Welcome to our second panel, which will look at rail in Wales as a result of the Railways Bill. I welcome to the Committee Andrew Ranger MP, who is a guest from the Welsh Affairs Committee. Thank you for joining us, Andrew. Could our witness introduce himself?

My name is Peter McDonald. I am director for transport and digital connectivity in the Welsh Government.

I would say that the Railways Bill as drafted is neutral with respect to the devolution settlement. It reflects the current settlement. As we may get into, it takes us further in terms of how the current settlement can operate efficiently and effectively, but does not in and of itself move Wales and the Welsh Government along the devolution spectrum. As you heard in the evidence from the Scottish Government, there is a spectrum. If you want another data point, the Scottish Government and Scotland are far further along that spectrum, albeit not entirely.

That was certainly the last point at which an active decision was made by UK Government and Welsh Government to review the settlements. Obviously, debates have been had since then, but essentially what you have in the Bill today is a reflection of the devolution settlement as was codified at the time you referenced.

It would clearly provide the Welsh Government with more control, and that could theoretically bring benefits in terms of integration with transport modes, because all the other transport modes are devolved—in particular, bus, road and active travel. Rail is an anomaly in that respect. On the other side of the coin, it would bring a large degree of financial liability and responsibilities, and there is a question about whether the Welsh Government’s balance sheet could currently absorb and accommodate those. Certainly, when we reflect on different devolutionary settlements, we have to reflect in parallel on the fiscal settlements that would go alongside them.

This is not taking us further down the devolution pathway, but will the Bill enable a better railway for passengers in Wales?

Yes. But I think we have to look at the Bill and its documents as a package. You will notice in your scrutiny—we may talk about it—that the memorandum of understanding is quite a key part of what the Bill delivers in Wales. To properly answer your question, we need to look at both the legislation and the MOU as a package.

In what ways, in particular, might it improve things?

We think there are significant benefits from track-train integration. We have seen them in south Wales for the element of the railway track that we own—I can talk more about that later if it is useful. We think there are significant efficiency benefits, from both moving towards public ownership and bringing together a series of duties and responsibilities within a single body—albeit with sufficient respect for devolution, which we do not think is a constraint.

We have just heard from the Scottish Government, and they said that it was a model engagement in terms of Bill preparation. Does that reflect your experience of how the Bill was prepared for, and the engagement you had with the UK Government?

Yes, it does. We are very grateful for the engagement from Lord Hendy, as Rail Minister, and his officials.

Does the Bill reflect everything that you asked for?

Yes—if we refer to my previous answer and look at the Bill as a package of both the legislation and the MOU. You will have seen that we have shared with you, and therefore published, the heads of terms for the MOU. If you take those heads of terms—those areas—and the provisions of the Bill, then we are seeing progress in all the areas that we sought progress on. There is then a question on the balance between legislation and non-legislation, which you may want to reflect on. I appreciate that was discussed in your previous session.

Setting aside the MOU, is there anything in the Bill that you would like to see that is not in there?

It is hard to set aside the MOU, given how much is being put in it: in terms of the operation of efficient cross-border services; in terms of how there is sufficient respect for the rail infrastructure that the Welsh Government owns; and in terms of how we create an empowered business unit—a part of GBR that really works for Wales. It is hard to comment on the legislation specifically outwith the MOU, and there is certainly a question around whether there are sufficient links between the MOU and the legislation, which you may want to reflect on.

As I see it, this Bill and its clauses are an accurate reflection of the current devolution settlement. In the same way as a change to that settlement was not on the table as part of this process, it follows that a different approach to directions was not on the table. My Ministers, the Welsh Government and I would not mind additional powers, but it could look and feel odd in the context of the devolution settlement, given that we do not fund or pay for railway infrastructure. Certainly, if you want to take the broader constitutional approach, you need the alignment of the power to tell a part of the system to do something and the ability to fund it and be accountable for that funding. If there were stronger powers of direction, there would be a disjoint there.

