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1998-09-18 RFO-002
Railway Forum

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The government white paper on the future of transport


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Railway Forum

The government white paper on the future of transport
_______________________________________________________________


date
18 September 1998
source Railway Forum
type Report



Railway Forum Analysis: September 1998

Contents

I Introduction

II Five Key Requirements of Rail Growth

Improved Service Standards
Increased Investment
Equitable Pricing of Transport Modes
Equitable Investment Appraisal between Modes
Forward-looking Regulation

III Strategic Vision: the role of the Strategic Rail Authority

Strategic task and structure
Public funding
The impact of the SRA on the Five Key Requirements

IV Conclusion



FORUM ANALYSIS

A NEW DEAL FOR TRANSPORT: BETTER FOR EVERYONE

The Government’s White Paper on the Future of Transport: July 1998


Introduction

The Railway Forum

shares with the Government a vision of rail’s growing contribution to the country’s passenger and freight transport needs, following years of decline
applauds the Government’s commitment to all-round improvement in the provision of public transport, and to a more coherent approach to transport planning
welcomes the strong focus which is given to the role of rail both in the White Paper (Cmnd 3950), and in the Government’s response to the Environment, Transport and Regional Affairs Committee’s Report on the proposed Strategic Rail Authority, and on Rail Regulation (Cmnd 4024).
To secure rail’s future growth, there are five key requirements:

delivery by the industry of improved service standards which satisfy the customer through operational efficiency and progressive integration with other transport modes
increased investment by the industry (with contributions from the public authorities where appropriate) in infrastructure and rolling stock improvement, to support and sustain service efficiency
equitable pricing of all transport modes which reflects the marginal cost of use, taking full account of wider social and environmental costs and benefits, so that no mode is substantially overpriced or underpriced in relation to others
equitable investment appraisal between transport modes, ensuring in particular that appraisal of road and rail schemes is conducted on the same basis
forward-looking regulation which encourages growth, avoiding an over-prescriptive approach which could have the opposite effect.
In varying degrees, the White Paper recognises the importance of all these factors, which are closely related to one another. So far as rail is concerned, the success of the various innovations outlined in the White Paper must be judged in relation to their effect on these key requirements.

The main question now is how the industry and the Government can best work together to secure a step change in rail’s contribution over the next five to ten years and beyond.

The following sections:

discuss the content of the White Paper in the light of the five key requirements for rail growth set out above
examine the role of the Strategic Rail Authority in delivering "strategic vision", looking at its objectives and structure, its role in relation to public funding, and its task in relation to the five key requirements
summarise the Forum’s conclusions and concerns.


Five Key Requirements for Rail Growth
Improved Service Standards
The need for continuing improvement in service standards is fully recognised by the industry, and is a matter essentially for management action by the rail companies themselves. Cmnd 4024 (para 58) rightly looks to the train operators to take action on their own initiative to improve services.

The emphasis placed in the White Paper on the need for greater integration of timetables and for greater modal interchange is supported by the industry which has already taken various actions to promote the "seamless journey". The industry also endorses the Government’s wish to work towards greater rationalisation and comprehensibility of fare structures. There is far more common ground between the industry and the Government on the need to secure network benefits and integration than might appear from a casual reading of the White Paper. We very much support the emphasis placed (para 4.18) on the fact that the railway is a national network which needs to be marketed accordingly and in a way that encourages people to switch from car to train.

The White Paper declares an intention to "forge a new relationship with the passenger railway, for the benefit of the people that it exists to serve" (para 4.20). The SRA is to be the prime vehicle for this, "combining pragmatism with a strategic view". We discuss the role of the SRA at greater length in section III. Franchisees recognise that public confidence is an essential ingredient of business success, and are determined to provide affordable services of high quality. Progress is being made, and increased reliability and comfort will flow progressively from massive new investment in train, tracks, signalling and stations.

Mainline and metro investment over the next five years will total some ?bn.

