HOUSE OF LORDS European Union Committee 10th Report of Session 2008–09 Recast of the First Rail Freight Package Volume II: Evidence Ordered to be printed 19 May 2009 and published 2 June 2009 Published by the Authority of the House of Lords London : The Stationery Office Limited £price HL Paper 90–II CONTENTS Oral Evidence Network Rail Written Evidence 1 Oral Evidence, 2 March 2009 6 Supplementary Evidence 11 European Rail Infrastructure Managers (EIM) Written Evidence 12 Oral Evidence, 2 March 2009 15 Rail Freight Group Written Evidence 21 Oral Evidence, 9 March 2009 25 NewRail Written Evidence 34 Oral Evidence, 16 March 2009 38 Supplementary Evidence 46 Office of Rail Regulation (ORR) Written Evidence 53 Oral Evidence, 23 March 2009 56 European Rail Freight Association (ERFA) Written Evidence 60 Oral Evidence, 23 March 2009 69 Freightliner PL Oral Evidence, 23 March 2009 74 Federal Network Agency Written Evidence 78 Oral Evidence, 30 March 2009 80 Regulatory Service for Railway Transport and for Brussels Airport Operations Oral Evidence, 6 April 2009 88 Community of European Railway and Infrastructure Companies (CER) Written Evidence 96 Oral Evidence, 6 April 2009 99 Arriva Written Evidence 109 Oral Evidence, 6 April 2009 113 Brian Simpson MEP Written Evidence 121 Oral Evidence, 7 April 2009 122 Michael Cramer MEP Oral Evidence, 7 April 2009 131 Department for Transport Written Evidence 137 Oral Evidence, 20 April 2009 141 Supplementary Evidence 149 Written Evidence Cargo Rail Europe 151 Deutsche Bahn AG 151 European Association for Forwarding, Transport, Logistic and Customs Services (CLECAT) 153 Mr Henry Holbrook 155 International Union of Private Wagons (UIP) 157 Ministry of Transport, Slovakia 160 Mr J H Rees 160 Swiss Rail Traffic 162 Mr Andrew Woodcock 163 NOTE: The Report of the Committee is published in Volume I, HL Paper No 90-I The Evidence of the Committee is published in Volume II, HL Paper No 90-II Processed: 21-05-2009 21:44:26 Page Layout: LOENEW[ex 1] PPSysB Job: 424756 Unit: PAG1 Minutes of Evidence TAKEN BEFORE THE SELECT COMMITTEE ON THE EUROPEAN UNION (SUB-COMMITTEE B) MONDAY 2 MARCH 2009 Present Bradshaw, L Rowe-Beddoe, L Dykes, L Ryder of Wensum, L Freeman, L (Chairman) Walpole, L James of Blackheath, L Whitty, L Paul, L Plumb, L Berkeley, L Letter from Network Rail 1. Further to the Sub-Committee’s request for evidence in support of its above inquiry,I am pleased to provide the following submission on behalf of Network Rail. 2. This submission will seek to demonstrate that within Great Britain, the rail network is governed by a legal and regulatory framework together with an industry structure that supports the aim of EU market liberalisation and promotes competition. We believe that as a result, this country has a highly successful freight market supported by the strategies and investment needed to continue that growth. 3. Network Rail is committed to delivering these plans and investments in partnership with our customers. We hope that the approach we, together with government and the rest of the industry, have adopted, is one that is encouraged across other markets for the benefit of the European freight sector as a whole. 4. In summary, we believe that the success of freight is dependent upon eVective asset management and long- term planning combined with the principles of eVective regulation, transparent access and charging, and non- discrimination. The first package recast should seek to guarantee these principles across Europe, but with as light a touch as possible where these principles and the resulting success can be evidenced. Context 5. Before considering potential changes in the provisions in the first package, it is instructive briefly to review the development of Great Britain’s rail freight industry since privatisation, and the implementation during that time of measures consistent with the first package. 6. Prior to publication of the first package, the industry in Great Britain was already largely compliant with the package’s directives by virtue of the Railway Acts establishing the current structure of the railway. The remaining elements of the first package were implemented in Great Britain in November 2005 through The Railways Infrastructure (Access and Management) Regulations 2005, and The Railways (Licensing of Railway Undertakings) Regulations 2005. 7. Since 1995, Great Britain has seen the fastest rate of rail freight growth of any major network in Europe— excess of 60%. Many of the other liberalised markets such as Belgium, Portugal, Spain and Finland also show growth in this period. Processed: 21-05-2009 21:44:26 Page Layout: LOENEW [E] PPSysB Job: 424756 Unit: PAG1 2 recast of the first rail freight package: evidence % 80 68 61 Percentage variation of rail freight 60 traffic performance 1995-2005 in 44 selected EU countries (on the basis of 37 tkm) 40 20 Competition 0 No or little competition -20 -15 -20 -40 -50 -60 UK NL AT DE FR LU IE Source: DG TREN 8. Those countries without liberalised rail industries but with growth in rail freight are generally members of the Alpine Initiative, where legislation against road transport has been used to drive modal shift to rail. For example, the Swiss 2001 TraYc Transfer Act limits lorry movements across Switzerland from 2009 onwards to 650,000 lorries—half that of 2000. 