Infrastructure and Capital Investment Committee

Meeting date: Wednesday, March 21, 2012

Official Report 495KB pdf

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Rail Franchise 2014

Item 4 is the committee’s second evidence session on the Scottish passenger rail franchise, which is due to be renewed in 2014. The committee has begun brief and focused scrutiny of the issues around the renewal of the franchise. We heard at our previous meeting from organisations that represent the interests of rail passengers. The committee will hear from several stakeholders and will consider whether to feed into the “Rail 2014” consultation process. At today’s meeting we will hear from transport trade unions, followed by the Association of Train Operating Companies.

I welcome the first panel of witnesses: Kevin Lindsay is the Scottish secretary of the Associated Society of Locomotive Engineers and Firemen, which is commonly known as ASLEF; Ian Macintyre is regional organiser of the National Union of Rail, Maritime and Transport Workers; and Tom Kennedy is senior regional organiser, Scotland, for the Transport Salaried Staffs Association.

I invite members to ask questions.

I have a few general questions. I will put the first two together, because I suppose that they are related.

The Scottish Government’s position is that all public bodies are prevented by law from directly providing the Scottish passenger rail franchise service. I imagine that some of you would maybe like our public bodies to provide the service. The legislation is fairly circumscribing on that point, but there are exceptions, such as East Coast. Your views on when and if public bodies could provide the franchise service would be interesting.

Related to that is the possibility of the franchise being provided by a co-operative or not-for-profit organisation and how that might work in practice—I imagine that that would not be prevented by the legislation. What are your views on that?

I am quite happy to answer. We are aware of the Westminster Scotland Act 1998 and we have made representations to other consultations about getting changes to that legislation. We believe that 1998 act is restrictive. The Scottish Parliament controls the budget and how the franchise should be run, and it seems bizarre that it cannot make a decision on whether the railway should be publicly owned and publicly accountable. We find that anomaly strange and we have made representations on it.

The present franchise set-up is quite restrictive because of the costs involved. A co-op approach would be highly unlikely to work, but we would be happy to hear from and meet anyone who had views about taking that route. The not-for-profit question is rather simple. It would depend on whether you could put in place a management contract that stated that the not-for-profit body would run the railway for X, Y or Z, and the rest of the money would be ploughed back into the railway or given to the Scottish taxpayer. There are alternatives. For example, you could run a not-for-dividend company, with the railway not paying out a dividend to its shareholders. The railway is heavily subsidised—the ScotRail franchise is the second most heavily subsidised in the whole UK, just behind Wales—and we welcome that support, but it is wrong that a private company can come in and take a slice of that money out when it should be put back into Scotland’s railways. From ASLEF’s perspective, the matter seems fairly straightforward.

I support everything that Kevin Lindsay says. Whether there should be some model other than one whereby companies come in and make profit out of the railways is the key issue at the centre of our concerns about what is happening in the railways. The McNulty report demonstrated that the railways in the UK as a whole cost 30 to 40 per cent more than they should. As far as we are concerned, that is a result of the fragmentation brought about by rail privatisation. When you consider alternative models a number of difficulties arise, but when you consider the profits that have been taken out of the rail industry since rail privatisation, you can see that it would be worth while for your committee and the Scottish Government to explore alternative mechanisms to deliver the railway system in Scotland.

ScotRail paid dividends of £18 million in 2010, £18 million in 2009, £17 million in 2008 and £21 million in 2007. In two of those years, ScotRail paid more in dividends than it made in profit, leading to the obvious conclusion that, as it does not contribute anything towards investment in the railways or rail infrastructure—the level of Government subsidy even covers its track access charges—it is simply milking Scottish railways.

The Scottish Government’s proposals in “Rail 2014” allow for the intensification of that theft. If dividends had not been paid in 2010, the RMT estimates that rail fares could have been reduced by almost 7 per cent, which would undoubtedly have improved accessibility. That makes clear the case for public ownership of Scottish railways.

My question is broader. I seem to remember a bit of a stushie a couple of years ago when Stewart Stevenson, as transport minister, approved the franchise extension. The deal that was done at that time indicated that a substantial part of the additional profit being made by ScotRail would be ploughed back into the business. Surely if there was no profit, no money would have been ploughed back into the business.

I cannot answer whether that was a good deal for the Scottish Government or not. I cannot answer whether the money was ploughed back in—that is not something that would be put out publicly. At the time, we were concerned that the announcement was made to the stock exchange before it was announced to Parliament or the stakeholders in the industry. We thought that that was wrong. We also had an issue about whether ScotRail was going to put its profits back in. We had no evidence of that happening at the time. There was a trade-off for additional services and for ScotRail getting a longer franchise again. I am unsure what additional services the Scottish taxpayer got.

May I clarify whether we are talking about FirstGroup’s profits or whether the profits are broken down to show those of First ScotRail?

I mean First ScotRail.

How long do you think that the new franchise should last and why?

If it was a private franchise, I would say a week—that is me being generous. We do not have an opinion on how long a private franchise should last and it would be wrong of us to speculate.

Does anyone else have a comment, or are the witnesses of one mind?

When we have met the minister, the TSSA has expressed the view that a shorter franchise would be more beneficial than a longer franchise.

One issue on which the committee asked us to comment was that of improving rolling stock.

We will come to that later.

That is fine.

If there must be a franchise, we suggest that it should last no more than five years.

10:30

On what basis?

That would keep the competitiveness in the tendering process, if it must be used.

Another factor that speaks for having a period of five years is that the rolling stock will enter a critical period in 2019, five years after 2014.

We will come to that.

One of the more controversial suggestions is the idea of specifying different service levels for economically viable and socially necessary routes—minimum specifications would be made for economically viable routes and more would be specified for other routes. We would appreciate your views on that.

The RMT totally opposes that idea, because it would create a two-tier railway system and lessen part of the railway service that is provided at the moment. One part of the railway would be dealt with through profit margins and would get the best rolling stock, to the detriment of the other part. Creating a two-tier railway would not be in the public’s interests.

The TSSA’s view is the same as that of the RMT. The danger is that having two measures for evaluating the railway system in Scotland could mean a break-up and could lead to operators cherry picking railway services. The profits that could be made from parts of the passenger railway system would go to private operators and the taxpayer would be left to support the social services, which would not be profitable. Overall performance in the passenger railway is best delivered by looking at the railway system as an economic benefit as a whole and not by segregating it into profitable and non-profitable segments.

I support my colleagues’ comments.

My next questions are general, but the subject might be discussed more specifically later. What level of detail should be set out in the franchise contract? What impact does that have on staff and service provision? Whether all fares should be regulated is an obvious issue, but lots of other details could be specified.

We are happy to have a minimum service requirement, but we are always wary about incentives to run more trains if just a minimum service is set. You asked about dividing the railway into economic and social services. Our concern is that economic, rather than social, trains would be run, whereas we believe that the railway should be for all.

Having a minimum service requirement guarantees a level of service, but that might not be the service that a community requires. If trains or buses do not link up with one another and only one person gets on the train, but they need that train to get to work, that becomes an economic issue for them and a social responsibility issue for the community.

Such challenges would be faced in the franchise. Writing those matters into the contract for the whole of Scotland would be a mammoth challenge and might be difficult.

The proposal of minimum service levels in the “Rail 2014” consultation must be looked at in the wider framework that could emerge from the consultation. Control of and decisions about passenger services could be handed over mainly to franchisees—if a number of franchisees emerge. That would not benefit the system as a whole.

The danger with introducing the minimum service level provision is that it would encourage the private operator who takes over to run only the services that were profitable, and they would be would be reluctant to run any services that did not prove to be profitable. That would mean that you would be enabling the franchisee to determine rail services based on profitability. In the general economic context, that would not be desirable.

I concur with my two colleagues and do not have much more to add.

Okay. There is a lot of agreement on many of the issues.

My next question is addressed specifically to the RMT, although the other witnesses may wish to comment. In its written evidence, the RMT expresses strong views against the inclusion of an indemnification clause in the franchise agreement. I have heard those views expressed orally in various contexts recently. I ask Ian Macintyre to elaborate on them and to explain what the consequences of such a clause—of which I think that there has been one already—have been or could be.

One of the main problems arises if we get into industrial disputes—even if agreements are in place. We have consistently argued for the indemnification clause to be removed from the franchise and are disappointed that that move is not included in the consultation.

A question regarding indemnification was asked in the Westminster Parliament by Jeremy Corbyn. In his answer, David Jamieson said:

“In the past year, the Strategic Rail Authority (SRA) has made payments of £12.65 million to National Express in respect of revenue loss by ScotRail arising from industrial action.”—[Official Report, House of Commons, 15 May 2003; Vol 405, c 340W]

There was no incentive for the company to resolve the dispute while it was getting paid through the indemnification clause. The clause does not serve the taxpayer one iota or help to resolve problems with the running of the railways. The last thing that we want to do is get into disputes, but it does not assist us in any way if a company knows that it will get funded.

I give the example of the dispute that we were in recently with ScotRail on the extension of driver-only operation on the Bathgate line, to which we were totally opposed. Part of the argument that we prosecuted involved Lord Cullen’s recommendation regarding the evacuation of trains. We argued for the operational role of a guard on all trains and no further extension of driver-only operation. We believed that we had an agreement with ScotRail about that but, because it knows that the indemnification clause exists, it was less willing to come to the table and stick to the agreement.