Cmnd 4024 paras 46 - 48 discusses the need for rail passengers to have a larger say in the rail services "which are paid for with their fares and their taxes". The Consultative Committees are to be given explicit powers to refer perceived breaches of franchise agreements to the SRA, not just breaches of passenger and station licenses. It is important that the industry’s performance should be open to scrutiny, and that the voice of rail users should be heard. Rail performance is undoubtedly now more transparent and highly monitored than that of any other transport industry. The industry will work together with user groups to secure further improvement.

We particularly welcome the intention

to seek improvements to the current railway performance scheme so as to encourage train operators to hold connecting trains when delays occur
(para 3.67)
to issue general guidance on the application of the prohibitions in the Competition Bill, so as not to deter co-operation between operators that is in the interests of connecting services, co-ordinated timetables and integrated networks (para 3.68)
to require local authorities to establish groups including all interested parties to discuss timetable needs and planning (para 3.69)
to aim for a nationwide public transport information system by 2000 (para 3.74).
Increased Investment
The two main aspects touched upon in the White Paper are:

the volume of present and future investment
the value for money obtained from public subsidy.
As to volume, the White Paper notes (para 4.27) that franchise commitments for new or re-bodied rolling stock, station improvements and so forth have so far resulted in commitments to the value of some ?6bn. It also alludes, without quantification, to the ?bn investment programme of Railtrack over the next ten years. It states unequivocally that the Government wants "more capital investment for the benefit of passengers" and it notes the potential for growth in rail freight, endorsing (para 3.33) the aspirational targets of EWS and Freightliner.

It does not however attempt to quantify the investment required in rail over the next five to ten years, even in indicative terms; nor does it consider the availability of the necessary funding. This will be one of the biggest challenges for the Strategic Rail Authority, and is discussed in Section III (ii) below. The Authority should be able to build on the results of the Franchising Director’s current review for Government under his new Objectives, Instructions and Guidance of the "type and level of service that the rail network should provide". This is to include an assessment of Railtrack’s investment plans, and should make a major contribution to debate on a subject of central importance to the future of rail.

Meanwhile, the decision (para 4.31) to provide additional funds under two new schemes is of considerable importance, recognising as it does that public support will continue to be needed on occasion to supplement commercial investment, in order to promote schemes for system development and modal shift which are desirable on public interest grounds. The funding - some ?0m over three years - should be enough to prime a number of useful schemes, though there is still some doubt about the amount available for new projects.

The decision to suspend land sales pending an audit by British Railways Board of the remaining sites is welcome (para 4.35). Sale of sites which could be used to develop the rail network runs counter to the aspirations of both Government and industry for an improved rail transport system.

It is also encouraging that, in addition to the increase in freight grants to ?m in 1997/98 (with budgetary provision of ?m in the current financial year), the Government is prepared (para 4.37) to consider applications from Railtrack and others for additional public subvention "on a case by case basis" towards the cost of intermodal freight terminals and piggyback style operations.

The White Paper states (para 2.39) that the "privatised railway continues to receive vast amounts of public subsidy, with inadequate public accountability". Obviously it is important that Government should have the means of satisfying itself that public subsidy is being applied for the purposes intended, and in this context we support the decision to retain the role of the independent Rail Regulator with the duty, amongst others, of assessing whether Railtrack is delivering the investment and maintenance programmes underpinning its access charges. The White Paper (para 3.31) welcomes the Regulator’s current investigations of Railtrack’s committed projects to renew and develop the network, and of its committed plans to meet the requirements of freight. The Rail Regulator is also invited in his forthcoming review of access charges to ensure that Railtrack has adequate incentives to perform efficiently and effectively (para 4.24). We endorse the wide remit which has been given to the Regulator, including the invitation to consider mechanisms for payment, and fully expect that a detailed dialogue will lead to increased confidence in Railtrack’s stewardship. It should be noted that Railtrack’s investment plans are based on the expectation of considerable growth, both for passenger and freight business.

