Local Government and Transport Committee, 25 Nov 2003

Meeting date: Tuesday, November 25, 2003

Official Report 370KB pdf

---

Rail Industry

Item 2 on the agenda is evidence from the Strategic Rail Authority. The evidence follows on from the decisions that the Office of the Rail Regulator is considering on future maintenance levels in the rail industry. Obviously, those decisions will have a significant impact on the SRA. Before I invite Jim Steer to make some introductory remarks, I advise members that the committee will be taking evidence from the rail regulator and the Minister for Transport in due course—the evidence from the SRA will be taken in that context. After we have heard Mr Steer's introductory remarks, we will move on to questions from the committee.

I start by explaining that I am the managing director of strategy and planning at the SRA in London and I am responsible for all the forward planning and policy in the SRA. I was pleased to respond to the invitation to appear before the committee and I am happy to answer any questions that you want to put to me.

One of the critical areas in which the committee will be interested is the interim review process. I welcome the fact that, as the convener said, the committee will be talking to the rail regulator and Network Rail, because the interim review was an important process that was triggered by the emergence of Network Rail after Railtrack had gone into administration. The rail regulator set in process a sequence of consultations, in which the SRA is, like the Scottish Executive, a statutory consultee. The process is drawing towards a close and the rail regulator is expected to publish his final conclusions in December.

The rail regulator asked for submissions on the draft conclusions that he published last month to be made to his office by 21 November. The committee should find that Network Rail's submission is available on the internet—I did not check to see whether it was there this morning, but I believe that that was the intention. The SRA's submission will be made public shortly.

The importance of the interim review is that it will establish the charges that are to apply for the use of the rail network over the next five-year period, which is the period that the rail regulator is looking at. The interim review is particularly important for the SRA because the charges that the regulator determines, which are based on his assessment of the efficient cost of the network over the next five years, fall to the train operating companies. In turn, the companies pass any difference in charges through to the funding agencies, in particular the SRA and, in respect of the franchise in Scotland, the Scottish Executive. The interim review is obviously an important process for all parties to be involved in.

During the summer, our submissions to the rail regulator were the subject of consultation. Some parties were critical of the shortage of time that was available for the consultation. We regret that we were unable to allow a full three months, but the availability of time was prescribed by the dates between the regulator's third set of conclusions and his provisional conclusions—that covered the period between July and September.

The SRA was concerned about two key issues that affect the rail network: cost and the performance reliability that is achieved through the combination of the train operators and the infrastructure provider. Following consultation, we asked the rail regulator to take two policies into account. First, we asked him to adopt differentiated standards—sorry, I should say "differentiated policies"—with respect to maintenance and renewal as a function of how busy the individual routes are. Secondly, we asked him to take another look at the way in which Network Rail can take engineering possessions of the network to carry out necessary work, including maintenance and renewal or, indeed, enhancement.

The regulator responded to those two proposals. He indicated that he did not believe that the policy of differentiation was particularly new. He accepted it in principle, but said that it was not for him to prescribe to Network Rail which routes should qualify for different levels of maintenance and renewal spend. He said that that was outwith his remit as a regulator and that it was not his job to micromanage or decide on a route-by-route basis what Network Rail should do. Network Rail has noted and acknowledged that conclusion and, unless there is further change or a further submission is made to the rail regulator, we expect that in summary to be part of the regulator's final conclusions.

The revision of possession arrangements has been characterised as giving the network operator longer periods of possession, but it is a little more complex than that. It is designed to enable Network Rail to achieve cost savings through more efficient use of the time available to do work on the track. The regulator has acknowledged the sense of taking that revision forward but, in his provisional conclusions, he indicated that he would like the issue to be made the subject of what he calls a "reopener"—in other words, after further work is done and conclusions have been drawn, the issue can be brought back and adjustments can be made. We are continuing to press for the regulator to take on board what we believe to be a realistic level of saving to be achieved through that policy. No doubt he will be considering that matter over the next couple of weeks as he draws his final conclusions.

I hope that those introductory remarks were helpful, convener.

Thank you very much. Do you think that the relationships between the rail regulator, the Strategic Rail Authority and various parts of the industry need to be reviewed, given that the structure of the industry has changed in recent years? I am thinking in particular of the establishment of the SRA, the change in the status of Network Rail and the fact that the role of the regulator was established in order to regulate between fully privatised network providers and privatised train operating companies. Given the changes of recent years, is a review required of the relationship between the regulator and the SRA?

