R A I L T R A C K

Railtrack PLC (in Railway Administration)

Alan Bloom, Chris Hill, Scott Martin and Mike Rollings were appointed Joint Special Railway Administrators of Railtrack PLC on 7th October 2001

The Joint Special Railway Administrators act as agents of the company and without personal liability

EVIDENCE to GLA TRANSPORT OPERATIONS SCRUTINY COMMITTEE

SCRUTINY OF MAINLINE RAIL SERVICES IN

Introduction Railtrack owns, operates and maintains Great Britain’s rail infrastructure, including the tracks, signals, , viaducts and level crossings, and is responsible for managing the provision of access to the network, including creating the timetable. It also owns 2,500 stations, which are leased to the train operating companies apart from 15 major stations which are operated by Railtrack.

Within the GLA area, Railtrack owns around 320 stations, of which 9 are major stations operated by Railtrack, and operates around 800 route kilometres of – a network around twice the size of the LUL network. 21 separate passenger train operating companies, as well London Underground Ltd and freight operators, operate train services over the network within London – of these 10 predominantly provide commuter and other services in London and the South East.

Railtrack operates the rail network in London through four Zones (Great Western Zone, Midlands Zone, Eastern Region and Southern Region), who also manage day-to-day relationships on operational issues with TOCs, boroughs and other stakeholders. It has a separate London Development office, headed up by the Director, London, who takes responsibility all London-wide issues, including strategic planning and major projects. The Director, London also takes overall responsibility for stakeholder management and relationships, including managing Railtrack’s relationship with the Mayor, Transport for London, and the GLA and its members, as well as the various sub-regional partnerships. Railtrack sets great importance on maintaining good relationships with its stakeholders.

The Wider Context The rail network in London is clearly a vital part of the city’s infrastructure, and essential to its development. However it is important to recognise that, in railway terms, London is not an island, but the key focal point of the national rail network. There is virtually no

14 January 2002 Scrutiny of Main Line Rail Services in London RAILTRACK national rail infrastructure in London which is used solely by services serving the London area, and equally there are very few national rail services which only operate within the Greater London area.

This means that many of the stakeholders in London’s rail network have interests beyond the capital. In particular, there are varied and often potentially conflicting demands for network capacity, from metro, long distance and freight services. Railtrack plays a central role in reconciling these demands in order to optimise the utilisation of the national network.

It is not just in terms of infrastructure usage that London is inextricably linked with the surrounding region and the rest of the country. 23% of all persons entering the Central London area in the morning peak come from outside the Greater London area, and 80% of these travel by rail. Nearly 50% of rail passengers coming into central London in the morning peak come from outside the GLA area. This contrasts strongly with, say, Paris, where only 8% of those entering the Central Area of the city come from outside the Metropolitan Area1. London is therefore economically dependent on commuters from outside the Greater London area, who in turn depend on rail services to bring them into the centre.

The national rail network is an essential component of London’s transport system. Railtrack recognises the need to work with other operators and stakeholders in the operation and development of the network.

It should be noted that there are a number of issues relating to the use of the network in which a Transit Authority may have an interest, but which are not matters which Railtrack deals with. These are not, therefore, further addressed in this evidence. These include branding, fares, passenger overcrowding targets, and the ownership of rolling stock.

Problems facing the national rail network In many respects the performance of the rail network improved in the first few years following privatisation, with rising passenger numbers and freight volumes, significant improvements in operational performance, and the introduction of new services. However recent events, and in particular the consequences of the Hatfield accident, have served to highlight a number of fundamental problems which the rail industry faces, and which need to be addressed urgently.

We highlight what we consider to be the main issues below, and the next section makes some general observations about their solution: in the interests of keeping this evidence brief we have avoided detailed discussion.

1 Data from London Research Centre: The Four World Cities Transport Study, The Stationery Office, 1998

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Finance and funding and risk allocation Investment in rail infrastructure has to be justified by the benefits it generates. Railtrack, as a commercial company, is required to cover the costs of investment and to generate a commercial return on asset enhancement. A similar regime applied to BR as a nationalised industry.