We note from para 63 of Cmnd 4024 that the Regulator is seen as having an important continuing role in ‘balancing and sustaining a private sector-public sector partnership, setting the charges which form such a large part of the subsidy bill’. The Regulator’s functions are to include setting charges both for access and ‘for any investment required by the SRA’. The implications of this are not entirely clear, but presumably the reference is to agreed, jointly-funded investment to be carried out in the context of a balanced public sector-private sector partnership.

One serious concern in relation to sustaining the volume of rail investment is uncertainty over the terms and conditions of franchise renewal, advice on which is to be an "early task" for the Strategic Rail Authority (Cmnd 4024, para 30). It is essential to avoid a hiatus in investment, and particularly in rolling stock orders following completion of the orders placed as part of the original franchise packages.

Most of these will be delivered within a couple of years. Thereafter, there is not much in the pipeline. A dearth of orders for an extended period would defer the benefits of new rolling stock to rail users and would be highly damaging to the economically important rail supply industry (which previously suffered a lengthy period without orders due to the uncertainty caused by privatisation). The statement (para 4.20) that the Government are willing to consider renegotiation of existing franchises where this provides a passenger dividend is too indefinite to constitute an adequate basis for planning and it is difficult at present to see how holders of "seven-year" franchises can be incentivised to maintain the momentum of investment during the latter part of their tenure. Any delay in establishing the Strategic Rail Authority will simply exacerbate the problem.

Timescale is of great importance. If questions of extension are to be left until the Strategic Rail Authority is up and running - which could take two years or more - the momentum of strategic planning and investment could come to a stop and the already depleted UK rolling stock industry would contract still further. The issues need to be addressed now, not later.

In this context it is paradoxical to read (para 3.30) that "the ability of the railway to cope with the increase in passenger demand that we wish to see will depend in part on the pace of infrastructure works and rolling stock improvements". The question of "pace" is very much the issue here. We could pay a high price for a slackening of momentum.

Equitable Pricing of Transport Modes
The White Paper makes a number of important general statements about the relative pricing of transport modes, but regrettably does not carry the debate to any conclusion other than the need for further work - the Commission for Integrated Transport is to be asked to give advice on "the costs and benefits of transport" (box following para 4.11). A good deal of work in this area has of course already been carried out by the Royal Commission on Environmental Pollution, and others.

We hope that the further work will be advanced with considerable urgency, not waiting for the formation of the Commission. It should take full account of the regional and local development benefits of rail, as well as its key role in e.g. helping to reduce greenhouse and other emissions.

It is said that the Franchising Director’s criteria for assessing the costs and benefits of rail schemes (para 4.91) will "give due weight to the social and environmental benefits which railway investment can provide as part of an integrated transport policy". The Railway Forum has already provided its views on these benefits to the Franchising Director. Our main concern is that the treatment of these benefits in OPRAF’s Planning Criteria document of November 1997 is disappointingly thin. In our view, it does not give them the full weight which they deserve.

The White Paper does in fact accept (para 4.118) the conclusion of the Royal Commission of Environmental Pollution that the costs (sic) paid by transport users do not reflect the environmental damage and disbenefits - such as noise, nuisance and pollution - caused by the use of land for transport infrastructure and by movements of vehicles. It concludes that "the use of economic instruments, such as pricing measures and taxation, is an important way of influencing travel choice. Such measures can help to ensure that all costs, including environmental costs, are reflected in the price of transport". It is also stated (para 2.35) that the Government will "make increasing use of economic instruments such as pricing and taxation to send clear signals about the wider social and environmental impacts of travel decisions".

We strongly endorse these statements and regret that the White Paper does not identify ways of moving more vigorously to "send clear signals about the wider social and environmental impacts of travel decisions".

The White Paper notes initiatives at the EU level to use charging as a means of promoting sustainable mobility and enhancing competitiveness. It mentions (para 4.120) a forthcoming Commission White Paper on transport charging with "long term proposals" for a fair and transparent charging framework for commercial operations across the EU.

The Commission White Paper, which has now appeared advocates action in a timescale substantially faster than the phrase "long term" would suggest, with charging principles agreed over the next two years and applied progressively thereafter. It is strongly to be hoped that the Government (and the Commission for Integrated Transport) will take the principles advocated in the EC White Paper fully into account in their further work, and will contribute actively to the development of the Commission’s proposals.