I do not know what the cost of that dispute was yet—it will come out sometime in the future. However, we know that the cost in 2003 was £12.65 million, and the cost of the more recent dispute could be similar.

The indemnification clause does not assist industrial relations or help companies to sit down and negotiate properly with the trade unions. We, our affiliates and the Scottish Trades Union Congress have consistently argued for its removal so that we can get on with the business of running railways.

I understand what you say and agree with you. Have all the franchises throughout the UK always had such clauses?

The only one that I am aware of is the clause in Scotland.

The TSSA supports what the RMT put in its written submission regarding the indemnification clause. We do not think that the Scottish taxpayer would want to support employers to break agreements with trade unions—that is what has caused the disputes that have arisen. It is important to understand that it is not a proper use of taxpayers’ money to indemnify an employer against the costs of a strike if the employer takes it upon itself to break an agreement that had been reached with the trade unions.

We were involved in a dispute in 2002 with National Express, which was the franchise holder at the time. It got £12.65 million because of the indemnification clause, but that was the only year in which it recorded a profit during its time as the franchise holder, which in itself tells a story.

We have already mentioned the level of subsidy that ScotRail gets, which is a huge part of the Scottish Government’s budget. It seems bizarre that you will underwrite the actions of a franchise holder. None of us wants to be involved in industrial disputes—industrial action is always taken as a last resort—but they provide an incentive for the employer to come back to the table to negotiate a fair settlement. However, the franchise holder in this case can hold out and say “We’re still getting money from the Scottish Government, so we are not making a loss.” It seems an anomaly that the Scottish Government underwrites the actions of a private company. When our members go on strike they lose money for the day, so it is not something that anyone wants to do. It seems bizarre that shareholders are protected but workers are not.

Okay. Thank you.

Mr Macintyre said that as far as he knew only the ScotRail franchise has an indemnification clause and that that does not apply to any other franchise. Are you aware of how the inclusion of the clause came about? Was it because of bad negotiation when the first franchise was set up? Was the franchise badly drafted?

My understanding is that the clause is in all the franchises. I concur with the suggestion that it is badly drafted.

Is it possible to take the clause out? Would that cause lots of problems? Would it mean that fewer companies would be willing to bid for the franchise?

I suppose that it would be possible to take the clause out if the other party to the contract agreed that such a clause should not be in it.

It has been suggested to us by parliamentarians in this building in various discussions at various committee meetings that it could be written out of the franchise. That is our understanding.

I am not sure about what Kevin Lindsay said. We seem to be a wee bit at odds about whether it was just because of the devolved Parliament that the clause was written into the ScotRail franchise. I am not 100 per cent sure about that.

We need to get clarification on that.

I want to reprise the position. How far back does the particular form of franchise and contract with an indemnification clause go?

It goes back to the start of privatisation. I said that I thought that it was in all the franchises because the question was raised in the Westminster Parliament by Jeremy Corbyn, who I think represents Islington. I suspect that he would not have a great interest in the ScotRail franchise, but he may have an issue with an employer being indemnified in the way in question.

Mr Ingram’s question applies particularly to the ScotRail franchise in 2003 and to the amount that was paid because of the indemnification clause at that time, which was £12.65 million.

We obviously have to go back and check out the position and whether we have powers to remove the clause.

Okay. We will move on to the issues of reliability, performance and service quality.

Train performance is measured through the public performance measure, which looks at the percentage of trains arriving on time. There is also the service quality incentive regime—SQUIRE—and the franchisee is incentivised to exceed the SQUIRE targets through bonuses for good performance and fines for poor performance. Do the current PPM and SQUIRE regimes lead staff to focus on meeting targets rather than on customer needs? If so, how could that be changed?

I do not think that the SQUIRE regime was intended to be used as a vehicle for disciplining staff, which is what has arisen from the regime. The initial discussions about SQUIRE were all about penalties and improving the service. It was never intimated to us that a disciplinary procedure would come out of it. We are obviously opposed to the SQUIRE regime being used as a vehicle for disciplining staff.

There is merit in the SQUIRE regime covering the tidiness of stations and trains and so on. We agree that there should be penalties to ensure that a railway is run properly, but that should not be to the detriment of the staff.

We have a problem with the regime, so we are currently monitoring it and seeking feedback from our staff. From that feedback, it seems that implementation is a moveable feast. If health and safety issues arise rather than just small matters, we will seek the imposition of severe penalties on the franchisee.

10:45

The staff are responsible for ensuring that the railway stations, the carriages and so on are kept clean and tidy and meet the required standard. How can the regime be implemented if staff are penalised for not achieving those standards? Is the franchisee penalised? How would you implement that change?

The SQUIRE regime exists to provide good customer service across a whole range of services. We improve customer service by managing people well and motivating them. We do that by treating them well and ensuring that they know how to do their job, are properly trained and have all the equipment that they need.

In general, the SQUIRE regime is intended to support that system. There are times when the regime falls down, and it can be—for want of a better word—abused, but on the whole it is part of an overall system that has delivered quite high scores for the First ScotRail passenger franchise as rated by the general public.

We do not necessarily say that the regime is a bad thing: it is a good thing, but like any good tool there can be problems if it is not used properly. In our view the regime is an insurance policy that enables First ScotRail to deliver the level of service that customers see when they get on the train.

On train performance and lateness, it is quite tough for us to suggest how we might change things. One glaring thing that stands out is the relationship between Network Rail and the franchisee or train operator. Fragmentation exists, which causes a lot of problems.

I know that Network Rail and ScotRail are taking steps towards joined-up thinking about how they manage delays, and the minister has led some work on severe weather. However, it seems to us that the two control centres do not work together.

There is also the anomaly that a train is not late if it is less than five minutes late. If passengers are catching a connecting service or have to get to work, they do not accept that: if a train is late, it is late. If a train is five minutes late the driver has to fill in a report, but if it is only four minutes late that does not count against ScotRail. That anomaly must be considered, but it would presumably be for other people to decide on the measurements that are put in place.

In relation to the SQUIRE regime, you are talking about rewarding positive performance rather than penalising staff.

That is one element. The other issue is that the requirement that there should be two employees on a train could be written into the franchise. During the dispute that I mentioned earlier, we flagged that up on a number of occasions. When we looked into the situation, we were a bit surprised at the number of trains that were running with only a driver. Those are driver-only services, but the trains are geared for two people.

Part of the Strathclyde manning agreement involved an assurance that there would always be two people on the trains. That seems to have gone to the wall, and trains are running without a second person on them. We are concerned about safety in the event of a train evacuation. That has not been written into the franchise, and the SQUIRE regime does not seem to pick up on it.

We are talking about customer service, improving performance and the franchise. What changes to the franchise would allow rail staff to maximise the opportunity to improve service performance and customer service, for example by improving staff training and availability, as suggested by some passenger groups?

On the whole, our experience is that ScotRail staff are well trained and well supported, that they know what their job is and how to do it, and that they do it quite well. Whenever a person travels on a railway in Scotland, they cannot escape the generally high standards, which stare them in the face. That does not happen by accident.

Obviously, staffing numbers always cause concern. A great number of new services have come in over the past few years, but I am not convinced that that has been reflected in the same number of staff being employed. We work longer shifts on the railways, and we now work more flexible shifts than ever. As a result, fatigue probably plays a part. We all have bad days. If you are still here at 6 o’clock tonight asking folk questions, I dare say that your minds will not be quite as sharp as they were at the start of the day. There are issues to do with fatigue.

We have worked with ScotRail on Scottish vocational qualifications for staff. The issue is getting the company to roll them out across the board. As members can imagine, we are quite defensive of the fact that the staff are well trained and provide a good service, but we sometimes think that there are not enough of them.

A survey of the public that has been done shows that ScotRail’s standards of quality and everything else have gone up. I will supply that survey if I can get it.

I pointed that out this morning.

I will get the survey and send it to the committee.

I have been to see ScotRail and have met its apprentices and spoken to other staff who have been trained. I compliment it on its first-class training.

Last week, we had passenger groups in. They broadly welcome SQUIRE, but perhaps it focuses more on specific targets on picking up sweetie papers and crisp packets in railway stations, for example, than on meeting the needs of customers—the people who use the rail service. One of our witnesses was from a disabled group. Are you satisfied that your members get sufficient training to meet the needs of groups of customers such as the disabled and that enough is being done to include such people in the services that you provide?

A scheme was introduced in ScotRail a number of years ago—I do not know whether National Express was involved. Disabled people were invited to come in and meet staff, and we did various things with ramps. Obviously, handling people could do more damage than good, and we were concerned about that. Disabled people went to briefings to give staff their views so that they could relate to them. Obviously, that is one initiative that could be taken up again.

Train drivers have no training at all in dealing with disabled passengers, which I find a bit bizarre, as they are part of the ScotRail workforce.

