Economics and Business- Unit 4B: The Wider Economic Environment and Business

Evidence A- "UK has ' most expensive train fares in Europe' "

  • Fares were 50% higher in Britain than on the Continent
  • Annual season tickets for journeys under 25 miles were 88% more expensive then the next more expensive country
  • The number of passengers per train journey kilometer in 2009 was 107 in Britain and 294 in France
  • SNCF high speed system have large seat capacity (500), long trains (240 m)
  • The government reconsider its plan to shift the cost of railways from taxpayers to passengers 
  • Passengers cannot be expected to pay above inflation fare increases during a recession
The Independent

Rail bosses are being handed pay packets worth as much as £1.4m while commuters are being hit with rising ticket prices, according to figures published yesterday.

Information obtained under the Freedom of Information Act showed that eight executives on the East Coast line, where services are being run by the public sector, were revealed to be on £100,000 or more, with the highest paid on a salary of between £161,000 and £180,000.
Two other East Coast directors are being paid between £121,000 and £140,000 and five more between £100,000 and £120,000 a year. The revelations are likely to cause anger among commuters, who were hit with above-inflation price hikes less than two months ago.
And executives at Go-Ahead, FirstGroup and Network Rail were getting deals worth more than £1m when assorted bonuses and other benefits were taken into account.
Meanwhile, a passenger satisfaction survey published today by consumer magazine Which? shows that more than half of the companies running Britain’s train network were given scores of less than 50 per cent. The research showed that only 22 per cent of train users felt the service they received was improving, despite rising ticket prices.
Figures from other operators showed more six-figure salaries being doled out in boardrooms across the industry. The 10 directors at CrossCountry, which runs services mainly in the West Midlands, were paid £795,000 in total in 2011 with the highest paid taking home £222,000 including pension contributions.
It was revealed last month that ScotRail boss Stephen Montgomery received a £54,000 pay rise, taking his salary up to £333,000 in 2012.
The company is owned by FirstGroup, where chief executive Tim O’Toole was paid £846,000 last year, plus a £134,000 pension contribution and £75,000 as benefits in kind. Accounts showed that, in the year ending March 2012, FirstGroup made an operating profit of £110.5m on its UK rail business.
Network Rail, which is currently fighting to meet targets on punctuality, paid its chief executive Sir David Higgins an annual basic salary of £560,000, while finance director Patrick Butcher was on £382,000. Two other executives, Robin Gisby and Simon Kirby, were paid salaries of £360,000.
National Express chief executive, Dean Finch, is paid a salary of £550,000 in a deal which was worth more than £1.4m in 2011 with bonuses and other benefits. National Express group finance director, Jez Maiden, is on £420,000 a year and his deal was worth more than £1m with additional benefits. Chairman John Devaney, who is about to stand down, was on £225,000.
Accounts also showed that Go-Ahead chief executive David Brown’s salary was £510,000 but his deal was worth £900,000 after a bonus was added, with finance director Keith Down on £326,000.
Manuel Cortes, leader of the TSSA rail union, said: “One of the reasons we have the highest rail fares in Europe is because we have created an army of Fat Controllers since John Major sold off British Rail 20 years ago.”
None of the train companies responded to requests for comment.

Evidence B- High Speed Rail

  • High speed rails- "Bring cities closer, enable businesses to operate more productively, support employment and regeneration. 
  • 'would cost £32 billion to construct
  • 'Links London to Birmingham, Manchester and Leeds'
  • Generates roughly £44 billion to the economy, £27 billion in benefits. 
  • Slash journey times and increase capacity to meet the demand of overcrowding on existing railways. 
  • Creation of more than 40,000 jobs. 
The Guardian 