I do not think that those changes in themselves trigger a need to change the organisations' roles, functions and relationships. The SRA and the rail regulator agreed a protocol, which I think was a necessary step, as the relationship between them under the previous leadership was not always as smooth as it should have been.

Although each organisation has distinct and different roles, we feel that we work well together. The rail regulator, if he were here, would stress his independence, as he has been doing publicly over the past few weeks. He has a different function from that of the SRA, which is ultimately accountable to ministers as a non-departmental public body. There is value in those two roles continuing. Network Rail is a different animal from Railtrack, and the rail regulator is of the opinion that the function of independent regulation remains just as important. I have no reason to doubt that.

You said that the SRA will shortly be publishing its comments to the rail regulator on his interim recommendations. It might be difficult for you to give us details, but could you give us a flavour of what the SRA's comments are likely to be?

I will outline the critical issue that we have been attempting to deal with. The provisional conclusions, which were published in October, propose a significant increase in the level of track charges, which, to put a round number on it, go up to £5 billion per annum. The charges are currently in the low £3 billions—in other words, there is to be an increase of roughly £1.8 billion per annum.

The financial provisions for rail in Great Britain as a whole are set out in the 10-year plan, which contains a budget for the public sector spend. Those provisions do not anticipate an uplift in track charges, certainly not of the same order of magnitude as that detailed in the regulator's provisional conclusions.

The question has been how we can reconcile the need for additional funds to go into the railway, as determined by the independent regulator—as I have explained, that requirement passes through the train operating companies and effectively comes back to the Government or taxpayers to fund—with the inevitable limitations that are set by spending reviews on available funds, particularly in the short term. Our response has been to try to reconcile those factors.

As I believe is already known, the question centres on the extent to which Network Rail is capable of raising debt finance to fund the gap between what is likely to be determined as needed and what is currently available in the short term from the public purse. To answer that question, we must think not only about the calculation of the shortfall, but about the basis on which the banks that lend money to Network Rail will be repaid—what is the medium-term and longer-term financial prospect for Network Rail? As members can imagine, that is not a simple or straightforward matter; indeed, it is what we have been engaged with and it is, in brief, the main issue in our submission.

If I heard you rightly, you talked about "differentiated standards" regarding maintenance and renewals and then changed that to "differentiated policies", in the context of the role of the rail regulator being non-prescriptive. Will you clarify what you meant?

I corrected myself because Network Rail already applies different standards across a set of categories of route. Whether it does so sufficiently accurately is another question, which will be for the regulator to decide.

We proposed a simple distinction between two categories of route in our network outputs specification. We suggested in the first category that Network Rail should be encouraged to undertake maintenance and renewals in much the same way as it had planned in its business plan. The regulator is busy assessing the costs of that. We said in relation to that first category of route—the simplest definition that we could find of the busiest passenger and freight routes—that the SRA would seek to secure additional funds to speed up progress in improving performance reliability and so forth.

On the remainder of the network—the less well-used parts of the national network in Great Britain—we suggested that it would be more sensible to look at ways of containing maintenance and renewal spend where possible, because of our concern about the overall cost in the networks. We were seeking to contain costs while achieving performance improvements where they would be most beneficial.

So you are operating a double standard.

We are seeking to ensure that costs are spent on the network where they deliver best value for money.

I am concerned about the line that you have drawn in the sand in relation to what you deem to be the primary routes—in London and the south-east of England—and the main secondary lines, and the extent to which they attract the maintenance renewal moneys and deferments. I notice that you talk about the containment of costs instead of a deferral of costs in relation to other secondary lines. Most lines in the Strathclyde Passenger Transport area fall into the "other secondary" category, despite the fact that they represent more than half the rail journeys that are made in Scotland. If, according to you, the review is designed to look at the areas that are the most used, I suggest that placing virtually the entire SPT area into the category of deferred maintenance renewal, which means that there is no money to be spent, is detrimental to that area. Is it not a fact that the policy will simply be to treat people in the west of Scotland as second-class citizens as far as rail travel is concerned?