As a union, we have met the STUC disabled workers committee and heard its views. Strange things happen. Every time ScotRail gets a new train, it puts a different texture on the handle of the toilet door and moves the button for closing the toilet door. Such things seem fairly straightforward, so why can they not be standardised? Can that be written into a new franchise? If that happened we would be inclusive: when people stepped on to a train, they would know how to lock the toilet door and where the doors were to get off. Conductors can be heard making safety announcements, but there is never anything in Braille on the doors, for example. The railway does not necessarily cater for disabled travellers, and that should be taken care of.

Does Tom Kennedy have any thoughts on that?

I believe that, as part of the ScotRail franchise commitment, specific resources have to be provided for disabled passengers. Kevin Lindsay is right that things are probably not perfect yet. There is certainly room for improvement. Even with the introduction of closed-circuit television and an extensive network of call points, it is probably still a mixed bag.

There have been no complaints from my members about not having had specific training on dealing with disabled people. A lot of our members are front-line staff who work in ticket offices, and I have not received any specific complaints.

There has been quite a big improvement in the provision of ramps. Each train now has a ramp on it, which was not the case previously. In addition, there is communication with the stations where disabled passengers need assistance getting on or off the train. The situation has improved slightly, but the process has not stopped. If any further improvements needed to be made, we would look at that.

I should make the point that our members who work for ScotRail and who are disabled are well treated. Managers quite often ensure that reasonable adjustments are made. A lot of work goes into supporting people who are disabled and who work on the rail network.

I may touch on the issue later, when we discuss through trains.

We will move on to ask about train services, fares and stations.

On this committee, we often find ourselves drawing comparisons with rail services in other countries. Over the past few years, I have travelled on trains in countries as far apart as Norway and Italy. What characterises such journeys is that you can often buy a ticket, travel on the train and get off the train and never see another human being, other than your fellow passengers. With that in mind, what are your views on the staffing levels that are required on passenger rail services and at railway stations in Scotland?

I know that some of the regimes that you are talking about have penalties for people who do not have a ticket. I cannot think what it would be like in the west of Scotland if we gave people the opportunity to travel for free. We had enough trouble with the open-station concept regarding linkages and the cost to the various companies, as a result of which gates and so on were introduced. There is an effect on the revenue at intermediate stations and so forth.

We believe that there needs to be more than one person on a train. There has to be a driver, of course, but there should be a second person on the train, not just for revenue protection but for passenger protection. Especially late at night or early in the morning, people like to see a second person on the train, simply for their own wellbeing. It makes them feel a bit safer when they are travelling; it is not just about the fare box. That is why we believe that there should be two people on every train. That should be written into the franchise. One of the clauses uses the word “should”. I would change “should” to “must”, because a safe railway is not just about there being no incidents on the operating side of things; a safe railway must be about passenger safety as well. I would say that a vital part of that is having a second person on the train.

I will deal with the situation on the platform, which is also part of the issue. In terms of the ratios of staff in ScotRail, the overall balance of staff working on the platforms is just about right. Last week, the committee heard from the organisations that represent the travelling public. There is always a furore whenever there is a proposal to unman stations. The first newspaper campaign that got off the ground in relation to “Rail 2014” was about the withdrawal of resources from stations in Glasgow. People are always protective of their local booking office and how it is resourced. That is a key part of how people perceive the railways. Every year, more and more people are travelling on the railways. In general, that is because railway stations are safe places. If you want to get from A to B, and you travel by rail, you will be fine at the station you get on at, while you are on the train and when you get off the train. Beyond Scotland, there is quite a robust campaign on what the UK Government seems to be lining up for the railways, which is that it wants to savage stations and unstaff them. I think that the committee would find that the public would be coming to its meetings and complaining bitterly if that happened here.

11:00

If children are travelling on trains and fare dodging or whatever, because we have staff on trains we can contact the police about those children. On numerous occasions staff have returned the children to their home station for their parents to pick them up. The RMT does not subscribe to the idea of the unmanned train; we have always argued that, for the safe running of railways, there should be two persons on trains and there should be an operational conductor.

I have a point about ticketing. I travelled to Doncaster last week and bought a return ticket. The fare that I wanted to pay restricted me to travelling on one particular rail service. I had to stand at Doncaster station and watch three trains go from Doncaster to York before a CrossCountry train came in that I could get on to go to York, to catch another CrossCountry train that would take me through to Glasgow.

Countries on the continent such as those that Alex Johnstone is talking about have quite simple ticketing arrangements and one company running the railway system. That is fine. Doncaster is not an out-of-the-way little hamlet somewhere; it is a fair-sized town and station. However, when you go there, you have to navigate the system that I have described. I think that Ian Macintyre’s members need boxing instruction if they have to explain to someone on a train the ins and outs of the railway ticketing system that applies in the UK.

Before we leave the issue of staffing, I note that we discussed with rail service users last week the idea that third parties—for instance community groups—could participate in the running of some marginal stations, perhaps in rural areas, where there is a low level of service. What do you think of that?

We would be totally opposed to it.

We would have concerns about what having part-time or voluntary rail staff would lead to. There is a safety implication, too. Running a railway is not like running a community shop. People die on the railway. Bringing in volunteers who see it as a hobby would not necessarily be a good thing for us. If there is a need for staff, we should have properly trained, properly waged staff. That is the only way in which we would see it going forward.

For the TSSA, the “Rail 2014” consultation document points to options a bit beyond having somebody opening up a little tea shop in a station. The danger is that that could lead to the management of the stations passing to someone other than the franchisee. Attention needs to be paid to that aspect of the consultation. It could lead to even further fragmentation and an entirely different group of people working at station level. Over the years, the network has been tried and tested. The single passenger network works well in Scotland, with the stations kept under the control of Network Rail. We believe that that has to be managed consistently because to do otherwise would lead, some way down the road, to an even more fragmented, disjointed railway system.

I will move on to a subject that was touched on a moment ago. The “Rail 2014” consultation contains the idea that, in future, cross-border services coming up the east coast might stop at Waverley rather than go on to Glasgow, Inverness and Aberdeen as they currently do. What are your views on that?

We are not opposed to Edinburgh being a hub, but we have got a problem regarding cross-border services. One of the arguments relates to the ORCATS—operational research computerised allocation of tickets to services—system and the ticketing process. The proposal would create a monopoly for ScotRail, which would not benefit the taxpayer in the long term. Regarding the ticketing process and hubs, as we outlined earlier in relation to the disabled, families and many other people who travel on trains would prefer through-trains to their destination. It flies in the face of competition and franchising if we say that competition stops at Glasgow and there is a monopoly for the rest of Scotland. I am opposed to that idea. People should be able to board a train in Aberdeen and continue their journey to their destination in London without getting on and off at various stations and making changes.

Many people lose out in the ticketing process, even at present. Even if we go back to the British Rail days when everything was joined up, people used to go to the main stations to buy their tickets when they did not have to. That was because of a lack of knowledge. If someone boarded a train in, say, East Kilbride to go to London, they might have bought a ticket to go to Glasgow Central and then have bought another ticket there. They could have bought a ticket from East Kilbride to London, but a lot of people did not know that.

The proposal would make the situation worse, and the travelling public would lose out considerably. In a number of cases, we have had to rectify things so that the cheapest possible fare is provided. The committee is going to hear from somebody from the Association of Train Operating Companies, who will probably subscribe to what I am saying. There is a duty on people on trains and in booking offices to provide the cheapest possible fare for somebody travelling.

Apart from all the implications regarding the disabled and families and so on, our view is that, if there has to be franchising, there still has to be competition. Otherwise, if there is not going to be competition, the Government should do what we are asking and have a publicly owned and publicly accountable railway throughout the network. We subscribe to that.

That was heavily qualified, but I will take it as being in favour of competition. [Laughter.]

No, it was not.

The cross-border services must be preserved, full stop. The proposal would drive folk off the railway. We would be doing a disservice to people outwith the central belt and it would be wrong. The Parliament was rightly critical of Westminster when, first, it wanted to stop high speed 2 at Birmingham and then only take it to Manchester. If we now say that we will not have fast trains from London to Aberdeen and Dundee, we would fall into the same trap. The cross-border services must remain, because they are vital for outlying communities. The proposal would drive people off the railways and more people would return to flying. It is just wrong.

There would also be a job impact. We have members who work for East Coast and who drive trains to Aberdeen. We also have members who work for CrossCountry. If those services go, their jobs will go—they will not automatically move to ScotRail, because it is a different franchise. That is another argument against competition in the railway.

I cannot add anything to what my colleagues said, other than that it would be difficult for me to think of how the proposal could be described as an improvement. The objective is to improve the railways, but making people decant at Edinburgh to catch another train would have all the negative impacts that Kevin Lindsay has just described.

The economic benefits of a high-speed train network are well documented. In 2006, W S Atkins published research that found that high-speed links from London via Heathrow to Birmingham and Leeds would cost £31 billion to build and would deliver benefits of £63 billion over a 60-year period. We totally subscribe to the benefit of high-speed trains.

My final question is on a point that Ian Macintyre has touched on, but there might be other things that need to be said. Would removing the requirement for the other franchises to go beyond Edinburgh have a direct impact on the Scottish franchisee?

Of course. If there is only one train that you can catch, the Scottish franchisee can set the price and do what it wishes. At the moment, the majority of people like travelling on East Coast trains to Aberdeen because they are spacious and there is more room—they like the experience.