In this context, the Government’s plans to enable road user charging and a levy on non-residential parking are very welcome, but must be seen as only the beginning of a process to reflect "marginal social costs" in transport pricing. The Government are to be congratulated on agreeing to allow local transport charges to be applied to local transport ends, although this is of course commonplace in many other countries.

It is important that the legislation should be cast in terms sufficient to allow authorities to undertake this role effectively. They should be able to capitalise the value of revenue streams and, as para 4.90 of the White Paper recognises, should be able to enter into appropriate partnership arrangements with private sector firms to encourage integrated transport provision. It is also essential that the proceeds of each road charging scheme should be additional to the resources which the local authority concerned would otherwise have had available, since otherwise the beneficiary would be the Treasury rather than public transport.

Equitable Investment Appraisal between Transport Modes
Historically, the appraisal of road and rail schemes has not been conducted on the same basis, generally to the detriment of rail. The Government are to be commended on the ‘new approach’ set out in para 4.195 of the White Paper, where alternative solutions in all modes are to be assessed on the basis of five criteria - integration, safety, economy, environment and accessibility.

The White Paper makes it clear that the new approach, once finalised, will be applied to the appraisal of all transport schemes. We look forward to seeing early results from this work, and believe that the Strategic Rail Authority and Highways Agency should work closely together in developing a common framework.

We believe that rail has a great deal to offer under all of the five criteria, and not least with regard to economic development.

In this context we note that the potential of high speed rail links and the provision of upgraded freight links (particularly to and from ports, airports and the Channel Tunnel), to assist regional development in the Midlands, North of England and Scotland remains a matter of keen political interest in those areas.

We would also stress the importance of weighing the merits of light rail schemes such as the Manchester Metrolink in the balance with other forms of transport provision. The White Paper states that such schemes should not be a priority for funding (para 3.38).

We do not agree: the point is that light rail schemes should be assessed fully and fairly, and on the same basis as alternative solutions, giving full weight to wider social and environmental benefits.

Forward-looking Regulation
The White Paper promises "tougher rail regulation to serve the public interest - ensuring that the private sector honours its commitments to deliver a modern and efficient railway" (box following para 3.24). It also recognises (para 4.22) that the rail industry needs "an element of stability and certainty if it is to plan its activities effectively".

The industry’s regulators will need to steer a very careful course between those two statements.

The Government proposes to amend the relevant provisions of the Railway Act 1993 so that enforcement of franchise agreements and operating licences is "less cumbersome", enabling the Strategic Rail Authority and the Rail Regulator to levy financial penalties more swiftly than at present, and to take action in respect of past breaches. It is stated in Cmnd 4024 (para 60) that the intention is not to penalise train operating companies for the sake of it, but to provide incentives to live up to their commitments to passengers. Much will turn in practice on the perception by operators (and by prospective new franchisees) that decisions are reached fairly, and openly.

As discussed in Section III below, in discharging its regulatory functions the Strategic Rail Authority will need to strike the right balance between the day-to-day tasks of franchise management and the challenge of ensuring growth. The White Paper promises that the Authority will combine "pragmatism with a strategic view" (para 4.20).

Given the likely day to day pressures on the Authority from Government and Parliament, it will be essential to "build in" the strategic dimension very carefully from the outset.

The Rail Regulator is to be given a new duty (para 4.22) to have regard to statutory guidance from the Secretary of State on his broad policy objectives for the passenger and freight railway. Cmnd 4024 para 64 suggests that the objective is a limited one - to give a statutory basis to the existing voluntary concordat between the Secretary of State and the Regulator.

Nevertheless, in legislating, Parliament will no doubt wish to clarify what interpretation should be sought or placed on the meaning of the term "broad policy directives" as it relates for instance to industry structure, pricing, or investment. It should not for example be possible for the Secretary of State to issue guidance the effect of which, when implemented, would be to prejudice an investment which had already been committed. Guidance should be strategic in nature: the Secretary of State should not become involved in detailed operation of the railway. The same concerns apply equally to the Secretary of State’s guidance to the SRA.

