 Felly, wrth fy ngyrau i gyd, i ni ddim yn gynafeinio, aír fan, i gyllid yn cynhyrchu a Gwylodau Cymru. Felly, lle yn gallu pob erbyn o'r gwaith o'r cyffredin ei gyd y brifysgol gyda ddefnyddio cy switching porto'r dod yng Nghymru, ac mae'r cyfgrifnwys wedi'i byw kwrth am y ddiwrnodiau cymdeithasau, rydw i'ch ffordd i gyrsbyddemiaethu, ac i gael pulau wrth gwrth i gyrsbyddodau cymdeithasedd. The second item is to hear evidence on the draft national bus travel concession scheme for older and disabled person. Scotland amendment order 2015 from Derek Mackay, minister for transport on islands, Tom Davies, team leader, bus and local transport policy and Nancy Woodhead concessionary travel policy manager at the Scottish government. That instrument is laid under affirmative procedure, which means that Parliament must approve it before the provision may come into force. Following the evidence session, the committee will be invited to consider a motion to approve the instrument under agenda item 2. Can I welcome the witnesses this morning and can I invite the minister to make any opening remarks? Thank you very much, convener, and good morning. Thank you for inviting me to discuss the draft national bus travel concession scheme for older and disabled persons Scotland amendment order 2015. The order sets the reimbursement rate and the cap level of funding for the national concessionary travel scheme in 2015-16 and 2017. In doing so, it gives the agreement that we have reached in January with the confederation of passenger transport representing the Scottish bus industry. That agreement was based on a reimbursement model developed in 2013 on the basis of independent research commissioned by the Scottish Government. The research was extensively discussed at the time with CPT and their advisers. The model in recent discussions in updating the various inputs to it, including forecasts based on historical trends and agreed indices, have given us a good basis for informed decisions, which will apply stability and clarity for all parties. Using the updated model, we have concluded at the appropriate rates for reimbursement in 2015-16 and 2016-17 should be 57.1% and 56.9% of the adult single fare respectively. Those rates, we believe, will most closely deliver the aim, set out in the legislation establishing the scheme that bus operators should be no better, no worse off as a result of participating in it. Based on those rates and our expectations for future changes in journey numbers and fares, we forecast budget requirements of £202 million and £212 million over the next two years—that's £414 million, of course. Those figures are also reflected in the draft order as budgetary caps. The order is limited to the next two years. We have agreed with CPT and a reimbursement model will be reviewed during the year 2016-17 to ensure that it continues to provide a fair deal for all parties and an appropriate mechanism for determining future payments. We know that older and disabled people greatly value the free bus travel that the scheme provides and enables them to access local services, visit friends and relatives, and gain from the health benefits of a more active lifestyle. The order would provide for those benefits to continue on this two-year basis, and on that basis it's fair for operators and affordable for taxpayers. I commend it to the committee for their consideration, and I'm happy to take any questions. Okay, thank you very much minister for that opening statement. Can I invite members to ask any questions of the minister? Alex? Am I the only one? Is there any surprise there? The minister has brought forward the order, which covers the requirements of the scheme, but continues to propose the order on the basis that it should provide free travel for the elderly from the age of 60. Many people don't believe that 60 is elderly any more. In view of the growing cost of the scheme, it has been suggested by myself and others that it would be more appropriate to align entitlement to the scheme to pension age rather than the age of 60. Will the cost go up and the effect that it has on the overall budget for support of the bus industry? Has the minister given any consideration whatsoever to the idea of changing the age of entitlement? I'm delighted that Mr Johnson has asked the question without expressing a preference as any good politician would do. I also take the point that some people don't see the age of 60 as being particularly old. I've spent most of my life wanting to be older. Now I've hit tipping point, I want to be younger again at the age of 37. I'm quite far off from the travel arrangements myself, as of course is Mr Johnson. Of course it is the case. You said it. Of course it is the case that the Government considers options, but we set out a commitment around continuing with the scheme. The scheme, clearly because of the two-year arrangement, will continue through the term of this Parliament. It will be for all politicians to decide the eligibility criteria going forward if there are some who believe that the age of entitlement should be raised to the pension age. There's some consistency around that, but for the time being we stick to the 60 age limit. That's what's established in the scheme. That's what we've carried through this Parliament. Then it will be for everyone to consider their position going into the next election. It may surprise Mr Johnson to learn, though, if he thinks that it would have a massive impact on the total cost of the scheme, I don't believe that it would, which would then beg the question, is the system change worth any financial saving that may be made? That brings in the other element of the discussion. If he were to expand the scheme, who else would he consider? I think that there's a very strong argument to consider extending the scheme to others, those seeking work, those at the younger end of the spectrum who might require support or travel as well. Those are issues for all politicians to consider as they approach, frankly, and manifesto in the next Scottish Parliament elections, but this Government will continue with the scheme as we have outlined and sustained so far. There are indeed a number of groups that many of us would wish to see the scheme extended to, but savings could be used for a number of purposes. One of the key groups that are not able to take advantage of the service are those who are not near bus routes, and those who rely on community transport in order to support their travel requirements, quite often serious travel requirements, are not able to access bus services where they do not exist. One of the things that savings could be used for within the scheme is to extend support to community transport. Has that been given any consideration? I think that that is also a very fair question and point that Mr Johnston puts in terms of the provision of the scheme to community transport. Politics is indeed about choices, and if the position of the Conservatives was to remove it from the age category of 60 to 65, or whatever the pension age entitlement is for that person, of course not removed. I'm sure you wouldn't be suggesting removing a pass from anyone who's currently a holder. I'm sure you're proposing just new applicants and entrants to the scheme, but even in those circumstances it would be about choices. I don't think that that is a direct equivalent and a direct choice for the reason that I'm about to give. Community transport in terms of eligibility and financial support should get more support of that, I have no doubt. I'm not one for passing the buck. However, there is provision within local authorities so to do, so if a local authority wanted to expand the community transport provision or extend concessionary schemes, they are perfectly empowered and entitled to do, and I think that from that respect it would be better if local authorities who understand the local circumstances better, who knew where the gaps in transport provision were, addressed that gap if they felt it was a gap, and that would help in the scenarios where Mr Johnson rightly indicates that there might not be an adequate private sector bus provision, but there may be community transport. In terms of extending the scheme within community transport, I think that that would be for local authorities to lead. The power is there and the resources are there if they choose to use them in that fashion and set it out as a priority. As has been the case in a number of years, as the cost of the concessionary scheme rises, the proportion of the total support being given to the bus industry that goes through the scheme increases and, as a consequence, things like the bus service operators grant become less significant in the overall scheme of things. That has a potential side effect of distorting the shape of bus services in Scotland, where services are targeted at the high level of market interest that concessionary travellers use, and sometimes that has an effect of removing services that are more often used by people who are using the bus to go to their work, to go to college, for example. I have had a number of cases come to me where bus services have been lost early in the morning in particular because priority has been given to services at other times of the day. Have you come across any evidence that suggests that the pattern of subsidy is distorting the shape of bus services across Scotland? Not particularly, because you have to look at the scheme in the round as well as the other grant schemes that support bus travel. If you put it in the context of bus services operators grant as well, there is a cocktail of grant support that funds the bus industry. Incidentally, 45 per cent of all income in the bus industry in Scotland comes via a Government or local authority grant. The rest is from the fair-paying public, of course. I am not sure that it distorts the market to that extent. I do not know if I have heard Mr Johnston, but it is not the case that the grant subsidy, the reimbursement rate percentage, is going up. No, the overall cost is going up. The percentage compensation is dropping. The percentage compensation is dropping marginally. That is correct, but that is because I am trying to squeeze the public pound and get best value in terms of the private sector operators. However, I do not believe that the marginal reduction in terms of an increasing budget and an increasing spend is in any way distorting the market. If we then turn to why routes change and why some routes are not served, I suspect that it matters much wider than the concessionary travel scheme that we will fund. Of course, we are not debating—but I am happy to at your discretion, convener—not debating the eligibility of the scheme today, but it is the mechanics of the cap and the funding. No, I have not had that evidence, but I am more than happy to receive it from local members if they believe that the scheme is in any way a disadvantage in local communities. However, on the contrary, I suspect that it is sustaining bus routes that otherwise would have disappeared. Can I ask the minister about the wider issue? If you take your six-year-old driver, if the aim is to get a modal shift to get the driver out of the car and onto the bus, or indeed active travel by cycling or walking, the minister will agree with me that you are cutting emissions, you are cutting congestion in roads, and presumably there is a wider issue about road maintenance as well. The second brief question, has the minister been approached by veterans organisations who have certainly approached me, who are very keen that veterans per se have concessionary travel? I do appreciate that some will be over 60 and some will be eligible because of disability, but has the minister had representations? It is certainly one that I have had, and I have a great deal of sympathy with the plight of veterans in Scotland today. You can tell why Mr Stewart is my shadow. I mean what he said in his first question to me in terms of why is the concessionary scheme so important in terms of transition to the low carbon economy, modal shift, getting people more active, reducing isolation, promoting individual independence. Those are all good reasons to continue with this scheme, and that is why many of the over-60s benefit from it. On the point about veterans, I want to check some of the exact detail around this categorisation. It is my understanding that transport to veterans has been improved over the past few years, partly because of the efforts of Cabinet Secretary Keith Brown, who was my predecessor, but I am happy to come back with the detail on what veterans may be entitled to. If we need further work on that, that will be undertaken. From memory, I do not have the detail to hand, we have enhanced transport provision from what we inherited. The minister agrees with me that, although the points that Alex Johnson made about aligning the bus pass with pension age and retirement age, on the face of it, it might seem to be sensible and have some appeal. Our success in longevity, although that is to be commended, is by no means universally spread about the country, so that in some areas of deprivation, lifespans are much shorter than in other areas, and that great care, considering the health benefits that go along with it, in promoting active family, but also in maintaining links of families who these days tend to be much more dispersed than they were in a previous era. Government, I hope, would take into account those factors very carefully before implementing any changes to realign with the pension age. If I can just touch on the same question and another issue, convener, it is relevant to the previous discussion that, in representing a predominantly rural area, I am very aware of having spoken to bus operators who tell me that many of the routes that they operate would not be viable if not for the revenue that they derive from this bus pass scheme. So, in order to keep some of those rural routes viable, this scheme is absolutely essential, and again that is another factor in considering any significant changes to the scheme that might impact adversely on rural bus services. Yes, convener, I think that those are all very fair points, working back from them. There is a mixture because of the bus environment in Scotland of market forces, commercial interests and, of course, the concessionary that is subsidised in locally supported schemes as well. That is why some of the provision that exists does rely on schemes such as bus services operators grant besog and the national concessionary scheme as well. Again, I am convinced that some of those routes would have disappeared if it was not for schemes such as this. Of course, the rules were changed to further support rural communities in terms of the last review of besog, to further support rural communities. On your first point about life expectancy in Scotland, yes, particularly in areas of deprivation and our country is a whole life expectancy in Scotland is lower. People live shorter lives in Scotland and some other parts of the UK. That is a fact, so you bear that in mind when you are making decisions around entitlement to services and to concessions. However, this Government has a different perspective on pension age as well from the UK Government, and that is also a consideration going forward. The scheme that we have proposed is the scheme that we will continue with for the period of two years. That ceases through this term of Parliament. I do not think that there is anything wrong with members making choices, having an opinion and debating where the scheme works well and how we could change and approve it, what their priorities are, but our priority is to continue with the national concessionary scheme as proposed, to give certainty to operators and residents across Scotland who greatly value the scheme in the way that it is constructed at the moment. It may not come as a surprise, but in a survey that we have conducted, 98 per cent of respondents stated that they were either very or fairly satisfied with the scheme