I am guilty of doing that.

It is not just to Aberdeen, though, because East Coast still runs to Inverness and CrossCountry runs to Dundee. It is about choice and, at the moment, people are choosing to go on the larger trains. The train that ScotRail runs to Aberdeen is more of a commuter train and is therefore not as popular with rail staff and passengers.

Relying on feeder services will congest local services at various times of the day. Providing seats and so on is not viable if people are put off the train at Glasgow or Edinburgh and have to travel on feeder services, because they will just block up the commuter services. That is why we oppose the kind of thing that you suggest, Mr Johnstone. We believe that it is vital that the Anglo-Scottish trains—CrossCountry, East Coast and West Coast—should remain.

In fact, I will take it a stage further and say that there is an option of opening up Ireland to the rest of Scotland through having a train service from Stranraer, which has problems at the moment with Stena Line, into Glasgow and then through to the capital, which would also open up the whole of the east and west coasts for Anglo-Scottish services. That is something that could be considered for providing improvements.

I have nothing to add.

Kevin Lindsay’s point brings us neatly on to the issue of rolling stock. I will ask the questions on this, having got some publicity after my comments last week, with lots of e-mails and people telling me that I was quite right in what I said.

Kevin Lindsay confirmed my point that, if people’s journey is not time sensitive, they wait for East Coast and CrossCountry trains because those trains are more comfortable. Do you believe that current passenger rolling stock meets the needs of passengers, particularly on the longer-distance intercity and Highland routes?

The trains certainly meet commuters’ needs. However, Scotland’s railways are about—

What do you define as a commuter?

Those who travel into Edinburgh, Glasgow and the major cities. However, there are issues around running the class 170 trains to Aberdeen, because they are not overly comfortable, and neither are those to Inverness. In fact, we have a conference in Inverness in a couple of weeks and have already booked seats on the East Coast train. It tells you something when train drivers choose that service. I think that that speaks volumes.

I do not want to play one type of train off against another, though, because the big con—I do not use that word lightly—is the rolling stock companies. They have taken so much money out of the industry that it is frightening. When the railways were privatised, every train in the UK got sold to the rolling stock companies for around £1.1 billion. They were undersold, because they were sold on by the original ROSCOs for £2.5 billion.

We need to find a way of getting the trains that Scotland needs for different routes. We also need to look at where we get the trains. Yes, it would be a big investment of capital expenditure to buy your own trains but, in the long term, that has to be cheaper than continually going back to a monopoly that will decide what trains you can get and how much they will charge you. The big anomaly in the railways is the ROSCOs and how they have taken so much money out of the railways.

ScotRail’s argument is that the Scottish Government provides it with the trains, so how are we in a position in which the trains that ScotRail uses are so different from East Coast mainline trains, on which we all prefer to travel? Why have we got rolling stock, for example, with two three-carriage units in which the trolley service cannot get from unit to the other? Why have we got rolling stock that is so restrictive?

11:15

The Competition Commission looked at rolling stock on the railways. Its report, which was published in 2009, analyses what the problems are across the UK with the provision of rolling stock.

Kevin Lindsay has correctly put his finger on the rolling stock companies’ excessive costs and profits. The Competition Commission report shows that ROSCOs do not have enough of everything to let everybody have what they want. There is a limited resource to be allocated. The market favours the three companies that own the rolling stock. In other words, there is no competition in the market—this is an area where there is a lack of competition. There is no obvious remedy to that.

Under the current franchise, ScotRail paid about £81 million for the rolling stock for 2010. That kind of cost will be carried into the next franchise. Given that this committee looks at investment and infrastructure, the TSSA would like it to examine why the ROSCOs are continuing to bleed the Scottish taxpayer for profits, based on a gerrymandered market, which they preside over. The Competition Commission did not have any specific proposals to resolve the problem; it could say only that there is a problem and that a number of measures need to be introduced. When the Scottish Parliament looks at managing this level of expenditure, it should think innovatively about how we can ensure that the Scottish taxpayer does not pay through the nose for rolling stock.

Our position is that ROSCOs are totally unregulated and we would like to see them publicly owned and publicly accountable.

I will answer the question about rolling stock and why we cannot have loco hauls in Scotland. We would need to look at a lot of station platforms to see whether they could accommodate loco haul trains. Some loco haul trains have a considerable number of carriages. We think that the Sprinter trains, and so on, that we have are fit for our purpose, but if we were talking about bringing in loco haul trains, we would need to look at platforms.

I do not know whether that is what you are looking for: a straightforward answer on rolling stock.

I do not think that that problem is insurmountable. Often, when we stop at a short station platform we just get told to go to another carriage to get off. We are not talking about ScotRail necessarily having great long trains. I am talking about the comfort of the interior of the train in terms of spacing of seating, decent luggage space, and catering and other facilities.

Moving trains up and down platforms can cause problems for disabled people, whether they are deaf, blind or whatever—we spoke about disabled people earlier—and we should not be telling them to go through the train. That should not be encouraged. There are dangers in things like that. I am trying to be as frank as possible.

Clearly, ScotRail purchased generic units that it can use on various different routes. They come in twos or threes, and some of the new units come in fours. The units can be added together. If ScotRail is going to run a train round the Fife circle early in the morning, it can join two 170s together, which gives six coaches. That is fine. Then, it will split those and run three coaches to Aberdeen and three coaches to Inverness. Clearly, more luggage capacity is needed on Inverness and Aberdeen trains than is needed on a Fife circle train. That is where the problem lies. If the franchise holder wants to run intercity trains to the north, it must purchase units that are suitable for purpose. However, it has gone for a cost-effective solution by getting generic units that can do both. There is a cost associated with that.

We have talked about SQUIRE, and there are performance issues to do with people having to stand on trains. If more seats are taken out, more folk will have to stand. That is the reality. The problem is the units that are leased—they are not purchased—in the first place, because it is clear that we should be leasing different units for different routes, but that has never been ScotRail’s attitude. It is interesting that we are talking about comfort on the high-speed trains, as they are the oldest trains that we have in Scotland, yet we are still saying that they are the comfiest.

You talked about purchasing and leasing trains. My understanding is that Transport Scotland leases the trains from the ROSCOs.

Yes, that is correct.

So there is a direct lease between Transport Scotland and the ROSCOs, and ScotRail operates the trains.

Yes; it operates the trains under the franchise.

Am I being unreasonable in saying that ScotRail needs a different type of train for the Aberdeen to Glasgow or Edinburgh service compared with the trains toting around Fife or going on the Glasgow to Edinburgh commute, which is about 40 minutes compared with over two hours?

I agree with you—that is what I said. However, it is down to cost and ScotRail prefers the generic unit.

Is that because it is easier for it to operate?

We agree with you. There should be more legroom and everything else that goes with a longer journey because there is a high price associated with that, as well as further for the passengers to travel. We, like you, believe that there should be the greatest degree of comfort and everybody should be guaranteed a seat. For example, on many occasions I have travelled from Aberdeen and not got a seat until Stirling.

It does not cost more to use East Coast. I looked at the prices last night when I bought my ticket and that costs less than the ScotRail one.

It just depends on what you can get in 10 minutes.

When I looked—it was last night at Stonehaven—I saw that all the East Coast off-peak tickets cost less than the ScotRail ones.

My question is not for the panel; it is a matter that I address to the convener. The issue of rolling stock companies has come up. A little knowledge is a dangerous thing and I am not going to repeat what little I know on the record. However, if possible, I would be interested to have details on who the rolling stock companies are.

The companies are coming to the committee on 18 April.

I will move on to the subject of passenger comfort, security and information. The passenger experience is an important aspect of rail travel and we have seen ScotRail passenger numbers increase. We must try to continue to attract passengers from the business users, commuters and leisure travellers. People are unlikely to travel by train if they consider that it will be uncomfortable or unsafe. Do you have any views on how passenger comfort can be improved and, in particular, the provision of on-train catering services and wi-fi and first-class seating?

By increasing the availability of wi-fi and retaining the on-train buffet service and catering services, especially for journeys to Aberdeen, for example. More than anything else, people expect those services. From RMT’s perspective, that saves jobs as well. There was talk in the franchise about decreasing catering services. We would be opposed to that and we hope that those service will continue.

Wi-fi seems to be a big thing in the modern age, so that could be included in addition to telephones in trains. That is not unreasonable these days.

West Coast, East Coast and CrossCountry currently provide catering facilities or a shop—they are named differently—and the catering facilities are greater than those of ScotRail, which provides a trolley that moves through the train. Interestingly, First TransPennine, which operates the Manchester services, also has a trolley service and also does not have wi-fi, so there is a link, in that the same company provides the poorest catering and does not provide wi-fi.

We are rail passengers as well as trade unionists; we use the trains and we want a comfy journey, we want somewhere to store our luggage and, if we are working on the train, as many of us inevitably do nowadays, we want access to wi-fi so that we can get on and do our work. It seems to me to be a must, certainly on the intercity links—Edinburgh to Glasgow, services to Dundee and so on. I understand that half the time on the busy suburban routes, in and around Glasgow for example, you are lucky to get a seat, never mind the opportunity to take your laptop out. There should be targeted wi-fi rather than wi-fi across the board. I am not sure how convenient it would be or how easy to use, but people might want to use it on their phones and so on.