I do not accept that. The point that we are making is that choices have to be made. Network Rail already makes choices and we felt that, given the scale of the funding that is needed for the network, it was right to strengthen the distinction that is drawn between the busiest routes and the less busy routes. Through the rail regulator, we should seek to get Network Rail to focus on ways of getting best value for money. The distinction that we drew between categories of route was based initially on Network Rail's categories—it has a hierarchy. We modified that and we certainly listened to responses to our consultation. We included what we believed to be the primary longer-distance routes in Scotland, even though arguably, on traffic-density grounds, they would be less busy than a good number of routes south of the border.

The question is not simply about deferring maintenance and renewal; it is about considering whether the significant renewal expenditures for the routes are strictly necessary. We encouraged Network Rail to confer with the users of the routes and the operating companies to assess the best course of action.

I am happy to answer any follow-up on that, but it is important to recognise what the rail regulator has in effect done with our submission. He has said that, although our submission is very interesting in principle, it is for Network Rail to decide in practice what it does at individual-route level. I do not recognise from our submission Bruce McFee's description of the policy. In any event, it will be for Network Rail to decide how best to manage the policy. The rail regulator also commented on retaining the network's capability. That is why it is important that the committee should hear from the rail regulator and Network Rail in assessing how the policy will affect individual routes in the west of Scotland, for example.

Yes, but with respect, we are not talking about an individual route. We are talking about a decision that will affect the entire SPT area. We are talking about a network that carries more than half of Scotland's rail passengers, not about an isolated route. You mentioned the consultation. How many of those who responded to the consultation supported the no-investment decision in the SPT area? Do you think that the designation of the lines as "other secondary/rural/freight" will have a negative effect on passenger or freight services, given that there are alternatives?

Perhaps when you answer that question, Mr Steer, you could also mention the containment of costs to which you have referred. According to information that I have had from Network Rail, there has been a substantial increase in maintenance and renewal in recent years. In relation to your proposals, what do you anticipate will happen within Network Rail in Scotland in years to come?

I will answer the convener's question first as a prelude to my response to Bruce McFee's question. The backdrop to our suggestion on how best to manage the expenditure on the network does not involve a flat expenditure profile. The increase is mainly on maintenance and renewal spend, although there is also an increase in operation spend. The figures that I cited are drawn from the provisional conclusions and were produced after the regulator had taken his view on efficiency. In other words, the issue is not just about allowing Network Rail what it says it would like to spend; the figures are produced after detailed and rigorous studies. There is a substantial increase. Just to put it in one context, I should point out that the increase is higher than the total cost of franchising all passenger rail services across the country.

Part of that spend is undoubtedly due to the intention in Network Rail's plans to make good a backlog of renewal work. As a result, there is an element of catching up for the period of underinvestment that certainly took place during the Railtrack years and even—though for rather different reasons—during the last years of British Rail. Making good that backlog will itself improve the network's performance.

On Bruce McFee's specific questions, we are not proposing that no investment be made. Instead, we propose that maintenance and renewal should be questioned on different parts of the network. Similarly, we did not suggest the definitions for main and other routes; instead, we adjusted Network Rail's definitions and added in certain routes in Scotland that consultees told us were very important and believed should have been included. We listened to their points, accepted the case and included those routes.

It is true that there are many lines in the Strathclyde network and that, taken together, they carry many of the passengers within Scotland. However, I am afraid that we have to make tough choices when we seek to contain budgets. We feel that we set out those choices clearly and fairly and asked for people's responses. As a result, in answer to Bruce McFee's question whether anyone welcomed the move to contain costs in Strathclyde or the west of Scotland—if I might slightly rephrase it—I do not think that anyone responded in such a way. Although quite a few consultees said that a policy of differentiation was plausible and sensible, they went on to say, "I don't want you to apply it to my railway, thanks very much." I guess that such a response is not particularly surprising. However, I urge the committee to find out from Network Rail and the rail regulator what Network Rail will do in practice, because that will determine the outturn in your area of interest.

I want to clarify—

Bruce, you jumped in a bit ahead of things. I wanted to come to Sylvia Jackson first.

I want to finish my point.

Please do so briefly.

Are you telling me, Mr Steer, that if the policy goes ahead it will have no detrimental effect on passenger or freight transport within the SPT area?

I am telling you that it will be for Network Rail to decide how to manage its network. At the moment, it has to take account of the regulator's direction. The regulator has said that he understands and appreciates why a policy of differentiation is being followed. I do not know what his final word on the subject will be. However, he will not prescribe that this or that line in Strathclyde or the west of Scotland should or should not be subject to a particular policy.

