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We come to the second part of this afternoon's session with the minister. I appeal to members to be as concise as possible because we still have two issues on which to question the minister, the first of which is the rail industry in Scotland. The minister will be aware that, in the past year, the committee has taken a significant amount of evidence on the rail industry from various bodies that operate in the sector, including the Strategic Rail Authority, Network Rail and the rail regulator. Since we took that evidence, much of it has been overtaken by the outcome of Alistair Darling's review of the structure of the industry. I encourage the minister and members to concentrate as much as possible on the situation that we now face and the forthcoming developments, as I think that that would be the most profitable way for the committee to proceed. I welcome Kenneth Hogg of the Scottish Executive, who has joined the minister to support him on the issue. I ask the minister to make any introductory remarks on the rail industry.
I will try to be brief. You are right that significant changes have taken place since the Transport and the Environment Committee's inquiry into the rail industry and since this committee's evidence sessions on the issue in the past year. It is important to focus on the key changes. Some of the details are still to be worked out, but the overall principle of the changes is clear. The new approach to rail in Scotland will make a dramatic difference to the Scottish Executive's ability to support and to help to deliver high-quality rail services in Scotland. The changes have been broadly welcomed by members of all parties, but it is important to get the details right. We are working with the Department for Transport, the SRA and, in Scotland, SPT and others to ensure that we deliver improvements. Network Rail's role is key to the changes, but we have an opportunity to make significant improvements to the rail industry in Scotland.
When we took evidence from Network Rail, its chief executive John Armitt advised us that there had been a dramatic improvement in the rate of track renewal compared with the early days of Railtrack, when the level of track renewal fell to 1 per cent or less per annum—in recent times, that has risen to between 3 and 4 per cent per annum. Are you confident that that enhanced rate of renewal, which is necessary to retain the network's reliability and safety, will be maintained after the funding settlement is reached for investment in Network Rail?
The short answer is yes. We are determined to see the rate of renewal that is required to protect the ScotRail franchise and the other important services that are delivered in Scotland, such as freight services, the east coast main line franchise and the Virgin cross-country service. We want all those services to be maintained and improved. One of the benefits of the new structure is that we will be able to integrate more closely the investment that Network Rail is making with the quality and level of service that we want to see in Scotland as a result of the franchises.
One of the outcomes for us should be increased transparency about the amount of money that is spent in Scotland by Network Rail and what the outputs are in return for that expenditure. The convener cited figures on income and expenditure in Scotland. One problem is that it is difficult to say what the income is from Scotland. One can quantify the access charges that ScotRail pays—and that we in turn fund—which flow through to Network Rail. However, over and above access charges, Network Rail receives a significant income from direct grant, which comes from the UK Government and is not disaggregated across Great Britain. One of the benefits of the new arrangements should be that for the first time we know exactly what the income is from Scotland and what level of activity that will fund in return.
I return to some of the projects that you mentioned, minister. You will be aware that I am a strong supporter of a number of the projects and that I have a strong constituency interest in the progress of the Bathgate to Airdrie line in particular. Do you believe that the coming changes will enhance the Executive's ability to deliver such projects? Do you expect that the new strategic transport agency, in its role in driving projects forward, will recruit people with expertise in railway investment projects in order to enhance the Executive's ability to deliver?
I will bring in John Ewing on the skills that we want to attract to the new agency, but the short answer to your questions is yes. Project management of the major projects is vital; we have to deliver those projects on time and within budget.
I very much agree with that. From soundings that I have taken from other MSPs, I think that there would be a willingness to work with you to find an appropriate solution that streamlines our ability to progress major transport—especially railway—infrastructure projects. I would certainly welcome further discussions on that issue and I am sure that other committee members would as well.
I want to ask about another massive investment in the rail industry and about FirstGroup's success in the rail franchise. I know that I am going off the subject that you were focusing on, minister, but do you appreciate the importance of organisations such as FirstGroup working with existing companies that have served the rail industry in the past? As you will appreciate, there has been a tendency for the major plcs to carry out much of their enterprise in-house, or to develop means of doing so. Do you appreciate the importance of local economies benefiting from the rail franchise?