HS2 high-speed rail now has the "green light" to go ahead, the government said on Friday after the high court dismissed the majority of cases brought against the scheme by campaigners.
In a keenly awaited verdict, Lord Justice Ouseley upheld just one of the 10 grounds for complaint – the claim that the government had acted unfairly and unlawfully when consulting on compensation for homeowners affected by blight along the route.
The government claimed a "resounding victory" and said the ruling would not delay the scheme, although it will now reopen the public consultation on compensation.
The high-speed rail minister, Simon Burns, said: "This is a major, landmark victory for HS2 and the future of Britain. The judge has categorically given the green light for the government to press ahead without delay in building a high-speed railway.
"HS2 is the most significant infrastructure investment the UK has seen in modern times and a project the country cannot afford to do without. The judgment ensures that nothing now stands in the way of taking our plans to parliament.
"We will now move forward as planned with the crucial business of getting the scheme ready for construction in 2017 and delivering enormous benefits for the country.
"We have listened to the judge's comments about the property compensation consultation and to save time and public money we will reconsult on this aspect – but this will not delay HS2. We remain fully committed to fairly compensating the public who are impacted by the scheme."
HS2 Action Alliance, the umbrella group for more than 70 local associations that brought the compensation case, said the court ruling on that issue was "a huge victory". Around 172,000 properties within 0.6 miles (1km) of the first phase of the construction, from London to Birmingham, are said by campaigners to be suffering from "HS2 blight". Lawyers argued that they faced being unable to move or remortgage for 15 years or more, and that the consultation process lacked enough detail on compensation arrangements to be fair.
On that ground, Ouseley ruled: "Although the overall decision is not irrational, the carefully reasoned and substantial HS2AA consultation response addressing the consultation issues as framed by the secretary of state cannot have been conscientiously considered. All in all, the consultation on compensation was so unfair as to be unlawful."
Hilary Wharf, director of HS2AA, said the government had made a "shabby attempt to railroad through an inadequate compensation scheme whilst ignoring the views of ordinary people." She added: "There are many better compensation alternatives which would help all those up and down the country trapped by HS2."
The government will seek to recoup legal costs from the other, defeated claimants, although several have already announced they will appeal.
Martin Tett, chairman of a 15-council coalition called 51m alliance, said he was delighted with the compensation ruling but found the judge's reasoning in striking down their own challenge bizarre.
He said: "We will obviously appeal this decision as it defies common sense. We are also particularly concerned at the DfT's view, which the judge accepted, that the business case and environmental impacts of HS2 don't need to be considered yet."
The judge said it was not his task to review the merits of HS2, but to consider whether the decisions setting it up were legally flawed. The cases against that he rejected included attacks on how the project was steered through parliament and claims it breached EU environmental directives – although lawyers for campaigners were confident that his ruling on this point opened the way for a clear challenge at appeal. Simon Ricketts of SJ Berwin said yesterday's verdict was "just the start of the process".
The judicial review cases were heard in December at the high court, where lawyers argued that the government had not followed due process. Campaigners have also attacked the public consultation, in which several thousand responses were apparently overlooked, and the economic case for the £33bn scheme, which will link London and Birmingham by 2026 and later extend to Manchester and Leeds. High-speed trains will almost halve travel times and substantially reduce journey times for onward destinations. Proponents argue the main benefit of HS2 will be to increase capacity as ever more passengers crowd on to the rail network.
However, it has met with ferocious opposition, particularly in the Chilterns, a region that faces disruption but will garner few of the benefits, and in the London borough of Camden, where hundreds of homes are to be demolished for the enlargement of Euston station.


Evidence C- Public subsidy for rail users must end

  • Transport secretary ruled out fare cuts. 
  • £5.2 bn a year subsidy is unsustainable. 
  • Fair payers spend £6.2bn a year on tickets. 
  • 12% of the population use trains. 
  • cutting £1bn a year from costs by 2020 
  • handing control of routes to train operators 
  • remove conductors
  • Cap RPI at 3% 
  • 17 franchisees operating services under government contracts.
The telegraph

Over the Science Museum audience, lit as unflatteringly as possible, loomed a vast picture of Dr Richard Beeching: bald, double-chinned, amply-waistcoated, a nasty smirk on his face as he held up the most notorious document in the history of British railways.
Almost precisely 50 years since the Beeching Report was published, the crowd, from the Railfuture campaign group, had gathered to hiss the devil and celebrate the extraordinary turnaround in the railways’ fortunes since the dark days of his cuts.
Michael Palin, the former Monty Python star, called the report, which recommended the closure of more than 3,000 miles of track, “infrastructural vandalism” that left a “psychological and emotional scar” on the country.
Beeching, he said, “ignored the special place of the railways in British lives” and failed to realise that “hacking away at the railways was never like closing a factory or a steelworks”.
Lord Adonis, the former transport secretary, told how, as a 13-year-old, he and his friends did their own passenger counts to expose the fake figures used to justify closing the Cotswold line from Oxford to Worcester. The line survived, thrived, and now boasts an hourly service, the best it has ever known.


