(1 day, 17 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Lord Young of Cookham
To ask His Majesty’s Government what plans they have for open access operators following the creation of Great British Railways.
The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)
My Lords, I remind noble Lords that, apart from the noble Lord, Lord Young of Cookham, and the Minister, the speaking time limit for the following debate is four minutes. When the screen flashes, your time is up.
Lord Young of Cookham (Con)
My Lords, for a debate on open access, many noble Lords have applied for the vacant slots. I am delighted that the Minister is in his place to pronounce on the quality of the bids.
Open access did not exist under British Rail, but privatisation, in which I played a modest role, allowed open access train operators to run passenger services. They identify available capacity and apply to the ORR, which then consults on the proposals and analyses their feasibility and benefits. New services have to pass a rigorous abstraction test to ensure that they will add passengers to the railways and grow total revenue, rather than removing passengers and fares from existing services. Open access operators then pay access charges to reflect the additional cost that their use of the railways incurs. They get no direct subsidy and carry the commercial risk of running the railway.
Applications are considered in accordance with statutory duties, including protecting the interests of users of railway services; promoting the use of the network for passengers and freight; and promoting competition and improvements in railway service performance. The final decision rests with the ORR, and neither the DfT nor Network Rail, nor the franchised operators, has a veto.
In 2000, the first open access operator entered the market: Hull Trains. Since then, there have been real benefits from open access—especially to underserved areas that provide the only direct link to London—for cities such as Sunderland, Hartlepool, Halifax, Rochdale and Pontefract, helping regeneration in those areas. With a cancellation rate of less than 1%, open access rail operators are the most reliable. They have focused on affordable fares, with Lumo’s average £40 fare between London and Newcastle as opposed to the £195 walk-up fare. These lower fares from open access operators have in turn attracted a broader demographic to rail travel.
Importantly, we now have a mature, evidence-based, 25 year-old case study on the east coast main line, where three open access operators compete with the Government-run intercity operator, LNER. Passengers travelling to the north and Scotland from King’s Cross enjoy robust fare competition and a choice of operators. Importantly—the Treasury should take note of this—LNER’s subsidy continues to fall, despite it facing robust on-track competition.
There have been wider benefits, promoting the Government’s growth agenda. FirstGroup has invested £0.5 billion in new rolling stock, securing jobs in the north-east, with a further £0.5 billion awaiting a decision. Open access operators account for around 19% of all new train orders placed in the UK in the past five years, although they provide only 0.9% of passenger services.
Last year’s Office of Rail and Road report said:
“An economic appraisal of the impact of open access operators in 2022 concluded that open access operators had been beneficial to the UK economy, and that this was particularly apparent for flows not already directly served by a franchised operator. Our 2023 report noted the particularly strong post-pandemic recovery for open access operators”.
All of the leading European countries with state-run operators, including Germany, France and Spain, have increasingly used open access as a vital tool in complementing their national service operators.
I turn now to the Government’s proposals, which dramatically change the terms of trade and put at risk the benefits that I have outlined. There should have been no cause for alarm because, in September, the previous Secretary of State said that,
“where there is a case that open access operators can add value and capacity to the network”,
as assessed by the Office of Rail and Road,
“they will be able to”.—[Official Report, Commons, 3/9/24; col. 18WS.]
However, that is not what is proposed.
The consultation document of 18 February says:
“GBR will become the decision maker for key decisions on access terms that are currently led by the ORR: the duration and form of access rights, developing and setting the access charges framework and the design of performance incentive regimes contained in track access regimes”.
Then, we have the historic understatement:
“For GBR to have the space and authority to take access decisions on the best use of its network, the ORR’s current role must change”.
GBR will, in due course, absorb Network Rail and all the franchised train operators. It will have a massive conflict of interest in deciding whether an open access operator should provide a new service. We know this because, in the last 10 years, Network Rail opposed all 10 applications to the ORR for open access, which then approved five of them, with the DfT either opposing or not responding. The letter which the Minister circulated yesterday—to everyone except me—opposed nearly all the applications. These are the organisations which will decide in the future.
The ORR—the final arbiter, at the moment—will have its powers curtailed. Instead of being the referee, the ORR can overturn a decision only if GBR has not followed its own processes or has acted irrationally. But those processes could include a large increase in track access charges, making a proposition unviable. It could change the abstraction rule, again making current services uneconomic. The ORR would be powerless to intervene. Its role has been crucial to the success of open access, and it will be marginalised. This would be self-harm for the railway, the regions and passengers.
Behind all this is the Treasury—the controlling mind of the new regime, if ever there was one. It is the Treasury which insisted on the letter to the ORR in January, with its primary objective of minimising subsidy, setting aside the wider obligations of the ORR to promote competition and better use of the network. The consultation document does not refer to competition law or the CMA, which will remain in place. In the absence of a strong independent regulator, there is a risk that we could see more competition law challenges, which will be inherently unpredictable for operators and GBR.