I certainly do. A major franchise such as that could clearly bring significant multiplier benefits to other sectors and companies in the Scottish economy. We want to encourage that. Scotland is a relatively small country. We want to strengthen our skills base, and we want to strengthen the transport companies that we have here. We want them to grow and develop. One of the exciting developments of the past 20 years has been the success of Stagecoach and FirstGroup. I hope that they can encourage and support the development of other Scottish-based companies.
As the minister has already signalled, it is anticipated that the new national transport agency will exercise its responsibility for rail matters. For that to happen, we will have to expand our capacity. We have already increased knowledge of the rail industry through certain appointments, which will enable us to fulfil our current tasks with respect to the big projects. We need to expand that further. As the minister said, we are working with the SRA, Network Rail and the other players to get a clear understanding of the roles and responsibilities that we will be discharging in the future. We will be developing a recruitment plan so that, when the agency comes into existence, it has the necessary staff to do the job.
In your opening remarks, minister, you referred to the requirements that follow from the transfer to the Scottish Executive of the power to monitor and manage—in other words, the need to transfer appropriate resources to Scotland. By what criteria will Scotland's share of resources be calculated and will the Scottish Executive have an equal say on how those criteria are devised? Can you explain in detail where we stand with respect to how Scotland's share is to be assessed and what role Parliament will play in this very important area of policy?
As far as the criteria are concerned, the basis of the settlement has still to be agreed, but it will be a negotiated settlement. It should be a fair and appropriate settlement. We will be full partners in the negotiations, and we will seek to negotiate the best possible deal for Scotland. We will keep the committee and the Parliament informed of the outcome of the discussions and negotiations. We recognise their importance, and we share your view on that. Kenneth Hogg can perhaps describe a little more the likely process and the likely timescale.
It is important to make it clear that the rail review and the discussions with the UK Government are taking place on the basis that this is an agreed transfer of devolved responsibilities to the Scottish Executive. There is no question of any imposition.
The rail review outcomes were announced in late July. By far the most significant financial transfer attaches to the responsibilities of Network Rail, as opposed to the franchise responsibilities.
I am not clear about the answer to my question about what criteria are to be applied. Mr Hogg said that they would be based on existing cost patterns. Is that right?
We are ensuring that we understand current and historic costs for Network Rail at Great Britain level and in Scotland.
I will suggest factors that seem relevant to me. I invite the minister not only to confirm that each factor will be taken into account, but to explain how that will be done. The first factor is an audit of need. Plainly, there has been a lack of investment in the Scottish rail track and the skeletal services that were left after the manic track breaker, Dr Beeching, did his work. A huge audit of need is required, particularly because in Scotland, according to Alan Rehfisch in his excellent Scottish Parliament Information Centre paper, there is a total of 3,034km of route and a total track length of nearly 5,489km, as well as 339 stations, many of which are in rural parts with a single track and so do not fall within Network Rail's priority categories of primary, London and south-east England, and main secondary routes. If Network Rail's classification is used, Scotland will inevitably be short-changed and be the loser, because a much higher proportion of our track does not fall within the priority categories.
I can assure Fergus Ewing that we will consider issues such as the length of the track and the number of stations in Scotland, all the Network Rail assets here and the amount of current investment here. We will also consider issues such as the Jubilee line and other UK investments that are supported through funding from the SRA, Network Rail and the Department for Transport. Kenneth Hogg and others are doing detailed work with Network Rail and the Department for Transport to separate out those costs and we will seek a fair and appropriate settlement.
It is worth noting that the UK Government, the Executive and Network Rail have a common interest in ensuring the safe operation of railways in Scotland, because responsibility for that will remain with Network Rail. I recognise the concerns that Mr Ewing has expressed about the selection by Network Rail, but the costs of maintaining rail lines reflect not just their length but their use, which will need to be factored in.
I am reassured by the answer that the minister has given, the approach that he is taking and his willingness to accept that the factors that I mentioned should all be taken fully into account. That is welcome, as safety must be paramount. The minister is correct to say that negotiations cannot be conducted in public, but will he come back before the committee to tell us what criteria will govern those negotiations? All of us accept Mr Hogg's point that the economics of the rail industry in Britain are as clear as mud. There is no public understanding of how the finances operate. For that reason, this is a golden opportunity for the Executive to put its case publicly and to be open and up front about the approach that it will take in arguing for Scotland's share. If it does not do so in public, that will be unhelpful, at best.