For most railway enhancements, particularly in London, the benefits are largely non- financial, such as time savings, reduced crowding and reduced road congestion. While such benefits can be valued financially, they accrue to society at large rather than directly generating funds to meet the cost of investment. This means that funding from local or national government is needed in recognition of the wider benefits. The railways in London are likely to remain dependent on government funding in some form for the foreseeable future.

Government and the SRA have advocated that certain projects should in future carried out by Special Purpose Vehicles (SPV’s). An SPV is a mechanism for financially structuring a project to facilitate third party investment. The mechanisms by which SPV’s would be implemented on the railway are as yet unclear, and such issues must be resolved in order to implement new projects.

The structure of the rail industry means that any scheme will involve a number of players. Even when a scheme does produce overall benefits for rail users, some of these players may lose out. Addressing the way in which risk and reward are apportioned between industry partners and government or other funding bodies is an important part of ensuring a project’s success.

Growth The rail industry saw an unprecedented growth in passenger numbers in the five years before the Hatfield crash. Passenger travel by rail is now at its highest since the 1940’s. However, this has brought with it its own problems, as a network which had been underinvested for many years was stretched to its limits by the increasing usage and the increasing demand for train paths. The resultant shortage in capacity has led not only to overcrowding but has had an impact on performance as network utilisation has reached capacity in many places, particularly in the South East.

Capacity allocation On a crowded network it is vital that strategies are defined for allocating scarce capacity. This presents particular challenges when there are different types of traffic (freight, short distance, long distance or train services serving different London termini) competing for space, as mixing traffic on a route in itself reduces efficient use of available capacity. A clear strategy is needed against which to set priorities for different types of traffic and produce a timetable which maximises the use of available capacity.

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Operational and performance issues Considerable emphasis has been placed on the need to make a step-change in railway performance. Railtrack is concerned that there is an implicit assumption the improving long-run performance on an increasingly crowded network can be seen as simply a day-to-day management issue requiring little explicit funding. A step-change in performance cannot be achieved without the realisation that (a) there is a balance to be struck between capacity utilisation and performance; (b) network stewardship must be properly funded; and (c) renewals and enhancements to the network must as a matter of course build in an element of resilience.

Lack of policy direction The SRA’s strategic plan is due to be published on the day this evidence is being submitted, and so we are unable to comment on it here. It is hoped that it will provide much needed overall policy direction to the industry, something which has been singularly lacking in the past few years. Direction is particularly needed in the area of prioritisation and the use of scarce resources, such as signalling and electrification design and installation engineers

Contractual relationships and perverse incentives The rail industry as currently structured depends on a complex matrix of contractual relationships between different players. In some areas this has worked well, serving to tighten up responsibilities and relationships which had previously been informal, introducing proper performance targets and incentives. However, in some cases the contractual structure has introduced additional costs of contract, and even perverse incentives. An example of this is the original infrastructure maintenance contracts, which Railtrack has now replaced with the new IMC2000 contract, designed to address the problems identified.

Lack of integration with other modes There has been a great deal of work carried by all parties including Railtrack, LUL, TfL (and their predecessors) on creating an integrated transport network in London. This includes, for example, the publication of an Interchange Code of Practice. However, in the public eye, there is still a lack of integration between national rail and other modes, particularly in terms of presentation, fare structure, and consistent provision of information.

Asset condition Investment in the national rail network is running at record levels, with £1.4bn of investment expenditure in the six months to 30 September 2001 (up 25% on the same period in 2000). However, significant investment is still need in order to bring the condition of the whole network up to a standard appropriate to sustain the network in the long term.

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Addressing the problems The problems and issues we have highlighted above are not limited to the operation of the rail network in London. We therefore feel that it is essential that the solutions to these problems are developed in a way which not only serves the transport needs of London, and the other transport modes within London, but which is also integrated with the demands on the national rail network.

In particular the needs to set the policy for dealing with the trade-offs which are inevitably needed, even though Transport for London clearly has a central role to play in influencing that policy.

Development of the Rail Network in London Railtrack has for some time been highlighting the need for a strategic mechanism to guide the development of the rail network in London, and put forward proposals for such a body, encompassing Railtrack, TfL and the SRA, last year. We welcome the fact that the London Programme Committee has now been established along these lines. Railtrack is represented on the LPC by the Director, London and the London Strategy Manager, and currently provides staff to the supporting programme office.

