grants and subsidies to encourage modal shift from road to rail) are just as important.

21 August 2012

Written evidence from Bluespace Thinking Ltd (ROR 03)

COST STRUCTURE – MARCH 2010 1 Summary 1.1 Total 2010/11 UK franchised rail fares revenue was £6.7 Billion, government support was £3.7 Bn. Network Rail spent £5.7 billion of the £10.4 Bn total and the 19 Franchised Train Operating Companies (TOCs) account for £4.7 Bn expenditure net of franchise charges and access costs (payments and receipts from Government or Network Rail) . 1.2 In this paper we show how this money is spent and highlight opportunities for cost reduction. We conclude “structural issues’ in the industry will limit the ability to make the efficiency improvements identified by the McNulty report. 2 Overall cost structure 2.1 It is mot possible to fully detail how this money is spent but from Network Rail accounts, accounts from some TOCs and information available via the Office of Rail Regulator and from DfT investment business cases it is possible to provide a reasonable estimate of the break down. Our methodology is to reconcile the cost base to the revenue figures in annual accounts. Figure 1 shows the expenditure breakdown.

Figure 1 Overall expenditure breakdown Network Rail 2011 2010 Financing cost & derivatives losses £1.68 £1.67 Staff costs £1.73 £1.75 Contractors costs (track maintenance and upgrade) £1.60 £1.73 Other operating losses (income) £0.25 £0.25 Corporation Tax £0.13 £0.11 Retained for future investment £0.32 £0.11 Network Rail total revenue/expenditure £5.71 £5.62

TOCs Group 2011 Mid range Rolling Stock base cost £0.90 Rolling Stock lease financing premium £0.60 Staff costs £1.35 Power costs £0.35 Other costs £0.80 Other operating losses/ (income) £0.40 Corporation Tax £0.10 Dividends (To shareholders) £0.20 TOCs group revenue/expenditure net of franchise £4.70 costs, subsidy & track access cost.

Total summary 2011 Total true operating costs £6.74 65% Finance costs £2.28 22% Operating losses undefined £0.65 6% Retained for future investment £0.32 3% Tax £0.23 2% Dividends £0.20 2% Total £10.41 100%

3. Financing Costs 3.1 Financing costs (£2.28 Bn 22% of all costs) are a major source of disparity between UK rail and other European networks. Network Rail have £26 Bn of government guaranteed debt on which they paid 5.8% average interest in 2011. Also over the last two years they have lost £0.7 Bn on financial derivatives presumably bought for risk management purposes. 3.2 Because of the franchise system TOCs tend to lease rolling stock for relatively short periods of time. A combination of lease finance and the risk associated with short contract periods add a significant premium to the base rolling stock cost. 3.3 In the evaluation of major new projects the DfT assume that Government will provide the infrastructure and rolling stock capital; interest and lease charges are not taken into account. Where commercial finance is used out turns will clearly not meet original project expectations. Alternative ways of providing Government finance could reduce finance cost significantly but would appear as Government debt in the National accounts. 4. Rolling stock costs 4.1 The manufacture of rolling stock is a competitive international business, purchase costs for a given train specification are similar across Europe. However cost per passenger km varies significantly based on the specification (capacity & speed) and utilisation. UK average passengers/train ranges from 240 on the East Coast Mainline to 46 for Northern Rail Ltd at this lower level of passengers it is not possible to run a rail franchise without considerable subsidy. 4.2 After removal of lease financing premium just £0.9 Bn (9% of all costs) is spent on rolling stock. 4.3 Because of the way value of time is treated in the DfT evaluation method four short trains per hour will appear to have greater social benefit than two longer trains with greater capacity or utilization. However when cost /passenger km is looked at the more frequent, lower capacity, trains are much more expensive to purchase and operate. The DfT analysis approach leads directly to higher fares and greater subsidy than in Europe. 4.4 Zurich and Liverpool provide an interesting comparison. Both have similar urban area populations and regional catchment areas In 2008 SBB ordered 50 six‐car double‐deck electric trains with capacity for 1694 passengers (526 seated) and a top speed of 100mph for Zurich commuter and regional services. In contrast the average age of Merseyside rail’s rolling stock is 32 years and each train carries on average 89 passengers. 4.5 Switzerland has on average 124 passengers/train the UK has 110. Swiss rail subsidy is 28% versus the UK’s 37%. Average Swiss fares are 11.1 p/km versus the UK’s 12.4 p/km. Newer trains result in less breakdowns and a more efficient service. 4.6 The UKs emphasis on track and infrastructure expenditure, the form of franchise contracts and investment evaluation methodology means that current rolling stock is not able to provide effective and efficient rail services in many franchises. 5. 5taff costs 5.1 Combined Network Rail, TOCs, contractor and other staff costs total about £4 billion (40% of all costs). UK average salaries are about 10% higher than in Europe, based on DfT Webtag projections salaries are predicted to increase by 50% in real terms over the next 20 years. 5.2 This means that over the same time period staffing levels would need to be reduced by 55% if the McNulty report’s proposed 35% reduction in costs in real terms is to occur and be maintained by reduced staffing. 5.3 While there maybe scope for reduced staffing through improved working practices this level of absolute reduction is not realistic, the UK appears to have similar staffing levels / passenger km as Switzerland. However by rolling stock changes (higher capacity trains), higher utilisation and passenger numbers it maybe possible to make reductions in staffing cost per passenger km or at least offset the real increase in salaries to hold fares and subsidy level in real terms. 6. Other costs and other income/(losses). Network Rail and TOCs accounts do not indentify the reason for other costs and charges, however it is probable that part of the other cost category is attributable to contracted services; transport police and national ticketing & enquiry services are mentioned in some accounts. We have assumed that 50% of these costs are salary related and are included in our discussion on staff costs. 6.1 The other income/losses category reported in the accounts is equally opaque but maybe of more concern, both Network rail and some TOCs report “other losses” and the £0.4 Bn figure in the table assumes this level of losses across all the TOCs . 6.2 These “other” categories at 12% of all costs (charges) is more than the cost of rolling stock (ex financing costs), twice the cost of power and 5 times the combined cost of corporation tax and dividends. Further investigation by the TSC may explain these costs & losses and establish if it they are reasonable and if they can be reduced to achieve the 35% McNulty target. 6.3 When evaluating major new rail networks it would appear that the DfT do not include an allowance for this “other” category of cost/charge in their economic evaluation. 7. Electricity, Corporation Tax, Dividends, Board costs and Pension deficits 7.1 These costs all seem in line with the size and structure of the industry, they will hopefully decline in relation to the cost reduction in other areas. Having 19 relatively small TOCs, although owned by just 5 parent companies, will raise Board costs and other costs where scale of operation would spread the cost. Concerns about individual salaries or bonus payments appear unfounded. 7.2 We have noted however that Pension funds are generally under funded by about £1 Bn in total, at some point this money will need to come from fares or subsidy. 8. Conclusions 8.1 The Government’s Command paper talks about changes in Franchise arrangements, organisational structures and vertical integration to reduce costs and improve efficiency. 8.2 To make any real difference there needs to be higher capacity and fuller trains. This may be achievable from investment in rolling stock, platform lengthening and making rail a more attractive alternative with competitive fares and better services. 8.3 In our view it is the Government’s own methodology for the evaluation of investment and the way the subsidised industry is funded that cause the biggest impediments to making the UK rail network efficient. Our second paper “Planning assumptions” explains how inaccuracies in demand forecasting are causing over investment in some areas and a lack of investment in commuter and regional services. 4 April 2012 References Office of Rail Regulator Statistics 2010/2011 Network Rail Accounts 2011 Various Train operating Company accounts and other data Swiss Railways SBB Facts and Figure 2011

Further written evidence from Bluespace Thinking Ltd (ROR 03A)

PLANNING ASSUMPTIONS – MARCH 2010

1 Summary

1.1 Why is the UK rail industry uncompetitive? Our first submission reviewed the cost structure of the industry and provided some high-level ideas and analysis. However good demand forecasting is the key to establishing an efficient railway. Investment decisions and franchise contracts are dependant on demand forecasts.

1.2 Over estimates of demand result in over expenditure on infrastructure, higher /passenger costs and franchise contracts that are sub optimal. Under estimates of demand result in over crowded services, a loss in revenue as service capacity is not available, higher/passenger costs and increased profits/dividends under Franchise agreements.

1.3 This paper shows that the current DfT forecasts are not consistent with recent growth patterns reported by the Office of Rail Regulator (ORR)) official statistics and explains why past forecasts have not been correct. The Government contention that long distance rail journeys are increasing faster than shorter journeys is not supported by the facts.

2 Reforming our Railways - Command Paper

2.1 The command paper provides the forecast of passenger demand growth that is envisaged over the next 20 years. – The following abstracts provide a summary.

DfT - Reforming our Railways: Putting the Customer First

Investing in our country’s future

1.16 We predict significant growth in passenger demand into the future.3 Estimates for demand growth by 2030, based on current GDP trend forecasts and fares policy, are set out in Table 1.1

Table 1.1 Growth in passenger miles from 2011

2020 (%) 2026 (%) 2030 (%)

London & South East 17-21 28-34 34-42 Long distance 22-28 39-49 50-63 Regional 8-10 16-20 19-24 Total (average) 17-21 29-36 36-46 Source: Network Modelling Framework (NMF) – estimates based on model runs conducted in October 2011. Lower values in the ranges provided are based on an average of 20% lower than current forecasts. The range of regional forecasts is based on a 10% range around the NMF central case.

3 Office of Rail Regulators’ Official Statistics show a different past trend

3.1 Official statistics from the Office of Rail Regulator do not support this pattern of growth; it is not consistent with what has occurred over the last 15 years.

3.2 The ORR data from 2002 shows in Figure 1 significant growth due to modal shift from air, car and bus but contradicts the DfT Growth assumptions on where the growth has occurred. Although it has had the least investment in service upgrade the greatest growth has occurred in Regional networks then, probably due to substantial upgrade investment, Long distance, London and South East has had the least growth.

Figure 1. Rail passenger km by sector (index) (Source ORR National Rail Trends 20102011) 2.0

1.5 Franchised long‐distance operators 1.0 Franchised London and SE operators 0.5 Franchised regional operators 0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010

3.3 The last 15 years growth can be established from an analysis of rail journeys within and between Government Office Regions (GORs) (ORR National Rail Trends 2010-11). Figure 2 shows that, with the exception of the 2008 spike in within Regional GORs, growth in journeys across all areas and distances have been similar. Since 2002 average journey length for Long distance journeys has slightly reduced with average length of Regional and London & SE & E journeys remaining about the same.

3.4 There is no evidence to show that demand for Long distance journeys has or will increase faster or that demand for rail in the Regions will grow at a slower pace. 3.5 The ORR warn that due to changes in reporting linked to Oyster cards in London and PTE ticketing in some regional cities (e.g. Birmingham, Manchester and Liverpool) the step increases shown in 2007-2008 impacting both “within” and “between” GOR data may not be real. Removing these step changes still shows Regional growth being slightly higher, and then Long distance, with London based growth being a lot lower.

Figure 2. Rail journeys in and between GORs (index) (Source ORR National Rail Trends 20102011) 2.5

Within London, SE and East 2 GORs area.

To/From London, SE and 1.5 East to other GORs (Longer distance) 1 Between regional GORs (Longer distance) (Ex London SE and East) 0.5 Within regional GORs (Ex London, SE and East)

0 1990 1995 2000 2005 2010

4 Establishing inve stment priority

4.1 In 2009/10 65% of UK Rail journeys were in the London, SE and East area, predominantly commuter journeys; journeys within other regions represent 26 % of journeys, 6% are longer distance journeys to/from London and 3% between other regions. The London commuter bias causes the UK to have higher rail costs than other European countries as services are only fully utilised for 25% of the day. Figure 3. Rail journeys 200910 (000s) in and between GORs (Source ORR National Rail Trends 20102011)

Within London, SE and East GORs area. 279,471 To/From London, SE and East to other GORs (Longer distance)

35,577 Between regional GORs (Longer distance) (Ex London 62,244 690,591 SE and East) Within regional GORs (Ex London, SE and East)

4.2 The current priority for new UK rail investment is driven by time saving for business travelers. Since 2000 (the data on which value of time (VOT) is set) significant changes have occurred to both the average salaries of rail users and the extent to which they are able to work on long distance trains. The current 2012 VOT Business time is about £54/hour versus £7/hour for commuters. 4.3 With a lower forecast of demand growth and substantially lower value of time it is not surprising that regional commuter se rvic es are not a priority for inves t ment. 4.4 However they are probably the services that time saving and over crowding improvements would increase passengers, increase fare revenue, show the greatest reduction in cost/passenger, and provide economic benefit by helping people get to work. 5 Why are DfT forecasts not correct? 5.1 The reason that the DfT rail forecasts do not accurately predict rail growth was identified by MVA in March 2007. Their report “Rail Passenger Demand Forecasting Research” Workstream 1, prepared for the DfT, explained that the elastisities to GDP being used were unreasonable. 5.2 MVA made recommendations for changes that were due to be implemented in 2009 however successive Secretaries of State for Transport (Adonis, Hammond and Greening) have persistently not approved the changes although interim growth caps and cautions have been advised but not always been applied. This has had the effect of increasing the forecast demand for long distance rail and its associated investment projects to the significant detriment of investment in regional rail projects.

5.3 The following are abstracts from the MVA report: ‐

3.3.8 We are also concerned at some of the very large elasticities to GDP in PDFH v4.1 at long distances, which are driven in part by the distance term. Table 3.1 below shows the elasticities and also the exogenous growth due to GDP alone (based on an assumption of 2.25% pa growth in GDP per capita) for four different distance bands with typical cities.

Table 3.1 Elasticities to GDP and implied growth in PDFH (non seasons)

Approx Distance Elasticity from Elasticity to Growth from Growth to from London Typical city London London London London

2.6% pa 100 miles Birmingham 1.16 1.80 5.3% pa

Manchester/ 200 miles 2.32 6.1% pa Leeds 2.96 3.3% pa

300 miles Newcastle 1.48 2.12 4.1% pa 6.8% pa Edinburgh/ 3.28 4.8% pa 400 miles Glasgow 2.64 7.6% pa

3.3.18 The following table gives our recommendations for elasticities to GVA per capita for non- seasons.

Table 3.3 Recommended elasticities to GDP – non seasons

From Central To Central Non Central London London London London TCA 1.3 1.3 1.3 South East 1.2 1.2 1.2 Rest of country less than 20 miles n/a n/a 1.2 Rest of country 20 80 miles n/a n/a 1.2

80 – 130 miles 0.7 2.0 1.2 130 + miles 0.7 1.4 1.2

5.4 As the DfT Oct 2011 MNF model runs forecast long distance growth at twice that estimated for regional growth it is clear that some element of the extreme prediction in travel to London is included (5.3% ‐ 7.6% pa due to GDP alone, not including growth due to improved services). The MVA recommendations would lead to more equal growth rates. 5.5 Since the MVA work other DfT consultants have advised that the distance term should be completely removed and various versions of webtag guidance 3.15.4 have been issued with cautions and caps concerning long distance growth forecasts. However the latest version issued in November 2011 rather than following the evidence based consultants advice appears to follow, or justify, the approach taken by HS2 Ltd in their work. This applies a high level cap that does not significantly reduce long distance journeys leaving the forecasting errors and imbalance in place. 6 Conclusion 6.1 DfT passenger demand forecast methodology has consistently under or over estimated growth. Until the methodology is comprehensively audited and amended investment decisions and the commercial parameters of franchise agreements will preclude optimisation of the UK rail system, and the reduction of fares and subsidy.

11 March 2012

References

DfT - Reforming our Railways: Putting the Customer First (March 2012)

Office of Rail Regulator Official Statistics 2010/2011 MVA . “Rail Passenger Demand Forecasting Research” Workstream 1, (March 2007) Further written evidence from Bluespace Thinking Limited (ROR 3B)

1 Summary 1.1 The July 2012 HLOS covers 4 strategic priorities, continued network electrification ‐ including a new freight and passenger “electric spine” route from Southampton to South Yorkshire, capacity and journey time improvements to existing intercity lines, capacity improvements to commuter services and improved links to port and airports. 1.2 Along with £5.2 billion of committed infrastructure projects (Cross rail, Thames link and other upgrades) an additional £4.2 billion has been allocated for extending electrification, the improvement of existing inter city routes, increased commuter capacity and improved ports & airports links. [1] 1.3 In addition during the period up to the end of 2019 the Government plans to spend about £11.7 billion on construction of the HS2 Y scheme. (Although not publically announced this is the figure shown in HS2 Ltd economic calculations that support the Jan 2012 announcement). [2] 1.4 The specification for the enhancement of the existing rail network is based on demand forecasting methodology that did not predict the recent significant increase in rail usage for commuting and leisure. The DfT forecasts assume that demand growth will increase with GDP however over the last few years GDP has not increased and rail demand increases have been as a result of mode shift from air, bus and car, this may be as a result of the economic difficulties or maybe as a result of improved rail services, there is no reason to believe that the increase in rail growth will continue at recent levels. 2 Overcrowding and recent growth 2.1 The starting point for our analysis is to take the latest (July/August 2012) Office of Rail Regulator (ORR) data on overcrowding levels and passenger demand growt h. [3] [4] 2.2 Graph 1 below shows, by Train operator and journey destination, the most overcrowded rail services ranked in priority for investment (top to bottom) by the % of passengers in excess of capacity, during the 3 hour AM peak period. The % of standing passengers on the commuter routes is far higher; although this is unpleasant for passengers and reduces productivity it is accepted tranport pos licy/rail industry practice. 2.3 The graph also shows the % growth in passenger kms (2010/11 to 2011/12) for each of the operating companies. 3 Commuting capacity 3.1 The single most important aspect of the HLOS is that it should provide sufficient commuter capacity into London and the other major cities. The DfT are proposing an increase in capacity during the period of 22% for London and Manchester, 20% for Leeds, 10% for Birmingham and 14% for the other major English cities. Most of the additional London capacity of 119,000 peak time passengers is provided by Crossrail and Thameslink with the growth at other London stations specified at about 10%.[1 ] 3.2 The other cities total capacity increases are just 20,100 additional peak time passengers. Collectively their urban populations are similar to that of London. Based on DfT methodology the significant recent growth in regional rail usage is not predicted, it shows instead that the highest growth will be in long distance rail travel a prediction that is not supported by ORR data. [5] 3.3 In the event the growth level seen in the last year were to continue the HLOS would be totally inadequate however we consider that the specification for commuter growth is probably reasonable although it may result in some regional cities not having sufficient capacity and serious over crowding may continue. We are also concerned that without significant efficiency improvement there will not be sufficient funding for the considerable rolling stock investment required to meet the capacity specification. Graph 1

4 Intercity improvements 4.1 The HLOS proposes improvements to the First Great Western (FGW) long distance services and also improvements on the Midland Main Line (MML) and East Coast Mainline (ECML). As the service with the greatest overcrowding the FGW London service is the highest priority for investment. 4.2 While the improvements on the MML(East Midlands Trains) and ECMT long distance services are logical, based on over crowding criteria, these services are not a high priority for investment. However the proposed electrification of the MML and the introduction of the European Rail Traffic Management System on the ECML (East Coast) will allow these services to be significantly improved and will mean that the HS2 business case will need to be re evaluated as they will significantly reduce the benefits and economic case of that project. HS2 Ltd assumed these improvements would not occur when they developed their economic case. [6] 4.3 Graph 1 shows that further capacity improvement on the Virgin ‐ West Coast Mainline is also not a priority. Although not highlighted in the HLOS the £11.7bn expenditure forecast by HS2 Ltd during the period and the additional £44bn (nominal, money of the day) required to complete the Y scheme need to be considered in evaluating the effectiveness and prioritization of the HLOS. 4.4 The HS2 Y scheme provides about a 200% increase in capacity of the long distance Intercity services currently provided by VIRGIN, EAST COAST and London Midland operators by 2037. It is not clear from the latest ORR data or the assumptions in the HLOS (only 10% growth assumed during the HLOS period) why this extreme level of increase is required. 5 Electrification, electric spine, ports and airport improvements. 5.1 Although highlighted in the HLOS as a key initiative the “electric spine” will not itself have a major impact although it will open up another non London centric route and allow freight a South/North passage away from the main long distance WCML and ECML passenger routes. 5.2 Information on passenger flows between the South East, East Midlands and South Yorkshire is made available by ORR at regional level but information for the areas served by this route are not freely available. However based on a high level view of the ORR data it is probable that an hourly passenger service between Southampton and Leeds stopping at Oxford and other towns on the route would average about 40 passengers/train. The route may also facilitate a mode shift from car and could well require no more subsidy than other similar cross country routes. 5.3 UK freight overall has not grown significantly over the last 15 years and rail freight (mostly bulk, coal, liquid, construction materials) has slightly reduced however a container freight route from Southampton to the North would establish whether rail can attract freight that may currently enter or leave the UK at other ports and use road transport. 5.4 The continued electrification and improved port and airport links make sense and the HLOS makes clear that as individual projects are progressed they need to have a sound economic case. 6 Conclusion 6.1 While most aspects of the HLOS are reasonable the work highlights yet again the deficiencies in the DfT forcasting and evaluation methodology. Business passenger journey time saving are evaluated on the assumption that the average business traveler has a salary of about £78,000 (2012), £70,000 (2010) and is unable to carry out any productive work on a “business orientated” train. At the same time the benefits attributed to a commuter being able to sit down in comfort and work or read on the way to and from work assume their time is valued at about £10,000/year and that there is no differe nce in their productivity whether they can get a seat or not. [7] With this methodology commuter services will remain inadequate and under funded while major projects reducing business journey times on long distance services will appear far more economically attractive than will actually be the case.

23 August 2012

References [1] http://assets.dft.gov.uk/publications/hlos‐2012/railways‐act‐2005.pdf [2] http://www.hs2.org.uk/assets/x/85310 [3]http://dataportal.orr.gov.uk/displayreport/report/html/d4c0d281‐51b3‐4ee1‐815c‐ fe86d3df2f74 [4] https://dataportal.orr.gov.uk/searchresults?ReportSearch=key+stat [5] http://www.dft.gov.uk/webtag/ [6] http://assets.dft.gov.uk/publications/hs2‐strategic‐alternatives‐study‐update/hs2‐ strategic‐alternatives‐study‐update.pdf [7] Note ‐ During evidence to the Public Accounts Committee concerning HS1 the DfT Permanent Secretary advised that the earning equivalent of £70,000 (2010) calculated by Bluespace Thinking Ltd in an April 2010 critique of the HS2 analysis and others similar calculations were incorrect and that in his view this was an equivalent productivity figure including indirect taxation and other productivity uplifts. We have re checked this figure and confirmed that following DfT Webtag guidance it is an “earnings” equivalent, the figure in 2012 money is £78,000. Further written evidence from Bluespace Thinking Ltd (ROR 03C)

WCML Franchise bids. Having reviewed the transcript of the West Coast Main Line Franchise session it was not clear to me if the Committee received clear answers to some of the questions. The following may assist the Committee in its deliberations. Risk There is a far higher risk that the DfT will not receive the full £5.5 billion bid by First than that they would not have received the £4.5 billion if they had chosen the Virgin bid, hence one could say it were riskier. However there is probably a very similar risk with either bid that the DfT would receive any given sum, say £3.5 billion. By analogy if two Olympic women high jumpers each claim they will beat the world high jump record ( 2.09 m set in 1987 by Stefka Kostadinova) one saying they will jump 2.10 the other 2.50 both are unlikely, the 2.50 claim is far riskier but there is probably a similar chance that they will both be able to jump 1.95 on the day, in the Olymics just 12 cms separated the top 10 competitors. Because the bond for First is 5 times greater than that for Virgin does not indicate that the bid is 5 times riskier. It is however more likely that First will forced to default on their bid due to insolvency than would be the case for Virgin. The biggest risk to the eventual receipts from either bid (but not to the risk of default) is the GDP growth forecast provided by the DfT. Because the premium is leveraged to this growth rate if the eventual GDP growth rate is 20‐ 30% lower than forecast the DfT will receive far lower premiums from either bidder. A full risk assessed procurement evaluation should show sensitivities to the bid values under a range of scenarios. The quality and transparency (to some oversight body) of the bid evaluation process is far more important than the outcome of this particular bid. It is not possible, based on what is currently in the public domain, to make an objective assessment of the risk associated with each bid or whether the DfT made the correct decision on a risked basis. Passenger Growth Forecasts In their submissions First referenced the growth on their Transpennine Express as evidence that they could achieve a 6%/ year increase in passenger numbers for the next 14 years on the WCML. Based on Office of Rail Regulator Statistics, passenger journeys since 2005/6 have increased 60% from 15.5 million to 24.8 m in 2011/12. However during this period the track distance included in the franchise has increased by 28% and the train Kms have increased by 30%, these options are not available on the WCML. The passenger increase was 19% from 2005/6 to 2006/7 since when the increases have been declining. The initial growth was due to latent demand, again a situation that does not exist on the WCML, although this was the situation for the WCML following the substantial upgrade.

Transpennine Express growth rate deline 25% 20% 15% 10% Passenger 5% journeys growth rate/year 0%

DfT and rail industry guidance on demand modeling is based on elasticities to GDP growth and does not properly evaluate the impacts on transport markets as they potentially reach a saturation point in travel/head of population. If the WCML franchise follows a similar pattern of growth rate decline as shown on the Transpennine Express the First bid assumptions for growth will not be met.

13 September 2012

Written evidence from Jonathan Tyler (ROR 04)

TIMETABLE PLANNING

Preamble and summary Jonathan Tyler joined British Rail as a Traffic Apprentice in 1962. His career path has been from operations through demand modelling to BR-sponsored university lecturer and then to independent-minded consultancy in a range of transport work. Since 2000 he has specialised in making the case for the importance of integrated strategic timetabling, drawing in particular on Swiss methodology and software for case-studies in Britain. The thrust of this submission is that the existing process of timetabling Britain’s railway is inefficient in itself and incapable of delivering either good use of scarce capacity or an attractive national network of services. It does yield benefits within each franchise, but these are as much to do with advantage to shareholders as to that of travellers and they cannot sum to a coherent whole. The wider public interest and environmental values receive insufficient attention. Structural reform is essential if the railway is to become something more than a loose collection of fiefdoms. The proposed solution is to move from franchises to concessions, thereby acknowledging that strong public specification within a national framework is desirable – while allowing for flexibility in delivery. The timetabling process would be managed by a National Timetabling Authority.

1. Public transport can be provided either as a commercial activity or as a public service. Under the commercial model each business seeks to maximise its market share, uses marketing tools to stimulate demand, aims to maximise net revenue, is vigilant in cutting costs, where necessary without regard, for example, to the wider consequences of withdrawing services, may be innovative, and owes its ultimate loyalty to its shareholders. 2. Under the public-service model the organisation puts more emphasis on maximising market share than on stimulating demand, seeks to optimise general welfare by considering social and environmental value, is mindful of costs but recognises non-monetary considerations, may be innovative, and is ultimately responsible to democratic institutions. 3. The problem in Britain is that we have an uneasy mix of the two models. Neither the McNulty Value for Money study nor the Command Paper offers much clarification, and the latter may make matters worse. 4. In the bus industry the majority of services are run commercially. The operating companies have improved their offer, in some cases to a very high standard with commensurate increases in market share relative to private cars. However, quality remains uneven, fares are deemed to be too high, coordination is poor (partly because of the arbitrary application of laws against anti-competitive behaviour), and the industry has generated little public trust. Substantial profits are paid to shareholders while ruthless application of financial criteria leads to withdrawal of evening, weekend and geographically-marginal services. Provision of supplementary services supported by public funds is stricken by austerity budgets and typically troubled by scratchy relationships with the commercial services. This is not a promising exemplar for rail to follow. 5. The franchise system for Britain’s railway combines features of the two models. Two of the franchises (Merseyrail and London Overground) are essentially public-service concessions, since the infrastructure and the timetable are largely determined by public bodies, and the franchisees are contracted to deliver the service. Revenue-risk lies with the specifying authority. All the other franchises are based on a process whereby bidders propose the price for which they will operate a service outlined by government. The winning company is then free (subject to the terms of the franchise) to operate in whatever way will enable it to maintain the committed premium payments or to minimise support. 6. Under this scheme the Train Operating Companies [TOCs] are constrained by the initial specification and to some extent by public opinion in respect of changes to their offer, especially to the timetable, but few questions are asked about their marketing activities and there appear to be no market-share targets. It is considered acceptable to fulfill the premium commitment and to pay dividends by stimulating new travel and (especially in the peak period) by maximising revenue rather than passenger-kilometres. Because there is no clear and explicit definition of what may be expected in the public interest companies can point to numerous initiatives to meet particular demands – many of which are worthwhile in themselves – while emphasising that – monetary value is the ultimate criterion. 7. The Government proposes to continue this mixed model, with some modifications. It seems likely that the Scottish and Northern franchises will move closer to being concessions, with a significant degree of control exercised by public authorities. That is to be welcomed. For the London commuter and inter-city franchises it is intended that they will have greater freedom in order to reduce the much- and rightly-criticised micromanagement by the Department for Transport. Precisely how this will work has not been properly defined, and hence there is a risk that public-interest constraints will be weakened while private objectives are encouraged. (Ironically these may now include transfers of British public funds to support railways in other countries – an anomaly that must surely be removed.) 8. It is therefore important at this moment to register some significant disadvantages of the current franchise model and to consider some remedies. 9. Disintegration of the national network. Each franchise is treated as a distinct business. The franchises are let sequentially with only limited concern for interactions with neighbouring franchises. There is no constraint on branding, brands are multifarious and unstable, and customer-loyalty is consequently weak. The result is that any communal sense of a national network has become very attenuated (the phrase National Rail is deployed but is almost devoid of meaning). Whether this matters deserves more careful investigation than it has yet received. It may be that highly-focussed regional businesses realise substantial benefits. The offset is that rail is no longer recognised as the universal public service that it undoubtedly remains in some countries in mainland Europe, with the possibility that irritation with a complex and opaque structure hinders the railway’s ability to increase its market share. 10. Confused priorities in marketing. The behaviour of the inter-city TOCs is becoming ever more like that of supermarkets. Both types of business have a fairly fixed number of ‘products’ to sell, with limited scope for satisfying niche markets (supermarkets may claim to offer what customers want, but of course they will not stock what does not fit readily into their large-scale logistics operations), and they both respond by vigorous marketing designed to win customers from rivals and to persuade them to maximise their spend. That is business, although it does raise some social, ethical and sustainability questions that cannot altogether be ignored. More immediately, however, in the railway case the purposes must be queried. 11. Ostensibly the objective is to fill seats that would otherwise remain empty, given that most railways operate (for very good reasons) fixed-formation trains at fixed intervals and that there is nothing more perishable than an unoccupied seat at the end of a train’s journey. Thus far the marketing activity and the associated fares structures are unobjectionable. Yet there are some increasingly concerning downsides. Virtually all of a TOC’s effort goes into selling journeys within its own territory, with the result that place-pairs that happen to involve more than one TOC tend to be offered fewer or less substantial discounts. This raises important equity and regional issues. The fares system necessitated by supermarket-styles of selling has become increasingly unwieldy, to the point where confusion and a palpable sense of being exploited are discrediting both it and the companies who run it. Any reform must be drastic. Frenetic promotions are now commonplace, and one gets the feeling that some companies are primarily focussed on stimulating trips that would not otherwise have been made (ie. by diverting expenditure from non-transport items). That is perfectly legitimate from their standpoint, but it runs counter to the long-term sustainability target to reduce the total volume of travel, and more immediately it diverts effort from the purported government aim to increase the share of the travel market held by rail. The combination of on-line marketing with internet booking systems affords the traveller many benefits and the company valuable tools for planning its services (not least to spread traffic as evenly as possible), but one unintended consequence is the widespread belief that all tickets have to be purchased in advance, must be accompanied by seat reservations and are subject to restrictive rules. The concept of the ‘walk-up’ railway has thus been gravely weakened. The government’s commitment to maintain it is welcome, but active measures are needed to re- emphasise its vital role in making the railway a convenient and credible alternative to the private car. Reform of fares and timetabling must take this into account. 12. Disconnecting the network. Actions by TOCs, no doubt each reasonable from its own point of view, accumulate to undermine a network in which the companies collaborate. Because franchises are let sequentially any one operator is restricted in recasting its timetable by the pre-existing and legally-protected paths of other operators. Some instances only cause minor difficulties, and it is important to maintain some stability rather than be constantly changing timings. Nevertheless the system can devastate the process of radical overhaul that is necessary from time to time – as it did in respect of the East Coast Main Line revision that was both interminable and eventually mediocre. TOCs pay little attention to securing good connections with other operators’ services. It is not a priority for management time because the net-revenue benefits are limited and difficult to discern, while the process for achieving them would often be fraught. The Office of Rail Regulation [ORR] has systematically neglected its duty to facilitate the making of journeys which involve the services of more than one operator. The loss of potential revenue that this entails to the national railway and the social and environmental benefits forgone are unlikely to be trivial, but the narrow focus of each TOC and fear of change are preventing even a study of the issue, despite copious evidence of the benefits of connected networks in a number of European countries. Most TOCs have also ceased to offer useful information about connecting services in their printed literature and on-train announcements. Network-wide maps are not often displayed, and publicity for the facilities offered at a system level is scarce. In one indefensible case a TOC poster shows only its own lines while purporting to assist travellers with their onward journeys. Connections are commonly broken as each TOC seeks to protect its performance statistics. There can be good reasons for not holding trains for a late-running service, but what to the customer look like casual or self-interested actions, sometimes resulting in disproportionate inconvenience and long taxi-rides, have undermined confidence in the collective railway. The effect on demand is unknown, although research suggests that the perceived interchange penalty has increased dramatically (with the perverse effect that through trains are demanded beyond what there is any realistic prospect of delivering). 13. Setting the franchisees free. This is a key feature of the proposed Government policy. It has long been sought by ATOC, the franchisees’ association, and it chimes with a general intention to reduce central control. Little detail has so far been offered as to how it will work, and therein lie some worries. If TOCs seek significant changes to their timetables in order to pursue what they believe to be their customers’ interests (but which will also be driven by shareholder interests) then two things may happen. One is that they will be frustrated by the constraints imposed by other operators’ paths. The other, partly in consequence as compromises are worked through, is that the changes will degrade the offer by varying standard-hour paths, creating gaps and nibbling at the edges of evening services and geographic spread. This will then bring the Department back in, because public criticism will have to be faced. The issue will become critical if, as some comments suggest could happen, TOCs try to withdraw services from secondary stations or flows in order to concentrate on the big flows that maximise profit. These potential problems will be exacerbated because no precise definition of the public interest has been offered by any government running the present franchise process. There is neither a modal-split target to underpin the public involvement in the railway nor any framework of standards of service by which to measure whether particular communities are receiving a good, fair or indifferent quality of public transport. Franchisees will only be incentivised to pursue innovations which happen to fall within their territory and happen to be advantageous to them. The industry will still lack an overall view such that wider initiatives for new service patterns and inter- connections or, say, for some clearer differentiation of service-types can be explored. 14. What then are the remedies for the unresolved contradictions in the franchising model ? Neither the Government nor the current industry players have any inclination to resort to major structural changes. This is despite the fact that many informed observers have become convinced that further tinkering evades the reality of the failure of the fragmented and contractualised railway and despite what appears to be a consistent majority in public opinion in favour of reunifying, or even renationalising, the railway and thus explicitly confirming its public-service status. What follows is therefore based on an attempt at reform in pursuit of a key objective without resorting to comprehensive change. 15. The steps in the reasoning are these. Any vision of a railway that takes an increasing share of the market, that contributes significantly to real long-term sustainability (by minimising transport’s use of resources and damaging emissions) and that affords every citizen a reasonable standard of accessibility for a fulfilling life must be centred around a coherent national network (which could well extend to public transport as a whole). A national network implies that the component parts will function as an entity in respect of the service offer, common standards, ease of use and the perception inculcated in public attitudes through consistent presentation and branding. It is perfectly possible for the network to be delivered by different players so long as they work collaboratively – while retaining freedom in respect of any matters that do not detract from the national system (this is more or less how London Buses functions). The very costly process of delay-attribution could usefully be cut back in a unified network. The timetable is the central feature of the product offered by public transport and a fundamental element in the operation of a disciplined railway. This needs to be recognised more explicitly. In particular, Britain can never have a high-connectivity timetable with well-delineated services and easy-to-understand repeating patterns unless the existing process is comprehensively reformed. In parallel it is becoming increasingly clear that the capacity of the railway can neither be used efficiently nor expanded effectively if pathing is no more than the cobbling together in a rigid legal process of the demands of an uncoordinated set of players each seeking its own independent advantage. The conflict between franchise and open-access requirements is a particularly pernicious example of inefficient use of resources. These aspects were acknowledged in the McNulty review in the form of a need for system-level functions within Network Rail and for some form of ‘guiding mind’ in timetabling. Such weaknesses can only be addressed by moving from the franchise concept to a concession system. The timetable would be planned centrally using well-established principles and methodologies in order to realise all the benefits of an integrated system, including opportunities for ‘clean-sheet’ recasts to optimise outcomes. Service-delivery would continue to be contracted out. This would in turn enable the entry of a wide variety of operators, since it would no longer be necessary to offer large franchises, and particular services could be taken on by, for example, local or cooperative organisations. 16. Responsibility would rest with a National Timetabling Authority [NTA]. Its remit would be to balance all the requirements for paths in the way best calculated to optimise the use of existing capacity and to guide its enhancement. This body would: take over the specification of the public interest from the Department of Transport, whose role would be to lay down overall policy; consolidate (and hence secure economies in) the overlapping timetabling activity now undertaken by the Department, Network Rail, the TOCs and other players; receive representations from all interested parties, including businesses with market experience and organisations of users; work systematically and consensually to consider every aspect of services, including market potentials, connectivity, accelerations and resource utilisation; and devolve many detailed tasks to regional bodies. 17. Network Rail would continue to manage the infrastructure and would work closely with (and probably be best co-located with) the NTA. Access-rights would be determined as an intrinsic element of the timetabling process and no longer require a distinct legal process, but ORR would retain a referee and appeal function in order to ensure non- discrimination, especially with respect to capacity for freight trains. The Department for Transport would manage the concessions process based on the specifications of paths drawn up by the NTA, including arrangements for adjusting terms when timetables were altered for system reasons. 18. This does not claim to be a fully developed proposition. Plainly it would require extensive reorganisation and probably statutory powers, although with a degree of goodwill and cooperation it could begin to function immediately on a provisional basis. The point however is that the Command Paper represents the fourth attempt to make the fragmented railway work, and once again analysis suggests that it contains the seeds of the next failure. 19. That will be particularly the case if no action is taken to address a system of timetable planning that is cumbersome, inefficient and incapable of delivering an effective national network. The alternative vision of an integrated pattern of regular and connected services delivered in the public rather than in the shareholders’ interest must surely merit consideration at this time since it would very probably reduce costs and increase revenue. 20. There is no reason to believe that this structure would be incompatible with European Union law as it now stands, since most mainland railways continue to offer a unified service. It might however be necessary to challenge further liberalisation, given that the evidence that that will secure the style of public transport appropriate for a sustainable future is very thin.

11 April 2012 Written evidence from Mr R J Parr (ROR 05)

THE IMPACT OF 1st CLASS ON CROWDING ON UK TRAINS

1. EXECUTIVE SUMMARY

1.1 There is substantial anecdotal evidence that the comfort of passengers on UK trains, both intercity and commuter, is being compromised by the excessive provision of first class carriages. Standard class passengers are regularly required to endure crowded carriages whilst at the same time there are often plenty of empty seats in first class carriages.

1.2 Trains with first class carriages (or even with a few larger than standard class seats) will have a sub‐optimal total passenger capacity. Thus, when constantly increasing passenger demand is outstripping the supply of train seats, total carrying capacity could be increased significantly by converting first class accomodation to standard class.

1.3 The available evidence suggests that first class carriages run at lower occupancy levels than standard class. This leads to unnecessary crowding in standard class and, at the margin, to standard class passengers having to stand. This would seem bad enough when the first class carriages have some empty seats but is especially aggravating to those affected when first class has low occupancy.

1.4 The Train Operating Companies will not make available such information as they have regarding occupancy levels in first and standard class or the numbers of first and second class tickets sold, citing commercial confidentiality. Given the higher fares charged for first class tickets it is understandable that revenue figures are sensitive. However the utilisation vs capacity figures are a matter of genuine public interest and are not in themselves commercially sensitive.

1.5 Without reliable statistical information it is difficult to recommend any particular course of action with confidence. Simple observation, however, would suggest that demand for first class travel could still be satisfied by replacing at least one first class carriage with a standard class carriage on most intercity trains. This would, in turn, significantly increase the availability of standard class seats and reduce crowding at most times. Moreover, since the average passenger would benefit, consideration should also be given to the total abolition of first class carriages.

1.6 At the very least, the TOCs should be required to submit such information as will enable the Committee (and the public at large) to better assess the efficiency with which train seats are provided to the travelling public. In addition, further research into the travelling public’s attitudes to first class travel should be commissioned.

2. ANECDOTAL EVIDENCE

Anyone who travels regularly by train cannot fail to notice the preponderance of empty seats in first class carriages. This is particularly noticeable on intercity trains where most passengers embarking at a London terminal have to endure the long walk (or run) past the (frequently empty) seats in first class to reach standard class. There, they will often discover very high levels of occupancy – to the point where finding a seat may be all but impossible. Many intercity trains leave London with standing room only in standard class – and yet rarely with first class being anything close to full.

3. INFORMATION REQUESTS TO TOCs

3.1 No train operator that I have contacted is prepared to reveal their occupancy levels by both first and standard class, citing commercial confidentiality. Whilst it is understandable (if not necessarily acceptable) that they should not wish to disclose revenue figures, I can see no good reason to withhold occupancy level information.

3.2 Other information which could reasonably be provided to assist an inquiry into the first/standard class question includes the percentage of pre‐booked seats, the occupancy levels at the start of any particular journey and the number of first class passengers resulting from upgrades (see para 11. below).

3.3 Whether or not the TOCs provide the requested information it might be appropriate for the ORR to commission an independent survey on train occupancy levels and on attitudes towards first class.

4. WHY FIRST CLASS AT ALL?

4.1 First class carriages have been provided on UK trains since the earliest days of railways. By the time third class was renamed second class in 1956 the term ‘second class’ had largely disappeared. Second class was renamed standard class in 1985.

4.2 There are a number of reasons for continuing to offer first class carriages. Customer surveys* site the guarantee of a seat, more comfortable/spacious seats and additional facilities such as complimentary drinks. Another obvious reason is the quieter atmosphere, more conducive to working on a train.

*e.g. Ipsos MORI for London TravelWatch, July 2010

5. TRAIN OPERATORS

From the train operators’ perspective, first class provides a ready means of boosting revenue. Whilst the information to assess the profitability of first class vs standard class is not available publicly, it might be assumed that train operators, who are under no statutory obligation to provide first class seats, only do so because they deem it worthwhile. In fact there is evidence that operators have responded to demand by reducing the number of first class seats on commuter routes, although this would not appear to be the case on intercity trains.

6. OFFICE OF RAIL REGULATION / DEPARTMENT FOR TRANSPORT

6.1 The ORR say that they do not have a breakdown between first class and standard class rail travel. Given the level of customer complaints about overcrowding in standard class one might expect them to have inquired into this area.

6.2 At the time of the 2010 announcement of an £8 billion investment in more than 2,000 new carriages for the national rail network, a spokesman for the DfT was unable to say how the carriages were to be configured. Whether the DfT has any views on this matter is unclear.

7. QUIET CARRIAGES

The popularity of standard class ‘quiet’ carriages suggests that there is considerable demand for the quieter atmosphere normally to be found in first class carriages. Indeed it seems likely that many first class customers would be satisfied with a standard class quiet carriage if more were provided. Undoubtedly, there is a point at which most first class customers could no longer justify the price premium of a first class ticket to a seat in a standard class quiet carriage.

8. THE FIRST CLASS SUBSIDY

It is widely believed that first class ticket sales effectively subsidise the cost of standard class tickets. However, this is debatable – certainly if the social costs imposed on passengers forced to stand are included. Given the lower seating density of first class carriages and the additional staffing costs, the marginal cost of carrying a first class passenger is significantly higher than a standard class passenger. Again, relevant information is required from the train operators to assess the contribution of first class to overall profitability.

9. CLASS IMBALANCE

9.1 The benefits enjoyed by travellers in first class come at a price for the majority who cannot afford (or justify) the expense of first class travel. This price is regular over‐ crowding in standard class – often to the point where passengers are forced to stand. Because of the lower number of seats in a first class carriage, yet finite number of carriages in each train, every first class carriage reduces a train’s potential capacity. In the case of Virgin’s current 9‐car Pendolino set, capacity could be increased by around 20% if all carriages were standard class.*

* Virgin’s Pendolino trains are configured as five standard class carriages with 46, 62, 48, 62 and 72 seats respectively (allowing for the driver’s cab and a baggage compartment in the first carriage and a buffet area in the third car) and four first class carriages providing 46, 44, 37 and 18 seats respectively (including the kitchen, baggage area and driver’s cab in the last carriage). Thus a full Pendolino set has 145 first class seats and 294 standard class seats – making a total of 439, around 90 short of the maximum possible if all were standard class.

9.2 Ignoring any financial arguments, it is clearly unreasonable for a train to carry just a handful of first class passengers whilst at the same time forcing some standard class passengers to stand. Whether a first class occupancy level of 20‐30%, say, is reasonable in such circumstances is clearly a matter of opinion but for the passenger who is obliged to stand for all or part of his journey, having paid a reasonable price for his ticket, the sight of a single unoccupied first class seat is bound to be annoying, at the very least.

10. DECLASSIFICATION OF FIRST CLASS

Certain train operators have responded to the problem of overcrowding in standard class by declassifying one or more first standard class carriages on an ad hoc basis. This allows standard class passengers who would otherwise be forced to stand to get a seat, improving their comfort and that of anyone else wishing to move along the train. Indeed this may well boost takings at the buffet car. On the other hand, any first class passenger in such a carriage who is unable to move into another first class carriage is eligible for a differential refund. The amount repaid in these circumstances is not disclosed but the evidence of East Coast Main Line, for one, in response to an FIO request in 2010, was that “declassification of first class travel is an extremely rare event”.

11. UPGRADES

Another way in which train operators attempt to fill empty first class seats is to offer upgrades, both in advance or on the day. An upgrade on the day of travel is usually a lot more expensive than if pre‐booked. However these upgrades are not available on peak time trains and consequently do not solve the problem of overcrowding at the very time when it is most likely to occur. Of course, a passenger is always free to upgrade at the full marginal cost – usually such a large amount as to make even the most affluent think twice!

12. CARRIAGE CONVERSION

One way to deal with the issue of crowding would be for train operating companies to convert at least one of their first class carriages to standard class on every full train set. In the case of Virgin’s Pendolino sets, for example, this would increase total standard class seats by at least 62 seats and reduce first class seating capacity by at most 46 seats. If current average utilisation rates in first and standard class are assumed to be 35% and 65% respectively, first class occupancy would increase to 51% whilst standard class would drop to 54% ‐ assuming no passenger switches class. In other words, first class, which is inherently more comfortable than standard class, would remain less crowded than standard class. If two carriages were converted, the occupancy levels would become c85% and c45% respectively. This suggests that at peak times first class would reach capacity – although this could be readily ‘managed’ by reducing the number of ‘discounted’ first class tickets sold.

13. ABOLITION OF FIRST CLASS

13.1 The most extreme reform would be to abolish first class altogether. Whilst this would substantially increase seat capacity on intercity trains, there could be a significant cost to the train operators. This would depend in part on the first class / standard class price differential, and also on the number of first class passengers deciding to no longer travel by train. Of course it is possible that some of the shortfall would be made up by additional passengers choosing to use the train in the knowledge that they would, in the immediate future, be less crowded.

13.2 Given the level and regularity of overcrowding, the case for abolition of first class on commuter trains is a lot stronger than for intercity trains. London TravelWatch, for one, has said that first class carriages on London commuter trains are unnecessary and should be freed up to increase capacity for everyone, especially at peak times. LTW’s own survey indicates that 90% of first class travelers would travel standard class if first class was abolished.

13.3 Abolition of first class on intercity trains would undoubtedly cause some first class passengers to switch to car or plane. However, as already noted, if the number of ‘quiet seats’ was increased to compensate, the loss of first class passengers might not be significant.

14. ROUTE DIFFERENCES

The make‐up of trains differs widely from route to route across the country. However the basic points set out in this paper are likely to apply to most routes; in particular, the anecdotal evidence of overcrowding in standard class and underutilisation of first class is apparent countrywide.

15 April 2012

Personal Note

My own experience of train travel in the UK spans 50 years, starting as an unaccompanied child visiting my grandparents in North Wales, many years of business travel (in both first and standard class) and as a regular leisure traveller – again in both first and standard class. My normal practice these days is to pre‐book a seat in standard class and, when I deem the cost reasonable, to upgrade to first class. The abolition of first class would hold no particular fear for me – so long as it was accompanied by an increase in the number of ‘quiet’ seats in standard class.

My mother relates the story of my great‐grandfather waiting for a train with a friend, both with second class tickets. As the train pulled in, his friend turned to him and said “wasn’t that your son in first class?” to which the response was “Yes, he has a rich father!”. My son has to pay for his own train tickets – and, I suspect, has never purchased a first class ticket in his life. Written evidence from North East Combined Transport Activists Roundtable (ROR 06)

Introduction

NECTAR, the North East Combined Transport Activists Roundtable, is an open, voluntary, umbrella body, established to provide a forum in which the many organisations with an interest in sustainable transport in all its forms can develop a co-ordinated view on contemporary transport issues.

The NECTAR area of interest covers the North East of England from the North Sea coast to the Pennines and from Scotland to North Yorkshire. NECTAR provides a voice for dialogue with government, transport providers, transport users and similar bodies concerned with transport and related policy and practice locally, nationally and internationally. Membership of NECTAR is open to organisations which: Ó support the use of sustainable transport and sustainable changes to the transport infrastructure Ó broadly support integrated transport and land use policies which reduce the need to travel Ó promote better provision for public transport, walking and cycling Ó seek to minimise any negative environmental or social impacts of transport, whilst maximising accessibility, safety, good health and quality of life for all NECTAR is one of a national network of Transport Activists’ Roundtables working together with the Campaign for Better Transport, railfuture and similar national bodies that share the core aim to promote sustainable transport.

1. What should be the Government’s vision for the railways in 2020, taking account of likely spending constraints? How should the balance be struck between the taxpayer and the farepayer in paying for the railway? People able to exercise choices in their personal travel opt overwhelmingly for their cars. The consequences of these choices range from congestion with resultant delay, air pollution and its health effects, death and injury resulting from accidents, increasing levels of obesity resulting from lack of physical activity, and the financial and social costs that accrue through the exclusion of those unable to drive or without access to a car. The present level of car travel is not sustainable, given the need to curb carbon emissions and the likely decreasing supply of oil. These limitations will also apply to freight transport. The Government's vision for the railway should therefore be to provide attractive alternatives to the car, in conjunction with other sustainable modes of transport, thereby enhancing the travel choices available. The command paper Reforming our Railways: Putting the Customer First sets out the Government's vision for rail as follows: Ó offer commuters a safe and reliable route to work; Ó facilitate an increasing amount of business and leisure travel; Ó support regional and local public transport; and Ó transport freight around the country. The command paper admits that rail transport is both greener and safer than road transport. We agree with these objectives, but feel that rail alone will not achieve the first three bullet points relating to passenger transport. To deliver on its potential, passenger rail must be integrated with other modes of travel so as to achieve the convenient door-to-door journey that travellers expect. Necessary measures to encourage transfer to rail will include car parking at stations, improved bus links and better active travel access to stations. We would propose that new franchise agreements should oblige operators to grow their share of the journeys made in their principal markets. We would add to the vision easy ticketing, especially across different modes, fares that are attractive when compared with the direct costs of less sustainable modes of transport, and trains with sufficient capacity to carry the numbers of passengers already travelling by rail together with those that industry forecasts expect in the future. To enhance the attractiveness of rail travel to passengers, the industry should ensure that changes to ticket retailing, staffing and facilities at stations appeal to people rather than being undertaken for the convenience or financial gain of the operator, or arbitrary concepts of acceptability to tax payers. This will require a rigorous analysis of issues such as fare evasion so that measures imposed do not offend or deter legitimate passengers. There needs to be a recognition of the importance of staffing to the confidence of travellers. Manned station booking offices are in reality very much more than human ticket machines Booking office staff provide information, answers to questions arising from the complexity of the current fares system, access to facilities such as waiting rooms and toilets, support for less confident travellers and an overall sense of security. Active travel aside, it must be accepted that all modes of transport, even rail travel, have environmental costs. The vision should therefore be part of a wider strategy to reduce the need to travel. The command paper and fares consultation identify a better offer for flexible and part time workers. A more significant impact is made by the location of housing, employment locations, shopping centres and leisure facilities. It is regrettable that recent changes to the planning system (the abolition of the regional spatial strategies together with the new National Planning Policy Framework) have made this objective, to lessen the need to travel, more difficult to achieve. The final part of the vision is the Government's localisation agenda and DfT's commendable desire to decentralise the commissioning and management of rail franchises. The shaping of rail services in the localities that they serve is a very necessary step in making those services more attractive to potential passengers, but this will work best if complementary modes of transport can be integrated imaginatively so as to provide more numerous and convenient door-to-door journey options for travellers. We suggest that the following principles should underlie the division of costs between farepayer and taxpayer: Ó The identified cost to the traveller should reflect the economic, social and environmental costs of making the journey. This would require that the costs of land, construction, maintenance, policing, congestion, greenhouse gas emissions, pollution, and other adverse health effects. Death and injury resulting from accidents, and increasing levels of obesity resulting from lack of physical activity should also be factored in to the identified cost of motoring. Ó Sustainability should be a decisive factor in comparing cost distributions between modes, investment and pricing decisions. Ó Government should not be able to impose fare increases above inflation (determined using the same criteria as for pensions, benefits, etc.). Any change in the ratio of farepayer to taxpayer funding should be achieved through organisational and operational efficiency improvements. Ó A key objective of changing the balance of fare to tax funding should be to ensure that sustainable travel modes become progressively cheaper relative to the cost of motoring. It should not be forgotten that fare payers are taxpayers too and indeed often motorists as well. Neither should it be forgotten that not all taxpayers are motorists. Around England some 30% of households do not have access to a car; many more individuals do not have access to the one car in the family for the journeys that they need to make. Currently all modes of transport are subsidised by “the taxpayer” to some extent, even if only through the provision of made up (and often inadequately maintained) footpaths. The command paper makes several mentions of aligning the incentives of the various players in the industry so as to bring down the overall costs of the railway. We suggest that fares should be reduced in real terms at the outset, so that the cost to the taxpayer falls as the industry has to become more efficient in order to make a profit. This will give Government the necessary incentive to ensure that a reduced contribution by the taxpayer is delivered.

2. How are the targeted efficiency savings (£3.5bn by 2019 on a 2008/09 base) to be delivered? What will be the consequences? The Government is clear that the costs of operating the railway are too high and need to be reduced. This determination is nothing new: the Strategic Rail Authority's second strategic plan issued in January 2003 had as a central aim the requirement to reduce total industry costs. That operating costs remain too high demonstrates that this will be a tough nut to crack. Thus, it is entirely possible that efficiency savings will not be delivered, but that costs will be cut at the expense of service quality and extent (for example, by closing booking offices, reducing off-peak services, and reductions in the cleaning of trains and stations). A key organisational efficiency that could be achieved is the termination of the internal money redistribution achieved through ‘delay attribution’. This wasteful activity employs 600 staff in Network Rail (RAIL 693, Apr 12, Page 49) and no doubt a similar number again if not more across the operating companies. European railways do not engage in such unnecessary and wasteful activity. Possible saving 1200 x £40,000 (salary +on-costs) + overheads at say 100% = around £10 million per annum. A rigorous review of perverse incentives should be carried out and all pointless internal money transfers eliminated. For example, a major contribution to the downfall of GNER was reported to be the improved performance achieved by Network Rail that resulted in significantly reduced ‘compensation’ payments to GNER. If anything, operators should contribute to, rather than be ‘compensated’ for track improvement works for which Network Rail need possessions. The McNulty review recommended that infrastructure management be let out to third parties on a long term concession basis. While this is different to the contracting out of maintenance responsibilities that Network Rail inherited from Railtrack, it should be remembered that bringing maintenance activities back in-house saved sums of money comparable in magnitude to the efficiency savings now being sought. We have not seen any convincing demonstration that the proposed concession system will reduce costs. 3. Will the reforms to rail franchises proposed by the Government, including alliances, deliver better services at lower costs? We believe that a major contributor to the present inflated costs of running the railway is the fragmentation resulting from the current structure of the industry. This requires a complex arrangement of contracts, which have to be policed by expensive armies of lawyers and accountants. We are not convinced, therefore, that the proposed reforms, which entail the creation of more bodies such as the Rail Delivery Group, will necessarily reduce industry costs. We note that the DfT cold shouldered the McNulty recommendation to establish a change management team. The reported restriction of the Executive Summary of franchise bids to 1500 pages spells out the inefficiency of the underlying contracting process. Alliances built on legal agreements will multiply the legal costs and the resolution of disputes will further add to the internal inefficiency of the process as, for example, the delay attribution costs noted above. Such proposals as Alliances represent a managed situation; to ensure that any gains are not simply creamed off into operator profit, profits allowed would also have to be managed. Whilst Network Rail (a not-for-profit organisation) may seek to improve for the benefit of rail users, the primary motive of the operators is likely to remain profit extraction. We might take note that from a freight operator’s perspective, alliances are not viewed with enthusiasm. That said there are some natural geographic areas (eg Scotland) where an alliance between Scotrail and Network Rail Scotland may help reduce the internal friction at the interface. However, rail decentralisation (local franchises etc) will immediately increase the fragmentation! The Government's vision depends on the private sector organisations which deliver rail services (train operators, rolling stock leasing companies, maintenance companies, etc.) accepting the need to do so at significantly lower costs. An early test of their willingness will come with the bids for the three franchises currently in play. Now that a Government owned organisation, Directly Operated Railway, exists, it could be tasked with preparing properly costed and financially sound bids in the forthcoming franchise competitions. This would give DfT an invaluable “value for money” check on the bids it receives. 4. How should fares and ticketing be reformed? The present system of fares is too complicated to be fully understood by rail retail staff, let alone passengers. The last attempt at reforming the system resulted in very little improvement. The industry is not always very good at collecting fares, for example on overcrowded local services where the conductor cannot physically get along the train to sell tickets. Misdiagnosis of such situations as fare evasion leads to solutions being adopted that are inappropriate and ineffective. Rail fares have appreciated well ahead of inflation while the costs of driving have remained flat in real terms. The aim of reform of fares should be to reverse this situation so that more sustainable modes of transport become progressively cheaper. For people who have access to a car, and have already paid the capital cost of the vehicle together with tax and insurance, the marginal cost of each journey is that of the fuel involved and, potentially, parking charges at the destination. Multiple occupancy reduces this cost still further and makes rail travel even more expensive by comparison, albeit railway initiatives such as family railcards have ameliorated this situation. Fares policy should be designed to attract new travellers to off-peak services and indeed peak time services where the journey is transferred from the car. The government policy is perverse in that it works counter to the whole mode shift, low carbon sustainable travel thrust of the same government. The proposition that passengers should be rewarded for avoiding the most crowded trains is dubious in that overcrowding makes for an unpleasant journey and therefore is already an incentive to change travel patterns. Without a clearer steer to employers, who seem reluctant to embrace flexible working, increasing fares for peak hour services is unlikely to make much impact. For commuters and other regular travellers, smart ticketing systems offer significant benefits. Oyster type smart cards have proved overwhelmingly successful in London, and are now on the agenda of most major cities. In the North East, Nexus is introducing the Pop smart card, and the associated ticket machines and card readers are starting to appear at Metro stations. The Oyster regime, with capped daily fares will undoubtedly prove attractive and have a have a proven record. It is difficult to imagine part time season tickets being similarly successful.

5. What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities? On their own, local authority areas are too small for individual authorities to exert any practical influence. The abolition of the regions, which would have had the right size to commission and manage franchises, makes decentralisation more difficult. Expecting sufficient numbers of PTE's and shire county and unitary transport authorities to have adequate commonality of interest to make workable consortia is difficult to believe. Moreover, ITA’s/PTE's, having more resources and expertise, will inevitably dominate. In London, the Mayor and TfL are bidding to control all rail services into the capital, even those originating well outside its boundaries. Congestion and air quality issues provide powerful incentives to get this right. The Greater Manchester combined authority initiative is one way of emulating the situation in London. Responsibility must be accompanied by adequate resources to ensure that appropriate provision is possible. In itself, though, resourcing groups of smaller authorities will be an inefficient process as it will require trained staff to discharge the same tasks at a greater number of places across England. This will almost certainly result in a significant increase in numbers employed to achieve the current result, let alone any improvement.

16 April 2012

Written evidence from Railfuture (ROR 07)

Railfuture is pleased to submit this response to the Reforming the Railways inquiry that has been prepared by the Policy, Lobbying & Campaigns Committee.

Railfuture is a national voluntary organisation structured in England as twelve branches and two national branches for Scotland and Wales.

Introduction: It is difficult to define the extent to which the railways are subsidised and how much is taxation and how much is investment. Taking into account the large sums of money which the industry returns to government through taxation, premium payments and profit sharing arrangements, it is clear that the net cost of the rail industry is significantly less than the figure currently being used to determine fares policy and that assumed by the Sir Roy McNulty inquiry. Including indirect taxes, it is now estimated that Network Rail alone pays taxes under 19 different headings, many of which British Rail did not have to pay as a Nationalised company and many of which would not have been in place when British Rail was in existence. One such is Industrial Buildings Tax, which Network Rail has to pay on structures like bridges, tunnels, viaducts and even embankments. Furthermore, unlike the privatised railway, British Rail did not have to pay insurance let alone insurance tax. This is not a plea for not taxing the railway but drawing attention to the fact that it is not possible to compare the cost of British Railways with the cost of the railways now.

Question 1: What should be the government`s vision for the railways in 2020, taking account of likely spending constraints? How should the balance be struck between taxpayer and the fare-payer?

1.1 In 2020 the government should look to having the major schemes that are either under construction or on the drawing board completed within this timescale.

1.2 Thameslink upgrade, Crossrail, Great Western & the North West Triangle electrification, Northern Hub, Reading and New Street stations should all be completed and working as required. The government should have in place a strategic plan for the future development of the rail network, which lines should be developed, which should be expanded under the strategic freight network, which are suitable for conversion either to light rail or tram-train operation and the infrastructure developed accordingly.

1.3 Rolling programmes for electrification and capacity enhancements should be in place. The speed of implementation would be adjusted to suit the financial situation but work should not be stopped. In the past, the stop start policy has been costly with the break up of construction teams and assembly lines, requiring it all to be put back together again before work can restart.

1.4 In 2020 the most pressing need will be for the provision of more capacity. External factors will generate continued strong growth in demand for rail transport. Population growth, higher oil prices and the trend away from car ownership will all play a part in further mode shift to rail. About one third of young people under the age of 26 do not now own a driving license and the number of men up to the age of 39 and women up to 29 in possession of a driving license is reported to have been falling for the last ten years.

1.5 Railfuture is concerned that the government has under estimated the future cost of oil from an assumed low figure of $75 per barrel to a high of $170 in 2030. This seems grossly unrealistic when it is remembered that the price has already exceeded $125 per barrel in 2012. In addition, environmental concerns will combine to generate strong growth for rail transport and in parallel with a rolling programme for electrification government will need to have in place a rolling programme for new rolling stock and rail served freight terminals.

1.6 Generally speaking, rail expenditure is twofold, firstly operating and maintenance and secondly investment in enhancements. Whilst it would not be unreasonable to say that the former should be in balance between cost and fare income, it must be remembered that Network Rail inherited a huge backlog of maintenance and renewals from Railtrack and British Rail before it. Much of this backlog has now been cleared and there is evidence that costs are now falling as a result. However, there will always be a need for some services to be subsidised through revenue support for social and wider economic benefit reasons and, to its credit, the present Government has recognised this.

1.7 Railfuture would caution against experiments with vertical integration for a number of reasons. Firstly, it is vital that Network Rail is maintained as a unified national network for reasons of impartiality and to maximise economies of scale. Secondly, fragmentation is acknowledged as a major cause of rail industry costs and vertical integration would increase fragmentation and create more interface issues. Thirdly, a franchise system cannot work satisfactorily with vertical integration because, without certainty of future ownership of the franchise, operators would tend to neglect investment in maintenance, renewals and enhancements as a franchise approached the end of its term. We therefore urge that alliances and “virtual” integration should be allowed to develop as currently proposed by Network Rail.

1.8 It is an unfortunate fact that much of the recent growth in rail patronage has occurred at times of day when the railway is already operating at or near capacity. Nobody travels in overcrowded trains by choice but out of necessity and further juggling with fares will make little if any difference. A high proportion of rail industry costs therefore results from the need to provide capacity to cater for huge peak demands with about one third of passenger rolling stock used for just one journey each way per day for 5 days per week. At around £1.5m per carriage, the high cost of catering for peak commuter traffic can be judged. The national trend to work in city centres as manufacturing and traditional industries have declined has exacerbated this problem. However, failure to cater for this demand would damage the economy by making access to jobs and education more difficult whilst increasing road congestion, pollution and accidents.

1.9 Railfuture therefore considers that the balance between fare payer and taxpayer has already been reached. Fare payers are themselves taxpayers and further above inflation fare increases would simply price many people off the railway and make access to jobs more difficult. Nor should the wider benefit provided by rail transport to tax payers generally be under estimated.

Question 2: How are the targeted efficiency savings to be delivered? What will be the consequences?

2.1 Longer franchises will reduce the cost of the franchising process, both for the DfT and the bidders. It is estimated that bidders each spend about £5m per bid and the DfT spends at least as much evaluating the bids. Short franchises distracts management time from running the railway and creates a high workload for the DfT. Longer franchises could be phased so as to avoid peaks when several renewals occur simultaneously, allowing the DfT to work more efficiently and provide greater stability whilst encouraging private sector investment.

2.2 Closer collaboration between Network Rail and train operators should help create more efficient working practices, reducing perverse incentives and giving operators more control but, other users concerns such as freight companies must not be overlooked. It is probable that there would be pressure on Network Rail to carry out as many maintenance and renewal works as possible at the same time when routes are closed for engineering work, reducing the number of closures needed. Single line working to keep routes open during maintenance on one track should be used wherever possible. Alternatively, trains should use diversionary routes rather than bus replacement services being deployed. Most importantly, closer collaboration between Network Rail and the operators could remove the wasteful need for compensation payments, which has a major influence on the cost of renewal and enhancement work.

2.3 One of the suggestions in the McNulty report was the reduction in the number of booking offices to improve efficiency and reduce costs. This will be unpopular with the travelling public for a number of reasons. Firstly, ticket machines are suitable only for basic transactions and many passengers find them complicated. They do not sell the complete range of tickets and present problems for holders of oyster and freedom cards travelling outside the zone area. Machines will not answer queries. Where do I change trains? Which platform do I go from? What time is the next train etc.? Unmanned ticket offices usually mean unmanned stations with all that that implies. Where ticket sales are lighter, staff can be asked to carry out additional duties and they could issue tickets away from the office using portable machines.

2.4 There is scope to convert some routes to tram or tram-train operation and operating costs would be reduced because expensive signalling systems would not be required. More frequent services could be operated, making the service more attractive to passengers. Light rail systems can also be extended into town centres, making the route more accessible. Croydon Tramlink is just such an example where the previous single-track heavy rail branch line had a poorly patronised 45-minute interval service. Following conversion to a tramway and extensions into Croydon town centre and beyond with a 7 to 8 minute interval service, patronage exploded and the system now carries over 28m passengers a year. Conversion to light rail operation could also improve the efficiency of lightly used rural routes and enable service enhancements to be implemented by provision of automatic passing loops at minimum cost. Routes such as the Whitby branch, whose timetable is geared to the needs of school children but cannot cater for commuters and tourists, and the St Albans- Watford line, would be suitable candidates. We also note that an additional passing loop and more frequent service provided on the Falmouth branch has brought a significant increase in the number of passengers.

Question 3: Will the reforms to rail franchises proposed by the government, including alliances deliver better services at lower cost?

3.1 The answer is “yes” in both cases, but because certain activities and obligations will still have to be met, the scope for cost reduction is limited. The cost of catering for peak loads has already been discussed above and this problem is likely to become more acute with demand growth. Operating more intensive services increases operating and maintenance costs and, at the behest of government, investment in capacity enhancements is funded from interest bearing loans at commercial rates from city banks and Network Rail now pays over £1.2 billion per year in interest charges alone. With future projects to be funded in the same way, this burden is set to grow considerably and combined with taxation and loan guarantee fees, we feel it is unlikely the cost savings of the order of magnitude envisaged by Sir Roy McNulty and in the Rail Command Paper could be realistically achieved.

3.2 Community Rail Partnerships have proved their worth with an average of £4 worth of benefits for each £1 spent. They have very successfully promoted patronage, particularly on branch lines in Devon and Cornwall and the principal should be expanded.

3.3 Railfuture remains concerned however, that seeking to put more and longer trains onto an already overcrowded network while trying to reduce costs is a very big ask.

Question 4: How should fares and ticketing be reformed?

4.1 Fares are one of the most contentious issues with passengers sitting in adjacent seats often paying vastly different fares for the same journey. Most passengers think fares are poor value for money and too complicated. Journeys over different routes of similar distance also have vastly different fares. Restrictions on the use of off peak tickets are also a minefield with many rail staff often making mistakes apart from passengers. Ticket restrictions are also used as a devious way to increase fares. The common practice of charging full fare with no refund on the fare already paid should a passenger make the mistake of boarding the wrong train is wholly unacceptable and should be disallowed.

4.2 The fares minefield could be made more easily understood by colour coding tickets to indicate if any train can be used or if the ticket is valid only for off peak or shoulder peak services. Timetables could also indicate ticket restrictions by colour coding each train. All tickets should be available at half the price of the equivalent return fare, enabling passengers to travel out during the peak period and return on an off peak service or vice versa. Anybody wishing to upgrade should pay only the difference, not the full fare.

4.3 The idea of introducing discounted carnet tickets is to be welcomed. This will make it much easier for people with part time or irregular jobs to get to work without needing to purchase a season ticket, which would only be partly used. Validation at point of use as is common practice in most continental cities would enable carnet tickets to be sold in shops, post offices and libraries, for example.

Question 5: What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities?

5.1 At a local level, this could be beneficial. Better station facilities and access to them could be improved. Integration of local bus services with rail could be encouraged. Local authorities could become more involved in supporting and developing train services. PTE`s could gain more responsibility for specifying franchises train services. Closer cooperation between train operators and local authorities could improve efficiency and aid promotion of local services.

5.2 In the absence of Regional Development Agencies however, there is a risk that Local Enterprise Partnerships will be too small to take an overview of strategic issues. Since most rail services are inter- regional, the overall effect could be detrimental. It would only take one LA with different priorities and little or no rail expertise but who see their problems only in road terms to make development of rail services difficult. For example, proposals to reopen the Oxford-Cambridge railway are currently supported by local authorities along the route but if only one LEP had a change of heart, this strategically important project could fail.

5.3 Where services are self-contained or within the boundaries of one authority they could be “micro franchised” subject to oversight by the ORR. The Whitby branch and the Watford–St Albans lines could be suitable examples.