Evidence D- EU Directive 91/440- Development of the Community's railways

  • More need for integration of the European railway system.
  • Need to facilitate international competition. 
  • Enable trains from each member state to operate freight and international passenger services. 
  • Must ensure all rails are managed independently of state.
  • Seperation of infrastructure and transport operations 
  • Publish seperate profit and loss accounts and balance sheets. 
New Europe
The Swiss Federal Railways (SBB) announced on 21 February their plans for equipping 100 train stations in the country with free internet access.
The project will be running for the upcoming three years, while it is expected that the first 20 stations will get free WiFi access this year and the rest by the end of 2015.
Quoted in media in the country, Andreas Meyer, SBB’s CEO, said that the state-owned company will be installing telecom repeaters in the railway carriages of trains on its major routes to improve reception for passengers using mobile devices, such as smartphones, tablets and computers. This would complement the reception in the trains.
In addition, it was reported that Swiss mobile operators were also expanding their 3G and 4G/LTE telecom networks along rail routes.


Evidence E - Labour calls for review of trains contract awarded to Siemens

  • Cameron awarded a £3bn contract to Siemens of Germany
  • 'dealt a body blow to British manufacturing
  • Could cost 20,000 jobs including 6,000 people working for the Derby factory
  • Crossrail and HS2 in favour of the company producing the 1,200 Thameslink carriages(Siemens)
  • Germany offered (euro) 6bn contract to Siemens -
  • EU require equal treatment for Government contracts - protectionism is regulated against

The Guardian

Crossrail trains to be fully funded by taxpayers

Coalition abandons plan to secure private finance to help fund £1bn bill due to uncertainty over trains being built on time
The full £1bn bill for Crossrail trains will now be met by the public purse after the government decided that attempts to secure private finance risked delaying the project beyond 2018.
After the problems Siemens encountered in securing financing for its Thameslink trains contract, the transport secretary, Patrick McLoughlin, has abandoned private finance plans and agreed to the proposals from the London mayor, Boris Johnson, to fully fund the new trains and maintenance facilities for Crossrail.
Labour and unions demanded that the public money be used to secure train manufacturing jobs in the UK.
The state had previously planned to make a £350m contribution. Last September, bidders were invited to apply for a government guarantee to help secure financing in an attempt to accelerate the delivery of the project. The offer apparently did not go far enough to guarantee that trains would be built on time.
Crossrail, London's east-west line joining Heathrow airport to Canary Wharf and beyond, is scheduled to open in late 2018, with 26 miles of tunnel being constructed under the city for trains that will also operate on standard overground tracks, with a capacity of 36,000 passengers an hour.
With the Department for Transport still reeling from the west coast mainline franchise fiasco and yet to fully establish when and how major train operating contracts for the whole network will be awarded, it has decided to simplify and speed up the procurement process for Crossrail. The department hopes a deal will be struck next year, with train delivery and testing starting in 2017.
The bidding battle may again pitch Germany's Siemens against its Thameslink rival, the Derby-based Bombardier, the shortlisted pair for the Thameslink contract. Siemens' win was seen as potentially spelling the end for the Bombardier manufacturing plant in Derby.
Johnson said: "Crossrail is now hitting its stride with tunnels being bored and stations being built at lightning pace. Nothing must get in the way of this fabulous new railway and it is fantastic news that we can now crack on with buying the wonderful fleet of brand spanking new trains."
However, Labour said the last-minute decision to abandon its plans to use private finance represented "another humiliating transport shambles" and said it was crucial to ensure that the new public spending created British jobs.
Shadow transport secretary Maria Eagle said: "Labour has spent two years urging ministers to learn the lessons from the botched Thameslink contract, which saw trains for London being built in Germany, and instead fund them in a way that secures the best deal for the taxpayer. Ministers must now ensure that this public spending delivers jobs in the UK.
"The government must come clean and admit how much taxpayers' money was wasted on the abandoned model of procurement and whether they will be forced to compensate bidders for their own additional costs, adding to the £50m paid out to train companies following the collapse of the west coast franchise competition."
Bob Crow, the RMT general secretary, said: "The Crossrail fleet should now be built through public procurement at Bombardier in Derby, saving skilled manufacturing jobs and UK train building, and delivering the rolling stock on time without the madness that has dogged Thameslink from day one."



Evidence F- Campaign for Better Transport warns Government over high speed rail

  • Campaign for Better Transport - Add to congestion and encourage car use'
  • Provide greener long-distance travel 
  • New jobs created will mainly be in London.
  • Heathrow link will only increase air travel.
This is StaffordShire

FAMILIES have formed an action group to fight plans to run the controversial HS2 railway line through part of their village.
The Swynnerton HS2 Action Group will be run by a band of residents and local councillors Stan Highfield, Frank Chapman and Dave Butler.
More than 100 residents were told about the latest developments at a public meeting at Swynnerton Village Hall on Saturday.
Stafford borough councillor Mr Highfield said: "We are trying to co-ordinate people and get them to come together.

