The performance of the Department for Transport - Fleet News

Processed: 26-02-2010 19:09:54 Page Layout: COENEW [E] PPSysB Job: 442441 Unit: PAG1Ev 8Transport Committee: Evidence2 December 2009 Rt Hon Lord Adonis and Mr Robert DevereuxQ57 Chairman: Have you an estimate of it?Lord Adonis: It is in the many tens of millions ofpounds. It is in that ball-park. If I said it will be inexcess of £50 million that is how we calculate it at themoment. Given that in two years’ time we will beseeking to have a competitive franchise, and ofcourse we only let franchises where we are confidentthat they deliver value for money, our judgment isthat the right thing to do in terms of value for moneyis to have another competition for the franchise tostart in two years’ time.Q58 Mr Leech: Do you think given the action thathas been taken against National Express in relationto their other two franchises, they would have stilltaken the decision to hand the franchise back if theyhad known what action you were going to takeagainst them?Lord Adonis: It is impossible for me to answer thatquestion because of course I am not one of thosewho was taking the decision, but I think that we havesent the clearest possible signal to other trainoperators that the consequences will be very seriousif they were to behave in the same way.Q59 Chairman: Do you think they were surprised byyour actions?Lord Adonis: I do not know. I hope not because Ihope that they would expect that the Governmentwould be absolutely robust in defending thetaxpayer, but if there was any doubt in their mindthat the Government might have been robust indefending the taxpayer, I hope (and I believe I have)I have dispelled any such doubt over the last fewmonths.Q60 Mr Leech: Has the Department made anyassessment on the potential loss of revenue from areduction in the growth of passengers on therailways?Lord Adonis: At the moment given that the recessionis still in play, and we are still dealing with numbersThis is an embargoed advance copy.Not to be published in any form until00:01 on Thursday 4 Marchwhich are very hard to predict, we do not have asettled view on the long-term passenger growth ratein the industry. However, what I can report to you isthe judgment that train operators themselves havemade recently, of which the best indication is theSouth Central franchise, which began only twomonths ago, where the operator, Govia, projectspassenger traYc growth of 5% a year from next yearfor the following three years under that franchise.Thus they are still projecting significant growth,which I take to be a positive sign. On the basis of that5%, they are also making premium payments for thatfranchise of over £500 million over the nearly sixyears that the franchise operates. This comes back toyour previous question, Mr Leech. The judgmentthat we have made on why it is right to refranchise isthat our most recent experience of franchising,which was South Central, which was let right in themiddle of the recession, produced a very hotlyfought competition with a large number of trainoperating companies bidding for the franchise and itproduced a very healthy premium payment, which isof course vital for meeting the on-going costs ofoperating the railway and, as I say, it was based onwhat are still healthy passenger growth numbers forthe period coming out of the recession.Q61 Mr Leech: Some franchises are doingconsiderably better than others. Northern Rail forinstance, their franchise that they have had since2003 was based on a no-growth estimate and as aresult of very significant growth, including I think258% growth at one of the stations in myconstituency, it has led to a significant amount ofmoney coming back to the Department. Is there acase for putting the money that comes back to theDepartment back into the region that it has comefrom to improve transport and add an additionalincentive to increase passenger growth?Lord Adonis: That is a very kind invitation but, as wewere saying just a moment ago, alas, because of therecession and because of National Express’s default,I also face very significant additional pressures onother parts of my budget. I wish I were in a positionto be able to give you some benefit from the higherpassenger numbers.Q62 Mr Clelland: Would this not be an incentivethough for the regions, which we have all argued dovery badly out of the transport budget incomparison to London and the South East? Wouldthis not be a good incentive for franchisees withinthe regions to increase growth?Lord Adonis: There is a strong incentive on them todo so anyway because of course the train operatingcompanies, because they receive a share of theadditional income, have a very strong incentive tomaximise revenue and to grow passenger numbers.The regions have a strong incentive too, partlybecause of course the local authorities supportmodal shift. Virtually all local authorities have as anavowed policy aim moving passengers from roadand, where appropriate, air on to train to reach thepolicy objective and of course because more peopleuse the trains when it comes to respecifying thefranchises the case for an improved service level innew franchises increases too. So I think there is awin/win but, unfortunately, I cannot oVer to giveyou back the regional gains because I need them tomeet big pressures we have got in other parts of therail budget.Q63 Chairman: You will continue to include servicesrequired by passengers in the franchises in the waythat you did in the Southern franchise?Lord Adonis: Sorry, we will continue?Q64 Chairman: You will continue to include servicesrequired by passengers in the franchise conditions asyou did in the Southern franchise. Is that yourpolicy? So you will look at passengers’ overallrequirements?Lord Adonis: Yes and we set detailed—the industrythinks too detailed but I think it is absolutelyappropriate detail—service level obligations in thefranchises. In the case of the South Central franchiseto which I referred to a moment ago, there is asignificant increase in the capacity required in the