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Transport Committee

Oral evidence: Scrutiny of the draft Rail Reform Bill, HC 584

Wednesday 8 May 2024

Ordered by the House of Commons to be published on 8 May 2024.

Watch the meeting

Members present: Iain Stewart (Chair); Jack Brereton; Sara Britcliffe; Fabian Hamilton; Paul Howell; Karl McCartney; Grahame Morris; Gavin Newlands.

Questions 161172


III: Robert Cook, Policy Director, Railway Industry Association.

Written evidence from witnesses:

Railway Industry Association

Examination of witness

Witness: Robert Cook.

Q161       Chair: Welcome to our third panel of today’s session. For the purposes of our records, could I ask you to state your name and organisation, please?

Robert Cook: Good morning. I am Robert Cook, policy director at the Railway Industry Association.

Q162       Chair: We had hoped to be joined this morning by Malcolm Brown of Angel Trains. For perfectly understandable personal reasons, he is not able to attend today. We hope to reschedule a panel to talk about the rolling stock side at a later date.

Mr Cook, you represent the Railway Industry Association. Would you talk us through what commitments you would like to see made, whether that is on the face of the Bill or in supporting documents, for the new IRB to develop relationships with suppliers?

Robert Cook: Thank you very much. There are three specific things that we would like to see changed on the face of the Bill. I will provide a bit of context about our overall views on the Bill, which will help to explain why we are asking for those three things.

Over 50% of all expenditure on rail in the UK goes through the supply chain, so it is hugely important to get that right for value for passengers, taxpayers and freight. We have always supported rail reform. We want to see a Bill brought forward. We think the scrutiny process is helpful. Partly, it is because six years on from the May 2018 timetable changes, which triggered the Williams review, we need certainty over industry structure. It is really important for businesses. We agree with Keith Williams’s diagnoses and recommendations: the importance of bringing integrated management of costs and revenues together in one place; removing the fragmentation between decisions being taken in the Department for Transport, in the Treasury and Network Rail; and the need for a guiding mind that is empowered but also made accountable, to think in the interests of the whole system and for the long term.

Our members are a diverse bunch of companies. We have not just the physical railway but also the digital railway. We have very large companies, but 60% by number of our members are SMEs. The one thing that they all have in common is that if they are to invest in skills and innovation to bring efficiencies, what they need to see is that there is a clear and credible plan that they genuinely believe will be delivered. They need to have a long-term, visible pipeline of work. They need reasonable confidence that the rules of engagement for how they sell into the railway are stable, with no nasty surprises.

In that context, the three things that we would like to see tweaked on the face of the Bill—they are quite simple changes—are, first, a commitment to a long-term strategy for rail. We think that should be published. Secondly, there should be strengthening of some of the expectations around the IRB’s licence, to support transparency and investment confidence. The third area is that we think the Secretary of State’s open-ended powers should be reconsidered, particularly the power of direction. I am happy to unpack those in further questions.

Q163       Chair: Thank you. In other sessions we have raised concerns, as a Committee, about the feast and famine nature of much of railway investment, whether that is in rolling stock procurement, electrification or other infrastructure development. Why do you think the Bill needs to have that on its face to give long-term certainty, as opposed to its just being part of the business plan?

Robert Cook: The argument for a long-term strategy is accepted pretty universally across the sector. We have industry consensus and political consensus. As you say, the question is whether it should be on the face of the Bill.

It has been a number of years since Keith Williams was clear that the railway has come to lack a single strategic direction. There have been repeat promises of a strategy being developed and we still don’t have one. We are worried that, unless there is a legal hook, we may never see one. It might not always be easy or politically convenient to set out some of the difficult trade-offs that are inherent in setting out a proper, comprehensive strategy for the railway, but it is a helpful thing to do.