You make a very good point: when partnership happens, it can really deliver significant benefits. It is quite hard to codify partnership in legislation, and that is not just a comment on rail; it is a comment on all other parts of the devolution settlement. The key intervention that I would point you towards will be the creation of a Wales and borders business unit within GBR. This a place where we feel we can codify the current effective partnership that happens, but wire it into the GBR system in the right way. GBR will be a very large organisation in quite a highly regulated and structured industry, so certainly we feel that we need to wire the system within GBR effectively, such that there is adequate respect and consideration of things that happen in wider parts of the country that might not be where the majority of services are, but matter very much to my Ministers. That is why the creation of the business unit within GBR is a really important intervention for us.

I was wondering whether you could take that specific example and describe what the passenger benefits might be. The unit that you just mentioned sounds pretty pertinent to some of the challenges for rail passengers in Wales in particular. I know there is not all the detail yet, but what could that hopefully unlock?

I will give you two examples. We, as the Welsh Government through Transport for Wales —the best way to think about that is as our equivalent of ScotRail—think that there is a case for running more services between Cardiff and Bristol. Those are cross-border services that will be quite economic, joining up two big city centres of employment. We think the business unit will provide a very effective way to have the partnership discussion around cross-border services. Under the devolution settlement, we do not have the same powers over cross-border services as Scotland does, as you can clearly see from the Bill—there are very different provisions. For the second example, let’s take Cardiff Central station, which is the busiest station in Wales. Everything comes together in Cardiff: Welsh-Government owned valley lines come into Cardiff, freight goes through, there will soon be an open access from London to Carmarthen, and there are Transport for Wales, GWR and CrossCountry cross-border services. Those are not the types of things that I would like to attempt to codify in legislation, but ultimately there needs to be a decision about how to use the capacity of Cardiff Central. That is another example where a business unit working effectively could really deliver benefits for the passenger.

But that business unit would not help to join up the west coast, for instance. That would have to be done subject to the same kind of provisions that any essentially non-devolved regional rail service would try to lobby for or make the business case for.

Apologies, just to clarify, is that the west coast of England?

No, the west coast of Wales.

I think most of those services would be cross-border services because they will probably start somewhere in England, albeit they then move on to Pembrokeshire. Some of them would be Wales-only services run by Transport for Wales. I think that it is a place where the two can come together in the same pot, albeit those two different types of services—the cross-border and the non—are funded by two different Governments. People who currently work together would be working together in a more empowered system, so I do think there would be benefits.

To pick up on the point you made earlier in response to a question from my colleague, you cited the benefit of bringing track and train together. Despite its being a slightly amusing metaphor, I do understand that that is the driving benefit of a lot of GBR’s case, but you also mentioned owning some track at the moment. Can you tell us a bit more about that and how that would fit into that model?

Sure. That is a really good question. Irrespective of the current devolution settlement, the Welsh Government chose to purchase for a nominal fee what we call the core valley lines, which are in effect the pieces of track that go from Treherbert, Merthyr and Aberdare down to Cardiff. It is a relatively segmented part of the railway. It does not really connect with a lot of other things, which is one of the reasons why the transfer worked. Using Welsh Government money, again irrespective of the devolution settlement, we have been significantly upgrading the lines. They are now fully electrified with brand-new trains. They will be turn up and go services. Transport for Wales is now therefore not just a rail operator; it is also an infrastructure owner and an infrastructure maintainer. We are really seeing, in how Transport for Wales operates, how we can get better performance and efficiency when we own the asset, control the asset and run the services. You can see that in the rail performance data on the lines that come down to Cardiff.

Isn’t that slightly counterintuitive? Are they going to try to gobble up all the good work that you have just done?