I support everything that my colleagues say. Let me add just one point, which is a personal observation. I believe that it is correct to say that the high quality of service that you get from ScotRail goes straight through to the catering staff. The current passenger franchise is that well run; you have that degree of quality and you should be looking to protect that in the next franchise.

Another thing to consider is the route. On the west highland line, for example, you know that you will have a lot of bikers and people with rucksacks and so on, and, in the context of what we said earlier about trains, specific trains could be allocated to that line and the Aberdeen line. You get lots of people with rucksacks and bicycles, and bicycle space on the Sprinters is very limited at the moment, so we should take into account that the west highland line is quite popular with bikers and so on.

If we are talking about passenger comfort, the west highland line is probably one of the most scenic and beautiful journeys you will ever take in Scotland and it is also one of the most uncomfortable, on an old 156 unit. Our scenery and our tourism are a huge industry, so why do we not provide viewing cars and specifically designed trains to go up the west highland line? Let us start selling Scotland; we are missing an opportunity.

You touched on on-train catering services. How do you feel about there being an alcohol ban on certain services? It has been suggested that family groups and elderly people sometimes become a little concerned if people are drinking on the train, and passenger and staff security needs to be taken into account.

Our view is based on the knowledge that there are bans now when there are football games, rugby games and other sports events. We need to look at the trips that are a feeder service to those lines. When people are travelling from Edinburgh having been at Murrayfield or at a football game at Hampden, the bans are on specific routes and the problems happen when people leave them and go on to other routes. There should be a ban right through, but only on specific days.

Should there be a network ban on those days?

There should be a network ban for the safety of everybody—the travelling public, the staff and everybody else.

How can provision of real-time rail information, particularly during periods of disruption and delays, be improved, specifically for passengers who are already at stations or who are on the train? Disabled passengers might have a hearing impairment or sight problems, so how can we improve provision for them, too

When there was considerable disruption with the weather last year, a lot of learning went on at ScotRail. The company took a hard look at its experience and at what it had learned in order to try to ensure that things that had not gone well would be improved. That is part of what happens on an operating railway. When things go wrong, the weaknesses show up, but those weaknesses should be examined and addressed properly. That is the main thing I have seen, from my members’ points of view.

For RMT members, such times are when we see things at their best. People who work the railways say that it is great to work on them when everything is going okay, but it is when something goes wrong that the expertise comes out. They try get as many passengers around as possible.

11:30

Teletext used to be a great asset for telling people about train delays and so on, but a number of channels have done away with it. There is still local radio for people who take their cars to train stations, many of which have opened car parks to allow drivers to drive to the station and then take the train into the city centre. I think that the staff do exceptionally well in getting out as much information as possible, but companies themselves need to use the media a lot quicker and to best advantage.

ScotRail has learned a lot of lessons from the horrendous time it had a couple of years back. For a start, it uses social media a lot more; it has its own Twitter account and sends out e-mails in the morning about late-running trains.

However, as has already been suggested, there is nothing better than having a member of staff at a station telling you that your train will be late and the reason why. That must be a way forward. After all, the technology exists; drivers get information about why their train is delayed and if there is a guard on the train they can pass on that information. However, on a driver-only train, the driver might get that information but has no way of passing it to the ticket examiner. He can use the public address system when it is safe for him to do so, but the fact is that when there is a lot of disruption on the railway, getting the train from A to B safely and efficiently is higher on the agenda than putting out information to passengers. As for providing information at stations, it would certainly help if more investment could be made in technology to ensure that public address systems work better.

What more needs to be done to make rail travel more accessible to disabled and elderly passengers and to people who travel with young children?

With regard to disabled passengers, we must ensure that stations have enough ramps and, if they cannot be provided, lifts. I do not know the exact number but, in a number of stations, disabled access could be better; in some cases, disabled passengers can access the station through only one entrance and have to go along various roads to get there. The same point applies to families, and the ramps that have been built in a number of stations have certainly made things easier by saving them having to jump up stairs and so on.

Of course, the most important issue for all those groups is provision of through trains. Instead of having to chop and change, disabled passengers and families would prefer to get a train straight from A to B.

Someone mentioned encouraging elderly people to travel. At the moment, pensioners get free bus passes; I would also offer them free off-peak rail travel. Everyone is talking about having an integrated transport system: if we can let people go on a bus from here to wherever, why can we not do the same on the railway, if the capacity exists?

Are not there a number of local authority schemes like that?

Coming from West Lothian, I know that the local council subsidises travel. However, there are anomalies in the system. For example, when my mother travels to Glasgow, she has to buy a ticket to Drumgelloch, get off there and buy another ticket for the next train to Glasgow. People are not allowed through travel. Given that seats are available, that we have the capacity and that taxpayers’ money is running the trains, why are we not doing the socially responsible thing and opening up our railways to our pensioners? It seems to be straightforward to me.

Having worked a train, I know what Kevin Lindsay is talking about. On the Edinburgh to Glasgow line via Shotts, the train can take people only as far as Shotts. Of course, that also gives staff a lot of trouble. If such a system were to be introduced, it would have to apply to the whole network in Scotland; it should not stop when people cross over into, say, the Strathclyde partnership for transport area. That would, in fact, also stop a lot of confusion over tickets. We have enough problems with ticketing as it is.

One way of encouraging more families to use railway services is to consider fares because cost can be a significant barrier.

We could look at off-peak times.

Finally, how should the Caledonian sleeper service be developed? Should it be let as a separate franchise?

The sleeper service should remain part of the ScotRail franchise.

We are of the same view.

We totally oppose any move to take the sleeper service out of the franchise. Although we welcome the investment that the Westminster and Holyrood Governments have committed to it, we still have some reservations about the decision to divert the £50 million from Westminster to Scottish Water and about the fact that there is no timescale for bringing that money back. It is a bit strange that people are suggesting that the ScotRail sleeper service be siphoned off into a separate franchise and that, after a deal to safeguard the franchise is done, the money be taken and put into Scottish Water. That is a bit of an anomaly.

When, a few years ago, I noticed a lot of mobile phone aerials appearing on railways, I inquired about it and was told that it was all to do with better communications, the provision of wi-fi on trains and so on. However, you seem to be suggesting that real-time communication to the trains is not as good as it ought to be. Is the system being improved or is it simply not up to the job?

The new “global system for mobile communications - railway”, or GSM-R, that is being introduced will revolutionise contact between the signalling centre and the driver.

Can that system also provide wi-fi?

GSM-R is about direct communication between the driver and the signaller. It will totally change the railways, because the on-board team will have the information that they need about what is going on all around them.

It is not about folks’ wi-fi.

The question then, of course, is how we relay that information to passengers.

I thank the witnesses for their evidence. I suspend the meeting to allow them to leave the room.

11:37 Meeting suspended.

11:43 On resuming—

We continue our second evidence session on the Scottish passenger rail franchise and we welcome Richard Davies, who is the head of strategic policy for the Association of Train Operating Companies, or ATOC.

I have a couple of questions on the franchise. First, what are your views on the suggestion that the Scottish passenger rail franchise could be let as a management contract in which the operator is paid a fee to provide a service, rather than as a traditional franchise?

In approaching that question and in answering all the committee members’ questions I represent train operators as a whole, across the country.

One thing to make clear is that there are a range of franchise agreements out there already—the arrangements depend on when and by whom they were let. The Merseyrail electrics contract, for example, was let for 25 years about 7 years ago and it is in a different form to the West Coast franchise agreement—it is much more like a management contract. The concession in place for the local lines in north London, which was taken over by Transport for London four or five years ago, is a different kind of contract again. Our members are used to operating in a variety of different contracts. They are also used to bidding for a variety of different kinds of contracts elsewhere in Europe.

11:45

We tend to come back to what is likely to lead to the best value for money overall from the taxpayers’ point of view, because we are acutely aware of the high subsidy requirements of many railways. The balance is of a management contract—which perhaps has rather limited incentives in terms of management of cost and revenues—against a full-risk franchise. A full-risk franchise is clearly more difficult to let. It is sometimes more challenging for the franchising authorities, but it puts in place somebody who can take full responsibility for the costs and revenues of the train operation and who may therefore be able to manage them much more closely. We advocate that the full-risk franchise is probably the better way to go—although a variety of structures are possible.

What are your views on the creation of a single franchise with different levels of service specification for economically viable and socially necessary rail services?

Transport Scotland’s proposal is, in some ways, quite similar to the proposal that we put together two years ago. We did a piece of work on franchise reform to identify some of the issues that we thought ought to be considered in the next range of franchises. Transport Scotland’s proposal allows for a degree of flexibility for the more commercial end of the spectrum, but even there we have always fully acknowledged that in practice an awful lot of regulation is still likely to be required in a lot of different areas: commuter fares, for example, which the previous witnesses touched on; late night services; Sunday services and so on. I tend to view them not so much as alternative models as degrees across a spectrum. I suspect that the model of a completely liberated franchise—with, as it were, no social obligations—is probably not going to be a starter for the ScotRail franchise.