The White Paper notes the discussions taking place between the Regulator and the ROSCOs on a concordat covering rules of conduct to back up competition legislation. While the possibility of further action, including regulation, is held out in the White Paper, our belief is that the Government’s new competition legislation will provide substantial protection against any abuse.

We note the changes which are being introduced to remove "confusion about the respective roles" of the Rail Regulator and the Franchising Director (para 2.43) and are in general supportive of the changes, including the transfer of responsibility for the RUCCs. It is not however self-evident that the potential for overlapping will be completely removed under the new regime. In particular, the Rail Regulator will need to develop his own view of the industry’s investment needs which will not necessarily tally with that of the Strategic Rail Authority. Furthermore, while the Regulator is to continue to exercise powers concurrently with the Director General of Fair Trading, it will be for the Strategic Rail Authority to "set the longer term policy framework for competition, ensuring continuing safeguards against erosion of a properly integrated network" (para 2.38). The Regulator is to take account of the SRA’s policy aims (Cmnd 4024, para 70).

Policy on competition (including regulatory responsibilities) needs to be clarified as quickly as possible, affecting as it does the service and investment plans of existing operators and the commercial judgement of prospective new entrants. Delays could lead to a blight on individual companies’ strategic planning.

We note the intention to align the duties of the SRA and the Regulator as closely as possible to minimise the potential for conflict (Cmnd 4024, para 65). Relationships between the Strategic Rail Authority and the Rail Regulator will no doubt be further clarified during the passage of legislation. It will be important to demonstrate that possible relationship problems have been fully thought through and do not in any event have the potential to damage the industry’s progress.

In all this it should be stressed that the rail industry is already very highly regulated, and that its dealings with its regulators constitute a significant element of cost. It will be important to ensure that the new regime does not lead to the introduction of new and unnecessary layers of bureaucracy. The volume of future investment is likely to be influenced adversely if expectations develop that regulation may become yet more intensive or detailed, or more time-consuming, or less predictable.

Strategic Vision: the role of the Strategic Rail Authority
We now turn to the role of the Strategic Rail Authority, looking at

its strategic task and structure
its role in relation to public funding
its impact on the five key requirements for rail industry growth.
Strategic task and structure
First and foremost, while we have some concerns about the way in which the Authority will actually develop, we would emphasise our support for the creation of a focus for long-term strategic planning for the industry, and for the concept of a "strategic vision" - a vision to which the Forum wishes actively to contribute. We endorse the requirement to ensure that freight operators’ plans are taken into account in the planning of the network as a whole.

A strategic focus is not in our view required purely to help resolve real or potential conflicts of priority between different rail companies. It also flows from the Government’s own moves to develop transport planning on a regional basis, in the context of its wider proposals for regional devolution.

The future involvement in transport planning of a considerable number of diverse bodies - the Scottish Parliament, the Welsh Assembly, the Regional Planning Conferences and Regional Development Authorities in England, Transport for London, the existing PTA/PTEs and local authorities - elevates the need for an ‘overall vision’ to a considerable height. It is inevitable that differences of judgement will arise between these bodies about the use of available resources. An overall strategy is essential to help set priorities, and resolve disputes.

The general duties of the Authority, as set in paras 4.14 and 4.15 of the White Paper, are very close to the Forum’s own views which were set out in a note in response to the Government’s Consultation Document of August 1997. In brief, we recommended that the Authority should

establish as a matter of priority the requirement and the means to increase rail system capacity in support of the Government’s broad transport, environmental and social policies
develop strategies to facilitate the growth of rail and monitor progress against defined objectives
assess the growth potential of closer integration with European mainland rail transport systems
carry out assessments of the wider environmental and social benefits of rail, and take these into account in determining levels of support
identify the need for new investment, how that need is to be met, and within what timescale
avoid any loss of momentum during the process of franchise renewal, or during the establishment of the Authority itself
establish a framework within which operators can work with Local and Regional Authorities
clarify the role of the Authority in relation to other bodies with strategic planning interests
provide a clear national strategic vision, which other planning bodies should be required to take into account
support the industry’s commercial development, avoiding bureaucratic delay on proposals to improve rail services.
We also recommended that members of the Authority should have business experience and be accountable for success against well defined, published objectives.