"The idea is to get five or six people working on research and collating information so that we can pass it on to people in Swynnerton and take action."
The latest stage of HS2 will see trains running at up to 225 mph between London and Birmingham and onto Manchester and Liverpool. But the proposed route will plough through parts of Staffordshire, including Swynnerton.
Stone MP Bill Cash, who organised the meeting, told villagers: "It is very important to get the maximum level of co-ordination. It is my job, working with others, to get everybody on the same page which is going to provide maximum compensation. There is nothing the Government likes more than to divide and rule."
The action group will report to Mr Cash who is already lobbing the Government over the plans.
He hit out at the plans and said: "It is not economically sensible and I do not believe it is necessary."
Residents discussed the need to collate petitions against HS2.
There was also an option to get their houses revalued by a local estate agent to find out the true cost of the blight.
Chris Hall, aged 63, of Fairbanks Walk, Swynnerton, said: "We do not have enough information on the impact of HS2.
"I want to know what the real impact of noise and pollution is going to be on my property.
"I think even if these plans go ahead I wouldn't know what effect it would have and perhaps there is a bit of scare mongering going on."
Staffordshire County Council is contributed £5,000 to individual action groups.
The Government revealed its preferred route for the £32.7 billion HS2 rail network in January.
At least two trains an hour will stop at Crewe – slashing journey times to London from one hour 40 minutes to just 58 minutes.
But the HS2 track will pass through a number of areas, including Betley, Madeley, Whitmore and Baldwins Gate.
The HS2 line will not have a stop in North Staffordshire.



Evidence G- Passengers kilometres travelled Great Britain annual data 1987 to 2009(billions)

Evidence H- Passengers journeys Great Britain annual data 1985-86 to 2008-09(millions)

Evidence I- Commuters face overcrowding

  • A 9bn investment programme designed to double the number of places on trains launching in 2006- fall short in keep overcrowding at minimum level
  •  2014- There will be a 15% shortfall in places available on London's peak services and a third few places in other cities
  • Taxpayers will have to step in and meet the shortfall
  • Commuters were forced to pay for new services that did no benefit their stop or station
  • South East passengers - Pay above average fare to pay for 140mph high-speed javelin.
  • Millions of passengers were receiving a slower service than 70 years ago(London School of Economics)
  • Victoria to Orpington takes 30 mins - 6 mins more than 1976. 
London Evening Standard 


Commuters should be offered flexible travelcards and rebates on monthly tickets to help curb overcrowding on the Tube.
A report by Tory London Assembly members urges Mayor Boris Johnson to adopt their proposals because there is little financial incentive for passengers with a travelcard to use it for less than its entire duration.
The report said that if a travelcard was available that was valid for any three days in a week, it would make part-time work more affordable and people would be encouraged to work more from home. The report said existing Oyster card technology could be adapted and called for Transport for London to appoint a full-time “home-working officer” to drive plans across the network.
During last year’s Olympic Games, thousands of Londoners worked flexible hours or from home, leading to a fall in regular Tube usage and helping the network cope with the influx of Games visitors.
“The rise in London’s population is leading to ever more overcrowding on public transport,” said Roger Evans, London Assembly member and author of the report.
“Clearly, London needs transport investment, but TfL and the Mayor should also be focusing on what they can do to incentivise home working.
“The Olympic Games forced London to confront the problem of overcrowding and gave people a taste of some of the solutions which will become necessary in the longer term.”
He added that more walking and cycling, greater capacity on automated Tube trains and a sharp increase in home and flexible working could all help keep numbers on trains to a minimum.
Mr Evans said Mr Johnson’s attitude was “flawed” when he suggested before the Games that Londoners could use them as an excuse to “stay home, skip work and open the fridge and hack off that bit of cheese”.
Instead, he said that better connectivity had led to a 20 per cent increase in home working over the past decade and a rise in productivity.
Every Monday, more than 3.4 million journeys are made by Tube and over six million on London’s buses. The capital’s population has increased by 12 per cent to 8.2 million in the past decade and is likely to reach nine million by 2018.
However, Shashi Verma of TfL, said: “While the Oyster ‘pay as you go’, with its daily fare caps, supports those with flexible working patterns, under the existing ticketing system it is not possible to provide a part-time travelcard.
“Later this year, we are introducing the option to pay by contactless credit, debit and charge cards on Tube, rail and bus services. Customers will also get a weekly cap, taking away the need to buy a weekly ticket.
“The new Oyster software provides an ideal opportunity to review the range of ticketing products on offer, including the possibility of introducing a part-time travelcard at some point.”



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