Regional Eurostar services

Foreword

1. The Government welcomes the Environment, Transport and Regional Affairs Committee's report on regional Eurostar services and is particularly grateful for the speed with which the Committee's report was produced. The large number of detailed recommendations in the Committee's report have been invaluable in drawing up the detailed terms of reference for the Government's independent review of regional Eurostar services.

2.Soon after the report was published, the Government placed an advertisement in the Official Journal of the European Community for a consultant to undertake the independent review. Expressions of interest for this commission have been received and tender bids will be invited during April. The terms of reference against which bids will be assessed will ensure that the review is as broad ranging as both the Committee and Government would like.

3.This response to the Committee's report therefore highlights the key features of the terms of reference for the independent review which have been drawn from the Committee's recommendations.

Responses to specific recommendations

The regions have been cheated. The acquiescence of Members of Parliament to the Channel Tunnel Act 1987 depended on the provision of regional services. We do not understand why the Government has not conducted research into the economic and social impact on the regions both that the Channel Tunnel has had, and that regional Eurostar services would have (paragraph 3).

4.The Government has made clear it believes that people living beyond London should have convenient and effective access to Channel Tunnel rail services.

5.Section 40 of the Channel Tunnel Act 1987 ensured that attention would be paid to the possible future provision of regional Eurostar services against a test that any proposals should have "due regard to the financial resources likely to be available...and to any restrictions likely to be imposed on them with respect to the application of such resources".

6.The resulting plan " International Rail Services for the United Kingdom", published by the British Railways Board in 1989 outlined proposals for services which would have to pass the rigorous test set out in Section 40, namely that investment would produce the required rate of return.

7.The review which the Government has commissioned will continue to be mindful of the resources available to the train operator, and in particular any possible impact on the construction of the Channel Tunnel Rail Link (CTRL). However, the consultant will be required to undertake an assessment of perceived regional disparities arising from the ease of access to Channel Tunnel services, and the wider socio-economic benefits that regional services would have for the regions.

It is apparent that there are no significant technical obstacles to operating regional Eurostar services on the West Coast Main Line and East Coast Main Line by early 2000. All seven regional train sets could then be ready for use, the train paths are already cleared, and the necessary modifications to the infrastructure on both lines should have been completed. However, we expect those conducting the Government's review of regional Eurostar services to confirm our assessment of the matter (paragraph 15).

8.The Government will be instructing its consultant to work closely with Eurostar and Railtrack to obtain a clear picture, of what, if any, technical obstacles remain to the operation of Eurostar services on the West Coast Main Line and East Coast Main Line.

In the absence of any firm decision about regional Eurostar services we recommend that Eurostar (UK) Limited should consider leasing the regional train sets to domestic rail operators for use elsewhere on the rail network, in order to relieve the existing shortage of available rolling stock (paragraph 16).

9.When beneficial ownership of the regional train sets was transferred to LCR with the award, in 1996, of the joint venture competition to build the CTRL and to run Eurostar, Government policy was that in the event of LCR failing, the integrity of the Eurostar business should be capable of being maintained so that Eurostar (UK) Limited could be brought back into the public sector without compromising its ability to continue operating international services. Core assets such as the rolling stock, both intercapital and regional, were therefore subject to a ringfencing agreement with LCR. This ringfence agreement has been retained in the new agreements reached with LCR for the construction of the CTRL.

10.The ringfencing mechanism is a negative instrument, giving the Secretary of State powers to prevent uses of EUKL assets which might inhibit the ability of Government to continue to run international rail services in the event of the termination of the Development Agreement. The lease of the regional Eurostar rolling stock to domestic rail operators would be a use outside the ringfence. However, the Government would be willing to grant such a use, if any domestic operator were to reach such an agreement with EUKL, which would not prejudice the possibility of regional services being introduced following the conclusion of the Government's independent review.

We recommend that the Government's review should examine closely Virgin Group's business plan for regional Eurostar services, and, in addition, should conduct its own research into the potential market, costs and revenues of regional Eurostar services (paragraph 20).

11.The Government received the Virgin Group's business plan for regional Eurostar services shortly before the publication of the Committee's report. The Government shares the Committee's surprise that ICRR and the Virgin Group could reach such different conclusions about the viability of regional Eurostar services. The Government will be instructing the consultant to examine closely the Virgin Group's business plan as part of its commission.

12.The potential market, costs and revenues of regional Eurostar services form an essential feature of the assessment which will identify whether of not services to the regions will be viable. The Government intends to ensure that an assessment of the market is made by the consultant not only through analysis of market research data, but also by seeking the views of interested organisations, including those which gave evidence to the Committee.

We recommend that the Government's review should examine the effect that a stop at Kensington Olympia would have on the regional Eurostar market, and the revenue that such a stop would generate. It should also consider what works would have to be carried out to make it possible for Eurostars to use Olympia (paragraph 21).

13.The Government intends the review to be wide-ranging. There will be assessment of many routes and stopping patterns and the infrastructure requirements which would be necessary in order for a range of destinations to be served. The Government will ask that Kensington Olympia be one of the points included in the assessment.

We believe that Watford is well placed to become an integrated transport hub, and we recommend that the Government's review should consider what benefits and costs would be associated with (a) direct services from Watford, and (b) thorough services on the West Coast Main Line calling at Watford. Subject to the review's findings, we recommend that services from Watford to Paris should commence as soon as possible (paragraph 23).