Most of the differences between the above and paras 4.14 and 4.15 of the White Paper are matters of emphasis.

However, the White Paper does not address

the risk of bureaucratic delay
the need for members of the Authority to have business experience
the need for well defined published objectives against which the Authority’s success can be measured
the question of how differences of view between regional planning bodies on rail planning matters will be handled, and the role of the Authority in resolving these.
A clear statutory definition of the Authority’s role will be essential. The resources needed to enable it to discharge its various tasks will also need to be clarified.

As we see it the role needs to encompass, at the strategic level (i.e. in addition to management of passenger rail franchises, the administration of subsidy, and responsibility for the RUCCs)

target setting (which is a key part of strategic vision)
assessment of national strategic priorities for rail; and requirements for public funding in support of these
strategic advice to the various public sector bodies involved in rail transport planning, and resolution of disputes between them on rail priorities.
On (a), the White Paper recognises the importance of ‘clear and challenging targets, setting out what we want to achieve and by when’ (para 2.3). If the Authority is to succeed in the aim of promoting improved passenger and rail freight services, ‘nurturing the potential growth in rail patronage’ (para 2.44), it will need to work vigorously towards the development and implementation of such targets. The Government says that it will "ask" the Authority to develop targets for both the passenger and freight industry (Cmnd 4024 para 25) and the Commission for Integrated Transport will also have a role in this.

Defining these targets will not be easy, and will require the development of extensive scenarios of potential growth over twenty years and more.

However, this work is absolutely indispensable to underpin the assessment of the industry’s future investment needs identified in the White Paper as one of the Authority’s principal tasks (para 4.14). It will also help to define rail’s contribution to achievement of our international commitments on greenhouse gas reduction. The work will need a talented and well-integrated team, with strong leadership.

Task (b) is closely related to (a), and will be coloured by the Authority’s scenario work, as well as contributing to it. Determination of strategic priorities is clearly essential to ensure that the railways are ‘planned and developed as a coherent network’.

The Authority should publish its criteria for assessment of priorities in relation to the existing system, and system enhancement.

Its work in this area, as with (a) will require extensive consultation with both public and private sector bodies, and high quality staff work will be needed.

On (c), the Authority will face a very real challenge in fulfilling its duties to ‘work closely with local and national organisations, including local authorities, Regional Planning Conferences, Regional Development Agencies, transport operators and the Highways Agency and the equivalent organisations in Scotland and Wales to promote better integration’ and to ‘participate actively in the development of regional and local land use planning policies’. The resources required to maintain effective working relationships with all these bodies will be substantial.

If the Authority is to carry weight with the various regional bodies, it will need to demonstrate that it has a full grasp of the value of rail to national and regional economic development, and how this can be delivered.

The White Paper rightly emphasises the importance of the regional and local dimension in planning (para 2.71) bringing out the leading role which the PTAs/PTEs will play in delivering integrated transport objectives in their areas (para 4.71) and the need for local transport plans closely based on local knowledge (para 4.77). Targets for "coherent regional and local strategies" should indeed be developed at local level, but it would be wrong to suppose that coherence between a multiplicity of local plans can be achieved without considerable effort. Para 2.71 states that "national targets can usefully act as benchmarks and encourage improvement, but they do not recognise local variations". This is true. But there is also a need to ensure that local plans are developed with due regard to national strategic considerations.

Unless mechanisms are put in place to resolve disputes, there is a risk that they will continue unresolved to the detriment of the Government’s transport policy objectives.

When tasks (a) - (c) are put together with franchise management, administration of subsidy, and responsibility for the RUCCs, it is clear that the SRA will need a staff of considerable size and competence.