I will give careful consideration to Fergus Ewing's request and will try to give additional information to the committee as discussions progress. Within the constraints that I have mentioned, so that we in no sense undermine the negotiations and disadvantage the Scottish Executive and the interests of the Scottish Parliament, I will try to be as open as possible. Fergus Ewing can rest assured that we are determined at the end of the process to deliver a more effective and transparent system for the rail network in Scotland.
I want to ask about other factors that may be taken into account in the negotiations, and the Executive's strategic priorities. I recognise fully that some of its rail projects may be regarded as local enhancements to the network, but will consideration be given in the negotiations to strategic enhancements? I think in particular of the importance of Edinburgh Waverley to the UK rail network and of the links to the two biggest airports in Scotland, which are the two biggest airports in the UK that do not have heavy rail links.
As the committee knows, I have argued repeatedly that there are projects in Scotland that are of major UK significance and that it is fair and appropriate that the SRA or the UK Government should make contributions to those. The UK Government retains very important powers over aspects of transport in the UK. One of the most important of those powers relates to the rail industry and rail enhancements. The issue that the convener raises will be crucial in negotiations. We are determined to reach a fair agreement that reflects the need for enhancements in Scotland. If enhancements are made to the rail network in the UK—as has happened over the past few years—Scotland should receive a fair allocation so that we are able to continue making enhancements in the future. We must ensure that Scotland receives a share of resources to allow us to take on responsibility for projects such as the Waverley project and the Edinburgh and Glasgow airport rail links.
I am grateful for much of the assurance that the minister has given, but I seek more. As Fergus Ewing rightly pointed out, "The SRA's Strategy: Specification of Network Outputs" provides for different categories: primary, main secondary and other secondary. I think that Kenneth Hogg may also have alluded to that. It is interesting that the document went out for consultation in July 2003. I am a bit cynical about why the exercise was undertaken at that stage, just prior to the beginning of negotiations.
Kenneth Hogg will respond to the earlier part of your question about the proposals in the SRA document.
The timing is quite important. As you said, the SRA published proposals in 2003. However, that document was followed by the rail regulator's interim review of Network Rail's costs. In his conclusions, the rail regulator said that he did not agree with the SRA's approach in providing such criteria to Network Rail. Therefore, the SRA document was superseded by what the regulator said. Nevertheless, there remain valid points about whether Scotland will receive an appropriate share of the resource and about who should make such determinations. In a future world, once the proposed changes have been implemented, decisions on where Scotland's rail network investment priorities lie would fall to Scottish ministers, rather than to Network Rail at a national level or to the SRA, which will cease to exist.
It is also important to reflect on the role of the Office of Rail Regulation. Under the new system, Scottish ministers will specify the outputs that they want from the network. The rail regulator will then price those and advise ministers on what their cost is likely to be. There might be an iterative process about the affordability of ministers' proposals. Different strands will come together in determining what it will cost to deliver the rail services that Scotland wants.
At the beginning, the minister mentioned that time for the bill at Westminster was limited. Do we have a timescale for that limited time?
The intention is that we will make progress on all the issues over the coming months. Clearly, we cannot second-guess decisions on the timing of the railways bill. Those rest with the UK Government. It is for the UK Government to make an announcement on the bill in the Queen's speech, just as it is for the First Minister to announce our legislative programme. It would be quite wrong for me to prejudge when the bill might start to make its progress through Westminster. However, we are gearing up for an early start and we stand ready to reach an early agreement. That is why we have already had discussions with Network Rail and the Department for Transport.
I think that that brings us to the end of our questions.
I have a couple of questions, convener. Minister, you may not be able to answer this, but you will be aware that stations such as that at Lockerbie are in an unusual position. Although they are in Scotland, all the trains that stop at them are cross-border services. Will the change in powers have any practical impact on the general terms of operation of such stations?
Dunbar is another example of a station in that situation. Kenneth Hogg may be able to answer that question.