overall. With that kind of record and response that suggests that, even in the west of Scotland, from where I am from, using the colloquial term, you are doing no bad is appropriate. At 98 per cent, we are very and fairly satisfied with the scheme as we have it. In that case, the second agenda item is the formal consideration of motion S4M-12397, calling for the committee to recommend approval of the draft national bus travel concession scheme for older and disabled persons Scotland amendment order 2015. I invite the minister to speak to and move motion S4M-12397. I formally move. Thank you. I invite any further comments and questions from members. There are no further comments and questions. In that case, I will now put the question on the motion. The question is that motion S4M-12397, in the name of Derek Mackay, be approved. Are we all agreed? We are agreed. That concludes the consideration of this affirmative instrument. We will report the outcome of our consideration to the Parliament. I thank the minister and his officials for their attendance this morning. We will now allow a short suspension for a witness changeover. The third item on the agenda today is for the committee to take further evidence on its freight transport in Scotland inquiry. This week, the committee will hear from rail freight operators. I welcome Andrew Malcolm, chief executive officer at the Malcolm group, Ken Russell, strategy director at the Russell group and Kay Walls, commercial manager Scotland at Freightliner. Perhaps I could kick off our questions this morning and ask each of the panel to provide the committee with an overview of your rail business and its significance to the Scottish economy but also ask you to place that into a wider context and outline what you see as being your strategic vision for freight transport in Scotland and beyond. Perhaps we could start with you, Mr Malcolm. Thank you and good morning. Our organisation moved into rail back in 2001, not as an alternative to road transport, which is our core business, but alongside transport. We very much see rail as a combined road and transport operation. I often stress that road can survive without rail, but rail cannot survive without road, which is a fact that a lot of people miss nowadays. Some people promote rail rather than road. As an organisation, we run a seven-day service twice a day, length and breadth of the UK. We move in the region about 1,200 domestic loads on a weekly basis north and south to support the market. Rail has become a very key part of our operation, although it takes years to get confidence from our client base to use it, and it does not take long to lose it from that point of view. We have a number of challenges on the main routes in and out of Scotland, being the two east and west coast main lines. We have restrictions on the west coast main line and east coast main line, mainly due to gauge and height restrictions, which sometimes cause us delays to give our customers that service. When we started rail back in 2001, 90 per cent of what we moved by rail was not time-sensitive. People did not have the confidence in rail, but they had the wish to use rail. Today, it is fair to say that over 90 per cent of what we move is time-sensitive, and between Russells and Malcolm's, we probably move the majority of the retail sector's business to Scotland. It is a part that has become a very important part and crucial part to our organisation and something that we are looking to develop further in the future. Can you place that into a wider context for us in terms of what your strategic vision would be? Our vision is—well, there is a lot of vision in our industry today with let's say that people use this terminology just in time. I think that the culture in the UK now is just too late. People do not plan no far enough ahead and transport is transport and how that works. Trucks give customers so much flexibility that they can cut their lead time quite dramatically, whereas rail does not. Rail is very rigid and all the penalties that come with rail can sometimes deter customers off rail. Our strategy going forward the way is first of all to make sure that what we are currently doing is sustainable, most importantly, and to look at further growth. There is a UK driver shortage, so again our strategy going forward the way is ideally not to put any more trucks on the road to try to get more value at the trucks that we have, and that is where rail can play its part. You can move volume based quite quickly, you can move volume without increasing the resource quite dramatically as well, so our strategy of business is to look at trying to develop more of a freight on rail and again less on road. Thank you, Mr Russell. A very similar story to Andrew. In terms of the scale of what we are doing, very similar, we are operating seven days. Predominantly Midland Scotland is our core route and vice versa, but we are doing about 100 loads a day in each direction of that route on rail. Rail is complementary to our services, it is not core. We use rail where it fits, we use road where it is right and we use short sea where it is right, so it is a matter of choice that is best fit for the job in hand. In terms of our further links, we also have a daily rail service that links the Midlands to London and London to Northern France, again daily services. In terms of our strategy moving forward, what we want to do is widen the network that we can access by rail, making use of the channel tunnel more and links into eastern Europe, southern Europe, as well as our current links in France, which link us currently to Spain and all over France. Presumably, as with Mr Malcolm, you want to grow your business. How do you see the services that you provide fitting into the wider context of freight transport? Some of the obstacles that we have on rail at the moment that are delaying the developments for our international stuff is the issues of gauge that Andrew mentioned. We also have issues on HS1, where we are trying to get them to increase the size, the weight of the train that they are allowed over the route. Currently, we are restricted to 1,600 tonnes, but the channel tunnel is 1,800 tonnes, so the extra 200 tonnes would not cost us any more to be able to run that, and it would make a significant impact on the commercials. Unfortunately, we cannot get HS1 to engage with us, having been trying for about three or four months now. We also are doing some load tests in the channel tunnel with weight to try to increase the capability of a single locomotive. Currently, we have to use two locomotives to pull the trains through the tunnel. If we can get the benefits of a single locomotive, which, in theory, is capable of doing the job, it is just proving it in a test situation for the rail tunnel to be able to prove it. The other problem that we have generally in the UK is that the European gauge on rail is larger than the UK gauge. In the European gauge, we are normally talking UIC gauge, whereas in the UK, which is equivalent to the channel tunnel's capability almost, depending on which country we are going to. We have a significant decrease in our capability other than HS1. That has an impact on the sorts of equipment that we can run by rail. If we look at a lot of the inquiries that we get for terminal and barking coming from the continent, it is for trailers on trains coming through the tunnel and they can only come to barking. They cannot get any further because our gauge is not capable of that. We also get inquiries for 10ft 6 containers to be able to carry the likes of automotive components coming to our manufacturing plants. Again, we cannot fit those on our UK gauge other than HS1. I am sure that we will tease out some of those issues as we make progress this morning. Ms Wallace, can you outline for us the significance of your rail business to the Scottish economy and set out what your strategic vision is for freight transport? There is a long-established rail hall here. We were established in the 1960s by Dr Beeching, and we were fully owned by British Rail, but we were privatised in 1996. We are now a private company. We started initially moving containers by train. We were the first to do it. Since then, containerisation globally has grown, so our business has grown as a result. Post-1996, we also moved into the bulk hall markets. We also run bulk trains, cement, coal and so on through Scotland waste contracts. As far as container trains are concerned, our core business is moving goods in land to deep seaports. We are sending stuff from the UK to Scotland in this case, over to America, Far East and the rest of the world. Basically, container trains run from Coatbridge Freightliner terminal with full load containers—mostly spirits, I'm afraid, thankfully—and those go down to the big ports of Felixstow Southampton, the Thames ports, London Gateway, Tilbury and the Port of Liverpool, and they sail over to the rest of the world. Similarly, we are bringing imports from those countries up to Scotland, so a box will land at Felixstow. Destined for Scotland, we will bring it up in our train. Coatbridge Freightliner terminal has been there for a long time. It was a very busy site. It was the biggest rail terminal in Europe at one point. Things change and fortunes alter. In the post-hat field, we had a few issues. We lost a lot of traffic. I'm pleased to say that we're gaining it back. The benefit we have in Coatbridge is a huge site. We are welcomed in other rail operators, so we have three of Cairns trains every day. We have run Malcolm's trains. It is a huge site and we are looking to grow that further. I suppose that strategic vision, I would certainly like to see Coatbridge become an intermodal hub for Scotland—a core terminal—where we have parked trains from other areas. Maybe locations in Scotland that could not support a full big rail terminal, full trains, occasional at birth, feeding in to a central strategic hub and feeding down from there, consolidating and feeding out from there. I hope that that is the vision to come now. Whether that happens at Coatbridge or somewhere else is something that we are aiming for. Also, in Scotland, in deep sea terms, we are limited connectivity. We have options to go over to Rotterdam, Antwerp et cetera, but we have no deep-sea connectivity of our own, and that is something that I think that we would all like to see. I think that the last issue that you mentioned in terms of deep-sea capabilities is something that colleagues will want to pick up on later. Can I just ask the panel, if we can start with you, Ms Walls? The Scottish Government has to prioritise spending in terms of infrastructure. What would your priorities be for action that would benefit the freight sector? I do not know. Roads are obviously very important because you cannot have a rail terminal without a road connection to it. It is possible to look at where the freight is moving and try to target the spend there. One thing that I was dismayed when Euro Central was opened in all the big areas around about there was no thought given to a passenger train service there. The roads into Euro Central have jammed by people trying to get to work. Things like that were joined up thinking, a strategic thinking. If you want to build a big investment park or something, look at the rail link, break heads, a kens get a rail terminal across from a why was never really a rail link put into a break head. Things like that, I suppose. More strategic overview, rather than people having individual schemes that benefit from individual companies, look at what is good for Scotland. Ultimately, that would benefit everyone, because that would make it easier to get around about. It would reduce the cost and therefore encourage growth. Mr Russell, what would your infrastructure investment priorities be? From a Scottish perspective, I would certainly be looking at the local road infrastructure that would feed the major rail terminals and sea terminals, or ports, to ensure that we have the cleanest opportunity to get in and out. On top of that, we would need to look at the west coast, the east coast mainline access for rail, and then some of the diversionary options with the Glasgow south-western, and to have options for the current gauge capability of the west coast mainline, so that we are not reliant totally on a single route, which predominantly our trains currently are, and that can cause us problems. That also means that we need to have good links with London to ensure that, from Carlyle, we can continue to operate. I echo what both Keithan and Kenabat have said. Being a transport man at heart who brought rail to our business, we try to bring a practical mind to it. Scotland is a very short country from coast to coast, and we look at where the population is and also where the main freight is. When we look at the working-time directive, drivers, hours and regulations, our key objective is to have the vehicles moving fast, sleek and again with little delays. A share case view, a lot where we have rail terminals just now, we have a lot of congestion in cars from that point of view, which does cause a lot of delay and expense. For us, likewise, we try and have a road fleet, have a standard unit that in one unit can fit all requirements. Again, as we mentioned, the west coast mainline is open to nearly any size of container that we have, but we need to have other containers that can then go to the best routes around the east coast line, which creates problems with customers with capacity and capacity that they can get on the train. The flexibility, the delay and the train splitting it around. It is getting these alternative routes in place at work. For me, fundamentally, it is having the terminals in the right place, and I do not think that we have a bad structure of terminals. I think that a lot of investment is required in the terminals, because the terminals are expensive to run and to operate, but the road network in and out them needs a lot to be done there to try and get that flowing more smoothly. You would all be in agreement that we need investment in the road network, particularly to allow access to the terminals and then investment within each of the terminals. Has anyone done an assessment of what the cost of that investment would be? I think that we will move on. Alex, you have got some questions. A lot of freight that can be carried on trains, but what type of freight do you think have been the success stories and what areas of freight transport require improvement to get them on rail? There is one area that I think could help. Scotland has got a problem with both inbound and export, no, on domestic. There is always more that comes into Scotland because out of Scotland, so trying to balance traffic flows is a challenge for us with the road or rail. I know that Ken's Bond and Vismoror, but probably 90 per cent of what we move by rail north is for the retailers, so it cubes out before it weighs out, but most of what goes out of Scotland will weigh out before it cubes out. Rail has got a massive disadvantage over road bearing on weight capacity because we will normally lose between three and four tonnes capacity on rail and the road going vehicle, so we are less competitive. Many years ago, when transport moved from 40 tonnes to 44 tonnes, we had a 44-ton opportunity with intermodal rail within our radius of the rail terminal. We lost that with the neutralised 44 tonnes for all vehicles, so that is something that we urge to have a look at. However, the goods that we carry mainly are retail-related, drink-related and building-part-related. We try to take any customers' goods and see how can it fit on road or rail. When most of our customers have a parallel road service, we have to run the combination to give them that confidence and service. Again, it is not bespoke just that the goods that we carry on rail have to go on road and vice versa. However, one of our issues in Scotland now is how do we get more volume on to rail? We are trying to get more weight on to rail and it is more on the