9. Many of the factors that are cited by the Commission elsewhere in Europe as evidence of a restricted rail freight market do not apply to the British railway: — The number of freight operators in Great Britain is growing—doubling to 10 companies in the past five years. — The British market has grown—60% in 10 years and is projected to grow around 30% more in the next 10 years. — We have a national strategy for growth in rail freight—Network Rail has worked with the freight community to bring together all the key issues facing rail freight in the UK & identify this strategy for growth. — We are enhancing key freight routes—Network Rail is being funded up to £208 million towards the development of a strategic freight network in the next control period. — Bottlenecks are being tackled—Government funding through the Transport Innovation Fund (TIF) is already being invested in these in order to grow freight in regions across the UK. 10. It is our contention that the manner in which the UK has embraced liberalisation of the rail industry is, as in some other states, in no small part responsible for its recent success. This relationship was summarised by Chris Bolt, Chairman of the OYce of Rail Regulation (ORR), in his forward to the Rail Freight Group’s 2007 report “Success and Lessons of Rail Liberalisation in the UK”: 11. “We consider that some of the major factors contributing to this success are the total separation of infrastructure and train operations, medium term stability and certainty in rail policy, a contractual framework with clearly defined roles and responsibilities and the existence of strong and independent regulation. These factors continue to enable the companies involved to have the confidence to invest their time, expertise and money in the railways.” Chris Bolt, November 2007 Processed: 21-05-2009 21:44:26 Page Layout: LOENEW [O] PPSysB Job: 424756 Unit: PAG1 recast of the first rail freight package: evidence 3 12. Against this background therefore Network Rail would like to address the questions posed in the committee’s call for evidence. [Whether] the provisions on the separation of infrastructure management and train operations are sufficient; whether they should be amended or whether they should be replaced with a requirement for full ownership unbundling? 13. The first package leaves such latitude for implementation, that a wide range of models for transposition can be seen—some fully liberalised and others where no benefit has been delivered and separation is little more than theoretical. 14. If followed to their logical conclusion, the provisions do oVer a clear route to an open and competitive rail freight market. However, it is clear that some member states have preferred to take a minimal approach in transposition, and that even then many have failed to implement the required changes. 15. In its 2008 assessment of the compliance of each member state with the first package, the commission identified the UK as one of the most compliant. Letters of formal notice were issued to 24 national permanent representations. While the Netherlands was the only member state with a railway not to receive a notice, the UK was the only member to have just one issue identified. 16. We understand the UK notice stemmed from a misinterpretation of ORR’s timelines for its consultation and hearing process; the Commission did not account for the time taken to establish relevant information. Our understanding is that this has now been clarified and the ORR is compliant with the requirement to reach a decision on Track Access applications within the required two months following the gathering of such information. 17. Many other countries however were cited on the independence of essential functions or the actual competences of regulatory bodies. 18. The recast first package should seek to provide non-discriminatory access to the rail network. It will need to require a more practical separation of essential functions from train operations in many member states. These should ideally be required to be legally separated organisations to prevent any conflicts of interest arising in timetabling or operations, guarantee equal access to facilities, and prevent cross-subsidisation within owning companies by allowing operators to deliver with minimal margins. 19. The recast could also empower regulatory bodies or licensing authorities with the ability to carry out audits of the accounting separation provisions of railway undertakings and infrastructure managers if they are not fully separated.