5.5 Overall, Railfuture is optimistic that decentralising will improve working relationships between Network Rail, train operators and local authorities but concerns about the integrity of the wider rail network will need to be addressed.

17 April 2012

Written evidence from Rail Freight Group (ROR 08)

1. Rail Freight Group (RFG) are pleased to submit evidence to the Transport Committee’s Inquiry into Reform of the Railway.

2. As the representative body for rail freight in the UK, RFG represents companies from all across the rail freight sector, including operators, customers, suppliers, ports and terminal operators and service providers. Our aim is to increase the volume of goods moved by rail, where it is economically and environmentally beneficial to do so.

General Comments

3. Reform of the railways is critical to the rail freight business, and to growth. Rail freight is one of the sectors which has achieved efficiency gains since privatisation, and this was acknowledged both in the McNulty report and in the Government’s Command paper, which stated that ‘The competitive environment has also forced rail freight to find significant efficiencies over recent years, and it has encouraged Network Rail to do the same. As a result, in an industry that has had difficulty in reducing costs, freight has made good progress. Government seeks to repeat this approach with similar success for passenger services’.

4. However, the freight and logistics sector is constantly seeking to improve its efficiency, and rail freight must continue to become more cost efficient if it is to become a larger player in UK logistics. Rail freight receives little direct subsidy from Government, but, as most traffic pays only the variable track access charge (which covers wear and tear associated with freight traffic), Government also covers those parts of the fixed costs which might be attributable to freight (so called freight avoidable costs). So, in contributing to reform, the challenges for freight might be summarised as;

a. Can freight reduce its own costs to compete more effectively in the logistics sector? b. Can freight reduce the costs it causes on the rail network? c. Can freight contribute more towards the costs it causes on the network?

5. The Government’s Command Paper made a number of commitments to rail freight which we welcome, these are;

• Government will consider further investment in the Strategic Freight Network (SFN), both to help make best use of the existing network and, by increasing its freight capability, to leverage continued private sector investment in rail freight growth;

• Government is continuing to provide support through the mode shift revenue support scheme to shift freight from road to rail where there are overall environmental and social benefits from doing so; • Government will provide a clear planning policy framework to support further private sector investment in rail freight terminals and rail-connected distribution parks, including Strategic Rail Freight Interchanges (SRFIs), to support growth;

• Network Rail will work with the industry to safeguard strategic freight capacity and to facilitate strategic investment in SRFIs. It has also appointed a Freight Director to provide a single interface for freight in a world of greater devolution within Network Rail; and

• the ORR plans to give the freight industry early assurance over the level of access charges, by setting a cap on these in June 2012.

6. In return for these commitments, the freight industry is expected to consider a number of potential cost savings. Work is currently underway between the operators, ORR and Network Rail in a number of areas.

a. ORR are looking at whether coal and spent nuclear fuel could pay significantly higher track access charges (up to £60m pa greater). Initial analysis suggests that the downstream effect on energy prices would be small, but there are concerns over the impact on freight operators, ports, terminals and on domestic coal producers which we expect to be addressed in an ORR consultation at the end of April.

b. Network Rail is assessing whether cost savings could be made if freight operators agreed to forgo any future opportunities to operate on certain lines (mostly rural branch lines). Work to date suggests that cost savings would be fairly small.

c. Initial work is assessing whether the way freight access rights are held could be streamlined – in conjunction with developing Strategic Capacity as mentioned in the Command Paper. This could have some performance benefits on some routes.

7. In addition, proposals for rail reform being progressed by the passenger sector are likely to have implications for freight. Although we recognise the aims and objectives of reforms such as alliancing, and whilst the initial discussions have been encouraging, there is an overall concern that a more fragmented rail network will be detrimental to nationwide operators.

8. Network Rail clearly has a major role to play in ensuring that critical functions such as timetabling, access and charging are centrally managed. We understand that they are developing a System Operator role to encapsulate such responsibilities, and await more details of how this will be established and function. Proposals for devolution of franchises to a local level also emphasises the need for this.

9. ORR also has a critical role in ensuring that the needs of nationwide operators such as freight continue to be met – in particular in the award of access rights.

Specific Questions

What should be the Government’s vision for the railways in 2020, taking account of likely spending constraints? How should the balance be struck between the taxpayer and the farepayer in paying for the railway?

10. For freight, Government needs to have a vision which enables rail to be part of modern logistics, focussed on its areas of strength alongside road freight. Reform of the railways needs to ensure that rail freight can continue to be increasingly competitive and meet the needs of the logistics sector, and that in delivering cost savings the focus on efficiency is not lost. The Government’s Logistics Growth Review, published last autumn, highlighted the vital role of logistics for the UK economy.

11. Although investment in the rail network for freight continues to be necessary, spending constraints should cause a focus on making the best use of the available capacity for freight – for example overnight and at weekends – as well as in longer and bigger trains. Use of properly upgraded diversionary routes for freight is appropriate where the impacts on operators and customers are minimal.

12. In considering the ability to pay of freight operators and customers, the logistics market as a whole needs to be addressed. Road transport remains free at the point of use, and customers can, and do, switch mode for small changes in cost.

How are the targeted efficiency savings to be delivered? What will be the consequences?

13. For freight operators, continued efficiency gains can be delivered by allowing longer trains to operate, optimising journey times (eg by reducing time in loops) to reduce fuel use, growing volumes to reduce empty running, and, in the medium term looking to a greater use electric traction, if more of the network is electrified.

14. We continue to believe that Network Rail can deliver further cost savings, including in renewals, enhancements and management as well as in operations and maintenance. Freight operators who provide services to Network Rail for engineering work continue to cite inefficient working practices and short term alterations to plans for example. The review of standards cited by McNulty has yet to yield any outputs, but we believe that there may be unnecessary costs driven by some standards.

15. RFG members continue to find that the cost and time needed to bring new equipment to market can be prohibitive, particular given the small overall size of the UK market. This is likely to be stifling innovation in some areas.

16. As well as cost cutting, there appears to be little attention being given to raising revenue from other sources. Network Rail have suggested, for example, that they may wish to become more involved in rail freight land and interchanges and we await details of this from them.

Will the reforms to rail franchises proposed by Government, including alliances, deliver better services at lower costs?

17. Franchising is not per se a matter for freight operators. However, we are yet to see any real evidence that DfT is making real progress on relaxing the specification of services, or creating an environment where greater competition and commercial freedom will incentivise lower costs.

18. Alliances aim to reduce costs through closer co-operation, although as yet there is no evidence of whether this will be achieved in practice. We have received good assurances that the rights of freight operators will be protected in the new working arrangements, and that the right protections are in place.

19. As outlined above, the role of Network Rail as systems operator is key to ensuring freight operators are not adversely affected by alliancing and by devolution. It is too early to say how successful this will be. For freight it is key that control of the infrastructure remains with Network Rail, and that it is independent legally and commercially of any train operations.

What are the implications of the proposals for rail decentralisation and how should the responsibilities be devolved to local authorities?

20. As above, it is imperative that proposals for decentralisation retain Network Rail as an independent infrastructure operator. Proposals for alternative ways of specifying passenger services would need to take account of the needs for freight services.

17 April 2012

Further written evidence from Rail Freight Group (ROR 8A)

1. Rail Freight Group (RFG) is pleased to provide evidence on the HLOS Announcement as part of the Transport Committee’s Rail 2020 Inquiry.

2. RFG is the representative body for rail freight in the UK, and we aim to increase the volume of goods moved by rail where it is economically and environmentally beneficial to do so. Member companies of RFG come from all parts of the rail freight sector, and include train operators, customers, ports and terminal operators, suppliers and service providers.

Summary 3. Previous investment in rail freight has been shown to deliver significant benefits, and RFG is pleased that this has been recognised by Government in the HLOS.

4. The HLOS includes key priority schemes for rail freight and a continuation of the Strategic Freight Network (SFN) investment fund. These investment proposals will help to increase capacity for rail freight and target key remaining capability gaps.

5. Investment in the Electric Spine, as part of a rolling programme of electrification, will help to create the right conditions for future freight use of electric traction, and will support operators considering traction strategies for the medium term.

6. The HLOS and the reissued Guidance to ORR are a strong statement of Government support for rail freight. However, ORR’s proposals for freight charging are raising concern in the sector, and could act to undermine future growth.

Strategic Freight Network Development to date 7. RFG strongly supports the concept of the Strategic Freight Network (SFN) which was established at the start of CP4, and described in the DfT document ‘Strategic Rail Freight Network – The Longer Term Vision (Sept 09). The aim of the SFN is to develop key routes for freight into an integrated network with sufficient capacity for growth, and the right capability to help rail freight become more efficient and better meet its customers needs.

8. Government funding, through the Transport Innovation Fund (TIF) and through the rail investment funding in Control Period 4 (CP4) has already made good progress in creating a fit for purpose network. Many schemes funding in CP4 are now in development, with completion this year and next. The £200m investment for CP4 was provided as a ring fenced fund, with an industry steering group providing advice on priority schemes.

9. The benefits of this investment are already being realised. Since the opening of the gauge cleared route from Port of Southampton, (funded by TIF), rail’s market share from the port has increased by almost 10%. Data from Network Rail shows that since 2005/6 there has been an overall 32% improvement in productivity – the amount carried per train – with gauge clearance and longer trains key in achieving this.

10. The priorities for the investment to date have mainly been on capability – gauge clearance and allowing longer trains to operate. By the end of CP4, although some strategic gaps will remain, the capability of the SFN will have been considerably

upgraded.

11. The focus for the CP5 has therefore been more towards providing capacity for freight on the SFN. Inevitably, capacity enhancements schemes need to include freight and passenger requirements holistically to achieve the best outcome.

HLOS and Freight

12. Against that backdrop, RFG is pleased with the published HLOS and with the proposed investment for rail freight it contains. The document includes freight as an integral part throughout, not an afterthought, and the indicative schemes include many which are freight priorities.

13. In headline terms, the key freight elements are;

a. A £200m fund to be used on further development of the SFN – this is likely to include gauge clearance of the Great Western Main Line alongside electrification, loop extension for longer trains on West Coast North, and contributions to capacity works from Southampton alongside signalling renewals. This is in addition to a £30m fund included in the Scottish Government’s HLOS.

b. Capacity improvements from Felixstowe to Nuneaton with key schemes at Ely, Leicester and Peterborough specified.

c. Capacity and gauge improvements as part of Electric Spine, benefiting traffic from Southampton, and enabling Midland Main Line to take high gauge traffic.

d. Capacity improvements on East Coast which are necessary to support freight growth particularly from the new port at London Gateway

14. The development of the Electric Spine is described as a ‘crucial step in creating the right conditions for significant private sector investment in electric freight locomotives’. RFG supports this move, and also the commitment to ensuring that the scope of electrification schemes also includes the links to other adjacent routes, and to freight depots and facilities.

15. Presently, less than 10% of rail freight is electrically hauled, and the recent trend to divert freight away from main lines (Felixstowe – Nuneaton, Joint Line) has made even existing electrically hauled flows less viable. However, in the medium term, if enough of the network is electrified, including links to terminals and regularly used diversionary routes, the conditions for a greater use of electric traction will become established.

16. The oldest Class 66’s are now around 15 years old, the design older, and so in the next 2 or so control periods, replacement strategies will be under considerations. Environmental legislation is already making replacement diesel locomotives difficult to source, and expensive to procure, particularly given the additional development work required for the UK market. Whist there is also no electric locomotive available for the UK market at present, some manufacturers are starting to consider options which could be progressed, with sufficient interest from the passenger and/or freight sector.

17. It would be naïve to think that operators will necessarily respond to HLOS by moving immediately to order new locomotives. However, the development of Electric Spine, and the other electrification proposals – including infill gaps such as Acton to Willesden – will

bring the tipping point for such decisions forward. By talking of a ‘rolling programme’ of electrification, and with commitments to CP6 development also included, the HLOS helps to build investor confidence in the prospects for electric freight.

Next Steps

18. Ahead of the Strategic Business Plan in January, and the draft determination for PR13 later in 2013, the HLOS will be translated into a more detailed assessment of projects, with their interactions and priorities established. For freight, the SFN Steering Group has already met to discuss the initial approach to this, and to verify that the feasibility work for the key projects, which is already underway, will deliver key milestones to support this Plan.

19. The schemes which are outwith the SFN fund, in particular the Electric Spine, need to be progressed quickly, with sponsors identified and with the potential scope of the scheme developed in more detail. The freight elements of this work must be factored in from the start.

20. Experience on the SFN work to date has been that the final delivery costs have often been lower that the early GRIP estimates – indeed in CP4 additional work is being undertaking using underspend from other projects. Appropriate flexibility will need to be worked into the analysis to cater for this.

Guidance to ORR

21. Published at the same time as the HLOS, the reissued Guidance from DfT to ORR is also strongly supportive of rail freight. In paragraphs 32-34 of the Guidance, the Secretary of State states Government support for ‘the continuing development of a competitive, efficient and dynamic private sector rail freight industry’. Combined with the investment proposals in HLOS, this represents a clear statement of support for the sector, and its forward growth.

22. The Guidance also clarifies to ORR Governments expectations on how decisions affecting rail freight should be considered, including the ‘importance of sustaining efficient and commercially predictable network-wide freight operations including in decisions about access rights and charging structures.

23. The Guidance is well timed as ORR’s consultation on ‘The Variable Usage Charge and a Freight Specific Charge’ closed for comments on 10 August, with conclusions due during the autumn. The Guidance will form a key part of ORR’s considerations.

24. The potential changes for freight being proposed by ORR for PR13, can be summarised as follows;

− The variable access charge, which is paid by all passenger and freight operators, is expected to increase slightly, probably by around 5%.

− A new freight specific charge is proposed, of between £40m-£60m pa which would be levied on freight operators moving power station coal, iron ore, spent nuclear fuel and possibly coal for other uses (mainly steel and cement production).

− Likely increases in other charges, including the capacity charge, paid by all operators and the freight only lines charge and coal spillage charge paid by the freight sector.

− A potential new Capacity Utilisation Charge, the details of which are presently unknown.

− Compulsory Efficiency Benefit Sharing Schemes in each of Network Rail’s 10 routes, which will share a proportion of any outperformance of Network Rail’s efficiency target, but also require operators to contribute financially if Network Rail do not meet their targets.

− Proposals to make the variable charge vary geographically by route, which could have adverse impacts on some freight operators and customers operating on ‘more expensive’ parts of the network

− Proposals to rebase the regimes for possessions so that operators are no longer compensated in full for the losses they incur when the network is closed for engineering works.

25. These proposals are causing concern for the rail freight sector and for their customers. The principle issues are;

a. Complexity , ORR are proposing a significant number of changes to both the level and structure of charges. This will make quoting for new business more complex, and is likely to require additional resources to manage. This compares badly with road freight which pays just VED and fuel duty. Rail is already viewed by many businesses as too complex and difficult to understand, and these proposals will compound that position.

b. Regulatory Policy In making decisions, ORR is required to ‘balance it’s duties’. There is concern that, for freight in particular, undue weight has been given to the duty to have regard to the funds available to the Secretary of State perhaps at the expense of the duty to promote the use of the railway for the carriage of passenger and freight, and the duty to enable companies to plan their businesses with a reasonable degree of assurance.

These concerns are particularly acute for the freight specific charge, where the ORR have concluded that the charge should be set to cause a 5-10% reduction in volume per annum. We are concerned over a shift in regulatory policy towards pricing off demand, which could, in future also be applied to other sectors.

c. Market Impacts Although the coal market is volatile, an imposed price increase leading to a significant volume reduction will have impacts on the freight market, even if some of the increase can be passed onto end users. Reductions in traffic levels, (assessed as up to 23%) will impact on jobs, rail facilities and, where resources are shared, have knock on impacts to other traffic types. Reduced levels of business also impacts on freight operators financial viability and appetite to invest. There are also competitive impacts for ports, and significant concern over the effects on domestic coal production. Whilst the sector may be able to accept some modest increase in charge, the proposed increases are greater than

the market appears to be able to bear.

d. Investor Confidence The messages from the consultation are not helpful for building confidence in the customer, potential customer and supplier bases who are looking to make long term investment in the rail freight sector. For example, developers looking to invest in terminals are concerned at the effect of geographic charging. Those in other bulk commodities are concerned that in the future they may also be targeted for price increases.

26. We hope that ORR will be able to consider these points, alongside the Guidance and determine fair, affordable and stable freight charges for the next control period. This will be vital if the benefits of Government’s investment in the network are to be delivered as expected.

1 August 2012

Written evidence from Transport Watch (ROR 09)

The Government’s position 1. The Government’s position is illustrated by the following: (a) In the forward to the McNulty report “Reform of our railways: Putting the customer first”, Cm 8313, dated March 2012, the Secretary of State, Justine Greening, wrote “We all know how important our railway network is to the prosperity and wellbeing of this country”. (b) Likewise in the forward to the DfT’s Rail decentralisation report, also of March 2012, she writes “Rail has a vital role to play in the national economy, enabling large numbers of people to move between home and work across the country”. (c) The previous Secretary of State (Philip Hammond) is cited in Network Rail’s Initial Industrial Plan, the IIP, for England and Wales dated September 2011, as saying “Rail should be at the forefront of the Government’s transport strategy – contributing to the Coalition’s twin goals of economic growth and carbon reduction”. Those views are strongly held but seemingly without recourse to the facts. The Facts Modal share 2. Rail accounts for only 3% of the nation’s passenger journeys, 7.7% of its passenger miles, and for 8.3% of freight transport. That trivial contribution is illustrated by the following diagrams where the values are for the year 2010.

10 0 % 92.3% 70% 65.7% 90% Fig 1. Passenger-km Fig 2. Tonne-Km 80% 60% 63.7% 70% 50% 60%

50% 40% 40% 28.6% 30% 30% 21.7% 20% 20% 7.7% 10 % 8.3% 10% 4.3% 0% Rail Str ate gic Other All roads 0% Roads roads Pipe line Rail Water All roads

Costs 3. Furthermore, rail transport is punishingly expensive to the exchequer compared with road transport. For example: (a) Support from the exchequer for the railways averaged £4.7bn at 2010/11 prices for the decade to 2010/111. In addition Network Rail's annual accounts show bank debts of £25.6bn and liabilities including tax of £35.6bn. Net assets, after allowing for track and plant etc. valued at £39.6bn, amount to £7.7bn. However, the £39.6bn is unrealisable – Probably the track is nearly worthless in the market place unless income is guaranteed by the Government or change of use allowed. Hence the actual net debt is the £39.6bn liabilities minus the £7.7bn assets providing circa £32bn. It is unlikely that that debt can ever be repaid from the fare box. Hence, in the longer term, it will fall on taxpayers. If the £32bn has been accrued over 20 years the annual amount is £1.6bn. Adding that to the ten year average for Government support provides circa £6.2bn. (b) In comparison, the taxes taken from road users, including VAT on motor sales etc. total at least £50bn compared with expenditure of circa £10bn. If the net profit of £40bn is apportioned according to vehicle-miles the profit to the exchequer attributable to the Strategic Road Network amounts to £13bn per year. 5. These vast losses and profits, together with track lengths, lane lengths and usage, provide the following comparisons, also illustrate in figure 3. Annual profits from the Annual losses from the Strategic road network national rail network Per household £500 Minus £240 Per lane-km or track-km £253,000 Minus £196,000 Per passenger-km 6.4 pence Minus 11.5 pence Per passenger plus tonne-km 4.4 pence Minus 8.5 pence

30 Fig 3 Profits 25 and losses Profits from motorways 20 and trunk roads

-5

-10 £ hundreds £ ten K per Pence per Pence per -15 per track or lane Pa sse nge r- pass + tonne- household km km km -20

-25 Losses from rail

6. Further, dividing Government expenditure on the motorway and trunk road system by the sum of passenger-km and freight-km provides a unit cost of 1.4 pence, six times less than the cost of 8.5 pence for rail apparent from the above table2. 7. Against that background of relatively trivial use and extraordinary costs and losses it astonishes that the Government continues to pour money into the railways. 50% of the Government’s expenditure on Transport is on rail, leaving 39% for the strategic road network and 11% for local and other transport.3 That at a time when the strategic road network carries nearly four times as many passenger-miles and over double the freight of the railways. Usage 8. Worse still, the rail network is, in highway terms, lightly used. In 2009/10 the product of the national rail amounted to 54bn passenger-km and 19bn Tonne-km carried upon 31,500 km of track. If the passengers had been carried on that network by express coaches, containing as few as 20 people, and the freight by lorries carrying an average of 12 tonnes (24 tonnes out, back empty) then the daily flow per track, averaged over the network, would amount to some 235 coaches plus some 140 lorries, a total of 375 vehicles4. Such a flow would pass in 20 minutes in one lane of a motor road. 9. Further, rail is two to three times less productive per track-mile than is the strategic road network per lane-mile. The figure below illustrates where M +T denotes the Motorway and Trunk Road network5.

18000 Fig 4. Average Daily flows 15828 16000 per track or lane 14000 12000 10732 10000 8000 6347 6000 4697 5096 4000 Flow pertack or lane 1650 2000 0 Rail M + T Rail M + T Rail M + T Passengers, P Tonnes, F P plus F

10. As for London: some 500,000 surface rail passengers enter the capital in the three hours 7 am to 10 am, corresponding roughly to 250,000 in the peak hour. There are at least 25 inbound tracks serving the capital. Hence the peak hour passenger flow per track averages 10,000. The 10,000 would all find seats to spare in 150 75-seat express coaches, sufficient to fill one seventh of the capacity available. Outside the peak period this great Victorian network is a place of dreams. 11. Figure 5 shows a vast expanse of virtually empty of rail - all within a stone’s throw of Westminster where the roads are clogged with traffic. Meanwhile, in New York there is a single express coach lane 11 feet wide and four miles long that carries up to 700 45-seat express coaches in the peak hour - offering over 30,000 seats. In comparison at Victoria Main Line 30,000 crushed passengers arrive in the peak in the trains requiring four inbound tracks.

Fig 5. (Picture courtesy of National News & Pictures)

Speed and journey lengths 12. Half of all rail journeys are less than 20 miles long. 90% are less than 80 miles. For all of those the expressed coach, given an uncongested right of way, would match the train journey time, particularly after taking account of a service frequencies several times that offered by the train. Safety 13. Those supporting rail like to say that more people die on the roads in a day than rail passengers in a year on the railways. However, at the heart of that statistic there are two frauds. Firstly, when the statistic was originally put about there were 18 times as many passenger-miles by road as there were by rail (now it is 13 times). Secondly, it compares passengers killed in train accidents, accounting for less than 5% of those killed on the railways, with all those, system-wide, killed on a completely open road system. In contrast we found that when trespassers but not suicides were included the railways kill more people per passenger-mile than does the motorway and trunk road system6. Social equity 14. Railway travellers, as described in the Economist (17/3/12), are typically rich. (In fact those from households in the top quintile of income travel four times as far by rail as do those from either of the bottom two quintiles). Those people are also mostly able bodied. However, rather than the service that they use being taxed those users are heavily subsided. Since social equity is one of the Government’s aims it follows that, rather than subsidy, which leads to an expansion of the service, fares should be raised so as to balance supply and demand. Some Quotes 15. Uncle Remus: “It ain’t what ya don’t know that hurts ya. What really puts a hurtin’ on ya is what ya knows for sure, that just ain’t so”. 16. Stewart Joy, Chief economist to British Railways in the 1960s in his book, ‘The Train that Ran Away’: “There were those in the British Transport Commission and the railways who were cynically prepared to accept the rewards of high office in exchange for the unpalatable task of tricking the Government on a mammoth scale. Those men”, Joy wrote, “were either knaves or fools”. 17. Frances Cairncross in The Guardian of 29 April 1974: “When trains are still the theme of nursery rhymes and children’s stories, it is small wonder that the railways have a romantic fascination for most adults. Only years of nursery conditioning can explain the calm with which the public has accepted a bill of £3,000 millions to subsidise British Rail over the last decade”. (Note the GDP deflator for the year 1960, half way through the decade, was 5.723 compared with 100 for 2010-11. Hence the £3bn for the decade translates to £52bn at 2010-11 prices or to £5bn per year). 18. The Economist, 15 June 1974: “The taxpayer is going to have to fork out more than £2 billion (£14.5bn at 2010-11 prices) in the next five years to support British Rail. It … means that nearly half BR’s costs will be born by the taxpayer. In return there is little hope of any increase in the railways’ contribution to Britain’s transport: 8 per cent of passenger miles and 19 per cent of freight ton miles … Spending on this scale will leave much less money for building roads”. 19. Dan Pettit Chairman, National Freight Corporation, reported in The Time 17 October 1972: “One is not only saying that a rail haul generally has to be 250 miles to be economic, whereas more than 70 per cent of freight movements in this country are no more than 25 miles; one is saying that railways are incapable of offering the kind of freight service society increasingly wants … The car and the lorry have come to the rescue of the city … the way the environmentalists in particular talk about the railways reminds me of the tale about the king’s clothes. It is an exercise in mass self-delusion”.7 Conclusion 20. In the light of the above the beliefs expressed by Justine Greening and Philip Hammond, that rail is vital to the economy, seem misplaced if not entirely vacuous. Nevertheless those beliefs are held by the majority – a triumph of railway propaganda over reality. For that reason Sir Roy restricted himself to examining the railway as though it were perpetually bound to be nothing but a railway. Let us hope that the savings he identifies do not turn out to be illusory, but, whatever the case, a great opportunity has been lost. 21. Had Sir Roy interpreted his brief more widely he may have found that the railways are indeed the disaster that we paint above. He might then have canvassed for the more lightly used parts of this immense rail network – it is 10,000 miles long – to be converted to reserved motor roads, managed to avoid congestion via road pricing or otherwise. 22. If that were to be done, the trivial services offered by rail on those brilliantly engineered, almost flat and straight rights of way would be discharged by express coaches and lorries at a fraction of the cost of the train. Additionally countless thousands of other lorries and other vehicles would divert from the unsuitable rural roads and city streets that they now clog. The environmental benefit would be overwhelming, the tax burden imposed on the nation by the railways would be converted to a profit and the many thousands of hectares of near derelict land that abuts railways, particularly the stations, would become intensely valuable. 23. If the taxpayer is to be rescued from the endless drain on resources that the railways are and to capitalise upon the benefits of converting elements of it to roads then those in power need to set aside preconceived ideas, and act in the light of the facts. We commend to the Committee that they should take note. 24. Those who disbelieve should contemplate the strategic road network paved with railway lines. The place would be at a near standstill, as are the railways in highway terms.

17 April 2012

1 National Rail Trends 2010-11 Year book table 6.2a, with prices adjusted to 2010/11 prices using the GDP market Prices deflator. 2 In the text we showed that, including loans the subsidy to Rail was running at 6.2bn per year. There were 54bn passenger-km in 2010 and 19bn tonne-km, providing a total of 73bn (passenger + tonne) km. Division yields 8.5 pence per km. TSGB table 0117 provides capital pus revenue expenditure on the strategic road system of £4.16bn in 2009/10. We estimated that the network carried circa 200bn passenger-km and 95 tonne-km, a total of 295. Division provides 1.4 pence per km. 3 TSGB table 0117 data for the year 2009-10. 4 Equivalent express coaches per day: 54bn/20/365/31500 = 235:. Lorries per day 19bn/12/365/31500 = 138. 5 The values are obtained by dividing passenger or tonne-km by track length for rail or lane length for road. E.g. for rail the average daily passenger flow is 54bn passengers-km per year divided by 365days and by the track length of 31,500 track-km = 4,700 passengers. For strategic roads we had 201.7 passenger-km per year and a lane length of 51,500 km. Hence the average daily flow is 201.7bn/365/51,500 = 10,730. Similarly for freight where there were 19bn Tonne-km by rail and 95.8 tonne-km by the strategic road network. 6 See transport-watch facts sheet 2 here http://transport-watch.co.uk/fact-sheets.htm . 7 For many more in the same vein see topic 7 in the Transport-Watch web site here http://transport- watch.co.uk/transport-quotes-1974.htm . Written evidence from pteg (ROR 10)

1. Introduction 1.1. pteg represents the six English Passenger Transport Executives (PTEs) in England which between them serve more than eleven million people in Tyne and Wear (‘Nexus’), West Yorkshire (‘Metro’), South Yorkshire, Greater Manchester, Merseyside (‘Merseytravel’) and the West Midlands (‘Centro’). Bristol, Leicester and Nottingham City Councils, Transport for London (TfL) and Strathclyde Partnership for Transport (SPT) are associate members of pteg, although this response does not represent their views. The PTEs plan, procure, provide and promote public transport in some of Britain’s largest city regions, with the aim of providing integrated public transport networks accessible to all. 1.2. Since their inception, the PTEs have invested heavily in their local rail networks – funding new trains, routes stations, park and ride facilities, and higher service standards. Rail patronage has increased in every PTE area, up almost 160% since 1995/96. 1.3. The PTEs have high ambitions for city region rail networks in their areas. We believe that any reforms to the industry need to allow for the devolution of rail powers, responsibilities and funding necessary to unlock local rail’s potential in our areas in a way that supports wider objectives for developing city region economies in a sustainable way. 1.4. We believe that the railways can be run more efficiently but that passengers should be the last to lose out from such efficiencies, and that the Government’s efficiency plans for the railways should not unfairly target city region rail networks, given the success of these networks in recent years, and their key role in supporting city region economies. 2. Response to the Committee’s Questions

1. What should be the Government’s vision for the railways in 2020, taking account of likely spending constraints? How should the balance be struck between the taxpayer and the farepayer in paying for the railway? A vision for rail 2.1. The Government’s vision for the railway should be predicated on the contribution rail can make to the country’s wider environmental, economic and social needs. It should also be a vision that recognises the different ways in which rail can best achieve these objectives across the whole of the country. Given this, a key objective should be ensuring that rail can play its full part in supporting the economic potential of Britain’s major cities especially given that there is a broad consensus that the major regional cities will need to improve their economic performance if the wider overall performance of the UK economy is to be enhanced, and if the imbalance between London and the regions is to be addressed. Without modern and efficient commuter rail networks, and the wider connectivity that rail can provide, it is difficult to see how this could be achieved. Such an approach would also put in place the conditions to maximise the benefits of high speed rail, as part of the longer term strategy for the railway, beyond 2020. 2.2. Research illustrates how public transport accessibility to the centre of our largest cities can make a critical contribution to higher productivity and wages, job creation and direct foreign investment. According to KPMG’si analysis, rising overcrowding on the local rail networks radiating from Leeds and Manchester represents a growing constraint on economic growth and could be losing the national economy £250 million of GVA per annum. KPMG have also shown that the £530million Northern Hub scheme could generate as much as £1bn in improved productivity, employment growth and through structural changes to the local economic fabric across the North of Englandii. Analysis by CEBR for Centroiii suggests that the £187m Camp Hill chords project in Birmingham would have the potential to generate over 2,500 new jobs. Building on success 2.3. Rail services have been a major success story in supporting the growth of city region economies over the past decade, leading to a significant growth in passenger numbers - upwards of 100% in the past decade for many of our areasiv. We estimate that around 125 million local rail journeys start and/or end in PTE areas each year, corresponding to one in seven journeys in Englandv. This trend is likely to continue over the medium to long term with Network Rail forecasting an increase of as much as 50% on regional, urban rail services in the North of England by 2029, even in spite of the recessionvi. Rail use has been booming because more people are commuting over longer distances to access the jobs and opportunities that our core cities now offer. 2.4. When rail services have seen investment the results are even more compelling. For example after the run down Airedale / Wharfedale lines in West Yorkshire were electrified and new commuter trains provided, rail quickly gained market share. Today over two thirds of peak commuters into Leeds from key commuter stations on these corridors now travel by rail. Finding the right balance on subsidy 2.5. Rail in the city regions is a success story, and its continued success is vital if our core cities are to continue to act as the economic drivers for wider regional economies. However some argue that the subsidies for regional rail are disproportionately high. 2.6. Regional rail networks do benefit from a significant degree of public funding, but so do intercity networks, and rail services in the South East. What is important to understand is that the allocation of network costs (and hence the resulting level of subsidy) is a construct based on a series of assumptions and principles (some of which are implicitly political). As a result, it can be misleading to infer potential cost savings from current subsidy estimates. For example, some of the lightest passenger trains in the country share large sections of track with much heavier freight trains in the North of England. Yet, relatively light weight passenger trains are assumed to incur their entire infrastructure cost whereas heavy freight trains do not pay their full infrastructure costs (in order to make rail freight more competitive with road haulage). In effect, it’s unlikely that much, if any, infrastructure cost would be saved if those passenger services no longer operated and meanwhile the costs of regional rail services appear higher than they would otherwise have been if freight paid its full infrastructure costs. In making this point we do not argue that freight should pay its full infrastructure costs but that this example illustrates that the subsidy figures are a construct. 2.7. A further illustration is that government subsidy estimates often leave out capital investment, therefore failing to recognise the full cost of London and inter-city services. Over the CP4 period, Network Rail’s investment in new infrastructure was expected to total in excess of £8bn. Of this amount we estimate that less than 15% will directly benefit regional railways. In contrast, we estimate that regional operators contribute more than 30% of the total fixed track access charges received by Network Rail. 2.8. Whereas significant capacity enhancement of London’s rail infrastructure would require major capital investment, this could be achieved much more cheaply through additional rolling stock and longer trains on rail networks in the city regions. However, whereas the former is considered investment, the latter is classed under operating subsidy. 2.9. If local transport authorities, and PTEs in particular, are to make a positive contribution towards a more financially sustainable railway then we need to have access to more transparent information on industry costs, demand and revenue at a fairly disaggregate spatial level. Most of this information is not currently accessible to most LTAs in a suitable format. We believe there is much that the DfT, ORR, NR and ATOC can do to improve the current situation.

2. How are the targeted efficiency savings (£3.5bn by 2019 on a 2008/09 base) to be delivered? What will be the consequences? 2.10. The key principles on efficiency should be that firstly passengers should be the last to lose out and that secondly that regional rail (with its record of strong growth, despite underinvestment) should not be unfairly targeted. Focus on benefits to passengers, rather than to the industry 2.11. The Government’s cost reduction objectives are very challenging. The consequences of the industry failing to achieve these efficiencies could be severe, with the likely impact that those parts of the railway which currently have the most subsidy allocated to them are targeted for cuts. Our concern is that the tone of the Command Paper will leave too much at the discretion of the Rail Development Group (RDG) and that government needs to take care to protect the interests of all parts of the railway, not just those which the commercial operators are most interested in. 2.12. Given that the body created for achieving these efficiencies (the RDG) is made up of the corporations and private interests that currently run the railway, there is a danger that efficiencies will be delivered in a way that best suits the industry itself, rather than necessarily being focused on driving value for the passengers. This reflects the fact that commercial operators will need to satisfy both shareholder and customer interests, but will revert to protecting the ‘bottom line’ when under pressure. 2.13. These dangers could be resolved in part by government taking a more enabling role with the main deliverers of efficiency – Network Rail and the RDG - and by ensuring greater representation within the reform process for the block of interest in the railways with specific responsibilities for devolved areas like the PTEs, London, Scotland and Wales. 2.14. More widely many commentators have pointed out that the existing industry structure involves numerous entities (the majority of which are seeking to make a financial return) as well as the considerable interface costs between the various entities with all the legal, regulatory and bureaucracy costs that this entails. It is not clear to us why (if efficiency is the key objective) the inherent efficiency and costs of the current structure of the industry should not also be open to scrutiny 2.15. Finally we note that the DfT commissioned a review of the Northern (REF) which concluded on the basis of the current subsidy and investment that Northern “is an efficient and well managed operation and that there are no obvious and acceptable ‘quick wins’ to improving value for money”vii. The clear implication of this is that the scope for significant savings on the current costs of Northern (without structural change and/or investing to save) will be difficult to achieve. Invest to save and the Scope for savings under devolution 2.16. Operating services with older, unreliable and unattractive trains will neither reduce direct operating costs (such as maintenance) or increase revenue (through attracting passengers to rail). Capital investment in rail services (for example through route electrification or conversion of routes to tram train) can deliver greater benefits for the available levels of subsidy. 2.17. Devolution of responsibilities for local rail services also offers scope for achieving greater efficiencies as local transport authorities are much better placed (and incentivised) than officials in Whitehall to identify opportunities to find ways in which local rail services can be provided more efficiently if those efficiency gains are recycled back into the local transport network. 2.18. Integrated Transport Authorities have responsibility for the preparation of Local Transport Plans (LTPs) for the city regions. With the removal of Regional Strategies, LTPs have become the main statutory policy framework covering transport at the sub national level. Given the need for efficiency (and to avoid ‘reinventing the wheel’), particularly in a constrained public spending environment, it would seem logical for any future arrangements to build upon the existing framework for delivering strategic transport in the city regions.

3. Will the reforms to rail franchises proposed by the Government, including alliances, deliver better services at lower costs? 2.19. There are considerable advantages in having the railway’s assets within the control of a body that can take the long view rather than being driven by its day-to-day share price; has the economies of scale to deliver efficiencies; and can invest in both its human and its technical resources in the interests of the railway as a whole. If alliances are to be created then they need to take account of devolved bodies who may well wish to influence how alliances deliver efficiencies and where savings are used 2.20. We believe there should be a ‘horses for courses’ approach on franchise length. On subsidised urban railways both long and shorter franchise lengths can deliver a better deal for passengers. For example two highly successful examples of rail devolution on urban rail have involved very different franchise lengths – 25 years for Merseyrail Electrics and 7 years for London Overground.

4. How should fares and ticketing be reformed? 2.21. There is a broad political, professional and consumer consensus around the benefits that smartcards can bring for urban public transport networks in particularviii. The effect of Oyster has been transformative in London and all city regions aspire for something similar. We also note the considerable investment that national government has made in Oyster – first for TfL services, and then later to extend its provision for London’s heavy rail network. Government support for smartcard development outside London has been welcome but far more modest. Between 2009 and 2011, TfL received £43 million from the DfT for implementing smartcard ticketing. In contrast, each of the PTEs received only just over £2million over the same ix. We welcome the Government’s support for the extension of smartcard ticketing in the Command Paper. We believe that as for London the cost of its implementation in our areas should be covered by national Government and not an add-on extra that has to be funded locally. 2.22. We also need to ensure that smartcard ticketing for national rail services in our areas is not developed in isolation from the smartcard ticketing being brought in on bus services and on light rail. Otherwise the delay and cost in achieving Oyster-style ticketing in the major regional cities will, in the long term, be considerable. 2.23. The DfT has persistently given the impression that commuter fares across PTE areas are comparatively lower than London and the South East. It is more complex than that. DfT’s current analysis, based on a small sample of flows, shows a more complex picture than at first meets the eye. For example, there are some commuter rail fares between stations in the South East are generally much lower than for journeys into central London, and often lower than commuter fares into northern cities – possibly because for these journeys the car remains a feasible alternative. 2.24. Where there is a discrepancy in comparative fare levels, this can be down to factors such as the quality of the service provided (in terms of frequency, journey time, density of connecting services, rolling stock and station quality) or the fact that for many journeys into London in particular, there is no real alternative. Conversely in the city regions, the car remains the key competitor to rail on many routes. Even then, the difference is not as great as might be expected. For example, a journey between Watford and London takes around 20 minutes, with 7 peak trains an hour. In contrast, the fastest train between Macclesfield and Manchester, which are a similar distance apart, takes 25 minutes with the remaining 4 peak trains taking between an extra 5 and 15 minutes. Perhaps surprisingly, a Watford to London annual season ticket only costs an extra £4 per year for what is a substantial difference in service quality. 2.25. We would therefore contest the DfT’s blunt assessment of this issue and argue that if the review of rail fares is to contribute to wider government objectives then a much more sophisticated debate on fares is required that is not built on such misconceptions.

5. What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities? 2.26. We strongly believe that devolving responsibility on transport works. This can be plainly seen in the greater priority (and investment) that has been given to transport under devolution in both London and Scotland. This is because local politicians and decision makers place a high value on the role that transport plays in supporting local economies in a sustainable way and in providing communities with the modern and efficient transport that they want. On local rail we have seen the benefits of devolution clearly illustrated by both Merseyrail Electrics and by the London Overground. Services that were near the bottom of the passenger satisfaction league table under Whitehall control are now consistently at the top end of those same tables. Remote control from Whitehall has been replaced with local accountability – making those services both more responsive to what passengers want and the needs of the local economies 2.27. With a fair deal from Government on costs and risks we believe that further devolution of powers over local rail services would lead to significantly improved local rail services, greater accountability, more integration with wider local public transport networks and better value for money. 2.28. Research we commissioned from Atkinsx shows clearly that, based on experience from the UK (London, Scotland, Wales and Merseyside) and Europe, devolution delivers better outcomes for passengers: y rail is given greater priority, with stronger incentives and influence on network and service operators to acknowledge local priorities, maximise performance and deliver a better service for passengers; y investment levels rise, for example, in terms of rolling stock, new or enhanced stations or promotion of re-opened or upgraded lines to cater for, or foster, increased passenger demand; y operational performance rises, level of service improves, feeding into higher customer satisfaction; and y decision making is more fully integrated across modes and policy objectives, including capital investment, integrated fares and ticketing and branding 2.29. Importantly, moving toward a more devolved approach has benefits for national government. By transferring responsibility (and therefore technical, financial and political risks) for local rail networks to bodies that are better placed to address these risks, Ministers would be better able to focus on the strategic development of the railways, whilst being assured that accountability for local services is maintained through local transport authorities. Of course, such a transfer of responsibilities and liabilities needs to occur with a full understanding of the risks involved by all sides. 2.30. However devolution will only work if there is sufficient funding and a fair and reasonable allocation of risks. Local transport authorities will not be interested in devolution if it becomes an attempt by national government to shift the blame for unpalatable decisions to the local level because of decisions that have been taken nationally on funding. 2.31. The five PTEs served by Northern are working together (and with local transport authorities in the rest of the North) on a devolved proposition for the North. The preferred option is for Northern to be retained as a single franchise with Trans-Pennine rolled in. A Rail in the North Executive (responsible to the PTEs and other local transport authorities) would specific and oversee the franchise. A great deal of work is currently underway on all the financial, legal and governance issues involved. One obstacle that will need to be addressed in particular is the 25 mile limitation (set in statute in the 1968 Transport Act) on a PTE’s freedom of action beyond its own boundary. Government support for the necessary legislative change would be welcome. The London Midland franchise is on a longer timescale but Centro are working up their own proposition for the West Midlands 2.32. Accompanying the Command Paper is a consultation on devolving responsibilities for local rail services, which outlines the options for local transport authorities. We welcome the fact that the DfT is open to the potential that devolution offers. However it’s important to stress that: a) true devolution means going beyond the re-badging of the powers that PTEs currently or previously enjoyed (such as being co-signatory to rail franchises and having increment/decrement powers over existing rail services);and b) that to achieve devolution (with all its complexities on costs, risks and governance arrangements) will require the DfT to actively work with PTEs and local transport authorities to resolve these challenges. If the considerable opportunities that devolution has to offer are to be realised then achieving it needs to be a joint enterprise between national government and the PTEs and their local transport authority partners. 17 April 2012

i KPMG (2010), Value for money in tackling overcrowding on northern city rail services. Report to the Northern PTEs ii KPMG (2010), Rail Transport, Infrastructure and the Economy. iii CEBR (2008), Regional Transport Priorities: Understanding the wider economic benefits of Centro’s transport vision iv Source: pteg analysis based on ORR National Rail Trends 2010-11 Yearbook; our analysis excludes the MOIRA PTE infill trips which were added to the ORR data series from 0809 onward. Taking all trip ends within PTE areas for trips within PTEs and to/from their wider Government Office region (but excluding the MOIRA PTE infill) rail demand in our areas is estimated to have grown by 147% between 1999/00 and 2009/10. v Source: pteg estimate based on ORR National Rail Trends 2010-11 Yearbook. In 2009/10, we estimate that 126 million short/medium rail trips (those within a single Government Office region) started and/or ended within PTE areas. By comparison, there were 960m rail trips made in England over the same period. The PTE figure includes the MOIRA PTE matrix infill. vi Source: Northern Rail (2010), Northern Route Utilisation Strategy vii SDG (2006), Northern Review, report to the Department for Transport viii Benefits of smartcards can include simplified fares structures; increased patronage (and revenue) and passenger satisfaction; modal shift; reductions in transaction and administrative costs; reductions in fraud; acquisition of accurate data on passenger behaviour enabling better capacity and network planning; and faster boarding times enabling more reliable, faster and frequent services ix Response by Norman Baker (Local Transport Minister) to a Parliamentary question by Graham Stringer, MP, 9th February 2012 x Atkins (2010) report for pteg: ‘Enhancing the PTE Role on Rail in the City Regions’ Further written evidence from pteg (ROR 10A)

1. Introduction 1.1. pteg represents the six English Passenger Transport Executives (PTEs) in England which, between them, serve more than eleven million people in Tyne and Wear (‘Nexus’), West Yorkshire (‘Metro’), South Yorkshire, Greater Manchester, Merseyside (‘Merseytravel’) and the West Midlands (‘Centro’). Bristol, Leicester and Nottingham City Councils, Transport for London (TfL) and Strathclyde Partnership for Transport (SPT) are associate members of pteg, although this response does not represent their views. The PTEs plan, procure, provide and promote public transport in some of Britain’s largest city regions, with the aim of providing integrated public transport networks accessible to all. 1.2. pteg submitted an initial response to this consultation in April 2012. This document provides additional evidence at the request of the Chair of the Transport Select Committee, in respect of the following two areas: • Net public funding of regional rail networks (within the context of the first question in the original consultation document); • Level of commuter fares in PTE areas (within the context of the fourth question in the original consultation document). 2. Net public funding of regional rail networks “Regional rail networks do benefit from a significant degree of public funding, but so do intercity networks, and rail services in the South East. What is important to understand is that the allocation of network costs (and hence the resulting level of subsidy) is a construct based on a series of assumptions and principles (some of which are implicitly political). As a result, it can be misleading to infer potential cost savings from current subsidy estimates.” (Quote from our original response, para 2.6) 2.1. The analysis in this section is based on the best evidence available to us. There is a significant lack of data transparency across the rail industry which makes it difficult to cross- reference and verify the figures quoted by different sources. We have made our best efforts to ensure that our analysis is internally consistent. 2.2. The key point to stress in making the points below is that there is a lack of transparency about how funding figures are derived (and the assumptions that lie behind them); and therefore making policy decisions based upon such figures can disadvantage the position of regional rail services in terms of their apparent efficiency and value for money.

McNulty’s (unexplained) analysis of rail costs 2.3. The Rail Value for Money study attempted to estimate the net public support implicitly accruing to long distance, regional and London/SE passenger franchises (but excluding capital investment). Given that a large proportion of Network Rail’s costs are funded directly by government rather than through the access charges paid by operators, the results of this exercise depend critically on what proportion of Network Rail’s direct grant is spent on each part of the network. We would argue that some of the assumptions made by McNulty lack a robust rationale and try to show below that more realistic assumptions would shift a greater proportion of public support towards inter-city and London commuter services. 2.4. Excluding capital investment, the total cost of providing passenger rail services was taken by McNulty to be £9.7bn, allocated between different parts of the network as follows: y £2.8bn – Long distance franchises (LD) y £3.8bn – London and South East franchises (London SE) y £3.1bn – Regional franchises 2.5. However, few details are provided on how these figures are arrived at so we have attempted to develop our own bottom-up cost estimates. We began by working out the total operating cost of passenger rail franchisesi, excluding DfT’s direct grant to Network Rail and profit: y £2.4bn – Long distance franchises y £3.1bn – London SE franchises y £1.4bn – Regional franchises 2.6. In addition to this £6.9bn, Network Rail receives a further £2.8bn through central government’s direct grant. Added together, the two figures correspond to the £9.7bn implicit in McNulty’s analysis. 2.7. The way in which the £2.8bn (or 29% of total industry costs) are allocated between different franchises is critical in estimating how much public funding each group of franchises is actually receiving, both directly (through TOC payments) and indirectly (through DfT’s direct grant to Network Rail). 2.8. One obvious approach is to allocate these costs proportionally to the current level of infrastructure charges levied on TOCs by Network Rail. Based on the information available to us, we estimate that this approach would load 40% of costs (£1.1bn) onto LD franchises, 35% (£1bn) onto London SE franchises and 25% (£0.7bn) onto regional franchises. An alternative approach would be to use just fixed charges as a proxy for TOCs’ share of infrastructure costs – this would load £0.9bn onto each group of franchises. Interestingly, the McNulty team appear to have taken neither of these approaches by loading more than half of the unallocated infrastructure costs onto regional operators (£1.4bn), and attributing only £0.4bn to LD franchises. 2.9. Re-allocating these costs as suggested above brings the level of subsidy for long distance and regional franchises much closer together (from a ratio of 1:4.5 to a ratio of 1:2.5) than assumed in the McNulty report. This means, for example, that on the basis of this analysis the level of subsidy per passenger trip would be higher for long distance than for regional franchises.

Table 1. pteg analysis of net public support (excluding capital investment) Franchise Op. McNulty pteg TOC Net public NPS NPS NPS groups costs implicit allocation net support (NPS) per per per (£bn) allocation of NR fixed subsidy (£bn) pax train- pax- of NR fixed costs (£bn) (£bn) (£) km mile costs (£bn) (£) (p) Long 2.4 0.4 1.1 -0.16 -0.16 + 1.1 = 5.3 6.6 10.4p Distance 0.94 (LD) London SE 3.1 0.7 1.0 0 0 + 1.0 = 1.0 1.2 5 6.4p Regional 1.4 1.6 0.7 0.82 0.82 + 0.7 = 6 12 25p 1.52

Funding gap - regional inequalities in Network Rail’s capital investment spend 2.10. The McNulty analysis excludes Network Rail’s substantial capital investment budget, which is funded directly by the DfT. However, investment is heavily skewed towards inter-city routes and London and the SE. Once this expenditure is taken into account then the estimated level of public support per passenger can actually be shown to be greater for inter-city passengers than for those travelling on regional services. 2.11. Over the CP4 period, Network Rail’s capital expenditure will total £8bn (in 2010/11 prices), equating to an average yearly spend of £1.6bn. Of this amount, we estimate less than 15% will directly benefit regional railways (whereas they contribute more than 30% of fixed charges). In contrast, almost half will fund investment in the London and South East networkii. Adding in these figures almost doubles the subsidy received by London SE passengers and brings the net public cost of LD and regional franchises even closer together.

Table 2. pteg analysis of net public support (to be read in conjunction with the previous table) Franchise groups Net public support (franchise + NPS per NPS per NPS per pax- NRopex + NRcapex) (£bn) passenger train-km mile (p) (£) (£) Long Distance -0.16 + 1.1 + 0.56 = 1.5 8.5 10.5 16p (LD) London SE 0 + 1.0 + 0.8 = 1.8 2.1 8.8 11.5p Regional 0.82 + 0.7 + 0.24 = 1.76 7 13.8 29p 2.12. It is easy to lose sight of the fact that both the quality of current infrastructure and future investment levels play a key part in the ability of train operating companies (TOCs) to grow demand and generate additional revenue. Higher quality infrastructure can also lead to lower operating costs (and hence lower subsidy requirements) for TOCs. For example, an increase in track speed would reduce the number of trains, drivers and conductors required to operate a given service level. 2.13. In that sense, it is only reasonable to expect that decades of under-investment in regional rail infrastructure will lead to a widening gap in terms of subsidy requirements relative to other parts of the network.

Track access charge bias against local rail services 2.14. The above analysis allocates infrastructure costs in proportion to the track access charges paid by operators to Network Rail. However, we believe there are two strong sources of bias in the current charging framework, which act to overestimate the true infrastructure costs of local rail services. 2.15. Firstly, it assumes fixed costs are uniformly sharediii between different passenger operators running services across a shared network. We would argue that this tends to shift too much of the cost of providing, operating and maintaining high quality (and hence expensive) sections of track from high speed/heavy weight/lower frequency inter-city services onto low speed/light weight/higher frequency local services. Whereas local services could (and often do) run on much cheaper track, inter-city services would be unable to do the same. 2.16. Secondly, freight trains are only charged a fraction of the track access charges paid by passenger operators even where freight could be deemed as the main user of the infrastructure. The case of the Settle-Carlisle line is paradigmaticiv: in 2008, freight tonnagev north of Hellifield was 6 times greater than passenger tonnage; from 2009, freight tonnage on the line increased ten-fold due to capacity constraints on the West Coast Mainline. As a result there was a need for a step-change in the scale and type of renewal work carried out on the line. But whereas the additional cost would have been reflected in higher fixed charges for local passenger operatorsvi, freight operators would have carried on paying only a variable charge at their previous rates. 2.17. In making the latter point we do not argue that freight should pay its full infrastructure costs but that this example illustrates that the subsidy figures are a construct. The effect of ignoring the shared infrastructure costs between passenger and freight services is to overestimate the actual level of public support going towards regional rail in the North and the Midlands while underestimating the value for money achieved from that subsidy (which should include the external benefits from rail freight). 3. Level of commuter fares in PTE areas “(…) fares in much of the north of England lag so very far behind the rest of the country (…)” (Theresa Villiers, 20th October 2011, Northern Rail Conference) “The DfT has persistently given the impression that commuter fares across PTE areas are comparatively lower than London and the South East. It is more complex than that. DfT’s current analysis, based on a small sample of flows, shows a more complex picture than at first meets the eye. For example, there are some commuter rail fares between stations in the South East that are generally much lower than for journeys into central London, and often lower than commuter fares into northern cities – possibly because for these journeys the car remains a feasible alternative. (…)” (Quote from our original response, para 2.23) 3.1. In this part of our response, we try to address some of the commonly held misconceptions about commuter fares outside London and the South East. It is important to stress, as we did in our original submission, that a much more sophisticated debate is required on comparative fare levels.

Commuters in PTE areas are being subsidised by commuters in London and the South Eastvii 3.2. There are, in fact, many commuters in the South East which get a better deal than their Northern counterparts. Take the example of an annual season ticket between Banbury and Oxford: at 60p/mile this is a bargain compared to the cost of 82p/mile for a similar distance journey between Stalybridge and Leeds. But even an annual season ticket between Oxford and London turns out to be cheaper at 72p/mile. 3.3. An average PTE rail commute tends to be shorter than in the South East. Hence, average load factors on routes serving a wider rural hinterland look low compared to those routes serving London’s sprawling commuter belt. In reality, many short distance PTE commuters actually pay higher fares per unit of distance travelled because of the historical discount applied to longer distance trips. Compare, for example, an annual season ticket between East Didsbury and Manchester costing £1.40/mile with average figures of 80-90p/mile for a typical commute into London. So it could be said that shorter distance PTE commuters are actually subsidising longer distance commuters in the South East.

Regional fares are too low 3.4. Discrepancies between different parts of the country are not great – the average fare per passenger kilometre in the Midlands and the North is broadly in line with other areas, particularly when you take into account differences in income, investment levels, competition from other modes and journey length: y Fare-box revenue on local and regional services across the North is around 20% lower on average, per passenger-mile, than on London and South East servicesviii. In comparison, average wage levels in inner London are three times higher than in PTE areasix. y Investment levels lag behind London and the South East (see earlier ‘funding gap’ section of this response), meaning poorer quality and less frequent services. If this was any other product, consumers would expect to pay less for an inferior service. Take, for example, a journey between Watford and London, which takes around 20 minutes, with 7 peak trains an hour. In contrast, the fastest train between Macclesfield and Manchester, a similar distance apart, takes 25 minutes with the remaining 4 peak trains taking between an extra 5 and 15 minutes. Perhaps surprisingly, a Watford to London annual season ticket only costs an extra £4 per year for what is a substantial difference in service quality. y Critically, the car is a genuine competitor for journeys in PTE areas, unlike London where commuters have little choice – this necessarily requires lower fare levels in the North if rail is to remain competitive and contribute to reduced congestion and pollution from car use.

Putting up fares in PTE areas is a simple solution to getting more investment 3.5. As set out above, PTE rail fares are actually higher, relative to average wage levels, than in London. And, the higher the fare, the higher the sensitivity of passengers to further increasesx. This is more so where there are viable alternatives to rail travel such as the private car. 3.6. Our analysis, using standard rail industry models, suggests that even a substantial uniform increase in fares across the Northxi could generate little more than a 2% increase in revenue at the expense of a 25% fall in demandxii. And given that a substantial proportion of infrastructure costs are fixed or shared with other types of service there is probably little or no saving to come out of such a policy. Instead, it would often make more sense to maximise revenue from the use of existing infrastructure by increasing service levels and through targeted and cost effective investment than by chipping away at the existing network. 3.7. Analysis by TfGM and WYPTE suggests that a more targeted local approach to fares and investment could generate a larger revenue gain at a lower cost to passengers and the local economy.

4 July 2012 i Estimated as the sum of passenger revenues, net operating subsidy (or payment) (Source: TAS Rail Industry Monitor) and an estimate of other revenues. Other revenue (£0.6bn according to the McNulty Scoping Study) was allocated proportionally to passenger revenue. This figure excludes profit of around £300m. ii Source: pteg analysis based on Network Rail’s CP4 report iii Such costs are roughly allocated on the basis of train-kms iv Other obvious examples include Carlisle-Newcastle, Doncaster-Cleethorpes - which is shared with the access route to the port of Immingham - other parts of the network around Hull and Humberside, parts of South/West Yorkshire and several routes in the Midlands v Expressed as equivalent gross tonnes (EMGTPA) as defined by Network Rail vi Northern is the only TOC operating services on this route so they would have borne the entire cost of the change in track access charges. vii Annual season ticket prices are taken from the National Rail Enquiries website and distances represent the shortest route by road between stations. viii Source: pteg estimate based on Rail Industry Monitor data for 2009. ix Source: HMT estimates of workplace GVA per head by NUTS2 area - 2009 figures x The rail industry’s Passenger Demand Forecasting Handbook (PDFH) recommends the use of an elasticity modifier – yet, this often seems to be ignored when talking about major fare increases. xi Purely for illustration purposes, we have assumed a 50% increase in fares. xii Source: pteg analysis based on PDFH parameters. Detailed calculations are not provided here given that access to PDFH is restricted to PDFC members. However, these can be provided on request. Written evidence from the Tyne Valley Rail Users' Group (ROR 11)

Introduction

The Tyne Valley line, which runs between Newcastle and Carlisle, is 62 miles long, and runs through urban, commuter and rural areas. It is used for commuter, leisure and shopping journeys, as well as for connections with long distance services at Newcastle and Carlisle. The line has considerable potential to serve an expanding tourist industry centred on Hadrian’s Wall, a World Heritage Site. Rural railways are an important component of an integrated public transport system.

The Tyne Valley Rail Users Group was formed in 2000 to represent the interests of passengers using the Newcastle to Carlisle Railway. In that time we have worked with three franchise holders: Northern Spirit, Arriva Trains Northern and Northern Rail. In April 2014 it is likely that we will be working with a fourth franchise holder, possibly over a period like 15 years. The Rail Users' Group is a key stakeholder in the Tyne Valley Community Rail Partnership, which seeks to promote services along the line.

What should be the Government's vision for the railways in 2020?

What passengers expect from local rail services of the type provided on the Tyne Valley line is simply put:

Ó A timetable that provides services at times when people want to travel, to and from work, to shopping and leisure centres, to the places of scenic beauty along the line, and to cultural amenities at the major centres (including the return journey when the performance has finished); Ó Trains that arrive and depart at the times specified in the timetable, are clean and comfortable, and have sufficient seats for the numbers of passengers travelling; Ó Fares that are cost effective for passengers when compared with less environmentally sustainable modes of transport; Ó Ticket retailing methods that suit the needs of passengers, and succeed in selling tickets on busy services; Ó A staff presence on trains and at stations to provide security and reassurance; Ó Integration with other modes of transport, particularly buses.

These are features of transport systems that citizens of other countries take for granted: there is not reason why the British people should not enjoy rail services of this standard.

In determining a vision for the railway in general, and passenger services in the North East of England in particular, we would like to use aspects of the present Northern Rail franchise to illustrate the pitfalls of the franchising process as it stands today. Overall we believe Northern to have performed reasonably well given the contractual constraints under which it operates. Nevertheless, what passengers actually experience is a lot less than their reasonable expectation.

Timetable

The Newcastle – Carlisle line has a timetable that, by UK standards, is reasonably good. During the day Monday to Saturday there is an hourly service between Newcastle and Carlisle and an hourly service between Newcastle and Hexham. Better services on Saturday night and Sunday would be appreciated by residents of the Tyne Valley, who would like to return home by train from Newcastle after a night at the Theatre Royal, the Sage, or any of the many other attractions that Tyneside has to offer. The obstacle to later trains on Saturday night is Network Rail.

In 2005, the Tyne Valley Community Rail Partnership, Nexus and Northumberland County Council commissioned a study of the line. The resulting report (1) made numerous recommendations, including the following:

Ó All trains to stop at Prudhoe, giving the station two trains per hour in both directions during the day; Ó Extra early morning stops at Gateshead MetroCentre (recognising that shop workers need to arrive before shop opening times); Ó The smaller stations west of Hexham (Haydon Bridge, Bardon Mill, Brampton and Wetheral) should have a roughly two hourly service, rather than the irregular service with long gaps.

Northern has implemented these recommendations, which entailed adjusting the stopping patterns of trains that ran already. The Prudhoe stops have been rewarded by a significant increase in passenger numbers.

There are some other gaps in the timetable that it has not been profitable for Northern Rail to fill. Prominent among these is that between the first train of the day (arriving in Newcastle at 06.55) and the second (which gets in at 08.04). There is a 07.30 Newcastle – Middlesbrough service which we have proposed could start from Hexham, plugging this gap. Our members have told us that the 08.04 arrival is often too crowded for comfort, but that getting in over one hour earlier is just too early. A train between these two would be well used by travellers. The existing franchise agreement has not made it commercially attractive for Northern to provide such a service. We are keen to see the new franchise given incentives to improve its offer to passengers by spreading the load during the morning peak.

Overcrowding

A transport need to which the railway is particularly suited is the movement of large numbers of people. This is most obviously the case for commuters travelling between their homes and places of work in the major conurbations. It is also true for sporting events, where fixture lists are known well in advance and appropriate provision should be possible. There are also special events, such as the Northumberland County Show held every May, and one-off events such as the BBC Radio 1 Big Weekend held in Carlisle in May 2011.

The current Northern Rail franchise was let in 2004 on a standstill basis, i.e., that the operator would be expected to run the existing timetable with the existing fleet. There was no provision for growth in passenger numbers, and no perceived ambition to cater for events requiring the carriage of large numbers of passengers.

There has been a steady but significant increase in the numbers of commuters, leading to regular overcrowding in the peaks. For a few brief months in 2007, the North East enjoyed the use of a few class 158 units (2). These larger trains with more seats relieved the overcrowding on commuter services. Sadly, these units were then redeployed to Scotland. More recently, the North East has been allocated a single extra class 142 Pacer train, which has been used to double up the most overcrowded service in the morning peak.

Newcastle United home games attract large numbers of spectators from along the Tyne Valley, but local rail services do not cater for these extra passengers. This leads to services being jam- packed at best, and in recent weeks has led to intending passengers being denied boarding of trains.

The Northumberland County Show takes place annually on the Spring Bank Holiday. It results in heavy use of the train to and from the show ground at Corbridge, with passengers being regularly left behind. Provision for this event is usually limited to changes to the stopping patterns of trains to and from Carlisle that would not normally stop at Corbridge. There is seldom publicity for these changes.

The final example was a one-off occurrence, the BBC Radio 1 Big Weekend held in Carlisle in May 2011. Here passengers were treated to notices (3) advising that the number of passengers likely to be travelling would exceed the number of seats available, and also that the last trains from Carlisle would depart before the event ended.

Will the reforms to rail franchises proposed by the Government deliver better services at lower costs?

We believe that the present fragmented state of the railways contributes massively to their inflated costs. The McNulty report, far from simplifying things, proposes new groups such as the Rail Delivery Group as the means of driving down costs. We are sceptical that these groups will succeed.

A large element of the train operators' overall costs is that of leasing the rolling stock required to deliver the timetable. In the North East of England, Northern Rail uses class 142 Pacer and 156 Sprinter units. These date back to the 1980's, and the Pacer trains in particular have serious limitations that make them hugely unpopular with passengers and dangerous when overcrowded.

The rolling stock is leased from one of three rolling stock leasing companies (ROSCOs) that were created with the industry was privatised. The costs of leasing these trains is not public knowledge, but a BBC Radio 4 File on 4 programme gave a figure of £144,000 per annum for each Pacer unit (4). This can be compared with a new build cost of around £375,000. Had these units remained in public ownership, they would long have been considered fully depreciated.

A Competition Commission enquiry (5) into the rolling stock leasing market laid the blame for this situation on the way that DfT specified franchises. By defining the units that operators would be expected to use, bidders were left with a poor negotiating hand with the ROSCOs. The Government now proposes to give bidders more freedom to decide their rolling stock requirements. Given the shortage of suitable vehicles, especially diesel powered ones, it is not certain that this will make a serious difference to the outcome. It is notable that the Government has reserved the right to intervene if costs are not reduced.

It should be remembered that in putting together their successful bid for the Northern Rail franchise, its owners Serco and Abellio did propose the acquisition of new diesel units. This proposal was refused by the Strategic Rail Authority, at that time the body responsible for letting rail franchises.

How should fares and ticketing be reformed?

For the local journeys that account for the majority of tickets sold, the present arrangements do not cater well with passengers, not do they ensure that the operator collects all the revenue due to it. Apart from Hexham, the stations on the Tyne Valley line are unstaffed. There are ticket machines at Prudhoe, Hexham and Haltwhistle. At other stations, passengers must buy their tickets from the conductor. With only four minutes between some stations on the Tyne Valley line, it is difficult to collect all the fares at busy times. When the train is overcrowded, and there is physically no room to move, this becomes impossible even with revenue protection staff on board.

The installation of barriers at Newcastle Central Station means that passengers who arrive without a ticket must buy one before being able to exit the station. If a situation such as an overcrowded train is responsible, this is hardly fair on the passenger. The excess fare office on the platform side of the barriers is seldom manned, meaning that staff are obliged to let passengers without tickets out. Given the capital costs of installing the barriers, together with those of staffing them, it is hard to see that there is an economic case for their continued use.

We would be keen to see advance tickets (say scratchcards) available from local shops – simple single and return fares to popular destinations, e.g., Newcastle, MetroCentre, Hexham, Carlisle. Combined tickets with entrance to events such as Northumberland County Show at Corbridge, the Cumberland show at Carlisle, or attractions in Carlisle, Hexham and Newcastle could also be offered. Scratchcards are used in other parts of the world, are simple, and comparable with lottery products already on sale in the outlets we envisage.

It is important to stress that this initiative does not attempt to offer the complete range of destinations (which would not be possible) but would be additional to existing methods of ticket sale that would preserve the network benefits currently available. From the railways' standpoint, it is intended to improve revenue collection by taking some of the strain off the conductor. We would also like to see carnets – say ten journeys for the price of seven – to encourage those who don’t need to travel every day onto the train. These tickets would be aimed at commuters, but would also be attractive to regular leisure travellers.

What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities?

Our Group’s second pre-occupation is driven by what we perceive as the lack of management in North East England offered under present franchise arrangements. We have noted how the North East has become a repository of the class 142 Pacer trains. We note that Devon and Cornwall with a far less populous area to serve saw their last examples transferred to the North East in 2012. Around 2007 we were promised and for a brief while enjoyed the higher standard Class 158 train. They were moved to West Yorkshire and Scotland. In 2012 the government allowed Northern to obtain 100 additional carriages to cater for existing growth. Only one Pacer set (two carriages) came north of York. Additional instances of the lack of local management include long term issues of failure over revenue collection centred on commuting to Newcastle and the open access MetroCentre station. There is also a repeated inability to deal with extra demand like football travel, County Shows at rail connected stations, and seaside travel like the Bishop Auckland – Whitby Sunday train of 2011 (this regularly left scores of potential passengers behind at Middlesbrough). It is documented that people holding travel tickets have been unable to use them because of the systemic overcrowding. We suspect that the lack of local management has also stymied intended ticketing initiatives.

Northern Rail’s current boundaries embrace Lincoln, Nottingham, Crewe, Chester, Carlisle and Berwick. This is a huge area with numerous conurbations. We noted with interest the DfT map on page 11 of the decentralisation consultation (6). This shows our dilemma very well. Is not the business centre of the Northern franchise self evidently the Humber Mersey corridor? The map suggests that the North East area is indeed an island of Northern which it is, quite literally. There are no through Northern services south of Darlington or through Carlisle (save for Scotrail services between Newcastle and Glasgow). These operations are all run by one depot at Heaton in Newcastle.

The existing Northern franchise was envisaged as comprising five performance management units, one of which, Tyne, Tees & Wear, has the boundaries outlined in the preceding paragraph (7). Once established, Northern Rail organised itself into three areas. Area North comprised the Tyne, Tees & Wear and the Lancashire & Cumbria performance management units. While based in Newcastle, many of the management team resided considerable distances away. Limited knowledge of the area is likely to have been a significant contributor to the shortcomings in performance noted in this submission.

We understand that Passenger Transport Executives and local authorities in the North of England have been approached by DfT with a view to commissioning and managing local rail services. We also understand that these authorities have expressed concerns about how costs, revenues and subsidies would be allocated to individual services. There are also considerable financial risks to the authorities if the level of savings expected by the McNulty review are to be made as part of the process. If bids for the Northern franchise or component parts of it come in higher than the amounts made available by DfT, then local authorities will be placed in the invidious position of having to make cuts in services, rather that the increases that will be required.

17 April 2012

References

1. Tyne Valley Rail Study, Final Report, Martin Higginson Transport Research and Consultancy, November 2005 2. Angel Trains leases 30 class 158 diesel multiple units to Northern Rail, Angel Trains/Northern Rail news release, 13 March 2007 3. Advance Warning! Overcrowding expected on all trains to Carlisle 4. Alan Whitehouse, File on 4, BBC Radio 4, 27 January 2004 5. Rolling Stock Leasing market investigation, Competition Commission, 7 April 2009 (http://www.competition-commission.org.uk/assets/competitioncommission/docs/pdf/non- inquiry/rep_pub/reports/2009/fulltext/546.pdf) 6. Rail Decentralisation: Devolvong decision-making on passenger rail services in England, DfT, March 2012 (http://assets.dft.gov.uk/consultations/dft-2012-10/main-document.pdf) 7. Stakeholder Briefing: Northern Rail Franchise, Strategic Rail Authority, June 2003

Written evidence from Network Rail (ROR 12)

o Network Rail owns and operates Britain’s rail network. It is a private, independent, ‘not for dividend’ company directly accountable to its Members and regulated by the Office of Rail Regulation (ORR). Profits made go straight back into improving the railway. o Network Rail sees its purpose as to generate outstanding value for taxpayers and rail users by continually improving the railway; and our role as to develop, maintain and operate the rail infrastructure in partnership with our customers, suppliers and other stakeholders. o Our vision for Network Rail is as a leading, independent British-based infrastructure group that is internationally respected for providing rail transportation solutions that deliver outstanding value responsibly. o Network Rail owns around 20,000 miles of track; 40,000 bridges and tunnels; 1,000 signal boxes; 9,000 level crossings; 2,500 stations that are leased to train operators; 18 large stations that are managed and operated directly by the company, and a further 8,200 commercial properties all of which fund the rail network infrastructure. o In the decade since the company was formed, passenger journeys have increased by 40 per cent. Between 2004 and 2009 Network Rail delivered efficiency savings of 27 per cent, and we are on course to deliver a further 23 per cent such savings by 2014. o In a complex and entirely interdependent system, both Network Rail and the train operating companies share the responsibility of delivering train services to the travelling public and to the nation. o Network Rail welcomes the Committee’s intention to conduct an inquiry into the issues connected to reform of the railways, and the opportunity to respond. We would also be happy to provide further evidence once the High Level Output Specifications and Statements of Funds Available have been published in July if it would assist the inquiry.