southbound journey where we can benefit Scotland and get goods to market at a price that is acceptable. I agree with what Andrew Scott said. Equally, if you look at our volume, the main difference between Andrew's trains, my trains and K's trains is that we are concentrating more on the domestic market or the European market, K's concentrating on the deep sea market predominantly on the intermodal side. The other issue that we have is that a lot of the European and domestic market is based on a 45-foot pallet-wide container—the deep sea market is based on a 48-foot wide container—that you cannot put two pallets in the same direction on the width. We are trying to persuade shippers to use either a European type equipment to get whisky south or to use a deep sea box to bring goods north. We would have a big differential in the imbalance of trade, because at the moment empty containers come into Scotland in order to take whisky exports out. We move an element of empty containers south to bring European and domestic movements north. That is a challenge for us as an industry that we need to try to overcome. Is that one of these insoluble problems or is there a solution? There are solutions, but they are not palatable to either party at the moment. It is insoluble then. Do you have a view on that? As far as the deep sea market is concerned, we are out of step with the domestic market. Scotland is a net exporter, unlike the rest of the UK, who import more than export, but Scotland is a net exporter. If you look at a train out of Cotebridge, 99 per cent of those containers on that train will be fully loaded. Export is going to the rest of the world. The inbound trains will maybe convey around 40 per cent, so it is a massive imbalance. That gives the Scottish industry and Scottish exporters a major headache, because they struggle to make enough empties. You will hear Diagio, Edrington and various others saying that there is not enough empties and that there is not enough flow of empties into Scotland. By and large, that is because if a deep sea vessel lands from China at Felixdor Southampton, most of the cargo in there goes up to the Midlands. The container will be emptied in the Midlands at Crick Davernry, where Andrew Ken's place is. It will be stored there, and the empty deep sea container will then go back to the port and be shipped back out to China or Australia. Ken or Andrew's containers then bring those goods up to Scotland to the RDC, but of course we do not have the empty. We have a continual situation, a continual cycle, especially in the busy periods whereby the feed of empties up to Scotland is critical for the whisky industry. Our freight liner trains out of Coatbridge probably move about 20 per cent of the deep sea exports out of Scotland. The rest are moved by coastal feeder out of Grangemouth and Greenock. There is a huge demand for empties, especially at a particular time of the year, and it really gets pretty desperate. We have tried to crack this nut. I do not know many meetings that I have sat at with various people, but part of the problem is that when it comes to deep sea containers, in particular, they are global markets. Because the organisations are so huge, there is one part of the organisation looking after the global supply of containers, another part of the organisation doing the ops. To try and get someone to say, you know, marry this up because there is containers needed in Scotland. Can we get them there? No, that is not going to happen, because they might be containers needed in Los Angeles or containers needed in Taipei. That will take priority, so it is a very difficult meeting. It is not something that we are going to crack here locally ever. However, as Ken said, if we could get licence to get the people who are moving goods throughout the UK to share each other's containers, that would be good, but it is a big ask. On the commodity side, in terms of different products, it might be interesting for future growth on rail. At the moment, we both concentrate on ambient food and drink products, mainly fast moving consumer goods. There is a huge demand to try and get children frozen on rail as well. There is apprehensions, especially in children, because there is a big implication if there is a delay. In terms of the service levels that we are now being able to provide, that apprehension is beginning to get broken down. We have now got some children frozen running on air trains, but it is a very small percentage of the total volume, but it is a huge opportunity for further growth on the domestic and tomato market. The big issue for that in terms of moving forward is that, in terms of Scotland, you can get the equipment into Grangemouth, Moss End, Cope Bridge without a problem, but you cannot get it further north, because it is 2.6 metres wide for a reefer box mainly. The mass production units are 2.6 metres wide, so that restricts where we can go to. We cannot go to Inverness with a 2.6 metre wide box at the moment. We need to look at the economics of it. Does it justify changing the gauge to be able to carry it, or is it better to look at a 2.55 metre wide insulated box that would cost you a bit more to buy because it is more bespoke? It will probably be cheaper than changing the gauge to Inverness, but that bit of work has not been done yet. One thing that I should say in deep-sea terms is that we move a lot of frozen goods. We move a lot of frozen fish from Scotland over to markets in China, Far East, Spain etc. That has been happening for many years, and they are refrigerated boxes, but they are deep-sea containers, therefore they are a different profile from in-Kennis. There is a lot of seed potato traffic out of Scotland, particularly before Christmas. We can move something like 80 containers a week in our trains, seed potato, and we move by rail because it is faster than coastal feeder. Those are moved in ambient boxes. It is a well-established market in deep-sea terms because all the ports have refrigeration plug-in points, as we do in rail terminals. The big deep-sea ships have refrigerated plug-in points. If there is a disaster in something stuck in a train, most of the times the charge of refrigeration will last for around 72 hours. A lot of them have just generator sets that you can top up with oils. They will continue to run like a domestic fridge, so there is not an issue there. Probably the supermarket circuit is not so all-fee with that, and it is education and getting people comfortable with it. They are getting there, and it is good news at Ken's already. I will cover a lot of the next question. There is a perceived change in demand for freight on the rails. We are seeing things such as coal becoming less significant as time goes by because we are mining and using less coal. What actions do we need to take with the Scottish rail network to prepare us for the next generation of rail cargo as things change, other than what we have said already about container standardisation? I suppose that enhancing the rail network is what Andrew and Ken have said. We have a real issue if the west coast main line is closed. We can lose trains for three or four days. That would never happen in a motorway. We would always have another outlet, so the east coast main line clearance is crucial, but that is under way. Not what rail are working to that. I suppose that as rail freight grows and as the world market grows, if European traffic grows, their boxes are pretty odd sizes. It is not something that we have done at ticking the box. There has to be a continuous improvement. As far as Scotland is concerned, as Kenneth says, from the central belt south to Daven train to the midlands, we are not bad. It is not great, but it is not bad. However, once you start to head north from the central belt, that is less. Of course, there is a lack of terminals up in the Inverness area, so we could do with some improvements up there. I think that differential engage is an issue if you look at Aberdeen Inverness, which are probably your two larger populated areas outside the central belt. There are talks of possible terminals for Perth and Dundee. Personally, I struggle with that, because the economics of rail against road on that route will be very challenging for a rail operator. The places that it makes most sense to use rail in Scotland are the places that it cannot get a standard container to. The other aspect is making sure that we retain the capacity for freight on the rail. What we do not want is that the demise of coal suddenly appears into a passenger capacity rather than a freight capacity. We are seeing growth in domestic and deep-sea intermodal traffic in the UK that is accelerating—for a period of surpass coal, it is back behind it at the moment, but it will come back again, just with the movement in coal volumes up and down. We are seeing growth on that side. In the next 20 years, the one sector in the rail freight market that has the most potential, I believe, in growth is the domestic intermodal market. Between us, we are doing roughly 200 loads a day north on rail. We are scratching at the market, so there is a huge opportunity. We are seeing a major change in the way that large organisations are procuring their logistics solutions. They are definitely asking more questions about the carbon footprint of the solution. They are not saying that they want to pay any more money for it, but if they can match the price expectation with a rail solution against a road solution, they will generally choose the rail solution. That is a big change from where we were. I think that for me it is in the plan, the electrication of the Grangemouth path. Obviously, electric rail is the most efficient and effective way to move volume. We have that into Moss End and into Cotebridge, but we still have to do a change in Moss End to get it out to Grangemouth. Obviously, Grangemouth is one of the biggest retailers in the UK, and one of the big four is based there. That is when we are on the 70th service. Further electrification of the services would be number one. We would like to see a more formal rail freight strategy of what is going to happen over the next five years. We will be engaging more with that, and we are trying to put ideas in a very traditional business. We are always investing in the future and responding by the day. We have to have to have a view that this is what the market needs in five or ten years out. A more formal rail freight strategy would be very good to sit down and really see what the plan is for the next three to five years or even beyond, because it starts today for what we want to deliver in five years' time. We are talking about the container where we are on the market, but we do have a large number of import containers, but customers look for a discount because they cannot get the cube on. It is how we can continue to make sure that freight grants, what grants are available, can help support keeping stuff on the road, because at the end of the day you have got hauliers in the land who will run out of Scotland back down to Midlands area for the cost of fuel. I am up anyway, just commending back, and that is your competitor with rail from that side. However, we are doing more work with a number of our customers to come back to KWC and with the imbalance of containers on the deep sea market, where a customer may have an import route, an export route that the two do not meet when they get into other parts of the world. We are now doing joined up thinking with some shipping lines that can give that third link so that the same container can be used for the three links. Again, it is quite innovative, but it is getting customers now to come to the table. There is more of a buy-in now from certain customers who have to think outside the box, but I will just procure one route and not the other route. It is quite important to try to maintain close links between the deep sea and the domestic and the European markets in terms of the terminals that we are going through. If you can have all focusing through the same terminal, it gives you synergies and benefits in terms of your overall volumes, because we have different peaks in the deep sea markets for Christmas that peak a lot earlier than the domestic and European markets, so it helps in terms of balancing your flows. I concur with that. At Coatbridge, we have a high fixed cost. Until Kenneth and Andrew's trains came along, it was completely based on freight liner volume. Again, it is all deep sea, so everything was coming through this huge crescendo. Now, we have a domestic split, and it is very good, because vehicles arrive in the queue at a different time from the vehicles of the deep sea. It definitely works, but what it has driven us is that instead of deep sea terms, a Monday to Friday site, we now work seven days because we are handling Kenneth's trains. We always work 24-5, but it is now 24-7. That is good. It is good to have a mix of rail haulers in there, rail operators in there, and I would always suggest that any site should be a multi-user anyway, but that should be encouraged. The other thing is that there is a big gap with coal. The traffic that will transfer to rail is that that is still on road, or some of the traffic that is still on road, and there is still a perception in the haulage base that you have to be a really big guy, but Kenneth or Andrew, to use rail, no you don't. Any of them can buy a slot in my train tonight, and some of them do. I've got three or four small road haulers who buy individual slots on any given night in our trains, but there is a real kind of myth out there about it. It's all very difficult, but it's not. These are timetable daily services that run with spaces on them, and anyone can use them. You could use it if you want. It's that simple, but there is this big myth. We've talked about this and how we kill this stage and can get more people encouraged on to it. We had various haulers who would only use us when they were stuck. That's great. When they get really busy and they can't do that overnight, they'll book a slot with us, but the night they can do it, that's fine, because that makes you so their vehicle, but there's options out there for people. It annoys me this road v rail. When Freightliner started up, we probably are a road hauler who does the trunk all by rail. We always wear, at one point, the biggest road fleet in the UK. We still have our own road fleet, and customers can choose whether they just do terminal to terminal or port to terminal, or whether they want us to do the onward delivery to Aberdeen once the box comes to Cotebridge. That's their choice. We offer that service. In reality, probably, we do about 20 per cent of the haulage that was through Cotebridge. The rest is done by third-party haulers. Again, that's good, because it spreads. When the peak comes, no single hauler could cope with that, and it spreads it. Andrew and Ken and I know each other for years. We've worked together for years. They're my customers, and I'm their customers at times. There is a synergy there that needs to be recognised and developed from that. Mr Russell, in your opening remarks, spoke extensively about the channel tunnel. It's obviously taxing your mind at the moment. Is there Freightliner going through the tax channel tunnel at all at the moment? We're doing about 60 loads a week of whisky through the channel tunnel at the moment. We're running about 30 loads a day in each direction through the tunnel, off which the southbound largest portion is the whisky. The rest is a mix of various different products. What's the capacity for Freight through the channel tunnel? Is it time-limited? Is it an overnight thing or is it...? No. The capacity for Freight in the channel tunnel is still massive. The take-up has been small. The issue is whether you go via Kent and then you've got 24-hour, effectively a 24-hour opportunity to hit the channel tunnel. If you go HS1, you only have a limited window between 2,300 hours and 05 in the morning, five nights a week, and there are only five paths in