With respect, you are not answering my question. Can you give me a yes or no answer?

I cannot answer for what the rail regulator will say in a few weeks' time.

I think that Iain Smith has a supplementary question, after which I will call Sylvia Jackson.

What is likely to happen to secondary routes in relation to containment and maintenance costs? I understand and accept that primary routes will have priority in order to improve performance. However, will secondary routes be maintained to ensure that performance does not deteriorate?

The network outputs statement makes it clear that the intention would be to minimise any deterioration in performance. We cannot rule out the possibility that what you suggest will happen. The rail regulator could adopt our policy and say, "Yes, fine, I'll tick the box. Please go away, Network Rail, and implement the policy." However, the regulator has not done that. I am afraid that you will have to ask Network Rail that question if you want an absolutely clear answer.

I was trying to get clarification of the SRA's position. Is it your intention that the SRA's policy will not result in any deterioration in the secondary network?

If the policy is adopted, there could be some deterioration. We have outlined the ways in which we would expect Network Rail to minimise that. We have suggested that performance impacts could be not only minimised, but possibly eliminated by careful examination of timetabling. The impact of any change in maintenance and renewal is that temporary speed restrictions are imposed on the network. That is what is happening today because we are experiencing the backlog of underspend on maintenance and renewal. Provided that those restrictions are properly provided for in the timetable, there need be no adverse impact on performance.

Speed restrictions in the timetable are undesirable at all times, but there are many of them on the network at the moment. Many users are probably simply unaware of them. Provided that the network is properly managed, there need not be a damaging impact.

Are you saying that if an extra 10 minutes is added to the journey time, the train will not be 10 minutes late?

No. I do not think that the impacts would be anything like 10 minutes.

I was using 10 minutes as an example.

But seriously—

I am being serious as well.

Quite. However, the point is that extending journey times by a minute or two already happens to reflect the engineering allowances on the routes. The changes will be of that order of magnitude. Provided that the changes are properly managed, there need not be any damaging effect on performance.

I want to get to the heart of the rationale behind the policy. If I understood you correctly, you said that the SRA looked at the busiest routes and the best value for money. I want to ask about audits, which provide information on the condition of the track and, hence, on safety factors. Where would audits come into that policy? A point in the rail structure that is not on a busy route might become unsafe.

That is an extremely important issue. We made it absolutely clear that in applying the policy there could be no compromise of any safety standards whatever. As you imply, it is clear that there could be a situation in which expenditure would simply have to be made for safety reasons. That would be the case irrespective of the type of route.

You mentioned that the decisions would have to be made by Network Rail. Would the SRA flag up the areas in which sufficiently deteriorating conditions could lead to safety problems?

No. Network Rail has to manage that matter on a day-to-day, minute-by-minute basis.

Does Network Rail have that information?

Yes.

I have been interested to hear some of the answers so far, which seem to have been deflected a wee bit on to Network Rail. You mentioned that Network Rail, rather than the SRA, had come up with the definitions of Scotland's rail network as other secondary, rural and freight-only routes. However, the SRA states that

"a targeted increase in inspection and assessment where appropriate, will be used to maintain existing safety levels."

What do you mean by targeted inspection and assessment? What are the criteria for determining what is appropriate? Who will decide those criteria?

I have not sought to deflect anything on to Network Rail. I have answered the committee's questions as directly as I can. I am afraid that the nature of the railway is that more than one party is involved. Some of the issues inevitably fall to Network Rail. The rail regulator's response to the network outputs statement has made it clear that decisions on how that should be implemented in practice are in Network Rail's court.

On the question of inspections, there are group standards that Network Rail sets out for itself and which it is obliged to follow. Those standards are part of Network Rail's safety case and it will follow those standards on those routes. The SRA does not get involved in the detail of that.

You do not get involved in the detail, but in your document you give us guarantees about the maintenance of safety levels. I am interested in how you can give us guarantees when you are not involved in the detail.

I am not sure that we give you guarantees of safety levels, except to say that nothing that we are doing must be allowed to compromise the established rail industry safety processes. They will always override any other consideration.

Section 3.25 of the network outputs statement makes the point that

"a targeted increase in inspection and assessment where appropriate, will be used to maintain existing safety levels."