1.1 Over the last fifteen years, demand for rail has grown at an extraordinary rate. Passenger journeys are up 40 per cent in a decade, and there are more passengers each year now that at any time since the First World War. Demand from companies and others wishing to move goods in intermodal containers by rail has also grown substantially over a similar time frame.

1.2 Projections show that the underlying factors that have driven this growth, including economic growth and development, social trends, the broader sustainability agenda, and the improved service provided by the industry itself, are likely to drive continued growth in demand for rail over the next two to three decades. By 2034, the year that HS2 is due to be completed, we expect passenger numbers to have grown by a further 90 per cent to reach 2.4 billion journeys per year and, on the freight side, five million containers a year to be moving by rail, an increase of around 300 per cent.

1.3 This is fantastic news for the industry. It shows that rail, far from being an industry in terminal decline, as it was for much of the late twentieth-century, is well-placed for the twenty-first. It is a reflection on what the industry has achieved and a testimony to the importance of transport and infrastructure to the economy.

1.4 However, it also presents some significant challenges. Many key parts of our railway are already operating at or near capacity as it is, and this issue is only going to grow as time moves on. As the network becomes fuller it is even more important that we make best use of it. This could entail making trade-offs between running more trains and further improvements in performance.

1.5 Continued strategic investment in increasing the capacity of our rail network over the next two or three decades is also essential, and will help to continue to reverse the legacy of at least two to three decades of under-investment in the late twentieth- century.

1.6 The Government has already shown its willingness to invest in rail, and has recognised the contribution such investment can make to long-term sustainable economic growth. By 2020, both Thameslink and Crossrail will have been completed, delivering significant additional capacity into and through central London, and High Speed 2 – the single most important strategic investment in our rail network for more than a century – will be underway.

1.7 However, it is clear that other capital investment will still be essential, in line with a strategic analysis of where growth is expected, and at a time when the expectation is that public spending is likely to be constrained. This is likely to mean that rail will need to attract alternative sources of funding and financing for this investment.

1.8 Those potential alternative sources of funding will only be attracted to invest in rail if they can see the possibility of an acceptable rate of return on their investment. Above all, it is the need to attract long-term investment into our network that requires a focus on delivering sustainable efficiencies across the industry.

1.9 It is in this context that governments (the Department for Transport in England & Wales, and Transport Scotland in Scotland) will publish their High Level Output Specifications (HLOSs) and Statements of Funds Available (SoFAs) in July 2012. These documents will specify the outputs (what government wants to buy from the railway) and funding (how much money it has to pay for what it wants to buy) for Control Period 5 (CP5, 1 April 2014 to 31 March 2019). They will also reflect the choices made by government on the appropriate balance between fares, subsidy and investment. These choices are facilitated by a more efficient and affordable railway.

1.10 The industry has already been working collectively to help inform these choices. With limited funding available, there is a recognition that the industry must make a compelling case for investment in rail and how that investment can help drive economic growth. The industry (in the shape of Network Rail, the Association of Train Operating Companies, the Railway Industries Association and the Rail Freight Operators Association) produced its Initial Industry Plans for CP5 for England & Wales and Scotland in September 2011.

1.11 The Initial Industry Plans offer a railway that, by 2019:

o is more efficient and more affordable to the taxpayer – efficiency improvements and continued revenue growth could reduce the annual net cost to the taxpayer of the current railway in England & Wales to £1 billion (and by £72 million to £627 million in Scotland). These cost savings allow governments to consider the balance of investment in service improvements, the level of fares and the level of ongoing subsidy o stimulates economic growth through the efficient movement of people and goods into and between major economic centres by: • providing an additional 170,000 seats at peak times for commuters on key urban networks • delivering a step change in the rail connectivity of major economic centres providing a stimulus to economic growth and development • providing capacity to accommodate a 30 per cent increase in rail freight o maintains high levels of reliability and focuses on improving areas of poor performance which have significant impact on users o better meets the needs of passengers in key areas such as journey information, comfort, and accessibility, which together with high levels of reliability, can help the industry make steps towards meeting its ambition to achieve 90 per cent customer satisfaction in the longer term o maintains high levels of passenger, public and workforce safety while continuing to improve safety culture throughout the industry and reduce safety risk at level crossings by 50 per cent o contributes towards a lower carbon economy, reducing industry’s CO2 emissions per passenger kilometre by 25 per cent and removing the equivalent of one million lorry journeys off the road per year, a reduction in CO2 emissions of 500,000 tonnes

1.12 The DfT stated in the recent Command Paper (‘Reforming our Railways: Putting the Customer First’; March 2012) that the HLOS for England & Wales will be framed within the context of its longer-term strategy for the railway, that being to:

o put passengers first by maintaining the reliability and safety of our railways; o improve rail services by enhancing the connectivity and capacity of our national rail network, particularly for the journeys that matter most for economic growth – i.e. major inter-city, commuter and freight flows; and links to international gateways; o improve value for money from our rail network for passengers and taxpayers; and o support the achievement of UK environmental targets.

1.13 It is our view that the plans as set out in the IIP for England & Wales are consistent with enabling government to deliver this strategy, and will also be reflected in Network Rail’s Strategic Business Plan in January 2013.

1.14 In terms of the balance between the taxpayer and farepayer in paying for the railway, this is essentially a choice for government. The industry’s responsibility is to make sure the railway is affordable enough to earn the mandate for further investment, recognising the competing demands for scarce government funds.

1.15 However, the concept of making the user pay is not, in principle, wrong. It remains the stated position of government that the balance of funding should be 25 per cent from the taxpayer and 75 per cent from passengers. However, it is worth noting that this is (a) already the case on long-distance services, and (b) is in fact exceeded in London and the South East, where the balance is approximately 19 per cent public subsidy to 81 per cent from passengers.

1.16 It is on the regional network, outside London and the South East and long-distance inter-city services, that there is the greatest discrepancy between the aspiration and the reality in terms of the balance of funding. Here, fares cover an estimated 39 per cent of the costs of the service, with public subsidy meeting the remainder. There is, of course, a strong case for subsidy for services delivering wider social and economic benefits but which are not commercially viable.

2. How are the targeted efficiency savings (£3.5bn by 2019 on a 2008/09 base) to be delivered? What will be the consequences?

2.1 These annual savings, which were suggested by Sir Roy McNulty in his value for money study of the industry (‘Realising the potential of GB rail’; May 2011), constitute annual efficiencies – based on March 2009 costs – of £2.3bn from Network Rail and £1.2bn from train operators and rolling stock companies.

2.2 In terms of the £2.3bn savings identified for Network Rail, we are committed to delivering £1.2bn of these within the current control period (i.e. by March 2014), and have indicated annual savings of a further £0.6 for CP5 in the IIP (i.e. between April 2014 and March 2019).

2.3 This would meet the low-end level of the potential savings suggested by the value for money study, and would be in addition to the 27 per cent efficiency savings Network Rail delivered between April 2004 and March 2009.

2.4 It is realistic to believe these savings can be delivered, but success is by no means a certainty. The major challenge is not necessarily the individual elements of the wider programme of reform across the industry, it is the overall pace of change. Even without major structural reform, which was ruled out in the Command Paper, the industry is going to require continuous, radical evolution to deliver these savings, and this clearly brings its own risks to delivery.

2.5 Reaching the high-end savings of 30 per cent suggested by the value for money study would require Network Rail to find further annual efficiency savings of £0.5bn. This is likely to come from far closer collaborative working with our customers and suppliers, and is reflected in the priorities of our internal reform programme.

3. Will the reforms to rail franchises proposed by the Government, including alliances, deliver better services at lower costs?

3.1 It is clear that there is a need for reform of the franchise system. Primarily, this is about a less prescriptive approach to franchise specification, to allow greater freedom to the franchise holder to respond to market conditions, as well as a need to align incentives of train operators with Network Rail to deliver together for passengers.

3.2 We are entering a crucial period. Over the next few years around two-thirds of all franchises will be re-let. Government has stated clearly that it sees its role as incentivising train operators to be more efficient and to work more closely with Network Rail in the interests of passengers. This is likely to lead to a far greater focus on outputs (e.g. passenger satisfaction) than the present focus on inputs (i.e. detailed specification of what has to be delivered). Network Rail takes the view that this is an eminently sensible way forward, without which it is unlikely the desired savings could be delivered.

3.3 Alliances have been proposed and developed by Network Rail, rather than government, in the context that two of the key obstacles to improved value for money are the lack of alignment of incentives between industry parties and the lack of flexibility to deliver the required outputs in the most efficient way.

3.4 Our view is that the ultimate purpose of developing alliances with passenger and freight train operators is to achieve improvements in value for money and safety by enabling more effective cooperation or partnership with these customers. Such arrangements will not be appropriate everywhere, but they are a realistic option in many places. Effectively, this will mean an end to the ‘one size fits all’ approach across the network that may have been appropriate a decade ago, but which has served its purpose. Separately, we are also seeking to develop relevant alliances with our suppliers.

3.5 On 6 March, in response to the ORR’s publicly stated support for Network Rail’s alliances with train operators, we published our own draft policy statement on alliances.1 This document reiterates Network Rail’s commitment to bringing down barriers to greater co-operation in the rail industry and recognises that, through alliances, we can work together more efficiently with ultimate benefits to the taxpayer, passengers and freight users.

3.6 This policy statement sets out Network Rail's objectives from alliancing with its customers, which are to:

o drive continuous safety improvement; o deliver financial benefits beyond that which could be achieved without alliancing; o drive improved performance and user satisfaction through alignment of incentives around the market and customers; and o apply learning from alliancing to other parts of the business.

3.7 Network Rail expects to achieve these outcomes by using alliancing to:

o challenge constraints which would otherwise be regarded to be outside the control of the parties; o reduce interface inefficiencies and duplication of resource with operators; o transform behaviours and interface management away from being driven by defending current contractual positions towards collaborating to improve industry outcomes; and o drive positive change across the industry by improving Network Rail and operator understanding of each others' business.

3.8 Network Rail has been and will continue to provide input to government in relation to the specification of franchises. In future, we hope to agree with government a simple basis for alliancing opportunities which could then be encouraged through the franchise specification and evaluation processes.

3.9 Furthermore, Network Rail has increasingly been seeking to engage with shortlisted franchise bidders on potential alliancing arrangements and, if we can reach an agreement with government along the lines above, we would hope this engagement could build on whatever alliancing arrangements are included in the franchise specification.

3.10 Where Network Rail has developed alliancing projects with an incumbent franchisee in advance of the refranchising process, the details of these projects would be made transparent to bidders in the competitive process. However, any alliancing

1 Available at http://www.networkrailmediacentre.co.uk/imagelibrary/downloadMedia.ashx?MediaDetailsID=5488. conversations with shortlisted bidders would be non-exclusive and would be treated as confidential where appropriate.

3.11 It is important to stress that the ultimate purpose of developing alliances with passenger and freight train operators is to achieve improvements in value for money and safety through more effective cooperation or partnership. If they do not deliver these, or even hinder them, we would willingly end any arrangement that we had made.

4. How should fares and ticketing be reformed?

4.1 It is unlikely that pricing by time of travel can be used as a tool to manage peak commuter demand, at least to any major extent. It is likely that, to lead to the level of behaviour change necessary, prices would have to rise to an unacceptable level to deliver even minor capacity benefits. Research indicates that the price differential between peak and non-peak fares would need to be significantly larger than now to achieve even a modest reduction in peak demand.

4.2 However, fares and ticketing could offer some assistance in making the best use of existing capacity. Specifically, this could be through the introduction of smart ticketing that incentivises commuters to travel less often, if possible, and accrue some financial benefit from doing so. For example, people may be encouraged to work one or two days a week from home if they could receive money back on their season ticket. Reduced peak demand would help alleviate pressure on the network at the busiest time of the day for travel.

5. What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities?

5.1 In broad terms, Network Rail supports initiatives to devolve decisions on funding and outputs. Bringing local knowledge and priorities into play can clearly add value to the process.

5.2 We would support a range of local stakeholders having an increased role in reviewing and helping set franchise specifications based on such factors as current and expected future economic growth, local / regional priorities, available funding, and local rail demand.

5.3 In addition, government could formalise responsibilities with sub-national bodies for increments and decrements to train service provision – with incremental funding available for any such enhancements. An approach such as this could create a more route-specific focus for service provision and be suited to more rural branch line areas.

5.4 Arrangements in Scotland, with the Northern Rail franchise, or with Community Rail Partnerships, all offer examples as to how a decentralised approach can enable initiatives that improve service provision, station facilities and the environment.

5.5 We also consider that a more collaborative approach to station investment would also result from a greater local perspective. Such an approach could also help to establish a shared vision for the station development and / or wider regeneration schemes that can integrate rail with the wider community.

5.6 However, ultimately, it is vital this is output-based and we must remain able to optimise at a network level how to deliver these outputs efficiently and effectively. It would benefit no one to have sub-national bodies specifying inputs without regard to the wider circumstances. The railway is a network, and decisions must be taken within that context. This includes core functions like train planning which are undertaken at network level, and core responsibilities such as safety.

18 April 2012 Written evidence from Councillor Susan van de Ven,Transport Spokesperson for the Liberal Democrat Group, Cambridgeshire County Council (ROR 13)

1. Given the demise of rural bus services, I would urge the strongest possible consideration to the value of small rural rail services, which often sit within key trunk routes and offer enormous potential for enhancement, not only in their capacity to provide basic access to essential services and opportunities, but also, an alternative to transport by private car.

2. A good, staffed station booking office can hold the key to recruiting and retaining regular rail travellers, often providing advice and versatility that ticket machines can’t. At the very local level in rural communities, human relationships – not quantifiable perhaps – play pivotal roles and this is true at a good booking office where passenger confidence can be established.

3. Community rail partnerships and station adoption offer small but pivotal means for awareness raising and building passenger patronage, and should be strongly encouraged. Network Rail should play an active role in these ventures, alongside train operating companies and local transport authorities.

4. At present local transport authorities can leave the issue of rural rail services to the rail industry when in fact they should be playing an integral role in terms of providing high quality transport interchanges, negotiating concessions, and liaising between bus operators, community transport providers and train operators to foster integrated transport.

5. Sensible and fair one-way ticketing at 50% off the return fare should be available and would send out a positive message about ease of access to rail service

6. Like any transport service, rural rail services will perform well if they are properly supported, and a well-performing business brings economies of scale. If neglected, rural rail services will follow the same path as rural bus services.

18 April 2012

Susan van de Ven Cambridgeshire County Councillor, Melbourn Division and Liberal Democrat Transport Spokesperson Chairman, Meldreth, Shepreth and Foxton Rail User Group

Written evidence from the Chartered Institute of Logistics and Transport in the UK (ROR 14)

The Chartered Institute of Logistics and Transport in the UK (“the Institute”) is a professional institution embracing all transport modes whose members are engaged in the provision of transport services for both passengers and freight, the management of logistics and the supply chain, transport planning, government and administration. We have no political affiliations and do not support any particular vested interests. Our principal concerns are that transport policies and procedures should be effective and efficient and based, as far as possible, on objective analysis of the issues and practical experience and that good practice should be widely disseminated and adopted. The Institute has a specialist Strategic Rail Policy Group, a nationwide structure of locally based groups and a Public Policies Committee which considers the broad canvass of transport policy. This submission draws on contributions from all these sources.

Q1 (a) What should be the Government’s vision for the railways in 2020, taking account of likely spending constraints?

1. Assuming that the economy revives well before 2020 and that the predicted increases in population occur, together with a continuing increase in the use of rail for both passenger and freight: 1.1 Capacity will have increased in London and the South East with the completion of the Crossrail and Thameslink projects, both of which will have seen the introduction of new rolling stock and other technology led improvements; 1.2 More lines will have been electrified with associated changes in rolling stock and improvements in capacity; contributing to a more environmentally friendly railway; 1.3 Detailed work in preparation for the construction of HS2 will evidence Government's commitment to rail as an important mode of transport.

2. The Government's vision should be for: 2.1 A railway that puts the customer first, with operators responding continuously to improve the lot of their customers and to remove the barriers that prevent them from getting a better deal. In particular a network which is always available and services that are reliable, providing increasing value for money. 2.2 Continuing efficiencies in the cost of the railway through better use of the capacity both in the peaks and off peak, resulting in continuing reductions in operating subsidy in real terms depending upon government's view of the balance between tax payer and fare payer (see below); a modernised and safe railway where the country has measurable social and economic benefits from the considerable and sustained public and private sector investment which has been made since the completion of rail privatisation in 1996\7; 2.3 Increasing sustainability of rail as a mode of transport due to improved use of capacity including more freight on rail. The extension of electrification of the network to the greatest extent feasible, including infill to allow increased electric freight operation and (although not within the control of the railway) more efficient and less carbon intensive power generation and transmission; 2.4 A continuing commitment to investment (including the facilitation of private sector investment where it represents value for money) including the High Speed Railway and in the connectivity of urban areas including through the encouragement of light rail and potentially tramtrain.

Q1 (b) How should the balance be struck between the taxpayer and the farepayer in paying for the railway?

3. The Rail Command Paper states (paragraph 1.15) that “there will always be a strong case for subsidy for services which deliver wider social and economic benefits but which would not be commercially viable without taxpayer support”. We endorse this view and recommend that methods used to appraise investment projects, linked to data on rail fares and rail journeys, should be applied to decisions about changes to the level of fares and hence the proportion of the cost of the railway met by subsidy.

4. The Department for Transport (DfT) has recently codified its decision-making process for major investment projects, including an assessment of the economic benefits, in the Transport Business Case1. An appraisal based on the principles set out in the economic section of the Transport Business Case will provide evidence of the wider social and economic benefits that are claimed in the Command Paper as relevant to decisions on the appropriate level of subsidy for the railway.

5. Economic appraisal is invariably used for all transport investment projects to help determine priorities for the DfT’s capital spending and to inform decisions about the scope and extent of any proposal. However, we understand that economic appraisal is not used on a regular basis to inform decisions about revenue spending. Yet the same principles arise in the case of public spending on revenue support, which similarly result in costs to the taxpayer and benefits to transport users.

1 http:www.dft.gov.uk/publications/transport-business-case 6. CILT suggests that decisions on the level of spending on subsidy for rail should be determined by the balance between the costs and benefits of that policy and the level of spending should be determined by setting this level so that it delivers broadly the same ratio of benefits to costs as is obtained for contemporaneous capital projects.

7. There are several effects that follow from subsidising rail fares, with the strength of the effect depending, amongst other factors, on the level of revenue support. These include:

7.1 A transfer of funds from taxpayers to rail passengers who would otherwise pay the full unsubsidised fare or, when the fare is subsidised, are attracted to rail from another mode, switch from a different journey or decide to make the trip. Cost benefit analysis in general as applied to transport schemes in England takes no account of any differences in economic or other circumstances between those who benefit from the project and those who fund it other than through valuing time savings at a single national average or equity value. Since one of the main effects of the subsidy is a transfer of funds between taxpayers and rail passengers, there might be a case for decision-makers being provided with information on these differences.

7.2 Rail subsidy tends to encourage people (i) who would in any case use trains to travel further by rail i.e. live further from their place of work, or (ii) to use rail rather than cars or (iii) make journeys they would not otherwise make. For the purpose of estimating changes in rail revenues on account of a change in subsidy levels, information on the fare elasticity of demand for a specific type of journey is sufficient. However, in order to make a case for subsidy, estimates are also required on what trips would be made and by what mode.

7.3 The transfer from car generally results in additional benefits, because of the reduction in road congestion. Less road traffic creates time savings to the remaining road users, as well as environmental benefits through reduced pollution and a general reduction in road accident costs. Some evidence exists from transport surveys on the likely extent of modal shift and trip redistribution from transport surveys; however, this evidence is less robust than the evidence on the overall elasticities of demand.

7.4 Further benefits from rail subsidies occur because of the effect of a subsidy in reducing transport costs and hence increasing the output of the economy through greater urban agglomeration and increased labour supply. These wider economic impacts have been estimated for most recent major rail schemes.

7.5 Lower fares and higher subsidy result in additional crowding on some services. Unlike the external benefits outlined in 7.3 and 7.4 above, the higher the level of subsidy, the greater are the costs of crowding imposed by passengers generated by the subsidy. There is evidence, again used in the economic appraisal of schemes to increase rail capacity, on passengers’ willingness to pay to travel in less crowded conditions.

8. Changes in the level of demand on account of changes in the level of subsidy will, in many cases, result in train operators looking to change the level and pattern of services in response to the new pattern of demand. An assessment of the impact on economic benefits of the changes in demand that would follow from different scenarios about the level of subsidy would need to be accompanied by an analysis of the changes in train services that would be operated to accommodate that demand in the most efficient way.

9. Much of the data and evidence needed to estimate costs and benefits of different scenarios for rail subsidy are already available as part of the DfT’s published appraisal guidance and the information provided to the DfT by train operators on the services they operate and on passenger demand. Estimates of how passengers respond to changes in fare levels, in terms of the alternative modes they would use and destinations they would choose, are less well understood although local transport models, including London’s LTS model, could provide some evidence of these effects. CILT recommends that the Department exploits existing sources of data and models, including its recently developed Long Distance Model, and collects such additional data as might be necessary, to improve its understanding of people’s choice of mode and destination for the types of trips for which rail is an option. A better understanding of these choices would provide the Department with better evidence about the wider social and economic benefits delivered by rail services.

Q2 How are the targeted efficiency savings to be delivered? What will be the consequences?

10. By 2020 a substantial proportion of the savings identified in the McNulty report should have been achieved subject to the outcome of the Control Period 5 Regulatory review which will set the efficiencies to be achieved by Network Rail from 2014 - 2019 taking into account the HLOS and SoFA to be published in July 2012. Alliancing and partnership arrangements between Network Rail and operators, including potential for cost/revenue sharing, are also intended to create a sense of joint ownership of key business decisions. The savings which can be achieved through re-franchising will depend on the DfT's franchising programme continuing and bidders' assessment of risk under the new form of franchise contributing to a reduction of cost and/or increase of premia.

Q3 Will the reforms to rail franchises proposed by the government, including alliances, deliver better services at lower costs?

Franchising

11. The principal change to the franchising regime is to make franchises longer, typically around fifteen years, with the intention to create incentives on franchisees to invest, on the basis that the longer timescale will allow greater opportunities for financial payback and will reduce risk. At the same time the intention is to reduce the level of government prescription of the detailed management of the franchises, and to remove the existing system of support for shortfalls in revenue but link franchise payments to economic criteria such as GDP, in order to provide a degree of protection for franchisees regarding the major risks that are outside their control.

12. We believe these changes will bring benefits. But they do not address the fundamental issue of incentivising the franchisee to invest during the second half of the franchise period. The ‘cliff edge’ effect is likely to remain. In particular, there is a risk that innovation could be stifled for extended periods. The Government needs to consider a suitable residual value formulation to encourage continuing investment throughout the franchises.

13. The West Coast invitation does not bode well for producing imaginative or cost-reducing solutions, as demonstrated by the minimum service specification having been set effectively at current levels, giving no scope for cost reduction by replanning services. A slavish devotion to the past will not release the latent capability of the market to produce patterns of operation that serve customers and business objectives better.

14. There is no evidence that Government will work with operators to enable them to achieve the potential reductions in labour costs ranging from changes in working practices and in pay and pensions which were identified in the McNulty report. Government should actively support TOCs that try to make such changes.

15. In the long term the franchise system may need more fundamental redesign, or even abandonment. Other models, drawn from European experience, could be considered – possibly resulting in fewer but more financially resilient service providers, able to take more risk. In the nearer term, the government should ensure that it retains sufficient flexibility to make changes within the period of the next set of franchises.

Alliancing

16. The Command Paper states that the alignment of Network Rail and the train operating companies is “the most pressing reform necessary to drive down costs for the railway”. It describes in general terms a number of alliancing measures, including the ‘deep alliance’ already underway between South West Trains and Network Rail under which decisions about network maintenance and renewal are made jointly by a single management team. This particular form of alliance goes much further than simply the making of joint operational decisions by Network Rail and TOCs in joint control centres.

17. It is proposed that these practical arrangements will be mirrored by changes to franchise agreements and track access charges to create or align incentives between the operating companies and Network Rail. The success of the experiments will to a large measure depend on the skill with which these contractual arrangements are framed and the responsiveness of the industry bodies to the opportunities they present.

18. The Wessex alliancing proposals are instructive in showing a very clear intention to bring together the operation of the train service and of the associated routes and possibly the station management at Waterloo Station. It is the combination of collaborative governance structures and transparent financial incentives and disincentives which should achieve the improvements. Alliances need not be confined to new franchises, as the Wessex Alliance has shown.

19. There are potential downsides to alliancing. Too close a relationship between the main passenger TOC and Network Rail may be seen as a potential threat to the other users of the route, so this needs to be guarded against. Transparency of accounting, the basis of the new European railway structure, and the benefits this brings for public accountability and for the promotion of competition, must not be compromised.

20. It is much too early to say whether these experimental arrangements will in practice deliver better services to rail customers and drive down costs, but in principle the organisations working together seamlessly at an operational level does offer the prospect of greater efficiency and reducing the problems that arise at the interfaces of the industry’s disaggregated structure.

Q4. How should fares and ticketing be reformed?

21. Operators value the ability to offer a range of fares, market pricing services to maximise revenue and helping to manage cost through charging higher prices during peak times when the cost of providing additional capacity is high and offering cheaper fares to encourage travel at off-peak times when spare capacity often exists. This approach should maximise revenue, minimise cost and thereby minimise the requirements on the taxpayer.

22. It is unlikely that the current level of ticket complexity is maximising revenue effectively. Price theory is built upon “perfect knowledge” and rational economic decision-making of those choosing to travel by rail. In a number of rail markets the current fares structure is often distrusted by passengers, it can be illogical or counter-intuitive and unlikely to maximise revenue.

23. The temptation to introduce new ticket types (without removing others) to target a particular market at a particular moment in time or to introduce new offers which have to work around fares regulation appears to have led to a tactical approach to fares setting, which itself may entrench and exacerbate fares complexities and fare anomalies. Fares regulation prevents regulated fares being offered at lower prices – needed to stimulate smartcards (as was done with Oyster).

24. Reflecting the importance of commuting in the provision of rail services, season tickets are the predominant ticket type used across the system and have (arguably) changed the least and are the most regulated. These factors appear to be connected and may point to supporting the way in which season tickets are regulated in future. Regulation was (and is) intended to protect commuters (mainly to London) from market abuse. However, in practice the fares charged have encouraged long-distance commuting. We believe there is a need for a full cost benefit analysis of the level and structure of fares, as outlined above. Government policy would need to take account of the effects of any change of policy on commuters (and their local communities).

25. The current arrangement for season tickets does not encourage off-peak travel, but there is doubt about how many passengers commuting to work are able to travel other than in the peak. If the fares for travelling in the peak are increased and workers are still required to arrive at work during the peak, either passengers end up spending more of their income on travel (and thereby having less disposable income for spending in other parts of the economy) or businesses have to give greater pay increases to their staff to offset the increases (dependent on how much pressure staff are able to put on their employers). It should also be noted that British Railways experimented with shoulder peak tickets and at the time they had little impact. CILT believes that more research is required into the number of commuters that would be able to transfer into the shoulder peak and off peak services.

26. While there have been actions by some operators to introduce off- peak and shoulder-peak season tickets – c2c Rail operated Earlybird and Flexitime season tickets (valid anytime except the high peak into London Fenchurch Street) for a number of years – a failure to include such tickets within the operator’s fare basket has seen them withdrawn at a later date, again affecting passenger confidence in the ticketing system.

27. The question of fares policy needs to be integrated with other issues such as housing and employment development. It also needs to be considered in the light of the whole journey. If there is pricing to move passengers to the shoulder peak, what does this do the transport network at the rail destination location? For example, moving to shoulder peak on the heavy rail network into London may mean a greater number of passengers travelling on the London Underground in the peak period.

28. The anticipated introduction and extensive use of smart ticketing technology to the railway is very welcome. With the ability to store credit on smart cards, there is the ability to introduce more flexibility to pricing. For instance, it would be easy to have shoulder peak fares with commuters choosing whether to pay the full peak fare on a daily basis instead of having to buy a ticket for one or the other. However, as has been seen in London, the transition to pay-as- you-go (PAYG) ticketing has been frustrated by the way in which fares are regulated, with the new PAYG product being unregulated whilst all “cash” peak singles and returns and season tickets (including Travelcard) are regulated. This made the proposition to deliver lower PAYG fares, while retaining all other products and fares, difficult to achieve. When TfL introduced PAYG through its Oyster card it also took the decision to increase cash fares under its control to incentivise passengers to use the Oystercard, an action not readily available to TOCs. Some regulatory relaxation may therefore need to be considered as the use of smartcards is introduced.

29. Outside of the peak there are arguments to move away from a capped regulated fare or to have a much higher cap but introduce airline style yield management prices with lower cost seats to reach a minimum yield level and higher prices when only a few seats are left. The problem here is that unlike the airline industry, rail passengers are not guaranteed a seat and most services allow standing passengers. Yet compulsory seat reservation would reduce the ability to cope with peaks in demand. Also many passengers even on inter city trains are making shorter journeys for which it may be unattractive to have to book in advance, and in any case compulsory advance booking reduces the attraction of high frequency which is a selling point of rail in the competition with the flexibility of car.

30. Nevertheless, many longer-distance journeys may now be undertaken at much lower prices using Advance Purchase ticketing, which is now commonplace on most longer-distance journeys, and is likely to offer the potential to both protect lower fares while minimising crowding / maximising the use of available capacity (and therefore minimum cost). But the room for manoeuvre remains limited on particular services because of existing regulation. Regularly reviewing the time period in which regulated off peak fares may be used would be one way of easing the problem. From the customers’ perspective, some of the penalties for using the ‘wrong train’ may seem draconian (especially where this is a result of misunderstanding) and should be reviewed, although incentives to use less busy trains should remain.

31. The introduction of new fares (such as fare zones as a precursor to introducing smartcards) may be difficult without allowing for “step changes” to be made. It may, therefore be appropriate to consider mechanisms to “give permission” to allow fares to alter by more than headline regulation through application to the ORR to consider the economic and social case for making such changes. It may also be necessary to have a “two lane” process where existing users have a discount applied to moderate any economic effect of fare increases, given that they are effectively “captive” for a period of time i.e. time taken to relocate, look for alternative employment or to obtain pay increases to cover for the rise.

Q5 What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities?

32. Local control of rail service specifications and franchising should be a significant improvement on DfT central control. Local politicians and transport planners have a better detailed understanding of local issues. As an example of effective decentralisation, Merseyside's success with Merseyrail is a good start but could be taken further. The proposal to set up a 'Northern Rail Authority' with reps from the five PTEs, Shires and Unitary Authorities could have considerable merit if it could be made to work effectively (it would have been much easier had regional authorities been retained). It would however need strong devolved powers from its parent authorities to avoid inter- authority arguments. It would presumably take on Northern Rail and probably TransPennine, whether or not they were combined. The relationship and responsibilities between it and Network Rail and other operators would need to be carefully specified to ensure that local needs are met.

33. Local development planners should also be involved, bringing transport and planning closer together. This is not helped by the current regional planning vacuum,

34. The local devolution of rail matters would require account to be taken of rail routes / sub-networks that extend across local authority boundaries, to ensure consistency of policies. This would be of particular significance with regard to unitary authorities, whose boundaries are generally more tightly drawn than those of shire counties. Arrangements similar to PTE former 'Section 20' agreements for cross-boundary train services would need to be made. Similarly, long distance services, not controlled by local authorities, would need to be protected.

35. A key factor is funding. Decentralisation of responsibility for rail needs to be accompanied by transfer of capital and operating resources from central government – otherwise it will make local control responsible for presiding over major service cuts. Assurances are needed that the Treasury will back the plans with the necessary funds.

36. The alliancing issues considered in the previous question are important in the context of decentralisation. For instance, local authorities would need to have a clear understanding about the legal position on separation of management and accounting responsibilities for infrastructure and train operation under EC regulations. Would they provide funds for Network Rail expenditure associated with local services provided under an alliancing arrangement – and how would common costs and the costs of non local authority sponsored services be accounted for?

18 April 2012

Written evidence from Freight on Rail (ROR 15)

Freight on Rail, a partnership of the rail freight industry, the transport trade unions and Campaign for Better Transport is pleased to respond to the inquiry into the Reform of the Railways.

The impacts on rail freight do not easily fall into the suggested questions so the submission explains the positive and negative implications to rail freight of the reforms. Rail freight needs a national network which is managed nationally both because most rail freight flows are inter-regional and its competition has access to a national network by and large. Any new structure needs to incentive the promotion of rail freight by all parties to ensure that rail freight’s interests are safeguarded.

1. Impacts on rail freight of Command Paper

While the Rail Command paper recognises rail freight’s value in economic, environmental and safety terms, the restructuring plans to trial full vertical integration within the privatised model would be highly damaging to rail freight and will lead to more fragmentation. Rail freight’s interests need to be safeguarded if the Coalition Government is to be able to meet its climate change and economic targets.

We support the Rail Command Paper’s strong support for both existing and future rail freight services. It sets the scene for funding in the next rail spending round (HLOS) by recognising what rail freight needs to thrive and grow ie expansion of Strategic Freight Network including diversionary routes, gauge and capacity upgrades. It also highlights the need for the right planning policies to get terminals of all sizes and the need for protection of strategic freight capacity, all of which is very welcome.

Rail Command Paper paragraph 3.15 One of the key future roles of the existing rail network will be to continue to support the growth of freight services, particularly for inter-modal containers. Our strategy is set out in the department’s Strategic Rail Freight Network policy. We aim to fund a targeted programme of investment designed to make the best use of the existing rail infrastructure and to support continued private sector investment in the industry. Where there is a business case, and subject to affordability, we propose to increase network capacity to accommodate forecast freight growth. HS2 will also release capacity on the existing network to enable more freight services to operate.

Rail Command Paper recognises that road freight does not pay all its costs,

Paragraph 4.49 Page 49 Not all external costs of road freight are paid by users of the road network so there is a strong case for Government to continue providing support for the rail freight industry to create a level playing field.

2. Current charging regime Increases in rail freight charges would make it even harder for rail to compete with road freight. Rail freight charging principles set out in EU Directive 2001/14 state that freight operators should pay charges which reflect the costs that they impose upon the network.

3. Restructuring threats to rail freight However, as part of the re-structuring of the railways, its commitment to trial vertical integration in the privatised railway is a huge threat to rail freight. A fragmented model with more interfaces is no use for rail freight. Network Rail needs to work to ensure that freight’s interest are safeguarded. Under the present privatised model, separation of track and train must be retained to avoid passenger operators being put in charge of the track. The competition, ie road, does not face these complicated structures which will make it more difficult for rail to compete.

In particular, singling out Anglia routes for vertical integration tests is very worrying for freight given the importance of freight services out of Felixstowe and North Thames side to the economy. Changes which could threaten performance and thus the ability of the Focs to supply reliable services to their customers could be very damaging to rail freight. In some parts of the country this model could lead to conflicts of interest. The proposals for the Wessex franchise could be equally worrying for Southampton port.

There are fundamental questions on how services would be prioritised if the Tocs were in charge; Tocs would need to be incentivised to promote and increase rail freight flows. Any new structure must guard against intermodal freight trains sitting at red signals waiting to come out of Southampton and Felixstowe Docks. If the Focs are not able to provide a reliable and robust service to their customers, the traffic will revert to road leading to more road congestion and pollution.

It is therefore disappointing that Government is to continue to support trials of full vertical integration, going much further than the current proposals for alliancing which in themselves risk more interfaces and fragmentation.

The report considers a number of alternative structures for the infrastructure and train operator integration. The third option states that there is an option ‘to place responsibility for train operations and infrastructure management in an area in the same hands (table 4.1 paragraph 4.6). Later, the report states ‘we agree that vertical integration could offer promising benefits in the longer term (paragraph 4.27). We are strongly opposed to this type of vertical integration, as it could reintroduce all the issues of unfair competition, as well as potentially put one government funded train operator in charge of capacity allocation, that current European and UK legislation is designed to avoid.

4. Relationship with ORR Although third parties have the ability to appeal to ORR in certain cases, an approach which relies on appeals and arbitration is unlikely to deliver the commercial service which freight needs.

Regulatory protections for freight Both Government and the ORR are determined that any changes proposed to the structure of the industry continue to protect the interests of freight and other operators on the network. P45.

5. Rail freight needs a national network It remains crucial that the system operator ie Network Rail keeps all the timetabling, possessions and maintenance planning central. A key question is at what level in the chain of these operations are responsibilities devolved locally.

6. Rail devolution consultation Questions remain on how to manage a devolved structure and what features would be retained centrally. At the moment devolution relates to specifying franchises. However were the DfT to start talking about devolving the network grant that is potentially serious for freight.

7. Alliancing It should be noted that although the proposals as described for Stagecoach South Western Trains consultation do not constitute vertical integration, it clearly moves in that direction and risks splitting up the national railway network resulting in more interfaces.

8. Why rail freight is so important to the economy, environment and society

Congestion benefits Road congestion is now costing around £24 billion per annum according to the Freight Transport Association based on Government figures; a single aggregates train can remove a staggering 160 HGVs from our roads 3.

Environmental benefits

Rail freight creates 70% less carbon dioxide than the equivalent road journey and a gallon of diesel will carry a tonne of freight 246 miles by rail as opposed to 88 miles.

Rail freight is safer than long-distance road freight using major roads, as HGVs are over 3 times more likely to be involved in fatal accidents than cars due to a combination of size, lack of proper enforcement of drivers hours, vehicle overloading and differing foreign operating standards. Source: Road Statistics 2010 Traffic statistics table TRA0104, Accident statistics Table RAS 30017, both DfT

Rail freight is breaking out of its traditional markets into consumer business Last year for the first time, consumer rail freight traffic was greater than coal traffic; it grew 29% in the past 5 years, despite the recession, its eighth consecutive year of growth. The industry predicts that rail freight overall will have doubled by 2030 with consumer rail freight growing 7.6% per annum during this period.

18 April 2012

Written evidence from the South Yorkshire Passenger Transport Executive (SYPTE) (ROR 16)

Introduction

SYPTE supports the objectives for the reform of the railway network as set out in the Rail Command Paper published on 8th March 2012. These recognise the need to provide value for money for passengers and to improve the efficiency of the railway, particularly in the current fiscal climate. We support the identification of the role played by rail in supporting economic growth and change, as South Yorkshire’s rail network enables people to access employment and businesses to connect to markets.

We have contributed to and fully endorse the pteg response that has also been submitted to the Committee on the reform of the railways. This response sets out the additional issues and challenges from a South Yorkshire perspective.

1.1 The Government’s Vision for the railway in 2020 should seek to maximise its contribution to wider economic, social and environmental goals. In the current fiscal climate, it will be particularly important to realise the potential contribution that the network can make to economic growth and sustainable development.

1.2 To achieve this goal it will be of vital importance to ensure that in 2020 there is sufficient capacity on the network to facilitate such growth, rather than acting as a barrier to it. At the sub national level, the recently completed Yorkshire Rail Network Study1 has shown that passenger numbers in Yorkshire increased by 65% between 1998 and 2011. Furthermore, this trend is projected to continue with passenger numbers forecast to grow by up to 37% by 2027. Consequently, a key challenge will be to ensure that there is sufficient capacity available on the network to meet this growth in demand. The study highlighted that improving connectivity and increasing capacity could generate economic benefits of up to £12.2bn (over a standard 60 year appraisal period). Without investment, there will be severe levels of crowding on many routes in the Sheffield and Leeds City Regions by the 2020s, suppressing future demand and restricting economic growth.

1.3 The delivery of high speed 2 (HS2) will help to alleviate capacity challenges experienced on more strategic services. In the 2020s, the conditions will need to be put in place in the local transport network to maximise and spread the benefits of high speed rail. However, with high speed services not currently being planned to be delivered to South Yorkshire until 2032/33 it will be important to continue to invest in improving strategic, long distance services on the East Coast and Midland Main Lines. Furthermore, we support the construction of a link from phase one of HS2 to the Birmingham ‐ Derby Line and thus the Midland Main Line. This will enable the businesses and residents of South Yorkshire to benefit from access to high speed services from 2026.

1 Steer Davies Gleave (2012) Yorkshire Rail Network Study, Conditional Output Statement, Leeds City Region, Metro and South Yorkshire Passenger Transport Executive 1.4 Improving the quality of rail services provided in 2020 will also be important, to maximise the shift to rail from less sustainable modes of travel. For South Yorkshire, this will require the development and implementation of an appropriate strategy to improve the rolling stock in operation on local and regional services. The deadlines for Rail Vehicle Accessibility Regulations and Railways (Interoperability) Regulations should be seen as opportunities to replace outdated rolling stock, rather than continuing to refurbish outdated and life‐expired stock.

2. How are the targeted efficiency savings (£3.5bn by 2019 on a 2008/09 base) to be delivered? What will be the consequences?

2.1 SYPTE supports the need to deliver efficiency savings, but this should not occur to the detriment of service quality for passengers. Furthermore, the scale of savings outlined to be made by the Train Operating Companies (TOCs) may require difficult decisions on how to make best use of their funding in areas such as staffing, maintenance and fuel costs.

2.2 Some of the mechanisms set out in the Command Paper to increasing the productivity of the workforce are likely to be difficult to address, including the introduction of more driver only operations, which the industry has not tackled to date.

2.3 In the delivery of efficiency savings from the railway it will be important to consider the potential schemes that could ultimately save the Government money. For example, electrifying the Midland Main line from Bedford to Sheffield would save up to £60m every year in industry costs. Consequently, within ten years of completion, the electrification of the line will have paid for itself and will continue to reduce the cost of rail to the taxpayer year on year. Upgrading and electrifying the line would also generate additional wider economic benefits of £450 million, by enabling businesses to be more productive.

3. Will the reforms to rail franchises proposed by the Government, including alliances, deliver better services at lower costs?

3.1 SYPTE supports the introduction of longer franchises, as this provides a valuable incentive for greater investment by TOCs. Whilst longer franchises inevitably require greater flexibility, due to the uncertainty surrounding the nature of services required in 15 years’ time, the nature of the existing Northern franchise means that it requires high levels of subsidy. Consequently, it will be important to ensure that passengers in South Yorkshire do not suffer through an approach that concentrates on services offering better value for money. In reforming franchise specifications it will be important for the Government to ensure that the interests of passengers on more highly subsidised routes are considered, particularly in terms of the wider societal contribution of rail.

3.2 As well as franchise length, the Government must consider the specification and management of franchises and the appropriate strategies to deliver investment and other passenger benefits.

4. How should fares and ticketing be reformed?

4.1 SYPTE supports the introduction of smart ticketing and recognises the benefits of this approach. However, as noted in the pteg response it will be important that as in London the cost of the implementation of smartcards should be covered by national Government, rather than by local partners.

4.2 We strongly support the need to revise and simplify the national fares system, to make passengers more confident that they are purchasing the right ticket type. This should include putting an end to multiple tickets, which break a journey representing the cheapest option on some routes. This should also include having a consistent approach to the pricing and duration of peak periods, with clear guidance on these issues to be available for passengers. Until such fundamental issues are resolved with fares, SYPTE does not support the closure, or any significant reduction in the opening hours, of ticket offices. This is because the ticket machine technology does not currently always enable passengers to identify the cheapest fare. SYPTE has welcomed the introduction of the additional ticket machines at Sheffield Station, which enable passengers to more easily collect pre‐booked tickets.

5. What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities?

5.1 SYPTE is currently working with the other four PTEs in the north of England to produce an expression of interest to be submitted to DfT in response to the consultation on Rail Decentralisation.

18 April 2012

Written evidence from DB Schenker Rail UK Ltd (ROR1 17)

Introduction

1. DB Schenker Rail UK Ltd (DB Schenker) is pleased to submit evidence to the Transport Committee’s Inquiry into Rail Reform. Our evidence focuses on :

a. The vision for rail freight for 2020 and beyond b. The role of rail freight in the Industry’s response to the need for efficiency savings c. Rail freight and Alliancing d. The implications for rail freight of increased decentralisation.

We would be pleased to provide oral evidence to the Committee if required.

2. DB Schenker is the largest UK rail freight operator. DB Schenker moves around 80 million tonnes / 10bn tonne kilometres of freight a year and employs 3200 staff in Great Britain. Besides transporting coal for electricity generation, steel and petroleum, we move stone, deep-sea containers and operate international freight services through the Channel Tunnel in connection with the European Network of DB Schenker. DB Schenker is wholly owned by Deutsche Bahn AG, the second largest logistics provider in the world.

3. Rail freight produces between three and four times less CO2 per tonne moved than road haulage and up to ten times less polluting emissions. Whilst rail must continue to reduce its own carbon footprint, its primary contribution to Climate Change is to continue to attract traffic from more polluting modes.

4. Rail freight in Britain has been one of the success stories of privatisation and has grown by over 60% in the last fifteen years, increasing its surface market share from 8% to 11.5%. At the same time the industry has become more efficient with DB Schenker having reduced key asset numbers and costs by over 30% in the past five years. Although rail freight volumes reduced during the recession, they are again growing (by 8.9% between 2010/11 and 2011/12) and the industry continues to invest in the firm expectation that absolute growth, as well as increased market share, is achievable.

5. The achievements and efficiencies of rail freight post-privatisation, and the scale of competition both within the mode and with other modes, were recognised by the McNulty Value for Money report. Subsequently the Command Paper also gave government support for both present and future rail freight growth.

6. Both of these acknowledged that rail freight is essentially a private sector activity, whilst recognising that some fixed infrastructure elements attributed by Network Rail to freight are funded directly by Government in the same way as for passenger rail. The significance of this is that this places rail freight on a more equivalent basis with road freight, which is the main competitor and which is essentially free at the point of use (as road hauliers do not pay access charges, merely VED and fuel duty).

7. In summary therefore, rail freight is rather different to passenger rail and it is very important to always look outwards at the markets / competitors of rail freight and to resist insularity and merely looking inwards at the rest of the railway.

Vision for Rail Freight in 2020 and beyond

8. The essential vision is that of rail freight playing an even greater role in supporting economic growth and the development of UK plc and helping Governments achieve their carbon and other environmental objectives.

9. A key element to achieving this is implementing the vision set out by the previous Government in 2008 (“Development of a Strategic Rail Freight Network”) and subsequently endorsed by the Coalition, most recently in the Command Paper.

10. In support of this, the rail freight community has developed and recently updated growth forecasts for rail freight for both 2020 and 2030. These were used in the Initial Industry Plan and underpin current CP5 work. Recognising the multi-user nature of the rail network, these forecasts were endorsed by a wider stakeholder group that included Freight Operators such as DB Schenker, Network Rail, Department for Transport, Transport Scotland, Welsh Assembly Government, ATOC, the Office of Rail Regulation, the PTE Group and Transport for London. End-customers and other stakeholders were represented by the Railfreight Group and the Freight Transport Association.

11. Central to achievement of the growth forecasts will be the development of sufficient well- located rail freight terminals or interchanges; the publication by DfT of their Policy Statement in support of Strategic Rail Freight Interchanges in November 2011 was a key element in developing a planning regime that facilitates rather than hinders this.

12. The UK Government is investing over £400 million in Strategic Freight Network infrastructure investment in CP4; Government is currently considering whether to continue this investment in CP5, and if so at what level, as part of the HLOS/SoFA processes.

Efficiency savings

13. DB Schenker sees that the role of rail freight with respect to continued and increasing industry efficiency has two main elements.

14. The first element is that DB Schenker (and the freight community in general) is fully committed to playing its part in helping to understand and drive whole-system efficiencies – for example, in DB Schenker’s case, by involvement in the leadership role of the Rail Delivery Group and the various Rail Delivery Group workstreams. As the McNulty VFM Report suggested, these tend to be complex areas which require considerable development to understand why, as an industry, we are where we are and what changes will be possible over time.

15. The second element relates specifically to rail freight. The McNulty VFM Report recognised freight’s achievements in driving efficiency since privatisation – for example in the reduction of operating costs and staff numbers, improvements in asset utilisation and Investment in new equipment.

16. However we are not complacent. The McNulty VFM Report identified areas where freight could do more. These included;

- freight agreeing to forego potential future access to parts of the network where there is no reasonably foreseeable freight demand to allow different and cheaper asset maintenance & renewal policies to be considered,

- ensuring capacity is used efficiently at key pinchpoints

These are being followed up by DB Schenker and others within the freight community alongside the Rail Reform and Periodic Review 13 processes.

17. DB Schenker is also heavily involved in the Office of Rail Regulation’s Periodic Review 13 workstreams to help decide NR’s revenue for CP5.

Alliances

18. Alliances have the potential to drive change across the rail industry. By Alliance, DB Schenker simply means a bilateral or multilateral arrangement for parties to work together in a different way to drive efficiency and benefit.

19. DB Schenker would like to make three points.

• On a multi-user railway, no user should be disbenefitted by any such arrangement. All users have to learn to work together in a different way and in this respect the incentives to be put in place as part of CP5 will be vital.

• DB Schenker sees the keys to success with Alliancing as :

Communication – the earlier that all parties engage in dialogue the better. Solutions are likely to be more realistic and optimal, and it is DB Schenker’s belief that cost management will be enhanced. This is as true for track renewals as it is for enhancements, rolling stock provision or capacity management.

DB Schenker strongly believes that all users of a route have to be incentivised to support “deep” Alliances and, where appropriate, other Alliances (eg for delivery of specific enhancements).

Transparency – transparency of purpose, aims, structure, reporting and decision making will be vital to ensuring the support of affected third parties. Without transparency, the risk of an Alliance failing would seem to Trust – to some extent trust will follow from Communication and Transparency, but it is DB Schenker’s view that the management of any proposed Alliance have a responsibility to build and maintain trust with all stakeholders and affected parties. DB Schenker does not underestimate the scale of this challenge.

• This implies that Alliances require changes in behaviour and culture that will not be straightforward and experience suggests will take some time to mature.

However these cultural changes are at the heart of how the rail industry needs to develop to drive whole-system efficiencies.

Implications of the proposals for rail decentralisation

20. DB Schenker believes that decentralisation in its different forms – in terms of Network Rail devolution, possible future infrastructure concessions, possible future vertical integration trials or devolved responsibility for passenger services (both funding and specification) - potentially have major implications for rail freight.

21. It is important to emphasise the distinction that rail freight operates in response to demand, not in anticipation of demand which is the case with most passenger services. Therefore the known requirements of our customers drive the patterns and frequency of rail freight.

These requirements, which often change weekly or monthly, do not neatly follow railway lines of route or organisational boundaries. As an example, each freight flow typically crosses three or four Network Rail routes.

22. DB Schenker is always conscious that we – and other rail freight operators – compete directly with road freight in virtually all markets and rail freight has to be as simple and understandable as possible to use, if customers are to be persuaded to shift mode or increase their use of rail.

23. Rail freight therefore depends on a national network and needs to operate in a national framework – by this DB Schenker means that the customers demand (inter alia);

• Simple, affordable, national access charging

• A national network – trying to deal with multiple handoffs at regional boundaries would be a major problem, effectively replicating some of the problems of international rail freight on the continent within the UK. This applies to train planning as much as it would to differing standards, rules or maintenance regimes.

Development by Network Rail of the “System Operator” role is critical and it is of concern to DB Schenker that progress with this seems slow or has not yet been more widely shared.

• A co-ordinated national possessions regime to ensure that appropriate diversionary routes are always available.

24. DB Schenker suggests that there is a serious risk of increasing tension between the development of devolution, particularly of Network Rail routes, and the needs of freight customers and freight operators. Our main concern is that we risk having to apply considerably more manpower, cost and energy to managing internal railway relationships rather than focussing on developing business with customers.

Our main competitors, road haulage, face no such parallel task and thus Rail Reform inadvertently risks placing rail freight operators at a competitive disadvantage.

DB Schenker would make six observations;

• Network Rail has recognised this dilemma and has responded by appointing a Freight Director. DB Schenker welcomes the provision of this senior focus for freight.

• Notwithstanding the appointment of the Freight Director, the nature of the relationship between Freight Operating Companies such as DB Schenker, Network Rail’s Freight Director and his team and the Network Rail Route Managing Directors is still developing.

It is clear to DB Schenker that some form of direct relationship with Route Managing Directors is still necessary given their responsibility for managing the railway. However, for a national operator such as DB Schenker, forging such a relationship with all ten Route Managing Directors is a considerable logistical challenge.

• In the event of an infrastructure concession being let, or of a vertical integration trial, such a direct relationship with the Route Managing Director will probably become more important.

• PTEs are already showing greater interest in rail freight that operates either within or through their respective “areas”. It seems inevitable to DB Schenker that we will have to develop a new relationship with both individual PTEs and the PTE Group, if PTEs take on greater roles within the passenger rail sector.

• Local Authorities are typically interested in rail freight, but the only direct involvement tends to be via the planning regime (eg in applications for consent for new freight terminals) - so the current relationship between Local Authorities and the rail freight community is rather indirect.

It is not clear to DB Schenker what greater role Local Authorities might take with respect to passenger services, but any greater role would imply the need for some different relationship with the freight community even if only for communication. This would have considerable logistical challenges for rail freight

operators.

• DB Schenker has some concern that Local Authorities – or indeed Local Enterprise Partnerships – will inevitably be focussed on issues within their area and may be less well placed to put rail freight in the wider context which is necessary. It is important to remember that many of the benefits of rail freight fall outside of the railway balance sheet.

25. DB Schenker therefore foresees that there is some risk that the interests of rail freight customers and operators will be subordinated (perhaps inadvertently) behind the issues for which Network Rail Route Managing Directors, PTEs, Local Authorities or Local Enterprise Partnerships have direct responsibility or immediate interest.

18 April 2012

Further written evidence from DB Schenker Rail UK Ltd (ROR 17A)

The Government’s High Level Output Specification (HLOS) for Rail for 2014-2019

Introduction

1. DB Schenker Rail UK (“DB Schenker”) is please to submit additional evidence to the Transport Committee’s Inquiry into Rail 2020. This evidence should be read in conjunction with our submission of April 2012.

HLOS Vision and Policy

2. DB Schenker welcomes the Government’s vision for “dynamic, sustainable world class transport that drives economic growth and competitiveness and puts the customer and businesses at its heart”.

3. The strategy of successive Governments for rail freight has been consistent since the publication in September 2009 of the Strategic Freight Network; the Longer Term Vision.

4. The March 2012 Command Paper - Reforming our Railways: Putting the Customer First reiterated this policy and it was further referenced in the Secretary of State’s July 2012 “Guidance to the Office of Rail Regulation” which summarised the Government’s position as;

“The Government recognises the important role that rail freight plays in the nation’s logistics and in the achievement of the Government’s sustainable distribution objectives. The Government wishes to facilitate the continuing development of a competitive, efficient and dynamic private sector rail freight industry and is committed to ensuring that policies and regulations should work to this end and should not create unnecessary transactional costs or other obstacles to the achievement of these objectives and future growth”.

“In an industry where planning and operational decision-making are increasingly devolved, the Secretary of State wishes ORR to have regard, in exercising its statutory functions, to the importance of sustaining efficient and commercially predictable network- wide freight operations, including in decisions about access rights and charging structures”.

“The Secretary of State wishes the ORR, in developing any proposals, and in making decisions in relation to rail freight, to note particularly the Government's rail freight policy. The Secretary of State wishes to be advised by the ORR of, and to discuss with the ORR, any material measure which the ORR proposes to take or policy which it proposes to pursue which would adversely affect the competitiveness of rail freight compared to other modes”.

5. DB Schenker welcomes the clear expression of government policy and support for rail freight set out (most recently) in the Secretary of State’s Guidance to the ORR.

HLOS Strategic context.

6. The HLOS is framed against the background of forecast further strong average growth during CP5 of 16% in passenger demand and 23% in freight.

7. These forecasts need to be set against a backcloth of strong growth. Sir Roy McNulty’s “Rail Value for Money Study” published in May 2011 noted that the low point of rail freight traffic was in 1994/95 when 13bn net tonne kilometres were moved. From then, until just before the recession, rail freight activity increased by 68% to 21.9bn net tonne km. During the recession activity fell as demand for bulk, manufactured and consumer goods reduced. By 2011/12 the level of rail freight activity had recovered to 21.06bn net tonne km excluding infrastructure support services where activity totalled a further 1.86bn net tonne km. The sector grew by nearly 10% between 2010/11 and 2011/12, with substantial increases in activity in intermodal (now the largest sector), construction and coal.

8. The McNulty Report also noted that “this has been underpinned by some £1.5bn private- sector investment in rail freight equipment ….such as locomotives, wagons, yards, terminals and information systems”.

9. The industry is in the middle of the Periodic Review 13 process which will, inter alia, establish the access charging regime for CP5. DB Schenker has serious concerns about the potential impact on rail freight of the current proposals from ORR with respect to access charges (and especially the proposals to introduce a new freight specific charge and for geographic disaggregation of access charges).

10. In DB Schenker’s view these changes will make the structure of charges too complex, will place rail freight at a further structural competitive disadvantage against road and potentially worsen the financial position of rail freight operators such that it will place at risk the plans for further modal shift from road to rail.

11. It also represents a deeply concerning change to regulatory policy for freight charging; hitherto this been supportive of rail freight and an important element in underpinning rail freight growth. However the effect of the PR 13 consultations has already been to inject considerable regulatory risk into the sector. There is some evidence that potential third party (including customer) investment in rail freight facilities has already been impacted.

12. Long term planning, and long term investment, is critical for railways and political and regulatory support is therefore of huge importance in terms of investor confidence. DB Schenker is concerned that ORR, in considering the balance of its various statutory duties in respect of their PR 13 proposals for rail freight has placed insufficient emphasis on the need for freight operators to be able to plan the future of their business with a reasonable degree of assurance.

13. It would be unfortunate if the benefits of the supportive framework for rail freight contained within the HLOS could not be maximised because of the consequences of the PR13 process.

14. DB Schenker is supportive of the Government’s strategy for CP5 aimed at “exploiting synergies between schemes in order to efficiently meet forecast demand growth, support economic growth and better environmental outcomes, and secure cost efficiencies for both passenger and freight operators”.

However DB Schenker is concerned that implementation of the strategy might be adversely affected by the impact of the current PR13 process on rail freight access charging.

HLOS Priorities.

15. Government identified four main priorities in the HLOS;.

• The creation of an “Electric Spine”.

• increasing capacity and faster journey times between key cities.

• Facilitating commuter travel into major urban areas.

• Improving railway links to major ports and airports.

16. The major strategic questions posed for the freight sector by the HLOS relate to electrification and the capacity to cater for growth.

Electrification

17. Government has estimated that currently only about 6% of freight tonnes kilometres are electrically hauled. This is because :

• Relatively few freight customers or freight terminals have sidings or connections that are electrified, even if the Network Rail route itself is electrified;

• Relatively few freight end-end journeys pass along routes that are entirely electrified and changing locomotives en route is not practicable as;

i. as the economics cannot stand the cost;

ii. it would add in disproportionate time to the journey;

iii. it would increase performance risk.

• Many rail freight loading and unloading operations are untaken with the train locomotive attached to the wagons and moving the train when necessary. In addition, many rail freight cargoes are loaded into the top of wagons - for example coal is loaded from overhead chutes into the top of hopper wagons. It is not possible to undertake many loading and unloading operations under electric wires.

18. DB Schenker’s general policy across Europe is to use electric locomotives as long as it is operationally practicable and economically sensible, for reasons of efficiency and environmental responsibility. The regime for charging for traction electricity is also a key influencing factor in the assessment of whether to invest in electric locomotives. This has been DB’s policy for many years and DB has an established track record of investment in electric traction.

19. Within the UK, a high proportion of the rail freight locomotive fleet has been renewed since 1998 - in DB Schenker’s case, over 66% of the fleet of active main line locomotives. With a book life of 30 year and an actual life often closer to 40 years, the current locomotive fleet is not in need of significant replacement until the late 2020s/2030s. DB Schenker has some 55 electric mainline locomotives, designed for high speed and Channel Tunnel operations – these were built between 1987 and 1996, so are effectively only half way through their operational life.

20. It is therefore likely to be complex to make an earlier financial case for reinvestment in new electric locomotives for rail freight.

21. In addition, electric haulage poses additional operational issues for rail freight operators. When the main electrified route is not available for freight trains to use because of Network Rail engineering possessions for maintenance and enhancement, few diversionary routes have, or will have, electric capability. The economics of rail freight do not allow a duplicate fleet of diesel locomotives to be retained for use in these circumstances.

22. The detail of individual electrification projects is important for freight to ensure appropriate connectivity between main lines as well as connections into yards, sidings and depots. An example of this, which DB Schenker welcomes, is the inclusion of the Acton – Willesden link between the Great Western Main Line and the West Coast Main Line (WCML) within the Great Western Electrification project.

23. The Electric Spine opens up new possibilities for the rail freight sector by offering an alternative electrified route from Southampton to the WCML, and from the WCML to the Midland Main Line north of Bedford. This will make sites adjacent to the “Electric Spine” and the Midland Main Line north of Bedford realistic possibilities for development into rail freight interchanges for the first time.

24. The Government’s commitment to a programme of main line electrification, potentially continuing through CP6, has therefore posed a number of important strategic questions for the rail freight sector. We are commencing work with Network Rail to evaluate in more detail the financial implications of these so that we can develop a clearer picture of the choices, options and timescales involved.

Capacity for Growth

25. The Initial Industry Plan published in September 2011 forecast that rail freight growth would continue by approximately 3.5% per annum in terms of tones carried and 4.3% per annum in terms of tonne-kilometres between 2010 and 2030.

These forecasts, developed by the wider rail freight community, have been validated by MDS Transmodal and are generally accepted (including by Government) as reasonable forecasts in the light of the growth achieved since privatization. They therefore underpin the freight element of planning work for the HLOSs.

26. Not all sectors of the freight market will grow – indeed some, such as power station coal, will decline due to structural changes in those markets. Growth is anticipated in the intermodal sector as well as some bulk commodities such as aggregates.

27. DB Schenker is pleased that these freight growth forecasts seem to have been taken into account in Government’s consideration of rail capacity needs and key elements of the HLOS capacity enhancements therefore explicitly reference freight including;

• Accommodating crossing freight and passenger trains at Leicester, Ely and Peterborough • Gauge clearance for large containers and appropriate electrified links to adjacent electrified routes, depots and freight facilities.

• Improving port links being a stated Government priority. DB Schenker welcomes the confirmation that ”The Government has a longer-term aim to provide high- capacity electrified routes from all major ports to the long-distance electric rail network.”

28. DB Schenker also welcomes the recognition within HLOS that strategic railway planning is a longer term process that will extend beyond the end of CP5. With this in mind, DB Schenker supports the creation of a Development Fund for CP6 and also the request for the industry to “identify the most efficient strategic electrification schemes that may be considered for CP6. This should include freight linkages in South Yorkshire and Derby – Birmingham – Bristol”.

Metrics.

29. As rail freight is a private sector activity, there is less specification in the HLOS in relation to metrics for freight as it is recognized that market disciplines appropriately incentivise the sector. DB Schenker agrees with this approach but would make the following observations.

Safety

30. DB Schenker fully supports the Secretary of State’s desire for “the continued safe operation of the railway to be of the utmost importance” and will work together with industry colleagues “to continue to improve its record on passenger and worker safety through the application of the “so far as reasonably practicable” approach and to ensure that current safety levels are maintained and enhanced by focusing domestic efforts on the achievement of European Common Safety Targets”.

Reliability and customer satisfaction

31. Reliability and quality of service are critical for freight customers, but there is no freight equivalent to PPM nor any customer satisfaction mechanism as freight customers, in a competitive market, have a choice as to the rail freight operator (or mode) that meets their needs and can (and do) exercise that choice. The dynamics of the market therefore provide sufficient incentive, although within the Strategic Business Plan there will be a Regulatory metric for Network Rail’s freight performance.

European Rail Traffic Management System

32. ERTMS poses particular issues for rail freight. The nationwide nature of freight operations, coupled with the need for flexibility in deployment of assets and staff in support of Network Rail’s programme of infrastructure improvements and enhancements, means that the early retro-fitment of the entire freight locomotive fleet together with appropriate staff training will be essential. This will be complex to organize and early clarity on the precise financing and operational elements will be important. DB Schenker is committed to playing its part in making sure the works necessary for ERTMS are procured and delivered timeously and with value for money, and also that the projected efficiency and capacity benefits are identified and realised.

Ring-fenced investment funds 33. DB Schenker strongly supports the use of ring-fenced investment funds. The experience of the CP4 Strategic Freight Network fund confirms that with an appropriate remit, membership and governance arrangements, these can be a powerful driver of aligned behaviour that drives value for money and obtaining the maximum benefit possible.

34. DB Schenker supports the ring-fenced allocation of £200 million over the course of CP5 made by the Secretary of State for Transport in respect of infrastructure improvements to benefit rail freight in England & Wales and the separate £30 million Strategic Freight Fund established by the Scottish Government.

35. Some key elements of infrastructure capacity and capability will be delivered within route based projects and the proposed ring-fenced fund for the East Coast Main Line will be critical to delivering the identified requirement for improvements at Peterborough to allow for the crossing flows of passenger and freight traffic. The governance and structure of the proposed East Coast Main Line ring-fenced fund will therefore be critical to freight.

36. Given the long term nature of railway planning, together with strong forecast growth in freight traffic, DB Schenker supports the proposal of the Secretary of State for a fund to plan for future control periods and to develop innovation in the industry. .

Update on rail reform progress

37. Since DB Schenker submitted evidence to the Transport Committee in April 2012 relating to the impact of Rail Reform, key policy initiatives have continued to develop and DB Schenker would offer the following additional observations.

• Network Rail’s Freight Director has established himself and his team within the organization and has helped to increase focus on rail freight across Network Rail, This has been particularly evident in terms of day-day operational performance, where the focus of Network Rail has increased visibly and their operational performance has improved;

• Network Rail in Scotland has established a Joint Freight Board with wide stakeholder involvement that will seek to manage the relationship between Network Rail and the sector in a different and more open form. The Board has met once and early indications are encouraging;

• DB Schenker is also a member of the Stakeholder Board of the Wessex “Deep” Alliance which met for the first time in July. The Alliance has hitherto been concerned with establishing itself so no radical changes have yet been evident. However the Board was conducted in an open manner, and that, together with the enthusiasm and commitment of the Alliance team, was encouraging.

• DB Schenker is a member of the Rail Delivery Group, and is actively involved in a number of the workstreams established by the Rail Delivery Groups to drive cost-industry efficiencies.

23 August 2012 Written evidence from Travel Watch North West (ROR 18)

TravelWatch NorthWest is an independent Community Interest Company representing all public transport users in NW England. We are pleased to give our views as follows to this inquiry.

1.1 As 2020 is only 8 years away and most significant railway investment takes very much longer, any vision can only be superficial and short term. There is a need to provide adequate capacity and focus more on the needs of regional railways addressing the challenges of overcrowding, reliability, punctuality, safety and comfort to encourage greater use of public transport rather than the car. Improvements in interconnectivity between various modes (airports, buses, parkway stations, etc.) should enable travellers to have confidence in the ability of a public transport system to take them where they want to go - end to end.

1.2 The balance between taxpayer and farepayer is already causing great hardship, especially for regular commuters and should not be pushed any further on the basis of energy conservation and carbon reduction. A transparent decision has to be taken as to whether the railway is to be a commercial operation or a social utility. The level of government subsidy, a result of the way the privatised railway is structured with too many stakeholders each taking their own profits, remains significantly higher than what it was under public ownership. This problem of high subsidy leads to the demand for a higher contribution from the fare box. Perhaps the real question is how to divert private sector profits into public investment?

1.3 The opportunity should be taken to examine European rail management to see whether any lessons can be learnt from the way that the farepayer/taxpayer balance is arrived at there.

2. How are the targeted efficiency savings (£3.5bn by 2019 on a 2008/09 base) to be delivered? What will be the consequences?

2.1 It is difficult to see how £3.5bn savings can be saved in 7 years time without fundamentally changing the structure of the industry other than by massive increases in fares or cut backs in services, neither of which is acceptable. Proposals to close some booking offices are likely to be counter productive, not save much and give rise to an increase in ticketless travel, hence losing revenue. Checking tickets on trains would probably raise more but not significant amounts. Closing ticket offices or reducing their hours of opening would be a false economy. Passengers like the reassurance of a personal presence and to be able to discuss their purchase with a helpful ticket clerk.

2.2 Similarly staff should not be withdrawn from station platforms which would be an open invitation to vandals and others at these stations which can be pretty busy at times of the day. Station staff perform many vital functions - they are ambassadors for the railway into the local communities, they are available to assist disabled and elderly passengers and their presence gives confidence to reluctant rail users.

2.3 Before setting a target of £3.5bn, would it not be better to ask what savings would be achieved by a range of policy decisions? (and what the consequences of each would be).

2.4 Bureaucracy in the railway seems to be an enormous burden to costs and the waste needs to be eliminated. However, savings of this nature are likely to be unachievable in such a short term when the railway will be going through its most extensive refurbishment for decades, with escalating prices. A target by 2030 may be more realistic. It should also be borne in mind that increased passenger numbers equals increased income (and no doubt better bid offers by franchisees) and allowance for this should be set against the target savings needed.

2.5 With Network Rail costs widely reported to be 30% higher than maintenance costs on the continent, which must include a substantial percentage of high speed lines, a considerable contribution to the savings could be made here. It is however accepted that our loading gauge imposes constraints not found on the continent. A root and branch review of Network Rails costs is required and perhaps proper competition introduced to carry out contracts.

2.6 Network Rail’s costs are perceived to be over the top and there are examples which show this to be the case. Here is an example from Grange over Sands.

A couple of years ago Network Rail decided that a very old crossing needed walling up to replace inadequate wire mesh fencing just off Grange promenade. Perhaps about ten feet of stone wall was required. How was this tackled? By the use of a national contractor who set up a large secure work site in a nearby car park (rent to the council) with messrooms, toilet (public toilet at entrance to car park). They could access the railway by means of a locked and gated crossing off the car park onto the promenade or via the promenade. But they took a series of overnight possessions to use a rail trolley to ferry materials the 100 yards to the worksite and do the work (in sandstone, which is alien in appearance to the local limestone!). The cost perhaps £50k or more. The alternative - engage a local contractor who could safely work during daytime from outside the railway using the promenade for access, with a safety fence between wall and running line with no need to be on the railway at all. Cost perhaps £2000 at most.

3. Will the reforms to rail franchises proposed by the Government, including alliances, deliver better services at lower costs?

3.1 Longer franchises (giving operators time to properly develop a business model) and the combining of operations and track on SWT are promising developments. However just what are franchises for? Passengers have little say in the competitive bidding process and there are few examples where competition really exists between operators, especially in the north. Franchises create barriers of various kinds between TOCs for the passenger - not least in the attitude of TOCs to other TOCs connecting services, covering for cancelled services, ticketing, etc. Urgent attention should be given to integrate franchises in order to reduce boundaries/barriers between them. There is a good case to lower bureaucratic costs and for operators to undertake some activities currently under the stewardship of Network Rail for example fully taking over stations enabling a commercial approach rather than just a maintenance responsibility.

3.2 Alliances should also eliminate the ludicrous arrangements whereby NR has to pay compensation to TOCs for engineering possessions, etc which are really for their benefit. This would encourage the maintenance of a rail service wherever possible rather than resorting to road replacement services which are not popular with passengers.