I would not necessarily apply the lens of competition to it, because these are railway lines that go to valleys’ heads and then stop. You are not looking at a lot of potential freight paths or cross-border connections. As I say, it is a pretty segmented part of the railway. In terms of cross-border services, it could not be simpler. There are none and there never will be any, so I do not see that the benefits are at risk. I think the benefits are harder to do in other parts of the network. Some of the clauses on infrastructure are important. We would like some simplification of the infrastructure requirements on this bit of the railway.

There might be some lessons to be learnt, though. You have clearly done those improvements off your own balance sheet. Are there any lessons to be learnt about electrification, for example, that could be applied elsewhere? Because it does not matter whether it is going to an end stop or per kilometre cost. It is presumably not that different.

We have learnt a lot about what they call in the business “discontinuous electrification”, for example, where the pylons are interrupted by a tunnel or other features. We are building infrastructure expertise in Transport for Wales and would very much like to use that expertise in broader projects. That is why we are working closely with the UK Government on whether Transport for Wales can take on some responsibility to help develop, plan and deliver some of the infrastructure projects announced by the UK Government in the spending review. It is technically UK Government track, technically UK Government money, technically UK Government responsibility, but we think that we can help with the delivery, and that is all within the current devolution settlement.

Very interesting.

That is useful. Andrew, do you want to come in at this point?

Again, that is a very good question. It all comes down to how empowered this business unit is. Does it have its own leadership? Does it have its own budget? Does it have the right recourse to GBR senior leadership? We are quite optimistic on that front. We think there is the opportunity to codify a lot of that in the MOU. But it does mean that we are quite reliant on the MOU. It is a very important document in the context of the Bill, given the devolution settlement.

Clause 80 of the Bill puts a duty on GBR to consult Welsh Ministers “if it appears…that the decision will significantly affect the interests of Wales’ economy or of persons living in, working in or visiting Wales.” Do you think that the words “significantly affect” are the right test?

That is reasonable for the purposes of primary legislation. I have a lot of sympathy with some of the comments made by the Cabinet Secretary in Scotland on the role of primary legislation once you get into operational rail services. I am afraid that this is another of my answers that takes me to the memorandum of understanding, because this is the place where “significant” and the nature of consultation could be codified. That is where I would expect to see that, rather than on the face of the Bill.

Could you give an example of something that you think would “significantly affect” and that you would like to see codified in the MOU?

Just to give you a sense of scale, a third of all passenger journeys in Wales are cross-border. It is a very different border from Scotland’s. It does not take a lot for a change in cross-border services currently controlled by Network Rail, and soon to be GBR, to affect Wales materially, not least because some of these cross-border routes are the most economically important routes in Wales. They connect Welsh centres of employment with English ones, and that applies in both north and south Wales.

It sounds like this power might have to be used quite a lot because lots of things will be “significantly” affecting. Do we need further detail on how that consultation should be done?

I think you should put both Governments under some pressure to codify it effectively in the memorandum of understanding. I return to my answer that primary legislation is not the usual place where you would put such a process. A lot of this consultation is happening already in practice on the ground between the current Network Rail teams and those at Transport for Wales. There was already a very close sense of partnership at working level. We need to wire that partnership into the wider GBR so that it can be protected and promoted. I come back to my point that GBR will be a very large and structured organisation and that, in the grand scheme of GBR, the services that I care most about are not going to be a huge percentage of those services, but they matter a lot to the constituents of my Ministers.

How often should this MOU be looked at and revisited, or do you see it as a document that is going to last for a very long time?

Every few years is a good rule of thumb. It is worth noting that since devolution began in Wales 25 years ago, the devolution settlement has probably changed on four or five occasions. You would certainly want to reflect on the MOU at any point where the devolution settlement was to change, especially in relation to transport, or if anything were to happen in respect of devolution in rail. We will learn a lot through running this empowered business unit—at least I hope we will. I suspect that we will think of things and interactions and links in five years that we have not quite worked out now, so I think it needs to be in the realm of a living document.

Are there any more specifics that you can think of in terms of the links between the MOU and the Bill that you would like to see now, bearing in mind, that it is soon to go into Bill Committee?

