GLA TRANSPORT OPERATIONS SCRUTINY COMMITTEE: SCRUTINY OF MAINLINE RAIL SERVICES IN

MEMORANDUM OF EVIDENCE FROM THE STRATEGIC RAIL AUTHORITY (SRA)

Introduction

1. It is easy to lose sight of the fact that the railway is delivering each day, carrying a third more passengers than five years ago, and 40% more freight. Everyday 18,600 trains are run (21% more than five years ago). Every day 2.8 million passengers are carried, and 480,000 people are safely delivered to Central London between 07.00 and 10.00. The results of the last five year’s planning are starting to be delivered. New trains are arriving. The fleet has been transformed. With LUL and TfL, the SRA has started work on the East London Line extension. We have set out details of the re-franchising programme and have extended the Rail Passenger Partnership Fund. We are spearheading the drive to improve rail industry skills. On 14 January the SRA will publish its Strategic Plan, a blueprint for how we are going to plan and deliver a better railway in line with the Government’s Ten Year Transport Plan. Seventy per cent of passenger journeys take place in the South East, from which much of the growth will come to fulfil our key targets. It is also the region that will benefit most from the share of the available resources.+

2. But much remains to be done, working in partnership with TfL and others. Meeting the needs of rail users, and working towards the Government’s core targets, requires action to tackle the following key issues affecting mainline services: • safety; • industry stability and structure; • the need for better performance; • delivering improved capacity and major infrastructure projects; • the railway’s cost base; and • industry skill shortages.

SRA January 2002 1 An appreciation of these issues provides the context for many of the decisions and trade-offs that need to be made. The SRA’s Strategic Plan addresses these issues, funding and priorities.

3. Performance remains poor, and the collapse of Railtrack has left uncertainty for passengers, for train operators and for rail staff. The priority is to restore a sense of stability and belief back into the running of the day-to-day railway.

4. The SRA will play a full part in this process and take a lead by prioritising what is done and when. In the railway industry, this means skills and technical resources as much as money. For example, in the next few years key signalling resources are in limited supply.

5. Focusing on delivery means some hard choices in the short term. But the longer term will not be forgotten. The projects that will define our future, such as cross London links, are being developed and planned now. This is a long lead time industry and many of the problems we face today are a direct consequence of short term investment thinking in the past. The SRA will not repeat that mistake.

6. The SRA is also committed to making sure it does not lose sight of smaller things that can be done relatively quickly to improve the quality of the overall travel experience. That is why we have re-launched the Rail Passenger Partnership (RPP) programme and made it easier and quicker to access such grants. Many schemes have been successfully implemented but we are keen to see them happen more quickly in the future.

7. The Strategic Plan sets a clearer vision for the future than has existed before. However, planning is not a static exercise, it’s a way of working. So the SRA is working with the Rail Regulator’s office to create a process designed to provide a better model of the investment needs of the railway.

Railtrack

SRA January 2002 2 8. Bringing Railtrack out of railway administration as soon as practicable is a top priority. The SRA has recently taken responsibility for the formation and sponsorship of the Company Limited by Guarantee (CLG) which is preparing a bid to take over Railtrack plc’s railway assets and its role as network operator.

9. A CLG is a private company without shareholders. It would not be a ‘not-for-profit’ company, but any profits or surpluses would be invested directly back into the network. The CLG would have the management, board and independence of a conventional PLC – including strong financial and other incentives for directors to achieve demanding performance targets.

10. The company would be accountable to members representing the key interests in the rail industry, including passengers, the Train Operating Companies and stakeholders. These members would effectively be the owners of the company. The Government always envisaged that the SRA would be a founder member of a CLG and it makes sense that the SRA should take on the sponsorship role. This includes agreeing the appointment of directors and legal and financial advisors to support Chairman Ian McAllister, and approval of the business plan and associated financing arrangements for the CLG bid. Railtrack CLG would, of course, be a national company requiring direction on a national scale.