3.3 We are concerned at the proliferation of franchise bids from non-UK based companies. Any profits such companies make from UK taxpayers will only go to subsidising services in their home countries - so UK rail passengers are subsidising rail services in Germany, France and the Netherlands.

4. How should fares and ticketing be reformed?

4.1 The fares structure is perceived with its very wide variations (e.g. fares Manchester – London from £10 to over £350 depending on how, when and where) as being complex and difficult to understand. Simplification could help but it is important to retain the ability to purchase value for money journeys in advance to attract people from the roads. In reforms the following should all be considered –

• Wider use of smartcards may help, provided they are standardised across the network, inter operator and intermodal and provided they are not hastily introduced before their shortcomings have been rectified. • Need for good marketing of end to end travel to encourage transfer from the car. • Focus should be on keeping the railway affordable, whilst delivering attractive and incentivised fare systems e.g. multi journey tickets (carnets), discounts for 2+ travelling together. A standard distance based anytime fare would discourage rural passengers. • We are concerned at the concept of paying more for peak travel to suppress demand. All TOCs should be encouraged to offer off peak deals. • Individual TOC advance fares should be broadened to encompass franchise boundaries to be crossed and changes of operator en route – currently if fares on different legs are set by different operators such cheap fares are often not available. In relation to this the sum of a combination of tickets is sometimes less than the though ticket. A web based fare finder could result in wider use of ticket combinations and persuade TOCs to address such anomalies. • The off peak single fare is often only pence less than the return fare whilst the anytime single fare remains around half the anytime return fare. • Car parking charges at stations are a related issue as the high level in many places is a serious deterrent to passengers making shorter journeys by rail - unless they can reach stations on foot or by good integrated bus services. • Passengers buying tickets with restricted availability should be supplied with a printed statement making clear what the availability is. However if they mistakenly board the wrong train they should not be required, as is the case now, to buy a new ticket without the option of receiving a credit for the cost of "invalid" tickets. • Quality of journey should not necessarily be directly related to the level of fares. The relatively cheap level of fares in the North is used, wrongly we feel, as a justification for the paucity of investment in new trains. This region has a fleet of aging trains with virtually no new build since privatisation, whereas there is hardly a pre-privatisation trains running in the SE on local or regional services.

5. What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities?

5.1 Devolving franchise responsibility to local control is well worth exploring. Merseyside has shown the way with positive results. However it must be something much stronger than current LTAs if decentralisation is to be effective and properly co- ordinated and much wider geographically than present counties and metropolitan areas. There will need to be a totally multi-modal focus to ensure that areas do not become dis-enfranchised.

5.2 It will be interesting to see how closely Local Transport Bodies align with the consortia of Local Authorities and Local Enterprise Partnerships responsible for investments in infrastructure. As currently to be constituted they are just another unnecessary layer of bureaucracy.

5.3 The key to devolution will be funding - any devolvement can only work if adequate funding is guaranteed and local authorities not given a poisoned chalice of having to administer cuts.

18 April 2012

Further written evidence from Travel Watch North West (ROR 18A)

Government’s High Level Output Specification (HLOS) for rail for 2014-19.

Introduction

TravelWatch NorthWest welcomes the investment package announced by Government in the HLOS announcement and the package of improvements, including electrification and implementation of the Northern Hub, in the North of England. We are of the opinion that this is well overdue and we would urge that the total package be implemented with all haste.

Routes and Services

However we do retain some concerns that rail lines that are not scheduled to be electrified, may suffer as a result. Already we have witnessed proposals to downgrade services in parts of the North West in favour of more intensified electrified services on main lines and transfer of rolling stock to alleviate overcrowding elsewhere by strengthening of train accommodation. The main example of this is the withdrawal of a number of direct trains between Barrow in Furness, Windermere and Manchester Airport, leaving passengers on these well used services to face the prospect of changing trains en route. We believe that these moves will be detrimental to travel and passengers will revert to car usage as it will be more convenient in many cases.

We are further concerned that, after completion of the total route electrification in the North West, priority will be given to electric powered trains on the 2 track pinch point section of line between Castlefield Junction and Manchester Piccadilly. This section will remain 2 track even when Platforms 15 & 16 are put in place so, with additional electric services from Yorkshire via Manchester Victoria using it, paths for diesel powered trains may get squeezed out especially taking into account the flat junctions at its western end of the section. It is vital that through diesel services from non-electrified lines to Manchester and the Airport are not terminated short of their present destinations as this would leave no through services whatsoever from places such as Barrow in Furness, Windermere, Southport and Blackburn. Direct trains on these routes are vital to these population centres and so there must be no prejudice against them operating “under wires” for their journeys.

To assist in retaining such services electrification should be considered to allow towns such as Morecambe (in need of regeneration) and Windermere (an outstanding environmental case for encouraging public transport rather than by car) to have through services to main nearby cities and airports. Logic would also dictate that electrification is extended to destinations such as Barrow, Hull and Middlesbrough to enable through services to operate. Research shows that the availability of through services is a major factor in attracting passengers to rail and this must be taken into account when pursuing what should be a rolling electrification strategy.

Rolling Stock

Adequate rolling stock to allow for continued passenger growth must be provided. We have a concern that the new electric trains for the Scotland - Manchester Airport services will hold only a few passengers more than current stock - hardly enough to cover present standing passengers much less growth. With Barrow and Windermere cut off from direct airport services the new trains will have to additionally accommodate these passengers as well as continually growing numbers for Lancaster and other calling points. Stock provison is therefore questionable.

Rolling stock displaced by the electric trains should be retained in the North West to strengthen services on other lines, rather than being cascaded elsewhere in the country. However much of this rolling stock will be close to life expiry at this point and so will need replacing. Traditionally new stock has been largely provided for the south and second hand sent north. This must not happen now. If growth in rail travel continues at its present level and with the need to stimulate the northern economy there must be a replacement programme in place to bring in new trains by the end of the decade otherwise there will be serious consequences.

Fares

Every time we hear the good news about rail investment (witness the West Coast Main Line upgrade), we are then told by Government Ministers that fares must rise to pay for it. Already having to pay some of the highest fares in Europe, we believe that passengers will be angered, especially given the recent announcement that regulated fares will rise by an average of 6.2% in January 2013. Some commuters are not in a position to use other transport modes (others will give it serious consideration) but leisure travellers, who account for some 70% of train travel in the North West, will undoubtedly “vote with their feet”. Therefore, we believe that government must resist large fare increases and keep the railway affordable.

Stations

We welcome the news on refurbishment of some stations like Manchester Victoria but believe that this programme must not be lost for other major stations requiring upgrades. We cite Preston as the most used intermediate junction station on the West Coast Main Line which is in dire need of overhaul. If passengers are to enjoy the quality of a new railway, then it must follow that the infrastructure that serves it must also be of equal quality. We recognise that this will take time, but if it is not programmed it may not happen within the next 2 decades.

Devolving Rail to the Regions

Although we generally support the principle of decentralising the franchising role where appropriate1 to give local people more say in these matters there is growing concern in the Shire counties and even in Tyne & Wear PTE that there is a danger that non-PTE areas may be marginalised and given secondary priority on rail matters and rail development.

23 August 2012

1 www.travelwatch-northwest.org.uk Response to DfT consultation - Devolving Rail to the Regions – June 2012

Written evidence from the Local Government Association (ROR 19)

1. Introduction

1.1. The Local Government Association (LGA) is a voluntary membership organisation with 422 member authorities covering every part of England and Wales, and includes county and district councils, metropolitan and unitary councils, London boroughs, Welsh unitary councils, fire, police, national park and passenger transport authorities.

1.2. The LGA lobbies and campaigns for changes in policy, legislation and funding on behalf of our member councils and the people and communities they serve. Together they represent over 50 million people and spend around £113 billion a year on local services.

2. Response to inquiry questions

2.1. What should be the Government’s vision for the railways in 2020, taking account of likely spending constraints?

2.2. The LGA shares the Secretary of State’s determination to move to a more localised approach to decision making on the railways and wants to work with the department to realise that vision. In submitting this evidence we seek to make a constructive contribution to the development of a policy we support.

2.3. The Government’s vision for rail also needs to see rail in the context not only of the totality of an area’s transport provision but in the context of other polices, in particular around economic growth and the environment.

2.4. The LGA would like to see the development of a model of transport devolution that:

2.4.1. Supports increased local economic growth 2.4.2. Maximises councils’ involvement in bus/rail and road provision, including through increased involvement in the rail franchising process 2.4.3. Allows authorities to enter into partnerships when and where appropriate with each other, private and third sector partners and agencies such as Highways Agency and Network Rail, and to get the best from LEPs 2.4.4. Minimises financial risk and ensures devolution does not simply mean creating an environment in which service cuts are inevitable and councils get the blame. 2.4.5. Maximises budgetary flexibility to shift funds between modes and to access other funding aimed at promoting growth/environmental goals and health outcomes 2.4.6. Maintain a role for DfT, working with LGA and others to provide support for councils through the provision of central expertise and dissemination of best practice, while freeing councils from a single DfT evaluation criteria 2.4.7. Dovetails the various devolutionary measures central

government is currently considering both within the transport sphere and relevant to it.

2.5. Coherent, integrated local transport systems are key to creating growth in our cities and rural areas. This involves managing existing systems and infrastructure more effectively and new investment where appropriate.

2.6. Decisions on these matters need to be taken locally. Local authorities and ITAs are in the best position to deliver integrated approaches, but to do so they need greater influence over local transport decision-making.

2.7. Many of our major cities and towns underperform their European equivalents on key economic indicators and at least part of the reason is the quality of the local transport systems, which make these cities attractive places to invest and which enable people to get to the jobs.

2.8. In the UK, transport infrastructure problems are estimated to cost businesses nearly £20,000 per annum on average, and the top two improvements businesses would like to see in their current city are improved transport links with other cities and improved public transport.

2.9. Another key role for transport in economic development is helping people to get into work. Nearly 40 per cent of jobseekers say transport is a key barrier to getting a job. Studies have show that this support works best when they are designed with the needs of different individuals and places in mind; when they integrate and assist individuals in the use of existing transport provision; and when they work alongside initiatives in other policy areas. Again, this requires decision-making at a local level.

2.10. The LGA has long argued for greater local decision-making in transport. A number of recent developments – including in regard to rail franchising - suggest that central government has begun to appreciate the advantages of such an approach, but these developments need joining up. The DfT’s hopes for railway devolution need to dovetail with the devolution of other forms of transport funding– and the barriers between them removed – so that councils can target funding where it will have the greatest effect. This is not just about rail policy but total local effect – for example through realising the potential of stations as local economic and social hubs.

2.11. The government is currently consulting on the proposal to devolve local major schemes (LMS), an aim the LGA supports. In responding to that consultation we have argued that councils need to be free to make alliances that are project-specific, where they see this as sensible, rather than being tied into a local transport consortia as that consultation proposes. Although the Government recognises the need to consider the two devolutions together,1 we are not convinced it will always be possible to construct local transport consortia as envisaged in the LMS devolution that are appropriate vehicles for rail decentralisation. On the other hand

1 See paragraph 5.5 of the rail devolution consultation

project-specific alliances could enable councils to work together on rail projects that dovetail with road or bus schemes without having to create a permanent bureaucracy around them. We are not opposed to the consortia described in the LMS consultation but we think there needs to be room for alternative approaches.

2.12. With specific reference to rail we are unclear as to how greater decentralisation will fit with the government’s desire for more flexible franchises. If this means councils have less scope to specify the content of franchises than the DfT (and councils where they were involved) had during the last franchising process, it is difficult to see what incentive councils will have to take on a franchise in this round.

2.13. We question the DfT’s desire to subject ‘decentralised’ transport to DfT value for money models. The DfT’s methods for appraising and evaluating value for money in transport are open to criticisms and for devolution to be meaningful, councils must have more leeway in determining what ‘value for money’ means so that greater or lesser weight can be given to different outcomes (for example economic, environmental, health, social), depending on what local priorities are. In particular the use of time-savings as criteria should not be imposed on councils.

3. How should the balance be struck between the taxpayer and the fare payer in paying for the railway?

3.1. The subsidy paid to a rail service should reflect the fact that the benefits of that service accrue to those who do not pay directly to use it – in terms of economic growth, reduced carbon emissions, reduced congestion and in some cases the avoidance of social isolation. Subsidy paid on this basis needs to be treated as a payment for a service and not simply a cost to be reduced irrespective of the knock-on effects. This should not mean that no effort is made to deliver the service efficiently nor that the subsidy cannot be withdrawn, but that cost savings and subsidy reductions need to be viewed in a wider context than that of the railway’s balance sheet, because a reduction in the cost of the railway to taxpayers may ultimately incur a greater cost to them elsewhere.

3.2. In making these points we are conscious that the current rail industry plan has been considered by the Rail Delivery Group which contains no public sector input. This imbalance needs to be addressed. In addition, there needs to be more opportunity for councils to lever money into the railways either from private sector partners or from other budgets where appropriate.

4. How are the targeted efficiency savings (£3.5bn by 2019 on a 2008/09 base) to be delivered? What will be the consequences?

4.1. The LGA is concerned that the Government intends to devolve funding in a manner that assumes the savings set out in the McNulty report will be made; and that if these savings subsequently fail to appear, councils will be left with inadequate funds to maintain an acceptable level of service. We believe this will act as a significant deterrent to local authorities in taking on franchising

responsibilities, in particular if it is combined with long-term franchises devoid of break-points.

4.2. The Government’s consultation on decentralisation states that it ‘would expect that the level of funding devolved would fully reflect the efficiency improvements that can be reasonably expected, as well as any extra cost required to respond to growth where this represents value for money’.2 The effect of this intention will depend almost entirely on what the phrase ‘that can reasonably be expected’ means in practice, and in particular whether local authorities feel confident that the expectations of government are reasonable.

4.3. In turning this phrase into a detailed set of plans, the Government needs to bear three points in mind:

4.3.1. Historically it has almost always been the case that the rail industry over-estimates future earnings and underestimates future costs.

4.3.2. Key aspects of cost reductions set out in the Initial Industry Plan are as yet unclear and there is an inevitable uncertainty over whether these savings will emerge. While exploring the possibilities for decentralising NR, greater partnership working and increasing train utilisation are sensible and welcome proposals, but while it is almost certainly true that the industry can save money through better partnership, at this stage none of these initiatives can offer a firm, securable, saving. Some may yet turn out to be dead ends (for example there is no guarantee that the work on possible increased train utilisation will find significant savings), and the report acknowledges that ‘a step-change in the degree of cross-industry collaboration’ is required, if the envisaged improvements are to be achieved.

4.3.3. Equally the IIP sets out a vision in which lowering the subsidy requirement depends to a significant extent on an increase in revenue, which could fail to materialise for a variety of reasons, some of them beyond the railways’ control.

4.4. Quite apart from the concern set out above, we think that unless the reasonable expectations of savings are very low there is little prospect of additional savings materialising that can be redirected to increase train usage as mentioned in paragraph 3.9 of the consultation paper.

4.5. The financing of railway services needs to be viewed in a wider public policy context. For example, we need to ask whether the opportunities provided by staffed stations are being fully exploited and to consider the transformative power of stations within local economies as hubs that can play an important part in supporting the high street and town centre economy, rather than seeing station staffing simply as a cost issue. One success of the private railway

2 See paragraph 3.5 of the rail devolution consultation

has been the proliferation of small businesses on platforms and in station buildings which had often suffered years of neglect and which had become eyesores deterring passengers. De-staffing stations runs the risk that they will once again cease to be a business-friendly environment, leading to an increase in crime and antisocial behaviour in and around stations and deterring rail use. Greater local involvement in the railway at both council and community level may help here.

4.6. Another pertinent example of the wider context is the proposal to raise more revenue from car parking facilities. The LGA is already aware that this is encouraging passengers to get lifts to and from stations, doubling their road journey (as those who drop/collect them return/leave home). In addition, the increased cost of station parking is already leading to displaced parking in surrounding streets. It may also encourage passengers to leave rail and journey instead by road.

4.7. LGA is concerned that if the envisaged savings fail to emerge, investments in or support for services which are in themselves worthwhile, may be cutback in an unplanned attempt to meet savings targets that reflect unrealised expectations of what can be saved, or unmet hopes of increased revenue. This would have damaging economic and social consequences at a local level.

5. Will the reforms to rail franchises proposed by the Government, including alliances, deliver better services at lower costs?

5.1. The LGA supports the Secretary of State’s desire to increase local government’s involvement in rail franchising and her willingness to consider a variety of means to that end. We do not think there should be a single model of rail devolution. Different approaches will suit different areas and it is for the councils involved to decide on the right approach for them.

5.2. We support closer working between Network Rail and ToCs. One difficulty facing councils in getting enhancements to local rail services is the number of partners involved. Alliances should help reduce this obstacle to enhancements.

5.3. While we are not opposed to more flexible franchises, we do note that the franchise system was tightened up in the middle of the last decade to iron out problems such as train companies running additional services that were not required in order to generate additional subsidy payments. Increased flexibility will need to be accompanied with safeguards against the re-emergence of the issues that have prompted reform in the past

6. How should fares and ticketing be reformed?

6.1. We support the Government’s intention to expand smart ticketing technologies. We hope that a more flexible approach to ticketing will not only help to manage peak demand, but will encourage passengers onto trains that are currently less than full. For

example, through considering contra-peak ticketing that would reduce the costs of those travelling against the peak flow, making cheap days out simpler for families in school holidays. Greater local involvement in franchising would, we think, encourage a more innovative approach to ticketing by bringing more detailed local knowledge into play.

7. What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities?

7.1. The key point for the LGA is that there must not be a one size fits all approach to devolution. While their will be common elements across franchises, to a certain extent, local involvement in each needs to be bespoke. Different authorities will want different models and some may not see franchising as the best means to influence rail outcomes. An approach that can accommodate these different views is required.

7.2. We believe it is for authorities themselves to come forward with views on the structure they prefer, either individually or in consortia.

7.3. While the LGA is still considering its detailed response to the consultation on rail devolution, it broadly agrees with the division of local and central responsibilities set out in paragraphs 4.1-4.15 of the consultation document, and with the views stated in paragraph 5.5.

7.4. We do not necessarily agree with the Government’s view that some types of service should be outside of local control because they are strategic. For some authorities, the most important rail service may be the intercity connection to London or regional inter urban services. Authorities should be free to fund improvements in long- distance services where these are considered a priority for the authority’s area (although we accept that this is unlikely to be best- achieved through responsibility for the franchise). Where authorities wish to come together to franchise inter urban services across a region they should be free to do so.

7.5. If authorities are to play a part in franchising, there needs to be greater transparency over costs and passenger number figures, and this data needs to be made easily accessible to the sector.

7.6. We are not entirely convinced that it will be possible for decentralisation of rail to be carried out without new legislation. We would encourage government not to settle for second best when a more desirable structure is possible but requires a short bill. We will work with government to devise such legislation if necessary.

18 April 2012

Written evidence from the Mayor of London and Transport for London (ROR 20)

1. Introduction

1.1 The Mayor of London and Transport for London (TfL) welcome the opportunity to contribute to the Committee’s inquiry into this topic and this evidence is submitted on behalf of both.

2. Government’s Vision for the Railways

2.1 The second High Level Output Specification or HLOS2 will set out the required outputs for the rail network in Control Period 5 (CP5) between 2014 and 2019. Government’s stated intention is to improve the connectivity and capacity of the network, particularly for the journeys that matter most to economic growth including major intercity, commuter and freight flows. These aspirations are shared by the Mayor and TfL. The Mayor’s Transport Strategy sets out the challenges faced by London and the Mayor’s Rail Vision, published in February 2012, develops a realistic proposal setting out the schemes that should be funded in London to achieve the Government’s and the Capital’s goals. This includes a proposal for the policy of rail decentralisation to be further extended in London, building on the successful London Overground model.

2.2 The Capital is highly dependent on rail, with the Tube and National Rail having a combined mode share of 78 per cent for trips to central London in 2010. Londoners make six times as many rail trips as people in the rest of England, and 60 per cent of all UK rail trips are made either to, from or within the Capital. As rail is the main means by which people get to two million central London jobs, the Capital’s economy is crucially dependent on it.

2.3 Londoners experience lower service quality than other parts of Great Britain. This is demonstrated by National Passenger Survey scores which show overall satisfaction is three to four percentage points lower in London and the South East than in the rest of the country. National Rail fares are higher in London than in regional cities (averaging 13p per passenger kilometre compared with 10p). London stations have lower accessibility, with only 33 per cent of stations step-free compared with 60 per cent in the three next biggest cities. Crowding is more severe. Almost 60 per cent of trains arriving in the morning peak have passengers standing and 20 per cent of passengers stand. This is around twice the level of standing in Birmingham and Manchester.1

2.4 The UK’s economy is crucially dependent on the London economy. As a global and business financial centre, the city’s productivity per head is 60 per cent higher than the UK average. London and the South East contributes more than a third of UK GDP, and by 2016 it is forecast to generate a tax surplus of £27bn. Paradoxically, London also has a significant amount of deprivation, playing host to 20 per cent of the most deprived areas in the UK.

1 ORR National Rail Trends, 2010-11

2.5 The balance between taxpayer and farepayer should take more account of the economic benefits delivered by rail services. The importance of rail to London’s economy and of London’s economy to the UK’s, mean that there is a strong case for continued investment in London’s rail services. With fares already high, it is necessary to look to Government to provide this investment. Despite this, subsidy per passenger kilometre is only 15 per cent of that of regional operators as shown in paragraph 3.2.

2.6 London has a growing population and a severe housing shortage. But it also has a number of major opportunity areas, brownfield sites that could accommodate dense development if rail access were provided. Some of this investment, which is normally beyond the capacity of the site developers to support in full, could be recovered from tax income generated by the development, but there is still likely to be a gap that Government could be called on to fill. Investment in infrastructure to regenerate abandoned parts of London can be justified by the Capital’s importance to the country’s economy.

2.7 The requirement on the rail industry to provide greater step-free access is a further call on the investment budget.

2.8 Providing sufficient capacity to meet commuter demand is essential to the growth of London and of the UK. Jobs and population growth in the Capital is projected to be such that, by 2020, there will be very severe crowding on many rail corridors. Committed schemes will meet part of the capacity shortfall on a proportion of routes. But in many places crowding will remain very substantial and further investment in capacity will be needed if the rail network is to support London’s and UK’s potential economic growth. Capacity at key stations will also be a problem.

2.9 The most severe crowding is forecast on orbital routes. The upgrade of the London Overground has transformed the passenger experience and unlocked a huge volume of previously suppressed orbital journeys, with 110 per cent growth over four years on a like-for-like basis. However, in the context of the forecast growth, longer trains will soon be urgently needed to cope with the anticipated high level of demand.

2.10 Severe crowding is also forecast on the line between Staines and Clapham Junction, on services into London Bridge and on the Tilbury and Grays line into Barking and Fenchurch Street. TfL also has concerns over crowding levels on outer-suburban services, especially on Essex Thameside, Kent coast, Brighton main line, South West main line and Great Western main line services. TfL’s recommendations for CP5 and the associated benefits are set out in the Mayor’s Rail Vision.2 The recommended package of schemes is estimated to increase GDP by around £3bn in present value terms.

2.11 The Initial Industry Plan shows that the provision of additional London commuter market capacity offers good value for money, with an outstanding benefit-cost ratio of 11 to 13, and fits with the Mayor’s Transport Strategy.

2 http://www.london.gov.uk/mayor%E2%80%99s-rail-vision-investing-rail-services-london 3 Initial Industry Plan England and Wales, September 2011

3 Targeted efficiency savings

3.1 The McNulty review targeted efficiency savings of £3.5bn by 2019 to be delivered by the rail industry. Reductions in Network Rail’s costs as a result of the last Periodic Review and existing commitments are expected to deliver £2.5bn of efficiencies. In its March 2012 Command Paper, the Government states that a further £1bn of savings can be delivered as a result of its recommendations. ORR’s Advice to the Secretary of State estimated Network Rail’s costs for CP5 to be very close to Network Rail’s own submission. This suggests that the Network Rail cost savings identified so far are deliverable. However, the Government needs to set out the mechanism through which the additional £1bn savings will be delivered and to publish milestones.

3.2 Savings need to be found from across the industry in the form of cost reductions or growth in revenue. Sectors that already largely cover their costs should not be unduly penalised. Table 5.1 of the Command Paper4 shows that net cost to Government is 4.8p per passenger mile for London and South East operators compared with 7.3p for long distance operators and 31.1p for regional operators. London and South East services are already covering a high proportion of their costs through the farebox. Efficiencies should be targeted at areas which will not impact negatively on economic growth.

3.3 Nonetheless, inefficiencies in the franchising system mean that some savings can be delivered in London.

4 Reforms to franchising

4.1 The Government’s preferred model of longer, less prescriptive franchises works better for medium to long distance journeys where train operators are incentivised by the farebox to provide good quality services which meet passenger demand. 4.2 Urban rail services, on the other hand, meet a social and economic need but would be relatively neglected by a commercially focused train operator. Demand for London commuter services is driven largely by London employment and other macro-economic factors. Fares are largely outside the control of operators, and yields are relatively low in absolute terms because of short average journey lengths, under £2.50 compared with £20.00 per journey on long distance services. Other things being equal, commercial incentives are therefore modest when combined with relatively high costs associated with peaked mass-market demand, and largely captive customers, so companies that provide inner suburban rail services deliver the minimum required. However these 400 million journeys every year are vitally important to the London and by extension UK economies. 4.3 The Government is requiring the industry to lead the delivery of cost savings and believes that train operators will be incentivised through the new franchises to deliver changes to working practices. The Government wishes to take a hands-off approach, but it is not clear how train operators will be incentivised to deliver efficiencies. Rather, quality may suffer because of limited commercial or contractual

4 Reforming our Railways: Putting the Customer First, March 2012

incentives: off-peak train services could be cut and station facilities scaled back. The Government should set out clearly what steps will be taken to incentivise operators to deliver industry reform. TfL’s proposals for urban services in London (see section 6) would address these problems. 4.4 The Command Paper targets significant savings to be found from closer alignment between train operators and Network Rail’s zones, through alliances for example. It is essential that alignment results in genuine efficiencies rather than a reduction in quality. Furthermore, almost every alliance will play host to one or more secondary operators (both passenger and freight). Their interests need to be protected. ORR has issued a statement to this effect and it has an important role in managing the implementation of alliances.

5 Reform of fares and ticketing

5.1 TfL supports the case for greater use of smartcards across the National Rail network and for season tickets to be issued on smartcards. In London, experience has shown that passengers prefer Oyster Travelcards to magnetic Travelcards. Transferring season tickets to smartcards will deliver benefits to passengers and reduce fraudulent travel because of the ability to hotlist cards. It will also enable operators to provide flexible alternatives to the traditional season ticket, for example by offering better value to people working from home one day per week or with shoulder peak discounts. There will be an opportunity to introduce weekly fares ‘capping’, analogous to the current daily cap, as an alternative to a weekly season ticket. TfL believes that fares should be aligned to the time of travel and number of journeys made. Currently prices are disproportionately high for part-time workers, many of whom are less well off. The Government should take steps to address these issues when franchises are let, noting that changes will need to be made gradually.

5.2 TfL aims to roll out innovative new ticketing systems like ‘wave and pay’, that is the use of contactless debit and credit cards as a smart ticket valid for travel. Customers who choose this method need never use either a ticket office or ticket machine at all. Enhanced functionality on easier-to-use ticket machines will reduce the need to buy tickets from ticket offices. TfL’s experience is that, especially with the rise of new ticketing technologies, customers increasingly want to see staff out and about in the station to help customers by providing assistance and security, rather than behind glass.

5.3 Demand spreading measures will help to move demand into less busy periods but will not solve London’s crowding problem unless they are used alongside capacity increases. The Fares and Ticketing Review consultation quotes research that shows a hypothetical 40 per cent peak additional increase in high peak fares over five years would generate a five per cent reduction in peak demand, equivalent to just over one year’s growth.

5.4 The Mayor’s response to the fares and ticketing review consultation will provide more detail on these points.

6. Rail decentralisation

6.1 Urban rail services such as London’s inner-suburban services are most suitable for local control because they deliver substantial economic and social benefits yet are neglected by commercially focused operators.

6.2 In London, TfL proposes that national government should continue to specify and manage outer suburban rail and longer distance rail services. Responsibility for specifying, procuring and managing some London-focused inner suburban services should be transferred to TfL along with general responsibility for setting all rail fares for travel within the London area. The following five point plan sets out TfL’s proposals:

1. The Mayor should be allocated DfT’s rail budget for relevant inner suburban passenger services 2. When Anglia and Kent franchises come up for renewal, inner suburban services should be specified by TfL to Overground standard under a separate concession 3. TfL should have full accountability for contract management, such as ‘breach’ and ‘default’ 4. All fares for travel within London would be set by the Mayor to enable a simplification not only of the associated bureaucracy but also to reduce confusion around ticket products and fare structures 5. ...and with the above, relevant inner suburban services could be branded ‘London Overground’

6.3 Although the West Anglia and Southeastern inner suburban services are proposed for devolution in the Mayor’s Rail Vision, the specific routes mentioned are indicative and there are feasibly other options.

6.4 Local bodies such as the Mayor and TfL have a detailed knowledge of the services and their characteristics and can respond quickly as changes occur. They are also best placed to integrate rail services with the rest of the public transport network in terms of fares, information and the delivery of a consistent customer service proposition. This is especially so in London where National Rail services are fragmented and disjointed in many passengers’ eyes, compared to the multi-modal TfL network.

6.5 Devolution in London would also improve value for money. As with its existing London Overground, Docklands Light Railway and bus services, TfL would let ‘gross cost’ contracts, in which it absorbs revenue risk, for the operation of devolved inner-suburban services. Because train operators have little control over revenues, which as noted earlier are driven largely by macroeconomic factors, they will only do so at a price. This additional cost to the public sector would be reduced if TfL took the revenue risk instead. For the routes proposed for devolution, the gross saving from the transfer of revenue risk has been estimated at £100m over 20 years. This could then be invested in improving customer service quality and providing incentives to improve reliability. This is wholly consistent with the objective of greater value for money as set out in the McNulty review.

6.6 Savings would be achieved by properly incentivising train operators to collect revenue. Fare evasion surveys show that net cost contracts have been ineffective in incentivising operators to collect fare revenue on inner suburban routes. However on London Overground, where concession operator, London Overground Rail Operations Limited (LOROL), is subject to penalties and incentives geared towards meeting a specified target, reduced fares evasion now generates an estimated £9m per year in revenue. 6.7 Incentives would improve other aspects of service quality. On the London Overground concession, for example, the customer satisfaction survey, mystery shopper survey, reliability measures and other performance indicators objectively measure the quality of service. A detailed service quality regime of this type is appropriate for an urban railway. The London Overground service quality regime is different from that on DfT franchises where reporting is at a more aggregate and less objective level. LOROL is also penalised for delay minutes attributed to the operator in a way that does not apply to franchised TOCs. This has resulted in LOROL becoming one of the best performing train operators. Conversely, these are all areas that could be neglected under longer, less-prescriptive franchises. This effect can be seen already in lower performance and satisfaction ratings for franchised TOCs (National Passenger Survey scores of 80 for West Anglia and Southeastern inners compared to 87 for London Overground). 6.8 Devolution in London would provide a means to achieve more readily and cost effectively the goals of the Mayor’s Transport Strategy, of simple and consistent standards of service quality. London and South East already has the lowest subsidy per passenger mile in Great Britain and devolution would provide improved services and better value for money as well as benefits to the economy. TfL’s proposals would not add new bureaucracy or layers of management to the industry. Rather, they are designed to replace existing industry relationships and functions. Responsibility for London’s railways would sit in one place, directly accountable to a local electorate, integrated with other modes, delivering operational synergies and, via a ‘single till for transport’, providing cost savings. Interests of passengers living outside London would be protected and democratic accountability for rail services would be increased compared with the current industry structure. 6.9 The Mayor’s response to the Rail Decentralisation consultation will provide more detail on these points.

18 April 2012

Further written evidence from the Mayor of London and Transport for London (ROR 20A)

Rail 2020: High Level Output Specification Announcement

1. Introduction

1.1 The Mayor of London and Transport for London (TfL) welcome the opportunity to provide additional evidence to the Committee’s inquiry and this evidence is submitted on behalf of both.

2. Overall conclusions

2.1 The High Level Output Specification (HLOS) process works well and brings greater certainty to the industry. Its content is hugely important to Londoners who make six times as many rail trips per head than anyone else in the UK.

2.2 However, seemingly in London it is driven solely by demand and crowding as opposed to wider considerations, such as the London Plan, which identifies a number of areas of future growth, regeneration and economic development, but where there is no crowding in the absence of existing services.

2.3 The HLOS announcement sets out a number of illustrative options. TfL looks forward to working with the industry in shaping these further as part of the Strategic Business Plan process through to January 2013 which will determine in detail what will be delivered in Control Period 5 (CP5).

3. Government’s Vision for the Railways

3.1 The Government has recently announced the second HLOS setting out the required outputs for the rail network in CP5 between 2014 and 2019. The Government’s strategic priorities are to improve connectivity and capacity of the network. These aspirations continue to be shared by the Mayor and TfL who welcome additional investment of over £700m in congested routes in London and the South East. This is in addition to existing schemes including Crossrail and Thameslink, which will be delivered in CP5.

3.2 Rail crowding in London is more severe and more widespread than in other British cities. Reliability tends to be somewhat worse than regional

services. Taken together, it is no surprise that customer satisfaction is rather lower, as measured by Passenger Focus.

3.3 Almost 60 per cent of trains arriving in the morning peak have passengers standing and 20 per cent of passengers stand. This is around twice the level of standing in Birmingham and 50 per cent more than in Manchester.1 3.4 The HLOS, including existing capacity schemes, will accommodate a 22 per cent increase in morning peak arrivals at London termini by 2018/19. TfL welcomes this capacity increase which, we estimate, will contain the growth in crowding levels overall on National Rail, though by no means solve it. London’s population continues to grow strongly as demonstrated by the 2011 Census which reported that London’s population is now 8.2 million, 12 per cent higher than when the 2001 Census was carried out. Population in London and the South East of England has grown by 1.5 million since 2001. The London Plan, which has broadly been correct to date, anticipates this growth to continue over both this decade and the next.

3.5 TfL notes the progress rightly required to achieve a more cost effective railway. The context though, as identified in the McNulty review, is a subsidy per passenger kilometre which is considerably lower at only 5p per passenger mile compared with 31p per passenger mile for regional operators.2 London and South East services already provide relatively good value for money, given the high level of benefits they deliver and their importance to London’s economy.

3.6 TfL welcomes the provision made for ring fenced investment funds, particularly those covering the Strategic Freight Network, Passenger Journey Improvement, Station Improvement and Development. This simplifies existing arrangements and gives the industry flexibility. We look forward to working with the industry to develop proposals for scheme funding through the investment pots.

3.7 Within London there are large variations in the quality of station infrastructure and facilities and the £100m fund for station infrastructure improvements is welcome. The Mayor has proposed improvements to West Anglia and Southeastern inner suburban stations as part of his Expression of Interest in rail decentralisation. However this only covers selected routes and there are many other stations in London which would benefit from improvements.

3.8 A smaller proportion of London’s stations is accessible compared with other parts of the country, with only 33 per cent of stations step-free compared with 60 per cent in the three next biggest cities. The HLOS

1 DfT Peak Rail Capacity RAI0212, 2011 2 McNulty Rail Value for Money report, May 2011

announcement includes a £100m fund to improve the accessibility of stations. TfL welcomes the continuation of the Access for All programme which has already delivered significant benefits to passengers across the country. TfL has identified a priority list of stations which require accessibility improvements and it is ready to submit the stations as candidates for future tranches of Access for All funding. We believe there is a case for further increasing the level of funding provided for step-free access above the £100m identified in HLOS. This sum equates to only half the annual level of funding in the original Access for All programme, yet many stations still require step-free access, and implementation becomes increasingly difficult as the easier stations are addressed.

3.9 Station congestion is a constraint on rail demand growth and the Mayor and TfL welcome illustrative options to reduce congestion at Paddington, Victoria, Clapham Junction and Wimbledon stations. Other London stations, as set out in the Mayor’s Rail Vision, also suffer from severe congestion and would benefit from capacity enhancements during CP5. These include Fenchurch Street, Charing Cross, Finsbury Park, Bromley South, Sutton, Surbiton and Barking.

3.10 The additional train and station capacity will meet demand overall, essential for supporting the growth of London and the UK. However, there are some routes where TfL believes the illustrative options require some development to meet better demand requirements (see section 4).

4 Illustrative options

4.1 DfT has published a number of Illustrative Options to meet London’s capacity challenge. The Mayor’s recommendations for capacity enhancements were set out in the Mayor’s Rail Vision3 in February 2012. The illustrative options are a good start in scoping these, but some important gaps remain in planned capacity provision which, left unchanged, will constrain the economic growth projected in the London Plan.

4.2 The most severe crowding is forecast by TfL to be on orbital routes. The upgrade of the London Overground has transformed the passenger experience and unlocked a huge volume of previously suppressed orbital journeys, with 140 per cent growth over four years on a like-for-like basis. However, in the context of the forecast growth, longer trains will soon be urgently needed to cope with the anticipated high level of demand. Capacity provision for 8 car Southern services on the West London Line is welcomed. However this does not provide for much needed capacity improvements on other orbital routes. Although responsibility for the former Silverlink Metro franchise was transferred to

3 http://www.london.gov.uk/mayor%E2%80%99s-rail-vision-investing-rail-services-london

TfL with effect from November 2007, the infrastructure remains under the ownership of Network Rail as part of the National Rail network. Furthermore, capacity enhancements to London Overground services form part of integrated solutions to National Rail network capacity problems; for example, on the West London line and the Sydenham corridor, where capacity enhancements are of mutual benefit to all parallel services regardless of who operates them. As such, TfL considers that enhancements to the London Overground network should remain part of the HLOS process.

4.3 Gospel Oak-Barking electrification is another scheme proposed in the Mayor’s Rail Vision which would deliver significant freight and environment benefits as well as enabling train lengthening on London Overground services, but which is not in HLOS. This is despite the fact that it featured in Network Rail’s electrification Route Utilisation Strategy as one of four core schemes, the other three of which feature in HLOS. It also featured in the Initial Industry Plan. Passenger demand is also growing fast, which is expected to be matched by a rapid increase in freight flows from the opening of the DP World London Gateway port next year. Electrification is an effective means to solve these capacity problems.

4.4 Network Rail estimates that nearly 60 per cent of freight traffic would switch to electric haulage were the route to be electrified. TfL’s cost benefit appraisal also shows that 60per cent of the benefits of electrification are from freight, including a substantial contribution from reduced carbon emissions from freight traffic right around the UK. It also contributes to our shared goals of improving air quality, especially to reduce NOx emissions which remain a major challenge in London. For example, the analysis for the Mayor’s Air Quality Strategy suggested that electrification of the line would save around 200 tonnes of NOx and around 5 tonnes of PM10 a year, the equivalent of 1per cent of London’s transport emissions.

4.5 An Illustrative Option to provide additional Brimsdown-Stratford services on the Lea Valley line is included in HLOS. The Mayor and TfL believe that this scheme is insufficient to provide the turn-up-and-go frequency required to regenerate the Upper Lea Valley, one of the London Plan’s main areas where growth can be comfortably accommodated. The route is currently particularly poorly served by rail with stations such as Northumberland Park and Angel Road only receiving a peak service of 2 trains per hour or less. Planned developments on the route would generate 37,000 new jobs in and around the Upper Lea Valley and lead to the building of 18,000 new homes. A regular and adequately frequent rail services is an essential contributor to economic development here.

4.6 The statement provides for a significant enhancement at London Waterloo to increase capacity. TfL’s analysis shows that there is a clear and urgent need for additional capacity on the South West suburban lines via Wimbledon. These have had little capacity added in CP4 and are limited to 160 metre trains. Lengthening to at least 200 metres (10-car trains) or longer is a scheme that TfL believes needs to be progressed as soon as possible. In the 2020s, the Crossrail 2 scheme could deliver additional capacity on the South West corridor as well, and this could help solve multiple problems on this corridor.

4.7 While also a scheme that will open only in the 2020s, High Speed 2 (HS2) will increase the demands on cross London services. Again Crossrail 2 is a means to mitigate its substantial impact on the Underground at Euston, especially in HS2’s second phase to Yorkshire and further north. It is also a means to relieve the heavily crowded corridors to/from north east London. While beyond CP5, the illustrative options should take account of this safeguarded scheme, to ensure joined up transport planning.

5. Rail decentralisation

5.1 It is essential to make the best use of available capacity. Improved service quality and integrated fares encourage use of the railway, especially at off peak times when there is spare capacity. Since taking over management of the London Overground service in 2007, dismal reliability and customer satisfaction have improved to become among the UK’s best; while consequentially demand has increased by 140 per cent even before taking the East London Line extension into account. The Mayor and TfL believe that devolution of more inner suburban rail services in London offers further opportunities, as set out in the Mayor’s response to DfT’s recent consultation on Rail Decentralisation. Southeastern and West Anglia inner suburban routes are the Mayor’s priorities for devolution.

5.2 The DfT’s model is for train operators to be incentivised by farebox revenues. This approach works well for long distance services with fares of perhaps £25 each way and competition from car and air. In these circumstances, the operator has a strong commercial incentive to increase demand through provision of high quality services. Those incentives are much weaker for London local journeys where fares are a fraction of that and alternatives for rail trips to and from London are limited. Indeed, the incentives are so limited that the predecessor to London Overground, Silverlink Metro, left 13 per cent of fares revenue uncollected. The result is local services are often relatively neglected compared to longer-distance routes, a quite rational business response by the operator in the circumstances.

5.3 The alternative model is that used for urban railways such as London Overground and DLR where operators’ income is determined by performance – which they control directly – leading to higher service quality. Payment is made by results. The higher performance is, as measured by reliability, service quality and fares evasion rates, the more the operator makes. The operator collects fares, but the revenue goes to TfL. The operator can therefore focus on service quality and managing the costs, both of which are directly within its control. In contrast, it need not take a bet on macro-economic conditions, such as employment, which largely determine demand and revenues. Taking away this risk tends to reduce the margin which operators require, so this offers better value too.

5.4 Investment in station cleaning and facilities, better staffing, improved reliability and frequency improvements where possible would improve customer satisfaction. On West Anglia and Southeastern, it is expected that devolution could deliver an increase in customer satisfaction from around 80 per cent to 90 per cent and an increase in reliability from the current levels of 87 per cent for West Anglia and 92 per cent for Southeastern to 90-95 per cent. In addition, ticketless travel will be reduced from around 10 per cent to below 5 per cent, reducing the net cost of rail operations.

5.5 In summary, rail devolution will improve efficiency and deliver higher service quality for London passengers.

August 2012

Written evidence from the Freight Transport Association (ROR 21)

Introduction

1. The Freight Transport Association (FTA) is pleased to make this submission to the House of Commons Transport Select Committee’s inquiry into Reform of the Railways. This submission sets out the role of FTA and the importance of freight, then goes on to respond to the Committee’s specific question as appropriate to FTA.

FTA’s Role

2. FTA represents over 14,000 companies spread across the UK relying on or providing the transport of freight both domestically and internationally, to or from the UK. Our members include road hauliers, freight forwarders, rail and air freight operators, through to customers – suppliers of raw materials, retailers, manufacturers and wholesalers, covering all modes of transport – road, rail, air and sea. Our members involved in rail freight include shippers of bulk, deep sea and domestic intermodal and retail goods, and also freight operating companies and logistics service providers.

3. FTA members are responsible for 90 per cent of goods moved by rail and around 70 per cent of goods moved by air and sea. They also operate over 200,000 commercial goods vehicles in the UK, approximately half of the UK fleet of goods vehicles.

4. FTA’s primary rail freight focus is to represent the shippers – the ultimate end users – of rail freight who make the decisions about modal choice.

The Importance of Freight

5. Freight is crucial to our way of life. This is not because of the direct contribution of the sector to the economy, though this is substantial. But rather it is because of what freight makes possible – the entirety of our modern economy. Every physical product grown, made, traded and consumed in the modern world requires the services of freight – to move it from field or mine to production site to distribution hub to retail outlet and even to our homes.

6. Too often the needs of freight are ignored as it is not as visible as public transport or private motoring. This fundamentally misunderstands the relative importance of freight to the UK economy and that risk should be avoided by this study specifically addressing the needs of freight within both the industry structure and this review.

7. Within rail too, any discussion on rail is automatically taken to mean passenger rail. In fact, when judged by distance, the rail network moved a tonne of freight for every 2.5 passengers that it transported1. This demonstrates the importance of freight within the context of the rail industry.

1 source: FTA calculation based on ORR National Rail Trends 2009/10 Reponses to Committee’s Questions

8. In the following FTA will respond to those aspects of the Committee’s question that are appropriate to the Association’s remit and where we have concerns about the direction of policy.

1. What should be the Government’s vision for the railways in 2020, taking account of likely spending constraints?

9. Rail freight is benefiting from public sector investment to help optimise Britain’s mixed use rail network for freight. Part of this recently has been via the Strategic Freight Network (SFN) scheme.

10. Plans to continue the development of the SFN in the next control period (2014-19) have been set out the Initial Industry Plans (IIP) for England and Wales and for Scotland. FTA supports the IIPs wholeheartedly. The Association has found the Strategic Freight Network programme to be an excellent vehicle for enhancing rail’s contribution to the UK supply chain. The commitment to a national structure for freight is exactly what is required and the scheme has been handled in an efficient manner. Furthermore, the four proposed freight schemes that are put forward in the IIPs fit with the needs of the logistics industry and the users of freight services – Britain’s production, manufacturing and retail businesses.

11. The envisaged fund for freight would deliver real benefits in terms of enabling the logistics industry to utilise trains in place of trucks, freeing up space on Britain’s roads in key areas across the country. It would improve the quality of the supply chain for Britain’s importers and exporters as well as reducing carbon emissions.

12. This fund, at £350 million for England and Wales, represents only a small part of the total proposals in the IIP, which include £4.9 billion worth of investment proposals (excluding schemes already committed).

13. The Association ask the Committee at all opportunities to encourage the UK Government to support the proposals for freight investment as contained in the IIPs when they make their proposals for the next control period in summer 2012.

3. Will the reforms to rail franchises proposed by the Government, including alliances, deliver better services at lower costs?

14. The largest single concern FTA has about the package of rail reforms as about the proposed alliances between the infrastructure manager and the dominant passenger company. The freight industry is concerned that the closer integration of passenger services and infrastructure operations could see freight become a second class citizen on the network.

15. If Network Rail and a given passenger operator are more closely combined (in an organisational sense or by joint financial incentives) there is the possibility that passenger services would be given unfair preference. This could be either during routine planning of issues such as engineering works, or in getting trains moving again in the event of a disruption.

16. Whilst safeguards are proposed, if these are legal requirements that freight operators would have to go to court to get enforced, our experience is that this will be a less than ideal arrangement. Freight companies are reluctant to go through the expense and effort of legal work. Breaches of requirements can be difficult to prove.

5. What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities?

17. The move towards regionalisation within Network Rail could create difficulties for cross- national operators such as freight. If Freight Operating Companies (FOCs) have to deal with many different regimes across Great Britain this could multiply the amount of bureaucracy that has to be dealt with to make rail freight services work. Whilst we understand issues such as pathing will still be dealt with at a national level, this regionalisation could create problems in areas such as co-ordination of engineering works and providing diversionary routes to avoid them.

18 April 2012

Written evidence from Campaign for Better Transport (ROR 22)

1.1 The Government vision for the railways should be as part of a modern transport system that can both support economic development, reduce the impact of transport on the environment (including achieving significant reductions in carbon) and improve people's quality of life. Rail provides a lower carbon mode of transport but it needs to be a more affordable and attractive option for both passengers and freight compared to motor traffic (and aviation on longer routes). This would help to cut congestion in urban areas and on strategic routes between cities. In addition, rail has significant potential on regional and rural routes which have not been a priority in recent investment rounds.

1.2 Given this, the key indicator underpinning this vision should be that rail's share of trips is increasing relative to motor traffic (private cars and HGVs) and aviation. The implication of this vision and ambition, is an expansion of capacity on the network.

1.3 Achieving this vision also means that the railways should be at the centre of a network of door-to-door sustainable transport, providing a high quality alternative to car travel. This requires attention to connections between the railways and other modes of transport, including the car. In the same way, railways should be part of the freight logistics chain so they can substitute for longer distance road freight transport. Both of these require good interchange - passengers also require good information, through tickets and connections between different trains and between trains and other modes.

1.4 Railways already help to deliver a range of Government objectives and provide a host of social, economic and environmental goods that do not simply benefit those who use them. Some of these can be quantified, in terms of the economic “agglomeration benefits‟ of rail services to a particular area, or the savings to businesses of reduced congestion. Other benefits in terms of having development that is less car dependent or improvements to quality of life are less easy to quantify but are still real.

1.5 The Government's vision for the railways should link with its policies on the economy and on land use planning. The evidence is that if developments are built around public transport, people choose to use cars less and rail freight use goes up. Other countries as diverse as the USA and the Netherlands have been better than the UK in integrating public transport with housing and commercial development.

1.6 There will also be wider benefits from continuing rail investment: Ó There are clear economic benefits. Each day, the railway helps underpin our economy by carrying millions of people to and from their work and thousands of tonnes of goods and other cargo to our shops and factories. Investment can strengthen this, notably by improving links between and within urban areas and supporting railfreight. Continuing current levels of investment will also safeguard and expand employment in UK-based rail manufacturing and construction, and this will contribute to the Government’s aim of rebalancing the economy. Ó Railways are a low carbon form of transport, and can be made more so with electrification, so continued rail investment can help achieve the Government’s environmental objectives and the need to meet challenging targets for reducing carbon emissions. Rail investment can also help tackle other environmental problems, such as poor air quality and noise. Ó Rail investment can contribute to the Government’s social policies, notably in helping people gain access to labour markets.

1.7 These benefits must be acknowledged when addressing the question of who should fund the railways – a fact which is recognised by many of our European counterparts, where state support has helped to create modern, efficient and affordable railways. These wider benefits also need to be fully reflected in transport appraisal – currently the Government's forecasting and appraisal methods do not fully allow for them.

1.8 Public spending on the railways currently sits at £4 billion annually.1 Of this amount, £3.4 billion, or approximately 85%, went to Network Rail in 2010-11, with the majority of the remainder spent on subsidy payments to train companies and rail in the city regions.2 It is therefore worth noting that, when we hear about the high levels of Government subsidy for the railways, this is in large part to finance Network Rail‟s track and infrastructure operating costs and its significant debt – not to lay on trains in rural areas or reduce the cost of travel for particular vulnerable groups, as the common notion of “subsidy” suggests.

1.9 Moreover, the level of Government support has been steadily declining since 2006/07, when it peaked at £6.8 billion following the wave of upgrades and improvements that were prompted by the Hatfield crash of 2000.

Figure 1.1 Farepayer and taxpayer contributions to GB rail since 1989/90

Source: National Rail Trends, DfT statutory accounts, TOC statutory accounts

1.10 This chart shows that we are already on course to meet the target of fare-payers shouldering 75% of the costs of running the railways while taxpayers contribute 25% by 2014, as set out in the 2007 White Paper.3 The Initial Industry Plan, meanwhile, suggests that the rail industry should cover its costs by 2023/24, with the London and South-East sector generating a surplus as early as 2018/19.4 Unlike the nation's roads, which are expected to need to be subsidised in perpetuity, much of the rail network has the potential to be self-funding in the near future. In other words, the Government is already achieving its goal of reducing public spending on the railways, which undermines the most common justification for the need for

1 The remainder of the industry‟s total annual cost of £11 billion is met by £6.6 billion in revenue from fares and £377 million in private company investment. Office of Rail Regulation, National rail trends yearbook 2010-11, July 2011 2 Office of Rail Regulation, National rail trends yearbook 2010-11, July 2011 and Department for Transport, Business Plan Quarterly Data Summary, July 2011 3 Department for Transport, Delivering a Sustainable Railway, July 2007 4 Network Rail, Initial Industry Plan England and Wales, September 2011 the current policy to accelerate fare rises by increasing the permitted cap next year for regulated fare rises to RPI+3%. It also raises the question of what the Government‟s end goal might be on this front – and the possible consequences if this is to reduce taxpayers‟ contribution to running the railways to zero.

1.11 The other core justification for the RPI+3% formula for regulated fares in 2013 and 2014 is the need to fund additional capacity and investment in major rail projects. Again, there is often a difference in how spending on road maintenance and additional road capacity funded through general taxation is regarded as investment, whilst spending on rail capacity and maintenance is regarded as subsidy. In fact, rail investment is catching up on decades of under-investment, which lagged well behind spending on new motorways, trunk roads and by-passes from the 1960s through to the early 1990s.

2. How are the targeted efficiency savings (£3.5bn by 2019 on a 2008/09 base) to be delivered? What will be the consequences?

2.1 The rail industry is already bringing its costs down and the savings already identified should bring the share of income between farepayers and other income sources compared to taxpayers support down to the target share in the 2007 White Paper. The additional cuts identified by the McNulty report on top of these (including closure of ticket offices, reviews of station staffing and higher “super peak” fares) should be reviewed as these could be counter-productive to the overall vision of increasing rail shares of travel, and could even reduce its fare income as rail travel becomes less attractive.

2.2 There is scope to further bring down costs and the means to achieve this include greater transparency of rail costs, better procurement (such as standardising components) and better planning and management of works, as well as reviewing the evidence base to assess whether high cost specifications are appropriate or justified. Reducing the number and costs from interfaces between different bodies involved in delivering rail services should also reduce costs significantly.

3. Will the reforms to rail franchises proposed by the Government, including alliances, deliver better services at lower costs?

3.1 Changes to the franchise system could help reduce costs but changes which put passengers and freight customers off using the railway need to be avoided. While the Government is seeking to cut costs, this should not result in cuts to services. We want to see the reach and capacity of the railway grow, not wither. Minimum service frequency should take account of latent demand and the possibilities for modal shift. Adequate frequency and first and last train times for evening and weekend services should be specified. Franchises should specify that current levels of service should be maintained as a minimum standard. Greater flexibility carries the risk that operators will decrease services at times and stations where demand and income are lower, including services at evenings or at weekends. However these trains are vital for many passengers, for example for tourists and people who work non-standard hours, as well as providing the certainty of a regular service that people need in order to rely on rail as a reliable services to get them home.

3.2 We are concerned that if the structures that govern the railways change to include more alliancing and even vertical integration there must be provisions to protect the interests of rail freight. Rail freight creates 70% less carbon dioxide than the equivalent road journey, and franchises must allow this sector to grow. Moves in the direction of vertical integration raise concerns because the national railway network risks becoming more fragmented with more interfaces. Road freight does not face these complicated structures which will make it more difficult for rail freight to compete. Greater clarity on the governance structure of alliances is needed. In particular third party operators should have an advocate on the governance board of the alliance, and there needs to be greater clarity on the appeals process open to third parties. The needs and interests of both existing and future freight traffic must not be overlooked.

3.3 We are not convinced that longer franchises are automatically in the best interests of passengers. The right controls, incentives, standards and sanctions must be in place to ensure the railways fulfils its purpose as a public service. There is no conclusive evidence about the impact of franchise length alone on performance.

4. How should fares and ticketing be reformed?

4.1 The Campaign for Better Transport has been calling for reform of the fares and ticketing system for some time. We launched the Fair Fares Now campaign in January 2011 calling for cheaper, simpler and fairer fares and as part of this we produced a Fair Fares Charter. This sets out 13 straight forward and deliverable policies to achieve that.5 The current fares system does not deliver for passengers.

4.2 The Department for Transport Rail Fares and Ticketing Review is an opportunity to look at how the fares system can be made less confusing for passengers and provide products that are more useful for many kinds of travellers. However, the Department for Transport is restricted in what it can say by a refusal to look at the overall level of fares and a desire to avoid changes which could lead to less revenue from passengers or a cost in implementation which central government would have to pick up (ie any proposal should be revenue neutral).

4.3 There is also a tension between the Department for Transport’s desire to hand train companies more freedom and flexibility in future franchises and the ability of the Department for Transport to see some of the ideas discussed in the review through to implementation.

4.4 The proposals to develop “super peak” fares in the rush hour, balanced by some reductions in prices on less busy services, is deeply unpopular. A poll commissioned for Campaign for Better Transport showed that only 14 per cent of people believe that raising fares on the busiest trains at a higher rate than other services is fair. In contrast, 63 per cent thought the proposal unfair for all passengers, even if it meant lower fares on some less busy services.6 Many commuters have no choice but to travel at the busiest times to get work at 8.30 to 9.30 because of the nature of their job or of other commitments like childcare or school times.

4.5 The Department for Transport is also considering introducing a new higher “shoulder peak” period to avoid big changes in price when the peak comes to an end on some services, particularly longer-distance services. This can lead to overcrowding on the first off-peak service after the peak period – the example often given is the 19.03 from London’s Euston station on a Friday night. However, peak times already vary across different services and adding to the confusion further could lead to more cynicism from passengers about the way the fares system works. There is a danger in setting overall policy to solve the problems on some particular services, rather than setting policy to meet general policy aims.

4.6 Smart cards offer an opportunity to introduce a new generation of tickets more in line with passengers' needs. Oyster is already successful and the effect of extending Oyster to National Rail in London has on its own led to an increase in patronage of 5.5 per cent, generating an additional £50m in revenue.7

4.7 However, to deliver for passengers, there needs to be: Ó Products that are simple and clear to underpin the technology

5 See http://www.bettertransport.org.uk/files/fair-fares-charter-march-2012.pdf 6 See http://www.bettertransport.org.uk/media/08-mar-fares-review] 7 Transport for London, Rail and Underground Panel, Oyster on National Rail Progress Update, January 2011 http://www.tfl.gov.uk/assets/downloads/corporate/Item08-Oyster-NR.pdf)] Ó Fare levels that are transparent and understandable (eg based on zones so passengers know what they will pay, rather than complex fares which could hide actual costs from passengers) Ó Co-ordination between train companies, bus operators and local transport authorities to ensure that products can be used across different forms of transport like rail, bus and tram

4.8 Smart cards could help part-time workers and the consideration of this in the Fares and Ticketing Review is helpful. For part-timers, smart cards could help either through an e-purse which can be loaded up and which would charge a lower rate compared to the normal rate (basically an electronic version of carnet tickets) or a more complex season ticket product which would specify which days travel would be covered, or how many days in a week.

4.9 Even without smart cards, there is still much more that could be done to promote part-time season tickets. Carnet tickets (where, for instance, 12 tickets can be pre-bought for the price of ten) is one option that can work for part-time workers. However, research carried out by Campaign for Better Transport found few carnet schemes currently available nationwide and that of the 50 busiest commuter stations in the South East outside London, only four rail companies run schemes which are valid on commuter services.

4.10 Another option is a part-time season ticket with the customer specifying which days the ticket would be bought for. Campaign for Better Transport's research found only one example of such a scheme (in Devon and Cornwall). If a three-day-week season ticket were available at 60 per cent of the cost of a full season ticket and a four- day one at 80 per cent, a part-time worker travelling into London from the South East would save on average between £700 and £1,400 a year .8

5. What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities?

5.1 The devolution of the London Overground routes to Transport for London (TfL) and the Merseyrail network have both shown that devolving powers over rail can deliver real benefits. Every other country in Europe, even those such as France which are traditionally centralised, has devolved some responsibility for local rail services, often to groupings of local authorities. The evidence is that local management and specification of rail services brings more business to local rail lines and raises standards and quality of services. Many local services have, as noted already, received very little investment over the years; where they have, usage has grown significantly.

5.2 Much investment in local rail services has come from local authorities or via Community Rail Partnerships, with little central Government involvement. As well as the examples in the big cities, counties such as Lancashire and Devon have helped developed their local rail services over many years. Devon has pursued a "Devon Metro" strategy and has now got at least an hourly service on all its branch lines - the result has been some of the highest growth in usage in the country as services have become more attractive to car users. In the absence of regional bodies, devolution should be pursued with groupings of local authorities. Government needs to actively help devolution rather than just waiting for proposals.

5.3 In principle, we think there are opportunities in four areas.

5.4 First, on some local branch lines in areas such as Devon, Cornwall and Cumbria, existing partnerships should be extended, giving councils more control over specifications and allowing them to buy extra services where possible. This should be mirrored by local management of those lines or networks, within both operators and Network Rail.

8 See http://www.bettertransport.org.uk/media/08-feb-part-time-season-tickets) 5.5 Second, the West Midlands rail network, currently part of London Midland, should be considered for a local franchise overseen by Centro, with remaining London Midland services linked to the West Coast franchise.

5.6 Third, options for giving local control over the Northern Trains and Trans Pennine Express franchises should be explored. Though we recognise that there are issues with governance and accountability, we think that there are models from elsewhere that could be used to manage this.

5.7 Fourth, existing devolution arrangements in Wales, Scotland and London could be extended. In London, clear proposals have been set out by Transport for London to extend the benefits of the Overground to other lines. This should be subject to formal partnerships with local authorities in surrounding areas to ensure that their interests are fully considered and that they have influence over the devolved services.

5.8 Devolution can be used to experiment with different approaches to franchises. The London example is significant in that the way train services are contracted is significantly different to the usual franchise model used by the Department for Transport. TfL’s contracts are gross-cost, where TfL take the risks over revenue from tickets and set more detailed terms for the services on offer, including station standards and service frequencies. TfL believes that, because they take the risks on revenue, they can avoid train companies charging a high risk premium in franchises (as revenue is largely dependent on factors outside the train operating companies’ control). This offers savings that can be used to invest in improvements, as well as delivering improvements for passengers.

5.9 There could be particular benefits from improving railway stations integration with other forms of public transport if decentralisation is pursued.

18 April 2012

Further written evidence from the Campaign for Better Transport (ROR 22A)

Thank you for the opportunity to comment on the HLOS inquiry.

Freight on Rail, a partnership of the rail freight industry, the transport trade unions and Campaign for Better Transport, works to promote the economic, social and environmental benefits of rail freight to local and central Government.

Summary Our response covers the following areas:-

1. HLOS rail freight related announcements 2. The case for rail freight investment and the need to reduce freight’s carbon footprint. 3. Trends in rail freight and forecasted growth 4. What the HLOS announcements will mean 5. What else is needed

1. Key rail freight schemes announced and funded in HLOS and SOFA i) £200m for the Strategic (Rail) Freight Network (SFN) Additionally, the following projects are the main schemes which will benefit freight and passenger services:- ii) Reconstruction of Ely North Junction iii) Leicester area capacity iv) Electric Spine – Southampton Port to Basingstoke, Basingstoke – Reading- Oxford –Banbury – Leamington Spa – Coventry to join up to the West Coast Mainline v) Capacity upgrades to the West and East Coast Mainline vi) Great Western electrification

These key schemes will expand key routes to and from the ports and to major cities.

2. The case for rail freight investment This continued expansion of the rail freight network will stimulate the economy and create green jobs, relieve long distance road congestion and reduce long distance road accidents. These upgrades will unlock suppressed demand for long distance rail freight services out of the ports and on key arterial routes. Rail is well placed to offer reliable long distance services to customers who want a robust cost effective service by a combination of the most appropriate freight modes.

A. Value of Rail Freight to GB PLC The rail freight sector directly contributes £870 million to the UK economy and supports output of £5.9bn.

• The rail freight industry has achieved a 48% growth in tonne kilometres since 1994/95 with half the number of locomotives and two thirds of the wagons employed at that time. • The benefits of rail freight fall outside the railway balance sheet but benefit the road network and the economy by removing or reducing; o £772 million per annum in congestion costs o £133 million per annum in road infrastructure costs

o £68 million per annum in CO2 costs o Pro-rata 42 road deaths at a value of £78.8 million • There has been over £1.5bn of private sector investment since 1996.

B. Sustainable distribution and its role in helping the Government meet its CO2 targets

Freight is a big CO2 emitter; HGVs are responsible for 20% of carbon dioxide emissions from all domestic transport and road freight now account for 8% of UK carbon dioxide emissions. Rail produces 70% less carbon dioxide than road per tonne carried for the equivalent journey so it has a crucial role in reducing freight’s overall carbon footprint.

Energy efficiency of rail - A gallon of diesel will carry a tonne of freight 246 miles by rail as opposed to 88 miles Network Rail July 2010

3. Trends in rail freight

A. Rail freight has been a success story

• Rail freight overall grew 60% in past 10 years. Over the last 5 years during the recession, inland freight market down 10%, HGV veh kms down 13% but rail tonne km up 2%, (excluding coal) up 15%

• Latest ORR figures for the year 2011/12 show total tonne kms up 10% and intermodal freight up 11% on previous year, the 9th consecutive year of growth for consumer rail freight

• Overall volume of containers at ports in 2010 was the same as 2005 but rail volumes 29% up

• Actual tonne kms figures for the years 2009-2011 higher than previously forecasted

• Potential from Felixstowe to increase long distance traffic from 25% to up to 40% when HLOS capacity schemes completed which will also remove 40 million long distance lorry miles for annum off the A14 corridor.

B. Forecasted growth

• MDS forecasts rail tonne-km doubling 2010-2030 with Intermodal quadrupling and in fact with investment intermodal could grow five fold

• MDS forecasts rail tonne-Km doubling 2010-2030 with intermodal quadrupling or even fivefold with investment.

C. Targeted investments in rail freight work

Southampton example - Rail’s share of market increased from 29-36% within a year of the gauge work being completed in March 2011. 4. What these investments will mean for rail freight These upgrades will create a robust network to ports and key centres with diversionary routes so that rail freight can offer its customers a fast reliable versatile service.

A. Spatial Planning It will encourage developers to submit applications for :-

Large strategic rail freight interchanges for consumer market on the Strategic Rail Freight Network which will make rail more competitive over shorter distances

Medium sized and smaller terminals for specialist cargos on the network

Different freight modes complement each other. Rail freight has shown that it is well placed to provide the long distance trunk services as part of an integrated offering to customers

B. Electrification announcements These announcements are important for the future so that rail can offer even lower emissions and faster services to customers.

5. What else is needed

A. Stable Pricing Structure - ORR Periodic Review HLOS announcements will help give industry the confidence to invest in the sector; however, the ORR variable usage and freight specific charge proposals could significantly increase charges and add layers of complexity. These proposed increases threaten existing rail freight traffic viability and future growth as they undermine confidence in future rail freight investment.

As the Secretary of State for Transport’s guidance issued to the ORR on 16th July states, rail freight needs a simple consistent charging structure to give its customers and the industry confidence to invest long term. (Paragraph 33)

The guidance spells out in more detail the Government’s commitment to rail freight expansion. It not only highlights the importance of rail freight distribution to society and the economy (paragraph 32) but stresses the need to take into account the Government’s policies to develop rail freight i and the need for the ORR to discuss with the DfT any policy which would adversely affect the competitiveness of rail freight compared to other modes (paragraph 34).

The proposed changes and increased charges raise a number of issues:-

The ORR Periodic Review proposed increases appear to conflict with the SoS’s guidance.

A major change in ORR policy stands outside normal commercial risk by overlaying a political risk upon the commercial ones. In PR08 ORR continued a trend established since privatisation by further lowering freight access charges by one third to reflect Network Rail’s long term efficiency requirements. Just one Control Period later there is a policy to raise charges for some commodities three or four fold. This major change in ORR policy does beyond affording businesses the ability to do their business “with a reasonable degree of certainty”. ORR is proposing to set the charge at a level which is forecast to reduce rail freight for ESI coal by 10% which would result in 25% reduction in traffic. These planned changes to reduce coal traffic by 10% would directly affect jobs so we ask what impact assessments on job losses has the ORR made?

Coal is approximately one third of all rail freight so a significant contraction in this sector will affect the viability of operators and impact on other sectors as the servicing of coal traffic cannot be isolated from Freight Operators’ overall business. This will have knock on effects on other parts of rail freight, for example locomotive use, maintenance and terminal costs across other commodities which could render other traffic unviable. There will also be a knock on for other users of coal other than the electricity generators that also rely on coal deliveries for their production process, e.g: cement, steel. This could result in a spiral of decline for rail.

Variable usage charges to be increased by 5% in 2014 which is unhelpful.

It raises longer term questions about ORR’s remit and powers. Should it be allowed to price demand off the railways and shrink the sector?

Additionally, the question remains whether this charging mechanism would set a precedent to price off other freight commodities and indeed rural or open access passenger services?

Decline in rail freight would undermine the government’s ability to meet its legally binding Climate Change emissions reductions Freight is a big CO2 emitter; HGVs are responsible for 20% of carbon dioxide emissions from all domestic transport and road freight now account for 8% of UK carbon dioxide emissions. Rail produces 70% less carbon dioxide than road per tonne carriedii for the equivalent journey so it has a crucial role in reducing freight’s overall carbon footprint.

Were all freight modes to internalise a greater proportion of their costs, then the rail freight sector might be more able to make a greater contribution to track access charges – however, this would depend on the details of any such proposals.

Rail has to compete with road which sets the market price which, by and large, has access to national network and does not pay charging to access the network. Complex charging systems are a disincentive to using rail. Currently, road pays an annual VED and fuel duty whereas rail already has seven different charges with an additional four charges being proposed by yourselves. The added layer of complexity provided by the proposed changes will make it more challenging for rail freight operators to respond quickly in quoting for business to potential customers and will therefore be a real deterrent to new business. This factor does not arise for competitors on road.

It has to be asked why the ORR is considering undermining rail freight which has been a success story for the railways and is forecast to double tonne kilometres by 2030?

B. UK government must stand firm on its opposition to mega trucks of 25 metres and up to 60 tonnes in weight on UK roads

The UK Government will come under increased pressure from the road haulage industry to allow 25 metre trucks from Europe after the EU Transport Commissioner unilaterally allowed cross border traffic of 25 metre trucks between consenting countries. It must oppose mega trucks on economic, environmental and safety grounds. The example of the 7ft longer trailers demonstrated how the Government buckled to industry pressure.

Road and rail complement each other but large quantities of long distance freight can be more sustainably and more safely carried by rail than in even larger lorries, 25 metres long and 60 tonnes in weight.

The proponents’ case is predicated on mega trucks, which would be fifty per cent longer and a third heavier than existing trucks, delivering a significant reduction in vehicle kilometres. The assumptions for safety and environmental improvement depend entirely on the prediction of a dramatic reduction in vehicles kilometres on the premise that 2 mega trucks would replace 3 HGVs. However, their calculations ignore the dynamic effects in terms of distorting the intermodal competition which would significantly increase the demand for road freight and undermine sustainable alternatives. They are also derived from very high levels of load utilisation – in excess of that routinely achieved within the haulage sector. So until there is a rational basis for all existing HGVs to be used more efficiently it is questionable how assumptions can be made that mega trucks will have higher utilisation than existing HGVs. Government statistics show that currently one in four lorries are completely empty in the UK and almost 50% of lorries are neither constrained by volume or weight, ie partially loaded. When empty and partially loaded, mega trucks will use more fuel per vehicle kilometre because they are heavier than current HGVs.

History shows us that previous increases in lorry dimensions have neither improved vehicle efficiency nor reduced road congestion or emissions The case for longer lorries relies on the same questionable presumption used in the past to justify each increase in lorry dimensions, that there would be fewer but bigger trucks on the roads. In practice however, since the previous increases in dimensions there is no direct evidence of larger or heavier lorries leading to improvements in average payloads or a reduction in empty running. Source Review of Longer HGVs MTRU June 2011

Mega trucks have dangers of their own due to their size and lack of manoeuvrability The European Commission's own research in Jan 2009 stated that mega trucks are individually more dangerous than standard HGVs. – TML Effects of adapting the rules on weights and dimensions of HGVs P14 penultimate line 6 November 2008 DGTREN website. The double articulation of a mega trucks increases side to side oscillation ie a “snake” (rear amplication) and problems with other manoeuvres at cruising speeds, for example changing lane on a dual carriageway. There is a conflict here between manoeuvrability needed in urban areas with this loss of stability at cruising speeds.