The LPC is a body where the strategic planning of London’s rail network can come together, and in particular it has a key role in managing the many interface issues which arise. These include interfaces between different rail projects, as well as wider issues such as dispersal arrangements at terminal stations, and the staging of developments to minimise disruption to rail travellers and Londoners. Under these arrangements a number of Project Development Groups have been established, with membership encompassing Railtrack, the SRA and, where appropriate, TfL. Railtrack also supports the arrangements which have been established to take forward the CrossRail projects (Cross London Rail Links Ltd) and the East London Line extensions. Managing the interface with the operational railway is a key issue, which can have a significant influence on the ability to deliver projects cost-effectively.

A considerable momentum has therefore been built up behind the various initiatives for joint planning of the rail network in London, and Railtrack is hopeful that the emerging relationships will bear fruit in the coming months.

Proposals for a London Transit Authority At the time this evidence was prepared Railtrack had not seen any firm proposals for the establishment of a London Transit Authority, other than those which have been floated at the London Rail Conference in November 2001. A number of different hypothetical options are explored in this response: TfL’s current proposals would appear to be something of a hybrid of these. It should be stated at the outset that any proposal will only work effectively if there is full consultation with, and buy-in from, key stakeholders, including Railtrack, the SRA, ATOC and its members.

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General comments As a general point, we note that any change of responsibilities for the management of the rail network would probably need legislation and reorganisation, and sufficient thought must be given to the consequences of any change before embarking on it. The rail network in London is heavily used, and optimising the use of capacity needs a holistic approach to timetable specification. Any boundaries which were created between “London Rail” and “National Rail” (however these might be defined) could lead to sub-optimal use of capacity and conflicting requirements which could generate additional costs for the rail industry as a whole. Our preference is to minimise interfaces and complexity to allow for as holistic approach as possible, and to maximise utilisation of the network. Additional interfaces are also likely to make the process of developing major projects more complex, and increase the cost and time taken to deliver their benefits.

The assessment of any option must rest ultimately on whether it would deliver value for money benefits for users of the rail network, both passengers and freight forwarders. There are certainly potential passenger benefits to be gained from a uniform planning framework for London’s transport network, such as a more consistent presentation and specification of rail services, and a more unified fares structure. However, it is important to understand that many of these changes could be achieved within the existing structure, without necessarily committing to further change. We note that many aspects of the new framework are as yet untested, e.g. TfL has not yet issued directions and guidance to the SRA; furthermore the London Programme Committee has only been in operation for 4 months and hence it is premature to prejudge its effectiveness.

1) Retain Status Quo The first option is to use the existing legislation which allows the Mayor to issue directions to the SRA, together with the London Programme Committee, to provide a context in which Railtrack, TfL and the SRA can work together, while preserving the ultimate authority of the SRA as the national rail planner. We believe that the aspirations of TfL to improve services in London can largely be met within this structure.

2) Adopt PTE model The seven Passenger Transport Executives in Britain play a major role in in their respective regions. They specify services and fares on the local routes in their area, and are co-signatories to the franchise agreements for the relevant TOCs. However SRA has the ultimate responsibility for franchising services. PTE services (trains and stations) carry the branding of the PTE rather than the TOC which supplies the service. The TOC retains responsibility for interfacing with the rest of the rail industry in terms of timetabling, fare setting etc.

This is a model which could possibly be replicated in London, although a London PTE would have to deal with many more TOCs than the PTE’s (who generally only deal with one or two). Careful consideration would need to be given to where the boundary of a

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London PTE would be drawn, and what services it would specify. However the boundary was set, it is inevitable that there would be conflicting requirements between the London PTE and the SRA, which would need to be resolved by the SRA as it specified franchise services.