There is precedent, potentially, for putting it in legislation. We describe the planning framework for railway in legislation. We have the five-year periodic reviews, which have been immensely helpful and provide important stability and predictability for the railways. If you were to add the requirement to publish a 25 or 30-year strategy, and the requirement when you have a periodic review to check consistency with that strategy, it could really help you to provide long-term planning. It could generate a lot of value-for-money benefits in terms of making good, long-term decisions about things like electrification and checking that what you do in the next five years is still going to be valuable in 30 years’ time, given that railway assets often last for decades.

Q164       Chair: In your opening comments you referred to concern about the powers that the Secretary of State will retain to intervene in the industry. In what is on the face of the Bill, would you like to see those powers constrained or clarity as to when they could be used?

Robert Cook: The general principle is that all open-ended powers to change the rules of the system potentially have some unintended consequences and carry some risk with them. There may be appropriate powers. We strongly support the importance of the integrated rail body being made accountable to the Secretary of State and to Parliament. There is no question about that.

It comes back to some statements that have been very helpfully made by the Department for Transport that it is the role of the integrated rail body to take the operational decisions and the role of the Secretary of State to set the strategic framework. When that breaks down is when you start losing clear accountability. The Department for Transport has been clear that the IRB would have operational day-to-day control. The permanent secretary has said that she is clear that it does not make sense for civil servants in London to be making decisions on operational matters. I think there is consensus about that.

In terms of the specific legislation, the way it is drafted at the moment seems to be a very open-ended power of direction. It can be issued at any point in time. There is no requirement for consultation around it. It is not just a power to be able to tell Great British Railways what to do; it is drafted as a power to specify the manner in which it must exercise its functions. There is a possibility, especially coming from a few years when the railway has had unprecedented levels of Government decision making, for understandable reasons, that you are creating a power that potentially is almost like a magic button. The Secretary of State could ask Great British Railways to do almost anything.

I think the argument would be either to remove that, because the Secretary of State has a lot of other powers, or to rescope it much more narrowly, based around specific areas where the Department for Transport can demonstrate that the Secretary of State may need to be able to intervene. The regulator has quite strong powers independently to be able to intervene and issue enforcement notices, so there is a framework for specific intervention. The question is why, if we did not need these powers during the entirety of the covid period, we need them now.

Q165       Chair: I will cite a hypothetical example, just to test where the boundary of intervention should lie. We all want to see greater electrification in the railways. GBR comes up with a network plan to continue electrification, but the resources only allow one big project at a time, so there is a decision to be made on the sequencing. Let’s say there is political lobbying from Members of Parliament along the Chiltern line and lobbying from Members of Parliament in Devon and Cornwall and Somerset. Is that an appropriate point for the Secretary of State to intervene and make a political choice over what the industry might think is the right answer?

Robert Cook: There are inevitably clear political choices to be made. The question is what the right framework is for taking those choices. I would argue that you should take the choice through the long-term strategy. You should take the choice through the periodic review process, which is transparent and open to consultation. The wrong way to take the choice would be to have an established list of projects and, without any announcement or consultation, change the pecking order of those during the middle of a control period. That could have quite a lot of unintended consequences because you are pulling money away from some activity and putting it into others. You have spill-on consequences over the integrated rail body’s other activities, and then you are faced with the question of which parts of its performance the integrated rail body is still accountable for, and which parts of its performance the Secretary of State is accountable for. There is no problem at all about making political trade-offs, but it is about having them in the right framework.

Chair: That is helpful. Thank you.

Q166       Gavin Newlands: In answering the Chair, Mr Cook, you covered an area that I was going to pursue, so this may be a shorter session than we perhaps envisaged, particularly without Angel Trains being present. You mentioned earlier a more strategic approach and having a 25 to 30-year review. In what other ways do you think the Bill could be changed? You have given your views on the Secretary of State’s potential powers as it currently stands, but in terms of that strategic approach what other things do you think could be changed in the Bill?

Robert Cook: I think it is quite simple in terms of the long-term strategy. We just need a requirement that it should be published. I think our proposal would be that the Secretary of State should rightly set overall priorities, a strategic remit. The integrated rail body would need to produce that because it would have the relevant expertise, and the Secretary of State would need to approve it.