Rail freight is safer than long-distance road freight using major roads, as HGVs are over 3 times more likely to be involved in fatal accidents than cars on major roads due to a combination of size, lack of proper enforcement of drivers hours, vehicle overloading and differing foreign operating standards. Source: Source: Traffic statistics table 2010 TRA0104, Accident statistics Table RAS 30017, both DfT Rail freight which has a much better environmental record than road UK rail freight produces 70% less Carbon dioxide emissions than the equivalent long distance road journey

In the UK mega trucks would destroy the intermodal rail market (ie containers) and 50% of bulk traffic forcing the traffic back onto congested roads. Under existing operating conditions, intermodal freight is forecast to grow four or five fold by 2030.

Certain elements of the road haulage industry has a poor record in complying with existing road regulations In the UK over 82% of HGVs exceeded their speed limit of 50 mph on dual carriageways and almost 75% exceeded the 40 mph limit on single carriageway non-built up roads.

Longer heavier lorries will increase road congestion as they are closer to negotiate junctions etc. whereas with the heaviest UK train can remove 160 long distance HGVs from our roads Source Network Rail 2010.

Trying to restrict mega trucks to dual-carriageways and motorways will not work -The promoters are claiming that these vehicles will be restricted to motorways, dual carriageways and major roads. The reality is that these vehicles will need local road access to distribution hubs not on motorways/dual carriageways. Dutch trials stated that mega trucks should only be allowed on roads with separate infrastructure for bikes which does not exist in UK and most member states.

Adaption costs Taxpayers would have to pay millions for adaptation and maintenance of the road network up front. The Austrian Government estimates that it would cost over £5bn to adapt infrastructure in Austria, alone.

23 August 2012

ii The Strategic Rail Freight Network Vision and the Strategic Rail Freight Interchange Policy ii DfT Logistics Perspective Dec 2008 P8 section 10 ( corrected version)

Written evidence from London First (ROR 23)

1. London First is a business membership organisation with a mission to make London the best city in the world in which to do business. We do this by mobilising the experience, expertise and enthusiasm of the private sector to develop practical solutions to the challenges facing London. London First delivers its activities with the support of the capital’s major businesses in key sectors such as finance, professional services, property, ICT, creative industries, hospitality and retail. Membership also includes further education colleges and London’s universities.

2. We welcome the chance to address some of the questions posed by the inquiry. Our submission is based on the conclusions of the Commission London First established to examine – in the round – the capacity and quality of London’s transport infrastructure links with the rest of the UK and the wider world. Its report London, Britain and the world: Transport links for economic growth made recommendations for the short, medium and longer term to Government and others as appropriate. It can be found at www.londonfirst.co.uk.

What should be the Government’s vision for the railways in 2020, taking account of likely spending constraints?

3. The Government’s vision for the railways in 2020 should reflect the strong economic case for increasing the capacity of London’s key commuter and long- distance rail links, as well as their interchanges with London’s transport. Without new capacity, London’s ability to grow and extend the benefits of its economic success to the rest of the country will be undermined.

Underpinning economic growth

4. The rail network – and the connectivity it provides – enables national economic activity and spurs London’s dense agglomeration of activity. One billion of the total 1.4 billion rail journeys taken every year are made by commuters and business travellers. Three-quarters of all the country’s rail journeys start or end in the capital. A well-functioning rail network is critical to London’s economy, carrying large volumes of commuters to the heart of the capital at peak. Almost half of all those entering central London in the morning rush hour do so by rail.1 Over 500,000 people enter central London by rail in the rush hour – fourteen times more than do in England’s next largest city.2

5. The last two decades have seen considerable and sustained public investment in the rail network to boost capacity and improve service quality. However, while London is well served by the range, frequency and, increasingly, the reliability of rail services, demand outstrips supply. Since privatisation, demand has risen by around 50 per cent and there are few signs of diminution. Last year saw an eight per cent growth in journeys3 across the country, while demand for services in and to London and the South East grew at almost twice this rate.4

6. A result of peak demand for services to central London outstripping supply is overcrowding.5 The ten most overcrowded rail services in the UK serve the capital6 and the data, though not systematically collected, suggests that half of rail passengers travelling to London in the rush hour do so in conditions classed as overcrowded.7 Overcrowding is apparent at all London’s stations and on all services serving the capital. One effect of this is that over 90,000 rush hour commuters travel to work by train without a seat.8

7. As employment in London continues to grow, demand is set to rise. Network Rail estimates that demand for routes linking central London with the rest of the country will rise by 34 per cent by 2031. Demand will outstrip supply, equivalent to almost 40,000 passengers every day being prevented from entering London in the rush hour. Without additional action, current overcrowding will worsen and future demand will not be met.

8. Planned investment – including the upgrade of Thameslink and the construction of Crossrail – is set to deliver much needed new capacity in London and the South East. But it will not be sufficient to meet forecast demand in the medium term, let alone the long term. And it will of course create additional demand, as people and employers relocate to take advantage of improvements. As demand grows, interfaces between the rail network and London’s other transport networks – particularly the Tube – will come under further pressure.

Prioritising investment

9. Given likely spending constraints and faced with the challenge of delivering this capacity, Government requires a clear and consistently applied framework for prioritising the provision of the infrastructure most likely to yield the greatest contribution to sustainable economic growth. Assessing the total economic benefit of all transport infrastructure investment on a like-for-like basis – in terms of jobs, productivity growth and tax revenues – would provide a strong basis for prioritising public investment in rail in the next control period. Investment in rail links serving London will continue to be required.

10. Network Rail has identified an initial range of options9 for increasing capacity on key routes serving London in the period to 2019.10 These are principally incremental improvements to track, signalling, trains and stations rather than major new projects such as Thameslink. They are driven by analysis of growing demand, and the trend for commuting over longer distances, both from London’s immediate hinterland and further afield.11 Some of the areas in the UK that are forecast to see the fastest population growth are outside Greater London, but within 45–60 minutes of central London.

11. It is worth noting that in drawing these plans up Network Rail has begun to assess the wider economic benefits of schemes, alongside traditional welfare or user benefits such as time savings. It argues that when this has been done, “it is difficult to escape the conclusion that the true value of rail investment to the ‘real economy’ is not fully captured by current appraisal methods.”12

12. While increased rail capacity in London and the South East for the next control period should generally take the form of incremental upgrades rather than major

new schemes, in the long term, new lines will be needed to bring a step change increase in capacity. The Government plans to achieve this by developing a new High Speed Rail (HSR) network linking Britain’s principal cities. If HSR is to deliver its promise, help drive London’s future prosperity and retain the support of London business, four conditions must be met. First, if we are to start, we must finish. The real transformative benefits of HSR come from linking a network of cities to London and to each other: first Birmingham; then Leeds/Manchester; and ultimately Scotland. Second, HSR must be an ‘and’ not an ‘or’. This visionary, potentially transformative, grand project must be in addition to other vital work needed to upgrade the existing transport network, to address both historic underinvestment and to meet future demand. Third, the delivery of HSR cannot be a substitute for a coherent national aviation policy. An integrated approach to transport policy is required, ensuring HSR dovetails with the provision of sufficient runway capacity in the South East – at our national hub and elsewhere. Fourth, further investment in London’s transport infrastructure must come in lockstep with any strategy for HSR if London is to cope with the increased numbers of passengers expected to arrive on high speed services. Proposals for a new HSR network should come with commitment from Government for a comprehensive strategy to reduce forecast congestion at Euston.

13. Further investment in the national rail network must come with greater policy and practical focus on improving the quality of interchange – whether from London’s airports to surrounding road and rail networks or at London’s major rail stations when passing between rail, Tube or street. Initial proposals put forward by Network Rail assume the completion of the Tube modernisation programme, which remains unfunded beyond this parliament. Analysis indicates the considerable wider economic benefits generated by completion of the Tube’s upgrade. And of course the public case for investment in rail will be undermined if the hundreds of thousands of rail commuters arriving in London who rely on the Tube to complete their journey find their experience of improved rail services quickly forgotten on cramped, congested and unreliable underground services. In setting high level outputs for the rail network that serves London, the DfT should confirm the role the Tube upgrade programme will play in meeting demand from rail commuters.

Improving international rail links

14. The Government’s vision should also incorporate recognition of the economic importance of London’s international rail links. These links support London’s access to international markets, both directly and indirectly. Directly, the high speed services to the Continent from London St Pancras International now cater for 80 per cent of all journeys to Paris and Brussels. 2010 saw over nine million passengers travelling by rail to cross the Channel, a tripling of numbers in the last fifteen years. Indirectly, rail supports London’s international connectivity via the rail services that tie London to its major airports. A transparent mechanism is required for judging the trade-offs between express and commuter services to London’s major airports as part of an overall strategy to improve access to Heathrow, Gatwick and the capital’s other major airports. 15. In the short term, the growth of services on London’s international rail links is unlikely to be constrained by limits on capacity. However, the European rail market is opening up to greater competition, giving Eurostar and others the

opportunity to compete in domestic markets across Europe. At the same time new high speed rail routes are being completed on the Continent, including Brussels to Amsterdam, Brussels to Frankfurt and Paris to Strasbourg.13 Regulation will require reform if it is to support growing competition and release the benefits greater choice can bring to passengers.

16. International services linking London to the Continent are overseen by the regulatory regimes of each member state. Performance regimes vary, in some cases do not exist, and there is little coordination of domestic and international rules. There is moreover a separate regulatory regime for the Channel Tunnel overseen by the Intergovernmental Commission (IGC). The IGC is set to undertake a review of these charges. We believe such a review should be part of wider efforts by the IGC to establish a transparent regulatory framework that promotes competition and the efficient use of capacity. It should complete its review of access charges to the Channel Tunnel swiftly to maintain the long-term stability and certainty required by existing concessions and needed to attract future investment. And it should bring greater transparency to the calculation of charges and the investment they support. In tandem, the Government should press for regulatory reform and modernisation to support a competitive market for international rail services, as it has done in modernising the economic regulation of UK airports.

How should the balance be struck between the taxpayer and the farepayer in paying for the railway?

How are the targeted efficiency savings (£3.5bn by 2019 on a 2008/09 base) to be delivered?

17. Improvements to rail services over the last two decades have come at a cost – to the taxpayer through the growing subsidy to Network Rail and the Train Operating Companies and to fare payers who face, on average, higher fares than in other European countries. Despite a 57 per cent growth in passengers since 1996/97, industry unit costs in 2009/10 are almost exactly the same. Over the same period there has been a 75 per cent real-term increase in passenger revenues and Government subsidy has roughly trebled (to around £5 billion last year). The industry is running a £4.3 billion operating deficit.14

18. The funding for the railways is currently split roughly 50/50 between the taxpayer and the fare payer. Fare revenue raises around £6 billion a year, paying for around half of the industry’s £12 billion annual costs. In response to concerns about industry costs, and the review led by Sir Roy McNulty (the McNulty Study),15 there is now a broad cross-party and industry-wide consensus that there are limits to the contribution additional fare rises can be expected to make and that taxpayer subsidy of rail cannot continue to rise at current rates.

19. The McNulty Study concluded that the rail industry should aim to achieve an efficiency improvement of 20–30 per cent by 2019,16 equating to a drop in total industry costs of around £3 billion, from around £12 billion.17 The industry’s proposals for Network Rail’s next control period state that efficiencies and continued revenue growth could reduce the cost of the railway to the taxpayer to £1 billion a year by 2019 (a 66 per cent reduction compared with 2014).18

20. The industry’s current proposals for investment in the next control period are based on the assumption that fares will rise at an annual rate of RPI plus one per cent for five years from 2014/15. We recognise that fare rises may need to make a continued additional contribution in future, but do not believe that the high annual increases currently being experienced are sustainable. At the same time, the delivery of essential new capacity on the national rail network will, for the foreseeable future, continue to depend on a significant contribution from public expenditure. The case for this subsidy will need to be accompanied by demonstrable improvement in services and significant efficiency improvements – without which the public case for continued contribution from fare payers will be weakened.

21. Services in London and the South East currently generate about half of all fare revenue and receive around a quarter of all public funding for rail. The chart in Annex 1 shows franchise costs across the country – costs here comprising train operating costs and Network Rail’s operating, maintenance and long run renewal costs.19 Franchises serving London receive the lowest subsidy in the country. Clearly it is for Government to decide whether savings from efficiency are reflected in lower subsidy or lower fares. We recognise that there are many services that do not cover their costs and will require ongoing Government support if service levels are to continue. In a world of constrained public finances, the Government should review those services which are used less intensively and require the highest levels of public subsidy – to see whether a better balance can be struck between a more appropriate level of support for infrastructure and operations, social equity and transport efficiency.

22. Progress must be made on achieving the cost reductions that McNulty set out. The regulator has a clear role to scrutinise industry plans for cost reduction and measure progress against them. Progress should also be communicated more widely, possibly by the newly formed Rail Delivery Group, which comprises industry leaders and has been tasked with prioritising and directing efforts to implement the conclusions of the McNulty Study. And long-term policy certainty will be needed if publicly funded infrastructure is to be efficiently provided.

18 April 2012

1 43% of peak journeys into central London; Travel in London: Report 3, TfL, November 2010. 2 National Rail Trends 2010-11 Yearbook, ORR, 2011. 3 1,354 million franchised journeys were made in 2010-11, a 7.6% increase from 2009-10; National Rail Trends 2010-11 Yearbook, ORR, 2011. 4 In 2010-11, franchised passenger journeys in London and the South East increased by 9%, Long-distance by 5.6% and Regional by 4.7% when compared to 2009-10; National Rail Trends 2010-11 Yearbook, ORR, 2011. 5 Demand outstrips supply by almost 10% in the busiest hour. Total peak time capacity in central London is 775,000 passengers. Only 42% of peak capacity is supplied in the busiest hour between 8–8.59am. London and South East Route Utilisation Strategy, Network Rail, July 2011. 6 DfT statistics, based on autumn 2009 figures. 7 Increasing Passenger Rail Capacity, DfT/ORR/NAO, June 2010. 8 In the morning peak. Note that this measure gives an indication of the number of passengers standing at a single point. Figures are not publicly available showing the length of time passengers have been standing. For shorter journeys less than 20 minutes it is seen as acceptable to have passengers standing (provided the number is within the standing allowance). 9 Initial Industry Plan 2011, England and Wales, Proposals for Control Period 5 and beyond, Network Rail, September 2011. 10 Control Period 5 (2014–2019). 11 London and South East Route Utilisation Strategy, Network Rail, July 2011.

12 Initial Industry Plan 2011, England and Wales, Proposals for Control Period 5 and beyond, Network Rail, September 2011. 13 There are also plans to deliver high speed links between Paris and Geneva, Paris and Barcelona, Marseilles and Germany, as well as to develop the northern European corridor. 14 Passenger revenues minus costs. 15 Realising the Potential of GB Rail: Final Independent Report of the Rail Value for Money Study, DfT, May 2011. 16 Costs per passenger-km. 17 As the McNulty Study states: Figures for potential cost savings are quoted on an “expenditure” basis, i.e. the savings would represent reductions in real expenditure, but would not necessarily translate directly into cash savings of the same amounts to government because of the accounting effect of National Rail’s RAB. Also, some savings would accrue first to others (National Rail and Train Operating Companies particularly) and would feed through to government only at Control Period ends or at franchise renewals. 18 Initial Industry Plan 2011, England and Wales, Proposals for Control Period 5 and beyond, Network Rail, September 2011. 19 Not enhancement or other capital expenditure which relates to future rather than current traffic; Rail Value for Money Study, Interim Submission to Secretary of State, September 2010.

ANNEX 1

Net cost to Government of rail franchises, 2010: pence per passenger mile and subsidy as a percentage of total cost

Written evidcence from the TUC, ASLEF, RMT, TSSA and Unite (ROR 24)

Introduction 1. This is a joint written submission from the TUC, ASLEF, RMT, TSSA and Unite, representing over 100,000 workers across all parts of the UK rail industry. 2. We welcome the opportunity to inform the Transport Committee’s inquiry into the reform of the railways. In our view, the rail industry clearly needs reform given that the burden on the taxpayer and passenger has increased significantly since privatisation. 3. However, we believe that the government’s proposals outlined in the Rail Command Paper do nothing to challenge the fundamental causes of inefficiency and fragmentation in our rail system, indeed in some cases will make it worse. Key Points of the submission: 4. Discussions around the balance of the cost burden on taxpayer and farepayer must take into account increased costs in the industry as a result of privatisation. Quantifiable costs directly attributable to privatisation in the rail industry amount to £1.2bn per year. Eliminating these costs from the industry could provide an across the board cut in rail fares of 18 per cent. 5. Train operating companies will be given greater freedom to reduce services, increase fares for peak time passengers and de‐staff trains and stations penalising the passenger and laying off thousands of rail workers. 6. Achieving high end cost savings of £3.5bn by 2019 could result in 20,000 job losses across the rail industry as well as closures of over 650 ticket offices. Passenger surveys consistently show that passengers want staff on stations, on trains and in ticket offices. 7. Network Rail will continue to reduce its own maintenance, signalling and renewals workforce in order to meet its efficiency savings, while undergoing fundamental restructuring that will see it fragmented and potentially subordinated to the interests of commercial train operating companies through the creation of alliances, creating a number of mini‐Railtracks. 8. This provides significant risk to safety and infrastructure management, creates a greater number of regional interfaces and threatens to subordinate the interests of rival TOCs and freight operators. 9. EU comparators indicate that unified and integrated national rail systems under public ownership are more efficient and cheaper for passengers. 10. Trade unions have, to date, been excluded from the Rail Delivery Group and high‐level strategic discussions within the rail industry. What should be the Government’s vision for the railways in 2020, taking account of likely spending constraints? How should the balance be struck between the taxpayer and the farepayer in paying for the railway? 11. In considering how our railways should be reformed, it is important to focus not just on the mechanics of reform, but on what we want that reform to achieve – that is, a vision of what our railways are for. 12. For UK rail to fulfil its potential and meet its full range of economic, environmental and social objectives, the government should be setting out a vision for rail that includes: o Providing a high quality service that passengers understand, with simple system‐ wide ticketing and affordable fares; o Tackling overcrowding through the expansion of capacity (rather than pricing people off trains); o Seeking ways to stimulate economic regeneration across all parts of the UK through investment in better rail services; o Rebuilding a rail manufacturing base in the UK, as a basis for then exporting our skills and technology to other countries; o Helping create uncongested liveable cities like the best in Europe through the expansion of urban rail networks; o Reducing carbon emissions by moving more long distance freight from road to rail (especially by encouraging palletised freight movements), as well as by providing passenger services that are an attractive alternative to driving; o Reducing longer rail journey times so that domestic and short haul flying becomes comparatively less attractive, in the way that Spain has achieved a more sustainable mode shift from air to rail; o Working with developers, development agencies and planners to integrate rail services with land use planning, so that users of major new developments can travel sustainably rather than being car‐dependent; o At the regional and local level, making the railway function as part of a fully integrated public transport system; 13. Perhaps above all, creating a strong ethos of public service, in which all staff feel they are working to create the best possible railway, for the benefit of all of us. 14. The current model of UK railways has singularly failed to deliver this agenda. Privatisation has proved costly for both taxpayer and farepayer while failing to deliver the efficiency, innovation or investment that was promised. 15. Unpublished research by Transport for Quality of Life1, commissioned by ASLEF, TSSA, RMT and Unite, shows that additional quantifiable costs of over £1bn per year are incurred through a combination of debt write‐offs, dividend payments to private investors, fragmentation and transaction costs, including profit margins of complex tiers of contractors and sub‐contractors and higher interest payments incurred by Network Rail resulting from being kept off the government’s balance sheet. The cumulative costs since privatisation could be well over £11bn, as the following table demonstrates.

1 Rebuilding Rail, Transport for Quality of Life, April 2012

16. As such, when seeking to address the balance that should be struck between taxpayer and the farepayer, we need to also address the fundamental problem of how both are being burdened with unnecessary and unproductive costs associated with privatisation. 17. A more useful exercise might be to look at the balance of benefits accrued to taxpayer, passenger, train operating companies, shareholders and other stakeholders as a result of escalating fares and public subsidy to the industry. 18. One way of looking at this would be that if all unnecessary costs highlighted above were eliminated and the resultant saving was used entirely to reduce fares, it would equate to an across the board cut in fares of 18per cent (or a substantially larger cut if applied only to regulated fares). Of course, savings could also be shared between farepayer and taxpayer. Either way, this would seem a more useful starting place to analyse the fundamental issue of how industry costs are being allocated between the passenger and the public purse.

19. Research by Just Economics2, commissioned by the RMT, constructed an index that evaluated a range of outcomes in relation to levels of public subsidy across the UK and other EU nations. It found that the UK is the poorest performer by some distance. National, integrated rail systems under public ownership in Europe are more efficient and cheaper to use than the fragmented, privatised UK rail system.

How are the targeted efficiency savings (£3.5bn by 2019 on a 2008/09 base) to be delivered? What will be the consequences? 20. Targeted savings of £3.5bn by 2019 represent the high end of estimated achievable savings set out by the McNulty Review. While rail industry employers have set out a case for achieving low end savings of £2.5bn through the Initial Industry Plan (IIP) the government strategy is “to incentivise the industry to entirely close the £3.5 billion efficiency gap by

2 A Fare Return: Ensuring the UK's railways deliver true value for money, Just Economics, February 2012 2019”3 and the ORR has committed to “challenging Network Rail hard to deliver further savings”4 beyond the low end savings already outlined in the IIP. 21. There remain serious doubts as to whether the proposed changes outlined in the Rail Command Paper and the IIP will be able to achieve the significant savings identified even at the low end. Moreover, until further detail through the publication of High Level Output Specification (HLOS) and Statement of Funds Available (SoFA) there remains very little detail as to how the government expects the industry to extend these savings to the high end target of £3.5bn. 22. Both the Rail Command Paper and the Initial Industry Plan place great faith in the twin track approach of providing greater commercial freedom to train operating companies and the alignment of incentives for TOCs and Network Rail through alliancing. This is premised on the assumption that TOCs run on commercial grounds will drive through greater efficiency, innovation and investment and that Network Rail should be more subordinate to their interests. Yet much of this is based on assumptions with little supporting evidence, as industry analyst Roger Ford points out the Rail Command Paper is “full of such unconsidered and untested assertions”5. 23. We believe that reductions in labour costs already form a disproportionate slice of overall targeted efficiency savings. It is also our view that where predicted savings fail to materialise in areas such as alliancing and train utilisation, the industry will resort to ‘quicker wins’ through further reductions in staffing costs, removal of services, further over‐crowding and fare hikes. 24. It is clear from the McNulty review is that efficiency savings through reduced ‘people’ costs is one of the main areas to be targeted, with labour costs constituting between a quarter and a third of all savings. 25. McNulty’s prescriptions for achieving these significant savings include the closure of over 650 ticket offices around the country, the use of Driver Only Operation as the default setting on UK rail, a review of station staffing and attacks on above inflation pay rises and revisions to existing terms and conditions for the rail workforce. 26. Many of these recommendations have been adopted by rail industry employers in their Initial Industry Plan and the Rail Delivery Group is currently working on its strategy covering ‘technology, innovation and the impact on working practices’, although rail industry unions have not been party to these discussions. 27. However, it is clear that job cuts are expected as part of the new rail franchises. 28. The Invitation to Tender for the Intercity West Coast franchise provides an indication of the way franchises will work to secure efficiency savings. Under a section on McNulty and Industry Reform it states that “bidders are required to consider how the costs of running the railway can be reduced to secure a sustainable and efficient railway for the future. Bidders are also expected to propose in their plans how they would reduce the unit costs of the existing operations to improve efficiency. “ 29. On staffing it specifically states that “it is not necessary for all stations to have a continuous visible staff presence, but staff should be on‐duty at each station each operational day. It is for Bidders to define the balance of resources at each station between the various functions to deliver the most effective results”.

3 Rail Command Paper, March 2012 4 Advice on NR’s Cost and Outputs in CP5, Letter to Sec of State, Richard Price, ORR, 15 March 2012 5 Informed Sources, April 2012 30. What might this mean for the rail workforce? Rail industry employers and the Secretary of State have been very reluctant to discuss potential numbers. Extrapolating from the McNulty Review we can identify the following jobs ‘at risk’: Job type Numbers at risk Ticket retail in E and D stations 2,000 Station staff 5,500 Non‐driver on‐train staff 6,800 NR maintenance, signalling and 6,300 operations Total 20,800

31. What this will mean in practice, is a reduced service to passengers and a reduction in customer‐facing staff that runs directly in contrast to what passengers want. We know from successive surveys and research: rail passenger want staff on trains and on stations. 32. Passenger Focus’s National Passenger Survey6 shows that “personal security” and “availability of staff” are two of the worst three areas of passenger satisfaction at stations. Personal security scored more highly on trains but less than half of all rail passengers were satisfied with the availability of a staff member on their train. 33. In response to the Command Paper, Anthony Smith, Chief Executive of Passenger Focus stated that “all our research indicates passengers really like the re‐assurance only the presence of staff can bring. Taking staff away from stations would represent a very short‐ term, short‐sighted saving.” 34. In her report commissioned by the Labour Party Everywoman safe everywhere, Vera Baird QC states that “a significant number of respondents to the consultation raised concerns about cuts to travel budgets and services and the corresponding impact on that could have on women’s perceptions of safety.”7 Removal of station and train staff and closures of ticket offices were chief among these concerns. 35. As Sophie Allain of the Campaign for Better Transport put it “cutting money from front‐line passenger services, like ticket offices and train staff, will do more harm than good. Passengers want to know that train fares will be collected, that stations will not be deserted and dangerous, and that staff at ticket offices will be able to answer questions when they have them. Without these basic passenger services, rail will be less attractive to new customers.” 36. What is more, we believe that the targeting of labour costs is misplaced. Labour cost efficiency targets are based on the assumption that wages have been a key contributory factor to the increasing cost burden in the industry. The McNulty Review blames “excessive wage drift” while the Rail Command Paper states that “successive substantial increases in pay have inevitably been one of the pressures behind the escalating costs of the railways”8 37. However, our analysis shows that unlike TOC profit margins, for example, there is very little correlation between increases in labour costs and public subsidy for the industry. 38. Train operating staff productivity has increased at a higher rate than unit labour costs and

6 National Passenger Survey, Passenger Focus, Autumn 2011 7 Everywoman safe everywhere, Baird, March 2012 8 Reforming the Railways: Putting Passengers First, DFT, March 2012 the wage bill. Rail pay provides value for money, as the following table shows: Employment, Labour Costs and Productivity 1996/97 – 2008/09

39. All TOCs Wage Bill9 52.2per cent Total employed10 13.6per cent Unit labour cost ‐ TOCs11 35.3per cent Unit labour cost – Whole Economy12 38.0per cent Productivity 13 56.3per cent

40. The McNulty Review also shows that UK rail workers are 4th most productive in Europe and also points out that “train staff” and “other staff costs” are actually lower than those European competitors used as benchmarks in the report. 41. It is also worth noting that rail employment has a significant multiplier effect in the wider economy. Research by Ekogen found that the creation of 100 direct jobs in rail supports 140 indirect and induced jobs in the wider economy. The scale of job losses that might be inflicted in the rail industry will have significant repercussions throughout the economy. Will the reforms to rail franchises proposed by the Government, including alliances, deliver better services at lower costs? 42. The government’s promotion of alliances between TOCs and Network Rail on a franchise basis and the potential for Network Rail to let long term infrastructure management concessions cause significant concerns. 43. In the absence of a fully integrated rail system under public ownership, the current national, not‐for‐dividend model is the most effective and efficient way for Network Rail to deliver its role as infrastructure manager. It provides economies of scale, an integrated approach across the network and prioritises investment in safety and maintenance over short term profit and dividend payments. 44. The economies of scale that can be achieved may be demonstrated by the savings of £400m per annum which resulted from Network Rail’s decision to bring maintenance in‐house. It is estimated that £100m of these savings can be attributed to reduced interface costs.14 45. The Rail Command Paper promotes both the fragmentation of Network Rail into smaller regional units thereby making it “more accountable to its train operating customers” and closer alignment of train and track, including “options to place responsibility for train operations and infrastructure management in an area in the same hands”.15 The paper makes clear the government’s intention to use future franchises to “encourage bespoke arrangements for cost and revenue sharing, including the forming of alliances between train operators and Network Rail”.16

9 TAS Business Monitor: Rail Industry Performance July 2010 10 TAS Business Monitor: Rail Industry Performance July 2010 11 TAS Business Monitor: Rail Industry Performance July 2010 12 ONS Labour Force Survey Unit Wage Costs data 13 TAS Business Monitor: Rail Industry Performance July 2010 14 Rail Value for Money Scoping Study Report, 31 March 2010 15 Reforming the Railways: Putting Passengers First, DFT, March 2012 16 Ibid 46. Alliancing can be seen as a first step towards the “full vertical integration” of track and train “through a concession of infrastructure management and train operations combined”17 as proposed in the McNulty Review. Indeed, the Command Paper commits the government to explore “full integration on discrete parts of the network”, identifying Network Rail routes such as Wessex and Anglia as potential areas for targeting vertical integration. 47. Of course, greater integration makes sense and we would support a fully integrated system if it were on a national, publicly accountable and not‐for‐profit basis. 48. But both alliancing and full integration within the current system will cause greater fragmentation, increasing transaction costs and inefficiency across the network as well as reducing the economies of scale currently afforded to Network Rail. Furthermore, it places safety and maintenance back in a commercial framework that was a key contributing factor to safety failures under the previous Railtrack model. Creating a series of regional Railtracks would pose a major threat to safety and maintenance. 49. Moreover, there are doubts as to what kind of savings might be made through alliances. Again, as Roger Ford notes, “the Command Paper claims that it is ‘clear’ that some of the additional Network Rail efficiency is only deliverable through partnership working with train operators. But no one knows yet how partnerships might work, let alone the savings they might deliver. It is back to 1992 when everyone ‘knew’ that privatisation would cut costs.”18 50. There are also serious concerns about the nature of Network Rail’s current alliance proposals, particularly in the ‘deep alliance’ model piloted with Stagecoach on South West Trains. Network Rail’s policy paper refers to “an integrated management team with a single Managing Director who is accountable to both companies”19. 51. To what extent does this demonstrate closer collaboration between Network Rail and TOCs or capture and takeover of Network Rail by the latter? While it is clear that Network Rail’s statutory responsibilities and accountability will be unchanged, there can only be significant tensions with the profit motives of Stagecoach when negotiating priorities for infrastructure work, particularly as Stagecoach will directly benefit from efficiency gains through the sharing of “upside risk”. The extent to which shared efficiency gains will benefit Stagecoach profits and dividend payments as opposed to the whole network is unclear at this stage and should be subject to particular attention as the deep alliance progresses. 52. We are also concerned by the impact of alliancing and/or vertical integration on access to the network by other rail operators, particularly those in the freight sector. 53. Finally, we are particularly concerned with proposals that have been mooted for privatisation of parts of Network Rail through the letting of infrastructure concessions to equity based providers. While this is separate from alliancing and no tangible proposals have been submitted to Network Rail as yet, this would raise considerable concerns about fragmentation and negative impacts on safety as highlighted above. How should fares and ticketing be reformed? 54. The Command Paper states that the government will “reduce and then end above‐inflation rises in average regulated fares, as soon as the impact of cost saving measures and improvement in the wider economic situation permit”20 However, it is made clear that this will only be achieved once savings are found as the government’s austerity drive means that subsidy will be cut. Given that the government is committed to RPI + 3per cent increases

17 Rail Value for Money Study, McNulty May 2011 18 Informed Sources, April 2012 19 Alliancing: Network Rail Policy Statement, March 2012 20 Ibid (along with the 5per cent that train operating companies can add to some routes) on regulated fares for 2013 and 2014, there is unlikely to be any respite for the passenger until towards the end of this decade at the earliest. 55. Furthermore, peak time passengers are likely to face a further fare hike. The government states that “while we reject the idea of using demand management to price people off railways, we need to look seriously at the possibility of rewarding passengers who do not travel on the most crowded trains, and asking those passengers who drive the need for capacity enhancements by travelling at the busiest times to pay more over the time for their journey by comparison”21 56. However, this approach to demand management jars with the experience of many paying passengers who have no choice but to travel at peak times due to working hours. Without a massive culture change in attitudes to working hours, this kind of approach will simply penalise a captive market of commuters. As the Campaign for Better Transport states “If people could change their commute times easily, they would have done so by now to avoid having to stand on crowded trains. Raising the price of tickets by RPI+3per cent +5per centflex +Xper cent for the busiest trains will simply price people on lower incomes off trains and make little difference to overcrowding.”22 57. A YouGov poll commissioned by the Campaign for Better Transport shows only 14 per cent of people believe that raising fares on the busiest trains at a higher rate than other services is fair, whilst 63 per cent think the proposal is unfair for all passengers, even if it meant lower fares on some less busy services. 58. Helping passengers obtain tickets through better information and technology is something that we would support. However, we believe that both the McNulty Review and the Command Paper have ambitious plans to de‐staff trains and ticket offices that will be at the expense of the passenger. And we do not believe that purchasing train tickets from non‐ trained staff in other retail settings provides the help and advice that passengers want. 59. Over half of all nationally available ticket retail is provided through face to face contact with ticket office or train staff. Nearly all (89per cent)23 ticket retailers offering the full range of tickets for passengers are handled by trained staff in ticket offices and on trains. What is more, surveys show that passengers value face to face contact when it comes to navigating their way around the complex ticket pricing system. 60. The Department for Transport’s own review into ticketing acknowledges Passenger Focus research that shows that “passengers are more confident with ticket offices than any other sales channel of obtaining the best value ticket for their journey”24. Plans to cut on‐train and ticket office staff will be unacceptable to a great majority of passengers. What are the implications of the proposals for rail decentralisation and how should responsibilities be devolved to local authorities? 61. As European comparisons indicate a strong role for regional and local authorities helps support greater specification of service needs and integration of rail services with local transport modes. 62. A greater role for regional bodies, such as ITAs, could result in a closer focus on local social, environmental and economic priorities through all parts of the country.

21 Ibid 22 Media briefing on fares review, Campaign for Better Transport 23 Rail Fares and Ticketing Review: Initial Consultation, Department for Transport, March 2012 24 Ibid 63. However, the examples from Europe suggest that this is greatly facilitated by the existence of strong regional structures within a unified national rail system under public ownership. 64. Negotiating long term sustainable outcomes is much harder in a UK system where most parts of the country are covered by local authorities that lack the scope and resources to engage with rail, where regional bodies have largely been abolished and where local funding is subject to severe funding cuts. This is exacerbated by the complex number of interfaces that local authorities would have with multiple passenger and freight operators. 65. There are also serious concerns about the devolution of funding for rail. The current situation with local bus services under threat due to severe restrictions in local authority funding, shows how vulnerable transport can be where devolved budgets are under threat. A similar devolution of rail funding might lead to additional threats to regional rail services. 66. As such, there are severe limitation to the current structure of local government and the rail industry in managing effective joined‐up regional management of the railways.

18 April 2012

Further written evidence from TUC, ASLEF, RMT, TSSA and Unite (ROR 24A) Additional information: Estimated jobs at risk Introduction 1. In our submission to the Transport Select Committee inquiry Reform of the Railways, rail unions identified over 20,000 jobs in the rail industry that would be “at risk” as a result of a number of recommendations arising from the McNulty Review and promoted within the government’s Rail Command Paper and the Initial Industry Plan. 2. These estimates were based on our analysis of figures included within the final report of Rail Value for Money Study.

3. At the oral evidence session of the Transport Select Committee on Tuesday 19 June, Sir Roy McNulty described the rail unions’ estimates as exaggerated and claimed that the likely figure was closer to 6,000. 4. In a later session featuring representatives of ASLEF, RMT, TSSA and Unite, committee members asked for further written clarification as to how the unions’ figures for jobs at risk were estimated. 5. This additional written submission provides information on how our figures were arrived at and what impacts this might have on passenger safety and services. Estimated jobs at risk 6. By extrapolating from the McNulty Review, our briefing indicated the total numbers of jobs at risk broke down as follows: Job type Numbers at risk Non‐driver on‐train staff 6,800 Maintenance, Signalling and Operations Staff 6,300 Ticket retail in E and D stations 2,000 Station staff 5,500 Total 20,600

7. The following are direct quotes from ‘Realising the potential of GB rail: the final report of the Rail Value for Money study’ published in May 2010. Non‐driver on‐train staff 8. The Rail Value for Money Study states: “the Study has reviewed the number and cost to the industry of the second member of the train crew employed by most TOCs – known as guards, conductors or train managers – of which there are 6,800.” 9. The Rail Value for Money Study recommends “the financial imperatives facing the industry, the need to change radically the cost structure of the industry, and the availability of new communications technology has led the Study to recommend that the default position for all services on the GB rail network should be DOO (Driver Only Operation)” Maintenance, Signalling and Operations Staff 10. The Rail Value for Money Study states: “The Study understands that, in order to meet its efficiency targets, NR expects to reduce staff numbers over Control Period 4 (CP4) by 6,300. Much of the reduction could come from the maintenance function, with further reductions from investment projects, and from operations staff (signallers and others). This equates to a 17% reduction in staff numbers and is predicted to deliver a corresponding 21% reduction in staff costs.” 11. The Rail Value for Money Study recommends: “NR employed 8,600 signalling and operations staff at the beginning of CP4. This number should be able to be reduced to 7,600 by the beginning of CP5. NR employed 18,000 maintenance staff at the beginning of CP4, which could be reduced to 14,000 by the beginning of CP5.” Retail staff in Category D and E station booking offices 12. The Rail Value for Money Study states: “Around 5,500 staff work on retail activities, of which 37% (approximately 2,000 people) are employed at small‐ and medium‐sized stations.” 13. The Rail Value for Money Study recommends: “The closure of all Category E station ticket offices; reducing the opening hours at Category D station ticket offices.” Station staff 14. The Rail Value for Money Study states: “Excluding those involved solely in retail, a further 5,500 staff work on stations on the platforms or elsewhere in the station environment. Their primary responsibility is dispatching trains.” 15. The Rail Value for Money Study recommends: “The Study recognises that TOCs are free to make commercial judgements on the need for dispatch staff within the bounds of their safety responsibilities and recommends that TOCs should review station staffing as a matter of priority.” 16. Clearly, all these estimates need to be treated with a great deal of caution and we are not claiming that the higher end figures will materialise in terms of job cuts. 17. However, we are confident that the figures contained within our briefing were an accurate reflection of those job numbers that will be under review or actively targeted for cuts as a result of McNulty recommendations.

18. Sir Roy’s assertion that we can expect only 6,000 job cuts looks unrealistic given the content of his own report, the figure for Network Rail job cuts in Control Period 4 exceeds that number alone. 19. Moreover, our figures may also be on the conservative side given that they do not include other groups within the industry such as catering or cleaning workers. Potential impact on passengers’ services and safety Personal security 20. There are direct associations between staffing levels and personal security. 21. Anthony Smith, Chief Executive of Passenger Focus has stated that “all our research indicates passengers really like the re‐assurance only the presence of staff can bring. Taking staff away from stations would represent a very short‐term, short‐sighted saving.”

22. Passenger Focus’s National Passenger Survey1 shows that “personal security” and “availability of staff” are two of the worst three areas of passenger satisfaction at stations. Personal security scored more highly on trains but less than half of all rail passengers were satisfied with the availability of a guard on their train. 23. Passenger Focus Wales published its report ‘The Passenger Experience at Unstaffed Stations’ in February 2011. Among its main findings were: “with 54% of passengers rating their personal security as good, 9% lower than the ATW average, personal security at unstaffed stations is a concern for many passengers.” 24. An Independent Social Research report from April 2009 ‘Passengers’ Perceptions of Personal Security on Public Transport’ stated that: “the presence of uniformed staff provided a sense of order and authority, and gave passengers confidence that anti‐social behaviour would be challenged. Women and older people in particular were reassured by staffing initiatives, and often commented that seeing staff on trains, stations and at bus stations made them feel safer.” 25. In respect to specific security issues facing young passengers, the report found that: “reactions to staffing initiatives – especially among older teenagers – were different for young men and young women. Most of the young women we interviewed were reassured by seeing uniformed staff on trains and stations, especially if they were travelling at night. This was the case for the staffing initiatives included on Merseyrail, Southeastern, and the Colchester to Clacton line. As with adult passengers, they liked to see an authority figure who would keep order and challenge anti‐social behaviour.” 26. In her 2005 research report ‘Women and Transport’, Kerry Hamilton of the University of East London found that: “women feel more vulnerable to attack and harassment than men and their greater concern with personal security ... This deep concern about personal security has important implications for the design of transport interchanges and waiting areas and for staffing levels.”

27. The report concluded that reduced staffing levels had direct impact on the perception of women’s personal security: “the removal of conductors, as a result of One Person Operation on buses and trains, which was introduced in the 1980s and was generally commonplace by the 1990s, resulted in reduced personal security for passengers, especially women ... Therefore the quality and level of staffing on vehicles and at bus and rail stations is of vital importance.” 28. In their response to the consultation on the Rail Value for Money Study, the RMT quoted research from a report by trade unions and passenger groups in relation to proposed ticket office closures on South West Trains which found that: “only 55% of passengers were

1 National Passenger Survey, Passenger Focus, Autumn 2011 satisfied with the current availability of staff at South West Trains stations. Only 62% of passengers say they are satisfied with their personal security while using South West Trains stations. Evidence suggests that staff presence is key to making passengers feel safer when taking the train.” 29. The ‘Women and Transport’ report published by the Scottish Executive in 2000 found that: “many transport interchanges are seen to be unsafe by women, and more isolated bus stops and unstaffed railway stations are often avoided after dark.” 30. Personal safety was the issue that solicited the largest number of responses to the Scottish Executive study. The report found that: “the change which was identified most frequently related to the provision of increased staffing at stations and on public transport vehicles (as well as in car parks and cycle paths) in relation to women’s personal safety needs (57% of these respondents). Although a small number argued that an increased police presence would be beneficial, many more identified the need for an increase in public transport staff.” 31. In her report commissioned by the Labour Party Everywoman safe everywhere, Vera Baird QC states that “a significant number of respondents to the consultation raised concerns about cuts to travel budgets and services and the corresponding impact on that could have on women’s perceptions of safety.”2 Removal of station and train staff and closures of ticket offices were chief among these concerns. Safety 32. In addition to providing passengers with general reassurance, travel and ticket advice, guards have a key operational safety role. Removing guards has serious repercussions for passenger safety. Currently both drivers and guards have operational safety duties. Currently guards on trains are fully trained in operational safety and route knowledge, including being able to safely operate the doors, protecting the train and acting in emergencies such as driver incapacity, failure of train safety systems and derailments. 33. The Cullen inquiry into the Ladbroke Grove rail crash highlighted the essential role of the guard in protecting the train due to the death of the driver. Arising from that inquiry Lord Cullen recommended that“increasing the training of the existing staff so that all members of the on‐board staff (including persons working under contract) are trained in train evacuation and protection.”

34. If the driver of a train is incapacitated in any way there will be no one who can carry out the recommendation of Cullen. It is also important to note that where DOO has already been introduced the guards have not been replaced in many instances by other staff, the trains are literally one person operated. Under the new less prescriptive franchises and pressures to drive down costs it is likely Train Operators will opt for one person trains. Even when other staff have been introduced they are not adequately trained in protection and evacuation as recommended by Cullen.

35. Network Rail’s in house maintenance and signalling staff play a key role in ensuring safety on rail. When announcing the in‐sourcing of 18,000 maintenance workers in October 2003,

2 Everywoman safe everywhere, Baird, March 2012 Network Rail chairman Ian McAllister said the move would not only provide greater efficiency savings but would ensure "greater consistency of maintenance standards”

36. The recent floods, derailments and landslides that have hit services hard in the north and Scotland, including the Tyne and Wear Metro, are the most graphic recent demonstration of the kind of emergency situations that are thrown at rail and transport staff without any notice and which only skilled and trained staff in adequate numbers can safely deal with. The evacuation of passengers in Dumfries and Galloway by guards following a fire on a Virgin train service from Birmingham to Glasgow illustrates the essential role that trained staff on board perform in emergency situations.

37. In 2009 the RMT compiled a dossier of evidence from rail maintenance workers from around the UK identifying the impact on track safety as a result of job cuts announced by Network Rail. The evidence illustrated a situation where inspection and maintenance staffing was stretched, there were numerous cases of backlogs in safety tests, work on reported problems was not completed or delayed and short cuts in safety procedures.

38. The loss of over 6,000 further jobs at Network Rail will exacerbate this situation. Access 39. The Department for Transport’s Code of Practice on accessible train stations, drafted in co‐ operation with ATOC and Network Rail states that “one of the most effective ways of making services more attractive to disabled passengers is to provide properly trained staff” and continues that “all railway passengers like to know, in advance of their journey, where to go when they reach the station and how to find the appropriate train service. This is especially true of disabled passengers, who may have particular concerns about ... help available from staff.”

40. The Code of Practice recommends that “At the very least, staffed booking offices and information points as well as appropriate remote help points should be able to provide this information.”

41. The Department for Transport accessibility strategy Railways for All states that “staff are seen by many passengers, and by disabled passengers in particular, as important at times of disruption, especially unplanned engineering works or delayed trains and in improving personal security, all of which increase confidence to travel by rail.”

42. In a Daily Telegraph article in December 2011, the Secretary of State for Transport Justine Greening, highlighted the role that staff on trains and at stations can play in helping passengers calling on employers and unions to work together to provide the best possible service for passengers. Ticket retailing 43. While new forms of ticket retail have become increasingly available, over half of all nationally available ticket retail is provided through face to face contact with ticket office or train staff. 44. Nearly all (89%)3 ticket retailers offering the full range of tickets for passengers are handled by trained staff in ticket offices and on trains. 45. Surveys show that passengers value face to face contact when it comes to navigating their way around the complex ticket pricing system. The Department for Transport’s own review into ticketing acknowledges Passenger Focus research that shows that “passengers are more confident with ticket offices than any other sales channel of obtaining the best value ticket for their journey”4. 46. In April 2011, Passenger Focus announced the results of its public consultation on the proposals for stations outside London. In a sign of the effect of community action, over 18,000 objections were received, including via petitions, pre‐paid post cards and templated letters as well as from individuals, MPs and organisations. 47. In response to recent announcements for ticket office closures and reduced opening hours at over 100 stations across the country, Passenger Focus stated that: “passengers really value the presence of staff at stations. Any reduction in ticket‐office opening hours and the subsequent withdrawal of booking staff often reduces the overall facilities available at stations. Access to waiting rooms and lavatories can be affected by this sort of change. We fear that this could lead to passengers feeling less safe at stations and paying more for their tickets than they should. Ticket vending machines are important, but as they don’t at present offer all ticket types or provide advice to ensure passengers get the cheapest fares, we see a strong ongoing need for visible station staff.” 48. Likewise, the Campaign for Better Transport stated “Plans to close ticket offices and cut staff in stations will mean passengers are left to fend for themselves when buying a ticket and will result in people paying over the odds for their journey”

5 July 2012

3 Rail Fares and Ticketing Review: Initial Consultation, Department for Transport, March 2012 4 Ibid

Further written evidence from Unite (ROR 24B)

2012 HLOS Announcement

1 Introduction

1.1 This response is submitted by Unite the Union, the UK’s largest trade union with 1.6 million members across the private and public sectors. The union’s members work in a range of industries including manufacturing, financial services, print, media, construction, energy generation, chemicals, transport and local government, education, health and not for profit sectors. In the arena of transport Unite represents over a quarter of a million members in all transport modes, making it the largest transport union in the UK.

1.2 Of importance to this enquiry Unite is the fourth rail union with members primarily in rail manufacturing, rail freight and track and train maintenance. A significant proportion of our members rely on the rail network to get to their place of work and hence our response will try and provide an overview of Unites concerns over the way the High Level Output Strategy (HLOS) has been drafted.

2 Background

2.1 The UK’s Rail network is struggling to cope with increasing demands placed upon it caused by the lack of a guiding mind since privatisation and the lack of onward investment by the rail companies. Instead of putting money into new capacity and new trains for a long term solution, the franchise system has encouraged a series of short term fixes targeted at obtaining the most out of what is already in place.

2.2 Rolling Stock Operating Companies (ROSCO’s) have failed to invest in new rolling stock, depending instead on government intervention due to claims over uncertainty over the needs of the new Train Operating Companies (TOC’s) future requirements. As a result ROSCO’s have been left to operate in an environment where they can make excessive profits for no risk while design through to finished product rail manufacturing in the UK has all but disappeared.

2.3 TOC’s too have had little risk that passengers would go elsewhere as they can operate on lines in competition only with other transport modes. On commuter journeys they have consequently been operating in a near monopoly being able to increase fairs far beyond pay increases, forcing passengers out of employment and companies finding it difficult to recruit in lower paid roles from outside the immediate area due to the cost of travel.

2.4 As the cost of car insurance also increases, especially for younger drivers and fuel prices spiral at the pumps, more and more people are being put onto the already overcrowded networks. To counter this and provide more capacity train speeds have increased, which has the twin detrimental effect of increasing wear rates of track and infrastructure and pushing up carbon emissions. The increase in speed also increases the risk of accidents and hence there needs to be a significant increase in safety oversight and more investment in maintenance.

2.5 Investment into the network is, therefore, urgently needed. Track gauge enhancement work has created a significant improvement towards encouraging freight away from long distance road movement towards the rails from Southampton for example. Equally enhancement on the Felixstowe to Nuneaton route should also create a far better climate for growth in this area. The issue still remains, however, that once on the rails the network of intermodal terminals is often inadequate or even under treat from developers of closing.

2.6 The Government has set out in the HLOS moves to increase the proportion of track which is electrified and focuses on the use of a ‘public performance measure’ (PPM). Whist the former may decrease the environmental footprint of the network in the long term and the later potentially improve journeys fro passenger traffic it will do little to assist rail freight.

2.7 Unite suggests that this improvement programme will be funded out of the travelling publics pocket and those of its workforce, not the governments, given the content of the Rail Command Paper. This seeks to reduce the cost of the government subsidy, by cutting jobs and undermining the terms and conditions of workers and Unite would argue putting passengers at increased risk.

3 Significantly late

3.1 At para 21 it states “The Secretary of State also wishes to see a reduction to no more than 2.2% by the end of CP5 in the overall percentage of trains which are cancelled or arrive at their final destination significantly late”. The measure of significantly late arrival is “A train is significantly late if it arrives at destination 30 or more minutes later than the time shown on the public timetable”. On the surface this appears to be a reasonable target to achieve until you realise that this measurement is generally made between the original departing station and the final destination and there is nothing to stop TOC’s building in additional time in the journey between the penultimate stop and the final destination to allow for delays.

3.2 Under current calculation methodology a train may be over 45 minutes late due to intermediate stops but arrive “on time” at the final destination. Unite would argue that the calculation of delays should instead be based on journey times to each station on the route to provide a more accurate measure.

4 Capacity

4.1 Unite welcomes the government desire to see an increase in carrying capacity. To achieve this goal, however, significant investment is needed in track capacity and stations as well as rolling stock. Due to size limitations UK rolling stock has to be narrower and shorter than European networks leaving only four ways to increase capacity.

4.2 Increase the length of the train which then requires a consequential increase in platform length for passenger traffic and a longer walk for passengers. Such a move also means the requirement in some cases to purchase back neighbouring land to facilitate such a move as developers have been allowed to encroach on what was railway land. This is not an issue for rail freight which could have trains over a mile long but introducing such trains does create a problem allowing space in timetables for such trains to pass.

4.3 Increasing the speed of trains does reduce journey times and provides space for additional services. Increasing speed does require an increase in safety margins and squares the wear rates on the track and infrastructure requiring a far higher level of maintenance. Such a move also reduces the reliability of rolling stock creating a far higher risk of failure. Despite this, this method of generating capacity has been the preferred avenue since privatisation.

4.4 Reducing safety margins can also provide more capacity. Doing so safely requires a far greater accuracy than is currently available on the network to pinpoint the limits of trains. Currently a controller will know that there is a train on a section of line but will not know exactly where the train is within that section of line. As a result it is often the case, that more track than is required to safely stop the train, is left underutilised. Global positioning and feed back of trains would provide a more accurate locating option but these do not work in tunnels, under bridges and can be distorted by built up areas and terrain. Unite opposes any move to reduce safety criteria, unless it can clearly be shown that such technology can be employed to make such large margins unnecessary.

4.5 Building more track is the final and most obvious solution but doing so often causes significant disruption to services whilst the doubling or re doubling exercise is carried out.

5 Electrification

5.1 Whilst the commitment to electrification is welcomed by Unite, for it to encourage freight away from diesel powered haulage, there needs to be infill work completed. Currently just 19% of freight is moved by electrically powered trains, with the balance diesel powered, often under the overhead electrical wires. Due to gaps in the network where no electrical power (neither third/fourth rail or overhead line), is provided, moving freight by electrically powered traction requires the hauling power unit to be dual (electric/diesel) powered in order to cope with areas where no electrification exists. Such units are significantly more expensive to purchase and maintain. To electrify the rail freight industry therefore there will need to be a major move toward electrical infill of these lines as well as electrification of a spine.

5.2 The other hurdle to electrification of freight is the need to utilise cranes and forklifts to load and unload trains in depots. This could be facilitated by diesel shunting trains from holding areas. Such a plan would however require far larger intermodal terminals than are currently in place around the UK. If these two developments were to occur, Unite believes around 55% of freight could be moved under electrical power.

5.3 Electrification of passenger services is also a welcome move but this will create demand for more electrically powered and dual power capable trains. Unite therefore hopes the commitment to electrification of lines is matched with a commitment to provide the rolling stock to make best use of this opportunity.

6 Customer Satisfaction

6.1 Unite is pleased to see a commitment to customer satisfaction but feels that this could be undermined by the content of the command paper and moves by franchises to reduce staffing levels particularly in ticket offices, on platforms and on trains. This will reduce the passenger’s access to a uniformed member of staff and consequently feeling of personal safety, particularly at night.

6.2 Implied reductions in maintenance and signalling jobs also appear at odds with a desire to increase capacity, as highlighted previously. Without these highly trained staff, services will become less and less resilient to increase wear rates created by higher journey speeds. Despite rail journeys being currently the safest transport option, this record will be under threat of another Hatfield disaster, if staffing levels are not maintained.

7 Environmental Performance

7.1 Other than the obvious savings that can be achieved from electrification, Unite struggles to see how commitments towards reducing carbon can be seen on services without impacts on off peak service provision. Typically, off peak capacity requires only a third of peak capacity trains as highlighted by the McNulty value for money review. Slowing off peak services or cutting these services would create carbon savings but doing so would make services less attractive.

8 Connectivity

8.1 Unite welcomes the plans to connect Heathrow to the Great Western Main Line (GWML). Unite feels that the airport should also be connected to HS2 in the initial phase of construction and bringing this line through to a terminal on the GWML as proposed by Heathrow Hub limited has far greater benefits as it would also provide the West Country and South Wales with access to HS2 without entering central London. The Heathrow Hub proposals would also reduce the impact on the Chilterns.

8.2 Unite also supports the Wandsworth Council ‘Airtrack Lite’ proposals for a line to run south from the airport to Staines providing the final link in a route connecting the GWML and Heathrow to Gatwick by rail.

8.3 Unite also welcomes the additional proposals to enhance services in East Anglia, connections to Gatwick and the ports. In terms of electrically hauled freight, however, as outlined previously, this would depend on in-fill electrification work.

8.4 Northern Hub proposals have been around for some time and Unite believes that such a development will be highly rewarding in the long term, benefiting not just passengers but also businesses in the region.

9 European Rail Traffic Management System

9.1 Unite welcomes the development of a common standardised signalling system across the network as it has the potential to provide savings in terms of training and enhanced safety.

10 Conclusion

Unite welcomes the majority of the proposals as set out in the HLOS but is concerned over how some of these proposals can be delivered in practice.

24 August 2012 Further written evidence from the National Union of Rail, Maritime & Transport Workers (ROR 24C)

HLOS

Introduction

The National Union of Rail, Maritime and Transport Workers (RMT) welcomes the opportunity to respond to the Transport Committee’s Call for Evidence.

The RMT is the largest of the rail unions and organises 80,000 members across all sectors of the transport industry. We negotiate on behalf of our members with some 150 employers.

Network Rail In the wake of the fatal events at Southall, Ladbroke Grove, Potters Bar and Hatfield, Railtrack, whose infrastructure regime enabled railway assets to be sweated, was condemned by the public, the courts, the unions and the passengers for having accountants determine its safety standards. As a result track maintenance and signalling operations was rightly reintegrated and passed to a not- for- dividend company, Network Rail. Whilst by no means perfect there have been important improvements in recent years in areas such as asset knowledge and the millions of pounds saved after the company decided to bring maintenance functions in-house.

The Rail Value for Money Scoping Study estimated that Network Rail’s decision to bring maintenance back in-house delivered cost savings of over £400m per annum of which £100m is the result of reduced interface costs. Self-evidently, to take the railways back to the days of the Railtrack era would be a serious error.

We are therefore concerned that the September 2011, Initial Industry Plan explains “The asset management capability developed by Network Rail will allow it to explain the benefits of outsourcing to facilitate the introduction of innovative work practices. Both Sweden and the Netherlands indicate that considerable savings have been delivered by contracting out maintenance activity. Network Rail does not believe that totally outsourcing maintenance is appropriate at this stage but it will increase the proportion of work undertaken by parties outside Network Rail”.

RMT is particularly alarmed at this prospect and has serious concerns that such a step taken together with the company exploring the possibility of letting one or more concessions to allow third parties to manage the infrastructure at a route level could see a return to the disastrous Railtrack era.

McNulty report Sir Roy McNulty’s May 2012, Rail Value for Money report raises some serious issues for the rail industry. McNulty found that the UK rail network is between 30%-40% less financially efficient in terms of maintenance and renewal costs than comparable networks in Europe. These figures are widely disputed, including by RMT.

RMT supports measures to improve the efficient financial operation of the network. We have consistently called for Government to put an end to the fragmentation and waste that has been an overriding feature of the privatised rail network. However, McNulty chose to completely ignore the fact that railways in Europe are cheaper for the taxpayer and farepayer largely because, in the main, they are in public ownership and less fragmented.

Indeed, research for the rail unions by the Transport for Quality of Life think-tank published in 2012 demonstrated that over £11 billion has been lost from the rail industry as a result of fragmentation and payments to shareholders since privatisation.

In terms of private sector driven waste and Network Rail, over £150 million is wasted annually in excess interest payments on company debt, £290 million on interface costs between the company and the train operating companies and £200 million on the cost of outsourcing renewals and enhancements to the network.

Our view is that in order to begin to put an end to fragmentation and waste Network Rail should be brought into public ownership and made directly accountable to Ministers and Parliament. Such a move would also help to resolve some important concerns that have been raised in relation to the Network Rail’s governance and accountability would probably be best described as opaque.

Concretely, McNulty advocates the further fragmentation and privatisation of the railway by recommending the breakup of Network Rail and the sale or leasing of its assets to the private train-operating companies. These proposals, if implemented, will increase costs and reduce efficiency leading to poorer services and higher fares. Further fragmentation will also have an adverse impact on the ability of the railways to contribute to strategic objectives such as helping economic growth, moving freight from road to rail and reducing carbon emissions.

The breakup of Network Rail, which deep alliancing must be considered to be a precursor to, will be accompanied by massive reductions in safety critical operational, maintenance and renewals staff, resulting in the loss of even more skilled rail jobs. Re-introducing the profit motive, coupled with fragmenting track maintenance and signalling operations, will create a Railtrack Mark II and is inexplicable given the woeful safety record of Railtrack.

Efficiency savings McNulty also maintains that Network Rail could deliver efficiency savings of up to 30% in Control Period 5 between 2014 and 2019. Savings of a similar level are due to be delivered by the company in the current Control Period (the five years to 2014). Efficiency savings of almost 30% were delivered in Control Period 3.

The Rail Value for Money Study states: “The Study understands that, in order to meet its efficiency targets, NR expects to reduce staff numbers over Control Period 4 (CP4) by 6,300. Much of the reduction could come from the maintenance function, with further reductions from investment projects, and from operations staff (signallers and others). This equates to a 17% reduction in staff numbers and is predicted to deliver a corresponding 21% reduction in staff costs.”

The Rail Value for Money Study recommends: “NR employed 8,600 signalling and operations staff at the beginning of CP4. This number should be able to be reduced to 7,600 by the beginning of CP5. NR employed 18,000 maintenance staff at the beginning of CP4, which could be reduced to 14,000 by the beginning of CP5.”

RMT has concerns that the drive for efficiency savings, divorced from structural changes designed to end fragmentation and waste will lead to ever increasing pressures on the infrastructure work-force and potentially bring the integrity of the infrastructure itself into question. Track gangs and signal and telecoms teams are already being stretched by the volume of work being undertaken on the rail network. RMT raised concerns in the run up to the current Control Period 4 funding settlement and we remain concerned that the CP5 funding process is being driven by a desire to implement McNulty recommended cuts, which will put jobs at risk and compromise safety.

HLOS & PR13

According to the Department for Transport, “The Secretary of State remains committed to improved rail industry efficiency and value for money for customers, as set out in the objectives of the March 2012 Rail Reform Command Paper. She expects the industry to deliver this through the agenda of transparency, alignment of industry incentives, franchise reform and other measures set out in her Command Paper”.

RMT is deeply concerned that this will lead to extensive cuts given our experience of almost 1400 skilled railway workers leaving the industry as a direct result of cuts introduced in CP4 following the last HLOS.

Whilst RMT welcomes the £5.2bn for the completion of current schemes, such as Crossrail and Thameslink and £4.2bn for new projects it must be noted that the vast majority of what are termed new projects were projects which had already been planned, under the previous government, but which were later deferred.

As such RMT maintains that the proposed £4.2bn is an insufficient sum for a rail network which is in desperate need of serious of investment, in order to meet the objective of providing a quality rail network, moving towards a more sustainable economy and increasing modal shift.

Additionally, adequate provision must be made to ensure that the circumstances do not arise again which lead to mass redundancies such as those at Jarvis, where 1200 skilled rail workers lost their jobs due to the failure of the contracting regime at Network Rail.

Fares

RMT is deeply concerned that the cost of investment in the railway will be, by and large, carried by the passenger, as recently demonstrated through the inflation busting fare increases of an average of over 6%.

RMT maintains that were the leakages caused by privatisation removed through nationalisation, these fare increases would be unnecessary.

Safety

Where the Secretary of State has made some provision for the reduction of risk at level crossings, RMT believes that the level of provision is remedial and that the Government must announce a programme of work which would remove level crossings from Britain’s railway, and thereby eliminate any possibility of a level crossing related accident.

Increasing capacity

RMT believes that capacity issues can only be truly resolved through a combination of more frequent services and new rolling stock.

The Government must immediately review the current rolling stock regime, with a view to developing a regime which is both financially and environmentally sustainable, and also with the economic benefits of British based rolling stock production being taken into account. This should form a key strategic priority for developing a sustainable rail industry.

Rail Freight

RMT welcomes the announcement for significant investment in the Strategic Freight Network during CP5, and believes it to be a step in the right direction in encouraging modal shift for freight traffic.

Inflation risk

RMT is opposed to the ORR proposal to increase the financial risk to Network Rail, and has very serious concerns about the impact of such risk on the financial health of the organisation. Additionally, RMT queries the ability of any organisation to make an “upfront forward-looking assumption” for inflation levels given the turbulence experienced by inflation figures at present.

Illustrative Peak Train Services

In relation to Illustrative Peak Train Services, RMT is shocked that such vital services are being left at the discretion of private industry.

RMT has consistently called for the highest possible level of specification for train services and believes that they should not be subject to the outcome of franchise competition, or what is termed the “value for money” solution which essentially means that such services may never be provided.

Indeed, in the Government’s own words “The illustrative peak train services are not what will happen; that will be guided both by the rail industry’s response to the HLOS in the Strategic Business Plan for CP5 where the industry will set out how it proposes to meet the HLOS, and by the outcome of future train operator franchise competitions”.

This clearly demonstrates the hypocrisy of this Government’s approach to investment in the rail network, and to tackling over-crowding at peak times, when ultimately it will be determined by private industry who will naturally prioritise dividend payments above investment. This arrangement has now been formalised through the creation of the Rail Delivery Group.

Environmental performance

RMT does not believe that the private rail industry “should set itself carbon and energy efficiency objectives” but rather that they should be set by the Government in the public interest.

28 August 2012 Written evidence from the Association of Train Operating Companies (ATOC) (ROR 25)

Summary

1. ATOC represents train operators in Great Britain and provides services for the passenger rail sector, such as National Rail Enquiries and the Rail Settlement Plan. We welcome the chance to submit evidence to the Committee’s inquiry into reform of the railways.

2. Our vision is of rail as a thriving business sector which makes an increasingly positive contribution to national life. Much has already been achieved and private sector train operators aspire to do more with others in delivering a better railway in future.

3. The key to rail’s future lies in improving its long term financial sustainability. We support the broad thrust of Sir Roy McNulty’s findings on lowering industry costs, but continued success in generating revenue is also vital.

4. The industry has already set out plans to reduce costs and a commitment to make progress towards further cost savings. How far these efficiency gains materialise depends on the success of the railways and Government in implementing major reforms.

5. The Government’s Command Paper sets out a framework for reform. It needs to go further by converting franchise reform into reality; improving fares and ticketing regulation; and promoting considered institutional and structural reform.

Increasing rail’s contribution to national life

6. Our vision is of rail as a thriving business sector which makes an increasingly positive contribution to national life. In Planning Ahead 2010, we and our industry partners set out our aim to contribute to the economy, society and the environment in the next 25 years, among other things by

• working to carry twice as many passengers as today • continuing to improve passenger satisfaction levels to at least 90% • moving towards cutting rail carbon dioxide emissions by 50% in the longer term.

7. The Rail Value for Money (RVfM) Study led by Sir Roy McNulty highlighted many of the successes achieved in GB rail since privatisation, for example, on safety, customer satisfaction and operational performance. Private train operators have been key to these achievements and want to play a greater role alongside others in delivering further improvements, building on their role in:

• reducing industry unit costs in recent years: TOC costs per passenger km have been falling in real terms since 2005/06. The RVfM Study (and HM Treasury’s subsequent National Infrastructure Plan) showed that costs of GB passenger train operation (ie not including infrastructure and rolling stock costs) compared favourably with the comparator European railways used in the study

• driving growth in both passenger numbers and revenue, which have increased by respectively 86% and 93% in real terms since 1995

• leading investment of c £5 billion in rolling stock in the years following privatisation and delivering a range of improvements in terms of timetables, the on-board and at- station travelling experience and customer information

• committing to deliver further improvements, individually through their franchise agreements and collectively, for example, through participation on the Rail Delivery Group (RDG), or their work in leading the development of an industry customer information strategy and proposals to improve value for money in rolling stock.

8. We see reform of the railways as an exciting opportunity for Government to create a better business environment in the interests of passengers and taxpayers. Successful reform would empower TOCs not only to deliver value in their own right, but also to work more effectively with NR and others to improve efficiency and prioritise improvements which meet customers’ needs and so drive revenue growth.

Improving the financial sustainability of rail

9. The key to rail’s future success lies in reducing unit costs and generating revenue to improve long term financial sustainability. The RVfM Study used a “top-down” assessment to identify potential cost efficiencies worth £2.5-3.5 billion pa and to propose that GB rail should aim to achieve the higher figure by 2018/19 – a figure since endorsed in the DfT Command Paper.

10. As part of the Study, a “bottom-up” review supported this view based on Network Rail (NR) savings already committed for CP4 or assumed for CP5 (£1.8 billion); additional savings delivered by NR and TOCs/ROSCOs by implementing recommendations in seven areas (up to £1 billion); and bringing GB train utilisation closer to levels which according to the Study are achieved by other European railways (£500-700 million).

11. The Study correctly identified key areas for additional savings (such as asset and supply chain management, and people) and we support many of the proposals aimed at unlocking these savings, such as reforms in franchising, NR and fares/ticketing. However:

• the scale and deliverability of potential efficiency gains should be treated with caution. On train utilisation, for example – which has increased by 24% since 2005/06 – further improvements may well be possible but we question the robustness of the comparisons used in the Study. In the case of rolling stock, ATOC’s own assessment on achieving better value for money (published in December 2011) suggests lower savings delivered in different ways to those highlighted in the Study

• the Study and Command Paper say little about the need to reinforce the industry’s ability to generate revenue and so (together with lower unit costs) deliver better value for money to the taxpayer by reducing reliance on the public purse. This ability is key to ensuring the industry can afford future investment and so earn its “licence to grow” in serving the wider transport needs of the economy and society in an environmentally-responsible way.

12. The Initial Industry Plan (IIP) published last September by NR, ATOC, RFOA and RIA set out industry proposals to cut annual costs over CP5 by £1.3 billion by 2018/19 – consistent with the low-end McNulty savings, assuming NR delivers its committed efficiencies in CP4. It also assumed growth in revenue to c £10 billion pa in CP5, by train companies and their industry partners providing improved services at a price which people are prepared to pay, to serve the growing demand for passenger rail travel.

13. The IIP’s combination of growing passenger numbers and lower costs creates the headroom for Government to choose the preferred balance between investment, fare levels and subsidy. The plan proposed a £10 billion CP5 enhancement programme to improve services, while potentially seeing subsidy fall to c £1 billion pa by 2018/19.

14. The decision on future subsidy and fare levels rests ultimately with Government, but the work to cut costs and generate revenue rests with both the industry and Government playing their respective roles. The IIP highlights that:

• NR plans to reduce costs through initiatives such as devolved decision-making and better asset management. TOCs are assumed to continue reducing unit costs by a further c.10% over CP5 as a result of existing commitments in franchise agreements

• further savings from TOCs, consistent with the low-end McNulty estimates, could be delivered but are heavily dependent on decisions made by DfT (eg on franchising). Greater efficiencies from NR would require a step-change in cross-industry collaboration, which itself can be influenced by the environment shaped by Government and the ORR

• the RDG has a key role in exercising industry leadership by looking at barriers to achieving higher savings and is currently looking at a number of the areas highlighted by the RVfM Study.

Creating the right framework for reform

15. The path to unlocking future cost savings and revenue generation, highlighted by the RVfM Study, lies in creating an environment where Government focuses more on strategy and less on detail, and the industry has better, more aligned, incentives to deliver value for money. The Command Paper sets out a framework of potential reform containing many of the right elements needed for the railways’ future success. The priority now for Government must be to follow through with effective implementation in three critical areas.

Convert franchise reform into reality

16. Franchise reform is vital to empowering TOCs to deliver greater value themselves and jointly with industry players such as NR. The IIP highlighted how franchise reform could unlock savings identified by the RVfM Study, for example, through:

• longer franchises, which strengthen the incentive to pursue staff productivity gains, build strong TOC relationships with suppliers and build up TOC capacity to play an enhanced role in strategy and projects

• more flexible franchises, with less prescription of the service specification and how it is delivered, allowing service levels to be better tailored to demand and encouraging more innovation at bid stage

• improved risk sharing (eg ending the cap and collar regime), helping to improve incentives to TOCs to grow revenue.

17. The Command Paper embraces such principles, which must now be reflected fully, on a “horses for courses” basis, in franchises due to be let over the next two years: these cover 70% of passenger rail revenue and will define how trains are run over the next two decades.