11. The bid team will develop the Government’s outline for a CLG, which was published on 23 October. Like any other potential bidders, the bid team will need to take account of the guidelines published by the Secretary of State on 31 October to help those formulating bids to understand what the Government is expecting of its successor as network operator.

12. The CLG bid team will put forward a proposal to the Administrator, who will evaluate all the bids he receives before putting a proposed transfer scheme to the Secretary of State for approval under Schedule 7 of the Railways Act 1993. It is for the Administrator to assess and make recommendations on proposals for how Railtrack plc's railway assets are transferred out of administration as a going concern.

SRA January 2002 3 13. It has been envisaged for some time now that major projects over a certain threshold could not be undertaken by Railtrack alone because of the risks involved. It is likely that future projects will be taken forward by stand alone partnership companies – Special Purpose Vehicles (SPVs) - a concept which the SRA has been developing with DTLR and Treasury. This has implications for how franchises are taken forward in future (see below).

14. The changed status of Railtrack also has potential regulatory implications. The Government announced on 15 October last year that it intends to streamline the existing regulatory structure, while still recognising that there will be a continued need for some form of independent economic regulation. No decisions have yet been taken.

Franchising

15. The SRA announced a new franchising programme on 19 December last year, to deliver the Government’s objectives of 50% passenger growth and a reduction in overcrowding. We want franchises that put passengers first and get the basics right - acceptable performance, better services, improved facilities, less overcrowding and with safety paramount. The SRA will explore the full range of options for securing benefits for passengers. These include: • variations to existing franchise agreements without any increase in length; • franchise extensions; • early replacement of existing franchises; and • "on time” replacement of existing franchises.

16. This 'horses for courses' approach means we can move forward quickly and secure some early benefits for passengers, while also putting in place plans for the medium to long term. The new programme helps to stabilise and restore confidence within the rail industry. It is both practical and deliverable, and provides clarity for train operators competing for franchises.

17. The programme reflects the different needs of each franchise. It provides a balance between short-term extensions and long-term commitments. Details are set out in

SRA January 2002 4 Annex 1 below. The Annex lists franchises for replacement and those for possible two-year extension, subject to negotiation of satisfactory terms which provide benefits for passengers and value for money for the taxpayer. Also listed are the franchises moving to expiry, but short-term improvements here may be sought through the Rail Passenger Partnership fund or through contractual agreement with the franchisee.

18. Clear guidance will be given to parties on the core requirements of a franchise, whilst leaving scope for innovation. Wherever franchises are replaced or extended, new contract terms will target improved performance and reduced overcrowding.

19. The length of new franchises will depend, amongst other things, on the investment needs of the franchise and the level of risk to be borne by the franchisee. It is also very important to establish structures that allow good quality operators to take a longer term view of their business and the needs of their customers. Where long- term franchises are appropriate these are likely to be up to 15 years (in line with emerging EU requirements) but, crucially, will be dependent upon delivering operational performance targets. Because this represents a considerable development in franchising policy the SRA will be consulting with key stakeholders on the proposed franchise term. Franchises would end after five or ten years if the conditions were not met.

20. The SRA is also looking at the longer-term benefits of combining franchises and a simpler structure. In particular, where two or more franchises share access to a London terminal, combination might produce benefits for passengers. It may allow better use to be made of available capacity, and would simplify the timetable planning process and contractual relationships, with the aim of producing a more reliable, cohesive and attractive service for passengers. The SRA will be consulting train operators, passenger committees, TfL and regional and local authorities on the value of combining franchises in such a way.

21. As a first step towards simplification, the re-franchising programme includes the creation of a 'Greater Anglia' franchise from 2004, through the grouping of Anglia, Great Eastern, and the “West Anglia” part of WAGN (Liverpool Street –

SRA January 2002 5 Cambridge/Hertford/Enfield/Chingford) franchises. A separate management unit will be established in Norwich to ensure local accountability and focus on local services in Norfolk and Suffolk. Work will also start in 2002 on drawing up plans for new trains for the Norwich – London service, to be procured once the new franchise is created in 2004.