14.The proposal for a Watford hub, as outlined in broad terms in ICRR's report is of interest to the Government. If there is a possibility that services to link the regions to the Channel Tunnel could be provided by such a link, the Government would be keen to see such a service operate. The review will assess benefits and costs of such a service and will consider possible commencement dates.

We agree with Mr Child [of Inter-Capital and Regional Rail Limited] that is does seem unlikely that many air passengers will opt to change at Heathrow on to a Eurostar in order to complete their journey to Paris or elsewhere. We recommend that the Government's review should examine the proposed Heathrow to Paris service, to discover the size of the market for such a service, especially in comparison to services to Paris from other possible centres, to ascertain the impact that operating from Heathrow will have on the provision of other regional Eurostar services, and to evaluate its impact on traffic flows on the roads around Heathrow. We also recommend that the review should consider what additional benefits might be gained by British Airways, one of the partners in Inter Capital and Regional Rail Limited, as a result of the introduction of a Heathrow to Paris service, and whether those benefits should be allowed to affect the decision to operate such a service at the expense of wider regional Eurostar services (paragraph 26).

15.The Government is keen to see services which would link the regions to the Channel Tunnel, particularly if they offer opportunities for an integrated transport hub. A preliminary proposal, made by ICRR, to provide a Heathrow to Paris service seemed to present such an opportunity. The Government has stated that it would be willing to consider a more comprehensive proposal from ICRR, who are responsible for the management and operation of such services. No such proposal has yet been received. However, the Government intends that its consultant will assess a broad range of criteria for such a service including the market for such a service, abstraction from air services, accessibility of terminals by other modes, road decongestion benefits from terminal access and the convenience or otherwise of a Heathrow hub for international rail access for regions beyond Heathrow.

We recommend that the Government's review of regional Eurostar services should consider what technical constraints there might be to the operation of a Heathrow to Paris service (paragraph 27).

16.The Government will require an assessment of possible technical and infrastructure requirements necessary for a Heathrow to Paris service to operate to be made by the consultant appointed to undertake the review.

Nevertheless, we recommend that the Government should as part of its review examine the possibility of regional Eurostar services carrying domestic as well as international passengers. In doing so, it should assess what extra revenue might be brought in by domestic passengers, how security could be maintained on the trains, and at what cost. We do not accept that the obstacles to maintaining security are insurmountable. The review should also consider the effect of competition from regional Eurostars on existing services, and the attitude of the regulatory authorities as well as the companies potentially affected (paragraph 30).

17.The Government is not opposed to the carriage of domestic passengers on regional Eurostar services, provided proper security controls are in place, and notes the Committee's view that obstacles to maintaining security on regional Eurostar trains are not insurmountable. The review will assess the costs of overcoming such obstacles and will consider the network capacity impacts and impacts on domestic train operators of such a service proposal.

We recommend that the Government's review should take due regard of the impact of phase two of the Channel Tunnel Rail Link on the journey times of, and the demand for, regional Eurostar services, and should make clear in its report what the impact will be. In assessing the viability of regional services, the review should assume that phase two of the rail link will be built by 2007 (paragraph 33).

18.The impact of Phase 2 on the viability of regional Eurostar services was noted in ICRR's report and in the proposals put forward by the Virgin Group.

19.The Government's review will look in detail at the benefits which will be accrued by the construction of both phases of the CTRL and will look at other possible changes in demand such as the growth in the cross channel market generally, and at the trend in Eurostar's competitive position relative to other modes of transport.

We note that Eurostar (UK) Limited must be operated to maximise the revenues flowing from it to LCR. We recommend that the Government's review should recommend nothing that jeopardises the financial position of LCR while it constructs the Channel Tunnel Rail Link (paragraph 34).

20.The Government welcomes the Committee's recommendation that the Government's review should not recommend anything which would jeopardise the financial position of LCR whilst it is constructing the CTRL.

21.Decisions on the provision of new services must not impact adversely on the financial performance of EUKL because of the threat to the basis of the CTRL deal which is underpinned by the performance of Eurostar. The review will assess proposals for regional services against the potential abstraction of business, made by a range of service patterns, from the intercapital Eurostar business and the impact this would have on the construction of the CTRL.

We recommend that, above all, the Government's review should be conducted against the background of the promise of regional services implicit in Section 40 of the Channel Tunnel Act 1987, and the investment of £320 million , by taxpayers across the country, already made towards providing such services. Regional Eurostars should operate, otherwise the regions will continue to be short changed. Whether the provision of regional Eurostar services should be achieved through a small Government subsidy or by accepting the proposal made by the Virgin Group is a matter for the Government's review to decide (paragraph 40).

22.The Government agrees with the Committee's recommendation that that the review should be conducted against the background of Section 40 of the Channel Tunnel Act 1987. This stated that the British Railways Board, which was then responsible for the planning and running of international passenger services through the Channel Tunnel, should prepare a plan stating measures which ought to be taken by any person in the United Kingdom or France with the aim of securing the provision or improvement of international through services serving various parts of the United Kingdom and that the Board should have regard to the financial resources likely to be available to them and to any restrictions likely to be imposed on them with respect to the application of such resources.

23.The Government cannot make a decision about how regional services might be provided until the consultant's report is received, but it will keep an open mind until the findings of the review are available.

Memorandum of inquiry by Select committee on Environment, Transport and Regional Affairs - Regional Eurostar Services - Government ResponseISBN 0 10 143142 2, Cm 4314, published March 1999, £1.90
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