18. The winning bid for the West Coast franchise will be an early test of how effective the Government’s approach has been in promoted value for money. We expect the competition for this franchise to be keenly fought, but we need to see more tangible evidence of Government commitment to franchise reform:

• even though the ITT reflects some greater flexibility on the service requirement, the DfT’s specification of a minimum number of station calls per week, combined with the existing rights of other passenger and freight operators, largely boxes bidders in to propose timetables that are very similar to the existing service structure

• the DfT only considers alternative proposals from a bidder over and above the Department’s own specification once that bidder has been selected, instead of as part of the re-letting process. Rather than a narrow focus on getting the lowest cost to operate the DfT’s specification, this new approach would allow bidders to put forward better plans that could generate more revenue and actively balance revenue with the use of resources

• the detailed design of the GDP mechanism to share economic risk was not as effective as it could have been eg to incentivise revenue generation, while the onerous arrangements for performance bonding and capital requirements will simply increase the cost of the franchise ultimately to taxpayers.

Improve fares and ticketing regulation

19. Much of the regulatory framework affecting fares, ticketing and retailing, has remained largely unchanged since privatisation, despite major changes in passengers’ travelling and purchasing patterns. The Command Paper and associated Fares and Ticketing Review (FTR) therefore provide a much-needed opportunity to review how far this area can drive better value for money for passengers and taxpayers, particularly in four areas.

20. First, we support the Government’s focus on what can potentially be achieved through smartcards, both in making it easier for passengers to buy tickets and in supporting new types of commuting products which are better suited to modern working life. The introduction of Oyster onto National Rail services in London, has been a major success and has resulted in a roundly 5% increase in rail demand.

21. We are excited by the recent allocation of £45m by the Department for Transport to fund the extension of smart ticketing to a wider area of the South East around London, and we are working closely with the DfT and Transport for London to roll out this investment. This project is an excellent test bed for new commuter fares products and should provide important insights into the benefits of potentially wider adoption of smart ticketing.

22. Second, Government has also highlighted the potential to improve demand management by using more sophisticated pricing techniques. This includes the use of shoulder-peak, as well as peak and off-peak, prices. Smart ticketing could facilitate such pricing structures and may be effective in shifting demand to less busy services, leading to reduced overcrowding, peak rolling stock requirements and future investment in capacity.

23. This is another area where Government needs to lead, as this issue needs to be considered holistically (eg alongside other incentives which may be used to encourage the adoption of more flexible working patterns by employers and staff), and because Government is best placed to consider the wider socio-economic impacts arising from such a policy.

24. Third, we support the Government’s recognition of the value to passengers in having a good range of fares to choose from in meeting their travel needs. The key is to reduce unnecessary complexity and provide better information, which in turn increase passengers’ confidence in their buying decisions.

25. ATOC and its members are proceeding with a programme of initiatives aimed at addressing this (including evaluation of a major investment in a new fares database and distribution system), for example, by improving the quality of information on tickets, at ticket vending machines and online. We welcome the FTR as a chance to consider what else might be done.

26. Finally, we welcome the Government’s willingness to consider modernising the current regime of fares and ticketing regulation. We fully acknowledge the need for regulation in commuting markets, where rail has a very high market share (as in London), although the new commuter fares products now being considered will potentially require significant re-structuring of current regulation.

27. However, the case for regulation for longer distance off-peak fares is much weaker and this regulation has resulted in unintended consequences, such as overcrowding on some services. Similarly, we believe that it is possible to safeguard passenger interests while introducing a more flexible regime on station booking office opening hours (by reforming the Ticketing and Settlement Agreement) to enable TOCs to modernise how they retail rail travel in keeping with changing customer preferences.

28. All of the above areas bring challenges, but the Government is right to raise them through the FTR. Again, if train operators are to play their full part in both improving industry cost-efficiency and generating revenue, Government needs to follow up its review by making clear and timely decisions to reform the current approach to fares and ticketing.

Promote considered institutional and structural reform

29. An important theme in the RVfM Study is the need for clearer definition of the roles of Government and industry. Franchise reform is key to enhancing the positive contribution to date of TOCs and entails a new approach by Government to specifying and managing contracts. The RDG has also been an important step towards the industry taking greater leadership in its affairs. There are three further areas to address.

30. First, TOCs and NR need actively to be incentivised to work together more effectively, by Government adopting a mature position on how the savings from alliances should be spread across participants. The ORR has been working on an Efficiency Benefit Sharing mechanism, with assistance from ATOC and NR, which ORR and DfT intend to be the minimum default in all future franchises. Under this scheme, train operators would share in any NR outperformance on efficiency. If train operators and NR can agree bespoke arrangements through alliances that are better than this ‘default’, then they should be free to do so.

31. Second, we think that proposals for an enhanced role for the ORR in managing franchises need to be re-considered. The oversight of the passenger rail market today and in the longer term certainly needs improving, for example, to support better whole-industry solutions to delivering value for money and to end micro-management of franchises.

32. Our concern is that extending the regulator’s role risks adding to industry costs, for example, by introducing double jeopardy through the overlapping requirements of DfT and ORR; or by diluting the focus of the ORR on its current core job of holding NR to account at a time of significant organisational change in NR.

33. We favour an approach where the authority accountable for the state’s financial stake in the industry (usually DfT) enters into output-based contracts with TOCs and holds them to account without excessive micro-management; and where DfT and ORR (with its primary focus in regulating NR) develop a closer working relationship to promote better whole-industry working. Consideration should be given now to the most appropriate regulatory model for any services which, as essentially commercially-viable in their own right, in future could be let on a different basis (eg as a long term concession rather than as a franchise).

34. Third, decentralising decision-making on franchises to sub-national authorities if done properly has potential merit and rail owning groups will readily bid for well-conceived ITTs to run passenger services let by regional or local bodies.

35. We look forward to engaging further with Government and others in this debate. Key principles for TOCs include having a clear contractual relationship with a lead client with minimal risk of serving multiple masters with potentially conflicting aims; ensuring the commissioning body has the financial authority to resource any contract to run services; and ensuring effective management of any competing demands for scarce track capacity in running services commissioned locally/regionally and those provided under franchises let by national government.

19 April 2012

Written evidence from the Department for Transport (ROR 26)

Letter from Teresa Villiers MP, Minister of State

I welcome the Transport Select Committee's inquiry into rail reform and the opportunity to discuss the Government's plans in further depth.

As you are aware, our recently published Command Paper: Reforming our Railways — Putting the Customer First sets out our ambition to reduce the cost of the railways for taxpayers and farepayers, easing pressure on the fiscal deficit and on hard pressed families. A financially sustainable railway also supports economic growth and our environmental objectives.

Given the recent publication of the Command Paper, and the accompanying consultations on fares and ticketing and on rail decentralisation, I will not at this stage submit further evidence. However, I look forward to contributing to the inquiry later this year.

April 2012

Further written evidence from the Department for Transport (ROR 26A)

Letter from the Permanent Secretary to the Chair of the Transport Committee

Following your evidence session on 12 September I agreed to write on two points with regards to the InterCity West Coast Franchise competition.

I undertook to respond in more detail about the differences between the InterCity West Coast and Great Western franchise competitions in respect of the approach to assessing risk in the procurement process and the associated financial provisions.

As I said in my evidence to the Committee, there has been no change in the underlying approach the Department is using. In both franchises, the risk adjustment process involves a series of steps which consider the credibility of the proposed revenues and cost of initiatives proposed by each bidder, and make appropriate adjustments.

The guidance issued to bidders for Great Western took account of the particular financial, operational and economic features of this franchise. It varies from West Coast in some respects, for instance by requiring a minimum subordinated loan of £40 million. I hope you will understand that I cannot comment in detail on the InterCity West Coast process at this stage in legal proceedings. However, you will be aware that the Great Western franchise has major differences from InterCity West Coast in terms of train services, markets, rolling stock, stations, staffing and many other features. Great Western will also oversee the introduction of a new fleet of InterCity Express Trains and major infrastructure work, including electrification of key parts of the network.

On new services to Blackpool, Bolton and Shrewsbury, as you noted during the evidence session, First Group’s proposal includes contractual commitments for the implementation of these services. These commitments are subject to the necessary track access rights being granted by the Office of Rail Regulation. The answer in the Parliamentary Question you referred to reflects the wording of the contractual commitment in the draft Franchise Agreement, which requires First to use its reasonable endeavours to implement new services, and then to maintain these for at least 12 reporting periods.

26 September 2012

Further written evidence from the Department for Transport (ROR 26B)

Letter from the Rt Hon Simon Burns MP, Minister of State, to the Chair of the Committee

At the recent hearing of the Transport Select Committee's Rail 2020 inquiry on 12 November, you asked for my views on the 50% real terms increase in subsidy since the days of British Rail. You kindly forwarded the analysis behind this statistic to allow me to respond in writing.

I would agree with the broad thrust of the analysis that your advisers have presented. The Government's March 2012 Command Paper, Reforming our Railways: Putting the Customer First acknowledged that while the railway was performing well operationally, inefficiency has meant that subsidy is higher than it need be. The Command Paper highlighted Sir Roy McNulty's finding that unit costs (in real terms, per passenger kilometer) were almost exactly the same in 1996/97 as in 2009/10, despite significant growth in demand.

As you are aware, our rail reform plans set out a range of measures to deal with these costs and the resulting subsidy bill. The measures include alliancing to improve Network Rail and train operators' focus on efficiencies and service improvements. They also include the scope in our fares and ticketing review to encourage more people to travel outside the very busiest times, making the best use of scarce peak-time capacity.

But this is not the only factor at play. A number of those presenting evidence to the inquiry, including myself, have made clear that part of the reason for the lower subsidy bill in the 1990s and before was a longstanding shortfall in investment in the railway. Successive administrations have sought to address this shortfall and the capital investment undertaken accounts for a very significant proportion of the increase in subsidy. As you know, the way the investment is financed means that farepayers and taxpayers meet the costs over the life time of the asset, matching funding to the timing of the benefits.

It is worth also pointing out that while the funding arrangements for rail make clear the cost of subsidy, there are also wider benefits from a growing railway which are harder to capture. The Government's strong support for the railway reflects not just the advantages for passengers, but the wider economic, social and environmental benefits that rail travel generates.

The Department has acknowledged that the franchising situation is a serious setback. Our intention must clearly be to learn lessons and then move forward as soon as possible. Whilst putting in place new, improved franchises is clearly one way of reducing costs, reform is under way on existing franchises, with 8 separate alliances in place between train operators and Network Rail. On the infrastructure side, Network Rail is ahead of its savings target in the period up to 2014, and the ORR will shortly give it a further target for 2019 that takes it significantly closer to the forefront of efficiency.

Government's aim is therefore to keep working with the rail industry. Collectively, we want to see a railway that continues to grow, supporting economic growth, our environmental goals, and delivering a better service for passengers and freight.

26 November 2012 Further written evidence from the Department of Transport (ROR 26C)

Letter from Philip Rutnam, Permanent Secretary, to the Chair of the Committee

Thank you for your letter of 13 November, requesting information following on from my appearance before the Transport Select Committee on 31 October. Please accept my apologies for the late reply and see my response to your requests below.

The PWC report of September/October 2012 which led to the DfT's decision to cancel the franchise competition. Please also state the date on which it was provided to DfT. (Q678/9)

PwC were retained to support DfT's detailed preparation for handling the Judicial Review. They were instructed by Eversheds LLP, which acts for the Department as legal advisers for the Judicial Review. PwC provided their final report to the DfT on 2 October 2012. Their report was one of a number of considerations that the Secretary of State took into account in reaching his decision to cancel the competition. I am afraid that I am unable at present to provide you with the PwC report. The PwC report contains sensitive commercial information and one of the interested parties has objected strongly to us sharing the report, even in a redacted form.

We are continuing as a matter of urgency to work through the options for sharing the contents of the PwC report with you, and hope to write to you shortly with a proposed way forward.

The grounds on which the three OfT staff were suspended in October 2012 and when you expect the HR inquiry to conclude (Q634)

Three officials have been suspended on full pay while the full facts are established as to their role and conduct in the franchise award process for the West Coast Mainline franchise. The suspension is not a disciplinary penalty and does not imply that any conclusions have been reached on the individuals. The suspensions are precautionary only and are being kept under review while the investigation takes place: a weekly review is taken of the merit of the continuing suspension, and in practice the decision is under constant review.

As I said at the time of the Transport Select Committee hearing, whilst the HR investigation continues, I cannot comment any further on the suspensions. In order to provide an authoritative report to me, I want to ensure that the HR investigation has sufficient time to provide me with a report on which I can rely. I have therefore deliberately not set a deadline for them to meet, but I do expect the investigation to be concluded shortly, which may be early next week. Once the HR investigation has reported to me, it will be my decision whether to initiate disciplinary action. Such disciplinary action may be in relation to the suspended individuals or any other individuals involved in the franchise process. Any such action will take a further period, it will be a confidential HR process, and during this time we will not be able to discuss the action being taken.

Who signed off on the level of subordinated loan facility requested of First and other bidders? (Q622/674)

The question of who signed off the level of the Subordinated Loan Facility is one on which we will need to await the outcomes of the Laidlaw Inquiry and the HR investigation. Clarification on whether financial consultants were used and, if not, why not? (Q694 etc)

Similarly, we await Mr Laidlaw's final conclusions before I can comment on our use of financial advisers. In answering your specific question about who did the financial evaluations, I should note that DfT has carried out its own financial evaluations of franchises in house since 2009 when we let the South Central franchise.

The DfT budget line from which the £40m bid compensation payments will come, and the arrangements in place to guarantee the validity of any claims and to ensure that the value for money is secured.

The bid compensation payments (which we have estimated at £40m) will be funded from headroom in the Department's budget relating to Support for Passenger Rail Services.

We have established a finance project team to manage the financial accounting and budgeting consequences of the cancellation, including the Treasury reporting and Accounting Officer actions required by Managing Public Money and the NAO audit requirements. We have fully engaged with the NAO and a member of the NAO is included in the project's Oversight Board as an observer.

The Department's Group Finance function has agreed and documented an internal assurance process to scrutinise claims before payment. This involves the preparation of an audit file and detailed scrutiny of invoices and other supporting documentation using a statistical sampling basis. The process will then be subject to an assurance review by the Department's Audit, Risk and Assurance Team.

We made a request to Treasury for approval in principle to the approach to making payments, and this has been agreed by the Chief Secretary. We will still need to get the Treasury's approval for individual payments once amounts are determined, consistent with the provisions in Managing Public Money for making "Special Payments". Before payments are made to bidders, we will provide the Treasury with appropriate details and legal analysis of each claim and the settlement amount.

A Value for Money assessment of claims will be carried out through challenge of and comparison of individual elements of each bidder's claim to check for reasonableness. However, it is not possible to provide an overall benchmark as each bidder will have approached the competition in different ways and were unsuccessful at different stages of the competition process, leaving FirstGroup as the preferred bidder at the last stage.

Whether the DfT has, in recent years, entered into contract negotiations for a sum larger than NPV of the payments involved in the West Coast franchise bids Bids for the West Coast franchise provided a range of Net Present Values (NPV) of premium payments. The NPV of the FirstGroup bid was £5.5 billion. The Department has a track record of entering into large and complex multibillion pound arrangements. Examples of these include the following (please note that we do not consider NPV is always the right comparator, and there can also be differences in price base):

• The M25 DBFO contract was let in May 2009 and has a NPV of contract payments of £3.4 billion'; • The sale of HS1 in November 2010 raised proceeds of £2.048 billion2; • The Intercity Express Project contract has a NPV of approximately £4.9 billion at 2009 prices, and a nominal value of approximately £17.8 billion over contract lifetime; • The Thameslink programme (including rolling stock and infrastructure) has an expected capital cost of around £6 billion; and • The new national contract for search and rescue helicopter services is currently in procurement with an expected contract value over its lifetime of up to £3.1 billion (nominal).

The Department is also joint sponsor, with Transport for London, of Crossrail. This project has an overall funding envelope — agreed between the Sponsors —of £14.8 billion3 and the Department is making grant payments totalling £4.7 billion3 as our contribution to the project.

Whether, and in what way, the Major Projects Authority was involved in assuring the tendering process for this contract?

The Major Projects Authority conducted assurance reviews of both the franchising programme as a whole and the Intercity West Coast franchise competition specifically. They undertook a Gate 2 review in March 2011 and Gate 3 review on the Intercity West Coast investment decision in July 2012. The scope of the Gate 3 review included a review of the evaluation criteria and of the planned application of those criteria to the bidding process.

30 November 2012

'These figures are expressed in 2007 prices. 2 This was a cash transaction. 3 These figures are nominal. Written evidence from Balfour Beatty (ROR 27)

Foreword

Balfour Beatty is a leading infrastructure group, working extensively across the rail industry in the UK and throughout the world. We are pleased to have the opportunity to contribute towards the debate on the reform of the railways here in the UK.

Rail is a key component of any effective modern‐day transport system. It stimulates and supports economic growth, reduces congestion, and is both sustainable and environmentally friendly.

In this paper, we draw on our experience of providing services across the full asset lifecycle (including financing, designing, building and operating railways) to set out our vision for an effective rail system. An ‘effective rail system’ to us means:

A high performing, reliable and safe rail system …that meets customers’ needs …whilst maximising the capacity of the network …and minimising the cost (per passenger mile)

You invited the industry to respond on a wide range of topics, including: a vision for the railways in 2020; how to deliver targeted efficiency savings; rail franchise reform; rail decentralisation; the balance in funding between the taxpayer and the fare payer; fares and ticketing reform Our response addresses a number of these topics ‐ with the exception of the final two points, which are not considered in this paper.

Summary

Our experience in the UK and around the world suggests that an effective rail system is built on the following principles:

1. Alignment of interests across the industry – ultimately driven by customer needs

2. Sophisticated asset management – including consideration of the full lifecycle of the asset

3. Appropriate investment – with the necessary investment in upgrades and new lines, and a flexible approach to funding sources

4. Supply chain engagement – continuing the positive trends in how the supply chain is engaged with, to encourage collaboration, innovation and better results

Alignment of interests

Aligning the interests of all parties in the rail industry to the end customers’ needs is essential to running an effective network. The system can only be optimised when all the different components of the railway, from train operations, through to network planning and infrastructure provision, are working to the same objectives.

One potential way of achieving this would be to create integrated delivery teams, with full responsibility for running the network, including infrastructure and train operations, in a particular area over a set period of time. This would be an evolution of the current Train Operating Company model, into more diverse, vertically integrated teams. The current franchise duration of approximately fourteen years is appropriate, considering the timescale to undertake asset investment. These bodies could be focussed on delivering services to the end user, making the necessary improvements to the supporting infrastructure to enable that. They will be able to balance the trade‐offs between infrastructure improvement and service disruption, minimise the internal transaction costs resulting from delay attribution; and better facilitate the interaction between renewals, maintenance and upgrade work on the assets with on‐going train operations. This structure has far fewer interfaces than the current model, which would eliminate much of the current interface costs.

The treatment of risk ownership in a more vertically integrated rail model requires scrutiny. The issue of who owns the risk associated with passenger safety, considering the wheel rail interface; and how do those responsible for the engineering assurance of the infrastructure discharge their responsibility and manage risks on heavily trafficked high speed routes.

As part of the rail industry other key roles are required:

• The controlling mind – most likely to sit in Government, responsible for the long term development, procurement of franchises and policy of the rail network; enabling Government to act as the ‘champion of the rail user’

• The asset steward – Network Rail, responsible for assuring the standards, and the capability and condition of the network

• Major projects team(s) – Network Rail, responsible for undertaking major or complex schemes that cannot be considered within the boundary, (either geographic or timescale) of a franchise

• Safety Assurance and Regulation – A regulator empowered to enforce safety performance

One good example of alignment that we have been involved in at Balfour Beatty is the Thameslink Programme. This involves a highly complex rail network change and migration strategy affecting various TOCs and Network Rail assets. A ‘route map to success’ was developed with the DfT and Network Rail to tie together the programme and provided a joined up vision. It provided an overview of delivering the new railway infrastructure and technology alongside legacy infrastructure, communicating to stakeholders the vision and progress of the programme and associated projects. The Thameslink Programme was commended in the McNulty review Realising the Potential of GB Rail – Report of the Rail Value for Money Study (May 2011). This fully aligned integrated approach demonstrates that in addition to the right industry structure the right tools are required to facilitate integration and alignment.

We would be supportive of alignment built on such experience and any proposed decentralisation accompanied with practices and tools that embed alignment at an industry level.

Sophisticated asset management

The UK network is developed and, with the exception of the investment in high speed rail, much of the investment in rail is aimed at balancing the needs of improved performance, value for money and asset condition. Sophisticated asset management techniques can generate significant efficiencies in this respect. Two examples of this include:

• Improved understanding of asset condition: Better monitoring, data collection and analyses (using appropriate technology solutions combined with industry expertise) enables infrastructure owners to make the right decisions on where and when to maintain, renew or upgrade the network. There is significant data currently being collected across the network, through train based, trackside and remote monitoring for example. The integration of this data with the operational requirements would provide a sophisticated asset management approach to enable performance based decision making.

• Asset lifecycle costing: Our experience across a broad range of infrastructure types has highlighted the value in taking the full lifecycle costs of assets into consideration. For significant efficiencies to be realised, the total cost of an asset across its whole lifecycle (from conception, through design and installation, to maintenance and operations) needs to be considered. Only by doing this can decisions be made that optimise total cost – balancing asset replacement with maintenance. For lifecycle costing to work, other changes to the industry would be required. The integrated delivery team concept outlined above would enable one organisation to take this complete view, which could then be scrutinised by the asset steward and validated by the procuring agency. The regulatory regime would need modification so that at the end of a 14 year franchise, franchisees are incentivised to handover assets that still have a reasonable life. As suggested, the asset steward would be the party most qualified to perform this scrutiny.

Appropriate investment

Running an effective railway in the UK will require investment in new lines (such as High Speed 2) and upgrade of existing routes to ensure the rail systems supports economic development, long term modal shift, sustainability and safety. As part of the investment activity we would welcome a process by which the business case for investment in rail considered a broader assessment of social and economic benefits, as well as the current focus on journey time saving.

To ensure this investment is forthcoming, especially in times of constrained government spending, different funding models should be considered. Two potential models include:

1. Operators invest in infrastructure development as part of a franchise process

2. Project finance is deployed by the supply chain to design, build and operate (and potentially maintain, outside of the asset steward’s remit) rail assets

Relevant evidence in international markets of alternate funding models applied to the rail sector includes:

The USA – Denver Eagle P3 Internationally, Balfour Beatty is proud to be at the heart of the Denver Eagle P3 project which is part of the Denver Regional Transportation District’s plan to expand and build new commuter and light rail lines throughout the Denver metropolitan area. The Eagle P3 project is a public‐private partnership (P3), which transfers certain construction and operational risks to the private sector. Balfour Beatty and Parsons Brinckerhoff is a part of the joint Denver Transit Partners team which will design, build, operate, maintain and finance the Eagle P3 commuter rail project. This encompasses a 23 and 11 mile rail corridor plus a connection link and rail maintenance facility. The entire Eagle P3 project is scheduled for completion in 2016.

France – Tours to Bordeaux An example of High speed rail built through long term concession models is the Tours to Bordeaux project, in which over 300km of high speed rail line will be built by 2017. The project will deliver a 350kph railway by using a 40 year concession procurement route, with funding from the concessionaire and the public purse.

We would be pleased to share in more detail our knowledge of such projects should it be helpful.

Supply chain engagement

We have started to see engagement with the supply chain in the UK rail industry utilising innovative early contractor involvement, more collaborative team techniques and a less prescriptive approach to specification. We encourage the developments in this area and believe they have the ability to align objectives and drive real efficiency and performance.

The Infrastructure UK (IUK) Cost Review (2010) considered that developing smarter ways to use competition is one of five key steps to improving the efficiency of construction in the UK. We fully agree with this. Three examples of how this might apply to the rail sector are outlined below:

Output specifications that define the operating requirements of the rail asset, but not the detailed specification, provide an opportunity for the industry to plan, design and execute on a lowest whole life cost basis. At Balfour Beatty we are able to draw on our knowledge from across the asset lifecycle and from around the world to add real value to projects where we are challenged to meet output specifications.

A longer term planning cycle gives the private sector and the rail industry supply chain greater visibility and encourages investment and innovation. This was one of the key findings of the IUK Cost Review. We are encouraged by the National Infrastructure Plan and support any actions that provide greater clarity regarding longer term spending plans, in particular the publication of the Network Rail workbank. Alliance style arrangements are a highly credible way to provide a joined up approach across the industry, with the current segregated industry framework in the UK. Alliances are proven in the rail environment and other sectors such as utilities. There are a number of key factors in establishing successful alliances, and we have analysed these across the Balfour Beatty group identifying six success areas:

1. Stakeholder management 2. Structure and organisational design 3. Processes and systems 4. Risk and Incentivisation 5. Governance and Performance Management 6. Interactions, behaviours and learning

We would be pleased to share this report if required; however, underpinning all successful alliances is the principle of a mutual desire to succeed collaboratively by all parties. Aligned goals are key to enabling successful alliances.

Crossrail South East Section This large multidisciplinary project is being delivered by Balfour Beatty and Parsons Brinckerhoff through a design and build process for Network Rail on the Crossrail scheme. The scope includes a station at Abbey Wood. The project has been set up as a collaborative venture from the start, working towards achieving the BS11000 collaborative accreditation, with the project team co‐ located and operating to joint objectives. The scheme deploys an innovative early contractor involvement mechanism and through this and the collaborative approach tangible savings of £35m have been presented.

Alliances in the rail sector have the potential to enable TOCs to form longer term relationships (a Delivery Partner approach) with infrastructure development companies, and potentially with Network Rail for maintenance activities, through the current regionalisation structure. This potentially could improve industry alignment.

Closing statement

Our vision for an effective rail system is built around four principles: alignment of interests, sophisticated asset management, appropriate investment and supply chain engagement.

There are many ways these principles can be fulfilled and above we outline some examples. By citing these specific examples, it is worth noting that we are not implying other approaches (which could meet the same aims) are less suitable. We give these examples to illustrate the importance of these guiding principles and demonstrate how they can make a difference. We believe that by learning from innovative schemes around the world, combined with experience and expertise to meet the four guiding principles, the rail industry can achieve successful reform.

We hope these ideas are helpful to the Transport Select Committee in its deliberations, and would be delighted to discuss them in more detail if that would be useful.

8 May 2012

Written Evidence from Gatwick Airport Ltd (ROR 28)

About Gatwick

Gatwick is the UK’s second largest airport and the busiest single-runway airport in the world. It serves more than 200 destinations in 90 countries for around 34 million passengers a year on short- and long-haul point-to-point services. It is also a major economic driver for the South-East region, generating around 21,000 on-airport jobs and a further 20,000 jobs through related activities. Gatwick Airport is owned by a group of international investment funds, of which Global Infrastructure Partners is the largest shareholder. We are home to the busiest airport rail station in the UK, and proportionally more passengers travel to and from the airport by rail than any other major UK airport.

Summary

• Any future rail strategy must take account of how best to extract maximum economic value from the UK’s rail network. To do any less would be minimise return on investment for the taxpayer. The Eddington Transport Study (2006) outlined that any modern integrated transport system should seek to ensure the greatest possible level of connectivity between the various modes of transport that it connects if the potential for all modes to promote growth is to be maximised. We have yet to realise this vision in the UK.

• There is clear evidence to show that improved rail links between Gatwick and London, as well as the broader South East region would assist Gatwick’s progress in attracting new routes to key emerging economies. China, Vietnam, South Korea and Hong Kong can now all be reached from Gatwick. We are not full. While a hub airport is important, Gatwick can also deliver this connectivity. Our rail links must be improved to facilitate enhanced international connectivity from Gatwick and encourage competition between London’s airports.

• To make short term progress to 2020, air passenger needs must be adequately considered in formulating the new Thameslink “super franchise”, which will provide nearly all of Gatwick’s rail links from 2015. Specifically, this franchise must explicitly detail the level and nature of services that any operator must provide to and from airports within the area concerned- including Gatwick. We would expect a clear requirement to operate non-stop express services to Gatwick, with no ticket gates and fit-for-purpose rolling stock, to be included in the specification. The Government’s sustainable transport policy, sustainable aviation policy and South East Airports Taskforce recommendations all suggest these considerations should be paramount

• In addition, we propose a series of targeted investments in rail infrastructure upgrades by Network Rail over the next two control periods. Our research shows that these improvements would accommodate growth in both air passengers and commuters more efficiently and secure wider benefits for all rail users. A report we have commissioned from leading rail experts, ARUP, outlines a clear plan for delivery. We have requested that Ministers consider the technical studies we have undertaken in formulating their strategy for rail to 2020.

The need for an integrated air-rail policy

1. Gatwick is clear that a fundamental reassessment of the way in which public policy caters for effective surface access, and particularly, rail access, to airports needs to take place. Airport Transport Forums and Surface Access strategies provide a valuable starting point for determining how best to meet this need. However, they should be seen as just that- a starting point.

2. Airports can outline the views of their local stakeholders, and outline their priorities. But provision of effective surface access is not within their gift. We look to Government to put in place a specific policy around the proper integration of airports with other transport modes, and, in particular, the UK rail network. Only through a clear policy can a step change in the quality of surface access, and the environmental benefits that could deliver, begin to manifest themselves. Train Operating Companies, Network Rail and Airport Operators need to a framework to drive improvement. That framework is currently lacking.

3. We believe there is a clear rationale for one to be developed. The Eddington Transport Study (2006) established that any modern integrated transport system should seek to ensure the greatest possible level of connectivity between the various modes of transport that it connects if the potential for all modes to promote growth is to be maximised. In practice, this means business passengers should be able to interchange as seamlessly and conveniently as possible between the air link that they have just made use of, and the rail link that might take them to their final destination, and vice- versa.

4. Gatwick is one of the best connected airports by rail in the UK, but we are not convinced that London’s rail links currently achieve level of air-rail integration that they might, or that other countries achieve. Whilst our evidence focuses on Gatwick, we are aware that most other UK airports around most other major UK cities share similar views. There is still much for Government to do if Eddington’s vision is to be realised. We do need to look at how we can link our airports and our railways more effectively.

5. In our view, any future vision for the rail network for the rest of the decade must focus on this critical need. We note that the recent rail command paper recommends improving rail access to airports. This paper contains a number of welcome commitments around the new Rail ‘High Level Output Statement’ (HLOS). Specifically, that the rail industry will need to focus on improving access to key international gateways, including airports from 2014-2019. Our proposals would help to realise these commitments, and we look forward to seeing further information when the HLOS is published.

Air-rail, growth and international connectivity

6. Gatwick accounts for a significant proportion of aviation’s overall contribution to the UK economy. The airport plays a crucial role in stimulating economic growth, boosting productivity, improving connectivity, promoting international competitiveness and encouraging inward investment. Additionally, Gatwick has an important role in supporting the tourism industry, global trade and London’s competitiveness.

7. The UK National Infrastructure Plan (NIP) recognises the national role the London’s airports have in increasing economic output, and enabling business to access new and larger markets; indeed the NIP has identified our current £1.2 billion capital investment programme as one of the country’s top 40 infrastructure projects. It also outlines that the Government will “improve road and rail links to the UK’s international gateways to help maximise the efficiency and competitiveness of the whole transport network”.

8. Gatwick Airport is not ‘full’. Between February 2011 and May 2012, we saw fifteen consecutive months of passenger growth. Under new ownership, we are investing £1.2 billion in the airport. From 2014, we want to invest a further £1 billion. Our strategy focuses on growing international long-haul services and short-haul leisure and business traffic. Based on our available capacity, and with no current plans to build any new runways or terminals, we forecast that our passenger numbers will increase from around 34 million per annum (mppa) today to 39.1 mppa by 2020/21. A 12% growth in flights is likely over the same period. Looking further ahead, we believe that even with our current one-runway, two-terminal configuration, Gatwick could increase

its passenger numbers to 45 mppa by 20301. There is a great deal of growth potential at the airport.

9. If Gatwick were to grow to 40 mppa, the airport would add at least £2.05 billion of Gross Value Added (GVA) to London and the South East, an increase from £1.97 billion today2. This excludes indirect benefits to businesses or inbound leisure travellers, as well as the substantial direct contribution that local business associated with Gatwick make to the Exchequer.

10. Gatwick is successfully attracting new business, and vital direct routes that promoting enhanced connectivity between the UK and its key trading partners, including economies including China, Hong Kong, South Korea and Vietnam. We want to attract more of these routes, fulfilling our ambition to become a ‘gateway to Asia’.

11. There is no doubt that Gatwick faces a competitive disadvantage in taking on Heathrow to deliver this connectivity. We are not a ‘hub’ airport. We concur that, in pure economic terms, ‘hub’ airports are more attractive to airlines than point to point airports. Neither could, under current market and capacity conditions, Gatwick become a ‘hub’. But we are competing and we are supporting routes that, traditionally, it has been seen as for Heathrow to serve. To suggest that that there is no alternative in terms of enhancing the UK’s international connectivity to emerging markets because Heathrow is full is, at best, an overly simplistic analysis and at worst, fundamentally inaccurate.

12. Travel to and from the airport is an important part of the passenger experience. We want Gatwick to offer a wide range of high quality services. In order to maintain and continue to attract new direct, high-value, routes to and from the UK to maximise the airports value to the local and national economies and to ensure the UK remains ‘open for business’, improved rail links to Gatwick are critical.

13. If Gatwick is to grow, and effectively use the capacity that we have available, we need to show airlines from emerging economies that we can meet the needs of their customers. Our investment in the airport itself has gone a long way towards achieving this. That investment must be complemented by a more comprehensive understanding from Government of the nature of the rail connections that airports need in order to grow. In real terms, this means that rail franchises and infrastructure investment plans must be designed with a clear understanding of what airports require to deliver the connectivity we all want to see.

Rail services to and from Gatwick

14. More than 10 million Gatwick passengers arrive and leave the airport by rail every year. This is the highest proportion of any major UK airport, and demand is growing. Indeed, Gatwick is already home to one of the UK’s 25 busiest rail stations. On present trends, the number of passengers wanting to travel to and from Gatwick by rail could grow by 30% over the next ten years3. Growth in peak-time trips to London could be as high as 50% in the same period. Already, the Express is posting record passenger growth numbers, with 17% growth in the last year alone4.

15. Our research shows that airlines operating scheduled flights cite surface access, and onward connections to their passenger’s final destination, as one of the top three criteria that shape their decision to locate at a given airport. However, passengers’ impressions of Gatwick’s rail links lag behind other London airports5. International

1 Gatwick Airport Masterplan 2 Gatwick Airport Master plan 3 Ibid 4 http://finance.yahoo.com/news/gatwick-express-celebrates-17-increase-110000399.html 5 Autumn 2011 Passenger Survey, Passenger Focus

comparisons also show the Gatwick Express at the bottom of league table of express rail links, behind Heathrow, Hong Kong, Kuala Lumpar and Stockholm6.

16. In recent years, Gatwick has lost direct rail links to Oxford, Birmingham, Manchester, Watford and Kent. Most importantly, the status of the Gatwick Express is under threat. Not only has on-board ticketing been discontinued, but 25-year-old carriages (not designed for air passengers) have replaced newer ones. Furthermore, Network Rail have recommended that the ‘Express’ nature of the service be discontinued completely7. Gatwick’s rail links are degrading, not improving. Insertion of a stop on the express would effectively discontinue our express link as a dedicated service and act as a real inhibitor to our continued efforts to attract new airlines that fly to emerging markets. We urge Ministers not to take forward any recommendations from Network Rail in this vein. There are alternative solutions to the issues they are seeking to resolve.

17. Improving rail links, and in particular retaining and improving a non-stop and high-quality Gatwick Express, will help us to improve the attractiveness of Gatwick to airlines who can provide the connectivity to emerging markets that our economy needs. At the same time, improved connectivity will lead to wider economic benefits including:

• Growth in Exports and enhanced competitiveness – through the influences that airport accessibility has for the competitiveness of UK businesses.

• Encouraging company location decisions in the UK – through the influence of accessibility to the airport on location decision of companies. Already we know that 51% of international corporations believe that international transport links are a critical in factor in deciding where to which country to locate and invest in8. The location decisions of firms will in turn influence the level of economic activity in the areas that they serve.

• Enhanced Business productivity – though the impact of accessibility on journey times for business air travellers. Today, the estimated saving to business travellers from reducing journey time on the Gatwick Express is over £6 million per annum. Improved links can drive further improvements9.

18. We acknowledge that the line supporting Gatwick’s direct rail links into London is important for both air passengers and local commuters. We are not suggesting that the needs of the airport outweigh those of the everyday user and that supporting our needs should be at their expense. We note that the Office of Rail Regulation has projected that, independently of air travel, passenger numbers on the main line running in and of Gatwick could grow by 29% by 202610.

19. Likewise, we do note that the Thameslink upgrade programme will improve connections north of London, with new services to Cambridge and Peterborough coming on stream. The number of services from Gatwick to central London will also double. These are very welcome developments. At the same time, a consistent implication from Ministers has been that these improvements are sufficient to deliver the improved rail connectivity that Gatwick needs in future. In our view, a far more holistic approach to improvement needs to be taken and, in particular, one that takes into account just how central a high-quality express service from Gatwick into Victoria is to our development. Good ‘North-South’ Links are important. But it is a dedicated,

6 Arup, Supporting UK Growth and global market access: the case for high quality services to Gatwick Airport, (March 2012) 7 Network Rail, London & South East Route Utilisation Strategy (RUS), 8Cushman & Wakefield, European Cities Monitor, (December, 2010) 9 Arup, Supporting UK Growth and global market access: the case for high quality services to Gatwick Airport, (March 2012) 10Sussex Route Utilisation Strategy, January 2010.

high-quality and properly designed express rail link that matters most to a large airport- and particularly Gatwick in the light of how reliant we are on rail access.

20. With this in mind, we have developed solutions that we believe will accommodate growth in commuting and air travel on the rail network in the South East to 2020, and secure wider benefits to all rail users. In short, a ‘win-win’ solution is there to be implemented. A range of targeted infrastructure improvements and timetabling improvements, over the next control period, form the basis of this solution. A summary of these improvements is outlined in paragraph 21-28. We urge Ministers and the rail industry to take them forward.

Delivering improved rail access

21. Rail travel to Gatwick is growing. The key issues to be addressed now relate to how best to provide adequate capacity for growth in both commuters and air passengers and how to deploy rolling stock on the Gatwick Express suited to the needs of passengers on the route. The opportunities for development fall into two categories – short/medium term involving timetables and new rolling stock and longer term enhancements requiring new infrastructure.

Short Term

22. The Department of Transport has recently published plans to merge the Thameslink and Southern franchises by 2015. A new longer term franchise will be introduced. This decision provides a unique opportunity to improve the efficiency and quality of services between Gatwick and London. 23. The series of changes expected also provide an excellent opportunity to take a holistic view of the whole Brighton Main Line timetable. The removal of complexity of service planning across the interface between two large train operating companies should make the process for achieving timetable changes more straightforward 24. Preserving Gatwick Express is a priority. It should be recreated as an all-day dedicated service between Gatwick and London to support Gatwick’s role as a key economic driver for London the South East and the UK economy as a whole. To guarantee its success, we believe that bidders for the franchise should be required to outline a vision of how both the quality of journey and the range of direct routes to and from Gatwick can be improved, with specific franchise ‘benchmarks’ to ensure it is delivered. 25. How an operator meets this requirement should be a criteria on which a franchise is awarded. In parallel there must be a requirement in any invitation to tender for bidders for the new franchise to include direct, express rail services to London from the airport. 26. Similarly, there must be also be a clear requirement for fit for purpose rolling stock that caters for the needs of air passengers to be introduced. It is clear from our research that the current rolling stock used simply is not suitable for air passengers or designed for their needs. There is inadequate room for luggage. There are no visual passenger communications systems. Seating is highly dense. Passengers with restricted mobility cannot board or get off easily. Added to the fact that many peak time trains to London are already full when they reach Gatwick, a significant degradation in our most important has taken place at the exact time when improvement is most needed. 27. Any new timetable could also provide additional capacity for commuters and reintroduce direct Brighton to Clapham Junction peak services. Capacity utilisation can be improved, to ensure that Gatwick Express and commuter trains are evenly loaded. The allocation of services to different South Coast destinations should also be reviewed in order to ensure the most efficient use of capacity. Long Term

28. For air passengers and commuters, a solution is required for the constraint of 20 trains per peak hour already running on the fast lines though East Croydon. Otherwise, the current very high capacity utilisation will lead to problems beyond 2020 in developing effective service patterns as well as accommodating growth.

29. The rail industry should prepare an industry enhancement plan for the Brighton Mainline for implementation in Control Period 6 (2019-2024). Our research outlines the form this plan could take, and suggests that Ministers work with the industry to:

• Fully exploit the current enhancement to Gatwick Airport railway station • Enable Gatwick Express to remain as a dedicated Gatwick to Victoria 4 trains per hour service • Provide additional route and platform capacity at East Croydon • Unlock capacity constraints at London Victoria station throat. This would enable more trains to operate into Victoria, which combined with cross-London Thameslink, would accommodate commuter growth.

18 June 2012

Written evidence from Alliance Rail Holdings (ROR 29)

1. I welcome the Government’s acceptance that in the past the Department for Transport has become too involved in the detail of the rail industry on too many occasions. As was highlighted in Sir Roy McNulty’s Rail Value for Money Study, many observers consider this involvement is now greater than it was under a nationalised British Rail. My concern is that there is little evidence yet that the Department for Transport is prepared to relinquish any of this control to industry participants. 2. The Rail Value for Money Study rightly focuses on the need to reduce costs throughout the industry. Unfortunately, although it identifies targets for cost reduction, there is very little indication of how these savings can be achieved in practice. Much store is set by closer industry co-operation, for example through alliances, to drive down costs. Little or no evidence is provided in the Command Paper to demonstrate that this approach will provide results. It seems to be an act of faith that it will happen: history suggests that this is not enough. 3. The Command Paper “Reforming our Railways: Putting the Customer First” acknowledges (in paragraph 4.42) that open access brings benefits such as greater choice and lower fares. However, rather than seeing this as a benefit and a way of driving down costs, the Minister appears to accept the Department’s view that fares need to remain high to deliver rail upgrades – upgrades that cost far more than they should because there is no pressure on Network Rail to reduce costs. This does not appear to be ‘putting the customer first’, which is supposed to be the theme of the Command Paper. I suggest that without proper competition in the passenger market, a 30% reduction in industry costs is purely wishful thinking. 4. A report1 produced for the ORR study referred to in paragraph 4.41 of the Command Paper shows that in certain circumstances higher levels of open access could actually reduce the cost to the Government rather than increase it. In any case, the increase in subsidy required for any affected franchised operators is minimal compared with the significant benefits for passengers or compared with the industry and Government costs – which are largely hidden - of running franchise competitions. All arguments are based on modelling done before open access competition commences. I am not aware of any evidence that has been produced after services start to demonstrate the revenue loss. Our own evidence suggests that providing an inter-city service at stations which previously did not have one also stimulates demand for local travel.

1 Modelling the Impacts of Increased On-rail Competition Through Open Access Operation, MVA and University of Leeds, July 2011 5. The Department’s view of competition for passenger services seems to be in marked contrast to its view of the freight sector. Paragraph 4.45 of the Command Paper notes that “The competitive environment has also forced rail freight to find significant efficiencies over recent years, and it has encouraged Network Rail to do the same.” It then goes on to say that “Government seeks to repeat this approach with similar success for passenger services.” How will this happen without competition? 6. It seems that the Department’s view, as expressed by the Minister, can be summed up as ‘freight competition reduces industry costs but competition in passenger services increases the need for subsidy’. I would urge the Select Committee to challenge the Department on these apparently contradictory views.

21 June 2012 Written evidence from Mr David Hodgson (ROR 30)

I have some comments on the oral evidence session of the 10th July 2012, which was broadcast on BBC Parliament Channel Saturday 14th July.

1. I believe David Mapp, ATOC, claimed that after allowing for inflation, there had been no real increase in train fares over the last 10 years. Given that in many of those years, fares have been allowed to rise by an RPI+..% formula his assertion seems intuitively and fundamentally unsound. So, I checked on a long distance journey I have been making regularly for over 30 years: Stirling ‐ Sheffield.

In 2005, the off peak return fare was £79.70, by 2012 that had risen to £106.20, an increase of 33%. ONS statistics for the increase in RPI over the same time is only 23.1%. This gives an overall net increase above inflation of about 10% just in the last 7 years. You may wish to question Mr Mapp more closely on his assertion.

2. There was also discussion as to whether the existing fares structure is fit for purpose. I suppose much depends on whose purpose is being considered. I make the journey referred to above (Stirling ‐ Sheffield) some 6 ‐ 8 times per year, primarily to visit my parents who are now in their late 80's. I also have caring responsibilities at home in Scotland, so the option of cheaper advance purchase tickets, which tie you to a specific time and train, are completely useless to me. I need flexibility to respond to whatever may be happening, either in Sheffield or in Scotland. So, it is pretty galling to catch trains, as I did recently, when virtually every seat was reserved (advance purchase passengers paying perhaps £15 or £20 for a seat), and I (having paid £106) had to stand all the way from Edinburgh to Newcastle. Is this fair? Should there not be a minimum, say 20%, of all seats which are NOT reserved, on long distance services?

In addition, I would welcome the option to purchase, at a suitable discount (!) a carnet style ticket for my regular journeys between Stirling and Sheffield.

Another aspect of fitness for purpose is the potential to achieve modal shift, something we have been told by various governments over the years is one of their priorities. However, it is now over 30 years ago that pricing for long distance rail travel was calculated according to the marginal cost of using a car, i.e. the cost of petrol. That link was broken by the Conservative government elected in 1979. Again, using my example of Stirling ‐ Sheffield, the current cost of petrol comes in around £80‐85, so the public perception will be that it is cheaper to drive.

Instead we have a fares structure, which Government advisers and some rail managers justify in terms of a) the passengers can afford it and/or b) pricing some people off trains, because the trains do not have enough capacity to carry the numbers of passengers who wish to travel. In this latter case, there has been repeated criticism of the Cross Country trains franchise, for over‐pricing, because the vast majority of their long distance trains comprise only 4 or 5 coaches. I have witnessed severe over‐crowding on Cross Country services. So it's not really a question of whether the fares structure is fit for purpose, rather whether the trains are fit for purpose! 3. Statements were made to the effect that subsidies per passenger in London and the South East were considerably lower than the amounts on the "Regional Railways" network. Frankly, taken in isolation this is almost meaningless. The total numbers of passengers in London and the South East are considerably higher than elsewhere, on average, their trains are fuller and longer than elsewhere, and "Regional Railways" includes a number of long distance, sparsely populated routes (e.g. Cambrian Coast, Leeds/Carlisle, Cumbrian Coast, Carlisle/Newcastle). If there is any suggestion that some passengers or routes are more worthy of subsidy than others, this leads down the dangerous road towards completely closing services which some remote beauracracy decides is too expensive. I believe the committee should look at the whole question of "subsidy" in a more systematic, structured and holistic fashion.

I also felt it was thoroughly unhelpful to state that on average rail passengers are better off than bus passengers. So what! Is this supposed to imply there is covert discrimination to deny access to rail services for the less well off? Averages deny range and plurality.

4. There was discussion mainly with Geoff Inskip, Chair of the PTE Group, regarding conflicts between local and inter‐regional passenger services, and a suggestion that the Northern Rail and Trans Pennine Express (TPE) franchises should be merged. Professor Nash agreed that there was a danger this would lead to greater focus on local services. This suggests that existing TPE inter‐regional services (Manchester ‐ Scotland; North West ‐ North East, and North West ‐ Humberside) end up in a bureaucratic no‐mans land. As it stands, most of these services are now sadly down‐graded from the days when they were fully fledged members of the British Rail Inter City Network. For example, there is only one return service each day at a ridiculously early hour giving a direct connection between Liverpool and Newcastle. It is suggested that a return to those days is long overdue. Genuine Express Services, strictly limited stop, 110/125 mph, would help to attract those long distance passengers, who don't want their services slowed by repeated stops at smaller towns en route. Maybe these services need to be set up as a separate micro‐franchise, added to other long distance franchises or made the subject of an open access competition.

5. Lastly, Howard Smith from Transport for London claimed there was no problem regarding allocating track priorities, and in any case, control is exercised by ORR. In truth, the progressive intensification of services over the last 15 years, means that additional or spare train paths are becoming fewer, and on the busiest routes at the busiest times, there is no spare capacity at all. Thus, proposals for new services are likely to have only limited availability of train paths, which in turn may compromise their commercial viability. In Mr Smith's own area, there is concern from freight operators, that there will be insufficient paths on the North London Line, once the new container terminal opens and becomes established at Thameshaven.

I trust these points help to flesh out your Committee's thinking on how the railways will look in 2020.

16 July 2012 Written evidence from Professor Chris Nash, Research Professor, Institute for Transport Studies, University of Leeds (ROR 31)

1. My evidence specifically concerns the way of assessing the value for money provided by regional rail services. 2. If we assume that intercity and London commuter services will continue to operate, then the appropriate way to assess the value for money provided by regional railways is to compare their avoidable cost with the additional revenue and other benefits they bring. These benefits include benefits to users over and above what they pay, reduced congestion, accident and environmental costs caused by road users where they are not fully paying for them, option values and wider economic benefits. 3. Avoidable cost is the most appropriate approach for assessing the costs of regional railways. That is to say that we should estimate the additional costs caused by the presence of regional railways trains given the assumption that the long distance and London commuter networks would be there in any case. An avoidable cost approach would load all costs on routes used only by regional railways on to them, but only marginal costs (including the cost of using scarce capacity that would otherwise be used by other services) on shared routes. Where regional railways share services with freight, there is less certainty as to whether the infrastructure would exist in the absence of regional railways services, but if so, then the same principle should apply. 4. The existing calculation of fixed charges for franchises uses a rather arbitrary approach to allocating fixed costs based on train km and revenue. Past allocations by ORR have also allocated the government grant to Network Rail on the same basis. Therefore it is difficult to know how reasonable the results are. The McNulty report gives an allocation which appears to load far more of the costs on to regional services, but does not explain how these are derived. I do not understand what McNulty did and I am surprised he did not use the existing allocation. 5. Given that rail services are subject to strong economies of traffic density, and that density tends to be lower on regional railways than on other parts of the network, there is little doubt that costs per passenger kilometre are higher on average for regional services than for inter city or London commuter services, even though regional services do not generally require as high a standard of track as these services. But there are great doubts as to the accuracy of current estimates of the extent of that difference. 6. There is also an issue concerning revenue. When considering the revenue produced by regional railways services, the revenue they contribute to other services should be included. There is evidence that for rural routes this may be 50‐100% of direct revenue, and that a large part of this would be lost to the rail network if the service ceased. To the extent that such additional traffic adds to costs on the rest of the network, that also needs to be taken into account. 7. Methods of valuing the reduced congestion and environmental pollution from diverting traffic from road exist and are set out in WEBTAG (the Department of Transport’s on line system of appraisal guidance); these benefits will be greatest for service bringing peak travellers into large cities. 8. There is also evidence that the population at large are willing to pay to retain the option of using a rail service should they need to do so in the future. Again the evidence is in WEBTAG; this option value is likely to be greatest where people may become heavily dependent on the rail service, for instance, if there is a risk that they might have to commute to the nearest big city for employment. 9. The wider economic benefits of rail services are more difficult to measure. There is evidence that providing rail services helps create jobs, but the results are very uncertain and in any case the jobs concerned may just be relocated rather than genuinely new. There is also evidence that rail services produce agglomeration benefits, both by allowing a greater concentration of jobs in high productivity locations and by improving accessibility. There is little doubt that rail services are important to the economic success of large cities, even if this effect is difficult to measure. 10. Few cost benefit analyses of existing rail services have been published in recent years. However, Jackson (2011) analyses the Leeds‐Morecambe service (which one would assume was not one of the better performing regional services, since it operates at low frequency and with low patronage, and only shares part of its route with other services) and finds its retention to have a benefit‐cost ratio above 1.5.

19 July 2012

Reference

Jackson, J (2009) Appraising rural railways: are they a special case? Unpublished PhD thesis, University of Leeds

Written evidence from Freightliner Group Ltd (ROR 32)

I am writing in response to your recent invitation requesting evidence following the publishing of the recent High Level Output Statement (HLOS) and Statement of Funds Available (SOFA). This is the submission of Freightliner Group Ltd (‘Freightliner’). Freightliner is a logistics operator specialising in rail, currently the largest haulier of deep- sea containers in Britain, moving some 700,000 containers per year. Freightliner is also the second-largest overall rail freight operator, moving over 20 million tonnes of bulk goods by rail each year.

Freightliner welcomes the £9.4bn investment that the Government is making in the rail network over the period covering the forthcoming Network Rail Control Period 5 between 2014 and 2019. It is pleasing to see that the Government clearly recognises the payback that an investment of this scale in the rail industry will have on the UK economy over the coming years. Continued investment to maintain an efficient rail network will play a vital part in stimulating the economy, as a key component of the UK transport infrastructure.

In the same way that the Government invests in the road network infrastructure, it is right that equivalent investment continues to be committed to the rail network. The HLOS announcement will be helpful in providing the necessary confidence to operators and other rail industry stakeholders in the private sector to be able to commit to long term capital investments, such as those currently being made by Freightliner (outlined later in this response).

Freightliner is pleased to see that the HLOS shows a balance between both passenger and freight as users of the railway in addition to specifically recognising the important role that freight has to play. This latter point is welcomed as all too often, the existence and importance of freight on the network is not always recognised, given its position as a non- franchised user of the network that operates on a purely commercial basis.

Alongside the HLOS announcement, Freightliner also welcomes the Secretary of State for Transport’s guidance issued to the ORR on 16th July. In particular the guidance states that, “The Government wishes to facilitate the continuing development of a competitive, efficient and dynamic private sector rail freight industry and is committed to ensuring that policies and regulations should work to this end and should not create unnecessary transactional costs or other obstacles to the achievement of these objectives and future growth”. Freightliner hopes that this helps support the continued growth of freight on rail and that future policy decisions taken by the ORR takes due cognisance of this guidance.

Of particular significance to Freightliner will be the £200m allocation for the England and Wales Strategic Freight Network. This will enable the delivery of several key schemes such as the Peterborough North and Wigston Junction schemes along with the planned improvements to Ely North Junction.

Whilst the direct benefits of increased rail freight largely fall outside the railway balance sheet, the continued growth and modal shift will help delivering the following key benefits (based on Rail Freight Group research):

• Relieving road congestion: It is estimated that congestion on the road network costs the economy £7-8bn every year. The average intermodal train removes 50 equivalent lorry journeys off the road. • Reducing accidents: Since 1997 rail freight has saved 644 deaths and serious injuries by taking lorries off Britain's roads. • Reducing carbon and other emissions: Road freight generates six times more carbon

dioxide than rail freight per tonne moved.

Up to now, the development of a dedicated freight investment programme in the form of the Strategic Freight Network (SFN) has been a great success story for the rail industry, with the improvements delivered in the current Control Period 4 delivering immediate results. For example, the completion of Gauge Clearance for High Cube, W10 containers between Southampton and the West Coast Mainline has increased rails market share on this route from 30 to 36% within the space of a year.

Despite the economic downturn brought about by the recession, UK rail freight has maintained growth, with the Intermodal sector growing by nearly 35% in the last 7 years, as shown in the graph below.

Source: ORR

UK rail freight post privatisation is a good example of how a highly competitive market place has forced individual operators to increase the efficiency of their operations and drive down costs wherever possible. This is not only to compete amongst themselves, but also with the road freight sector, which doesn’t incur the same costs and level of regulation in order to access the road network.

Since the introduction of privatisation, the number of freight operator companies (FOC’s) has increased from 3 (once they were consolidated) to the 5 that are currently in operation. Despite the growth that has been experienced, operators have been forced to become more efficient in their operations, in the face of this increased competition. The McNulty Value for Money study commented on how operators have achieved this, through its findings that staff per freight train km has been reduced by 36% since 1998/9.

A further example of the increased efficiency of rail freight is in the graph below which shows how freight tonnage per mile has been maintained since 2008 despite a reduction in the number of trains operated over the same period. An explanation behind this trend is the continual aim to increase train length and train utilisation as a means of increasing efficiency and utilising capacity on the network more effectively.

Source: Network Rail

Further investment in the rail network is now needed to provide both the capacity and capability to ensure that the continued rail freight growth trends can be maintained.

The announcement of further investment in the SFN for CP5, in addition to a dedicated fund for Scotland will assist in delivering the following:

• Gauge clearing further sections of the network in addition to necessary diversionary routes that will allow operators to provide a reliable service to customers and facilitate further growth within the deep sea container market. • Modification to network infrastructure to accommodate longer 775m freight trains, which will increase the utilisation and efficiency of freight on the network. • Development of electrified routes linking the key ports and terminals that will make the increased use of electric freight traction more viable for operators. • Creating the necessary capacity that will allow the forecasted doubling of freight tonne kilometres between now and 2030 to be accommodated on the network.

Following the announcement of the HLOS, it is vital that Network Rail fully engages with passenger and freight operators to work through the detail in order to obtain the best possible value for money from the schemes committed for CP5 as well as to ensure that the schemes are delivered in the most efficient manner. Furthermore, with the volume of work due to take place, it is important that any synergies between the main schemes and those specific to the Strategic Freight Network are identified to again ensure that maximum value is delivered. For example, considering the feasibility of incremental gauge clearance on the back of electrification of routes.

Freightliner recognises the important contribution that other rail freight industry stakeholders can make in utilising the investments that are being made by the Government, through continued increases in efficiency and reduction in costs to maintain the competiveness of the market. Freightliner is committed to a programme of significant capital investment to drive our own efficiency within the market place, examples of this include:

• Introduction of new Class 70 locomotives, capable of hauling longer trains with the ability to make use of the investment by Network Rail to deliver 775m capability of

the network infrastructure. • New ‘Shortliner’ wagons in response to the market trend of greater use of 40ft containers. These new wagons will increase the number of 40ft wagons on a standard train by 42%, consequently delivering improved train load utilisation and enabling capacity on the rail network to be used more efficiently. • Investment in new cranes at Freightliner’s terminals at Manchester, Birmingham and most recently Southampton. Once fully operational, lift capacity at Southampton will increase by 80% and assist in making full use of the additional capacity and capability that will be offered for the deep sea container rail market once the Network Rail investment between Southampton and the West Coast Mainline is completed.

The HLOS announcement also includes funding for several key electrification schemes including the ‘Electric spine’, linking the Port of Southampton to the West Coast Mainline. The electrification of one of the key freight corridors is the first stage in a medium to long term strategy that will help in increasing the proportion of electrically hauled freight on the network although to facilitate the next stage of planning must focus on the following freight specific issues:

• Electrification of diversionary routes to ensure that freight operators are able to inject further electric locomotives into their fleet without incurring additional inefficiency by having to maintain numbers of diesel locomotives (which would otherwise be necessary). • Electrification of terminals and network infrastructure such as sidings, loops and other freight yards. • Addressing the issue concerning the higher costs of electric traction vs diesel (currently one of the reasons which prohibit its greater use). • Consideration of further routes for electrification – this could then lead to more electric locomotives being purchased if the commercial business case can be made.

In addition to the schemes announced within the HLOS, the issue of changes to Access Charges are emerging as key to the freight operators as CP5 approaches.

The ORR’s proposals to increase overall Access Charges that freight operators are liable to pay will not only lead to a decline in rail freight but also add further complexity to the charging structure. The proposals are in direct contravention to the Secretary of State for Transport’s guidance to the ORR which states that, “Rail freight needs a simple consistent charging structure to give its customers and the industry confidence to invest long term”. The degree of uncertainty that these changes will bring about will leave stakeholders including the operators and customers with no confidence to commit to long term capital investments necessary to develop future rail freight business.

Freightliner has concerns surrounding the ORR’s interpretation of “what the market can bear”, in terms of increase to Access Charges. This appears to equate to a reduction of up to 10% of the market, directly caused by access charges. Whilst the proposals are only limited to certain market sectors, such as ESI Coal, Spent Nuclear Fuel and Iron Ore, the impacts are likely to affect the viability of an operator’s overall business, with costs increasing. There is also likely to be a reduction in the jobs of train crew and other staff as it won’t always be possible to transfer resources to other existing and new business. We are concerned that the wider impacts to the rail freight industry and other markets have not been evaluated, and the ORR has given too much focus to the impact and incentives on the railway without fully considering the impacts of these proposals.

Freightliner would hope that the ORR does not proceed with these proposed changes and has serious concerns about the future viability of the industry should they go ahead.

6 August 2012

Written evidence from Skipton and East Lancashire Rail Action Partnership (ROR 33)

My submission is about the practicality of getting around by rail, from A to B or C or D. a) Missing links

Like myself, many people travel all over the UK by rail. We have to make long detours because of ‘Missing links’. 90 mile detours wouldn’t be tolerated on the road network and indeed that has been the case where major bridges have been built to replace ferries.

The DfT says it is down to Local Authorities to identify need but many are road orientated and so tend to be unwilling or occasionally put blocks in the way but even if sympathetic go with the least costly schemes as they are strapped for cash.

With road, Local Authorities instigate all but the most major of road schemes. But the road network was not decimated as the railway network has been.

Local Authorities also only represent their own residents but rail users from all over the country want to travel all around the country. Our ability to travel without huge detours should not be blocked because a local authority is not interested. There is also a problem where missing links cross Local Authority boundaries.

For this reason, rail needs an overall UK strategic investment, not just at major projects such as HS2 but at missing links and communities unserved by rail. It shouldn’t be down to grass roots voluntary groups like ours to have to press for change. New roads are built without any such grass roots voluntary groups campaigning for them. Certainly no new road scheme has had a fraction of the support our campaign has mustered (1). As our former MP Gordon Prentice argued many years ago, there should be a dedicated team in Government researching and investing in rebuilding the missing miles of railway.

I would like to suggest your Committee could build up the picture around the Country by taking evidence specifically on missing rail links and the effect they have on communities and their development, economically, environmentally and socially. If you were to do so, we would very much like to be involved.

As of 8th August 2012 the campaign to re-open the Colne to Skipton missing rail link has the support of 193 MPs, 49 MEPs (68% of UK MEPs), 101 Members of the House of Lords, 500 Councils, 176 NGO's and 151 organisations and businesses. We are frequently asked, with that level of support, why isn't it happening?’ b) Connections

Another problem with getting around is connection times and this is particularly difficult where services are hourly or less. As an example, until we get a modern railway with the reopening of the Burnley – Colne – Skipton missing rail link, the East Lancashire stations of Colne, Nelson, Brierfield, Burnley Central and Burnley Barracks have awful connections.

i) to travel east to Leeds and Bradford, you have to travel west to Accrington. As your train approaches Accrington station you see the Leeds train pulling out and you have to wait 58 minutes for the next train. Coming back, slightly better, you have 53 minutes to wait.

ii) to travel south to Manchester, there is a 30 minute wait at Blackburn going but what is especially galling is coming back your train from Manchester is held at the points outside Blackburn and you see the Colne train trundle across. When you get into Blackburn station the Colne train has just set off. Journey time home from Manchester (just 30 miles away) 2½ hours for a journey that in the 1960’s took just 1 hour.

iii) to travel south to London, a 58 minute wait at Preston for the connection.

iv) to travel north to Glasgow a 41 minute to 53 minute wait at Preston for the connection

v) to travel north to Edinburgh, a 58 minute wait at Preston for the connection.

Progress, East Lancashire style, then and now:

• In 1950 best journey time Colne to Liverpool was 1¾ hours, now it’s 2¾ hours to go 58 miles, an hour longer • In 1950 best journey time Colne to Manchester was 1¼ hours, now it’s 2 hours to go 32 miles, 45 minutes longer (and 2½ hours back) • In 1950 best journey time Colne to Leeds was 1¼ hours, now it’s 2¾ hours to go just 32 miles; 1½ hours longer.

It almost feels like someone ‘up there’ doesn’t like those of us who use the Colne branch. Surely they’re not trying to run it down so that they could close it?

My question for the committee in this regard is, how can a member of the rail travelling public have any influence on timetabling? Who do we contact about it? A simple 2 minute alteration in the timetable would solve many of these problems outlined above and I’m sure this will also be the case around the country.

August 2012 Further written evidence from Skipton East Lancashire Rail Action Partnership (ROR 33A)

Introduction

1. The Skipton – East Lancashire Rail Action Partnership (“SELRAP”) was established in 2001 as an umbrella group of individuals and organisations campaigning for reinstatement of the former railway line some 11.5 miles in length between Colne (in the borough of Pendle, Lancashire) and Skipton (in the district of Craven, North Yorkshire) for both passenger and freight traffic.

2. SELRAP welcomes the opportunity to respond to the Transport Select Committee’s Call for Evidence on the High Level Output Specification (“HLOS”) published by the Department for Transport on 16 July 2012. SELRAP trusts that the Committee will find the comments set out below of assistance, and will be pleased to provide any further information or clarification required upon request.

SELRAP’s response to the HLOS announcement

3. SELRAP welcomes and supports the broad thrust of the HLOS announcement and in particular the following statements [references are to the numbered paragraphs of HLOS] –

- “The Government’s vision is for dynamic, sustainable transport that drives economic growth and competitiveness … putting the customer and businesses at the heart of transport. [HLOS 1]

- “The Command Paper set out how our passenger and freight railways support Government’s overall transport vision by supporting economic growth, facilitating business, commuting and leisure journeys, providing a greener transport option than road and aviation, and relieving congestion on our road network. [HLOS 2]

- “This Statement … is framed against the background of forecast further strong average growth during CP5 of 16% in passenger demand and 23% in freight. It includes £5.2bn of infrastructure enhancements already committed for CP5 to reduce crowding, cut journey times, increase efficiency and improve the passenger experience. [HLOS 4]

- “The third strategic priority is to facilitate commuter travel into major urban areas, helping to expand the effective labour market, and helping people to access a wider range of jobs. … The HLOS sets out peak city demand to be met; designed to support economic growth in … Yorkshire, North West … [T]his investment is expected to unlock major economic benefits in the economies of the northern cities and conurbations. [HLOS 9]

- “[The Secretary of State] wishes the railway to continue to develop its capacity and capability to support economic growth by improving connectivity and meeting key elements of forecast demand growth. [HLOS 14]

- “The Secretary of State wants to see a significant increase in the carrying capacity of both the freight and franchised passenger railway, to reflect the growth in demand and to relieve crowding. [HLOS 24]

- “The incremental passenger capacity to be delivered is specified in a Capacity Metric, setting out the numbers of … passengers to be accommodated at … Leeds, Manchester … across the three-hour morning peak and across the one-hour high peak. [HLOS 25]

[Appendix A shows growth in the three-hour morning peak from 25,400 to 30,500 at Leeds, and from 28,100 to 34,300 at Manchester; and growth in the one-hour high peak from 13,000 to 15,800 at Leeds and from 13,600 to 16,200 at Manchester.]

- “The Secretary of State wishes the industry to develop and deliver … the ‘Electric Spine’, in order to increase regional and national connectivity and support economic development … [HLOS 34]

- “The Secretary of State recognises that … the route between Walsall and Rugeley … has regional and strategic value … [HLOS 42]

- “The Secretary of State wishes to fund completion of the Northern Hub … to meet the increased commuter demand into Manchester … ” [HLOS 46]

4. The references set out in paragraph 3 above mirror SELRAP’s view that the railways of Britain must be considered as a network, every part of which has a strategic value in providing the regional and national connectivity which the HLOS announcement rightly regards as important. SELRAP would suggest, however, that inadequate attention is paid in the HLOS announcement to the following matters –

- the fact that (despite considerable work in lengthening trains and/or platforms) many parts of the existing rail network are already operating at or close to capacity, and accordingly are unlikely to be able to meet the targets called for in the HLOS announcement, particularly the forecast growth during CP5;

- the fact often overlooked that (conversely) many parts of the existing rail network have spare capacity which is not being used to its full potential, and accordingly would be able to play a role in meeting the targets called for in the HLOS announcement;

- the fact that many areas do not at present have any (or any adequate) access to the existing rail network, and accordingly will derive no benefit from the improvements called for in the HLOS announcement; and

- the benefits which would accrue by selective re-openings of former railway lines which have been closed (or are now operating for freight only).

The shortcomings mentioned in this paragraph may be demonstrated by consideration of a case study in relation to the former railway line between Skipton and Colne.

A Case Study

5. Historically, the former railway line between Skipton and Colne (a mere 1l.5 miles in length) formed a small but strategically important part of a through route linking –

- the west coast main line with the east coast main line - west coast ports with east coast ports, and - the conurbations of Lancashire with those of Yorkshire.

The line was closed in the early 1970s, and subsequently the previously double track section of line between Colne and Gannow Junction (Burnley) was singled. The ‘missing link’ represented by the former railway between Skipton and Colne constitutes a gap in the rail network which prevents that network operating to its maximum efficiency.

6. Closure of the line between Skipton and Colne has not seriously affected rail services on the Yorkshire side of the Pennines, as the through route from Leeds to Carlisle (via Settle) survives. Indeed, the line from Skipton to Leeds and Bradford has enjoyed a renaissance following electrification in the 1990s. With its 15 minute frequency throughout the day, the railway is estimated to carry 75% of the commuter traffic into Leeds from the Aire Valley, where property prices have risen significantly following the improvement in the rail service.

7. In marked contrast, closure of the line between Skipton and Colne has had a direct and deleterious effect upon rail services on the Lancashire side of the Pennines. Gone are the fast and frequent direct services from Colne to Manchester serving Nelson, Burnley and Accrington, being replaced by an hourly stopping service to Preston, which fails to provide convenient connections to Manchester. Commuter traffic by rail to Manchester from much of Pennine Lancashire is virtually non-existent, while commuting by rail to Leeds from Colne, Nelson and other communities of Pennine Lancashire is impracticable.

8. The surviving railway between Colne and Gannow Jucntion (Burnley) is a prime example of a section which has spare capacity and is not being used to its full potential. If restored to double track in conjunction with reopening the line between Skipton and Colne, it could accommodate significantly more traffic than it currently carries. The reinstated railway would be particularly suitable for freight, given that the route is largely free of tunnels and gradients.

9. It is ironic that while the existing railway between Colne and Gannow Junction (Burnley) is not being used to its full potential, just a few miles to the south is a railway already operating to virtually the limit of its capacity, namely the line from Manchester to Leeds via Stalybridge and Huddersfield (the Standedge route). Reopening the line between Skipton and Colne as part of an alternative through route between Lancashire and Yorkshire would relieve pressure on the Standedge route by allowing the diversion of freight traffic and removing many passenger journeys – for example, between the Aire Valley and Manchester or its airport, which currently have to be made via Leeds. Further, it would provide a diversionary route which could be used to reduce disruption when the proposed electrification of the Standedge route is carried out.

10. Quite apart from its role in relieving pressure on the Standedge route, reopening the line between Skipton and Colne as part of an alternative through route between Lancashire and Yorkshire would afford access to rail services in areas which currently enjoy no access to any rail services or no access to any useful rail services. For example, it would be possible –

- to connect communities currently having no access to rail services at all – Earby and (by means of a feeder bus service and/or park and ride facility) Barnoldswick - to connect communities currently having no access to any useful rail service – Colne, Nelson and other communities of Pennine Lancashire - to provide (in conjunction with the soon to be restored Todmorden curve) an efficient, economical and environmentally friendly commuter link to Greater Manchester from Colne, Nelson and other communities of Pennine Lancashire, as well as from the Aire Valley - to provide (in conjunction with the soon to be restored Todmorden curve) an efficient, economical and environmentally friendly link to Manchester airport from Colne, Nelson and other communities of Pennine Lancashire, as well as from the Aire Valley

- to provide an efficient, economical and environmentally friendly commuter link to Leeds from Colne, Nelson and other communities of Pennine Lancashire, and - to restore the strategically important through route between the west and east coast main lines, between west and east coast ports, and between the conurbations of Lancashire and Yorkshire.