Working in partnership with TfL using the existing framework (see Annex 2 for statutory position)

22. The SRA is already working closely with TfL to deliver a common agenda. We will develop this partnership further, within the tripartite structure (DTLR/SRA/Mayor) for high-level decision making on matters.

23. With TfL, we have established a joint company – Cross London Rail Links Ltd – to promote and develop two major projects ( lines 1 and 2). There is similar co-operation to ensure rapid progress on the East London Line extensions, a stepping stone to improved inner suburban orbital services (Orbirail). A London Programme Office is being established to provide programme co-ordination for the work on London projects.

24. TfL is discussing with us draft Directions and Guidance from the Mayor. This provides the statutory mechanism for the Mayor to influence how the SRA exercises its franchise functions (subject to GB requirements – see Annex 2). We are maintaining close contact with TfL during the re-franchising programme.

25. As Britain’s biggest consumer market, a significant port and a major manufacturing centre, 50% of Channel Tunnel Freight and 60% of all rail freight traffic passing through London is either destined for or originates in the Capital. When allocating capacity on congested parts of London’s rail network it is essential to balance the needs of these freight flows with those of the local and national rail passenger services. We will ensure that the continuing importance of rail freight to London’s economy is reflected in the freight strategy to be developed with TfL, and will work to incorporate Freight Quality Partnerships within this strategy. London is thinly served by freight terminals and suitable locations for new ones are scarce. We will

SRA January 2002 6 seek the support of the GLA and TfL in some of the difficult decisions that will need to be made concerning the location of rail freight terminals in the London area.

26. The Mayor’s Transport Strategy requires TfL to bring forward a Rail Plan for London. The SRA will assist TfL in the preparation of this Plan.

27. SRA and TfL teams are already in close touch about progressing a number of interchange projects. TfL’s draft Interchange Plan, and the re-launch of the SRA’s RPP scheme, have given added impetus to this co-operation.

28. The SRA and TfL share the aim of improving fares integration. The SRA’s current fares policy is RPI minus 1% and FIAP (an adjustment for London commuter operators which links fares increases to changes in train service performance). Underground and Travelcard fares have risen more. This widening gap between Underground and national rail fares, and between Travelcard and non-Travelcard fares, is making it difficult to introduce further fares integration. There is a widely held view that national fares (which are based on individual point to point fares) and multi-modal zonal fares such as the Travelcard scheme, need to be simplified. Our analysis of extending the zonal fares system suggests that such simplification would either result in considerable extra peak overcrowding and/or considerable revenue loss for train operators. Nevertheless, we will continue to explore options with TfL. It is worth noting the introduction of the all-day Travel, valid on national rail and the Underground. The SRA will consult TfL and others as it develops work on fares policy, overcrowding and its capacity allocation strategy.

29. A Steering Group consisting of the SRA, TfL, LTUC, TOCs, Railtrack and local authority representatives meets regularly to take forward implementation of the South London Metro concept. In the first instance, improvement is subject to negotiation of the replacement franchises for and South Central, and a possible extension of the franchise.

The case against a Transit Authority

30. The SRA supports closer integration and joint planning of the surface, Underground, light rail and bus systems, but does not believe that a Transit Authority for London is

SRA January 2002 7 necessary or desirable. We believe that rail planning for the national rail network in and around London should be undertaken strategically in the interests of passengers and freight customers as a whole, rather than being determined by political boundaries.

31. London is at the heart of the national rail network. London’s railways are not a Transit network, but a mixed-use network for freight, local, regional, long distance and international passenger services. London’s rail routes connect Scotland, the North of England and the Midlands with the Channel Tunnel and the major ports.

32. London’s ‘travel to work area’ extends well beyond the GLA boundary, which excludes centres such as Watford, Gatwick Airport, Brighton, Milton Keynes, Peterborough, Reading, and Colchester. The GLA boundary itself has little relevance to passengers (for example, Sutton is within the boundary but Epsom Downs is not).