each direction for Freight on HS1. That is a limiting factor. However, there is plenty capacity to go through Kent and through the tunnel. As I said, you've obviously been addressing this issue. Do you feel that you're making progress and you're going to succeed? We are making progress. Our biggest challenge with the channel tunnel has been the economics of getting it to work against short-sea. What we had to do was go for a European wagon rather than a UK wagon because it was half the price per day to use. That meant that we had to use HS1 because it's a wider wagon, which gave us benefits and speed but a slightly increased cost. We can now do a rotation from leil into barking in back in 24 hours. The service is very attractive in terms of its operational capability. Price-wise is a different struggle. Where I'm frustrated is that if we'd used a UK wagon, we could have come through Kent and we wouldn't have had the fixed time criteria that we have because of the HS1 constraints. However, the cost of the wagon just took it away as an opportunity. Did you make it a longer term? What is HS2 going to do to the freight business? I personally have a view that HS2 will add no value for freight. If anything, it will add a complication because of the congestion that it's going to cause on the north of England. When HS2 stops and they move on to the traditional network, I think that you're going to have more congestion pushed up towards Preston area, which will then give us an issue in capacity for our freight. By congestion, what do you mean? If there's more passengers on HS2, then there will be more passengers catching the train to go north? Potentially. That's my fear. All the talk about HS2 will take volume off the traditional network to high-speed trains. I don't see that. All your passenger rail operators are still going to want to offer their intercity services rather than just an HS2 solution. I don't think that it will throw up a huge additional capacity for freight on the traditional network. Longer term, if you look 20, 30 years away, it actually doesn't do anything for the long-term benefit of the gauge for freight. I think that we need to look at a spine up the UK that has a European gauge capability for freight rather than necessarily look at how we can achieve other benefits for freight. Would that find agreement with? I don't know. At the end of the day, it's a hard call to make. What may happen is that it could stunt future growth. I don't know whether today's freight would be catered for, but we're hoping to see today's freight increase. Of course, it's forecast to increase. That's the concern. They will build in capacity for the traffic levels that we have today, plus probably a bit on top. Who knows? The freight business is notoriously fickle. We set out plans based on what a customer says, and that customer could disappear in two years' time, or that factory could disappear in two years' time. It changes all the time. It's not all the passengers where you have a housing estate and people are going to travel from work to get into the city. That's fine. That's kind of okay. If you run a train from there today, it's likely that it's going to run for the next 100 or so of years, while those houses are still standing. Freights are totally opposite of that. It achieves isn't it? Would it be fair to say, then, that if we're talking about HS2 and all it can achieve, we're going to have to do something quite deliberately to improve freight capacity, otherwise HS2 is not going to benefit the freight. I think so. Maybe a specific freight only line, still allow freight access onto the other lines, but do something about a freight only line, because it could be a major issue. Or a freight presence line. We're talking about the cost of rail. Rail comes with a fixed cost, and when you get it right, it's very advantageous. If you get it wrong, it's very costly. We've started now since last year, when they put up the charge for every minute that you're late onto the network. So if we'd lay a train onto the network, I think it's £40 a minute. £40 a minute, sorry. It's £40 a minute if we'd lay a train onto the network. So we'll now dispatch a train partially loaded, while fully loaded. But if we get laid on the network, it's virtually impossible to get any form of compensation to give back through the supply chain back to your customer for delays. So again, freight, as seen as the second best friend, is not given any form of preference. So certain customers, we've got, they all know, all know the cut-off time to get the train ready, get it prepped, get it checked, safety checks and get it out, out of the gate. Now we can't knock it out of the gate, so a container gets delayed in the M6 on the way to Durft in only five minutes. Sorry, he has turned around and taken up the road, because again, we're not going to hold the train back for that five minutes. So freight is penalised at the same time, so customers will not take the risk. So certain customers will, but it's not time sensitive. But more freight in the UK now moves very much in a time sensitive and a time window. So again, that takes a way to give you flexibility, no to enhance and hold more on. I mean, you have the situation whereby a train could be delayed coming into us because of no fault of any freight operator or ours, it could be a passenger delay, causes a train into Coatbridge three hours late. We therefore have to turn that train and get it out, you know, in its normal time slot. But it takes time to unload and reload a train, and I've watched trains get a Coatbridge half empty when we were screaming for space, because we had to because of delay thing. There's no leeway given, and that's an issue. Certainly, I think your trains were all held at Davernry. They could have been moved up country, but there was a total ban on moving them. So there is this hierarchy within the railway whereby freight trains tend to get put to the back of the pile. That's understandable, a passenger votes, freight doesn't vote, but there has to be a realisation that we want the shelves filled in shops. You know, we can't behave like that. There has to be some kind of a priority given. I think that the Royal Mail trains get priority, but... That's a good point, Kate. I mean, in some countries, some commodities will attract a different priority within the rail network. But in the UK, you've got nuclear and you've got Royal Mail that sit with a higher priority on freight. The rest sits with a lower priority. I think that we should have something where we can. For example, if there's a major incident in the network, freight almost stops until they resolve the solution for a passenger and then freight will drip back in. That, for the FMCG trains, is a major problem. And certainly for port trains as well. In the back end of the year, we're really busy. What will happen is we'll have goods getting brought into Coatbridge four or five days in advance because we're really stuck for space, you know, a train space. We have a timetable service that we can't afford to throw another couple of trains in just because it's busy. So we work to vessel deadlines. So we're sitting with a ship at Felix Stowe's going to sail on a given day. We've got to get it in that final train. And of course, if something like that happens, that's it. You know, you've missed your market, I've got Diageau on Scream and I've missed five boxes that were urgent for New York because we've missed this ship. So there is a real issue. They are time sensitive not all the time, but there are occasions whereby it's critical that these trains get through and there should be maybe some way, you could put some priority to say, look, this is a really hot one. Can we get this one through the network? And that doesn't seem to happen at all. And it's very frustrating. One train is suspended from Durf to Scotland. It takes nearly 50 trucks equivalent to move those goods. And 50 trucks are not sitting out in the marketplace where they used to be, come back five or 10 years ago. So that has to be put into perspective. No, if I'm sitting with a train and we run one train near Dedicade every night for Asda, we'll deliver to stores in Aberdeen, ourselves in Kent, for Asda at Litterworth. And you'll be lucky if the goods will probably do maybe 35, 40 mils in the public highway. And that's tomorrow's goods on the shelves requirement. And that can take 50 trucks if not more to move that length if a train's later suspended. So it has a massive impact in the whole of the Scottish economy, how we handle that. Did you have a supplementary? No, it's fine. It's been covered in that case. Adam, you have some questions. Yeah, thanks. My questions, some of them have already been answered by you, so I'll try and run through them fairly quickly. The first question was in terms of the capacity for expansion of Scottish rail freight. Are there any particular parts of the rail network in Scotland that are constraining, would constrain future growth? I don't think we're sitting here right now with parts of the Scottish network that's constraining growth. I think that our issues for Scotland are probably more in England, in terms of where our goods are trying to get to or where our consumption is trying to come from. It's fair to say that, if we take one of our customers, Tesco, as an example, Tesco would love to have a rail terminal at their depot in the MA corridor. That has an issue because of the amount of passenger traffic that's on that corridor. On specific instances, yes, I suppose we do have a potential blockage of what their desired aspiration is, but in reality, between Grange Mythe and Coatbridge and Mossend, you're almost servicing the MA corridor as well as you could. They would have a slight benefit if it was on their doorstep. I think that when we come to know where we can open up more routes, more important for me is where we can get more volume as a capacity on single trains. Again, we're the first ones to get restricted in length. We know that we can run longer trains, but again, any suggestion at all about delays, the train gets shortened. Then we talk about the capacity in the train. We launched last year the 50-foot container that, a few years ago, the Government brought out a trial to move from 13.6 curtain-siders to 15.6, so it went from 24 pallet footprint to 26. Again, it disadvantages to rail because we were still very much stuck on the old 26. We have now brought out containers for the retail sector that can carry 30. It was great. In north, we are bringing another four pallets, 15 per cent more volume north, at zero increase in cost, so we benefit to both the retailer and our customers. The cost on rail, 18-metre wagon, no disadvantage. Those containers now running south with one pallet less because they're slightly heavier. The retail is getting the benefit coming north, but there's a lot of spare capacity. I'm sure that Ken and I looked at our trains, know of weight on our trains per unit. There's a lot of spare capacity on the existing services that we can get the benefit of. We can just get them to the rail service and also get longer trains. That's an important one. The loops are too short. So we're restricted on length, especially daytime trains. We've had this suggested to us that we should be looking in terms of transport corridors. Rather than just looking at dualling the A9, for example, we should be looking at the whole transport corridor and looking at investing in something like maybe longer loops going north and that type of thing. Do you agree with that approach? Our train to Inverness is restricted to 20 loads, whereas from Glasgow to the Midlands, we're running up to 36 loads on the maximum-sized train. So the scale differential has a huge implication on the unit cost. I was interested in the comments that Network Rail made to the Aberdeen business community recently, which is basically to make the case if you think that there's more improvements necessary. Adam Ingram has rightly raised a couple of points that I was going to raise about passing loops, but if you particularly look at the north service that you've touched on, which is home to me, for example, the lack of dualling of rail is a huge problem. I believe that there's also height restrictions, which affect the issue of electrification. I mean, what Network Rail, who I met last week, told me that there is still ring-fenced funds, which is available for bidding. I'm not suggesting for a second convener that we can suddenly use that to electrify the line from Perth and Vanessa. That's not going to happen. There is a Scottish Government transport plan, there's a Network Rail plan, but what I was reassured about is that there is still still funds available to put bids in. What would you see the priority for any extra bids over the next control period to try and get some action to help facilitate more freight movements, particularly north, where there is restrictions? If we can get a longer train, what I certainly do not agree with is trying to suggest that rail is giving a bad turn because you're going to dual the A9 or you've increased the speed of the A9. Rail's got to stand up and be innovative itself and not to the detriment of another mode, so all modes need a free market to be able to do the best they can within the playing field they're in. I mean, I generally agree with that to your convener, although the point that it would make is that you're effectively comparing in the A9 route a dual route with the single track road, if you take the rail equivalent. So I'm quite happy to see equal competition, but the problem is that it's not equal because the infrastructure is totally different. I know that I'm preaching to the converted with the three witnesses to see her today, but if you want to encourage people to make choices, it's not just freight, but also passengers to say that they want to use rail rather than road. If you're comparing a dual road with a single track one, people are going to vote with their feet and still take the car, so I've got in general, I'm sure you probably agree with that statement. In principle, I do agree with it, but equally, as a business, you've always got to justify any expenditure you're doing. So, you know, just to say that someone's right to have access to a dual carriage where a dual rail route, if it can't be justified because of future use, then you've got to find different solutions that achieve the end game. Now, whether that's sections of dueling rather than the whole route, or whether it's longer loops can achieve it, I'm not sitting here with the answers, but we need to explore, because to dual the whole way would be a phenomenal cost, as it is on road. I'll perhaps leave it at that, convener. I know you're pressed for time. You've already, the panel's already discussed the issue of loading gauge restrictions, mostly down south, or the sort of change over from European to UK. Is there anything that you would want to add, particular restrictions in Scotland, for example, that might be addressed, or anything that you want to add to the loading gauge restriction point? Personally, my view is that if we need an alternative route for freight that to achieve the capacity issues moving forward for the next 20, 30 years, then we should actually look at a route for freight that is capable of better gauge. There's no point in doing it unless you do it right. I would be voting for a central Scotland down to access to the channel tunnel on a European gauge capability, but I don't expect that tomorrow. I think it's good stopping the gauge for actually running the actual train on itself. I would probably focus more on the actual gauge height restrictions for the containers. I've got a good example just now that we talked about asd a few minutes ago. I mean, we can run asd or from Lutterworth on a 9ft 6 container. We've got to put an 8ft 9 container to go to Aberdeen, and the idea is the same container should go into Grangemouth DC and come back out with Aberdeen on it. And it's the problem we've got about 9ft 