The performance of the Department for Transport - Fleet News

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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Not to be published in any form until00:01 on Thursday 4 Marchwhich are very hard to predict, we do not have asettled view on the long-term passenger growth ratein the industry.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
Processed: 26-02-2010 19:09:54 Page Layout: COENEW [O] PPSysB Job: 442441 Unit: PAG1Transport Committee: Evidence Ev 92 December 2009 Rt Hon Lord Adonis and Mr Robert Devereuxnew franchise that has just started as against the lastone, so much better services to passengers areresulting from the new franchise as well as more than£500 million in premium payments coming to thegovernment.Q69 Graham Stringer: Are you saying there will beno extra call on Exchequer funds or, if there is a callfrom the Mayor, you will not be paying any extraover and above the agreement?Mr Devereux: We have reached an agreement withhim as to the funding for the next 10 years.Q65 Graham Stringer: In the section in the AnnualReport on the Underground, you use a real SirHumphrey word about Tube Lines, you say “theirbiggest test is coming up” when you are talkingabout resignalling the Jubilee Line, I think it is. Does“biggest test” mean that you are worried aboutthem? Are they going to go to the same way asMetronet?Lord Adonis: Since you said that these are SirHumphrey words I think I must ask Mr Devereuxto answer!Q66 Graham Stringer: Your own Sir Humphrey!Lord Adonis: I think he may well have written it.Mr Devereux: I would be grateful if you could tell mewhere you are because I do not recall that.Q67 Graham Stringer: It is on the LondonUnderground part of it, the city and regional part,page 42.Mr Devereux: I made perfectly clear to the PACwhen we had a long afternoon talking aboutMetronet and the merits or otherwise of PPP thatthere are some very good things you can point toabout what Tube Lines has achieved under the PPPbut it is the case that a very substantial task, which isthe Jubilee Line upgrade, which is a really importantthing for them to deliver, is clearly having somediYculty. It is a subject which both the Mayor andTube Lines are engaged in seeking to resolve at themoment. That is a question which the Mayor is veryclearly exercised about and engaged with thecompany about. The company is engaged in tryingThis is an embargoed advance copy.Not to be published in any form until00:01 on Thursday 4 Marchto sort it out, too. I think that is a subject to do withwhen the Jubilee Line will be delivered. I am notsitting here thinking that of itself has an implicationfor the health of the company.Q68 Graham Stringer: To go back to the question,you do not see Tube Lines going the same way asMetronet? Do you see that there will be an extra callon the public purse if Tube Lines run into diYculties,because I think you are acknowledging there arediYculties in the next seven and a half year part ofthe contract?Mr Devereux: Let us go back to what the Secretaryof State said earlier. We have reached a £40 billion10-year deal with the Mayor of London whichincludes the financing for the tube. There are choicesto be made depending on what the arbiter says theprice of the second review period will be, but thoseare choices which the Mayor will have to make. I amnot saying that because I think he will make choicesdiVerent from what he has previously talked aboutbut that is the nature of the devolution arrangement.Q70 Graham Stringer: There were press reports that,after a Treasury value for taxpayers’ money look atThameslink, three-quarters of a million was going tobe taken out of the contract.Mr Devereux: Three quarters of a billion, I think itwas.Q71 Graham Stringer: A lot of money, £750 million.That is right. Is that report accurate?Mr Devereux: What the report was saying was that,somehow or other, we were seeking to reduce thebudget for this programme by £750 million. That isnot correct. We are aiming to deliver this project forthe budget we set.Lord Adonis: We are in detailed contractualnegotiations at the moment over the Thameslinkprogramme and we are seeking to deliver the outputsthat were specified at the outset.Q72 Graham Stringer: Is that a way of saying theopposite then, that the Thameslink programme isover-spending and you are trying to get its spendback on target?Lord Adonis: We are in detailed contractualnegotiations. It is our policy to seek to bring thisprogramme in on the budget that was indicatedbefore.Q73 Graham Stringer: That is not quite answeringthe question I asked. Are you worried that it is overspendingat the moment?Lord Adonis: We are seeking to ensure that it doesnot over-spend.Q74 Graham Stringer: I am pleased to hear that. Ishall take it that you are worried about the spend onthat matter. Are there any implications in yourworrying for the cascading of train sets around thecountry—it is an odd phrase, is it not? Some of thetrain sets will come from Thameslink and be used inother parts of the country. If you are worried aboutthe expenditure, does that have any implication forincreasing the capacity in other parts of the country?Lord Adonis: As I say, we are in the detailed stages ofnegotiating the contract. Our policy remainsunchanged. It is to secure the contract on the linesthat we previously announced which would make itpossible to cascade the stock as you have described.That remains absolutely our policy and we areworking to that end.Q75 Graham Stringer: If I can turn to the questionsJohn Leech was asking previously, in phase one ofthe extra stock for the Northern rail franchise, willthe contracts be signed within the next three months?
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