In terms of other changes in the Bill, I mentioned strengthening expectations around the licence. If you get the licence right, it can do a lot of the heavy lifting for you and help prevent you from having a very unwieldy, long Bill. It is important to have some hooks in the legislation that set up the licence well. Within the licence, in terms of having the longer-term view, one of the things we think is absolutely essential is that there should be a transparency requirement for publishing the future pipeline of investment for the railway. That would sit very well alongside a long-term strategy. In the past the Government have committed to publishing the rail network enhancements pipeline, showing what the potential investments are going to be. That was last updated four and a half years ago. It was supposed to be an annual publication. We do not know why, but there are clearly difficulties with putting that information out.

Making it a legal requirement, by having a hook saying that the licence has to require it, could be very helpful. You could also make it a more technocratic exercise, where it is the responsibility of the rail body to set out that sort of information. You would have a 25 to 30-year strategy. You would have an enhancements pipeline. Then you would have five-year plans. The cumulative effect of that would be a lot more visibility and certainty for the supply chain. To give you an example, we recently took some of our members on a visit to Ireland. Other countries set out pipelines. It is very clear there. They were setting out information on which projects have had funding approved and which projects have had business cases approved. It is getting a lot of investment interest. It is something that I think we can do quite easily here.

Q167       Gavin Newlands: You mentioned that Ireland can marry a strategy with a pipeline of funding. If I can be parochial for a second, the Chair earlier referred to feast or famine with regard to things like electrification. In Scotland, there is a continuous electrification programme. There is a decarbonisation strategy and an overarching transport strategy, with everything that feeds from it. There is a clear strategy and a clear programme that exists. What is missing is the pipeline element because of the negotiations for the current control period.

That operates within the current Network Rail arrangements. We have a guiding mind as much as is practicable because the network is still reserved to Westminster, and the guiding mind has largely been copied in many ways for the draft legislation. In fact, we lost our guiding mind to the DFT just in the last few weeks. Do you think that the draft Bill and the introduction of GBR is a potential threat to any of that investment or that strategy, as it works under the current arrangements?

Robert Cook: No, I do not. It could probably support it by creating a body that is empowered to take a proper long-term view. We are massive supporters of having a steady, rolling programme of work. That is not just because it benefits suppliers. It enables you to deliver things much more cheaply. There is lots of evidence that shows that if you have to stop and reskill an entire workforce because you have taken them off the job for a number of years, it will cost a lot of money and a lot of jobs. There is a lot of benefit to having that sort of framework.

The legislation is obviously not about making decisions on what specific projects should go ahead within the railway, but it creates a framework that will enable a much more holistic view to be taken of the railway at a range of national levels: at UK level and then through devolved Administrations.

Q168       Gavin Newlands: I have heard an argument that the arrangements currently proposed with regard to GBR versus the current Network Rail arrangements with regard to Scotland may remove some of the powers that are currently open, or at least make it far more difficult for the Scottish Government or Transport Scotland to make those plans. Would that be something that the RIA would oppose if it were to hamper those efforts?

Robert Cook: As a trade association representing suppliers, we would not have a view on what is the right balance of political power. For our members the key thing is that, whoever is making the decisions, businesses should have visibility over what work is happening and who to speak to about it. They need an understanding of who the decision makers are and when that will be set out. From a business perspective we are impartial on that, but we want to make sure that you have a long-term plan and clarity over who is making what decisions.

Q169       Jack Brereton: We have talked a bit about Government investment and private investment. In this country we have not seen huge amounts of private investment in the infrastructure when compared with other countries where we have seen much more. In terms of barriers, you have talked about strategy and the lack of strategic focus and plans for the future. What other barriers are there to attracting more private investment, particularly into things like infrastructure development?

Robert Cook: It is a great question. Across our membership there is a sense that you could do much more here. To be clear, we are talking about private funding but also private finance and leveraging third-party funding. For example, several local authorities have money that they might be prepared to put into the railway if it was stable.