You tell us that you will maintain safety levels, but say that you are leaving the details to someone else. That is what I am worried about, particularly given the designation of Scotland's railways, which I and other members fear means that the maintenance and renewals will not be of the standard that we had hoped for. That is why I make that point, and I will extend it. The document also states:

"The SRA does not expect that the policy of differentiated maintenance and renewals will require significant amendments to its franchising programme".

Why do you think that there is no need for significant changes in the franchising programme, if—as we hope—we will have an improvement in track renewals and maintenance? Are you satisfied with the current level of track renewals and maintenance? You do not seem to be happy with it, and neither are we.

No, we are not happy with it. That is why we support in general the rail regulator's conclusion that it is right that—even after a fairly large sum of money is taken out for the assessment of inefficiency in the way that Network Rail is going about the activities it inherited from Railtrack—there should be a significant increase in spend on infrastructure maintenance and renewal. That is the point that I made earlier.

The current backdrop is not a steady-state one against which any policy should be judged. It is an improving network that is being funded to make good a backlog of underspend over a considerable period of time. If the policy that we set out was adopted, in full and in part—which it is clear it is not going to be, in the sense of this part of the network and that part of the network—I would not expect it to affect the definition of franchises, because to do so it would have to materially change the network's capability to support franchise services. That is not what we would expect to happen, and I do not think that anyone has suggested that it could happen. At the limit, it may mean, or it may have meant, differences of the odd minute or two in journey times, but those arise from year to year in any event, as the network is subject to specific works.

You further state, in section 4.3:

"On the secondary network, provision would be focused on longer weeknights".

What do you mean by that? Are we talking about night work being undertaken and, if so, will there be strict supervision of who is contracted to do the night work? Will you ensure that no 16 and 17-year-olds are being pulled off the dole to be deployed at night on Scotland's railways?

Yes. The possessions policy is extremely important. Engineering work tends to be crammed into a few hours of the week; it tends to be done at weekends, much of it at night. What we put forward—we did not do so without consulting Network Rail in detail—is a policy shift, which would mean that, on different types of route, different times of the day and night and different times of the week would be used to carry out engineering work. Some routes are busiest at the weekend and some are busiest during the week. Routes that carry freight are often busy at night and routes that do not carry freight might carry nothing at all at night. The question is whether better use of human resources—the labour teams—and of plant and equipment can be achieved through better planning of the times that are made available for engineering work. We believe that, with proper planning, it would be possible to make significant savings and we are urging the rail regulator to take that into account.

The committee will know that the maintenance teams are being brought back in house by Network Rail, whose management responsibility it will be to ensure that the work force is properly equipped, trained and qualified. Of course, it is the intention that renewal works will continue to be subject to competitive tender—or rather, that they will continue to be contracted out. That balance in arrangements between private sector and state owned—not that Network Rail is state owned, technically—is pretty much the same as that which pertains across much of Europe.

I have a couple of other questions for later, but I have a final one on safety. According to your document, the SRA

"has a responsibility for the whole railway and all who use it."

What are the SRA's approach and attitude to the increasing practice of cattle-packed trains, in which people are packed like sardines? I very much hope that there will not be a disaster soon but, at peak times, it is increasingly the case that trains do not have anywhere near enough carriages to allow safe travel and passengers are not secure in seats.

Our attitude is that safety is, and will always be, the first and foremost concern when we consider any policy decision on the railway. We have highly specific directions and guidance on addressing overcrowding. We are endeavouring to do that, but it is difficult to do so within tight financial constraints. I am pleased to say that, jointly with the Scottish Executive, we have been able to fund relatively modest, in railway terms, investments to enable longer trains to operate. Using longer trains is usually the best means of addressing overcrowding in the first instance, although there are limits to what it can achieve.

We know from experience that the larger-scale projects that would allow more trains to run on the network often trigger resignalling schemes and new track schemes and tend to be extremely expensive. Our policy is to seek to manage the network and to get out of it better value for the travelling public. That can mean all kinds of changes to timetables and the deployment of rolling stock. There are two aims to that—a more reliable service and less overcrowding. We are working actively on trying to achieve that.