The outcome of the rail review will not change the situation whereby the cross-border franchises—currently Great North Eastern Railway and Virgin—are let by the SRA. In the future, they will continue to be let by the DFT. We will not gain an additional role in, for example, specifying those services: that will remain unchanged. In so far as those stations are served by ScotRail, the answer is yes, because we will have a more hands-on involvement with ScotRail. Because those stations are part of a rail network that exists in Scotland, we will have an increased role in specifying their standards and quality. Nothing in the rail review will undermine the present position, and it will not greatly change it going forward.
The point is that, at the moment, no ScotRail franchise services stop at those stations.
We currently have the ability to change the ScotRail franchise over time. That is one example of the kind of thing that ministers could do if they were prepared to reopen the franchise and fund the additional services.
My second question is about the role of the Strathclyde Passenger Transport network. Am I correct in thinking that the Executive is to assume SPT's rail powers? Can you set out what that will involve?
That is correct. We have made it clear that, as part of the Transport (Scotland) Bill proposals, we intend to assume the rail franchise powers of SPT. The detail of that will be discussed and carefully scrutinised by the committee as the bill's proposals are considered by the Scottish Parliament. We are already seeing progress on the order to be made under section 30 of the Scotland Act 1998 that will allow that to take place. The section 30 order requires approval at Westminster—from both the House of Commons and the House of Lords—as well as the approval of the Scottish Parliament. The committee has considered the proposals as they relate to the responsibilities of the Scottish Parliament and has approved them. The appropriate committee of the House of Commons will look at the proposals shortly.
Let us be clear. In the future, the Executive or the proposed transport agency will set timetables, decide fares and do the sort of things that SPT currently does.
We work closely with SPT on all rail franchise matters in Scotland. However, the intention is that, in future, the Scottish Executive will have those rail franchise powers and will take a consistent approach to the rail franchise in Scotland. We have also made it clear that we want a strong west of Scotland regional transport partnership. We still see a strong role for SPT or its successor body in Scotland in the operation and management of rail powers and in the development of rail, and we still see SPT's management team and staff having security of employment and considerable influence over rail issues. Obviously, we will give more detail about that in due course and as the bill progresses, but that relationship will continue to be an important partnership. We still envisage a strong and effective regional transport partnership with rail responsibilities in the west of Scotland.
What role do you envisage that body—or any of the other bodies that will be set up under the bill—having in negotiating the franchise in future?
Other parts of Scotland can take on those greater responsibilities if they wish to do so. That will be the spirit and approach. If local authorities or regional transport partnerships wish to develop their powers to move more towards the SPT model, they will be perfectly entitled to do so. Whether or not they do so, they will be an important part of the consultation process as we move towards any new or extended rail franchise. They will also have an important role to play not only in lobbying for or encouraging franchise developments, but sometimes in sponsoring those developments and helping to trigger appraisals of any rail improvements under the Scottish transport appraisal guidance. That is evident at the moment in the number of local authorities that have proposals for new crossrail schemes, new station openings or new lines to be developed. Perhaps the Stirling-Alloa-Kincardine scheme is the classic example. Clackmannanshire Council was the key organisation in driving forward that scheme. The regional transport partnerships will have a significant role in influencing the development and future shape of the franchise.
Things do not depend on waiting for the new franchise. There is a mechanism in the existing franchise for agreeing a price for a new service. Therefore, if one of the new regional transport partnerships wanted an enhanced service, agreed with ministers that that service was appropriate and was prepared to pay for it, it could be negotiated within the existing franchise.
Would the Executive be the lead body in that negotiation?
Yes.
That is right. Currently, we specify and fund the ScotRail franchise and the SRA has certain responsibilities and certain signatory powers, as does the SPT. We are considering making the changes that I have described in relation to that situation. Perhaps we would have looked for change in any event as part of the Transport (Scotland) Bill, but the rail review gives us an opportunity to take a much wider look at the future of rail in Scotland and to have a far better, more integrated approach. I think that the committee has previously strongly supported that consistent approach, which is one reason why the section 30 proposals and the first stage of change were unanimously supported by the committee and are now supported by the Parliament. I think that the proposals received the Parliament's consent without division.
That ends questions on this agenda item. I thank all the witnesses for giving evidence and Kenneth Hogg for his attendance. We will go straight into the third evidence session, minister, if you feel comfortable doing so.
Absolutely. We will pause momentarily for the other officials to join us.