We heard earlier from some of the transport trade unions on the length of the franchise. Ian Mcintyre, the RMT representative, said that the franchise should last no more than five years. How long do you think the Scottish passenger rail franchise should run, and why?

We generally support a longer franchise—by which we mean longer than the current First ScotRail franchise—of 15 to 20 years. However, we would also support a franchise that was focused on outputs rather than on inputs. A difficult area that the franchising authorities in London have got into is just how much detail to go into in specifying and managing the franchise. If one specifies the timetable, the rolling stock, the ticket office opening hours, the numbers of ticket machines, recycling spaces and car parking spaces and so on, some of the value in having a longer-term franchise is eroded. If a franchisee is there for a longer term, it can take a much more considered view of how to develop the franchise and improve services, which are important services for public transport across the piece. In five or seven years there is only so much that one can do. Franchisees can build much better relationships with Network Rail, local stakeholders, local authorities and people such as members of this committee if their tenure is 15 years. However, that is at risk of being undermined by having such a detailed prescription.

Thank you very much.

You expressed a view on the first point that I was going to raise—you may want to say a bit more about it—which was on the level of detail that should be specified. Following that, can you answer the concerns that have been expressed by the unions—and, I suppose, by others—that more minimal requirements could result in problems for passengers?

We have always acknowledged that this is a question of the balance between the public and private sectors. There will always be a need for a large degree of state involvement; the question is how to structure that to make it work a bit more intelligently than some contracts have worked in the past.

We acknowledge the need for safeguards in relation to service levels, the minimum number of calls at stations and so on. To decode this slightly—which might make things clearer—I should say that the problem that train operators typically have is the opposite: they want to offer more services, to increase service frequencies, to get more platforms put in, to extend platforms and so on. In the detailed franchise system that we have in England, it is quite difficult to do that. There is a significant procedure that must be gone through to amend service level contracts and add services.

Because we have been going through a period of demand growth in the two nations, we are in a quite different place from where the original architects of privatisation thought we would be. The problems that we have are those of trying to put in place increased service without having to go through a heavily bureaucratic process.

You mentioned England. Is that a problem with the ScotRail franchise, too?

There has been significant demand growth in the ScotRail franchise as well: as I understand it, passenger numbers have risen by about 50 per cent since privatisation. The rise has tailed off a bit in recent years, but the matter of provision of an adequate service where it is needed is important. That relates to the questions that were asked earlier about commuting and travelling into cities, which will clearly be a key question for the design of the next ScotRail franchise.

Has growth of services been prevented by the nature of the current franchise?

The current franchise has perhaps made it a little more difficult to grow services, as the changes must be agreed in some detail with Transport Scotland, which was originally the Strategic Rail Authority. I point out that I was in the Strategic Rail Authority when the ScotRail franchise was originally let, before its extension, and the Strategic Rail Authority’s model was carried through.

We need to think about how demand growth is handled. We have to move away from a model in which there is a timetable that is designed by a public authority at the centre, with any changes to that having to be done via a change procedure that involves negotiation of terms and so on, which can take a long time and leaves people travelling on crowded trains in the meantime.

What are your views on revenue risk sharing and how should it be managed?

Revenue risk becomes a more significant issue in the longer franchise structure. It is proposed that some of the franchises in England will be let for 15 years. The degree of risk that one can take in that timescale is a tricky issue for bidders. There is a broad issue of balance around what is value for money overall. You could have a system in which full revenue risk is taken by the franchisee. In a long-term franchise, you would have to build in a little bit of what is known as a risk premium for doing so. We have come to the view that some degree of risk sharing is sensible from the point of view of reducing, but not eliminating altogether, that risk premium.

In the west coast intercity franchise, which is being let at the moment, there is some protection on the changes in gross domestic product, and I believe that Transport Scotland is looking at the same sort of system for the future ScotRail franchise.

The key point is to consider the risk structure that is being proposed and how it is priced, rather than focusing on the payments that would eventually be made under it. The focus of quite a lot of discussion among your colleagues in Westminster is the question of why significant payments are being made to train companies under the revenue risk sharing provisions that the current franchise structures typically have, and which are there, ultimately, as a result of the recession. People tend to overlook the fact that, as a result of having had those revenue risk sharing provisions, people have offered more competitive terms in the first place.

What about the opposite situation, when companies make significantly more profits than they had expected?

Perhaps slightly unusually for a trade association, we have suggested that that is a significant issue and that, potentially, a profit-sharing system might be introduced to deal with those circumstances, but it must be structured so that some incentives are left.

The issue with all such systems is at the margins, because there can end up being some strange outcomes. In some franchises, we have had a combination of revenue share and profit share. When both interact, a lot of the incremental revenue goes straight back to the funders rather than to the train companies, which is an odd position in terms of incentives. We are aware of the issue of profits that are above expectations.

I will ask almost the same question as the one that I asked previously. The committee has heard evidence from passenger groups that service quality is often down to staff availability and the quality of training. How could those be improved under the new franchise?

With the ScotRail franchise, the SQUIRE regime provides a series of bonuses as well as penalties for the operator. We have been calling for a similar system in England. A system that is based on the service as experienced by passengers, which can perhaps be measured through surveys, anonymous surveys, mystery shopper programmes and such like, has considerable potential. However, there is a tendency with such systems to develop them and refine them to try to engineer out all the issues that concern particular interest groups.

We would advocate a system that is fairly broadly based and that measures satisfaction with ticket retailing facilities and with stations and station presentation, rather than, for example, satisfaction with the amount of litter on the station platform. We have reached the stage in rail privatisation at which there is an opportunity to focus the outputs of the franchises on what passengers really want, because we have quite a good sense of what they want now that all the market research has been done. We must have the courage to set up a system that facilitates that directly, rather than trying to regulate what I would call the intermediate stages, such as the number of times that a station is cleaned of litter and where the ticket machines are located.

ScotRail has introduced the successful adopt-a-station initiative.

Yes, and some of the English operators have done similar things. We heard the concern that the union representatives expressed about where the boundary might be drawn but, in general, there has been strong community support for having greater involvement in the stations and in marketing the train service generally. Of course, there are some safety issues, so people who volunteer will not do safety-critical work, but we have quite a successful programme of community rail partnerships in England, whereby the Department for Transport has put some seedcorn money in alongside local authorities to encourage community groups to get more involved in their local railway lines. That has been very successful on, for example, the lines to Cromer and Sheringham in Norfolk.

Should a train arriving “on time” mean that it arrives on time, rather than within five or ten minutes of the published arrival time?

12:00

That is a long-running question. We have taken the view through a national task force, which brings together the train operators, Network Rail, the DFT and the Office of Rail Regulation, that the existing system is probably the best starting point for the next control period. We are just beginning the debates about control period 5, which runs from 2014 onwards.

Part of that has been a debate about whether we should, over time, move to a right-time system of measurement, because in principle the data exist to do that. That potentially might be on the table in the longer term, but we have all got used to a time to five minutes or time to 10 minutes system, and I suppose that, if the way in which things are measured were changed, we would get into another debate about whether the measurement system was changed to try to conceal something else. Consistency over time is important.

There tends to be a view that, in planning and operating the railway, one can somehow plan for time to five separately from right time, if members see what I mean, but all the experience has been that, to get to the time to five measures, it is all about planning right time anyway. The two do not oppose each other in the way that they are sometimes thought to. All the big performance drives, such as that by South West Trains three or four years ago, have been about right-time railway.

You probably heard the criticism from the unions of the indemnification clause in the current franchises that protects train operating companies from the implications of industrial action. Can you justify the maintenance of an indemnification scheme in the new franchise?

I can certainly tell members a bit about the indemnification clause and fill out some history. Such clauses have existed since the start of privatisation. They were in place in the original Office of Passenger Rail Franchising agreements, and I believe that they exist fairly generally, although there may be some exceptions that I am not aware of.

To be blunt, if such clauses did not exist, there would be the possibility in an industrial dispute of not only staff losing wages, but train companies losing revenue. A lot of revenue can be lost very quickly in an industrial dispute. I am sure that the committee will want to go into the profit margins in franchising, which are not huge. Fundamentally, it is the franchising authority, not the train company, that has the discretion whether to use the clauses, and they were basically put in to prevent the train company from being wiped out by what might be regarded as a capricious industrial dispute. Obviously, industrial relations on the railway have evolved a lot, and perhaps we are not quite where we were in the early 1990s. Fortunately, everybody is aware of the need to work much more closely on such issues.

That is why those clauses have existed. They have always been controversial. They are a potential mechanism to improve efficiency over the long term. As members heard from the previous panel, that is a big finding of the McNulty report.

Now that we have 20 or so years of experience, would you regard the removal of those clauses as a significant threat, or would you be relaxed about our moving to do such a thing?

That is really a question for the franchising authority rather than a train company. It is for Transport Scotland, and it is a value-for-money question. People would probably bid either way, but the debate must be broadened out from the clause to the overall cost pressures on the railways, what those pressures are and potential ways of addressing them—over the past 18 months, we have spent a lot of time on the McNulty report. If one does not want to address some of that, which is a perfectly valid outcome, the indemnity clauses are less valuable. If one does, the indemnity clauses are potentially much more important. Fundamentally it will be a choice for Transport Scotland in letting the contract.