I asked what the difference was between differentiated standards and differentiated policies. I suggest that they are the same thing, because differentiated policies will lead to differentiated standards. You seem to be saying that there are two standards. The first relates to primary routes that will have add-ins and investment that will catch up on past investment failure. The second relates to secondary routes, on which expenditure will be minimal. By definition, such contained expenditure will not catch up on past investment failure. I want to clarify whether the primary routes are basically the Scotland to England routes and the secondary routes are everything else.

That is not the case. The routes in Scotland that are in the first category include all the routes that go across the border with England, but they also include the route between Edinburgh and Glasgow via Falkirk and all the routes between Edinburgh/Glasgow and Perth, Dundee, Aberdeen and Inverness, as well as the links to Hunterston and Grangemouth.

Those latter categories are not part of what Network Rail would define as the primary network, but they are the routes that we believe should benefit from additional investment, which is subject to our ability to secure the funding, to speed up the performance improvement. We would expect that to apply across the network. That rate of improvement would be mitigated by a review of maintenance and renewal spending. However, the backdrop that I am suggesting, which is one of catch-up and improvement in performance, is not restricted to what you referred to in summary—and I welcome the summary phrase—as the primary network but applies across the network. The £5 billion—if that turns out to be the amount—will be spent on the entire network, not just the busiest part. However, we have said that it makes sense to focus the balance of that investment on the busier routes. We think that that is a commonsense approach that would be taken by any prudent organisation.

The SRA indicates that this strategy might result in

"some degree of journey time extension on less well-used parts of the network."

Can you give an assurance that that will not disadvantage the single-track Highland rail lines where such delays have more of an effect?

I acknowledge that point. There are situations in which the odd minute or two—which is what we are talking about—could make a single-line section of railway line, some of which are quite lengthy, inoperable. In those circumstances, you would expect, I would expect and the SRA would expect that Network Rail would say simply that it had to do the necessary work because, if it did not, it would have lost a fundamental bit of the network capability. In other places, the minute or two—if that is what the length of time turned out to be—might not have such a damaging effect.

Are you sure that

"some degree of journey time extension"

means the odd minute or two?

Yes.

You are sure of that.

Yes.

I will be interested to check that against delivery.

Can you give an assurance that what are referred to as other secondary, rural and freight lines will not be allowed to deteriorate to the level at which services are so poor that the route could be faced with closure?

I can give you that assurance.

We are talking about the majority of Scottish rail lines. Are you sure that you can give an absolute assurance?

Yes.

What industries would be affected?

I am sorry; I do not follow you.

You have told us that no services will be allowed to deteriorate to the level at which routes will be closed and that we are faced elsewhere by extensions in journey times. We are talking about the majority of rail lines in Scotland—

Let me get this clear. You asked me for an assurance that the routes would not deteriorate to a point at which they would have to be closed. I gave you that assurance.

They will not be allowed to deteriorate to a point at which they could not be used, but how much improvement could they expect to receive over the coming period? That is a linked part of the equation for those who use the services.

Indeed. I suggest that the provisional conclusions that the regulator has come to are the best pointer to the detail on improvement. They set out targets for Network Rail over the five-year period for reductions in temporary speed restrictions, the number of broken rails and so on. The general direction is towards an improving network capability and reduced delay minutes for users of the network. Again, I repeat that we are supportive of that and would like investment to be targeted to maximise its value and speed up performance improvement on the busier sections.

What assurances can you give about the future of rail freight services in Scotland? Have you any idea which industries would be affected? It is obvious that industry wants the most efficient freight service, and we want to get as much material as possible off the roads and on to rail. Where do you see the future of freight services in Scotland?

When you say that the routes will be affected, you seem to imply that they will be deleteriously affected. I do not believe that they will be affected in a negative way. We have deemed the principal freight-flow routes in Scotland to be part of the primary network anyway. Network Rail will seek to maintain those routes because they are important flows that it is obligated to carry through its agreements with the freight train operating companies.

We see a strong future for rail freight. Scotland is an extremely important part of the national picture for various reasons. Longer-distance flows are clearly more attractive for rail operations than shorter-distance flows. That is a generalisation, of course, and there are exceptions. There are some very efficient shorter-distance rail freight flows in Scotland, and where those represent value for money the SRA would be highly supportive of them.

Paul Martin has a question.

My question has been covered.

I want to ask two questions. The first is about the maintenance of rail property—stations and the wider estate—at a level that only meets health and safety requirements. Do you not think that it will make stations less attractive to the travelling public if they are resourced to operate at a level that only meets health and safety requirements?