6, I can't go up these coasts line either. It can only come up the west coast main line. So again, trying to get a standardisation of gauge height allows more flexibility with the boxes. Again, give customers more flexibility on the load fill. And then it makes it more seamless. Long time ago, I was involved in a group in Aberdeen, and because we were running 9ft 6 boxes, we were becoming more of an issue, we said we have to get the gauge increase to Aberdeen. We were looking for W10, which will take a 9ft 6 box and a standard height bed, again. And the costs that were coming out were horrendous, absolutely horrendous. So the container gauge at that point wasn't even up to W8. You couldn't even get an 8ft 6, because over the years, tracks had been built up and we'd lost that, despite the fact that we had it years ago. And when we looked at the costs as well, there's another way we can get special low bed height. Rail wagons, can we get FFG? If Mohammed won't come to the mountain, can we get the money to build these special rail wagons, and that would go in as a pool for any operator to use? And that was the way the thing was progressing. And then it was taken over by, I don't know who, which group took it over, but that part dropped out of the equation. And the special, the need for the special rail wagons was kind of lost, and they went ahead and they increased the route. But we were still in this bind whereby you still need a specific set of rail wagons, and they're a huge cost, and they've got a 30-year lifespan. And at that point it was chicken and egg. Now you move megas and you can move them with nine foot six, but a freight liner, 60-foot platform, no, we couldn't do it. We'd have to use one of our low liners. And whether that could something, I know freight facilities grants, I don't think they could apply to that. But that would be a solution. Rather than having to raise the tunnels and raise the bridges, get these for any use for you. If you're moving containers in that route, or trains in that route, you have access to this rail wagon. So if you're looking for grant assistance for the equipment as opposed to the infrastructure. I, looking for a common pool, rather than going to huge it, because I think, you know, some of the costs that were coming out from Network Rail to get the route to W-10 were huge. And you have to look at the justification for that. Is there sufficient business that's going to move by rail up there to justify that? There may well be in the future, but at that point there wasn't. But they're certainly buying the special low bed rail wagons and putting them into a common pool for any operator to use who's traffic in that. Ken wants to use them, or I want to use them, or Andrew wants to use them. They're there for general use. Okay. And that's something that could be a better option. That's something that could maybe sit in the same way that the ships were dealt with for ferry services. Because what you want is something that's commonly available to all the operators from a central pool, rather than necessarily each operator having to invest and therefore not getting utilisation. That's an interesting observation. We'll consider all this for our final report. In terms of, we talked about freight facilities and rail terminals are another. We visited some as a committee, and we're probably going to visit some more. Does the industry have sufficient rail terminal capacity to handle our free business? We probably have enough rail terminals. You might say that there's the odd geographic area that could maybe justify something, but we've got enough rail terminals, but the rail terminals need some help to increase their capacity. So the infrastructure within the terminal could do with getting changed in order to enhance what the terminal is capable of. The footprint is fine. The infrastructure inside is just not quite right for what we're needing now. So what's lacking? Well, I mean, if we take Colt Bridges, an example, they're working with 50-year-old cranes. I'm sorry. I've got limited span and capability, so an investment to put larger, more modern cranes in would increase their capability tremendously. So what's holding you back from doing that? The cost and the difficulty in our market is that we don't get business commitment. Trains that run out of Colt Bridges are bought daily by customers on a slot basis, and there are no customers who will say, we will buy a slot from you every day. Our business peaks and troughs. We run daily timetable trains, and some days they run out half empty, some days they're overflowing. In order to make a commitment to spend, you need to know where your business is going to be there. If you look at our market in England, 60 per cent of our trains are contracted. Shipping lines by 60 per cent of the trains. Whether they put a box on there or not, they have that certainty. In Scotland, no customer will commit on a contract basis. So we have a situation where today trains are full and for the next three weeks it could be empty. So you cannot build a business case on that. It's frustrating, and Freightliner, as a group, have always had a very strong interest in Scotland. Despite the fact that our trains run at the margin a lot of the time, again on to the container situation, because we're bringing very little from the south, if you look at our train to Southampton, it's oversubscribed, but coming from Southampton, there's 60 per cent space on it because people aren't setting empty boxes to Scotland. There's a constant issue when some of our trains at times struggle to make a margin, and as a business manager in Scotland, I've had to fight hard to keep trains in Scotland, but, fortunately, Freightliner feels Scotland is a very important market and wants to stick in there. But do they have the money to revamp Coltbridge without someone saying, we will guarantee you business? No? Scotland with a case for a new terminal. It's an easier process than going with a case to enhance a current terminal. I mean, what you already have in Coltbridge is that. A couple of you have been round it, it's a cracking site. It's a big site which, with minimal spend in real terms, could double its capacity overnight. I mean, you could really transform it. It's in a great location. As far as real connectivity goes, you don't get any better. We did look at, prior to Hatfield, Coltbridge volumes were growing, and we looked to relocate it, and we were all over the central belt, could you find a place to relocate Coltbridge? Damn hard. The only one that was possible was where we looked at the Clyde's Mill steelworks out at the end of the now M74, and that would have been potential for us, and I think Kilgath we looked at, that was another potential. But it's very difficult to find something where within two miles of three motorways, in real terms, it's fantastic. The footprint is large. We're in the right area. We're close to Edinburgh, we're close to Glasgow. It doesn't really get any better location wise. So it's not an easy thing to do, but, you know, as Ken said, it's easier to build a new terminal than enhance what you have, and I would just say to the committee, please, look first of all at upgrading what we have. We've got a decent amount of real terms between us, but with a tweak you could enhance that and probably meet the next generation, and then from there on, if you need further capacity, then we'll look at building new. So what's the scale of investment you're talking about then? Off the top of my head, probably about £8 million, I would have thought. I don't know, I don't know, but looking at when we've reclaimed our other terminals in the system who have committed volume, that's the kind of price. I support, you know, the terminal infrastructure that we have in Scotland does work, but I'd like to say that terminals are expensive to operate, expensive to run, but we should also at one stage further also about, you know, making our ports more rail friendly as well. I think there's an opportunity to move more freight physically into the ports by rail and limit that completely. It's fair to say that, you know, we're not trying to talk bad of our friends at fourth ports, but certainly when you go into the peak trading, the road holiday industry now starts to shard all the customers of premium for delays at fourth ports, because the site is just too congested, what they're trying to be through. We ran, successfully rail service in there for a few years, but the train didn't quite take it where they wanted to go, so they started to charge us for the train to enter the port, so that made the job not effective, so again, just went back to road. So it's getting that fine balance, but I think we should look at no connectivity with the ports as well. Even short haul rail can work if you actually manage the asset base properly, but really the train should actually be going straight to the berth, rather than going to a stopping point just inside the gate. We had obviously the port authorities in last week, and it got the impression to some extent that there was a bit of competition between rail freight and the ports, which didn't really sound very helpful to us. There seemed to be a lack of co-operation, shall I put it that way, between port authorities and rail freight operators. Why is that the case? I think that there's more export freight heading south to catch a boat than going through the ports in Scotland, and it partly is just the time congestion at the ports. As far as freight line is concerned, our entire business model is built on relationships with ports, and that's what we do. We connect rail ports to inland UK. The only competition that we have in Scotland is freight line that does not compete with the road in Scotland, because of the distances that we run that have been nonsensical to run the road vehicle. Our competition is coastal feeder, coastal shipping, which runs out of Grangemouth, so the vessels go from there over to Rotterdam and Antwerp. The competition would be would we put a whisky container into the port of Grangemouth to go on a ship there and sail across to Rotterdam and Antwerp to meet the big deep-sea vessel, or would we take it to Coltbridge and put it in a train to go to Felixstow to meet the deep-sea vessel? Obviously, my preference is a train to Felixstow, but 80 per cent of the market will go the other way because, of course, we cannot compete. It's an unfair market. We have funding that we don't have, and the major shipping lines suit them to get vessels. They can, but less calls to the UK if everything ferries over to Rotterdam to them. To me it's bad for UK PLC, and whilst I always we need ports, we need Grangemouth, we need feeder services, I think the balance is out, but that is competition, and that might be what they're referring to, that they're competition with freight liner for deep-sea exports. But it's not really, they don't operate the feeder ships, but they obviously service them, so that's a competition that you may have heard of. And we also, you made the point early on about the fact that our terminals, rail terminals, the problem is more about the road network round about them, and that's a similar message we've got from ports as well. The last mile they talk about in terms of the run into the ports, so you think we should be focusing there in terms of the road networks round about the terminals as a choke point, if you like, in your whole business. Certainly for Coatbridge you round about 600 lorry movements a day in and out of our site, and we are two miles from the nearest motorway, so you're going through a town basically, and kennis vehicles and air vehicles between them round about 600 a day. A lot of movement to one site, and the roads and the response we've had so far as North Lancer Council tried to shut us down, and then at one point they suggested building a road out from the back of the terminal as turning our site round and building a road directly to the M73. Great, we thought, except they wanted us to pay for it. £6 million, thank you. No, sorry. We have a terminal, we have a road access, and in fact before we were privatised we spent £250,000 building a new access road into the terminal to mitigate the effects of our vehicles on Garcherry Road. So it's, you know, it's, it is crazy in Grangemouth. I think there's been some upgrades to Grangemouth roads in this year. The majority of Scottish whisky basically is bottled in the west, and again the majority of Scottish whisky, probably 60% plus, will be exported from east, and that whole M80 corridor is just a nightmare. Now we before before know about getting the Avon Gorge, no investment in the Avon Gorge to get an alternative route to get to Grangemouth. Again, okay, just now with the new house interchange you wouldn't pick the Avon Gorge down the M80, but again things like that, how can we get to Grangemouth? Quicker, the new road depth was actually not back into the port now, but there's quite a gridlock now, you know, if you take it down the Denny part of the country, there's a seized gridlock there with volume of traffic trying to, you know, do that, do that route. But this is what I say, road rail and docks, that we all have to come with the same strategy. Now we want to make the whole business more efficient, more effective, and princill, our objective every customer is how can we reduce the unit cost to get to the end market? Yeah. Well, this has been raised with us by previous witnesses as well, so feature no doubt in our report, convener. All right. Thank you. Just to clarify, Ms Balls, you're talking about the competition between Freightliner and Rotterdam. What are you saying that you aren't able to compete on price, but you are able to compete on speed and quality, is that it? Our traffic, the traffic that we get on our trains is the VIP traffic. We compete where, in simple terms, if you are Diageo and you have a box to move to Shanghai, and a very important load for Shanghai, if you put it in a train out of Coltbridge, it'll be in Felix Road the next day or Southampton or wherever it's sailing from, and it'll be on the ship. That's it. Job done. It's on the ship. You've got that certainty. If you put the container on to a coastal feeder out of Grangemouth, it will sail across to Rotterdam. It's quite a small ship, obviously. It will sit there sometimes for a couple of days because of weather or because there's a bigger ship getting handled. Eventually it's taken into the port, and the container is discharged from it and put in a holding area. At that point, the containers then have to move sometimes 20 odd miles across the port to get on to the ship. So there's some 10 different links in that chain where things can go wrong. Therefore, it's not so sure. However, it suits the shipping lines for a lot of cargo to be fed to them to Rotterdam because it means they have to make less UK calls. Therefore, they will subsidise the feeders to a certain extent. Obviously, it's a sustainable mode of traffic sea, so they get EU funding, Marco Polo funding, et cetera, so we cannot compete in any way, shape or form. So any business we do get is quality of service related. Costs probably about £150 to, I don't know, it depends who you are and who you're dealing with, but £150 is roughly cheaper than putting it in rail to put it across to Rotterdam. They've always existed, feeders have always been there, and up until Hatfield, rail had a very, very healthy share of the market. We had, post prior to Hatfield, our volume, deep sea volume through Coltbridge. Bearing in mind, in real terms, the deep sea volume has grown a big percentage since that, but in those days, 1999, I think we had 116,000 deep sea boxes going through Coltbridge. That dropped post Hatfield after the October 2000 or 2001, whenever it was. That dropped to £46,000. Huge share we lost. The reason for that was that we had to reduce our train offering because Hatfield was speed restrictions in the network. Therefore, instead of one train and one train driver to do a run, it was taking maybe two