One of the key lessons is that it has been very complex to do, and there is no set way of doing it. We published a report last year looking at ways of boosting private investment in rail. The key finding overall is that there is no clear policy on how the Government expect that to be done. The practical reality is that you come up with a lot of bright ideas and proposals, but then, as a scheme developer, you have to take them through so many different stages of approval and co-ordinate all the different stakeholders yourself. You have to get approval from the Department for Transport and then from the Treasury.

If you flipped it on its head so that the Government set out a really clear strategy and had a strategic view on what they want to do with private investment on the railway, there is no reason why the Government could not set out perhaps three or four overarching models and approaches, and then flip from being a gatekeeper to being a facilitator. There are a set number of ways, whether it is a concession model or a public-private partnership, of being able to do that. What you do not see is all the mechanics that you have to step through being set out neatly in one place. Again, I would come back to starting with a clear strategy and then setting out, practically, if you are an investor or a developer, what things you have to do to bring the scheme together. The final bit is that you have people in the public sector who are tasked, and willing, to help you on that journey. There is a lot of complexity in developing anything around the railway, but I think we make it more complex than it needs to be.

Q170       Jack Brereton: Do you think there is resistance in parts of the Department and also Network Rail to encouraging more private investment in the railway?

Robert Cook: What we have seen is not resistance; it is fragmentation. Everybody has a different issue that they have to look after, whether that is making sure that you have the right sort of safety procedures in place—quite rightly—or, in another part of Government, looking at whether there is any impact on the Government balance sheet position. What nobody is doing is joining up all of those pieces and getting everyone to say, “If we want to leverage investment, these are all the things that have to work.” You don’t have any leadership around that.

From a business perspective, trying to wade through all of that is very opaque and confusing. That is the frustration. It is not that anyone is actually trying to frustrate it. There have been lots of good statements about the importance of bringing it forward. There are clearly examples where, if you look at what is possible around the station estate, for example, you can imagine bringing in private investment because of the possibility to develop housing or maybe car-charging points and to develop retail spaces. There are lots of opportunities.

Q171       Jack Brereton: In terms of that process, obviously there are also financial hurdles. Network Rail often charges an overage to anything that isn’t in its spending programme. Do you think that is also problematic when it comes to encouraging more private investment?

Robert Cook: We have not heard a lot of specific problems about that issue from our members. It comes back to having a very clear playbook of how you do it and, on the face of it, what you are going to be charged, what the process is and how long it takes. That should all be set out. It is complex to do, but there is no reason why we cannot bring it all together in one place.

Q172       Chair: This is an open question and opportunity. Is there anything else that you would like to put before us as we continue our scrutiny of the draft Bill?

Robert Cook: I have talked about the long-term strategy and the Secretary of State’s power of direction. There are just a couple of other small things that are worth mentioning around the licence.

The Secretary of State has an open power to amend the licence, and that can be at any point in time. We think it is appropriate that the Secretary of State can amend the licence. We have no concerns with that, but it is desirable for it to be linked to the five-yearly periodic review process because that gives a bit more stability to the framework in which you are working. If it was necessary to make changes outside that five-yearly process, and it might be, we would argue for slightly more safeguards around that. Perhaps there should be a slightly longer consultation period or an opinion by the Office of Rail and Road as an independent regulator on what the impacts might be on Great British Railways and the outcomes it has been tasked to deliver. That is one small point.

The other point is that we think there should be an obligation in the licence to promote a healthy and sustainable supply chain. You have the visibility obligation within the licence, but you also have a behavioural one and a cultural one. If you are thinking about the culture of the organisation that you are trying to provide, which has been discussed by a number of panels, it is important that it is responsive to its customers, and that it works well with the supply chain. We would like to see that in there. We think a hook in the legislation that requires that to be in the licence, as has been argued for a number of different areas, would be a proportionate way to do it.

Chair: That is very helpful. Thank you very much indeed. We are very grateful. It was a shorter panel than we envisaged, but it has been very helpful indeed to our work. Thank you again for your time.