Because of the multiplicity of tasks, it will in our view be essential for the Authority to adopt from the outset a structure which distinguishes clearly between its strategic and day to day franchise management functions. Otherwise there will be a grave risk that the former will be submerged by the latter, and that bureaucratic detail will impede a larger vision for the industry.

According to Cmnd 4024 para 36 the Authority’s Board will have between 8-15 members appointed by the Secretary of State from a wide range of backgrounds. There are clear advantages in having a spread of experience on the Board not least given the Authority’s need to consult many different Government, Regional and public sector bodies as well as rail industry operators and other bodies. Except that there will be at least one passenger representative on the Board (para 4.12 and Cmnd 4024, para 49), the White Paper is silent as to how members will be selected.

The Forum considers it essential that the Board should include people with business experience, including one or more members with first hand commercial experience of the railway business. Unless the business dimension is properly represented, the Board will inevitably be unbalanced, and at risk of reaching unbalanced conclusions. The same applies to the Commission for Integrated Transport.

We trust that the Government will recognise the need to include first hand experience of this kind, in line with its overall pragmatic approach.

Public funding
The Authority is to take over

OPRAF’s budget for making franchise payments
DETR’s allocation of freight grants
It will also control

the new Infrastructure Investment Fund
the Rail Passenger Partnership Scheme
It is also possible that it will be allowed to retain any fines which it levies (Cmnd 4024 para 45).

It will have the power to offer guarantees to existing franchisees in relation to transfer of rolling stock leases to future franchisees.

In due course it will assume BRB’s responsibilities, presumably including land ownership.

Finally, it is to have a broad power to make payments to any person whether by means of grant or in contractual agreements where it considers that those payments will further the achievement of its statutory objectives.

Thus, the mechanisms are available for support to be channelled through the SRA to the rail industry in line with Government objectives to promote passenger and freight growth. What is not at this stage clear is the quantum of support which will be (a) required and (b) available. The answer to (a) should flow from the examination of strategic objectives to be conducted by the Authority, drawing inter alia on current work by the Rail Regulator and the Franchising Director. Clearly the Authority’s view of investment requirements to meet those objectives must also take full account of the "new approach" to investment appraisal outlined in Section II (iv) above. The Authority will need to consider carefully the weightings which need to be given to each of the five criteria of integration, safety, economy, environment and accessibility. The requirements emerging from a full analysis of the criteria will undoubtedly be substantial.

The Authority will also need to assess the effect on investment of the declining levels of public subsidy over the next few years.

The availability of public funding required to meet those objectives and investment needs remains to be determined. However, public financial support for the industry through OPRAF and the PTEs will by 2003/04 have fallen from ?79 bn in 1997/8 to some ?0m (1998 prices) - a reduction of over ?bn on an annual basis. By 2003/04 franchise payments received by Government from the industry will total some ?0m (1998 prices). Considerable scope therefore exists for support of investment which is seen to be in the public interest.

Cmnd 4024, para 71 refers to the possibility of a proportion of Railtrack’s access income being paid direct by the SRA rather than via the passenger train operators. The case for this is not made out in any detail and remains to be established.

The impact of the Strategic Rail Authority on the Five Key Requirements for rail growth
If rail is to make its full contribution to the integrated transport policy, the Authority will need to act with judgement, consistency and vigour in all of the areas identified in Section II above.

Improved Service Standards

Politically, this is seen as an area where the Authority can and should make a robust contribution, "promoting better integration and interchange" and "getting better value for public subsidy in terms of fares and network benefits" (para 1.33). The White Paper speaks of "better marketing" and "improved personal security". In all of this it must be stressed that there is a common interest between the public authorities and the operating companies. The aim of the SRA should be to facilitate and encourage rather than prescribe and threaten, bearing in mind that the prime responsibility for care of rail service users rests with the companies themselves. Cmnd 4024 (para 58) rightly looks to the train operators to take action on their own initiative to improve services.