or three. We had to cut our train services and the Hatfield debacle really went on from the October until the April and business started to leach away. What happened was the market, the whisky industry, started to produce three or four days ahead of where they used to produce to meet their market so that it could catch feeder and be rooted with feeder. Once you have a sea change like that, it's very, very difficult to come back. A customer, a passenger will say, trains look no bad today. They're starting to run again. I won't bother taking the train. I won't bother taking the bus or the car. I'll go buy a train. In business, that never happens. Once that change has been made, the industry in Scotland realised that we were important to them and they continued to keep us and continue to thank the supporters. The spirits industry has been the backbone of our site for a long time. What really saved us from going under was probably domestic trains, kens and Andrew's trains coming in because the terminal at Coatbridge is very high fixed cost and any location of that needs volume to survive and that brought more volume in. I'm pleased to say from the 116,000 down to 40,000 this year we'll do almost 90,000 so we're on the way back and that's great but in order to, we will come to a sailing then and we'll maybe start to struggle if someone wants to move more volume. That's why an upgrade to Coatbridge is pretty critical because I know kens got other trains, probably Andrew has in the pipeline as do Freightliner and they'll come a point where we think, oh that's us, you know so for a very small spend I reckon that that site could be transformed and you'd double the capacity. In terms of the competitiveness of Freightliner's offer, if you were to have the level of investment that you have indicated would be necessary, what would be the implications of that? Would you be able to increase capacity? Would you be able to lower the cost to the customer? Yeah well you could have a secure operation, we at the moment because of the layout and the infrastructure of the terminal we've got to handle every container three times because we don't have sufficient space under the mainline cranes to store so what happens when we're emptying a train we put it onto a road vehicle, the road vehicle takes it around to another part of the terminal that's put into storage so that's a lift you're not having to do, that lies in storage then another lift to get it back out. So you would cut that, the costs of the terminal, the operation would be cut. We also have two separate rail areas, one where we manage kens trains, one where we manage our trains and in order to get trains out of one area you've got to move it into another that means you therefore need space in that other one so it would mean that we could increase capacity, if you increase the capacity you can cut the cost but in real terms rail costs have come down when I started with Freightliner it was 1982. The cost for moving the price that we quoted to a customer for moving a container from Glasgow to London was around about £20 more than we quote today for a container from Coatbridge to Felixstall so in real terms our costs have come down massively and we've put huge investment into the network and we really have you know and we've tried to compete with FEDA where as lean as we can be but there's a limit because the trains that run out of Coatbridge will run day and daily if they were full every day both back and forward our prices could go down the unit costs would go down but they're not a lot of time there's spaces on them and we just don't get commitment. The heavy haul market with our bulk division that's a different animal entirely customers commit you know a coal customer or network rail will give them a contract for three or four years and said fine that allows them to go out and invest in assets but in the intermodal business especially in Scotland no traffic's here today and going tomorrow. I was going to ask you about the barriers to unlocking the investment because clearly Freightliner have not been able to make the £8 million investment at Freightliner although I think you've invested in other parts of the business in other locations in the UK there are obviously reasons for that but what are those barriers and how can they be overcome? The barriers as far as investment I mean we have bought new mobile cranes for Coatbridge I mean equipment becomes life expired we will renew it but there's a real step change needed which is a big investment and the terminal's working just now it's working it's coping at the moment but you know we could do with an upgrade in order to advance the barrier in Scotland is is the fact that no business would commit to us they will not we can't go to the the board with a business case to say can you spend money in this where's my return we don't know because no one will tell us when they're going to give us whether they're going to continue to give us business that's a Scottish issue we looked at FFG funding for the terminal and it's not possible because we're a multi-user site we have no customers who are going to sign a paper and say yes if you do this we will we will continue we will we will tell you will give you x amount of boxes a day in some ways it was easier for Kenneth and Andrew Andrew to go and see I've got 25 trucks a night going from Scotland to the Midlands if you give me investment I'll put them in the train and to do it I need this the sense of lorry mile formula works out it stacks up Coatbridge is an established railhead already with 200 customers there is no way in this earth I can make a case for it and I've got to pay tribute to the Scottish executive the freak grants in farmer etc did what they could to try and help us and assist it and we looked to all ways that we could unlock this funding but we kept coming across barriers because it just wasn't possible under the rules so something to assist and I think there's a real problem with freak grant take up just now I don't think it's the same issue but there must be problems that you know you guys are facing as well whenever you try to do something so I'll let you go in on that the problem with take up is that there's no schemes coming forward I think there's two schemes that they may come forward this year well I know one will and I'm told there's another one but they just haven't had the application through that met the criteria to allow them to progress but I think in terms of the more important point is it's not so much the cost in the terminal but the cost for us using the terminal is impacted at the moment because at certain times of the day we're bringing loads back for one of our trains the terminal's sitting full so we've got to bring the load into our own place and then later in the day when capacities feed up about take it back to the rail terminal so it has a big cost implication on us the way it's currently working so if we could increase the capacity it would help the overall cost not necessarily just the cost within the terminal okay and I think holliers in Scotland generally will have the same issue where you know you're having to hold equipment for a specific train until you've got the window for opportunity to deliver for that tree I think it's good to say the road transport of the UK is a hole we don't we don't run a cost plus model the market the market rate dictates the rate of the job your cost management dictates you make a margin and you lose a margin so you've got a very fine balance there know of service and the customer's needs and expectations and also then make sure you can make a margin at the end of it as well so it's all working together trying to get this cost control right because it's not a question that we can take out you know some money in respect out of no case no cost will that be benefit to us and to the customer it might just make the job finally go into a bit of a profit for all parties rather than a loss James I'm going to ask some questions about the relationship between port and rail which have already some of it's been asked and some of it's been answered but I wonder if you could give if you have any more to say about the provision of rail facilities to and from the Scottish ports as well as access between the cane railhead which somebody mentioned earlier on I think it was you mr Malcolm do these provisions limit your ability to increase the use of rail to transport freight to and from the ports and what actions should be taken to resolve this issue quite strongly the last few years with the fourth ports fundamentally we recommended they should go for a grant to extend the rail siding on the port right down to Keeside. We ran the shortest train in probably Europe it was 42 miles from Linwood in the west right into the port and one of the options that we were trying to mark at that time couldn't get a lot of buy-in from fourth ports and it was was the question that we should really become an inland terminal where you're consolidating loads for instance at Linwood and sending a train right through to the key to go right on to the boat but the train would have to go right to the boat yep and that was fundamentally you know take a lot of cost out of the whole supply train um we we put we put the train on board and the train wasn't a profit maker for Malcolm's the loss was less doing it by rail than it was doing it by road because that time you had the Castle Cary issues Grangemouth issues the kings and brish issues it took a lorry virtually no about five hours to go to Grangemouth and back yeah where you were sending a train in with if you're lucky you had 40 bucks on it being 20s or you're only 20 standard so that that discussion took place um it lost momentum as things changed and different priorities changed and it's still something we think a lot of scope for do and you still in contact with them about this issue or it's just went off the radar all to go we tried for long and hard and uh eventually became cost negative even more by putting a train in for the the started charges access charge for training again and it just it made the whole job not viable so it all went back to road does anybody else have any mr Russell have you get any similar I agree with what Andrew Cynon McGrangemouth because we were involved in the discussion through them as well um they um and it would make a fundamental difference if they extended the line down to the key side rather than the current terminal they've got equally the current terminal they've got very constrained so it can only take a very small train which adds complications as well but if you look at the other ports that we've got you know albeit Grangemouth will be the largest in terms of intermodal volume um Rossife has got gauge constraints anyway um to get in and out of Greenock has got gauge constraints so it's going to be very challenging to get them linked into the rail network for the current equipment type that is traveling because there's such a high percentage now um nine foot six boxes high boxes are becoming um they're over half of the percentage volume now I would say so that that's creating the problem for Rossife and um Greenock news going by and I first started with Freightliner we ran a train to Greenock every day with containers because you used to have before the really deep sea vessels typically were around about 2 000 TEUs you know and obviously they've taken up an equivalent depth of water today's vessels 18 000 20 000 they're growing to their massive you know they take 14 15 meters draft so and but we used to run trains every day down to Greenock but after the big deep sea operators decided they were moving they were closing Greenock and they were going to start all of their operations from the south of England and boats get bigger etc so the line fell into disuse and there's a tunnel at Greenock I think last time we spoke to Network Rail about potentially opening it it was something like a million and a half to do the work to open this tunnel but there's also I think housing being built over it so it's probably a big ask to open that line again but in the first when the move first happened Scottish exporters obviously were not happy at this because they had lost a Scottish port access to deep sea and in those days shipping line said don't worry we'll give an extra subsidy to traffic from Scotland which has got to travel down to Liverpool or Manchester or not Manchester Liverpool or the hull ports or alternative really deep sea ports and they gave an extra say 80 or 70 pounds which in those days was fine all of that's lost now so of course Scotland's got to transfer all that way now I don't know what the capacity is in Greenock whether they could take in a deep sea ship I know Anderson could but I don't know whether Greenock could but certainly a rail link to it would be difficult unless she did something completely new. Outside of the having the line right to the key is there anything else that you would have that would be able to resolve some of the issues that you have and it doesn't seem practical and certainly some of the smaller ones. Back onto rail I think I think it's back to invest in infrastructure at both ports. Train length train length would help but on the key would be. I think it seems like we're in a longer train going in I mean it runs into the empty container park yeah so they don't want it there you're taking a loaded train in and ideally we're trying to get loaded import boxes back out so they've got the shuttle that goes on up and down the port. Ms Walls you mentioned I suppose one of the infrastructure obstacle in terms of the Greenock key there but can you identify any other specific infrastructure obstacles to the free flow of freight by rail to Scottish ports and if so what improvements might remove these obstacles or deliver further benefits? The second work that Kenneth and Andrew have said we don't move trains to Scottish ports just now we used to move to Greenock and that's a historical thing. Aberdeen was one we had when I first started with Freightliner we ran trains to Dundee and Aberdeen to the ports and Aberdeen obviously the closed Guild Street which I thought was a backward step to be on this it's right across my harbour although I believe the harbour now has Waterloo Yard I think they've now got a rail facility connected to there so I think possibly you know given the level of oil trade and I see the prices going back up again so it might not be dead in the water but there's there's a lot of traffic moves up there we move a lot of it by road that should be in trains you know so I think a direct link to Aberdeen harbour would be would be better and enhanced link to there would be good. I don't know about anywhere else indeed. Rossithe has always been talked about and they do have a ferry there and freight but again it's like you can go to it but it's gauge restricted so you'd have to use a special low bed wagons for Aberdeen as well because Rossithe's not where you really want to send a truck from the west to. It's an ideal port for something that happens now on the north side of the force it's not an ideal port to run to if you're running though likes a spirit from the west. One further question I'd like to ask it and it was based on a comment you made earlier on as well as about the deep sea port. Would you like to expand on the benefit of deep sea port? Pretty good as far as inward investment goes you know at the end of the day if you're an international manufacturer looking to locate a plant you're going to look at your transport your cost to market if you're a global exporter how do you get the goods to market if you are producing in Scotland such as Diadu and Shivas and all these people do they have to look at how they get it there so they can either at the moment put it in a train from Coltbridge or wherever or more said possibly down to one of the southern ports and get it in a deep sea vessel from there or they can take its range mouth and put it over to Rotterdam and Antwerp and put it in a vessel from there. That