I have a few other questions about services and the shape of the new franchise. What could the new rail franchise operator do to decrease overcrowding on peak-time trains?

The committee has partially touched on that. Crowding is a major issue throughout Great Britain. It is a big problem in London, Manchester and Leeds and on many services in Scotland. It is about having adequate rolling-stock provision. In Scotland, it is perhaps a little bit easier than in other places. It is possible to lengthen trains and run full-strength trains more often. In the London area, we typically already operate 12-car trains and the next stage of growth is that much more tricky.

It is about planning and setting up the franchise on the expectation that some degree of peak growth will have to be met inside the franchise. People will then propose rolling-stock solutions to address that. As was touched on earlier, it could be a variety of options, such as more diesel multiple units and loco-hauled trains. That issue could be part of the franchise, and people bidding for the franchise could be asked to propose solutions. It is typical in these kind of franchises that we are suffering from demand pressures, so if bidders think that proposing solutions is a key way to win the franchise, they will think up ways of addressing crowding through rolling-stock provision.

No doubt we will come back to rolling stock.

My next question is on the proposal to increase the number of limited-stop intercity trains, which will meet with stopping services at a number of interchange stations. What are your views on the recasting of the franchise to accommodate that kind of approach?

Do you mean domestic or cross-border services?

I mean cross border and intercity, so that we get faster connectivity between our major centres, linked with stopping services at interchanges.

There are several points, really. It is important to acknowledge, as you have done, the role of cross-border services in Scotland, not just as cross border, but as providing significant connectivity within Scotland. East Coast and CrossCountry in particular play quite a major role in commuter provision.

Fundamentally it is a question of balance and where Transport Scotland wishes to take things. Some of the long trains that East Coast in particular operates run empty at some times of the day but not at others, when they play a major role in peak provision across into Fife and so on. The solution is probably more about sitting down with all the respective train operators to balance up the timetables and the capacity provision across the future ScotRail, East Coast and CrossCountry franchises. That kind of discussion has already happened, when East Coast withdrew the Glasgow services.

We do a lot of that in many parts of the network through the utilisation study process sponsored by Network Rail. We have generally been able to find ways of reconstructing the timetables, where necessary, to accommodate all the pressures on them. That approach has been applied to the west coast mainline, the south west mainline, First Great Western and so on.

So it is not your view that that different approach should be written into the franchise agreement.

I know that it is an area that Transport Scotland is interested in looking at. It is clear that there are pros and cons. It is a topic that has been much debated over the years. I gently point out that the cross-border services are part of the overall timetable construction in Scotland. Simply severing them without thinking things through and replanning a lot of the ScotRail services around that would be quite a difficult task.

There are reasons for doing that, though. I think that Transport Scotland feels that it could probably get a little more revenue, because it would be sponsoring some of the services directly, rather than through the franchisee. Again, it is a question of balance.

What about the management of stations? Should that be the responsibility of one organisation across the piece? At the moment, I think that ScotRail manages all the stations bar Waverley and Glasgow Central. Is that right?

Yes, that is the current position.

Over the past few years, we have been calling for and have been working quite successfully with Network Rail on a move to a system in which the train operators take over full responsibility for stations. Currently, the train operators operate the stations, but they do not maintain or renew the fabric, which makes for quite a complicated contractual relationship. To make all that work, the agreements have to be lengthy documents.

Both parties have come to the view that opportunities exist to do things a bit better by putting responsibility for all the work on one side or the other. With the major stations—Glasgow Central and Waverley—it is all on the Network Rail side. With the other stations, we think that it would fit best with the train operators. The contract for the Greater Anglia franchise that began on 4 February was let on that basis—the new franchisee, Abellio, has taken on full responsibility for maintenance and renewal.

That is a clear view.

The final question that I want to ask is about rail fares. Despite the simplification of rail fares that took place two or three years ago—in 2008, I think—a lot of passengers remain confused about how to obtain the best-value fare. How could that be addressed and rectified in the new franchise?

As you say, it is a recurring issue. ATOC would never say that the system could not be improved. There has been a process of progressive simplification, but there are opportunities to go further.

We have quite a complicated system of what I would call small-r regulation on fares through the ticketing and settlement agreement, which was put in place at privatisation. It sets out things such as ticket-office opening hours and how fares are to be constructed. The issue is whether, in the long term, an agreement on that level of detail is the best way of facilitating some of the improvements that we are talking about.

A few days ago, as part of the suite of documents that it issued with the command paper, the Department for Transport launched a consultation on fares. Part of it addresses the issue of complexity and the interaction with the regulatory system, which the department, in effect, sponsors. From our point of view, that is positive. We have continued to point out that the system that was put in place at privatisation predated the internet; it even predated call centres, more or less, and it certainly predated smartphones, iPads and so on. The way in which people interact and buy tickets has changed, and the rules need to move on with that.

12:15

What about the introduction of smart-card ticketing? Could that mechanism also help? It would certainly simplify things for passengers. Presumably you could do away with quite of lot of complex factors if everyone was issued with a smart card that they could use whenever and wherever they chose.

Part of the DFT’s consultation is about the wider use of smart cards. It is sponsoring a programme of development for the ITSO standard—the national smart card standard—that was awarded £45 million in the autumn budget statement last year. We are actively engaging with that.

I would not say that smart cards are a universal panacea. A large number of people use the rail system frequently as commuters or as regular shoppers or leisure travellers. However, there is also a large number of people who use the system only occasionally—perhaps once or twice a year at most—whom I suspect would not necessarily find the requirement to have a smart card for occasional use so attractive. It is therefore about getting the right blend of systems.

I agree that the system of fares is quite complicated sometimes. However, people do find their way through to cheap fares. Advance tickets are being sold in record numbers. You heard earlier about the example from Doncaster in that regard. They are clearly part of the process that has encouraged so much demand growth on the intercity routes in particular.

We move on to cross-border services. The “Rail 2014” consultation suggests that cross-border services that currently extend north and west of Edinburgh could stop there. What are your views on terminating all cross-border services that currently extend north and west of Edinburgh at Edinburgh Waverley station? Is that something that your members have expressed an interest in?

That is something that we touched on previously. It is one of the areas in which a balance must be struck. I think that Transport Scotland believes that an integrated intercity timetable could be a better way to go in Scotland. We always say that the rail system needs to be planned on as large a canvas as possible. Certainly, the timetabling of services by ScotRail, CrossCountry and East Coast means that they interact with each other across the country. A lot of the timings of CrossCountry services are of course driven by capacity across Birmingham and Leeds, because the trains travel through there. The system needs to be looked at as a whole. Clearly, the cross-border services in the peak hours provide a major slug of capacity, which I suspect it would be quite challenging to replace.

Would that lead to less competition?

It would certainly lead to less competition, but I do not think that that is the main point. The debate about cross-border services has been around for a long time. Clearly, some of them run quite empty. That is certainly the case for those up to Aberdeen and across to Glasgow in the late evening. That situation is balanced, though, by some of them being very full. The issue has always been viewed as a cost point more than a track-competition point.

We will move on to rolling stock. What is the best way of procuring new trains for the electrified lines created by the Edinburgh to Glasgow improvement programme project?

That is another area on which we have been doing a fair amount of work in recent months. Just before Christmas, we published a document on rolling stock that considered some of the comments that McNulty made in his report. We have had a system in which Transport Scotland has procured the trains itself—you touched on this with your previous panel—and that is a route that we could take. It can be done and it is what the Department for Transport is doing in England with the replacement high-speed trains, the trains for Crossrail and the trains for Thameslink. Some 2,500 vehicles altogether, about a quarter of the train fleet, are being procured on that basis, but our preference remains for rolling stock procurement and provision to be done via the franchisees.

Fundamentally, the franchisees—the train operators—must make everything come together. They need to make the train paths, the infrastructure, the train contracts, the train manufacturers and so on come together and if one bit of that is dealt with by another entity, it is potentially a little more complicated. Our preference, where possible, is for rolling stock to be regarded as a full part of the franchise. It should cover the provision of rolling stock as well as the provision of staff, in business terms.

Transport Scotland is currently involved. Is the Westminster Government not involved with other franchises?

Most of the franchises in England have been let on the basis of very detailed timetables and the presumption that all the fleets on those routes would stay put. In effect, the Department for Transport has planned where the rolling stock should go and continues to do that from time to time. In the grand scheme of things, that is probably not the best way to go from a Government perspective. Is the Government really best placed to plan rolling stock in such detail as we have seen in the past? It should be viewed as a core part of the franchise proposition.

Some of the franchises in England, if you go back over time, were dealt with in a different way. The rolling stock on the Chiltern franchise, which was let in its current form in 2002, was not planned by the department. It was totally a franchisee responsibility and as demand has grown over time the franchisee has negotiated with leasing companies to get more new trains built. That system seems to have worked pretty well.

My mission, as you have probably heard, is to upgrade the provision of rolling stock on the longer routes in Scotland. Could that best be achieved by whoever gets the franchise deciding what stock they can procure? The availability of stock is obviously limited, unless you undertake to upgrade a lot of carriages.

Yes. I will follow up on a couple of points that came up in your discussions with the previous panel.