Without wishing to put that question back to the Committee, I think it depends upon where Parliament reaches a view on the right balance between primary and other documents in this Bill. I refer back to my comments around there being quite a lot in the MOU that you would not want in primary legislation. It is more of a question of whether there should be more links in process terms between the MOU and the Bill. Should it be laid before Parliament? Should it be consulted? Should there, for example, be a duty to have regard to it? Given that there are a lot of metaphorical eggs in the basket, it is a very reasonable question for both Parliaments—and the Welsh Senedd will want to reflect on this while the Bill is going through the legislative consent process—as to whether there is enough legal weight around the MOU to reflect its importance. Again, I come back to my previous comments, that you would not want to over-encumber it with weight, given that this is about getting operations right and that is often quite hard to codify.

It sounds as if there is still quite a lot of talking and working out to be done on this. You heard the Scottish Cabinet Secretary for Transport say that things have to be sorted by the beginning of March because of purdah—prior to the Scottish elections in her case, and Senedd elections in the case of Wales. Does that present some urgency? Is there time?

I think it is helpful urgency. We have published via your Committee, for which we are very grateful, the heads of terms of the memorandum of understanding, and we are committed to working with the Government to publish a full draft in the spring. I would ideally like that to be in the early spring next year, so that it works for the Welsh Parliament’s electoral cycle, and so that the document is there, in draft, for elements of the Public Bill Committee and certainly Report, depending on the timetable in Parliament.

Okay, that is quite useful. Obviously, the Bill Committee kicks off in mid-January. We will move on to railway operation.

We have covered bits of my questions already, so I am going to pick out bits that we have not, and then possibly throw in something else. To start, given the different devolution settlements between Scotland and Wales, do you have concerns that Scotland will get better outcomes than Wales under the Bill?

I am not going to comment on different devolution settlements.

I do not mean the devolution settlements; I just mean the work through of your relationships with the British Government on the Railways Bill. Do you think your outcomes will be worse than Scotland’s, as a result of that?

No, I do not. I think that partnership working can be very effective, where it is sufficiently codified and empowered. I think a lot rests on the degree to which the Wales and Borders business unit is empowered, and a lot rests upon the provisions of the MOU.

Will the Wales and Border business unit have the detail of how it works in that MOU, or is that a separate thing that we need to be mindful of in the workings of that unit?

Without wishing for there to be a plethora of documents, there will be more than the MOU—that is the nature of rail. Certainly, one of the things that the MOU says is that the Wales and Borders business unit will have its own business plan, and that will be quite an important document.

There is quite a lot for this Committee, and those people on the Bill Committee, to be minded of to understand the detail of what this work will actually look like, isn’t there?

Yes. There is already a lot of detail in the rail industry; I do not feel that this is adding complexity in the round.

You have discussed Transport for Wales a little bit, which is obviously what you are here to represent. In a Welsh network largely owned by GBR, which is where the Bill will take us, and on which some GBR services will run, what risks do you feel there are to Transport for Wales’s ability to run its services effectively?

I think this gets you to the access and charging elements of the Bill. Again—I am going to sound like a stuck record—this is another important part of the memorandum of understanding. Certainly, it is true that the Welsh Government will be seeking for Transport for Wales to have sufficient access to the railway to run the services that we think that Transport for Wales can best run. In other evidence sessions, you will have listened to the debates from the freight operators and the open access operators, and this plays into that broader debate. Actually, it takes you back to the example I gave earlier of Cardiff Central. There is limited capacity in that station, and judgments will have to be made about which services should run through it. That materially affects Wales and the Welsh Government.

Finally on that, following the cancellation of the Avanti services in Wales, what discussions have you had with the UK Government about GBR reinstating some of these services once it is back in public ownership?