all has costs. There was a scheme some years ago to put a deep sea port at Hunterson and I was quite interested in that I thought it would be a good scheme it would have given Scotland an international port so it's a different scenario then whereby you've got to go to another country effectively to get your goods to market as opposed to running down the Yershire coast job done. The other thing with the Hunterson scheme which I think is now is gone but the benefit of that was I suppose the the concept was at the moment the vessels come over from America in the States etc South America, Canada they hit the UK coastline they go down the UK coastline through the English Channel and go to Rotterdam. Cargo's unloaded at Rotterdam then it finds its way across on feeder vessels to Grangemouth or anywhere else in Europe. Similarly traffic coming from the Far East would come up through the English Channel same story. The Hunterson scheme was based on the fact that the vessels would come over from the States and the vessels would come from the Far East and the two of them would meet each other and swap cargo so that vessel from the States would do all this European cargo off here or Far East cargo and sail back over and it was a scheme which was was kind of fronted by Clydeport at the time and they brought in a serious industry contender and he had he had interests there so that was one part of it but the other part of it you would have containers obviously landed on key as exactly in Felixstow or Southampton containers that landed there coming to Aberdeen. What you could have done with Hunterson was anything for the UK could have been offloaded at Hunterson and you would have run it from Hunterson down to the northwest of England down to the Midlands. Apparently something like 80% of what comes into Southampton goes north of Birmingham. Why is it coming into Southampton? Why is some stuff not coming in and it would help this and I always suggest that the UK is like a football field with a goalpost at one end. Why is everything going that way? It would have transformed the rail because we're all trying to funnel in so what you would have had was maybe a shipping line choosing the UK hub or one of the UK stops anyway as Hunterson so if one of their containers was loaded in another part of the country it would come to Hunterson rather than go to Felixstow or Southampton or Tilbury. Now you might think the straight line and that's bad news but it's not. It would be good news for anyone you know I mean because you'd have trains running both ways instead of this capacity funneling this way in the network you'd have a much more balanced way of working but the scheme's gone and I think the other one that we were looking at they were looking at a scheme up at Scapa Flow as well and I believe that still I think Professor Alff Baird was fronting that one and that's probably still on the drawing board but it is something I think Scotland should be considering. We export a huge amount of traffic to the rest of the world. We are big big exporters and yet we don't have our own port and it seems it seems a bit odd that we're building and financing ports in Rotterdam and Antwerp and Sevruga to the rest of the UK ports and you know ultimately be better at a Scottish port and that's me of course. I'm my soapbox but you know I don't know how Andrew and Kenneth feel about this but Do any of the other ones have any comments to make on this? I think one of the Hunterson which was probably the only option for a deep sea port was rail would have to work because nothing in the right mind would run trucks up and down to Hunterson. It just does not have a road network. No, anyway we used to run the iron ore into Ravenskig out there many years ago and a lot of them have been improving investment in the air share area. I wouldn't say this, improvement to the degree that you want to run volume of trucks so it would have to work for rail. They had a plan to do a three times bypass, a direct road link into it. I mean that was part of the plan you know because it was recognised that the road access was dreadful and initially it had to be rail and there was a stage development. I think that the issue around it is the triangulation of volume. If you look at the UK consumption profile and what we consume in Scotland, sorry, if you look at where we consume our goods it is predominantly for the UK that it is population based. If someone is bringing a load of toothpaste into the country it goes into the Midlands. It then gets disseminated and Scotland will get a pallet. The issue is that they will not put a container of toothpaste into Scotland to service middle England. I do not see a fundamental change in the way that people ship their trade around the world and so Hunterston, while it would be attractive for Scottish exports and a few Scottish imports, I think that the issue will be that you will have too many empty legs. The main focus of it, Kenneth, was not goods landed here. It was this vessel interlinking. It was the swapping of containers between the two vessels which were taken out of the need to go round the English Channel. It appeared that it might work. I think that we are also now at Teesport playing a bigger part as well, known freight, in and out of Scotland. Absolutely. At Liverpool or Liverpool, C4 is big and they are looking to do what Hunterston was looking to do. I think that the key for a more pointed view in a logistics player would be to try and make our own existing facilities more efficient before we start looking at how we should open up something new. I think that there are a lot of opportunities to improve what we have currently got. That is how we get that improvement through the sustainable for the medium to long term. I do not think that we have a consensus on that point, but thank you for your evidence on the list. Can we move on? Can I appeal to members to perhaps rationalise and condense their questions so that we can get through all the issues that we want to cover by the close of this session? David, over to you. Some of my questions have been covered, so I am sure that I can listen to your comments earlier. Can I take the witnesses back to freight grant schemes? It has already been discussed, as you know. We all see the logic of them getting freight off-road on to water and on to rail. You will know that we raised the question when we reported to colleagues last week. I personally was quite surprised to find that there has not been a successful award for freight facilities grant since 2011, although, in fairness, under the waterborne freight grant, there was one of almost a million to Boyd Brothers at Corpac, which you will be familiar about, and some examples under the Modeshift revenue support scheme. Why, particularly, is freight facilities grant clearly not working? What can we do to improve them? Clearly, it is in all our interests for climate change, for efficiency, to have those working. I think that number one is that we have had a lot of very strong support on grants since 2001 when we first started involved in rail. I compliment all parties who have been involved in that and living that. We have brought a lot of very innovative ideas to the table. You have heard a common theme across here, which is the word commitment. In 2001, you found that customers were being quite innovative and would commit to new ideas so that we could come for a grant with a word commitment backed by our suppliers, customers and so on. A lot of that is weird to try and revisit again for some new grant, maybe new grant to support some existing grants that we have already executed and used up. However, as I find line by going for some additional grant support on something that has already had grant funding, another question is, is there an opportunity to get grants to retain something on rail or to bring something to rail? I have raised the question with the Transport Committee. A few times we have had a few customers just now, which we lost last year because of some disruption in our rail network and services as we changed suppliers, although we have won most of them back. Like Kate said, it takes years to get people on to rail. It does not take long to lose them. We are in two more just now. We think that there is limited opportunity to bring new volume to rail and doing more of the same. I mentioned that we are trying to get heavier weights for intermodal traffic. I think that that could sweep people to start using rail a bit more and they have got that advantage over road. However, likewise, we are currently doing an evaluation of our own customer base of what we think could be exposed to moving off rail because, again, it is not sustainable in comparison with the cost for running by road and the flexibility as well. We are very complimenting the grants that we have had to date. We have maybe been a wee bit sloken back with some new innovative ideas to bring new business to rail because we have even focused a lot on the last two or three years of how we retain existing business on rail. We think that that is more exposure at the moment than it is bringing new business. I would say that the fundamental difference for us has been that we were getting three, five, seven-year contracts in the early 2000s. In 2008-09, with the issues that appeared around the world, suddenly everything went to annual negotiations. Every customer that we have almost now negotiates every year and has done since 2008-09. That is fundamentally our problem in being able to provide a commitment for the grant. Maybe we need to work and look at how we can overcome that problem in order to allow more grants to come back through the system. I do not know whether that is unovercomable or not. Similarly, because of the mechanism just now, it is impossible that we cannot get customers to commit to the business that is currently moving with us. If someone lands tomorrow and says, I want to run three more trains a day and I will put them into Coltbridge and I will give you that revenue for the next three or four years, we could then go and say, right, okay, that business is currently moving in road, take off road, can we qualify for a grant, some new cranes please, but that is not going to happen. That to me is the issue with it. We have generic growth, but we know that we will grow, but we cannot actually say to somebody when, how it is going to happen in order to secure a grant, you have to have someone signing and committing to a specific period of time that they will move goods from road to rail. Until that happens, we are not going to get it. Do you find that particularly FFTA is too onerous and too complicated? For example, Montrose Harbour, who was successful in getting a grant, had an expert consultant employed for a while to make sure that all the boxes were ticked and they were successful in fairness. Is the scheme itself notwithstanding your comments about customers' inability to sign longer-term contracts, is there an issue about the grant scheme, particularly FFTA being too onerous and too complicated? I think that the issue is just the change in the world in the way things are tendered nowadays is causing the biggest problem. We have had a number of FFTAs over the years. We have done them all ourselves. We have not used consultants and every application that we have put in we have been successful with. There is nothing wrong with the process. The change in climate has changed the circumstances that make the rules around the grant difficult to comply with. I agree with that. We have supported the grant internally. We have not used external consultants, but likewise we have always matched the minimum pound-for-pound for grants being available. We have committed to it. In this day and age, it is quite a challenge with some of the margins that we are actually working to. It is difficult. The lack of commitment has always been a feature of our business and it seems to be coming more and more so. It does not seem to be the same issue south of the border. We have a degree of commitment. The bulk sector customers, the big waste contractors, etc. will commit for a period of time, but in the intermodal business it is here today. Because Grange Mouth is here, that is the difference with us. They have a real choice, and they are not going to say to us, we will put these boxes on. Our customers themselves work in a changing market. They do not make commitment from anyone, they can be a flavour of the month with the producer, the shipper at the moment. Next year, they will say, sorry, I am using another shipping line, so he cannot really commit volume to us. It is just a difficult trading environment. Thank you for that, if you do think that that covers the points that I had. In directly a number of the questions that I would have posed to our panel today have been answered. I wanted to ask the panel about efficiency and carbon emissions. You will know that the Government has set quite an ambitious target to reduce emissions. Within that, the modal shift from road to rail can contribute significantly to that. Initially, I wanted to ask about how that could be improved in efficiency, but we have talked about height and gauge restrictions, we have talked about longer loops, we have talked about freight priority, we have also talked about the rail link to depots. Is there anything that you have not mentioned that could help to improve the service that you provide that has the knock-on effect of reducing carbon emissions? Is there any other initiatives that the rail freight industry has that can contribute to reducing carbon emissions? I think that it is well known that rail is more environment friendly with 30-35 per cent than road. Obviously, roads are getting more environment efficient with the new Euro 6 legislation that has come in, the capacity that we are now trying to carry, what we are trying to do on that side of it. I think that we have summarised everything that we have discussed. Rail is all about volume. The more volume we have got on, the more efficient it is, the more effective it is, the more carbon neutral it is as well. It is every element of trying to make it more flexible but also to get more capacity on it at the same cost base or the same unit cost or load unit cost as well. Do you think that, though, not enough is done to promote the link between all those efficiencies and the impact that it has on carbon savings, whether it is the longer loops, the bigger, the longer trailers, the different gauges, the links? Is the importance of those initiatives being stressed enough? I think that every time we, I know that we as a group, we certainly raise that very much. We are not just looking at an isolation of one part, because we are all the conscious of the part that we play in the environment, and I think that we are all very conscious of the part that we play as well. I think that I said earlier that we are on the amnod transport at heart, but we brought rail to Malcolm's. We do not want to put any more trucks on the road. We want to see a growth coming through, utilising existing trucks better, getting more capacity on to rail, and let these trucks, hopefully, support the rail that both work hand in hand. I think that every part that we have discussed is all key brought together, and we do share it amongst ourselves. I think that you have a fair point. I am not sure that it is the connection to the carbon emissions. I think that it is more a connection to the commercials that are there. It may be an element that, as an industry, we could do a bit better in terms of spreading the word of what the actual impact could be on carbon. I have got to say that as an industry, especially the rail industry, but equally the road industry, we get on and do the job and we do not shout about what we are doing. The general public will not realise the implications of a load going by road against a load going by rail. They just want to turn up in a shop and get what they want. What happens behind the scenes is not understood at all. I think that you have a fair