11. Reopening the line between Skipton and Colne as part of an alternative through route between Lancashire and Yorkshire would provide additional non-transport related benefits –

- by providing a much needed catalyst for the regeneration and economic development of Pennine Lancashire, for example by ensuring that residents in areas lacking employment opportunities are able to access places of employment in Leeds and Manchester and by attracting inward investment and tourism - by addressing the need to reduce the social exclusion of residents of Pennine Lancashire by affording access to educational establishments, health facilities, retail outlets and transport hubs (including airports), and - by encouraging modal shift from road to rail, leading to a reduction in road congestion, traffic accidents and CO2 emissions.

12. We have commented in detail upon the potential scheme for reopening the line between Skipton and Colne as it is the one about which we have the most detailed knowledge. We recognise, however, that there are many other potential schemes – such as reopening another ‘missing link’ between Uckfield and Lewes – which are equally deserving of consideration. Selective re-openings of former railway lines would in SELRAP’s view assist greatly in meeting the targets called for in the HLOS announcement.

SELRAP’s campaign

13. As indicated in paragraph 1 above, SELRAP has been campaigning for re-opening of the former railway line between Skipton and Colne since 2001, and in the intervening period has garnered a broad base of support. Supporters of the campaign currently include –

- 193 Members of the House of Commons - 101 Members of the House of Lords - 49 (UK) Members of the European Parliament - 502 Councils (including in particular Lancashire County Council, North Yorkshire County Council, Pendle Borough Council and Craven District Council)

The proposal fits with the Local Transport Plans of both Lancashire and North Yorkshire County Councils, while discussions with Network Rail resulted in supportive comments in the Lancashire & Cumbria Route Utilisation Strategy published in August 2008.

14. However impressive the list of its supporters, SELRAP recognises that in order to secure reopening of the former railway line between Skipton and Colne, it will first be necessary to establish –

- that reconstruction of the railway is technically feasible, and

- that a viable business case can be made for reopening the railway.

15. So far as the first of those requirements is concerned, a report by Steer Davies Gleave dated May 2003 (commissioned by Lancashire and North Yorkshire County Councils) concluded that there is no insuperable physical barrier to reinstating the railway. In addition, the full

length of the trackbed between Skipton and Colne is protected for future transport use in all relevant local plans. Accordingly, there is no reason to doubt that reconstruction of the railway is technically feasible.

16. So far as the second of the requirements mentioned in paragraph 14 above is concerned, SELRAP commissioned and paid for a report to GRIP 1+ standard by JMP Consulting dated October 2007. In accordance with DfT requirements the figures used in that report included loadings of 66% for capital costs and 41% for operating costs. The report also used the then current method for estimating passenger flows, which Network Rail has subsequently recognised underestimated the likely flows, as experience (particularly in Scotland and Wales) has shown that in virtually all cases reopened railways have generated far greater passenger numbers than anticipated. The report also discounted entirely the potential for freight traffic. Even with those very conservative assumptions the report concluded that a benefit:cost ratio of up to 2.43:1 might be expected. That figure did not of course reflect those benefits which cannot readily be assessed in financial terns, such as regeneration of the locality served by the project or environmental benefits. Accordingly, there is no reason to doubt that a viable business case can be made for reopening the railway.

The way forward

17. SELRAP has been advised by Network Rail that the next step in taking its proposal forward is to commission a more detailed study to GRIP 3-4 standard, the cost of which has been estimated as being in the region of £250,000. As a voluntary organisation, SELRAP is clearly not in a position to fund such a study. Indeed, while the County Councils and other local authorities named in paragraph 13 above agree that the case for reinstatement of the railway between Skipton and Colne is well proved, none is at present in a position to finance a study to GRIP 3-4 standard.

18. Accordingly, it would in SELRAP’s view be appropriate that the HLOS should include provision for the funding of studies into the selective reopening of former railway lines in appropriate cases. Where (as in SELRAP’s case) preliminary work has been carried out by voluntary groups, that work could be adopted as a starting point for taking such studies forward. By its very nature, the GRIP process involves a number of clearly defined stages, and it would naturally follow that funding could only be provided for a subsequent stage of the process upon satisfactory completion of the preceding stage.

19. The HLOS announcement indicates (paragraphs 50 – 56) that the Secretary of State has made provision for certain ring fenced investment funds for CP5, and it would in SELRAP’s view be appropriate that the funding of studies into the reopening of former railway lines should also be ring-fenced. That could either be achieved by creating an additional ring fenced investment fund, or by directing that a fixed proportion of the £300 million to be made available over CP5 to fund journey time and performance improvements and other rail industry discretionary investment should be used for that purpose.

20. In conclusion, SELRAP would submit that without investment in selective reopenings of former railway lines which have been closed the laudable aims of the HLOS announcement may not be fully achieved.

24 August 2012

Written evidence from Mr Richard W Malins (ROR 34)

Richard Malins has over 45 years of railway experience, 30 of those years working for British Rail, which he joined as a graduate trainee in 1966. For part of that time he held positions of responsibility in the field of revenue protection, including the introduction of the concept of Penalty Fares, and ticket vending machines. Subsequent to privatisation he set up Transport Investigations, a business that provides consultancy and support services in ticketing systems and customer information. This has included surveys and advice to franchise bidders, with clients in London and across the UK and Ireland. He is also well informed on railway practice overseas. He is an acknowledged expert in the area and gave evidence to the Committee for its Fourth Special Report in 2007/8. He has held positions in the Railway Study Association and the Retired Railway Officers’ Society that give him a wide range of industry contacts, and he has been a regular contributor to the railway technical press.

The Transport Committee’s Rail 2020 inquiry session on 10th July 2012

At this session the Committee returned to a subject first addressed in the Fourth Special Report into Ticketing and Concessionary Travel on Public Transport issued in April 2008.

Recommendation 9. There are moves to install ticket gates at more rail stations. Yet ticket gates are not a panacea. They cannot be used by all passengers and staff are still required to be present. Gates introduce new drawbacks including delays and obstructions for passengers; they are not in keeping with historic stations; and they are not always the best method of protecting rail revenue. The Government, in consultation with the rail industry and passenger groups, needs to review this one-track approach and develop a more holistic policy. (Paragraph 60).

In their response the Government said it believes that effectively deployed gating, together with the associated staff, can be an effective solution to the issue of revenue protection. It is understood that not all passengers have the same needs, which is why the Department for Transport stipulates that where gating is present, wide access gating must also be available. In the rail White Paper "Delivering a Sustainable Railway", the Government has committed to looking at the role of gating across the network, together with operators.

The Government will therefore be running a project to examine several aspects of gating, including revenue protection issues, alternative control methods and consideration of passenger flow in view of the predicted increase in passenger numbers over the next 30 years.

There is no evidence that the Government ever actually ran any project to examine the several aspects of gating, or if it did, there was so little consultation on the matter that it was not possible for interested parties to make any contribution on the subject. Having given evidence to the Committee for the above report, an opportunity to submit further comment was not offered and my repeated submissions to the Department and the rail industry since are never met with any reasoned response. Meanwhile ticket gate schemes continue to proliferate, often at unnecessary or unsuitable locations. Research by Passenger Focus in 2010, as a part of their National Passenger Survey, into the “ease of use” of ticket gates suggested that while they appeared acceptable to commuters they were causing a significant proportion of passengers difficulties at stations with a more general user profile. This research has not been followed up, and Passenger Focus has not challenged this continuing proliferation.

I was therefore particularly interested in this exchange:

Q282 Steve Baker: Is the Department right to mandate ticket gates as the preferred strategy for revenue protection? Steve Howes: I am not sure that they do mandate gates as their preferred strategy for revenue protection. Train operators are encouraged to install gates where there is a de facto case for having gates. Clearly they are an effective means of revenue protection, and most typically in inner and outer suburban commuter markets. For long distance, revenue inspection on-train obviously remains an important part of the overall revenue protection mix and I think that will remain the case.

Steve Howes, as head of Rail Settlement Plan, gives a fair response here, but could be picked up on some points. What he says is correct, in that with a few exceptions (such as Nottingham and King’s Cross) the DfT does not mandate gates as their preferred strategy (I have a letter from Norman Baker that makes that claim), but there is encouragement to do so (I have evidence of that too from my own work on previous franchise bids, and their recent agreement with First Great Western). There is a kind of collective "group-think" fallacy at the DfT and in some TOCs that believes gates to be a sort of fail-safe revenue protection default with de-facto business cases. Often there is no real case at all and it is actually a zero sum game. Some locations, after any initial disturbance of ticket purchase patterns has worked through, will be no better or worse for fare evasion now than before any barriers went in, but there is a cost and there can be degradation of the station's amenities. This could be relevant to the 5th September enquiry, as there are instances where the presence of a closed-off paid- area reduces station trading opportunities, both in actual revenue and potential sites. Claims of improved security are often spurious as much of the crime risk remains and less frequented stations can feel less secure.

There are two particular ongoing gating sagas that involve MPs.

At Sheffield where the situation prompted the Sheffield Central MP (Paul Blomfield) to raise the issue in an adjournment debate on 14th December 2011. (Transcript with comments enclosed). The subsequent manipulation of the situation by DfT officials, who keep trying to revive the scheme as an unfulfilled franchise commitment by East Midlands Trains, is ridiculous. Their insistence that there is no alternative to barriers, quoting absurd numbers for revenue loss and the staff needed to combat it without gates, led Justine Greening to offer a subsidy for a new footbridge to facilitate the gating scheme. Logically this proposal is now overtaken by the announcement of electrification of the railway there as there are clearance issues for the existing bridges.

Gatwick Airport, mentioned below by Steve Baker, is another attempt to enforce a franchise commitment. While it is correct that Southern, with DfT encouragement, put barriers in their bid, like Sheffield it was never consulted upon before being contracted, and the train operator later thought better of it. DfT would not accept a variation and insisted on the commitment being carried out. Norman Baker boasted of this in the Sheffield parliamentary debate already referred to in December, and the result is a complete trashing of service on the Gatwick Express.

Steve Howes should also have admitted that outside commuter environments like London, ticket barriers are not properly supported by the ticket technology (unlike LUL where it is very good) and there is an unacceptably high rate of incompatibility and wrong ticket acceptance or rejection. That taken with people unfamiliar with the system or encumbered means there is a very high degree of manual intervention, with consequent degradation of customer service and ticket checking. Also the assumed throughput rate of over 20 passengers per gate per minute is quite unrealistic, it should be nearer 12 and yet safety cases are based on the higher number. No-one in the national rail world of group-think wants to recognise any of these issues, and the Rail Safety & Standards Board, as custodian of RIS- 7701-INS ‘Railway Industry Standard for Automatic Ticket Gates at Stations’ has thus far ignored this point. They say‘RIS-7701-INS provides an estimate of gate throughput based on the experience and recommendations of the industry drafting review group, concerning the reliable operational performance of ticket gates under all conditions’.

Q283 Steve Baker: I understood that barriers had been mandated on the Gatwick Express and other non-commuter journeys. Steve Howes: For services of certain sorts where there is high density and high throughput, yes, gates are absolutely the best solution.

If the TOCs were to stick to the commuter market with high density / high throughput stations there would not be too much argument about the topic. It's their intrusion into the non-commuter market that is the concern. The latest news that the West Coast franchise is to be awarded to First Group, a long-standing proponent of universal gating, is a matter of concern. Virgin was the only InterCity operator to stick with the BR open stations policy, and only about 8% of its passengers had to pass a ticket barrier (at stations run by others like Milton Keynes). Now First propose to gate 21 stations, which is almost all of the West Coast network and virtually 100% of their passengers will have to negotiate barriers, for most of them at both ends of the journey. Given what can be observed at ticket barriers on similar stations elsewhere this is a step change (down) in customer service, largely unremarked upon in the furore so far. Unless this major step is challenged it will make ticket barriers appear standard practice and the position at York and Sheffield, where they have been strongly opposed by the community, seem ever more anomalous. There is evidence that ticket barriers are only effective in controlling short distance revenue and are not relevant to longer journeys, where on-train inspection, as Steve Howes says, remains important. There is also evidence that where barriers are provided, on-train staff then relax their efforts and vigilance, so in their net effect they may in practice be counterproductive.

Q284 Steve Baker: Whose responsibility do you see it being to protect revenue? Is it the responsibility of the Government or the train operating companies? Steve Howes: Absolutely the train operators. They have the primary responsibility for protecting revenue.

This excerpt from the Invitation to Tender for the recently awarded West Coast franchise suggests that the DfT does not see it this way, although this approach, repeated in the Indicative ITT for Great Western has been moderated in the final version recently issued:

3.4.5 Station Gating and Gate-line Staffing Bidders should consider maintaining the existing levels of gate line coverage at minimum throughout the franchise term. Where a bidder proposes not to do this then any alternative solution being offered by the bidder should be set out in its bid plan. Bidders are free to propose additional gates at locations where they would ease emerging passenger flow issues. Where gate lines are operated, bidders are expected to provide plans for appropriate staffing levels and this should be included within the Ticket Sales and Revenue Protection Delivery Plan.

Q285 Steve Baker: Given the emerging technologies, things like print-at-home, how do you see barriers fitting in? Steve Howes: The print-at-home proposition today is only available for advance purchase tickets associated with a seat reservation. That is obviously because you can fairly easily duplicate a print-at-home ticket. We are hopeful and are exploring ways in which we can extend the print-at-home proposition to other forms of ticket, and open tickets particularly, which are not associated with a specific seat reservation. That would require some level of on-journey validation so that the revenue protection inspector could check that it is a valid ticket.

It is not quite true that print-at-home tickets are only associated with advance bookings and seat reservations. Gatwick Express for one (and there are others) issues regular ticket types that way, and suitably fitted gates can read barcodes quite well. It's just that the passengers often don't know how to present their sheet of paper, and on East Coast for example, currently a Government owned company, there are inconsistent and confusing practices. At gatelines managed by East Coast there are bar-code readers where gates are provided, but none where there are no gates or they are not managed by East Coast. The latter category includes Leeds, the busiest East Coast station outside London. At King’s Cross the gates are made by Cubic and have upward facing bar-code readers, whereas elsewhere on the route they are by Scheidt & Bachmann with forward facing readers. Passengers are expected to work this out for themselves, and what to do when there are no readers. There is a further difficulty with the current standard credit-card sized magnetic ticket in that, although gate compatible, for many journeys several are issued for one transaction. This includes separate tickets for outward and return journeys, seat reservations and receipts. Selecting the right one to operate a ticket gate is a challenge for the inexperienced.

Britain is unique in Europe in re-applying the closed station principle to all types of travel. Elsewhere ticket barriers are only used for metro and commuter services where the density of short-distance traffic makes other methods of revenue protection less effective. In some countries however they are unknown and the open station +principle is universally applied. No rationale has been advanced for such an indiscriminate application of ticket barriers here, but the suggestion is often made that it has more to do with a surveillance agenda than sensible revenue control. The news that the Home Office continues to pursue rapid screening technologies that could be installed at controlled points within stations suggests that the encouragement to install ticket gates rests beyond the DfT in government.

Additional Comments on the West Coast franchise competition

I am not in a position to comment on most aspects of the West Coast Main Line franchise award, and I did not work on any of the bid teams in this case. I have however worked on a number of previous bids in the revenue protection field and I did undertake a review of the topic for First Great Western so I am familiar with First Group’s approach and philosophy on the subject. First claims to be the principal proponent of barriers on the Inter-City railway, and there is evidence for that on Great Western, so it has become some sort of fixed doctrine towards finding extra revenue for them. Having had the recent opportunity for a serious look at Great Western, I believe that strategy to be misplaced, both in customer service and net revenue terms. Despite contrary advice they agreed with the DfT to proceed with gates at a number of their stations (Cheltenham, Gloucester and Taunton are examples) for which no business can be envisaged and where there would be negative impact from the schemes. First propose to gate 21 stations, which is almost all of the West Coast network and virtually 100% of their passengers, for most of them at both ends of the journey. Given what is known about the unsatisfactory operation of ticket barriers at similar stations elsewhere and can readily be observed, this is a major step-change down in customer service, largely unremarked upon in the debate so far. At present only about 8% of West Coast passengers encounter a ticket barrier, at stations managed by others (such as Milton Keynes), and in particular there is easy access and egress at most of their major stations. Although without an opportunity to examine these in more detail, and access to any relevant data on fare evasion, I cannot see how this move to a check at both ends of the journey will enhance customer service and more important net revenue to the franchise. Capital costs of equipment and enabling works are likely to be in the order of £12m and annual running costs for maintenance and incremental staffing will be some £3m. There is a sound body of evidence to suggest that gates are only effective in improving revenue control for short journeys and that benefits to a longer distance operator are negligible, indeed they may even be negative since gates do not address many of the causes of revenue loss (class of travel, possession of a valid railcard, use of the correct train etc.) and on-train staff tend to relax their efforts once gates are installed. While there may be some local benefit in the Midlands or North West, little of this will accrue to the West Coast franchise where the regional flows represent a very small proportion of revenue, and it is not clear whether these extra costs will be offset to those beneficiaries. First also claims that ticket gates improve security through better crowd control and the curbing of anti-social behaviour. There is scant evidence to support that too, since barriers are invariably opened when there is crowding, and any impact on behaviour is dependent on a staff presence, rather than equipment.

So while I do not know enough about the other assumptions that lie behind First’s successful bid for the West Coast franchise, in this particular area, I believe they are flawed, and if the gates under-pin even a small amount of the predicted flows of extra revenue, then they could be in error.

West Coast Invitation to Tender Document: 3.4.5 Station Gating and Gate-line Staffing Bidders should consider maintaining the existing levels of gate line coverage at minimum throughout the franchise term. Where a bidder proposes not to do this then any alternative solution being offered by the bidder should be set out in its bid plan. Bidders are free to propose additional gates at locations where they would ease emerging passenger flow issues. Where gate lines are operated, bidders are expected to provide plans for appropriate staffing levels and this should be included within the Ticket Sales and Revenue Protection Delivery Plan. Gate lines will be introduced at Birmingham New St on a phased basis during the early years of the new franchise. Bidders are required to detail plans for staffing and maintaining the gate lines from the completion of Gateway Phase 2 (see point 3.3.1.1) Bidders are free to provide proposals for additional gating schemes where a case can be demonstrated and where the gating schemes are deliverable. Bidders should pay particular attention to potential negative impacts of any proposed scheme. Bidders will be required to set out when such gates will become operational, and the hours when the gates will be staffed, reflecting the security and other benefits gating schemes bring.

20 August 2012 Further written evidence from HS2 Action Alliance (ROR 35A)

West Coast Mainline and High Speed 2 (HS2)

I am writing on two matters that both relate to the transparency of transport decision making processes, which we fully support:

• The apparent inconsistency in the actions of the Department of Transport between the award of the WCML franchise and the treatment of WCML in the context of HS2.

• Recent developments on the business case for HS2. We have already responded to your request for submissions on HLOS, but there were wider issues that we felt should be raised.

1. WCML franchise award Whether or not there is an investigation into the WCML franchise award, we have also been examining the statements made about growth and capacity on the WCML by both First Group and DfT and cannot see how they reconcile with the assumptions made in the context of the HS2 debate. I attach at Annex A our analysis of these issues. Our concern is twofold. Growth and pricing assumptions. First Group are assuming more growth on the WCML (at 5.8%/a) than DfT assumed for their HS2 case (at 2.4%/a). We are concerned that First Group’s higher growth assumptions are the result of decisions taken on pricing that DfT refuse to recognise in their own parallel growth model for WCML (in their case for HS2). The difference is not the result of a more cautious outlook by DfT. The absence of a realistic pricing model for HS2 was highlighted most recently by the Public Accounts Committee (PAC) who pointed out how ignoring premia pricing for HS2 led to DfT’s exaggerated growth assumptions for HS2. This applies especially to the numbers of new travellers (24% of total passengers) attracted by HS2, where price competition from the classic railway (and other modes) would be crucial. But even without premia pricing, competition on price can drive passenger growth and investment eg Chiltern Railways mainline services (with Evergreen III) are one third cheaper while some trains take only 6 mins longer than Virgin services to Birmingham, and, as might be expected, are winning custom from WCML Now First Group have publicly demonstrated the importance of price in forecasting volume growth by putting pricing centre-stage in their winning WCML bid – cutting not just standard fares but selling surplus seats on WCML at a discount (getting passenger occupancy up from 35%). DfT, in accepting First Group’s bid, are accepting that discounting prices is a plausible and deliverable scenario for tackling low passenger occupancy on WCML. But this is inconsistent with: • DfT’s own pricing assumptions in their model for HS2 and WCML. Here they assume the standard pricing model (on average RPI + 1%) so that HS2 could not compete with deeply discounted prices on WCML without making much larger losses and hence requiring larger subsidies than the currently forecast £26bn (NPV, 2011 prices). • DfT’s assumption that when HS2 is built, WCML passengers will move to HS2 leaving much surplus capacity. The next WCML franchisee will (like First Group) want to sell the spare capacity at discounted prices. First Group propose, and DfT agree, that this is an outcome that makes economic sense for WCML. It is of course also why proper consideration of pricing is fatal to the case for HS2, (as some passengers will choose the cheaper but slower WCML option). This is no doubt why DfT are defending their current competition-free modelling approach for HS2, as it would destroy the already fragile case for HS2. • The general trend in long distance domestic travel per capita (ie market saturation) that has been static for 15 years. This suggests that after population growth is accounted for much of the 5.8% volume growth by First Group must be intermodal swapping, rather than new passengers. Rail cannot however increase its share of the long distance travel market indefinitely. It is now well known that the last two big rail projects (Eurotunnel and HS1) had unrealistic growth forecasts from failing to take account of competition – in one case from the ferries, in the other from low cost airlines. It would be inexcusable if DfT failed a third time by ignoring competition from other rail operators, especially as unlike previously the excuse cannot be that the outcome was not foreseeable. We feel that it would improve DfT’s decision processes were your Committee to ask them to take price into account in their modelling work for HS2. Currently DfT’s latest Economic update (released 23 August 2012) reports no plans to do this. Capacity: First Group report that there is ‘considerable unused capacity’ on WCML and that passenger seat occupation will be just 35% when they takeover in December 2012 (when the already committed 1061 new pendolino coaches that provide for 35 trains to be 11-car have arrived). We know, as our annex shows, that even in the peak and before the 11-car trains are in operation, occupancy was only about 60%, even though DfT still refuse to release the precise counts data. First Group are meeting their more aggressive volume growth forecasts2 of 5.8%/a (which is a more than doubling in the number of passengers by 2026, rather than by 2037 as DfT assume in their case for HS2) without investing in any more additional capacity on the southern end of the WCML. DfT and Network Rail are apparently satisfied with this. It is hard to reconcile this with the wide range of statements made by DfT, Ministers and Network Rail (see Annex A) concerning how WCML services are ‘extremely heavily used, will be full up (variously within 7 to 10yrs, in a decade, and by 2024) and the looming ‘capacity crunch’ on the long distance WCML services. This raises two issues • DfT/Network Rail have made it abundantly clear that without HS2 the WCML could not cope with a doubling in passengers by 2037, but First Group say existing capacity at the Southern end of WCML can cope (and DfT agree) with a more than doubling by 2026 (bar utilising one more train path)!

1 31 trains will be extended to 11-car (ie 62 further coaches), and 4 new 11-car trains will be in service (ie 44 more coaches) 2 First Group’s forecast will also be met using extra capacity they are creating by 11 new 6-car EMU’s operating from Birmingham northwards. But this capacity does not affect the southern end of the WCML and the DfT and Network Rail statements that relate to the London Birmingham leg of HS2 • If a more than doubling in passengers can be accommodated within existing capacity then it leaves the following measures available to accommodate further growth: o Extending all pendolinos to 11-car rather than just 35 o Further extensions to 12-car (except for Liverpool, where there are practical difficulties) o Rebalancing first and standard class (at no loss in revenue given low first class loading levels, believed to be around 20% on most services) o Addressing 3 pinchpoints3 on the WCML (that also provides an opportunity to address the already overcrowded commuter services run by London Midland to Milton Keynes that use the WCML fast lines) In validating the 51m proposals for DfT, Network Rail did not deny that extra capacity could be achieved this way (and for less than one tenth the cost of HS2) but did not consider it a strategic solution to the longterm capacity issue for WCML4. If in fact there is no shortage of capacity the case for spending £33bn on HS2 all but disappears.

We feel that it would improve DfT’s decision processes were your Committee to ask them to respond to both these issues before proceeding further with HS2. Capacity cannot both be at the heart of the case for HS2 while similarly accepting the First Group assumptions on capacity.

2. HLOS and IEP changes As we set out in our submission of 24 August we would expect that several of the HLOS and related improvements that will now be in place by 2019 would affect the incremental benefits of HS2, as the ‘do minimum’ position will have been significantly changed. However the latest business case for HS2 (released 23 August) neither mentions them, nor suggests that they will be taken into account of in their further work.

In 2010 HS2AA raised issues about the exclusion of Evergreen III that was a committed scheme. HS2 Ltd initially defended their decision to us on the basis it would not materially affect their modelling5, but subsequently did include it in their January 2012 business case. We are now seeking the same for the HLOS improvements.

We hope that the Transport Select Committee agrees that the HLOS improvements should be taken account of in the economic case for HS2.

3. HS2 business case updates

3 A grade separated junction between Leighton Buzzard and Cheddington; Stafford area by-pass and 4- tracking Attleborough/Brinklow (including freight works at Nuneaton) 4 Network Rail did raise issues about the 51m solution not meeting suburban capacity requirements (services to Watford). This stemmed from no discussions taking place with 51m and a misunderstanding concerning their proposal. There is no suggestion either that HS2 was being built to resolve suburban capacity requirements. 5 Letter of 29 June 2010 from Alison Munro to Bruce Weston, Director HS2AA We note also that DfT still compare HS2 with a ‘do minimum’ or the alternative of a new line at conventional speeds.

It is wrong in principle that this approach continues to be used, despite the best alternative to HS2 having been identified (as assessed by the benefit to cost (BCR) ratio) which is neither the ‘do minimum’, nor a new line at conventional speed, but an improved WCML (ie as proposed by 51m).

The latest update of the business case for HS2 produces an improved Benefit to Cost ratio (restoring the January 2012 picture, that had deteriorated in April), with the improvement largely attributed to ‘better modelling’. The deficiencies identified by yourselves and Public Accounts Committee are either still dealt with as sensitivities (that have not been updated) or not covered at all. It is difficult to understand what has and has not been included with such a brief and unsupported summary6.

Again we feel that it would be helpful if your Committee would ask that DfT are required to provide further details. For a scheme costing £33bn it is surely unacceptable to put so little information in the public domain. This is particularly important given that the August update says that no further business case will be provided until the Hybrid Bill and consultation on Phase 2 of HS2 in 2013.

4. Public Accounts Committee (PAC) recommendations The PAC report on the completion and sale of HS1 made a number of recommendations on the modelling assumptions used for HS2 related to pricing and the value of time. These included a recommendation that the assumption of no premium pricing for HS2 be revisited. The assessment of HS2 currently ignores the effects of competition from the ‘classic’ rail services that is clearly relevant when HS2 is built (irrespective of whether premia pricing applies). This would clearly have a very substantial effect on both background growth in demand as well the numbers of new travellers attracted to HS2 (as explained above).

Irrespective of the issues we raise about the award of the WCML franchise we hope that your Committee will press for price to be taken account of in the HS2 demand model

28 August 2012

6 Updated Economic case for HS2, August 2012, HS2 Ltd at http://www.hs2.org.uk/assets/x/93861

Statements on Growth and Capacity on the WCML in the context of the recent WCML franchise award and the case for High Speed 2.

First Group have won the WCML franchise from Virgin that runs from 2012 to 2026, ie until HS2 is scheduled to start. But DfT, First Group and Network Rail seem to have inconsistent views about growth and capacity on the WCML.

Growth

1. First Group say they are assuming compound volume growth of 5.8%/a ie about 120% over the 14 year life of the franchise – this is a more than doubling by 2026

2. This figure contrasts with what DfT assume in their HS2 business case ie 2.4%/a or a doubling by 20377 (in growth without HS2); and what DfT presume in their HLOS forecasts for the peak periods at Euston (about 10% over 5 years to 2018/198). So First Group are on the face of it being very much more optimistic for WCML than DfT.

3. One interpretation is that this simply endorses the view that DfT are being more conservative on WCML growth in their HS2 case as the taxpayer is heavily subsidising the proposal. But this is to ignore the very different approach to pricing in the two models

• First Group have demonstrated how price affects demand. Essentially they will price the market aggressively and attract additional passengers by discounted pricing to fill up the considerable spare capacity (with just 35% passenger occupancy in December 2012). They will reduce standard walk-up fares (by on average 15%).

• For HS2, DfT assume a standard model of what happens on price (overall RPI + 1%) with a ‘usual’ basket of different fares. They do not assume premia pricing for HS2 (which would affect both revenue and demand), and ignore the effect of price competition from neighbouring franchisees covering the same destinations. This is despite the issue being identified by both the Transport Select Committee and also by the Public Accounts Committee. On demand, premia pricing would be likely to have two effects:

a. To reduce the 24% of passengers that DfT assume are new HS2 passengers and attracted to travel on HS2 (this is twice the number estimated to switch from air and car to HS2, that would also be affected)

b. To reduce the number of passengers who will elect to move from WCML to HS2. People will have a choice of paying a premium to get there about 30 mins quicker, or remaining on WCML getting there slower but paying less

HS2 could not use discounted pricing in the same way as First Group envisage or its economics would suffer further.

The competitive response of WCML would undercut HS2’s prices even if HS2 were not at a premium.

4. If DfT/Network Rail believe that selling surplus seats at a discount attracts passengers then they should take it into account for HS2. Price competition from the next WCML

7 HS2 Ltd say WCML will increase from 60,000 passengers/ day (2010/11) to 117,000 by 2037 8 Appendix A of 2012 HLOS statement shows increase at Euston peak from 24,300 to be 1,400 by 2018/19 franchisee will undercut HS2 (whether premia priced or not) and the HS2 forecasts will be undermined.

Capacity

5. First Group in their winning announcement said there was a ‘considerable amount of unused capacity’. This is clearly consistent with the available evidence from the Network Rail South Eastern RUS (showing long distance trains as just 60% full in the morning peak at Euston which is the least busy domestic long distance station, and that is before the longer 11-car pendolino trains are in place). It is also confirmed by an independent survey conducted9 for HS2AA that showed Virgin services on average 56% full in the evening peak, also before the 11-car services were operating.

6. Extending Pendolino’s from 9-car to 11-car adds 50% more standard class capacity.

7. As far as creating extra capacity to meet the 120% demand growth First Group refer to 3 sources

a. New capacity for between Birmingham and the North of 11 new 6-car electric multiple units (EMU) ie 12,000 extra seats; and b. The already committed new longer 11-car pendolinos ie 10610 more coaches giving 28,000 extra seats from Euston on the length of the route.

c. An extra hourly service from Euston to the North West (that then allows shorter journey times by reducing intermediate stops to Glasgow).

8. When the Pendolinos have been delivered at the franchise start First Group say passenger occupancy will be just 35%11. This is before they add the new EMU capacity. So WCML has plenty of spare capacity.

9. It is hard to see how these statements on spare capacity, together with the current low levels of loading (particularly compared to other parts of the network) are consistent with DfT and Network Rail statements that justify HS2 on the basis of how full and crowded the WCML is, and how in the next decade it will run out of capacity.

• No one disputes (not even the previous Secretary of State, Philip Hammond) that specific trains are very busy because of the pricing structure and the ‘fares cliff’ at 7pm – but this just serves to illustrate the importance of price in managing demand. • It is also not disputed that there is chronic overcrowding on the London Midland commuter services to Milton Keynes and Northampton, which spills over to the occasional long distance Virgin trains that stop at Milton Keynes (that were found to be 67%12 full in the evening peak).. But HS2 was not designed to cure this (and certainly would do nothing about it for the next 14 years before HS2 was built). Other solutions are plainly relevant to address this issue.

10. Network Rail, and DfT have nevertheless made many public statements including to the Transport Select Committee and in the HS2 Consultation, about the ‘capacity

9 Survey by Customer Research Technology Ltd conducted for HS2AA in December 2011 that showed Virgin peak evening services from Euston on average 56% full (and under 45% full to Manchester) 10 The 106 more coaches relate to the 31 services that will be extended (2x31trains = 62 coaches), and the 4 new services 11x4 = 44 coaches). 11 Statement by First Group on 15 August on winning the Franchise 12 Survey by Customer Research Technology Ltd for HS2AA (December 2011) crunch’ on WCML. HS2AA catalogued (in Appendix 1.4 of their consultation response, also provided to the TSC) many of the statements made and how Network Rail’s were at odds with their own forecast in their WCML RUS (done prior to the latest pricing decisions on RPI+3%). Dialogue by Design13 chose to quote the following in their summary of consultation responses published alongside the HS2 decision in January 2012: “Network Rail indicate in their response to the consultation that they do not think it will be possible to meet future demand by increasing capacity on existing routes such as WCML: ‘However, once the work that Network Rail is undertaking at Stafford (which will have capacity benefits further south on the WCML) has been completed, there will be no possibility of increasing capacity on the line further to enable significantly more trains to run, and no possibility of lengthening the crowded services significantly”(Network Rail)

Despite this statement by Network Rail in 2011

• Not all Pendolinos are currently being lengthened to 11-car (just 31 of the 52 fleet plus 4 new 11-car trains), which has been ignored by the above statement. Network Rail 14 reject a further extension on the basis they could find no case for it! (This may be due to the current appraisal methodology being heavily tilted towards journey time savings that extending trains does not produce, a point also emphasised by the Public Accounts Committee in their June report15) • Further extension to 12-car (except to Liverpool where it is impractical) was an accepted proposition by Atkins in their analysis for DfT of Strategic Alternatives to HS216, and part of 51m’s proposal, Network Rail’s only comment17 being it would require further platform lengthening (the details of which are contested by 51m) • Network Rail themselves separately had made clear that there was opportunity for a low cost solution ie further off peak path18. This we presume is the extra train path that First Group refer to in their statement, and will have been approved by Network Rail in the bidding process for WCML franchise. 11. The statements that we have a capacity crunch by 2024 for long distance travel on WCML, with no possibility of doing anything else to alleviate it significantly seem wholly at odds with awarding First Group a franchise based on more growth than even DfT assumed, and for the southern end of WCML just using the already committed 11-car extensions and one further train path. This • Ignores going to 11-car for all pendolino services • Ignores going to 12-car for all services except to Liverpool • Ignores rebalancing first and standard class (quick, and with no revenue impact given the lightly loaded first class) • Ignores infrastructure improvements at three specific pinchpoints on the WCML that offer some journey time improvements, separation from freight, and an opportunity to also improve the commuter services)

13 Page 45 of Consultation Summary Report by Dialogue by Design, Nov. 2011 (published Jan. 2012) 14 Page 83 of Network Rail Draft RUS for WCML (published December 2010) 15 Public Accounts Committee June 2012 Report into HS1 Questions 107 to 110 16 High Speed 2: Strategic Alternatives Study Rail Interventions Report – where 12-car was part of Rail Package 1 but not developed further as RP1 was not considered a complete solution 17 Review of Strategic Alternatives to HS2, November 2011, Network Rail released as part of the HS2 decision documents in January 2012 18 In their own forecast in December 2010 Draft RUS, page 85

Written evidence from HS2 Action Alliance (ROR 35)

HLOS plans and priorities

HS2AA note that the Transport Select Committee (TSC) are inviting views on the Government’s HLOS plans for rail1, including how the schemes have been prioritised, when the new schemes will be delivered and how they will be paid for.

We would like to make three main points about the HLOS plans for Control Period 5. These concern:

• Their impact on other schemes and notably the business case for HS2 • What they imply for overcrowding on Britain’s rail network and hence the prioritisation behind HLOS • Funding implications.

Impact on business case for High Speed 2 (HS2)

The HS2 business case is kept under continual review. There have already been two revisions this year (in January and April) and another was released yesterday on 23 August taking account of the March 2012 economic forecasts and the preferred Y route. HS2AA ask that the TSC recommend that they also be required to take account of the HLOS programme.

Aspects of the HLOS programme affect the incremental benefits that are associated with HS2, as the ‘do minimum’ position is significantly changed for 2019. These aspects should therefore be incorporated in the revised business case for HS2. These will include

• The impact of Midland Mainline electrification programme which is expected to increase capacity and reduce the journey times to towns and cities (eg Leicester, Nottingham, Derby and Sheffield) in the catchment area for the Leeds leg of the Y branch of HS2. This clearly affects the benefits ascribable to HS2. Its connection to the High Speed Rail line was acknowledged as long ago as 2009 by many, including the Chief Engineer of HS2 Ltd2.

• The improvements to East Coast Mainline, both the IEP trains announcement together with the £240m for infrastructure investment (to sort the crossing flows of passenger and freight at Peterborough) announced as part of HLOS, will improve capacity and cut journey times from London to Newcastle (by 13 mins), again affecting the case for the Y. We note that

1 Railways Act 2005 statement at http://assets.dft.gov.uk/publications/hlos-2012/railways-act-2005.pdf 2 An FOI request revealed an unguarded response from the Chief Engineer at HS2 Ltd (in his personal capacity) about the MML electrification, where he noted in an email of 23 December 2009 to the South Yorkshire Passenger Transport Executive ‘…I think there has to be care not to undermine a very strong business case for a proper high speed line by proposing an investment in an intermediate solution which gives a proportion of the benefits and potentially allows government to say 'they have got part of what they wanted so the priorities now move elsewhere.………..' HS2 Ltd/DfT are currently claiming a 51mins reduction3 from Kings X to Newcastle (from 3hrs 9 mins to 2hrs 18mins), despite most trains on the current hourly service being typically 2hrs 50 mins (and the fastest from Newcastle just 2hrs 24mins). So we presume the proposed 13 mins journey time saving means the 51mins saving ascribed to HS2 comes down to a 19 mins saving with HS2 (and even less compared to the fastest service).

On costs we suggest that the £140m set aside for schemes including ‘all necessary work on development of the linkages to HS2 to the existing network’ should be taken account of as a cost within the HS2 business case, as were it not for HS2 these linkages would not be required.

HS2AA also note that HLOS will support freight infrastructure investment in developing a ‘wider strategic freight network’, with investment in the electric spine from the South Coast through to Birmingham, South Yorkshire and the Northern Hub. This will remove the pressure on the WCML to provide additional freight paths – the need to free up space on the WCML for freight had been a central tenet in the Government’s case for HS2.

Finally these changes can only be properly reflected in the HS2 business case if the demand model for HS2 reflects price. As was made abundantly clear in the June 2012 Public Accounts Committee (PAC) investigations into the Completion and Sale of HS14, that included implications for HS2, this is not currently the case. The latest update still ignores price competition, despite the fact the PAC recommended (at Recommendation 5, page 6) that the HS2 pricing assumption (of non premium pricing) be reviewed as it effectively ignores the competitive effect of the classic railway on demand for HS2. This will clearly also be important when assessing the impact of the HLOS schemes on the business case for HS2.

The August update of the HS2 business case apparently includes various ‘modelling refinements’ yet still leaves incontestable flaws in using an outdated demand mode; a discredited ‘simplified’ value of time saving assumption in addition to the unrealistic pricing. It is stated there will not be another business case until the Hybrid Bill and the consultation on the Y route in 2013. We would submit that the HLOS changes should be taken account of now.

HLOS prioritisation

For passengers ‘getting a seat’ represents an important factor in terms of prioritising expenditure. A few days before the HLOS announcement the DfT/ORR released the latest figures5 on rail overcrowding covering all key cities as well as London. If the data for ‘% of passengers standing’ is ordered by destination and operator it provides

3 High Speed Rail: Investing in Britain’s Future - Decisions and Next Steps, January 2012, DfT. Map on page 15 4 http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/464/464.pdf 5 http://assets.dft.gov.uk/statistics/releases/rail-passenger-numbers-and-crowding-on-weekdays- 2011/rail-passengers-crowding-2011.pdf a snapshot prioritisation for investment. It does not use PiXC (passengers in excess of capacity),nor does it disaggregate it by commuter or long distance service, but rather the simple straight forward measure of getting a seat.

The table of results below was prepared by Bluespace Thinking6. It shows the investment covered by key HLOS plans is well down the list, at 17th, 30th, 35th and 42nd/43rd and 51st. Note that London Overground that tops the league table is explained by the high capacity metro-style trains deliberately designed to carry a high number of their passengers standing as they have relatively few seats.

The apparent low priority given to overcrowding in the choice of HLOS schemes is particularly significant given

6 Bluespace Thinking Ltd. Table at http://www.bluespacethinking.com/projects • The recent pattern of rail growth – with the biggest increases in regional services (15.4% over last 2 years), then London services (11.4%), and lastly long distance services (9.6%). If these differences in growth rates are sustained then pressure on the regions will grow.

• The increases in peak capacity that the £9bn HLOS improvements are designed to provide7 are 10% for Birmingham services; 20% for Leeds; 22% for Manchester; 14% for other regional cities (Bristol, Leicester, Liverpool, Newcastle, Nottingham and Sheffield); and 22% for London terminal capacity when account is taken of the Crossrail and Thameslink projects.

• Government’s commitment of £33bn to HS2 that is set to increase capacity by more than 200% by 2037, with the serious expenditure starting after CP5. Interestingly HS2 comes in at 39th/40th and 49th/50th on the table.

Unless the economy performs unexpectedly well, this suggests that after the end of CP5 there will be little further money available beyond that earmarked for HS2. It therefore looks like the provision of extra capacity to help passengers get a seat is not a priority.

Funding implications

Funding for HLOS for CP5 is assumed to include

• The rail industry achieving up to £3.5bn in efficiencies by 2019 as identified by McNulty • Above inflation fare rises – with RPI + 3% in the short term • Savings from the electrification projects effects on long term operating costs. There will inevitably be political pressure on the fares rises, not least as an election draws near. Radical cost cutting has been on the rail agenda for almost as long as privatisation has been in place. All this means that the taxpayer may end up with a larger share of the bill than currently envisaged, creating an environment where HS2 would consume all the available funding. The Government’s suggestion that HS2 does not compete for funds allocation with other transportation projects (including road) looks increasingly unsustainable. Consequently whether HS2 is the right priority needs to be addressed.

24 August 2012

7 As identified in the capacity metric at Appendix A of the Railways Act 2005 Statement at http://assets.dft.gov.uk/publications/hlos-2012/railways-act-2005.pdf Written evidence from 51m (ROR 36)

Introduction The Transport Select Committee has invited views on the Governments HLOS plan for rail for Control Period 5, including how the schemes have been prioritised, when the new schemes will be delivered and how they will be paid for.

51m would like to raise a number of issues in relation to HLOS and the impacts on the current railway and possible future planned investments, notably HS2.

Overview 51m generally welcomes the announcement by Government in relation to the HLOS and the investments to be made in Control Period 5 and indeed the other recent announcements in relation to IEP trains on the East Coast Mainline (ECML) and the West Coast Mainline franchise (WCML). These investment announcements are entirely compatible with the proposals that 51m has made in relation to the future capacity needs of the WCML – maximise the use and capacity of existing infrastructure instead of spending £33bn on HS2.

The key issues that we wish to raise relate to:

• The impact of these investments on the rail network and in particular the case for HS2 • The effects on the economics of Britain’s railway

The impact of the investments in the rail network and in particular the case for HS2 A number of elements of the HLOS programme will bring benefits, including greater capacity and reduced journey times, to the current network in the corridors most affected by the proposed HS2. 51M believes that the business case for HS2 should be reassessed with this in mind.

• The impact of the Midland Mainline electrification programme is expected to increase capacity and reduce the journey times to towns and cities (eg Leicester, Nottingham, Derby and Sheffield) that are in the catchment area for the Leeds leg of the Y branch of HS2, clearly affects the benefits ascribed by the Government to HS2. • The improvements to East Coast Mainline, both the IEP trains announced on 25 July together with the £240m for infrastructure investment (to sort the crossing flows of passenger and freight at Peterborough) announced as part of HLOS, will improve capacity and cut journey times from London to Newcastle (by 13 mins), again affecting the case for the Y. We note that HS2 Ltd/DfT are currently claiming a 51mins reduction1 from Kings X to Newcastle (from 3hrs 9 mins to 2hrs 18mins), despite most trains on the current hourly service being typically 2hrs 50 mins (and the fastest from Newcastle already being just 2hrs 24mins). So we presume the proposed 13 mins journey time saving means the 51mins saving ascribed to HS2 comes down to just a 19 mins saving with HS2 (and even less compared to the fastest service).

1 High Speed Rail: Investing in Britain’s Future - Decisions and Next Steps, January 2012, DfT. Map on page 15

• The proposed new £500m Great Western link to Heathrow will affect the assumed passenger flows from the west using the proposed HS2 interchange at Old Oak Common for getting to Heathrow. The link will also provide direct Birmingham to Heathrow services. We note the link is described by DfT as ‘complementing’ high speed rail access, while we would suggest it is in fact competing with access to Heathrow provided by Old Oak Common and the HS2 business case should reflect this. • The successful First Group bid for the WCML will provide a £5.5bn payment to Government over the franchise period and it is reasonable to expect that any future franchises of the existing WCML would make similar or greater contributions. In comparison HS2, together with the residual WCML franchise, will require a £25bn subsidy from Government. The DfT have accepted that the 51m Optimised Alternative can provide up to 3 times the current WCML capacity, more than meeting future growth needs at a cost of less than £3bn. The decision to invest £33bn in HS2 seems counter intuitive, particularly against the stated Government policy of reducing the cost of Britian’s railways by £3.5bn by 20192 making it more financially sustainable and lessening the burden on farepayers and taxpayers, together with improving value for money for customers3. • The continued commitment to fund the industry to develop the wider Strategic Freight Network, and the investment in the ‘Electric Spine’4 route from the South Coast to the Midlands and South Yorkshire and the Northern Hub, will significantly reduce the pressure and need for any additional freight services on the southern end of the WCML. Indeed, in conjunction with the Felixstowe to Nuneaton investment it is likely to reduce the number of services using the southern end of the WCML. These investments negate any arguments that HS2 is necessary to provide more freight paths on the WCML. • The latest DfT/ORR figures on rail overcrowding covering all key cities as well as London, was published in July 20125 and it is surprising that the HLOS investments do not target and prioritise those routes which are most overcrowded. This is highlighted by the fact that the WCML Virgin Trains services have a crowding factor of 0% in the peak period at Euston, yet Government sees investment in HS2 as a priority. Investment should be prioritised to increase capacity and value for customers on the crowded sections of the network

Conclusion 51m supports investment in the railways and the improvements that they will bring to passengers, however it is critical that they should not be seen in isolation and that the evaluation of HS2 must take these investments into account within its evaluation and business case. We believe that inclusion of the HLOS and other announced investment will reduce the business case further to significantly less than 1.0:1 and this means that HS2 should not go ahead.

The new WCML franchise means the private sector make a £5.5bn contribution to the cost of running the railways, whereas HS2 will require a £25bn subsidy.

We urge the TSC to respond to the HLOS Railway Act 2005 Statement by requesting that Government undertakes a fundamental review of HS2.

23 August 2012

2 March 2012 Command paper – Reforming our Railways: Putting the Customer First 3 Railways Act Statement 2005 for Control Period 5 – paragraph 27 4 Railways Act Statement 2005 for Control Period 5 – paragraph 24 5 http://assets.dft.gov.uk/statistics/tables/rai0215.xls

Written evidence from West Anglia Routes Group (ROR 37)

HLOS Announcement

1. Introduction

1.1 The West Anglia Routes Group welcomes the opportunity to provide evidence to the Committee’s inquiry. The Group is an association of public and private sector organisations from along the routes running from Liverpool Street and Stratford through north London into Essex, Hertfordshire and Cambridgeshire. These routes are of major strategic importance providing the direct link between Cambridge, Stansted Airport, the City of London and Stratford. In addition they link growth areas along the Lea Valley including Cambridge and Harlow to the Upper Lee Valley to the south. Investing in infrastructure along the West Anglia Routes could unlock wider benefits for the UK economy of over £4.5 billion GVA by 2021 and over £10.7 billion by 2031.

1.2 Currently there is a major tension between longer distance services from Cambridge and Stansted Airport and inner suburban services that have to share the same two-track mainline. This has a direct impact on service frequencies, journey times and overall punctuality which is reflected in the routes having the 4th lowest customer satisfaction ratings in Great Britain (as measured by Passenger Focus in the Spring 2012 National Rail Passenger Survey published in June 2012).

1.3 Given this the West Anglia Routes Group’s organisations are working together, with cross party political support, to secure much needed and timely investment to improve services and thus support economic growth.

2. Funding Allocations

2.1 The contents of the High Level Output Specification (HLOS) contain a number of positives for London and the south east, in particular the confirmation of funding for the Thameslink Programme and Crossrail. In addition the allocation of £350m for projects to deliver additional capacity into central London termini is most welcome. This is particularly important for Londoners who make six times as many rail trips per head than anyone else in the UK.

2.2 The provision of various ring fenced investment funds is also welcome. There are a number of stations on the West Anglia Routes which need to benefit from station improvement and Access for All funding. This includes the regionally important interchange at Tottenham Hale, which station usage counts undertaken on behalf of the West Anglia Routes Group suggest serves 6.9m passengers per annum, putting it in the top 50 most used stations on the national network. There are also schemes in the illustrative options which could benefit from passenger journey improvements and level crossing safety funding.

2.3 The HLOS illustrative options include delivering Lea Valley capacity enhancements. The Group looks forward to working with the industry to further develop this important scheme as part of the Strategic Business Plan process, which will determine in detail what will be delivered in CP5.

2.4 Linked to this is the development fund for CP6 which must allow the preparation of further Lea Valley capacity enhancements including four tracking of the mainline. This long overdue investment should address the ongoing constraints arising from having services suited to a four track mainline operating on a two track railway. Currently there is a major tension between faster limited-stop longer distance services and slower all-stations inner suburban services running on the same tracks. Resolving this by investing in a four track mainline in CP6 will address ongoing capacity, connectivity and journey time issues.

2.5 Also of particular interest to the Group is the mention of a supplementary major project to deliver sufficient capacity north of Ely station (to accommodate freight and passenger growth). This is a long standing strategic issue and its resolution will benefit both passengers and the growing freight sector.

2.6 However the Group is concerned that the HLOS focuses on delivering increased capacity into London termini as a key output. This approach fails to acknowledge the complexity of the London and south east rail network and the role frequent and reliable rail services can play in regeneration and economic development. It is also of concern that specific targets are not set for customer satisfaction and that reduced journey times and improved connectivity are not explicitly recognised as outputs.

3. Capacity

3.1 As noted above, by focusing on capacity outputs for London and the south east the High Level Output Specification does not take into account the wider benefits that investment in the rail network can deliver. In London the focus on the central termini stations also fails to recognise that there are other drivers of demand for example at other key destinations and interchanges such as Stratford.

3.2 By focusing on capacity at central London termini the HLOS fails to take into account that crowding is often most severe at the interchanges with the Underground Lines which serve central London. This is particularly true on the West Anglia Routes where crowding on inbound morning peak services drops after they leave the interchanges of Seven Sisters and Tottenham Hale.

3.3 A particular issue is the forecast capacity requirements for services into Liverpool Street. It appears that the introduction of Crossrail services in 2018 will see capacity being freed up across the board. Unfortunately this will not be the case for the West Anglia Routes which operate along a separate corridor and only directly benefit if passengers interchange at Liverpool Street or Stratford.

3.4 It is also of concern that there is not specific reference to reducing the number of passengers in excess of capacity. For longer distance services this would mean having no passengers standing for over 20 minutes, while on shorter distance services the focus should be on reducing to acceptable levels the number of people standing per square metre.

3.5 The HLOS should recognise that the need to expand overall capacity at central London termini is only one of several issues that must be addressed in order to improve the experience for passengers on the complex and crowded rail network serving London and the south east.

3.6 A specific issue that needs to be addressed on the West Anglia Routes is the low frequency and irregular service patterns at a number of stations which is a result of infrastructure constraints. However the HLOS focus on capacity into central London termini does not recognise the important role that providing regular and frequent services can play in supporting regeneration and growth, which in turn deliver wider benefits to the UK economy.

4. Recognising Wider Benefits

4.1 In terms of wider benefits the scheme identified in the HLOS illustrative options as delivering Lea Valley capacity enhancements would also make a significant contribution to local regeneration and the national economy. Work by Oxford Economics on behalf of the London Borough of Enfield indicates that investing in infrastructure along the West Anglia Routes could unlock wider benefits for the UK economy of over £4.5 billion GVA by 2021 and over £10.7 billion by 2031.

4.2 The Greater London Authority’s strategic planning framework for the Upper Lee Valley identified enhanced capacity and connectivity on the West Anglia main line through Tottenham Hale as fundamental in opening up the redevelopment potential of this area. For example by increasing the frequency at two stations (Angel Road and Northumberland Park on the Lea Valley mainline) a development with a total value of £1.4bn could be brought forward and the ward with the highest level of worklessness in London could be served by a regular rail service.

4.3 Unfortunately the HLOS does not seem to recognise these wider benefits that rail schemes can unlock.

5. Customer Satisfaction

5.1 Rail crowding in London and the south east is more severe and more widespread than in other British cities. Punctuality tends to be somewhat worse than Regional and Inter-city services. Taken together, it is no surprise that customer satisfaction is rather lower. This is particularly stark on the West Anglia suburban routes where passenger satisfaction for the most recent period (as measured by the Passenger Focus National Passenger Survey) was a lowly 73% - the 4th worst in Great Britain and well below the average of all London & south east operators of 82%.

5.2 Given the level of investment outlined it is surprising that the HLOS does not set at least a minimum national target for customer satisfaction. Such an approach would see all franchises having a similar minimum standard, with investment being directed to those routes performing below par. This measure should also encourage improved performance against the Public Performance Measure and reduced Cancellations and Significant Lateness.

6. Journey Times

6.1 Given ongoing infrastructure constraints, particularly on the West Anglia Routes, it would have been helpful if the HLOS had considered reduced journeys times as a suitable measure of improved efficiency. For example journeys from Cambridge and Hertford along the West Anglia rail corridor to central London take significantly longer than on other routes serving the same destinations.

6.2 With Stansted Airport there are obvious links to aviation policy in the south east since the airport currently has significant capacity but not the fast journey times into central London to match those of Heathrow, Gatwick and Luton airports. The aspiration, shared with Stansted Airport Ltd, is to improve journey times to central London, but this will need major infrastructure investment.

6.3 It would seem that an output around achieving comparable journey times for longer distance services could have encouraged more efficient use of the rail network and airport capacity by offering passengers more choice.

7. Conclusion

7.1 Overall there is much to be welcomed in the HLOS including the ongoing Government commitment to investing in the rail network. It is also important that the HLOS recognises the ongoing need for investment in London and the south east where demand for rail grows as the region continues to power UK PLC. It is worth noting that in the area served by the West Anglia Routes the population continues to grow strongly, as demonstrated by the 2011 Census which, compared to the 2001 count, has reported an increase of over 15% to 2.9m people.

7.2 However the focus on capacity as a key output, and the method of measuring it in London and the south east, do not recognise the importance of other factors when determining the optimum strategy for investing limited resources. Despite this the West Anglia Routes Group looks forward to working with the rail industry to deliver much needed enhancements to the corridor by 2019.

24 August 2012

Written evidence from the Association of Train Operating Companies, Network Rail and the Railway Industry Association (ROR 38)

2012 HIGH LEVEL OUTPUT SPECIFICATION

1. Introduction This submission to the Rail 2020 inquiry on the Government’s High Level Output Specification (HLOS) for rail for 2014-19 is provided jointly by Network Rail, the Association of Train Operating Companies (ATOC) and the Railway Industry Association (RIA). It follows and complements their earlier individual submissions.

2. Context 2.1 Over CP5 (2014-19) passenger demand is forecast to increase by 16% and freight demand by 23%. 2.2 The industry set out last year in the Initial Industry Plans (IIP) how the industry can accommodate this demand increase and deliver a more efficient and better value railway that can play a key role in driving sustainable economic growth. 2.3 The IIP was a key milestone in the efforts of the industry to take up the challenge to improve efficiency posed by the Rail Value for Money Study, led by Sir Roy McNulty and published in 2011. 2.4 The IIP represented the first time the industry had worked closely together to produce a joint plan specifically focused on providing options that both deliver a more efficient and more affordable railway but also which could contribute further to the achievement of sustainable economic growth. 2.5 The Rail Delivery Group (RDG), made up of the Chief Executives of the passenger and freight train operating owning groups and Network Rail, has been established to provide leadership to Britain’s rail industry on cross-industry issues. The RDG will enable the industry to respond to the Government’s High Level Output Specification by collaborating effectively to deliver a higher performing, more cost effective and sustainable rail network for Britain’s rail users and taxpayers. 2.6 The industry is already developing proposals to tackle costs and develop greater partnerships between train operators, Network Rail and their supply chains. Change and collaboration is required by all parties involved in the specification and delivery of the rail system.

3. High Level Output Specification 3.1 The rail industry welcomes the HLOS as a signal of the coalition government’s ongoing commitment to rail and as an important announcement that has strategic implications for the long-term future of the railway, not just for the next five years. 3.2 The HLOS investment commitment is a real vote of confidence in the rail industry but we do not underestimate the task laid down and are committed to working together to deliver the rail network needed for the future. 3.3 The industry welcomes the recognition in the HLOS of the importance of continued investment in rail infrastructure as a means of driving sustainable economic growth. 3.4 The industry also welcomes the recognition of the important role the railway has in a prosperous low carbon economy as a greener transport option than road or aviation. 3.5 The industry welcomes the acknowledgement in HLOS that continued investment in rail is important both to accommodate the recent growth in demand and to attract increasing numbers of passengers. This will drive the revenue growth necessary to improve significantly the affordability of the railway. 3.6 We welcome the acknowledgement in HLOS of the safety of the railway and emphasise that delivering the highest possible levels of safety across the network will remain the industry’s first priority.

3.7 Efficiency 3.7.1 The industry understands that the extensive investment programme announced in the HLOS rightly comes with the expectation that the rail industry will improve its efficiency and value for money. 3.7.2 The Rail Value for Money Study challenged the industry to reduce costs without reducing the outputs delivered by the order of 20-30 per cent by the end of Control Period 5 compared to 2008/09. The industry remains determined to take up this challenge. 3.7.3 The industry is already focusing its efforts on identifying and delivering efficiency opportunities through:

• Collaboration in asset, programme and supply chain management • Co-ordinated industry planning • Production of a rail technical strategy • Updating working practices by embracing advances in technology and innovation • Improvements in train procurement and utilisation

3.7.4 The industry believes that efficiency gains from these workstreams will be greater still if the Government reforms the contractual and regulatory environment, and fulfils its ambition of ceding more control of the railway to the industry. Reforming regulated incentives, franchise agreements and fares and ticketing policy is central to this. 3.7.5 The greater confidence in future workloads that HLOS has given, such as the commitment to a rolling programme of electrification, will help suppliers to invest strategically in people and equipment and deliver upgrades as efficiently as possible. 3.7.6 Investment in electrification of the network, including the Electric Spine, will also help to deliver cost savings because of the lower purchase, maintenance and fuel costs of electric rolling stock. 3.7.7 By becoming more efficient and making every pound of investment go further the industry recognises that it will provide government with the opportunity to consider the choices – and the appropriate balance – between fares, investment and subsidy.

3.8 Investment in rail capacity and economic growth 3.8.1 The significant capital investment in the rail network announced in HLOS is a major boost for the rail network and the extent to which the railway can help drive sustainable economic growth. 3.8.2 Given the tough performance targets set out by Government in the HLOS, and the challenge to deliver record numbers of services on Victorian infrastructure, the pledge to invest in projects to improve, update and transform our railway is not only welcome but essential. 3.8.3 The completion of the Northern Hub and the commitment to tackle overcrowding on key routes into London and Bristol will support increased commuter travel into major urban areas and help more people to get to work faster and more reliably. This will also expand labour markets and give more people better access to jobs. 3.8.4 While the efficient utilisation of existing resources, particularly rolling stock, will help, we welcome the recognition in HLOS that there is a sound business case for investment to support the growth of the regional economies via capital investment. 3.8.5 The industry also welcomes the recognition in HLOS that investing in fast, reliable links between core towns and cities makes those places more attractive to businesses and spreads the benefits of economic activity across the country. 3.8.6 Improving rail links, including freight links, to major ports and airports is also a core part of helping rail maximise its potential to support economic growth.

3.9 Passenger experience 3.9.1 The improvements to the network set out in HLOS enable the industry to build on recent improvements to provide yet better services for passengers. 3.9.2 The provision of ring-fenced investment funds for improvements to passenger journeys and stations will be important in helping the industry to continue to improve the passenger experience. 3.9.3 The industry particularly welcomes the Government’s recognition in HLOS that peak crowding needs to be addressed following the sharp growth in demand for rail over the last decade in commuter markets. 3.9.4 The sharp growth in commuter rail travel is a response to the concentration of employment in urban centres, increased road congestion, and the increase in the relative cost of commuting by car which have all made rail a more attractive choice. 3.9.5 The industry recognises the important role of good passenger information to passenger satisfaction, particularly during disruption, and Network Rail has already released real time data on train running and timetable to enable new rail information services. 3.9.6 The industry welcomes the recognition in HLOS that demand management can help to spread travel out during the day and make journeys more pleasant for passengers.

3.10 Summary 3.10.1 The industry welcomes the investment commitment set out in HLOS as a real vote of confidence in the rail industry but does not underestimate the scale of the task set out and is committed to working together to deliver the rail network needed for the future. 3.10.2 The industry welcomes the investment commitment in HLOS as recognition of the role that rail can play in delivering sustainable economic growth in a low carbon economy as a greener transport option than road or aviation. 3.10.3 The commitment to invest in providing capacity for commuter travel to major urban centres and between key towns and cities is a vital part of this. 3.10.4 The industry re-emphasises its commitment to providing better value for money and making the railway more affordable. Under the leadership of the Rail Delivery Group, the industry has already made significant progress in working together to achieve this, and the Government’s reform programme has the potential to unlock even greater savings in the future. 3.10.5 The industry also acknowledges the importance of improving passenger satisfaction and will continue to work to improve passenger information provision, particularly during disruption. 3.10.6 The provision of ring-fenced investment funds for passenger journey improvement and station improvement will be important to helping the industry continue to improve the passenger experience.

24 August 2012 Written evidence from the London Borough of Enfield (ROR 39)

Summary 1 Enfield Council welcomes the opportunity to provide evidence to the Committee’s inquiry. The Government is focused on securing economic growth across the board. The case study set out here shows that the established investment priorities and policies of the rail industry and its sponsors have partially hindered as well as helped economic growth in the Enfield area in recent years. The remit of all bodies, national and local, should in future focus on collaborative delivery to support wider economic objectives. Hence the HLOS process, though sound in general, needs to accommodate this as an explicit objective of the railway strategic planning process.

2 Our evidence sets out the tensions facing an economic development zone aiming for major expansion of jobs and homes and area regeneration, when railway operations, planning and funding priorities are not well directed onto that wider set of targets.

3 Enfield’s economic growth is underway. However better alliances and convergence of project priorities by the rail industry and its Government sponsors would greatly assist the present scheme which aims for Control Period 5 (2014‐19). It is vital that successor rail project phases in CP6 and later should support the further economic and community outcomes. They should be focused on such outcomes from the start.

Context 4 Transport is a means to an end, not an end in itself. There is a hierarchy of objectives, where discussion on railways can often focus on the inputs and processes to achieve results, and so forget what the overall results are that really matter.

5 The overall worth of the rail network, its corridors and individual services is defined by outcomes such as: accessibility to jobs and services, personal lifestyles, industrial activity, economic growth, regeneration, capacity to support more jobs and homes, contribution to other national objectives.

6 The railway outputs to achieve these outcomes include: scale of network, service frequency, journey quality for passengers (and freight), and station accessibility. Key inputs are the trains, track, stations, staff, interchanges, information, fares and other income, costs and budget.

Current local rail usage 7 In recent years, passenger demand has grown despite fares increases higher than RPI. This results from economic and population growth and migration, location of jobs and homes, and transport factors such as road congestion. In London, the Underground, buses and DLR are reporting their highest levels of passenger use for decades. The new London Overground network is reporting 116m passenger journeys a year in early 2012, almost three times the previous operations which carried 39m passengers in 2006‐07 on Silverlink Metro and the East London Line. National Rail in London and the South East is also busier than foreseen in the last HLOS in 2007, despite the recession, with 17% growth from 2007 to 2011, compared to a projected 9% rise. The Mayor’s Transport Strategy forecasts a 67% growth in rail travel by 2031, against 25% on all modes.

8 Within Enfield, the Piccadilly Line has four stations in the west of the Borough and a fifth with part of its catchment, with ca. 15.7m passenger entries and exits in 2010‐11 and 15.8m in 2011‐ 12. The rest of the Borough relies on the national rail‐operated services: • The central corridor with the Hertford Loop line through Enfield, with six stations in the Borough and a seventh with part of its catchment, and 6.1m passenger entries and exits in 2010‐11. This is served by First Capital Connect and is part of Thameslink. • The eastern Lea Valley corridor with the West Anglia main line and the Edmonton, Enfield and Cheshunt loop, with ten stations and 6.8m passenger entries and exits. New estimates of West Anglia station usage (discussed below) raise this volume to over 10m passengers. The

West Anglia system is served by Abellio and has an interim franchise. Bidding for a new 15 year franchise is due to begin in December 2012 with the new operator in place by July 2014.

Current local rail usage ‐ implications for Enfield 9 The passenger numbers make a basic point, that the tube with only five stations serving 20% of the Borough is nearly as busy as National Rail with 17 stations serving 80% of the Borough. National Rail local services are less effective than a London‐focused operator. This is due to lower service frequencies, lower quality, and less effective marketing. Residents, businesses and developers are the losers, as is the railway business which is not achieving the passenger numbers and revenues (and consequent ability to re‐invest in the stations and services) that has been demonstrated to be a virtuous circle with London Overground.

Customer satisfaction 10 It is little surprise that customer satisfaction is lower on National Rail lines in London than elsewhere, as crowding and reliability tends to be worse. The latest (Spring 2012) Passenger Focus NPS research shows passenger satisfaction on the West Anglia lines to be the fourth worst in Britain at 73% and far below the 82% average for London & South East operators.

11 The standard of stations and local trains is also well below the qualities set for their counterparts on the Underground, DLR and London Overground. The London Overground operator, LOROL, is explicitly incentivised in the concession to maintain high standards, achieve full staffing and ensure high levels of passenger information. These are further positive incentives which we would expect to be applied more generally across London rail franchises and elsewhere, including the new long term Greater Anglia franchise.

Poor rail industry business case information 12 There is also poor rail industry information about station usage and hence about the business case for investment. In Autumn 2010 and 2011, the West Anglia Routes Group commissioned extensive station user counts from JRC Ltd along the West Anglia lines within and outside London. LB Enfield commissioned additional counts at stations in the Borough, to build a better knowledge base. The previous Anglian train operator, National Express, kindly gave permission for the surveys. TfL assessed and moderated the JRC research.

13 The reality from these surveys is that official station usage data published by the Office of Rail Regulation (ORR) is very deficient at least in the London region. It is based on derivations of ticket sales rather than station counts or ‘Oyster’ clicks‐in clicks‐out. It uses an old 2001 travel matrix (pre‐ Oyster and Overground travel patterns) to allocate zonal trips. After adjustment for seasonal flows, the station counts banded by Oyster zone show up to 65% more travel than is estimated by ORR. (See Background document 1, listed at end of evidence). The comparative data is summarised below for the West Anglia lines.

Rail devolution 14 Overall, the Borough would welcome devolution of local rail services to Transport for London (TfL), if this were decided this autumn by the Government. TfL has proposed to maintain a London Overground standard on the West Anglia local lines to Enfield and Cheshunt (and Chingford). If a local shuttle service is introduced on the Lea Valley main line (discussed below), TfL is interested in

managing that as well. The timing of a positive Government decision for devolution of West Anglia services would fit well with TfL involvement in the specification of the new Greater Anglia franchise, its funding arrangements and its required outputs.

Enfield’s development and regeneration plans within London’s growth strategy 15 Enfield is in the London‐Anglia Growth Corridor which stretches along the Lea Valley from Newham and Hackney to Stansted. The Greater London Authority is finalising its Upper Lee Valley Opportunity Area Planning Framework (ULV OAPF) which includes eastern Enfield and parts of Haringey and Waltham Forest. It is a partnership with many stakeholders, from local community groups to Government departments. (See Background document 2, listed at end of evidence).

16 The ULV OAPF area shows significant economic under‐performance with unemployment higher than UK (6%) and London (6.7%) rates (Oxford Economics 2012, see Background document 3, listed at end of evidence). At present, local labour markets are some of the poorest performing in the UK with productivity rates far below London and UK levels, along with pockets of severe national‐ scale deprivation costing the Exchequer over £3.3 billion in 2010 in costs to the public purse. Employment growth has been weak – just 3% over the whole decade of UK growth from 1998. Productivity has stagnated since 2000 while the rest of London accelerated away.

17 The Upper Lee Valley objective is to secure around 21,900 direct jobs and 18,000 new homes, by transforming the former heavy industrial zones. An additional 15,000 jobs will also be created in neighbouring districts of the Lee Valley Corridor outside London by releasing key strategic sites. It is the vision for reshaping the Upper Lee Valley over the next 30 years, beginning in 2014.

18 The ULV OAPF embraces areas which experienced serious rioting in August 2011, including Tottenham. Urgent transformation of the entire area is the highest priority of the Council and its partners. There are other parts of Enfield which also have priority for economic growth and regeneration, including Enfield Town Centre.

19 The Valley offers excellent potential for future business growth, with the right support and infrastructure investment. Transforming the entire local rail service is a key component, to stimulate developers to invest and to persuade people and businesses to come. People and investors need to trust a reliable, walk‐on, high quality transport service which fits their lifestyle in a 24/7 capital city. The West Anglia line is the economic umbilical and the gateway for accessibility. A strong transport offer, early, is therefore fundamental. Without better rail links, development in the Lea Valley and particularly the proposals for a sub‐regional town centre at Meridian Water adjoining Angel Road station, lack credibility for developers. 5,000 new homes and 3,000 new jobs are planned here.

20 Detailed reviews of future potential, based on a better economic performance (Oxford Economics 2012), show the Upper Lea Valley could become one of the brightest prospects for future growth leading the UK recovery. Economic modelling shows that the projects could deliver cumulative additional GVA of £10.7 billion (at net present value) within the core opportunity area by 2031 if the three core Upper Lea Valley boroughs (Enfield, Haringey and Waltham Forest) matched employment and productivity rates in wider London. The shortfall in growth across the Lea Valley without rail improvements would mean a loss of around £1 billion to the economy by 2021 and close to £2.5 billion by 2031 as a direct impact on growth and investment.

Enfield’s rail requirements 21 There are committed projects to improve services and capacity on the First Capital Connect route through Enfield Chase, as part of the larger‐scale Thameslink project. The Council welcomes these. It also seeks stronger London urban rail marketing and quality specification under TfL’s aegis.