That is a matter of current debate between Network Rail and the rail regulator. The rail regulator has made a provision for a certain amount of money for the maintenance and renewal of stations, and Network Rail has questioned whether that is sufficient. It is possible that the level of spend—I could probably dig the figures out if you were interested—is above the absolute minimum for health and safety requirements. Nevertheless, you are right that the quality of stations is a factor in the overall attractiveness of the railway service.

It would be helpful if you made those figures available to us. In the wider context, as you confirm, it is important that stations are attractive to people, who will not consider using them otherwise.

From time to time, there has been speculation in the media in Scotland about the impact of the vertical integration of maintenance. Would there be a significant benefit if we moved back to an integrated approach to maintenance?

I take it that you mean by vertical integration the same organisation maintaining the infrastructure and running the train services.

Yes.

That approach has some advocates. However, the difficulties in creating or recreating that position are often overlooked, such as the difficulty of dealing with rail freight. Rail freight is now in the hands of four or five major private sector companies that have invested in locomotive fleets, wagon fleets, and so on. They have invested several hundred million pounds—not modest amounts—and they rely for their business on having access to a rail network. If you had the groups representing that part of the rail industry here, they would say that they were strongly against vertical integration. They would anticipate that that would mean the ScotRail franchise and the Scottish part of Network Rail coming together in some form, and they would anticipate it being much harder for rail freight in Scotland to secure a growing and expanding future.

We want both passenger rail and rail freight services to expand. Indeed, that is in our directions and guidance and it is part of what we are trying to achieve. That is one of the serious factors that count against thinking about vertical reintegration, and there are a number of others. However, there are advocates for vertical reintegration.

Until now, we have largely covered issues relating to maintenance and investment in the existing network. You will obviously be aware that—

Could I just come in with two related questions? I did ask if I could.

I would like to make some progress, as we are overrunning quite badly at the moment. I would like to move on to some of the aspirations for enhancing the network in Scotland. One of the biggest spending areas relates to providing extra capacity at Waverley station. I know that there has been much discussion between the SRA and the Scottish Executive about the plans for Waverley's enhancement. It seems to me that Waverley is the sort of project that should have involvement from the SRA because of its importance to the network as a whole. However, I also recognise the pressures that are on your budgets because of the decisions that the rail regulator is currently pondering. What is the current state of play in discussions between the SRA and the Executive? How much of a role do you foresee the SRA playing in such a redevelopment?

The discussions continue. We are meeting colleagues from the Scottish Executive, not quite daily but certainly every week, to discuss the issue. I understand that the Minister for Transport met the Secretary of State for Transport earlier this month to discuss the subject. It is for the ministers to say what the conclusion of that discussion was, but I have no doubt that they will have talked about Edinburgh Waverley as well as other issues.

We will obviously be guided by what we are told by ministers in the Department for Transport and in the Scottish Executive, but our feeling is that Edinburgh Waverley is an extremely important station. It is experiencing growth, which presents challenges, and there are elements of the station's infrastructure that could clearly do with improvement. Access is not as easy as it should be and some features of the station are undoubtedly confusing to users, and it would be a fine thing to improve matters. As members are well aware, the costs of doing that kind of work for a station as large as Waverley are very significant indeed. Here, as in other parts of Britain, we are faced with the problem of inadequate public funds to make the investment that many people feel is needed.

When do you expect to reach a firm conclusion among yourselves, various other Government bodies, the Department for Transport and the Scottish Executive as to what will be proposed for Edinburgh Waverley?

The discussion is about the steps that could be taken. Everybody appreciates that, if there is a funding constraint, we must consider what we can do with the limited funds that are available. At present, the SRA has no spare funds, I am afraid, but we go into a spending review next year and we shall certainly be seeking to secure additional funds. We will have in our minds the investments that are on the table in Scotland as well as in England and Wales. In terms of funding from the SRA, there is unlikely to be any short-run conclusion, but I believe that the work that has been done on the options available at Waverley is close to concluding what a first prudent step might be. That might be just a matter of weeks away.

I want to move on to the modernisation of the west coast main line, and I believe that Tommy Sheridan has a question on that.