I am not aware personally of the detail of those discussions, but I can provide some details to the Clerks, if that would be useful. I should emphasise that I am representing the Welsh Government today. If my chief executive officer from Transport for Wales were here, he would be happy to help—we can provide some correspondence.

It would be useful to have some more correspondence on that.

Unfortunately, he was prevented from coming today.

I think you have covered some of this. You spoke about the experience of running an integrated track and train operation on the core valley lines, as well as running services on track owned by Network Rail. You spoke a little bit about the lessons you have learned by doing that and what help you could offer GBR. Overall, how could GBR as a whole learn from the experience of Transport for Wales?

I will answer that in two respects. The first is about efficient delivery of innovative infrastructure. I will not repeat the points I have made, but I think that is an important first answer to your question. The second, which we have not spoken about yet, is about multimodal transport operation. The story of Transport for Wales began as a rail operator. We have added significant infrastructure responsibilities to it, but in addition, I am currently in the process of giving it bus franchising responsibilities across the whole of Wales. There is also an active travel design team inside of Transport for Wales. It is supporting me in delivering a road project inside Transport for Wales. The point I am trying to make is that Transport for Wales is much more than a rail operator. We are seeking to develop it into a fully-fledged multimodal transport authority. That links to the final question that the Chair asked the Scottish representatives about land ownership. Multimodal links are quite important for other organisations to bring in, because GBR will be a very large and necessarily rail-focused organisation. I think there is a role for other institutions in the hinterland—in the mosaic—to bring these broader perspectives to bear.

Is the network under GBR truly going to be integrated as long as funding for services and infrastructure is separated?

Again, it is a good question; again, I have a lot of sympathy with the answer that my Scottish counterpart gave. Sometimes when you want to improve things, you want to reach for the capital infrastructure lever, and sometimes when you need to improve things, you need to work at how things work operationally. It is a different type of expenditure—a different lever. In general, you would want to look at all these things in the round to decide the most efficient interventions and the best use of public money. At the same time, I am sympathetic to the wider fiscal constraints around use of public money, but certainly, from a railways perspective, alignment of the business processes and the funding cycles as much as possible can only be a good thing.

You have talked a lot about the need for the MOU and how you are positive about that. Do you think there are any lessons to be learnt from that MOU structure and what is going to be in it for local authorities and mayoral authorities? From your experience, what should we be looking for particularly on that modal shift? Should that modal shift be included in those MOUs just to ensure that interaction, whether at a devolved Government level or a strategic mayoral authority level?

The short answer to your question is yes. I think we should look at the arrangements that are being developed for mayoral authorities in parallel with devolved government. There are similarities there; I am sure there are lessons we can learn. It is especially relevant for Wales and city regions such as Manchester, given the cross-border services. I think that is really important. I would also come back to the broader point I was making about the culture inside GBR—the extent to which it takes account of multimodal considerations and regional and national considerations. It will necessarily be a very large organisation and railway focused. We certainly want the benefits of a single guiding mind and a system-wide approach. I do not think they are inconsistent with having a culture that promotes multimodal operation and regional and national variety. You can see that on the continent, where you have different countries that are very closely connected and relatively small, and the railway works. You can still have a single view while having a culture that respects these broader considerations.

Finally, next year’s elections came up in the session with the previous panel. Do you have any concern that changes of Government in Cardiff or Westminster threaten the ways of working that are set out in your MOU, and what do we need to be mindful of with the Welsh elections coming next year?

I need to be slightly careful how I answer that, as a civil servant. You can certainly say that how devolution works in practice depends, to an extent, upon the relationships between the Governments in play. When devolution works best, it is with non-statutory partnership alongside statutory frameworks and protections. There are lots of examples where it can work really well, even when there is a political difference. I remain optimistic that if we can get the memorandum of understanding right, that is something that works in lots of different political scenarios, regardless of what happens.

That brings us to the end of our second panel. Thank you very much for your evidence, Mr McDonald. I will suspend the session for a few moments while the witnesses for the third panel take their places.