Constant second guessing by the Authority would be counterproductive. Whenever possible, problems should be solved through common endeavour rather than confrontation.

Increased Investment

Here again, the pay-off through collaborative endeavour will be high. The investment requirements of a growing network are substantial, and the Authority can play a key role in helping to identify how this investment can be funded. Where it believes there is a strong case, it should adopt an advocacy role within Government for public support - for instance of pinchpoints developing in infrastructure and in station capacity, where there may be difficulty in producing a full commercial case for new investment.

It will need to assess the effect on investment of declining levels of public subsidy over the next few years. The importance of its advice on franchise renewal to future rail investment can scarcely be exaggerated.

Equitable Pricing of Transport Modes

It is essential that the Authority develops its own expertise in quantification of the non-user and other economic benefits of rail, and ensures that these are fully taken into account in overall transport policy formulation. It should represent to Government and to the Commission for Integrated Transport (which has been given the task of advising on the costs and benefits of transport) the importance of ensuring that no mode is substantially overpriced or underpriced in relation to others, and recommend appropriate measures to remove distortions.

Equitable Investment Appraisal between Transport Modes

Here, the Authority needs to work with the grain of Government policy to ensure that rail investment schemes are appraised on a common basis with other modes, emphasising the strong contribution which rail is able to make in relation to all of the five major criteria stipulated by Government - integration, safety, economy, environment and accessibility.

It should work closely together with the Highways Agency to develop common frameworks for appraisal.

Forward-looking Regulation

The Authority will need to strike a careful balance between stick and carrot. The White Paper’s reference to "tougher regulation to secure the public interest"

(para 1.33) needs to be balanced with the statement in Cmnd 4024 (para 60) that the intention is not to penalise for the sake of doing so.

If the Authority is to succeed in its task of promoting industry growth, it will need to persuade the industry, as well as the public, that its judgements are fair.

As a publicly funded body, the Authority will need to demonstrate that its decisions provide value for money for the taxpayer. It is however essential that the control mechanisms put in place for this purpose are not excessively bureaucratic; that they acknowledge the commercial realities of transport operation; and that they do not stifle initiative.

IV. Conclusion

The Railway Forum

welcomes the Government’s commitment to a ‘vision for the railway system at the heart of an integrated transport system’ (Cmnd 4024, para 3); and to rail industry growth
welcomes the establishment of a Strategic Rail Authority to help formulate and deliver a strategic vision embracing both passenger and freight operations
applauds the White Paper’s enthusiasm for public transport enhancement, and specifically welcomes the recognition that wider environmental and social costs should be taken into account in transport planning, along the lines set out in the earlier Reports of the Royal Commission on Environmental Pollution
endorses the emphasis given to the need for a strong regional and local involvement in the development of transport policy, and not least in the implications of transport development for land use and social inclusion.
At the same time, it has concerns about

the time it will take to establish the Strategic Rail Authority and in particular the risk of loss of investment momentum through delay in the formulation of policy on franchise renewal, with potentially grave effects on the supply industry
delays in the formulation of policy on rail competition leading to a blight in individual companies’ strategic planning
the risk that the day-to-day pressures of regulatory activity will blur the strategic focus unless that is built into the Authority’s organisational structure from the outset
the need for the Authority’s ‘pragmatism with a strategic view’ (para 4.20) to be reinforced by business experience, including experience of railway operation. This applies equally to the Commission for Integrated Transport
the need for mechanisms to promote the resolution of disputes on rail priorities between regional and local transport planning bodies, and the role of the SRA in dispute resolution
the need to avoid bureaucratic delay on proposals to improve rail services
the risk that the various measures to encourage a fairer basis of pricing between road and rail will be insufficient, or delayed, or not adequately implemented by regional and local authorities, or other public bodies who may be involved.
We strongly hope that our apprehension over the possibility of damaging delays will be mitigated by

early legislation
evidence that Government do not intend issues such as franchise renewal to remain on the back burner until the Strategic Rail Authority has been fully established.

September 1998


Railhub Archive ::: 1998-09-18 RFO-002





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