33. Any attempt to create of a Transit Authority would require legislation and would involve delay and added complexity. Passengers and London’s businesses need the SRA, LUL and TfL to deliver improvements now not later – and to do more besides. Regulatory change is not necessary, particularly when so much is already being achieved through working together and making sensible use of the existing structure. Providing a better service to London’s rail users through collaborative working between the SRA and TfL is a more pragmatic and sensible approach. We should focus on delivery, and not add to the uncertainty and risk by further changes in regulation within London.

34. The Government has just created the SRA with a remit covering the entire GB rail network. TfL is also new. In reply to a Commons question on 23 October last year, Ministers made it clear that changes to the Mayor’s or TfL’s responsibilities in relation to the national rail network are not on the agenda.

Conclusion

35. The SRA’s vision is of a railway for which people are proud to work, in which customers can have confidence, is professionally managed and can deliver a safe, reliable and value for money service and in which investors, including Government,

SRA January 2002 8 wish to invest. To deliver this we need a concerted effort by everyone involved to deliver improvements. This will be best be achieved by directing energies into service and network issues, rather than distracting debates about a new regulatory structure for London.

SRA 10 January 2002

SRA January 2002 9 ANNEX 1 – PROPOSALS FOR EACH FRANCHISE

Category 1 Franchises whose future has already been announced :-

Chiltern (Heads of terms agreed – 20 year term) South Central ( “ “ “ “ ) South West Trains ( “ “ “ “ ) (Two year extension agreed) TransPennine Express (New franchise: consultation under way on core requirements) GNER (Extension being negotiated)

Category 2 New franchises being offered, or to be offered to the market :-

Wales & Borders Wessex Northern

Category 3 Franchises to be re-let on expiry (asterisk indicates those with potential for 2yr extension) :-

* *Connex South Eastern * * * / Great Northern # *First Great Western Anglia First Great Eastern Greater Anglia West Anglia #

# WAGN will be split between Great Northern services ( from Kings Cross and Moorgate ) which will form part of a greater Thameslink franchise, possibly as part of the Thameslink 2000 project. West Anglia services (from Liverpool Street) will be transferred to the Greater Anglia franchise.

Category 4 Existing long term franchises to remain unchanged :-

Virgin West Coast Virgin Cross Country c2c

ScotRail The ScotRail franchise expires in 2004. Extension of the franchise, or negotiation of a new Scottish franchise is under discussion with the Scottish Executive, who both specify and fund the franchise.

Arriva Trains Merseyside This unique small, self-contained franchise is Merseyside’s local railway. Discussions are under way to examine the potential for transferring responsibility to Merseytravel, the Passenger Transport Authority, as franchising authority.

SRA January 2002 10 ANNEX 2 – THE CURRENT STATUTORY RELATIONSHIP BETWEEN THE SRA AND THE MAYOR/TFL

The SRA and TfL have a duty to co-operate (in exercising their functions) for the purpose of co-ordinating passenger transport services for people travelling to, from and within Greater London.

The Mayor can issue directions and guidance to the SRA on services within London. The SRA must not implement these if to do so would prevent or seriously hinder the SRA from complying with the Secretary of State’s directions and guidance or the SRA’s financial framework. The SRA need not implement any directions or guidance if to do so would have an adverse impact on services outside London; or increase the amount payable by the SRA to a TOC.

The SRA has a duty to have regard to the Mayor’s Transport Strategy.

The SRA has a duty to consult the Mayor from time to time as to the level and structure of fares, and as to the general level of services, for services to, from or within Greater London.

TfL can give financial assistance for anything that is conducive to the provision of safe, integrated, efficient and economic transport facilities or services. For example, it can secure additional train services in London (via the SRA), and fund interchange facilities and travel information.

If the Mayor is prepared to fund schemes, he can ask the SRA to require operators to participate in multi-modal ticketing or concessionary travel schemes, on a no net cost basis.

SRA January 2002 11