22 However the West Anglia main line infrastructure and the approaches to Liverpool Street are capacity‐constrained and are working at the limits of operational reliability. Abellio Greater Anglia has reported that the new December 2011 timetable, which improved outer commuter and Stansted Express timings and capacity, has no margin for recovery. When it works, it is very good, but when it has problems, it is very hard to recover the service.

23 The West Anglia main line is only a two‐track railway north of Hackney, has at‐grade junctions rather than motorway‐style ‘flying’ junctions, eight level crossings between Tottenham Hale and Bishops Stortford, and no passing loops or 3 / 4 tracks for fast trains to overtake local trains for over 14 miles between Hackney and Broxbourne.

24 So the railway and its services have compromised outputs. Outer commuter and Stansted Express trains are slower and stop more often than passengers would wish, while the timetable at local stations is low in frequency: often only two trains per hour, and less than that at some key ULV regeneration stations such as Angel Road (peak hours only) and Northumberland Park (hourly off‐ peak). Some trains are shut on Sundays and there is only an hourly stopping service then, totally contrary to TfL urban rail objectives of at least four trains per hour, sometimes more. The railway prevents the outcomes which are required.

25 We also note the desires by other stakeholders for better services. For example Stansted Airport has argued for 30 minute journey times to Liverpool Street, which cannot be achieved without extra tracks or a new route for a long distance while retaining existing commuter operations, let alone improving those. Whatever is done along the middle of the line also faces another output constraint. Into Liverpool Street there are only two available tracks out of six in peaks for West Anglia trains and the operational limit has again been reached, about 22 trains per hour in and out of the terminus.

26 Crossrail has limited benefit for Enfield and other West Anglia stakeholders, as railway planners regard the continued expansion of Great Eastern main line peak capacity as more urgent (because of existing and foreseen physical crowding on GE trains) than more West Anglia trains into Liverpool Street. So running more West Anglia trains to achieve outputs and deliver outcomes is not possible unless those trains go via Tottenham to Stratford Interchange rather than Liverpool Street.

27. A service to Stratford is however a good alternative to Liverpool Street, in its own Opportunity Area with excellent access to the Canary Wharf growth area. Taken together, the Upper Lee Valley/Tottenham Hale and Olympic Park opportunity areas, all linked by the proposed Lea Valley local rail service, account for around a third of all London Plan jobs and homes within Opportunity Areas over the next 20 years.

Existing railway project processes 28 This is the point at which Enfield Council and other stakeholders interface with the railway planning, authorisation and funding processes for new projects. It is important to highlight two elements: (1) the preparatory processes for those new railway schemes which draw on more than internal operational and commercial necessity for their justification, and (2) the authorisation and funding elements which are largely within the control of the Department for Transport.

29 Improvement of the West Anglia lines to achieve better outcomes along the London Anglia corridor is a long‐standing objective shared by local and regional partners. The positive starting point is that the line runs conveniently through the Opportunity Areas and its upgrade doesn’t require land‐ take or complicated consents so it is straightforward and feasible. The difficulty is that while spatial reshaping, housing growth and new jobs are partly under way, and the rest wait on the rail improvements, the priority given to necessary spend on the railway is divorced from the wider goals.

30 There is poor liaison at best between Government departments, eg Transport, CLG, Treasury and BIS, to ensure that schemes below the level of the top UK 40 infrastructure projects maintain a converging priority on investment and timescales. Under localism, it can be the responsibility of key bodies such as the GLA or Mayor, and the local councils, to take the leadership on schemes. However unless the rail industry and its Departmental sponsor can match that priority – and match the thinking on what railway outputs are important, and why – then there will be a mismatch on priority, outputs and thence outcomes. There are related risks with budgeting and funding.

Recent West Anglia rail project history

31 Below is what has happened with schemes for better West Anglia outputs, despite positive intentions by partners such as TfL and Network Rail. A short set of headlines shows how the current processes has helped or hindered progress with the project at each stage: • 2007 Greater Anglia Route Utilisation Strategy. Focus on peak‐time commuting capacity for England’s fastest growing corridor, the West Anglia lines. Long‐term hope for four‐tracking the congested and compromised section between south of Tottenham and Broxbourne. • Recession and spending cuts limit rail initiatives to short term squeeze of last slots from existing railway and longer trains – but no urban service improvements on two tracks. In parallel, urban planning nearing full specification. • 2010 Enfield Council advocates three‐track local scheme to kick‐start economic growth and regeneration in ULV area. Scheme adapted by TfL as a first phase project. Included by Network Rail in initial scoping for Control Period 5 investment planning for 2014‐19. • 2011 London & South East Route Utilisation Strategy. RUS again geared to peak‐time commuting capacity. No further capacity available for local urban services on West Anglia lines without new infrastructure. But LSE RUS acknowledges that there are economic growth needs. Network Rail proposes several investment options for three‐tracking. • Cheapest scheme (£35m Option C2a) proposed in HLOS2 illustrative options announced by Government for CP5, even though this does not deliver the outputs required (walk‐on, four trains per hour, all stations). Those outputs would need £250m Option C2b scheme. • Train operator warns about performance risk with C2a. Local authorities anticipated this, and also recognise national affordability pressures in CP5, so now propose reduced outputs for CP5 with a ‘STAR’ project (a walk‐on local rail service, Stratford‐Tottenham‐Angel Road, by 2016, costing £72‐81m), which retains most critical early‐win outcomes. See Background document 4, listed at end of evidence. • ‘STAR’ project is now the lynch‐pin, unlocking the potential of the Opportunity Area. It can form the starting point for a larger scheme in CP6. • Department for Transport advises that allocated funds are ca. £21m. There are some ‘pots’ for potential extra funding (eg level crossings, station access, performance, project development). Third‐party contributions required for first phase because of the economic growth elements of the project. This is in parallel to equivalent type of funding for East West Rail which underpins economic development. • Urgent planning and funding discussions for ‘STAR’ scheme (or close equivalent) now underway with all partners, timed to meet the final Network Rail Strategic Business Plan for CP5 and its submission to ORR for regulatory approval during 2013.

Lessons learnt, aims for the future 32 For many lines in the London area, the Government’s High Level Output Statement has been informed by the ‘peak capacity’ approach adopted in the formative Route Utilisation Strategies. These have tried to get more train capacity from the existing railway, and have been heavily influenced by the existing commuting flows, but this falls down with existing stressed rail infrastructure including along the Lea Valley. The Lea Valley spatial strategy – and no doubt other parts of the UK – is about regeneration and economic growth and new communities along entire corridors, not just occasional interventions to manage peak flow commuting volume in individual trains, even if peak capacity is important.

33 For example, a first phase developer for Meridian Water adjoining Angel Road station, currently with a low‐frequency peak‐only rail service, has tabled plans for 450 homes if without rail improvements, and 850 homes with better rail. The company requires confirmation of rail investment before it will make the leap for more homes. The increased growth releases Community Infrastructure Levy (CIL) and in other areas TIF funding, which would help pay for the investment. However without Network Rail and other partners working closely with Boroughs to predict, plan and invest in future growth, with focus on outputs supporting the wider outcomes, then the growth can never occur, harming both the wider economy and the viability of transport projects. This is a vicious circle that only better planning can break.

34 Consequently, even though we see progress with a positive HLOS2 announcement in principle on an ‘illustrative’ option, the combination of RUS and HLOS hasn’t served the Lea Valley satisfactorily, because there are still structural gaps in the railway offer. The proposed ‘illustrative’ interventions do not provide a holistic approach to supporting the required outputs, nor the outcomes. Addressing these deficiencies and keeping to a tight timetable for project specification and funding to converge satisfactorily by the end of 2012, is now the urgent challenge to keep a feasible project on track. It needn’t have been like this. There is the danger of foregone growth, when Parliamentarians know the UK economy needs new jobs and homes right now. As noted in para.27, the STAR project will serve around a third of all jobs and homes in London’s priority sites (Opportunity Areas) for the next 20 years.

35 Steer Davies Gleave, in a report commissioned by Network Rail (The Value of Station Investment: Research on Regenerative Impacts, November 2011) evidences in section 5.3 that areas can see a 30% increase in property values in the immediate vicinity of a station investment scheme. The associated uplift in GVA is estimated to be between 10‐15% of the investment cost. Factors like this must be built in to the planning from the outset. Within London, partnering and funding elements such as the Mayoral Community Infrastructure Levy and Growth Fund may also be part of the forward strategy.

36 Looking ahead to CP6, the new process of replacing Route Utilisation Strategies by a Long Term Planning Process isn’t guaranteed to change the situation unless the context of railway priorities is better aligned with: • the area’s wider planning and development objectives • the strategic nature of what is wanted from the railway (eg, conditional outputs) • and the supporting interventions geared up to deliver on that strategy.

37 For the West Anglia main line, we remain clear that the transformation sought in the Upper Lee Valley and elsewhere along the London Anglia corridor will be continuous throughout the next two decades, so railway outputs are required which achieve a large measure of 3‐4 tracking within the built‐up area, as well as other important elements.

38 For transport more generally, its role in economic growth has been made by many commentators such as Eddington. Relevant infrastructure underpins growth and has done for centuries. BIS have now been given a remit to co‐ordinate across Departments to link investment strategies and plans for growth, so that, for example, when DfT are involved in a new scheme and DfE are proposing a new higher education training facility, the two could be linked etc.

39 This same approach is required for rail. Network Rail and others have a massive role to play here, not just on the acknowledged large‐ticket schemes such as electrification and Crossrail 2, but also on local schemes (a West Anglia example being Hackney Interchange with the Overground). These will create a backbone of accessibility, underpinning the UK's growth in the future. We trust the rail industry and its sponsors will embrace that role as leading partners, stimulated by this Inquiry.

24 August 2012

Background documents 1: Assessment of ORR station usage estimates: “Stations Count” article, Jonathan Roberts, Modern Railways, July 2012, pp71‐75. 2: Upper Lee Valley Opportunity Area Planning Framework, Consultation Document, November 2011. http://www.london.gov.uk/sites/default/files/ULV%20OAPF%20Draft%20Consultation.pdf 3: Investment and Regeneration in the Lea Valley Corridor – Assessing the potential economic impacts for London and the UK, Oxford Economics, January 2012. 4: Upper Lee Valley Conditional Outputs statement, Lea Valley partnering authorities and transport organisations, April 2012.

Written evidence from Passenger Focus (ROR 40)

HLOS 2014-19

1. Introduction

1.1 Passenger Focus is the statutory watchdog for rail passengers in Great Britain; and for bus, tram and coach passengers in England (outside London).

2. Funding 2.1 Passenger Focus welcomes the continuing emphasis on investment within the HLOS announcement – something we believe is essential given the ever increasing demand forecasts for rail and the contribution that rail travel makes to the economic well-being of the country.

2.2 Alongside specific/nominated capital schemes we note that HLOS contains a series of ring-fenced ‘pots’ of money that the industry can bid for but which must fit certain criteria: • East Coast Connectivity (£240m) - designed to improve capacity and reduce journey time • Passenger Journey improvement (£300m) • Station Improvement (£100m) • Access for All (£100m) • Level crossing safety (£65m) • Early development of schemes for 2019-24 (£140m)

2.3 Passenger Focus is supportive of these initiatives and of the flexibility given to the industry to allocate/manage expenditure. However, it will be essential to demonstrate that the investment is truly additional rather than something that ought to be provided for out of existing ‘business as usual’ funding. We would also argue that schemes must take into account the impact on passengers – the more that the investment is targeted on passengers’ priorities the bigger the ‘passenger dividend’ from the investment.

3. Strategy 3.1 HLOS sets out four main priorities: a) Electrification: the creation of an ‘electric spine’ consisting of high capacity passenger and freight corridors running from the South Coast through Oxford, Bedford and via the Midland Main Line to the East Midlands and South Yorkshire, with a link from Oxford to the West Midlands and the North-West. b) More capacity and faster journey times between key cities c) More capacity for commuter travel into major urban areas d) Improved railway links with ports and airports

3.2 Passenger Focus has long argued that the starting point must be to focus on what matters to passengers. Our research continually emphasises the importance of the ‘core product’: a punctual, affordable service on which you can get a seat. To this end we particularly welcome the emphasis on capacity.

4. Targets/Metrics

Safety 4.1 We note that the original HLOS (2009-14) set a specific target for safety/risk and that this is not to be continued within the next HLOS. However, we recognise and accept the argument that rail safety is already defined within a legal duty to keep safety/risk “as low as is reasonably practicable”. Delivering this legal duty will ensure that rail safety remains of utmost importance.

Reliability 4.2 HLOS requires reliability, as measured by the ‘public performance measure’ (PPM), to achieve an overall level of at least 92.5% moving annual average by the end of 2019. We note, however, that HLOS only seems to set a national target and is not broken down to sector level as per the first HLOS. It is also noticeable that the previous HLOS targets are London south east 93%, long distance 92% and regional 92%. In theory at least this could mask a reduction in the London and South East target.

4.3 Passenger Focus is a strong advocate of greater disaggregation of performance data. We believe that a single performance figure can mask pockets of poor performance. The more that passengers can monitor the performance of their train(s) the more they can hold the train company to account for the level of service provided: greater transparency breeds greater accountability. To this end we would have liked HLOS to set disaggregated performance targets rather than just a general (albeit welcome) commitment to focus on / target the worst performing routes. In saying this, however, we note and welcome recent announcements about increasing the transparency of performance data – including releasing right time performance figures. Ensuring genuine, easy access to disaggregated performance data will help keep the pressure on performance in place of any formal targets.

4.4 Our research into passenger priorities1 and passenger satisfaction2 shows the overriding importance of punctuality in forming passenger attitudes. This applies irrespective of sector and journey purpose. Passenger Focus has also demonstrated the importance of ‘right time’ arrival in determining passenger satisfaction3 . This analysis mapped passenger satisfaction with punctuality against the actual delay experienced by 12,000 NPS respondents. This showed that:

1 Passengers’ priorities for Improvements in rail services. Passenger Focus. march 20109

2 National Passenger Survey (NPS). Passenger Focus 3 What passengers want ‐ Towards a 'right time' East Anglian railway. Passenger Focus. 2010

• passenger satisfaction with punctuality declines on average by between one and three percentage points per minute of delay • commuter satisfaction with punctuality declines on average by around five percentage points per minute of delay.

4.5 Given this we would have liked HLOS to set a trajectory to improve ‘right time’ punctuality over the course of the control period - either as a formal regulatory metric or as an internal operational target arising from the Periodic Review process carried out by the Office of Rail Regulation. However, as above, we recognise and welcome the commitment to providing right-time performance data and the role that this additional transparency will have on improving performance.

4.6 We also welcome the continued operation of the Cancellation and Significant lateness target (CaSL).

Capacity 4.7 HLOS sets out the number of passengers to be accommodated at London Birmingham, Leeds, Manchester, Bristol, Leicester, Liverpool, Newcastle, Nottingham and Sheffield in the three-hour morning peak and across the one-hour high-peak.

4.8 We welcome the emphasis on capacity within the HLOS announcement. We would, however, urge that there should be much greater public access to loading/crowding data. Not only will greater transparency help passengers hold the industry to account but this could also help journey planning (i.e. helping passengers decide when to travel).

Customer satisfaction 4.9 Traditionally franchise targets have tended to focus on the relatively ‘hard’ measures of punctuality and crowding. We have argued that service quality is also important - and becomes even more so in the context of longer-franchises. For instance, it is possible for a train company to meet its punctuality and cancellation targets whilst offering a poor passenger experience e.g. dirty trains, unhelpful staff, not keeping passengers informed. Our strong preference is for targets based on what passengers think – the best judge of quality being those who use the services

4.10 To this end we welcome the statement within HLOS that the Secretary of State “seeks an improvement in passenger satisfaction, as measured by Passenger Focus’s National Passenger Survey.” While HLOS did not contain a specific target for passenger satisfaction we are pleased that targets are being embedded within individual franchise agreements – with the latest being the new West Coast franchise. We will continue to work with the DfT on the greater use of NPS results within the franchise framework.

4.11 We also welcome the emphasis placed by the Secretary of State on providing better information for passengers, particularly during disruption and the impact this can have on passenger satisfaction. Our research continually emphasises the importance of providing passengers with accurate and timely information.

Engineering work 4.12 We know from our research that engineering work is viewed as something of a necessary evil – passengers understand the need for regular maintenance but still do not like the disruption caused, especially when a bus replacement service is required. There have been some improvements: Network rail has a regulatory target to reduce the disruption that its engineering works cause to passenger services; and the Association of Train Operating Companies, jointly with Network Rail, announced in December 2009 a package of measures to reduce the use of bus substitution on key routes. Nonetheless, we feel that mentioning this issue within the HLOS announcement would give it more prominence and help reinforce the message to the industry.

Costs 4.13 We welcome the fact that the Government has resisted calls to set a cost reduction target within HLOS. This isn’t to ignore the issue – high costs clearly have a direct impact on the range of service offered to passengers and the fares charged - and an indirect impact on funds available for investment. However, it is essential that the debate does not get lost in a narrow assessment of cost. It must also look at efficiency (doing the same for less) and at the benefits of rail. Change needs to be focused on, and driven by, the needs of the passenger as well as by the issue of cost

4.14 We recognise that HLOS does not address the issue of fares. However, existing fares policy explicitly looks to pass a greater share of the costs of the railway onto passengers with the increase from an RPI+1% formula to one of RPI+3%. With the recent announcement of July’s inflation figure we know that this means an average increase of 6.2% in January 2013 – with some individual fares increasing by up to 11.2%4 . For hard-pressed passengers, especially those who rely on the train for work, the prospect of another significant increase is a worrying one. Passengers in Great Britain already pay some of the highest fares in Europe and our most recent passenger survey showed that just 42% of passengers felt they had got value for money on their ticket.

4.15 In 2011 the Government postponed the planned move to the RPI+3% formula and kept it at RPI+1%. We would urge them to consider a similar move for the coming increase. We would also reiterate our concerns about the flexibility given to train companies to increase some fares above the average. As we argue in our recent submission to the Governments Fares and Ticketing Review5 , limiting the ‘flex’ to two percentage points rather than five (as in the South Central franchise) would reduce the lottery in the way price regulation applies for indvidual passengers.

24 August 2012

4 Fares regulation allows some fares to increase by 5% points above the average. However, the average increase cannot increase beyond the RPI+3% formula so any increases above the average in one area must be balanced by decreases elsewhere. 5 Passenger Focus response to the Government’s rail fares and ticketing review. July 2012

Written evidence from Little Missenden Parish Council (ROR 41)

High Level Output Statement 2012

You have invited written comments on the recently published the HLOS 2012 statement. Little Missenden Parish Council (LMPC) wishes to drawn your attention to the key issues which we believe are missing from the statement.

1. The proposed electrification schemes do not cover a key area, that is the electrification of the Chiltern Lines, the one remaining main commuter route in the London area not included in any electrification proposals. Under the proposals, sections of the Chiltern Line routes will be electrified, from Oxford to Bicester which will only be used by freight services and from Banbury to Leamington Spa which may also be used by Cross Country as well as freight. The South Wales Valleys routes which are proposed for electrification carry much less traffic than the Chiltern Lines and LMPC considers that the HLOS does not recognise the importance of electrification for these key routes.

2. The information concerning Crossrail indicates no willingness to examine during CP5 the potential to serve other destinations, particularly to the west of Paddington. In particular LMPC wish to see Crossrail extended to High Wycombe and Aylesbury in CP6 at the latest, which would require preparatory work in CP5. However the proposal to close the section of route between Old Oak Common and Northolt Junction under the HS2 Hybrid Bill (as we have been advised by HS2 Ltd is to be included), will prevent this relatively easy extension to Crossrail ever happening, as well as removing a key diversionary route.

We trust that you will follow up these key issues as part of your examination of the HLOS.

24 August 2012 Written evidence from West Yorkshire Passenger

Transport Executive (Metro) (ROR 42)

HLOS announcement

Metro is pleased to respond to the Transport Select Committee’s call for evidence in connection with the Control Period 5 High Level Output Statement (HLOS). In particularly this response will consider Metro’s view on which schemes / outputs have been prioritised, when these will be delivered and how they will be paid for.

Metro welcomes the commitments made in the HLOS, which have the potential to significantly improve rail services in West Yorkshire and across the north. The identified additional capacity and other improvements will contribute towards ongoing sustainable economic growth in the region and the wider benefits this brings to the national economy.

Metro has recently published its latest RailPlan – RailPlan 7, which is part of the West Yorkshire Local Transport Plan 3 (www.wyltp.com). The RailPlan sets out the rail industry outputs Metro wishes to work with its partners in Government and the rail industry to deliver. These outputs will support economic growth, carbon reduction and quality of life for those in West Yorkshire and beyond. Much of the RailPlan is underpinned by evidence developed in a recent study undertaken by Metro, South Yorkshire PTE and the Leeds City Region, known as the Yorkshire Rail Network Study. This study demonstrates that there are up £12bn worth of potential benefits to be had from enhancing Yorkshire’s rail network, including from cross- Pennine links to Manchester covered by the full Northern Hub scheme. The proposed investments set out in the 2012 HLOS, particularly the full delivery of the Northern Hub, deliver some of these benefits, which is very welcome. It is Metro’s opinion however that the recent HLOS and magnitude of investment should be the latest stage in a sustained period of investment in the country’s rail network, which in the north of England and Yorkshire has been severely lacking in recent decades, inhibiting the North’s ability to deliver significantly more economic growth in a sustainable manner.

1. Prioritisation of Schemes / Outputs Included in HLOS

Electrification – Metro are very supportive of previous commitments to electrify the Trans Pennine route from Manchester to York via Huddersfield and Leeds and the announcement of further electrification from Leeds to Selby.

The principal behind the ‘electric spine’, particularly the freight benefits, is appreciated. However the Government must ensure that the solutions developed represent the appropriate value from money and affordability thresholds. In particular the development work must consider the case for dual electrification of the route from Southampton to Basingstoke as well as conversion from DC to AC electrification. Given that modern electric rolling stock is already operating on the route between Basingstoke and Southampton it is challenging to understand why this is a priority when there are large numbers of routes elsewhere in the country currently operated with ageing diesel rolling stock.

Metro are appreciative of the constraints that resources place in delivering a large electrification programme by 2019. However there are notable gaps in the electrification commitments in the HLOS which must be developed for delivery as soon as possible, including:

Sheffield – Leeds: To allow ‘electric spine’ freight services to access Yorkshire’s primary intermodal rail freight terminals at Leeds Freightliner Terminal and Wakefield Europort, electrified local passenger services between Sheffield and Leeds and, subject to further electrification, conversion of Cross Country services to electric operation.

Leeds – Hull / Middlesbrough / Scarborough: Subject to suitable business cases being identified the Trans Pennine electrification should be extended to allow electrically operated services to these destinations.

Northern Hub – Confirmation of full delivery of the Northern Hub infrastructure is strongly welcomed. It is important that new rolling stock and additional services are secured to fully realise the potential benefits offered by the new infrastructure.

Station Improvement – The Access for All and National Station Improvement Programme funding for Control Period 4 was allocated based purely on passenger footfall. Any future funding allocation should also consider the current condition and facilities at stations. This will allow funding to be targeted at stations where patronage has the potential to be higher, but which may be low at present due to the poor condition of the station.

Control Period 6 Development Fund –the Yorkshire Rail Network Study identifies that improvements to the rail network within to and from the Leeds and Sheffield City Regions could generate economic benefits of up to £12bn. It is important that the CP6 development fund is used to develop solutions that can deliver as much if the identified benefit as possible.

Capacity Metric – Metro understand that the capacity metric for Leeds is based on growth projections identified as part of the Northern RUS which represents an industry accepted demand forecasting framework. However local evidence developed by Metro in support of the West Yorkshire Local Transport Plan 3 targets suggests that the rail network needs to accommodate greater demand to maximise the potential economic growth in West Yorkshire while minimising the growth in car usage and the negative effects thereof. Growth above that set out in HLOS should not be precluded as a result of the HLOS. Capacity metrics for future HLOS should consider more locally derived growth forecasts. This has implications for the future governance and funding of local and regional railways.

2. Delivery of HLOS Schemes

In general the HLOS identifies that schemes, and in particularly the capacity metric, should be delivered by the end of Control Period 5 in 2019. Metro consider it is important for as many of the outputs as possible to be delivered early in the control period to ensure that current connectivity and capacity do not constrain demand growth, and therefore economic activity, during the early years of the Control Period.

The rail industry has a (welcome) challenge in ensuring it has enough capacity to deliver all the schemes set out in the HLOS. A long term, sustained investment plan over a number of decades would allow the industry to equip itself with sufficient capacity to deliver improvements as soon as funding becomes available, so ensuring that the UK economy can reap the rewards of this much needed infrastructure investment as soon as possible.

3. How Schemes will be Paid For

Recent investment in rail infrastructure has represented good value for money generating wider benefits for regional and national economies. It is important that funding is identified to ensure on-going, sustained investment to improve rail connectivity and provide additional rail capacity to support on-going sustainable economic growth over a period of decades.

There is a need to balance investment in the rail network between the public and private sector as well as fare payers, treating our railway as a vitally important “common good” that delivers both direct and indirect economic, environmental and social benefits. For example, it would be unwise to assume that the policy of shifting more and more of the railway’s costs onto the fare-payer can continue infinitum, as then the fare payer would end up paying for the benefits enjoyed by all that the railway delivers e.g. reduced emissions, reduced road traffic and congestion. Such a policy would also price passengers off the railway, particularly those with reduced financial means for which access to employment is essential.

The current taxation system means that the motorist does not pay for the externalities of road travel, and indeed recent research published by the IPPR suggests that the cost of private motoring has risen less in the last 20 years than the cost of living. The cost of public transport on the other hand, rail in particular, has risen by 62% in real terms between 2001 and 2011.

Why then should rail fare payers pay more and more of the cost of rail investment which delivers much in the way of common good, when private road users do not? This is a perverse policy that has not been fully thought through. Whilst Government is right to reduce the unit costs of running the UK’s railways, the question of how investment in it is paid for needs to be part of a wider debate on transport funding that has not concluded.

Metro’s preferred policy of how rail investment should be paid for is a balance between the fare-payer, the private sector and Government, with fares levels not rising above levels that would price people off and so hinder delivery of wider economic, environmental and social objectives.

Metro does accept that in some places fares may need to increase to support investment and to reflect the quality of the rail product on offer. Metro also believes that Government should consider how rail investment is paid for in other countries and why their rail investment funding models have been adopted, compared to that being used in the UK.

29 August 2012

Written evidence from FirstGroup plc (ROR 43)

InterCity West Coast (ICWC) franchise award

About FirstGroup

1. FirstGroup plc is the leading transport operator in the UK and North America. We employ approximately 124,000 people and we transport more than 2.5 billion passengers every year. Our company is comprised of five divisions – Student, Transit and Greyhound in America and Rail and Bus divisions here in the UK.

2. In rail, we are the UK's largest operator with almost a quarter of the market. We are the only operator to run every type of overground rail service in the UK, from high speed inter‐city trains and overnight sleepers to local branch lines, regional, commuter and open access services. We operate four franchises (First Capital Connect, First Great Western, First ScotRail, First TransPennine Express) as well as Hull Trains, an open access service, and Tramlink, for TfL.

3. Our four franchises have received more than 250 awards since 2005, including First TransPennine Express, the current Rail Business Awards Train Operator of the Year. We carry over 300 million passengers a year, an increase of 40m passengers since 2006/7. Passenger volumes increased by 3.8% in 2011/12.

4. We employ 13,000 people in UK Rail and have nearly 2,800 rolling stock vehicles, with around 740 additional vehicles introduced to our franchises by FirstGroup. We have put in over £650m capital investment into our franchises since 2006.

Commitment to the ICWC franchise

5. We believe in railways, we want to serve more customers, run more rail services, employ more people, and grow as a business. We are a long term investor in UK railways ‐ we have been involved since privatisation and have chosen to pre‐qualify for all franchises in the current wave of re‐letting. Any suggestion we may walk away from our West Coast bid is misplaced. We would not want to risk the damage to our reputation of doing so, nor being barred from being shortlisted for other franchise competitions, which would follow (as non‐default is a pre‐requisite of the pre‐qualification process).

6. We want to stress from the outset that many critiques of our bid are based on a false assumption: that we would walk away from this franchise. Nobody forces us to bid for franchises, nor enter into the franchise commitments that we enter into; we aren’t looking to escape them at the earliest opportunity.

7. To reinforce this, as part of our bid we are required to put up a bank guaranteed subordinated loan facility (SLF), which is designed to ensure the parent company stands behind the TOC and funds properly what it has promised in its bid. The calculation of the SLF is designed to equalise the risks the DfT attaches to each bid to make sure each can pay the premia offered. For the majority of the franchise, our premia levels are broadly similar to Virgin’s. Our SLF and capital contribution for this franchise bid is £200m; we understand that Virgin’s was £40m. We are satisfied that we are giving a good level of comfort to Government and taxpayers over our commitment to this franchise. The commitment is fully backed by cash and bank guarantees to government.

8. It is worth adding that our critics are wrong to allege that we walked away from the Great Western (GW) franchise. Government structured the GW franchise from the outset on the basis that the franchisee had a voluntary choice over a final three year extension. The franchise also was let on the basis that the IEP fleet, being procured by the DfT, would be introduced during the franchise lifetime. However, this is not now the case and the route is also about to undergo massive infrastructure upgrade, with Reading remodelling, Crossrail and electrification. Against this backdrop, we decided not to take up the extension. This extension was not part of our franchise commitment and we did not incur a penalty for not taking it up. We bid on the basis that we had a choice over the extension, and the Government accepted our bid on that basis. We are pleased to have pre‐qualified for the new Great Western franchise competition and will be submitting a competitive bid.

ICWC franchise bidding process

9. FirstGroup was chosen by the Government to operate the Inter City West Coast rail franchise on 15 August. This followed an extensive, robust and thorough bidding process overseen by the Department for Transport which ran over 18 months.

10. We are also involved in three other live franchise competitions, having pre‐qualified for Essex Thameside, Great Western and Thameslink. We currently operate both the Great Western and Thameslink franchises (although the latter is being refranchised on the basis of an expanded network, to incorporate services currently run by Southern, and some run by Southeastern).

11. The procurement process is governed by extremely strict rules, covered by the Franchise Process Letting Agreement (FPLA), the Invitation to Tender document and the published set of Franchise Evaluation Process Charts which mapped out how the evaluation process would be conducted. The process is anonymised so that senior officials making the final decision have no idea who has submitted each bid. The Secretary of State is only involved at the final stage when all bids have been evaluated and a winning bid has been selected.

12. We have played by these rules and have stuck by the letter of the FPLA, despite there being times when it would have suited us to ignore these rules and comment on press speculation or publication of inaccurate or selective details of our bid taken out of context, for instance. We believe it is clearly in both the public interest, and in the interest of bidders for these rules to be in place and to be followed. They ensure that all bidders can compete on a level and fair playing field and that bidders submit the most competitive tenders (which in turn helps ensure value for the taxpayer, in the shape of high premium payments). Having bid for a number of franchises, we understand that after a time for consultation, the Department for Transport sets the rules for the franchise competition. These are the rules bidders sign up to, bidders and government then have to abide by them, or there is no validity to the process at all.

13. We were not aware of any fundamental challenge to the franchise bidding process or this franchise competition being made to the DfT (nor was there any call for the Committee to review this franchise competition) at the time the rules were published or whilst the competition was live. There was consultation and different views expressed by a range of parties: this is normal. As far as we can see, the DfT considered its policy, made the process clear and followed the rules. Formal claims against the process appear to us only to have been made very late, at the final stage around award.

Growth and GDP assumptions

14. Virgin has not seen our bid and we have not seen theirs. Everything thus far said in public is based on limited information and their view of what the bid should look like.

15. We aren’t trying to recreate what Virgin has done over the past 15 years. It’s time to look to the future. We are taking an exciting, fresh look at the InterCity West Coast franchise and how best to serve the fast growing cities along the route. Franchise bids should not always follow the same style or model and our bid is firmly focused on investing for growth.

16. The route serves five of the top seven largest conurbations in the country and these cities are set to keep on growing. With no major road building programme currently planned the demand for rail will rise. Compared with other corridors, ICWC has a lower share of the total number of journeys made. There is considerable scope to take share from road and air – our bid will deliver the environmental benefits which accrue from encouraging people to take the train rather than planes or cars.

17. Over the past 15 years the amount of passengers on the route doubled ‐ despite major disruption through the upgrade works and the impact of the global economic slowdown ‐ and we will do the same. Network Rail's own forecasts show that the line will be full by the mid‐2020s and the Government is now looking at plans for HS2 a new high speed line to run in parallel with the existing services.

18. Thus, our bid does not rely on a growing economy to generate greater passenger volumes and revenues. However, if GDP turns out to be worse (or better) than is anticipated, then there is a support (and sharing) mechanism in place. This is part of the DfT franchise agreement proposition, applicable to all bidders. It uses GDP forecasts provided to all bidders as part of the tender process and which are the March 2012 Office of Budget Responsibility (OBR) figures. Using the OBR figures, the average GDP growth from April 2013 to March 2026 (broadly the life of the franchise) is predicted to be 2.48% (but often rounded for convenience in releases to 2.5%), including 0.5% for population growth, but we will begin with a lower predicted figure. If the cumulative difference from the GDP figures in our bid reaches +/‐ 4%, then we will share the impact with the DfT. (The precise details are in the DfT’s specified form of franchise agreement.)

19. The figure of 1.94% GDP growth since 1830 which has been quoted in some places reflects a period of world history which included the Crimea War, two World Wars and a great depression. Using the same dataset and method1, the increase over the last 60 years (1950‐2010) is 2.40% per annum and from 1982 to 2010 is 2.47%.

1 The figure is a CAGR from 1830 to 2010, in 2008 constant prices, from the website www.measuringworth.com.

The West Coast Main Line (WCML)

20. Over recent years, taxpayers have invested more than £9bn in upgrading the West Coast Main Line (WCML). Given this lengthy and expensive route modernisation of the WCML, we feel it is right to point out that Government, passengers and taxpayers alike should be given the maximum return for that £9bn investment – which both we and the DfT think our bid delivers. This investment will provide increased capacity and network reliability on WCML; this gives us the confidence that our growth figures can take advantage of this work.

21. We recognise that there will be further infrastructure work on the WCML. Indeed, speaking to analysts on 15 August our Chief Executive Tim O’Toole said:

“We shall be bringing forward in partnership with Network Rail numerous relatively minor investments in track and layout that will materially improve performance over time.”

22. As part of the bid process we worked with Network Rail to hear their plans for the routes. Examples of work to the WCML that we factored into the bid include:

• Power supply upgrade ‐ Northern section of the route • Signalling renewals and improvements ‐ Various points all along the route • Grade separation ‐ Norton Bridge, near Stafford • HS2 works

23. We have built in works such as these into our franchise forecasts in later years meaning increased speed limits and a more attractive route for passengers.

24. We don’t deny the significance of these works and we are well used to working with very major schemes, like Thameslink, Crossrail and Reading remodelling. However, they must be put in the comparative context of the scale of upgrade challenges facing other routes on the network, like the Great Western Main Line, and the scale of the work already carried out on the WCML.

Delivering for passengers

25. Our plans are predicated on passenger growth; it follows that we need to offer an enhanced customer service to deliver this. By 2016 we will deliver the following enhancements:

• Timetable and trains o Transforming the on‐board environment with a major refurbishment of Pendolino and Voyager interiors with new seats throughout and improved luggage space o 11 new six‐car electric trains for Birmingham‐Scotland service will deliver 12,000 more seats per day with the cascade of existing trains to bolster other routes, in addition to the 106 extra ‘Pendolino’ carriages currently being introduced which deliver 28,000 extra daily seats. o Improved journey time by 15 minutes for trains between London and Glasgow o Introducing new direct services from London to Blackpool, Telford, Shrewsbury and Bolton providing a new direct link for >500,000 people o Doubling frequency of London to Preston services, and more capacity to North Wales

o Improving connectivity with more stops at Nuneaton and Milton Keynes o Reliability and punctuality improvements through targeted investment and a new Alliance with Network Rail

• Fares and ticketing o Reducing Standard Anytime fares by 15% on average o Automatic ticket gates installation at 21 stations, including the major terminals of London Euston, Manchester Piccadilly, Liverpool Lime St and Glasgow Central (currently only 8% of ICWC passengers pass through automatic gates); o Investment in greater yield management capability to help grow demand at off‐peak times, increased marketing and introduction of new customer loyalty programme

• Enhanced customer offering and innovation o Smart ticketing introduced o Free upgraded high speed Wi‐Fi, and enhanced mobile phone coverage o Enhanced catering service offered, with increased at seat catering for customers o Improved information systems including new customer mobile apps o Station investment ‐ improving accessibility, security and passenger information, o Commitment to high quality service with emphasis on visible customer service staff on trains and at stations

Fleet capacity

26. An important part of our bid is our commitment to add 11 brand new electric 125 mph trains to serve Birmingham‐Scotland services, delivering 12,000 more seats per day with, unlike some other bids, existing Voyager trains re‐deployed to provide additional new services. This is all on top of the 28,000 new seats that will be provided by the additional 106 Pendolino carriages that will enter service at the start of the new franchise. Thus, we have 66 new carriages from 2016, to meet the latent demand for rail travel on WCML (which clearly the Government, like us, believes will continue to grow to the end of the franchise and beyond, given their plans to build HS2). We note that, from the information made public, Virgin would acquire a new electric fleet like us but not keep the Voyager fleet in service. This means they would have a net increase of only 24 new carriages (as opposed to 66 under our plans).

27. This means that, by 2016 we will be able to offer a total of 40,000 more seats than in 2011. We are confident that this means we will be able to meet the latent demand we know there is on the route. Furthermore, by keeping the Voyager fleet, in addition to acquiring new train sets, we are able to offer more frequent services and new services to new destinations. This along with greater marketing, lower fares and better onboard services and environment will enable us to drive greater revenue growth.

Staff and catering

28. We recognise that there have been specific concerns raised in the media and elsewhere about the staffing levels and catering standards under our plans.

29. We can categorically deny rumours that we are planning to slash staffing levels. Our plan for this franchise is to grow by expanding services and improving the quality of our services – clearly customer‐ facing staff will be central to achieving this. Our plans will see an increase of staff on trains and an increase of visible customer‐facing staff on station concourses.

30. There is no plan to close ticket offices, although we will encourage and promote greater use of technology such as mobile ticketing. We recognise that a shift in sales to the internet is inevitable, especially for this railway.

31. For the same reason, we will enhance on‐board catering, with increased at‐seat catering for customers, and transform the on‐board environment with a major refurbishment of entire existing Pendolino and Voyager train fleets.

32. All but a handful of the 3,000 staff working on the franchise will automatically transfer under TUPE regulations, with protected terms and conditions, as part of franchise transfer. The exceptions are chiefly senior management who we expect will want to stay with Virgin Rail Group. Any delay in the transfer of the franchise may well have a negative impact on staff morale; something we are very keen to avoid.

Looking ahead

33. Our focus is to ensure a smooth transition with continuity for staff and passengers alike. We intend to continue with our preparations to start the new franchise on 9 December 2012 so that we can deliver the many benefits and improvements that we are offering to customers and taxpayers without delay or disruption. 7 August 2012

Written evidence from Merseyrail (ROR 44)

INTRODUCTION Merseyrail is a 50‐50 joint venture between Serco, the international service company and Abellio, the international arm of Nederlandse Spoorwegen (Dutch Railways).

Mtogo is Merseyrail’s chain of combined ticket offices and convenience stores. There are now nine, the first of which was built six years ago. Five are on our underground stations in the centre of Liverpool and four, out of town. The Mtogo concept is based on similar schemes implemented in the Netherlands, as well as on Dutch best practice, brought to the UK by Abellio.

Within three years of the creation of the first Mtogo, another two had been developed. The last one to open was a second at Moorfields in the centre of Liverpool in the spring of this year. Mtogos are all built on old‐style booking offices. Now, most passengers using the Merseyrail network either travel to or from a station with an Mtogo. Funding for the stores was secured from a variety of sources.

Mtogo remains a unique concept in the UK rail market. Merseyrail’s main aim was, and remains, to enhance the customer experience while covering the business’s operating costs. It has indeed proved successful in improving passenger satisfaction and is popular with Merseytravel, the transport authority with whom Merseyrail has the concession, and also, with other stakeholders.

Mtogos are a significant component of the end‐to‐end journey experience for rail users, providing a one‐stop‐shop for all passenger needs: tickets, information and convenience products. While they have been successful in bringing about improvements in customer satisfaction for both ticketing and service provision, it’s worth emphasising that Mtogo was not designed to be a significant revenue generator, but as an initiative to enhance the overall passenger journey experience.

Merseyrail was well placed to introduce the Mtogo concept, thanks to:

• Dutch experience and best practice in this area • Our long concession agreement of 25 years • Being the principal operator on the stations where we provide a service • Our capacity to roll out a critical mass of stores, enabling economies of scale • The relatively low volume of long‐distance ticket sales on our network

RATIONALE • Improve customer satisfaction • Improve station security for passengers • Make ticket purchasing simpler and more convenient • Provide flexibility over peak periods • Promote cultural change and staff satisfaction • Use staff time more effectively

• Enhance station appearance

BENEFITS Mtogo continues to meet our financial goals and covers its operating costs, however we measure its success on customer satisfaction, based on the National Passenger Survey, Passenger Focus’s bi‐ annual poll. In the last NPS, conducted in spring 2012, Merseyrail scored 76% in the overall environment station category, an increase of 19%. Customer satisfaction for ticket buying facilities went up to 90%, a rise of 12%, and station facilities and services saw a 22% increase, from 31% to 53%. These scores are compared with figures from 2006, the year in which the first Mtogo was built.

31 August 2012

Written evidence from Virgin Rail Group (ROR 45)

Introduction and background

1. On August 15, the Department for Transport announced that the West Coast Main Line franchise would be let to FirstGroup (FG) from Sunday 9 December 2012. The franchise will operate for a core term of 13 years and 4 months, with an option to extend to 15 years. Importantly, this option is solely at the discretion of Government, and not FG.

2. Virgin Rail Group (VRG) has operated the franchise since 1997 and has achieved the top satisfaction levels of any long-distance franchise at 91% and the highest growth levels, taking the line from 13m passengers a year at the start at the franchise to 31m passengers this year – more than doubling customer numbers in the last seven years. A franchise that was once a laughing stock has become highly successful and this been achieved by a strong management team which has made the huge improvement once referred to as ‘Mission Impossible’.

3. Our bid for the next franchise was aggressive but realistic and prepared for further growth, taking the annual number of customers to 49m by 2026, making good use of the additional capacity provided by the 106 new Pendolino vehicles, which we are currently bringing into service. It also proposed premium payments to Government of £4.8bn during the core term.

4. In contrast, FG bid £5.5bn during the core 13-year-four-month franchise, based on carrying 66m customers per year by 2026. We believe this relies on unrealistic forecasting of demand and results in premium payments loaded heavily towards the end of the franchise. If the franchise is extended by Government to the full 15 years, these payments become even more unrealistic, with FG projecting to pay some £500m more than VRG in premium to Government in just one year, 2027.

5. This level of undeliverable bidding has happened twice before on the East Coast Main Line where VRG has been runner-up to unrealistic bids from GNER and National Express. On both occasions, the winning operator fell far short of its revenue forecasts and ran into financial difficulties, which forced it to hand the franchise back to avoid making their premium payments.

6. The Commons Transport Committee has frequently raised concerns about franchising. In its report on franchising in 2009 it said that “the process for awarding franchises along with the relative absence of significant risks for franchise holders tend to fuel very optimistic bids. The two failed contracts on the East Coast Main Line where operators had offered the Government £1.3 and £1.4 billion respectively to run the franchise are clearly cases in point.”

7. This has been shown elsewhere. In the case of Great Western, FG bid for the franchise with high premium payments totalling £1.2bn loaded towards the last three years. It recently withdrew from the franchise under agreement with Government before its payments of £830m were due to be paid.

8. The Public Accounts Committee has also previously criticised the procurement policies of the Department for Transport, and especially the ability to forecast realistically. In its report on the East Coast process, in July 2011, the PAC said: “The Department did not undertake sufficient due diligence on the bid by National Express for the East Coast franchise.”

9. We believe the same is about to happen on the West Coast Main Line franchise, and that taxpayers and customers will suffer significant losses as a result of a franchise that is unable to deliver the committed benefits expected over the full course of the franchise.

10. The inherent failings of the process used to assess the bids have produced an outcome which is bad for the taxpayer and bad for the rail passenger. This is particularly worrying on the West Coast line, in view of its importance as a vital link between key economic centres.

Passenger revenue, numbers and premium payments

11. FG is forecasting that it will carry 66m passengers in the final year 2026, compared to our 49m, and achieve revenue of £3.2bn compared to our £2.6bn in that year. FG’s numbers are beyond any rational projection of growth levels.

12. Moreover, even if such demand did materialise, it would lead to large numbers of overcrowded trains on such a scale that would not be accepted by passengers on the long-distance services which the West Coast franchise provides. The growth in passenger numbers forecast by FG is out of all proportion to the additional seating capacity it would provide, which is of a similar level to that which would be offered by VRG.

13. In the bid evaluation, we outscored FG on accommodating demand by a large margin, suggesting that our bid reflected the reality of capacity more accurately. We also outscored on deliverability, suggesting greater confidence in our ability to match the bid forecast.

14. Even the CEO of FG has acknowledged that VRG offers higher cumulative premium payments to Government over the first 10 years. However, FG makes extraordinary assumptions in the final three years, when there is no basis for additional growth in terms of new timetables or capacity improvement. On the contrary, it is rational to expect the growth in passenger numbers to slow down towards the end of the franchise, as capacity becomes more constrained.

15. Furthermore, FG’s assumptions ignore the risk of substantial disruption expected by Network Rail in the coming five years as they continue renewal of major sections of the infrastructure and then followed by preparation for HS2 at the end of the franchise.

16. To demonstrate the different attitude to risk, the premium profiles of the two bids show clearly that VRG pays £133m more than FG in the first half of the franchise (2013-20); but that in the final six years, FG pays £1.3billion more with no credible evidence of how this could be achieved.

17. The graph overleaf shows the gap in premium payments over the course of the franchise, including the extension period.

Graph 1: VRG and FG Premium Profile (£m)

18. First Group has justified this high future growth by linking it to historical growth over the last 10 years of the current franchise, when annual growth rate in revenue from 2003 to 2012 was 10.2%. However, this analysis is fundamentally flawed as it selectively starts the clock at the point when the current franchise began to grow, whilst ignoring the stagnation of the early years. In contrast, VRG’s bid was based on comprehensive historical revenue analysis, in order to have a realistic view of what is achievable in the future.

19. Specifically, the FG analysis ignores the following key events during that decade of high growth:

Recovery from the heavy disruption of the Hatfield rail disaster

Recovery from heavy disruption following Network Rail improvement work

Benefit of WCML upgrade and new Pendolino trains, to enable faster journey times

Effects of two major timetables improvements in 2004 and 2008, to increase frequency

A much stronger economy during much of the last decade

Transfer of new services from CrossCountry to West Coast (Birmingham-Scotland services)

20. These combined changes, which transformed the West Coast service, were instrumental to delivering strong growth, but there is nothing on this scale planned for the next fifteen years. Instead, only incremental improvements to WCML are envisaged by DfT in the expectation that investment will be concentrated on the new High Speed line, HS2. In turn, the works for HS2, particularly at Euston

station, pose a substantial risk to the level of service which can be provided on West Coast, and therefore to the revenue, in the later years of the new franchise.

21. In the face of all these issues, FG has predicated its bid on substantial growth in the last few years. See Graph below showing cumulative difference between the bids. The red line above the axis shows FG making higher cumulative payments than VRG, and below the axis VRG making higher cumulative payments than FG.

22. The variance between the two bids is even greater in the 20-month extension period, which is at the discretion of Government and cannot be opted out by the operator.

Graph 2: Cumulative Premium Variance of FG Bid (£’m)

Key flaws in the bid process

23. For a number of years, especially since the collapse of the East Coast for the second time, VRG and other bidders have consistently expressed concerns over the robustness and effectiveness of the franchising process.

24. In the case of the West Coast line and in the absence of any detailed information from the DfT, VRG believes:

• As FG bid substantially more than any other bidder, the process did not subject their bid to a direct comparison of deliverability and an overall risk

• DfT has not properly risk adjusted bids as it says it would do in the Invitation to Tender (ITT) documents

• DfT has therefore used a flawed process, that naturally picks the most risky bid

• DfT has not treated bidders consistently or rationally in calculating the additional funding required of bidders

• DfT has failed to act transparently or provide adequate reasons for its decision

25. During the short period after the announcement on August 15, VRG asked for clarification about this evaluation process, and failed to receive any answers. It was only at this point that we embarked on the legal process in order to challenge the decision-making process.

26. Contrary to suggestions that we only made our views known in recent weeks, we had voiced concerns over the franchising system and West Coast ITT for more than four years and met with three successive Secretaries of State and senior officials at DfT.

27. Immediately after the decision, an e-petition calling for reconsideration was created by one of our customer Ross McKillop, and quickly attracted more than 170,000 signatures and coincided with increasing interest from MPs of all parties on the West Coast route.

VRG Bid

28. To recap with an overview of our bid, we have promised to invest £800m to help deliver our planned growth, by providing customer benefits, contrasting with only £350m by FG.

The VRG investment includes:

– 21 new 6-car tilting Pendolino trains and Vossloh rescue locomotives (£385m)

– Infrastructure work to improve performance and journey times (£125m)

– On board service, including interiors refresh, state of the art WIFI and systems to facilitate at seat ordering in first and standard (£109m)

– Stations, including gating, 1,938 car park spaces, improved information systems and improvements to accessibility and security (£99m)

– Developing a new booking and customer experience systems (£39m)

New Services

– Direct services to Telford, Shrewsbury, Blackpool and Bolton

– Enhanced services to Liverpool, Gobowen, Chirk, Ruabon and Wrexham

– Faster hourly services to Glasgow, some in sub 4 hours, stopping at a new South Scotland hub at Motherwell station

– Direct services connecting Milton Keynes to Rugby, Stafford, the North West and Scotland

– Increased stops at Tamworth and Lichfield

Conclusion

29. We remain unconvinced that FirstGroup can match many of the commitments we have made in our franchise bid, and West Coast customers have yet to receive detailed information on FG’s commitments, as evidenced by the lack of detail on key issues below.

Services

• The DfT has stated that FG must only use “reasonable endeavours” to introduce new services to Shrewsbury, Blackpool and Bolton, so there are no guarantees of these services. Are journey time improvements between London and Glasgow guaranteed?

Investment

• Is the £350m investment suggested by FG guaranteed, or only conditional on customer numbers improving?

• Will FirstGroup match the £99m investment committed to by Virgin Trains at stations, including £20m on better car parking?

Revenue factors

• Why does FG believe GDP of 2.5% a year is realistic, when HM Treasury and other forecasts are lower?

• Tim O’ Toole, FG CEO has stated that the West Coast franchise is easier to operate “because it does not face the delivery risk present in almost every other franchise, because of the need elsewhere to accommodate extensive renewal and enhancement work. This investment is already in place. The railway is whole.” Is Mr O’Toole aware of the major impact on revenue that Network Rail work will have in the next five years?

Redundancies

• Will there be any compulsory redundancies under FG’s franchise plans?

30. In view of the lack of detail about these issues and the evaluation process, we believe there is a clear case for greater transparency and a review by an external body to establish whether the best value bid for taxpayers and customers has been chosen.

10 September 2012 FURTHER WRITTEN EVIDENCE FROM VIRGIN RAIL GROUP (ROR 45A)

FG Assertions in Bid Contrary Evidence Historic Revenue & Growth • VT have underperformed being in cap and • VT year on year revenue growth in last 3 years is: collar. It had little incentive to invest [in marketing] while under these arrangements o 7.9% 2011/12 o 11.0% 2010/11 o 10.1% 2009/10 o These results are above any other long distance operators, including FGW

The 16% growth rate discussed in the hearing for 2011/12 includes an extra period’s revenue due to a change in accounting year. The effective annual rate is set out above

VT has invested £9m p.a. in marketing up till 2011 and not, as suggested, done “very little” to promote growth while being under the cap and collar arrangements

• Historic growth has just come and FG could • Significant one-off events that, if adjusted for, reduce the maintain it historic 10.2% growth rate over the last 10 years. These are: o Upgrade disruption Recovery (0.6%) o XC service transfer (0.7%) o Faster Pendolino trains (0.7%) o Increased timetable frequency (1.3%)

This gives an underlying historic 6.9% annual growth rate compared to 10.2 % used by FG to justify their future revenue growth. • First TPE Customers Identical to WC • TPE customers do not travel to/from London, so they are not similar to WC’s. 80% of WC revenue is linked to London travel, as stated in FG’s investor presentation. Future Revenue & Fares • FG did not recognise 22% real fare increase From FG investor presentation: • FG will increase fares by RPI only • £824m 2012 revenue and 30m passengers, so average yield is £27 • FG passenger revenue average annual growth is 7.3% (excl RPI), reaching £2.2bn in 2026 • FG passenger journeys average annual growth is 5.8%, reaching 66m in 2026 • £2.2bn divided by 66m is £33 average fare, an increase of around 22% in real terms, not zero as stated by FG • 3rd class will give choice to “trade up” thus • We reviewed this option in our bid and rejected it as, in our average fares increase view, this is likely to lead to more down trading than up trading especially when more standard capacity is introduced • VT bid flat lines in last 3 years The VT bid real revenue growth (excl RPI) in the final 4 years of: • 3.4% in 2022/23 • 3.1% in 2023/24 • 4.0% in 2024/25 • 3.0% in 2025/26 • Deliverability scores were “close” 64 vs 60 The scores for the key revenue growth plans to “accommodate current and future demand” had VT scoring 72 vs FG’s 54 • Loading to hit FGW and TPE levels of 45% - • Average load factor across all trains in First and Standard 50% will be 37.5% following full introduction of 106 new • No more seats in carriages Pendolino vehicles (cf 35% quoted in FG investor pack). • It is natural that average load factor will be relatively low immediately after this 19% increase in capacity. • By 2026, 66m passenger journeys would mean that average load factor would increase to around 70%, even allowing for the 11 additional trains which FG would introduce. • Average load factor in standard would be around 80% by 2026. • Around 25% of trains would be full and standing in standard by 2026. • Start to sell cheaper Advance fares out on • We have been doing this for the last two years. services from Euston on which Off Peak fares are restricted. • £350m investment quoted by VRG was only • VT would commit to invest £800m in the first 5 years in a over first 5 years – more investment in later range of capital projects and more operational spend to years will be made on customer service ensure customer service improvements. The ITT stated that investments must pay back within the franchise term • VT making guesses about FG revenue growth • Compound Annual Growth Rate is quoted in investors’ • The increases in revenue at the back end of the statement. This is what we have used. franchise are merely compounding

• Services to Blackpool, Bolton and Shrewsbury • Simon Burns, the transport minister, confirmed in the are “firm commitments” Commons last week that FG were only required to “actively consider and use all reasonable endeavours” to implement them Risk • FG negotiated on the Shareholder Loan Facility • There is no provision for negotiation to occur in the DFT (SLF) reducing by a “small” amount process charts or the ITT – it is formulaic

• SLF guaranteed for 3 years only • This is stated in the Funding Deed documents

• FG understand how £600m could be calculated • In calculating the £600m, we have applied the same methodology used by the DFT for VT using the information available on growth rates, premium and margin. An independent firm of expert advisors concluded the same Other Comments VT would have defaulted on EC • This is pure speculation as VT’s bid is a private document • VT would have paid the committed premiums to DFT to date of circa £500m. Using Directly Operated Railways (DOR) payments for the same period of circa £450m as a benchmark, we would have earned a lower margin than expected but would still have paid the premium to DFT in full Margin of 7% The profit margin is there to make the bid robust and deliverable and to protect the taxpayers’ premium. The premium comes out first. We only make a profit after that and to make 7 per cent margin we need everything (economy, revenue ideas etc and cost control) to go in our favour. If not the margin disappears and then look to the SLF for the taxpayer protection.

This approach was endorsed by the DFT in several communications between us as a way of managing their key objective in the bid of ensuring franchises remained sustainable and robust in economic downturns

Nominal Revenue £'m

3500 Virgin First Group

FG line assumes pure 10.4% annual growth

3000

2500

2000

1500

1000

500 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Premium Profile £'m Exten Period VRG Premium First Group Premium

1,950 1,893 1,750 1,690 1,550

1,350 1,358 1,150 1,257

950

750

550

350

150

(50) Premium Variance £'m 2,300

1,800

Extension Period 1,300

800

300

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

(200)

Written evidence from Tony Bolden & Reg Harman (ROR 46)

Introduction

We are independent consultants and commentators on transport matters. We have a particular interest in modern railway practice and how that should perform in the wider economic, environmental and social context. We have written a number of joint articles and papers on this topic and have made previous submissions to the Transport Select Committee1, as well as to the Department for Transport.

This brief submission has been prepared for the Committee’s further consideration of rail franchising, following the problems encountered with the re-letting of the West Coast Main Line. It has three sections: • An outline of the main features of rail franchising common to most other European countries but differing substantially from British practice. • A review of possible weaknesses in the British system when compared to our continental neighbours, especially in terms of the wider impact and value of rail and its relationship with spatial planning. • Some ideas on possible practical steps forward to improve the effectiveness of developing and providing rail passenger services in Great Britain.

The submission has been kept brief in order to highlight the main points at this stage. The authors would be pleased to provide further information and inputs on particular areas if asked, through written material or oral evidence.

Railway governance and development outside the UK

The British system of railway franchising has few if any parallels. The McNulty studies2 looked in depth at the financial performance of four continental railways; but they paid no attention to the context in which these results have been achieved.3

The railways of continental Europe have been restructured over the last fifteen years, following the principles set out in European Union Directive 91/440 and developed in successive Railway Packages. This process has mostly been a steady one and it continues to evolve. While there are strong variations between countries, there exist several common features which differ from the British approach. These include: • The national railway infrastructure is vested in a national public agency, which is responsible for its development and management. In some countries these body is established on almost the same basis as for the national (trunk) road and waterway agency; in one or two countries there is one combined infrastructure agency. • The core national network of inter-city and secondary main line services is vested in and managed by the former national railway authority, now functioning as the national passenger company. A medium term formal agreement between government and operator defines responsibilities, services, funding, etc. In principle most governments

1 House of Commons Transport Committee (2006) Passenger Rail Franchising Session 2005-06 14th Report London: TSO 2 Department for Transport (2011) Realising the Potential of GB Rail

3 Harman R (2012) ‐ letter in MODERN RAILWAYS (February); Schabas M (2012) Benchmarking for dummies in MODERN RAILWAYS (May) are looking to sell the national company into the private sector, at least in part. Development of competing main line services has been very limited. • The responsibility for franchising regional and local services lies with regional authorities, or in some cases city or district authorities. Usually there is continuing financial support for this from central government. These authorities let franchises to (licensed) operators, which may be major passenger transport corporations or regional and local companies. Such companies may be owned by public or private organisations or even a mixture of both. • Local rail infrastructure is sometimes owned by regional or local authorities. They are often the main shareholder in regional rail operating companies. • Passenger trains are normally owned by the operators (especially the main national companies) or leasing companies. In one or two countries a publicly owned company owns much of the stock used on regional and local lines and leases it to franchisees.

As a result, there is a wider and sometimes more creative basis for understanding and developing rail passenger services against a broad range of policy aims at regional and local levels, as well as reflecting national policy objectives. Four aspects stand out: • Regional and local authorities also have responsibility for spatial development, including land use planning and economic, environmental and social development within their area. In consequence they are able to coordinate provision of rail passenger services with the wider development needs and opportunities for the area. • Regional and local authorities mostly have a strong responsibility for bus and light rail in their area, often through letting franchises for these. They are thus able to oversee coordination of all public transport for their area. • As part of this, regional and local authorities generally engage in the development of rail and other public transport infrastructure, through their powers for spatial planning, for local investment and for programmes and initiatives. In consequence many regional and local railways across the continent of Europe have seen considerable change over time in their physical and operational structures, through extensions, new and rebuilt stations, changes in format (e.g. to light rail) and some closures (when replaced by bus or tramway). • A mix of rail companies has evolved with strong interests in regional and local rail service provision. Some of these are independent; others are wholly or partly owned subsidiaries of major groups. Most have a culture of engaging closely with franchising authorities over development of regional and local services.

Weaknesses in rail franchising in Great Britain

A number of strands emerge, especially when set against common features of rail franchising across the Channel. Some of these have been inherent from the outset; whilst others have developed as the franchising process has evolved. They have been covered to varying degrees in the British railway press4. In summary the weaknesses which appear in the British system include: • The franchise process up to now has been over centralised. It has generally failed to understand and involve local decision makers, be it local authorities, business leaders and community groups. These bodies have particular interests and concerns in what rail franchises can deliver for their areas.

4 See for example various editions of MODERN RAILWAYS during the franchising era. • There is a very narrow vision of what franchises are supposed to be. The objectives are very heavily concentrated on financial criteria. Little or no attempt is made to state how a franchise would contribute to economic growth, to environmental sustainability and to social mobility for example. • There is fragmentation over responsibility. There are a number of different bodies who can affect how a franchise is delivered and this needs to be clarified. • There has been a tendency to regard franchises on a “one size fits all” approach whereas in reality there are a number of different circumstances at play. There are three broad business sectors affecting railway operations: Inter-City; London & the South East; and Regional & Local, into one of which all franchises fit. Each sector has different characteristics and circumstances affecting their performance, reflecting the areas served, and this should be reflected in the objectives set for each. • There has been little or no attempt to co-ordinate franchises with other local transport provision. Even within the major conurbations, where transport is cohesively developed by the ITAs, coordination is limited. Of course, the deregulated competitive nature of the bus regime makes this very difficult. Nor have there been any real links with spatial planning and how local authorities perceive the location of future development being accessed by rail services. • Funding for franchises has been causing problems before the current disarray over the West Coast franchise re-letting occurred. With the expectation that the awarding of new franchises would be based on a longer time period, these problems are likely to grow rather than diminish. • A similar problem exists over investment. The narrow central framework for franchising means that there is no sound basis for a consistent programme of service development and new investment in stations, rolling stock and services. If franchises are based over longer time frames and answerable only to the Department for Transport, this becomes even more difficult. • Potential franchise operators focus on the requirements of government, as the sole franchising body, and on the financial and operational aspects of large franchises rather than on the wider aspects of service provision. • There is a widespread hesitation to understand railway franchising processes elsewhere in Europe, and indeed other aspects of transport provision. Some techniques have been subject to limited trials, usually without widespread adoption. Mostly the lack of follow- up reflects failure to appreciate fully the context in which such techniques are used across the Channel.

We believe that it is essential to continue seeking greater efficiency in provision of railway services. However, the current approach to this concentrates on cost reduction within the existing system but it largely ignores the scope for more productive service provision and investment that full engagement with regional and local bodies would offer.

Developing rail franchising for the future

Although there are queries over its exact status, the national rail infrastructure in Great Britain vested in Network Rail is in practical terms nationally owned. Indeed, the whole rail system, regardless of ownership, is effectively a national asset: the national regime for franchising and funding the railway system. If use of this asset is to be optimised, to help in meeting key national aims, then the franchising system must be suitable for doing this.

In consequence, we consider that the first task for any reform of rail franchising in Great Britain should be to a. clarify the purpose of the railway system overall b. enable the purpose of the various franchises to be clearly determined, and c. Identify the roles of rail services in economic, environmental and social development, especially at regional and local level.

There are three main strands to these steps: • What is the principal aim? What objectives make this up? • What are the key outputs? • Over what time period should these be achieved?

In the immediate future it is unlikely that rail franchising in Great Britain can be decentralised significantly. Therefore the criteria for each franchise, and perhaps for sections of franchises, should be developed with regional or sub-regional authorities being involved with the Department for Transport. Developing and letting franchising must be geared to addressing the weaknesses we have identified and learning from the approach used by our continental neighbours.

We believe there are several factors that are important in developing a new franchise structure. These would help to move the franchising system on to a more effective working arrangement so that it meets the two key, but complementary, goals of passenger service quality and promoting a sustainable economic, environmental and social future. In particular we suggest: • The purpose of passenger rail franchising should be made clearer by establishing a coherent strategy, together with a set of more meaningful objectives, for all franchises. Additionally, separate sets of objectives should be developed for each of the three main service groups: Inter-City; London & the South-East; and Regional & Local. These should cover not just broad financial, operational and passenger quality objectives but should address wider sustainability issues as well. • Potential franchisees should draw up their proposals for service provision to meet these objectives, identifying what services they could meet commercially and what requires public financial support (whether national or local). They should include proposals for service development, including investment where necessary, and indicate when they could be introduced within the franchise term and what funding would be needed. • The franchising process should fully engage local authorities, in cooperation with business and community groups. Such bodies have considerable information and awareness of their areas and how future development might evolve. They should also be asked to contribute funding for service support and for investment. • In order to bring a more localised focus into different parts of a large franchise, potential franchisees should define the management structure for running the franchise. This might include commitment to specific semi-autonomous divisions for groups of lines serving distinct areas. Alternatively they might propose sub-letting one or more lines as micro-franchises, perhaps to locally based operators, within a structure, aims and funding regime agreed as part of the franchise. • Franchises should be developed on the understanding of operating at a sufficient level all day for seven days a week (18/7). Weekend performance is as important as weekdays. • More responsibility for stations should be passed to franchisees. This could enable them to undertake management and development in close cooperation with the local authority and other local interests • Franchisees should also have much more responsibility for decisions on rolling stock acquisitions. Often rolling stock orders have the potential to affect more than one franchise: two or more orders for new trains might be combined, to give better unit costs, to the benefit of railway operations and industry; or other operations may benefit from cascading of existing stock. Thus coordination between franchisees and other interested bodies over the timing, scale and funding of such orders would be very useful; this might be done by the Department for Transport or more possibly a separate body representing the Department, ROSCOs, operators and manufacturers. • Performance monitoring is essential, but based upon factors that are useful and readily understood: reliability; punctuality; comfort; cleanliness; and information about services. Appropriate data should be provided by the franchisees as well as from independent sources. • A complementary strategy should be drawn up for the development of Network Rail and complementary infrastructure addressing the role of rail in relation to wider policies at national, regional and local areas. This should form the basis for coherent programmes of investment projects required to support better service delivery. Such a strategy would make it clear what opportunities face potential franchisees in operating any franchise. Franchisees might offer to invest in the infrastructure as part of their bid. • The charging regime for the use of Network Rail’s infrastructure should be changed. Charges to Train Operating Companies (TOCs) should become more marginal in nature, rather than aiming at recovery of both fixed and variable charges. • The role of open access operators should be clarified in relation to existing and potential new franchise operators. • The funding regime for franchises should not be based upon economic forecasts of 10 years ahead, which will inevitably be wrong. Instead shorter term expectations should be used together with periodic reviews of performance.

Conclusion

In developing the franchising system for Great Britain, it is very important to take fully into account the structure and approach to railway franchising and development across mainland Europe. While Great Britain has major differences in regional and local governance, there is great value in considering what aspects of other European practices might be taken on board and how they might be used in British circumstances. In any case major changes are required to the process of passenger rail franchising in order to make it effective and efficient.

29 October 2012

Written evidence from the Office of Rail Regulation (ROR 47)

Letter to the Chair of the Committee from Anna Walker, Chair of the Office of Rail Regulation Thank you for the opportunity to appear before your committee on 12 November 2012, to give evidence as part of your Rail 2020 inquiry. On reflection, there were a couple of points of further information and clarification on which I thought I should write.

The first point concerns international comparisons of freight charges. Mr Stringer asked me at one point whether we had international comparisons for freight charges, and, referring back to evidence the committee has received in relation to a previous report, whether it was still the case that freight charges in Britain were still 'twice the industry's best worldwide'. We realised that Mr Stringer was referring to comparative charges for infrastructure costs- not freight charges- but I did not have the international freight charge comparators to hand. I can now let the Committee have these. The chart in the attached annex shows average freight track access charge per train km across the EU at 2012 prices. The data show that average freight track access charges in the UK were the sixth lowest in the EU.

Secondly, I thought I should clarify what I said to your committee, again in response to a question from Mr Stringer, in relation to our current position on reaching decisions on freight charges. As you are aware, our freight consultation raised a large number of issues and concluding on the issues has, and will, involve our board in taking a number of decisions. We are currently engaged in that process, which will ultimately lead to our publishing our decision document in a few weeks. As part of that process, we have in fact taken some decisions at board level and we expect to take others before we have a final package that we can publish. On reviewing the transcript, I realise that I said that no decisions have been taken in relation to the freight consultation document published in May 2012, and that I did not make clear that we are in the process of making our decisions. I hope this clarifies what I meant by that and apologise if my choice of words caused any confusion. Once again, thank you for the opportunity to contribute to the work of your committee. We would of course be happy to come back for further discussions if that was helpful to you.

26 November 2012

Average freight track access charge, EU - E/ train km at market exchange rates £ 9 £ 8 £ 7 £ 6 £ 5 ES SE LU PT SI UK Fl NL FR BE DE HU PL AT BG CZ RO EE LT LV IE SK Average freight track access charge / train km £ (2012 Prices) - assumes 1000 gross tonne freight train

This data is based on a 1000 gross tonne freight train and is expressed in 2012 prices using an exchange rate of Euro 1.25:GBP1.00.It comes from the 'Report from the Commission to the Council and the European Parliament - Third report on Monitoring development of the rail marker [COM(2012) 459 final]. List of abbreviations ES — Spain HU — Hungary SE — Sweden PL — Poland LU — Luxembourg AT — Austria PT — Portugal BG — Bulgaria SI — Slovenia CZ — Czech Republic Fl — Finland RO — Romania NL — Netherlands EE — Estonia FR — France LT — Lithuania BE — Belgium LV - Latvia DE — Germany IE — Ireland SK — Slovakia

Written evidence from Sam Laidlaw (AS 48)

Additional information from Sam Laidlaw, Non-Executive Director, Department for Transport

During my oral evidence to the Committee earlier this week, I said that I would revert on a small number of questions put to me by members of the Committee. Accordingly, I set out below my responses to those questions. I regret that, as you will see, I am unable to provide much further information,

1 How many of the 14 attendees at the meeting of the Contract Award Committee on 27 June 2012 had been involved in previous franchise processes?

The evidence gathered by the Inquiry team (see paragraph 2.15 of my Report) does not enable me to answer this question as we looked at general experience levels and seniority but not the specific previous experience of every individual in the process. I would suggest that, if the Committee wishes to obtain the requested information, it should seek the information directly from the Department.

2 Of those 14 attendees, how many were internal DfT officials and how many were consultants?

I believe that two of the attendees were contractors, while the remaining 12 were employed DfT officials (including internal DfT lawyers). If a definitive response is required by the Committee on this question, I suggest that confirmation is sought directly from the Department

3 Of those 14 attendees, how many had previously worked for TOCs (including First or Virgin)? I would make the same observations as my response to question 1 above, 4 What was the size of the reduction in the additional SLF required in respect of First's bid between:

(i) the amount orally notified to First by the NT on or about 20 June 2012; and

(ii) the final SLF amount of £140 million (in addition to First's bid SLF and equity of £60 million) imposed by the Department following the meeting of the Contract Award Committee on 27 June 2012?

The unredacted version of my Report that I issued to the Secretary of State sets out the amount of the SLF requirement orally notified to First by the Department on or about 20 June 2012. The reference to this amount has however been redacted by the Department in the published version due to commercial sensitivity. In those circumstances, I regret to say that it would not be appropriate for me to provide the requested information.

21 December 2012