When will we get an hourly service on the west coast main line to London? The original plan was to raise the track speed to 140mph; will that speed ever be reached and, if so, when? When will the Pendolino trains reach 125mph and will they have tilt operation?

The hourly train to London from Glasgow is planned for 2005. The 140mph target has been deleted from the programme, but the rolling stock has that capability and it has proved that it can operate perfectly safely, even tilting, at 140mph. In future, it would be feasible to upgrade at least parts of the route to that speed if it was found to be worth while.

Although 140mph makes for snappy headlines, it does not make a huge difference to journey times on the west coast main line when compared with 125mph. The journey time saving is approximately five to 10 minutes, even on the longest route, which is London to Glasgow. It is important to upgrade the route so that we can get 125mph operation and tilt operation, which would avoid the need to slow down and speed up between curves. At present, that upgrade is on track for introduction in September 2004 in the section between Crewe and Euston which, although it is in England, will benefit the Anglo-Scottish traveller. The trains are cleared for 125mph operation, they are running and they will be capable of running with 125mph tilt progressively over the route during next year. The current plan is to introduce a 125mph tilt timetable in September 2004. That date has not been finally agreed, but it is the current plan.

Many of your answers have mentioned restriction of public funds. Obviously, you have overall responsibility for the amount of money that is being invested in the rail network and I hope that you are aware of the amount of money that is being extracted from it. How much public money has been invested in the rail network since 1996? How much has been extracted in the form of profits from the 26 train operating companies during that same period?

My goodness. I am not sure that I can answer off the top of my head about the amount of public money that has been invested since 1996. It will certainly run into several billions of pounds.

The profit margins of the various train operating companies are not very high. The franchises have been let on the basis of tight margins and several of the train operating companies have failed to achieve their projections and have not made the expected profits.

So, if I were to say to you that during that time public investment reached £9.97 billion and the profits extracted amounted to £7.25 billion, would you dispute that?

In terms of the train operating companies, totally. The amount is nothing like that.

Perhaps we could ask you to provide those figures.

It would be useful if you could provide them.

I am sorry, but I am not sure that I can extract from all the sources the profit levels of the train operating companies. However, I will undertake to do what I can.

It would be useful if you could because, in response to David Mundell, you talked about vertical integration. I am in favour of that and I like to call it rail sanity. For the record, when you talk about increasing the track charges from £3 billion to £5 billion, you are saying that you will charge the train operating companies more to use the track and we will pay that cost, so the companies will not pay anything extra.

That is correct.

I have a small supplementary question on the west coast main line and faster trains. Will it be the case that smaller stations on the route will be less used by those trains? When there are faster trains, will there be—perversely—fewer services on the west coast and at stations such as those at Lockerbie and Carstairs on the route, as the service will migrate towards stops at larger stations?

I am not sure whether the detailed plan for station calls for the 2005 timetable has been drawn up. As far as I am aware, the service between Lockerbie and Edinburgh, for example, has improved over the past couple of years and I am not aware of any proposals to reduce it.

I am reassured by that; however, that service has not in fact improved, as there are fewer services. I hope that an outcome of faster trains and an SRA policy thrust would not be fewer stops.

The issue of station calls at minor stations always involves balance. Obviously, local communities must be served without there being undue extensions of journey times for perhaps the 98 per cent of passengers who will enjoy the momentary station call but think that it has added another five minutes to their journey. There will always be such issues, but certainly no policy direction that the balance will shift one way or the other is implicit in the west coast main line upgrade.

Which Scottish stakeholders did you consult in developing your strategy?

I am afraid that I do not have the list in front of me. We certainly received many responses from various agencies in Scotland.

Perhaps you could let us have the list.

I would be happy to provide it.

That brings us to the end of the first evidence-taking session. I thank Jim Steer for giving evidence and all members who participated in the session.

Before we take evidence on the Antisocial Behaviour etc (Scotland) Bill, we must consider a paper from the clerks. Earlier, I mentioned that the committee intended to take evidence from the Office of the Rail Regulator and Network Rail, but perhaps I was a little presumptuous, as the committee must first agree to take evidence from them. Do members therefore agree with the paper's proposal that we take evidence from the Office of the Rail Regulator and Network Rail?

Members indicated agreement.

We will have a two-minute break while the first witnesses to give evidence on the Antisocial Behaviour etc (Scotland) Bill come in.

Meeting suspended.

On resuming—