point. I know what Andrew Sede said, 33 per cent. Freightliner estimates that to be much higher, and it is because of the profile of our trains. The wagons that domestic trains use tend to be 54 foot long or 45 foot long with one box on it. A deep sea intermodal train is 60 foot long, and it can have up to 320 footers on it, so our trains can carry many more boxes and, therefore, the benefits go up. As far as doing the trying to reduce emissions, it is a commercial issue. If we can save money on fuel, that is what we will do, and that is what will drive it. Your driver is not essential to that, but because you are driving to reduce cost, again, there are some innovations in the domestic market. The new WH Davis wagon, 45 foot long, which saves space on trains, which means that more container trains per train, and, similarly, electric traction that saves from diesel. Less loops, longer loops would help as well, and that is getting worked on because, obviously, it takes—the reason we use electrics in Scotland to move the container trains to the ports is simply because the loops and an electric train can get out a loop much faster than a diesel can and build its speed back up. I suppose that more electric on the line would be a benefit as well, but we continually invest in trying to reduce—we have brought out new locomotives, new wagons, which are more trackable and friendly, etc., so we reduce this carbon there, and, also, we have a big road fleet, so we do not just look at it in rail, we look at it in our road, because we are doing the extra mile by road as well, so I think that the whole industry is very focused on it. Do you do to make that link between efficiencies that you could make in the modal shift and the benefits and carbon savings? I think that the one thing that we do not have done very well overall is a single measure, and you can go on to the internet and find various different measures on how you measure carbon, and that in itself creates a mixed message that dampens the benefit of what we are trying to achieve, so I think that if we can focus on having an agreed, concise measure on what we are doing would be beneficial. How would that be agreed? Would that be industry and government? Industry, government and your trade bodies. You mentioned earlier electrification of the line north of Perth. Are there any other parts of Scotland that would benefit from further electrification? We mentioned the one to Grangemouth, and that is the principle one that we have. That is our highest volume line there. From a fruit perspective, electrification adds a gauge enhancement. Even if there is a route that would benefit for passenger, but not necessarily for freight, the outcome is gauge benefit. I am not the one to ask what routes would be right for passenger trains, as opposed to what we have, but certainly from a fruit perspective, if it works for passenger as well to help to support the cost of it, then it is a different argument. I think that the main routes are covered, or if they are not, they are being worked on. You could say that there is a bit of track over there, and maybe we should look at doing that, but you have to look at how many trains a day are going to run over that, and where the cost benefit is going to come. I think that the network railer on the case, as far as electrifying where they can, is kind of said that first of all we need the loops to get the trains bigger, and then electrification is in the second cherry in the pie. I think that the west coast main line is done, east coast main line is in the process of being done, and that is the main arteries. Have we ever got this other third route? Yes, obviously, but the outlying parts, I am not sure whether Teesport is electrified. The final mail is not. It is electrified so far, and then you have to change to a diesel local. I suppose to the hull ports, but that is not in the gift of the Scottish Government. There are various routes throughout the UK, and maybe we could do with a tweak, but I think in Scotland there, there is a pretty strong lobby up here for what we need, so I think that we are railer on the case. I would like to put on the record to extend my thanks to Andrew and Kaye for the time that you spent with us in hospitality during the visits. I particularly found the visits very, very useful in informing our consideration of this inquiry, so thank you very much for that. A lot of the ground has been covered. I am going to try and condense it a wee bit, just because we are maybe chasing the clock a wee bit. Would you agree that an updated national free policy is required, when I believe the current one is ten years out of date? I will condense the questions, I will roll them into one. The second part that I wanted to touch on is, to what extent do you feel that planning policy in practice, both through the national planning framework 3 but more general policy and local policy, supports the rail freight sector or does not, as the case may be? Thirdly, are there any lessons from European countries in terms of Government policy or assistance for the rail freight that we can maybe learn lessons from? Those are the three points that I would ask you to comment on. Michael Dewin. So, planning system, Government freight policy and lessons from other parts of Europe in terms of infrastructure. Who wants to go first? Planning framework come out. David Spave and rail freight group was talking about it, where rail was barely given a mention. There was umpteen schemes for ports, et cetera, but rail just seemed to have dropped off the radar. That is an issue now. That might be a problem that we have as rail freight operators and rail freight and logistics partners, if we do not shout enough, where other modes may have a better audience. That is probably something we have to do. We have to be careful that we make sure that every mode is catered for and people make sure. Quite honestly, I think that there is a lack of a strategic plan to benefit the whole of Scotland. I think that people tend to look at their own areas and say, this is what we want for a very small country. If there was a strategic vision for Scotland, individual people might not think that that is the ideal for them, but if something to work to, you will do it. If you know what is going to be there, there was a discussion yesterday on the network rail joint board. Where is the right place around Aberdeen to have a freight terminal or a big freight hub for actual Aberdeen? There are five potential sites. If somebody just chooses one of them, that is fine, we will all work to it. However, there is this doing it, I want it in my place and I want it in. You saw it especially when Channel Tunnel was being built. We are umpteen councils, etc. We want a terminal. Without a business case, without knowing whether there was going to be traffic to support that terminal, those terminals were built because it was great. They did not actually ask the people, are you going to use this? It was just we wanting one in our constituency. There were a lot of terminals mothballed and underutilised after that. Public money was a bit mad. No one would invest in a business without doing that, so you have to have a business case. If you are going to build something new, you need to know where the traffic is coming from. Best guess scenario, there is a dirty great factory down the road producing 80 or 90 containers a day of goods. There is a banker, there is something coming out of there, but we seem to put terminals in the wrong places, or big RDCs in the wrong places. I would have thought that you would get the co-op one half-way along the MA and you would get Livingston. No rail link near it. Why? Why was there not some thought given to the fact that this is going to generate a huge amount of business? Why does not someone try and site it near a rail link? In terms of that, I get frustrated. Eurocentral alluded to earlier. Why was there not a passenger hold there? Why is there not a rail freight facility 90p ahead when Kenneth has got a terminal and so has Andrew sitting across from it? It is frustrating. That is a yes for the first two parts of the question, which other country can they learn from in terms of government help? I do not know. The only place I do know who specify if a factory that is built is a rail link into Switzerland. They are just as far as they are concerned. Roads are meant for other things. If you have a production facility that needs a lot of product in and product out, get a rail link into it and I think probably learn from them. Thank you very much. That is very useful. Anyone else got comments in this area? I think that we are starting in the other European countries. In the UK today, we do have a very effective logistics service and how we respond to the needs of the market. In the UK today, we have also got a very strong culture of, I mentioned earlier on, of just-in-time, just-in-time, just-in-time, which by default does not give a very efficient logistics operation. Our European counterparts are more relaxed on how they manage the requirements of goods, which gives transport providers what they road or it be by rail more time to manage the resource more effectively and more efficiently. One thing that we measure on road transport very closely is our empty mileage. We will never eliminate it, but if cultures were to change, we could reduce it significantly with an impact on the part that we play within the environment. The same would happen with rail. As I mentioned earlier, we are trying to get more and more customers' goods that are time-sensitive on to rail, but the penalties have come with that. The Europeans have got a more relaxed attitude to just-in-time than we have within the UK. The Europeans also seem to have a more relaxed attitude on how they comply with their own European legislation. We are very compliant in the UK. They are probably 95-99% compliant in other parts of Europe, so it is kind of that balance standard. We talk about the likes of the freight strategy. I think there is no need to be more joined-up thinking or consultation between the UK as a whole and freight, but freight and passenger, as we have referred to, is a proper policy, not just freight on rail. It is a global impact that it can have on the part that we can play with it as well. I think that that may be round sounds. A lot of what Keith said, you will find that there is no agreement with everybody. It sounds great, does it not? Without that, we won't agree on rates, that's for sure. Keith said most of that part, but I think that we have a culture within the UK that we really need to try to change. Thank you, that's very useful. Mr Russell. The honourable add-add is that major infrastructure investment for rail in most of the European countries is dealt with completely differently to how we do it in the UK. They don't have short-term views on what they are going to invest in. They really do look at the long-term and what that might produce for them. I suppose that our political environment in the way that we do that makes it very difficult for the UK Government to tackle those investment decisions. Equally, if you look at the freight corridors that were set up for Europe wide and how they have been developed, I think that the UK is the only one that is lacking behind. I think that we should look at how they are doing it and going about it, because we are not achieving the investment in our infrastructure that they are. Thank you very much indeed, convener. Pulling it all together, we have covered a lot of ground this morning. Your last point about the need for a long-term view of investment in the rail network was an interesting point, but we have also covered the need for investment in infrastructure more widely. The operation of the rail network, possibly electrification, longer loops, as Mary Fee mentioned earlier, and improvements to gauge capability to take higher and wider containers, improvements to the road network to address the last mile into the port. Is there one specific ask that you would have of this committee that you would want us then to take to Government in terms of what would benefit the freight industry in terms of your own individual businesses but more broadly the freight sector as a whole? Is there one thing that we should be asking of the Government that would make a difference and deliver real positive benefits to you, both to your industry and to the sector? If you could maybe start with Mr Malcolm, work along. Everything has been quoted there by yourself just now, everyone is relevant. If I looked at my business and my current business needs today to sustain what we are currently doing in rail and develop what we are doing in rail, our investment will be in no problem. If gauge happens then we will have to invest in containers and that is not a problem, we will invest in them because that will get standardised equipment. I raise it earlier on today than one and again it is probably out with this committee's no remit as well. If there is a way we could even get something on weights. We had it many years ago and we were trucks today which are designed to run at 50 tonnes of gross, running at 44 tonnes of gross. If we can get a benefit where we can make a level playing field or the actual carrying capacity of freight to and from the terminals. I do not think that that is rocket science to do it. I think it could happen very quickly. There would be no investment to do it because the trucks and the trailers are designed to do it. The trains can handle it. It is only legislation to allow us to do it. I think that if that legislation came in some of what we had a number of years ago to allow us that enhanced carrying capacity in a restricted radius of a rail terminal, it will give the opportunity to start focusing more goods on to rail that currently bypass rail. That is one request that I certainly would have very high up on the agenda. I raise it through the FTA, the RHA and the committee but that is certainly one that would bring rail into a level playing field with road if not an advantage over road if we could get that extra capacity. If I choose one and he chooses one, do they both go through? I must admit that what Andrew Sayes is absolutely right, but I think that simply longer, heavier trains would make a big benefit for us, even within Scotland. Aberdeen and Vanessa routes, if we could get longer trains, that would have a big advantage. For the overall freight market, longer, heavier trains, I do support what Andrew Sayes said. Kate, asking you will receive. Just in recognition of what we already have, we have rail terminals in Grangemouth, rail terminals in the west of Glasgow, they have got Coatbridge, some cracking sites, but they could do with a tweak, they could do with an investment, I think a realisation of what they actually do and what they bring for Scotland. We are well served certainly in the central belt for rail terminals and I think I hear other people saying that it would be a good one to put another one there, no it wouldn't, all you would dilute is what is currently moving through the existing ones and you will end up closing them. So I think that probably the recognition and infrastructure you have got, enhance it and then we will look to the future and go on from there. And I suppose what you are doing today is great, you are listening to the industry and everything will change, everything consistently changes, so if you just keep in touch with us and make sure that that continues and as far as the enhancements I agree with Kenneth and Andrew, to the north would be good, longer loops. The more containers you can put in a train, it cuts the unit cost, therefore you will attract more business to rail, so that is the way to do it, is to enhance the network. Thank you very much, I thank each of the witnesses for their evidence this morning and also for assisting the committee with our fact-finding visits, which we found incredibly helpful, so thank you once again and that now concludes this item and today's committee business.