Rolling stock is hugely constrained at the moment, with a total train fleet of about 12,000 vehicles across England, Wales and Scotland. That has increased by only about 10 per cent since privatisation, whereas we are running about 25 per cent more train miles than we did at privatisation and are moving about 60 per cent more passengers overall. That is what the Competition Commission found when it considered the issue back in 2008.

There just is not enough of the stuff, so the question is how to facilitate an appropriate level of provision to stop it being a zero sum game, as it were. The Aberdeen service is as it is because there are very few choices, fundamentally, but if we go into a new franchise perhaps we can open up more possibilities. I would certainly encourage Transport Scotland and you to consider using the franchisee to propose plans for rolling stock provision and make that a competitive part of the process. Transport Scotland could assess it by any criteria it wanted to use and hold the franchisee to account for that rolling stock plan.

Are the diesel units that will be released through the EGIP project likely to be cascaded to other parts of the ScotRail network, or will they be moved to other franchises?

You mentioned that you will shortly hear evidence from the ROSCOs. Formally, the vehicles belong to the ROSCOs, so it is up to them to assess commercially where it is best to lease them. Our understanding is that Transport Scotland envisages that the diesel multiple units will stay put in Scotland and be cascaded internally, which is sensible from the point of view of issues such as depots and capacity.

The franchise re-let point is the key point at which to test options such as retention of vehicles or life extension against new build. Some of the older DMUs, the 158s, are due for major mechanical work, which could involve fitting new and more efficient engines. Another option, to which the previous panel of witnesses alluded, is that loco-hauled stock could become available from other routes, such as the London to Norwich service, which has mark 3 vehicles that were bought in the 1970s. One plan is to convert that route to electric multiple units because, over time, it has become more of a commuter railway than an intercity one. That stock could be used on longer-distance services here.

To pick up on a question that you have alluded to, there are opportunities to accelerate intercity services within Scotland. That has always been identified in the route utilisation studies that Network Rail has done over the years to see how that might be done. That would probably fit with slightly shorter and faster train services. We have tended to have a bit of a hybrid timetable that is a sort of commuter timetable and a sort of intercity one. The timetable is perhaps not structured in the way that the size of the cities justifies.

That is another issue where, if the franchise is set up in the right way, companies will think about that and propose plans. However, if Transport Scotland just says that it wants the timetable to be run as at present, companies will bid on that basis, because they will assume that that is how they will win the contract as that is what Transport Scotland wants.

On the 10 per cent turnover in stock since privatisation—

Sorry, but it is 10 per cent growth.

Right. Do you have a figure for the replacement or upgrading of the stock over the period that you mentioned?

To give a round figure, we have 5,000 new vehicles in the system since privatisation, but the majority of those have simply replaced old trains, so that has not led to capacity growth.

What percentage of the total stock is that?

It is almost 50 per cent of the stock that the ROSCOs took on at privatisation, so there has been a significant amount of new build. In Scotland, there are the 170s. In the London area, south of the river, all the slam-door stock that was around from the 1950s and 1960s has been replaced with EMUs. A lot of money has gone into rolling stock but, overwhelmingly, that has been to replace old trains, rather than to grow total capacity. The pressure that we have nationally is to do with capacity, as we have demand growth of 3 or 4 per cent per annum nationally.

I will move on to passenger comfort, security and information. You mentioned the growth in passenger numbers since privatisation. Obviously, we want to continue that modal shift. Do you have any views on how passenger comfort can be improved to meet business and leisure travellers’ needs?

The issue of comfort and service provision is another key part of what the new franchise should be about. However, my sense always is that ScotRail starts from quite a good position compared with other franchises, for historical reasons. In Scotland, a fairly high amount of money has been spent on stations and, in particular, trains.

12:30

There is a lot more to do—earlier you touched on wi-fi and mobile telephony. In that regard, I would gently point out that wi-fi services are quite expensive to provide on trains, as trains zoom around all over the place, which means that the service has to be provided by satellites or the 3G system—it is a bit more involved than the standard wi-fi in Starbucks and so on.

That is all part of the level of service that Transport Scotland wants to buy. A variety of levels of comfort and quality is possible, each of which has a price associated with it. The franchising process can be used to tease out what the best balance, in terms of value for money, might be. However, overall, Transport Scotland has some significant pressures on its budget over time. The appropriate level of service provision and quality in a constrained budgetary environment will presumably be one of the things that it is thinking about.

We have put together the initial industry plan, which some of you might have seen as part of the periodic review process that took place last September. That indicated that, in a best-case scenario, the efficiency of Network Rail and volume growth would reduce support requirements for the ScotRail franchise by about 10 per cent over five years. However, I am not sure whether that will be enough to fulfil the kind of targets that Transport Scotland is working to.

How best might the safety and security of rail passengers and staff be improved?

There has been an enormous range of improvements across the piece on safety and security. CCTV is in general use and there has been an increase in visible staffing, as you heard earlier. Some of the train operators have what they call travel safe officers—a variety of names is used—who are police trained, although they are not sworn constables, and are able to provide a visible presence and sort out disputes that arise.

Most of the English train operators have been engaged in a big campaign of improving station security, particularly through gating and the use of CCTV, which helps them to identify trouble before it arises and to keep undesirable people off the system. Penalty fares also play a role in that.

On safety, we have taken a huge leap forward with the train protection and warning system, which has been in place for 10 years. It makes it practically impossible to drive past a red signal. Clearly, there is more to be done. We have a safety planning process that the Rail Safety and Standards Board runs on behalf of the industry. That process continues to identify that some of the leading safety issues are to do with slips, trips and falls at stations, as a result of passengers running around stations. A lot of people injure themselves that way, which is why you see a lot of signs saying, “Don’t run” and “Take steps gently”.

A lot of progress has been made over time on track safety, as a result of the enforcement of Network Rail’s maintenance contracts. There is a much tighter regime in that regard.

The vital signs are improving, but there is no room for complacency on these issues.

How can the provision of real-time rail information be improved, particularly during periods of disruption or delay, especially for passengers who are already waiting at stations or are on a train?

Everyone in the rail sector acknowledges that the winter disruption of 15 or so months ago was a dark episode. A lot of the systems and processes that people had thought were there did not really work very well on the day and a lot has been learned by ScotRail and other operators in Scotland as well as at a national level.

The Office of Rail Regulation has agreed with all passenger operators a new licence condition relating to the provision of passenger information that was finally signed off about three weeks ago. As a result, the issue will be formally regulated by the ORR through the passenger licences.

Another slightly more long-term issue relates to the national rail inquiries website, which is run by ATOC and already provides a lot of real-time information. As part of the initial industry plan, we have proposed that the system be upgraded to provide a better information technology backbone across the country that would get information from control centres out faster and would focus on what has become known as one version of the truth. What that means is that, when disruption occurs, there should be a single definitive viewpoint about what the problem is, what is likely to happen and what the resolution should be. After all, during that particular winter period, passengers found it immensely frustrating to have lots and lots of different sources of information all saying slightly different things.

An initiative to improve the IT architecture behind the scenes is getting under way. This is not my specialist area, but when I looked into the issue I was a bit surprised to find how common it is for station screen displays to be manually fed from a national system known as TRUST by someone with a computer somewhere else in the station. That bit has not been automated over the years, although I guess it is pretty obvious why. Nevertheless, clearly we can do much better in that regard and a programme with that very aim is being planned.

A moment or two ago, you said that the costs of wi-fi provision are relatively high. I find that surprising, given that free wi-fi is being offered even by bus operators who run between Edinburgh and Glasgow some of the lowest cost-per-mile services on the bus network. Is it really that expensive to provide it on trains?

Wi-fi was pioneered in the east coast GNER franchise; as I recall, it cost about £500,000 to install it on each train. Not only do these trains move fast, but the electrical environment on the routes throws up challenges such as arcing. Nevertheless, as you have said, some commercial operators have addressed the issue and, indeed, the London to Oxford service has a similar provision. Perhaps costs are falling over time but it is more challenging and therefore more costly to provide a standard service.

My real question relates to the Caledonian sleeper service, in respect of which the consultation document suggested potential reductions and significant changes. However, with the potential £100 million in the system for developing the service, refurbishing rolling stock and so on, we have moved on from that position. Would there be any value in separating the service from the ScotRail franchise?

This is the kind of question that makes me feel old, because it has been coming up for a number of years now—indeed, it has recurred throughout my railway career. Again, we have to strike a balance. If the service were to be set up as a separate train operator, it would be quite small and would run only two trains a day in each direction, all of which raises questions about the appropriate level of management and overhead. On the other hand, in the case of very small operations—I am thinking, for example, of First Hull Trains, the open access operator on the east coast main line—the management team is dedicated to commercialising the service, making it attractive and working with leisure industry partners. In fact, I suspect that that last aspect would be quite an important factor in separating out the sleepers.

As I have said, it is a question of balance. I imagine that it could be done either way, but I politely suggest that Transport Scotland look carefully at how much it would cost to operate the service on a stand-alone basis.

That is all I need to ask.

I thank Mr Davies for attending and for the information that he has given us. I suspend the meeting briefly to allow him to leave.

12:40 Meeting suspended.

12:41 On resuming—