3) Create a London franchising authority A development of the PTE model would be for the Transit Authority to act as a franchising authority in its own right, leading the franchising process for some of the TOCs serving London. As none of the existing TOCs serve only the GLA area, either the SRA would still have to be involved in the franchising process, or new London focussed franchise(s) would have to be created. Even if the franchises were redesigned to create one or more London Metro franchises, as has been proposed, the interfaces with national rail would mean that the SRA would still have to have close involvement. Having more than one franchising authority specifying services on the same network could lead to conflicting specifications, giving rise to the need for a third party to resolve them. The most likely arbiter for such conflicts would be the DTLR – leading to additional complexity in the specification of national rail services. It is not clear that the benefits of TfL acting as franchisor outweigh the complexity such an arrangement would create.

4) Combine train operations with infrastructure management in the London area – ‘Vertical integration’ In considering the option of vertical integration it is important to distinguish between the roles of network infrastructure controller and owner. From the point of view of day-to-day operation, it is the former role which is more important.

In our view vertical integration of rail operations in the London area would present major challenges. Concerns surrounding the fairness of treatment of secondary operators and of national consistency in timetabling and access are difficult to allay.

We believe that the principle of separation between the role of train operator and infrastructure manager - as currently enshrined within EU rail legislation - to be sound. Such separation is also consistent with the principle of allowing access to the network by different operators – whether on the basis of franchises or open access. The London network involves multiple-users – both passenger and freight operators.

The usual definition of vertical integration sees train operators also taking responsibility for running the network. It is not clear what train operators have to offer in relation to asset or the management of maintenance and renewal contractors. These are not skills which train operators will have developed or can call on from their group operations. Moreover, given that the majority of the network is multi-user, giving individual train operators a role in infrastructure operation would blur the separation between the infrastructure management and operation role and may be seen by those operators who do not wish to be involved in infrastructure operation, as conferring an undue influence by those operators who do. Similarly, capacity allocation, signalling operation and train regulation are all aspects which are best conducted by an infrastructure operator to avoid issues of discrimination in access to the network.

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5) Regionalisation of infrastructure ownership Proposals to alter the regional structure of the operation of the rail network are related to, but in some ways distinct from, those for vertical integration. For example, we understand that TfL’s proposals include them taking joint control with the SRA of a Railtrack South East region.

Railtrack’s zonal structure is designed to minimise operational interfaces between zones, and also, as far as possible, to allow train operators to deal with only one zone. The principal issue which TfL’s proposal raises is the creation of a boundary between the South East and the rest of the country. It would require all the main strategic rail routes to be managed by more than one zone (or even more than one infrastructure controller if the ownership of the London and South East region was different to that of the rest of the network). This could make the holistic planning of the network considerably more difficult: furthermore it would mean that over half the TOCs would have to deal with more than one region/controller, increasing fragmentation.

Implications of Railway Administration During the period of railway administration Railtrack PLC continues to operate the railway network as before. The options for future ownership are currently being explored by the Administrators and the Government. The timescales for taking Railtrack out of administration are not yet clear, and this may lead to uncertainty in some areas. There are issues, such as the development of SPV’s to take forward enhancement projects, which need to be resolved regardless of administration.

The implications for London of the railway administration per se are not fundamentally different to those for the rest of the country, however.

Conclusions Railtrack welcomes the Committee’s scrutiny of TfL’s role in specifying and developing the National Rail Network services, and the opportunity to present evidence to it. London’s rail network is a vital part of the capital’s infrastructure, and must be operated and developed in full co-operation with all stakeholders in order to optimise the use of limited resources and deliver benefits. Equally, however, London is not an island, and London’s rail network is the key hub of the national rail network.

Proposals have been made to establish a London Transit Authority, and some of the forms this might take have been discussed. Railtrack has a number of concerns about these, the three most important of which are:

• the gains of further reorganisation and upheaval would have to be carefully evaluated: the rail industry desperately needs a period of stability at present; • any move away from a single planning authority for the national rail network could lead to either conflict or sub-optimal use of the railway network;

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• any solutions for London would need to be aligned with potential changes across the rest of the network.

Railtrack recommends that TfL and the GLA make best use of the current, relatively new, arrangements to deliver benefits to rail users and Londoners before changing them. We believe these arrangements can deliver TfL’s aspirations if they are given TfL’s full backing.

Railtrack PLC (in Railway Administration) 14 January 2002

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