'Capacity crisis looms for Britain's railways'

[John Ashworth]

'Capacity crisis looms for Britain's railways'

The boss of Virgin Trains has called on the Government to embrace new financing techniques to address a looming capacity shortage on the railways.

By Alistair Osborne
Telegraph
Published: 8:46PM GMT 07 Mar 2010

Tony Collins said the Department for Transport (DfT) must think beyond its traditional reliance on only two forms of financing – the taxpayer and the farebox.

Pointing out that passenger volumes had doubled in just over a decade, Mr Collins said: "The railways have got to a point where we are starting to run out of capacity. We need to get capacity into the system quickly. When we look forward five or six years we see severely over-crowded trains."

Complaining about the DfT's predilection to "micro-manage" the railways, Mr Collins said: "At the moment tax is the single focus that the people who control the industry have. But there isn't going to be a lot of taxpayers' money around."

He said that, amid a round of looming public sector cuts, the Government needed "to be more strategic". He noted how Virgin Trains, which is 49pc owned by Stagecoach and operates 73 tilting trains on the West Coast main line, had increased its share of the London-Manchester rail market from 30pc in 2004 to 85pc today by taking passengers from the airlines. This had only become possible by investing in trains and infrastructure to allow two-hour journeys every 20 minutes.

He said rail could similarly raise its share of the London-Glasgow market from the current 18pc "if you get journey times to three hours 45 minutes. But that needs more rolling stock and upgrades to infrastructure.

"London to Glasgow is worth more than £100m a year," Mr Collins said. "Get rail's share up to 85pc and that's £85m. If we could capture that, over 30 to 40 years that buys a lot of infrastructure. The operator would only need a 5pc margin."

Apart from also directing the proceeds from environmental taxes to developing the rail network, Mr Collins suggested that a further way to fund new projects was via such things as increased business rates. He suggested, for example, that Birmingham International station could be redeveloped in such a way, with some direct investment from key beneficiaries such as the neighbouring NEC exhibition centre and the airport.

Mr Collins also called for a radical overhaul of the rail franchising system in the wake of National Express's failure to fulfil its £1.4bn contract on the East Coast main line. "The proposition they had to bid against was the reason they fell over. The only way you can win a franchise is offering the highest premium or lowest subsidy," he said.

He acknowledged that there was recognition by all the political parties that the franchising system had "got to change" but believed the latest proposals by Transport Secretary Lord Adonis were flawed.

"The Government is now talking about franchises of 10 years or longer but it also wants to specify the inputs and outputs even more and make the cost of failure even higher, so there's even more micro-management."

While welcoming longer franchises, Mr Collins cautioned that in practice "you still have to win the 10-year bid before you can talk about any extensions. Ten years, when you are dealing with 30- to 40-year assets is really difficult."

Moreover, he warned that, if the Government made the cost of failure too high "the only people who are going to have the balance sheets to handle that are Deutsche Bahn and SNCF [France's state-backed rail operator]".

Mr Collins added that he believed Network Rail should be forced to relinquish control of all but the major stations as well as many train depots. "The biggest cost on the railways is Network Rail. Maybe they are too big," he said. "We should have a lot more control over stations and depots."

He said Lord Adonis also had to think more radically. "He makes things happen but I would like him to be more strategic. He tends to go into detail too much – like how many cycle racks."