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Simple questions get funny peculiar answers in Whitehall
Unlike some of my contemporaries, I don't seek to cultivate Government ministers. It's not that I'm fastidious or squeamish, just that interviewing a Transport Secretary or Minister fails the Informed Sources cost:benefit analysis.
Lest readers think this arrogant, consider that the minister knows less that the typical Informed Sources reader, certainly can't go into the sort of detail Informed Sources readers expect from the column, can only answer in sound bites, rather than debate issues, and won't be allowed to say anything interesting anyway.
For example, when Tony McNulty (reputedly a political ‘bruiser') was appointed as junior Transport Minister with responsibility for railways, someone at DfT thought it would be a good idea for him to meet the railway specialist press for a briefing. For some reason only three of us turned up and he found himself like Lars Porsena facing the dauntless three in the form of Ford R, Hope R and Wolmar W.
After some introductory small talk we started asking questions and we soon detected an ingenious way of ducking the tricky ones. ‘What would you do?' Mr McNulty asked the questioner. At the end of the meeting, the Minister declared it ‘very useful' and looked forward to reconvening as soon as there was something to say. He soon moved on and no one else has risked the gricer challenge.
At least he tried. One of his successors Stephen Twigg simply refused to address topical questions when I met him at press functions (Informed Sources August 2006). He had got his sound-bites and would not depart from the script. But then to describe Mr Twigg as wooden was a slur on Antonio Stradivari, R.E. Bishop and my old chum Alan Burnard.
Now we have Tom Harris who has the misfortune to be up against Chris Grayling, the best shadow transport spokesman I can remember since John Prescott. And that is meant as a compliment. We have Mr Prescott, when in opposition, to thank for the Class 365 fleet.
In Transport Questions on 19 December, Chris Grayling tied the ‘old one two'. He reminded Tom Harris that when the ICEC franchise was awarded back in March 2005, then Transport Secretary Alistair Darling told the BBC that the £1.3 billion premium was not excessive and that the East Coast was a ‘profitable route'. Quoting Mr Darling's remark We've crawled over the figures over the last few weeks because we wanted to make sure that the bid actually stood up', Chris asked, ‘ What steps is the Minister taking to find out why his Department got it so badly wrong?
We then got this fascinating response. ‘The hon. Gentleman is speaking more from wishful thinking than from reference to the facts. The GNER bid was examined by the then Strategic Rail Authority and was subjected to the usual European Foundation for Quality Management assessment. The bid was easily achievable, as has been shown by the fact that recent passenger revenue has increased by 14.5% — an increase that has exceeded the revenue commitment in the franchise. The reason why the franchise had to be pulled was entirely due to problems with GNER's parent company, Sea Containers, and not to problems with the franchise'.
Hang on, I'll come back to reality in a moment. In came the smiling assassin. If the franchise and its financial elements were so easily achievable, would the Minister give an undertaking to the House ‘that he expects to get the same level of contribution to the Exchequer from the new franchise agreement when he reaches it in the new year?'
Harris immediately dived to ground level, firing off his waffle dispensers, which are standard Ministerial counter measure fit. ‘ The principle of the franchise system — to which I thought, until a few seconds ago, the Conservative party was also committed — is competition. There will be a competition to see which operator wishes to undertake the new East Coast inter-City franchise. Once the bids are in, they will be evaluated and we will hold any new contractor to delivering exactly what is specified in the contract. If they cannot deliver it, exactly the same process will have to be gone through again, but I am convinced that the financial problems that GNER encountered in America with its parent company will not be repeated'.
Right, back to reality. As has been clear from the start, GNERs problem was indeed costs and revenues and not its parent. As GNER Chairman Bob MacKenzie, who is also Sea Container's President and Chief Executive officer made clear on 14 December 2006 , ‘While we are not in breach of the current franchise agreement, GNER will not be able to meet the significant increase in franchise premium obligations due from May 2007. We would have preferred a renegotiation of the current contract, but that was not available.'
In November 2006 GNER finally got round to publishing its accounts for the 12 months ended 7 January 2006 . They showed passenger revenue at £465.5 million and an operating profit of £5.7million.
Dividends paid to Sea Containers in fiscal year 2005-06 were £8.84 million compared with £26.88 million the year before. In the year ending 31 March 2006 GNER's premium was £52 million, falling to £35 million in the current year. But after this respite, in 2007-08 the premium, was going to rise to £81 million.
Now, in addition to the impact of the July 2005 London bombings, GNER was also seeing its prime London-Leeds Marketing softening. DfT Rail settled GNER's force majeure claim over 7/7 losses before the new agreement was signed and the pre-Christmas Heathrow closure must have given the revenue line a lift.
Meanwhile, I am trying to get a definition of Mr Harris' ‘recently' for that 14.5% growth figure. But even though revenue may be recovering strongly, it is recovering from a reduced level.
Of course revenue is only half of the equation. As Bob MacKenzie explained after the DfT Rail announcement, ‘Our original bid was bullish, but we were knocked sideways by the July 2005 bombings, the hike in electricity prices and Regulatory approval for Grand Central '.
Grand Central is irrelevant to current revenue. More significant was Network Rail's improved performance which has seen GNER paying out, rather than receiving, under Schedule 8.
So what on earth was Harris talking about? And he is not alone in appearing confused.
Readers will recall that up to the last, DfT Rail was insisting that subsidy for Channel tunnel freight services would end on 30 November 2006 when the Minimum Utilisation Charge, worth £ 26 million a year, ended. But come 1 December and it turned out that the Government would still be paying Eurotunnel £6.5 million a year through the residual British Railways Board.
Asked by Lord Bradshaw on 6 December what was happening, Lord Davies of Oldham , the Government's transport spokesman in the House of Lords replied, ‘My Lords, the problem is that the capital costs of the Tunnel hang like a huge, dead weight on its viability. It is therefore prone to put very heavy tolls on current users, with the result that EWSI, the British company solely operating freight services from this country through the Channel Tunnel, is running at a loss and will continue to do so for the immediate future. We are concerned as a government to give what support we can. State aid ended on November 30 this year in line with European agreements, but we are giving environmental support to the tune of £6.5million a year, which demonstrates how much rail use saves in environmental terms compared with the use of lorries and ships to cross to the continent'.
Another of the Railway Lords, Lord Marsh, raised the issue again on 18 December and Lord Davies had another go. This time his explanation went as follows. ‘Under the terms of the Channel Tunnel Rail Usage Contract and in line with the access charge provisions of the first European rail package, we have agreed that the British Railways Board should continue to bear the UK freight allocation of Eurotunnel's operational expenses charges payable under the terms of the Railway Usage Contract, as these represent overhead infrastructure costs not directly incurred as a result of operating the railway service. To enable BRB to do this, we have made changes to the UK arrangements whereby those rights and obligations of BRB previously delegated exclusively to English, Welsh & Scottish Railway International (EWSI) are now delegated on a non-exclusive basis and apply to any international freight train operator. For the first year these charges will equate to approximately £6.5m'.
Dazed and confused? It seems like it.