Investors need certainty and confidence about the terms with which they engage with GBR. If we want to encourage investors in schemes such as Heathrow southern rail, which will be needed if there is a new runway, there will need to be a strong and independent regulatory regime to protect investors’ rights. These new reforms remove existing certainty and could shrink freight, the private rail sector and wider economic growth.
There is a devolution angle to all this. If the mayoral strategic authorities are to be empowered to take control over more railway operations, as Andy Burnham would like, they will need confidence about the terms on which they can access rail infrastructure that they do not own, and a strong independent regulator will be needed, overseeing the prices proposed by GBR that devolved authorities will be charged, and their ability to run trains extending across their own and GBR’s networks.
I noticed with alarm the press release of the RMT—which the Government were so eager to placate last July—headed, Why Open Access Rail is Incompatible with the Government’s Rail Policy. That is, by the way, the very same union that, in 2020, demanded
“urgent Government intervention to support the open-access sector and to protect all jobs at Grand Central and Hull Trains”.
The Minister needs to make it clear he does not share the view of the RMT.
To sum up, do the Government accept the need for a genuinely independent regulator if we are to continue to reap the benefits from open access? Can he confirm that he is genuinely open to persuasion on the proposals in the consultation paper?
Lord Tunnicliffe (Lab)
My Lords, I thank the noble Lord, Lord Young, for tabling this debate. Much of his involvement took place in the mid-1990s. At that time, he was my ultimate boss, and I became the ultimate student of this operation, in which, on the basis of the somewhat bizarre writing of an excellent letter, we could have been involved as well.
My simple answer to the Question is that open access should be phased out as quickly as reasonably practical. It is a bit of a shock to be informed that I am agreeing with the RMT on that matter. Rail privatisation was a product of the political doctrine of the day: that private ownership and competition would solve all our problems. My personal view is that privatisation as a generality has failed. Rail privatisation has failed, at best, bizarrely, and, at worst, disastrously. The bizarre part of it comes from the track being given to Railtrack, which is a sort of private sector company which went broke and then turned into Network Rail, which is a pretend independent company that was nationalised not by the Government of the day but by the ONS, which said that so much of it was tied-up with the Government that it was really a nationalised company. It dumped £34 billion on the national debt, which virtually nobody seemed to notice.
There was little pure competition in the railway throughout this process; open access was the closest, and was therefore pursued. There was some slack in the system and some open access operations emerged. It is my view that they undoubtedly cost the taxpayer money and that there was not much benefit. In future, they will inhibit total system optimisation.
Any operator of open access will need long-term stability of their rights, whereas the great thing about Great British Railways is that it will eliminate all the conflict in optimising the railway. There will be a single guiding mind. The only disputes in future are likely to involve open access operators, since they will be the sole source of external commercial pressure. This will absorb a disproportionate amount of management effort. The only case for open access is doctrine, and it is a doctrine I do not share.
Lord Bradshaw (LD)
My Lords, I would like to ask the Minister a few questions as my contribution. First, will he confirm that the regulator has objectives, but, in fact, all holders of the post have concentrated on the one about promoting competition to the exclusion of other duties?
The regulator costs the taxpayer £30 million a year and has 350 staff—in fact, it gives rise to much greater costs, as illustrated in the Williams review of the costs of running a railway. Because its decisions have the force of law, they compromise constructing a properly integrated railway timetable with an emphasis on connections, reliability and economic use of railway infrastructure. Is it true that the regulator allocates open access paths regardless of their impact on other trains on the network? Can the Minister confirm that this has delayed improvements to the timetable on the east coast main line for three years, costing the taxpayer a very large sum of money—hundreds of millions of pounds?
Are the regulator’s assumptions about revenue forgone and the generation of additional revenue sound? Have these been tested independently and properly verified? I believe that this is not the case and that, in fact, they are underpaying for access and exaggerating the revenue that they are generating for the system. I am not seeking to deny that there should be access from destinations not previously served by franchise operators, or to strike anybody off the railway map. I am particularly concerned that freight should have proper, guaranteed access to the network.
Railway regulation has not been a good thing for the railways. Indeed, regulation generally, as carried out by previous Conservative Governments, has been shown to be defective in almost all cases and for all utilities. We have to look only at the feeble responses of Ofcom and the power utilities to underline that case.
Lord Liddle (Lab)
My Lords, I feel a bit nervous speaking in this debate, alongside a former Secretary of State who was a major contributor to the railway we have; the noble Lord, Lord Tunnicliffe, who ran London Regional Transport; and the noble Lord, Lord Bradshaw, who is extremely wise and was one of the great modernising managers of the old British Rail. What am I going to say?
I am going to say that I do not want to see a return to a monopoly British Rail, but believe it is essential that the railways have a guiding mind and that decisions on access have to be taken in a single place if railway capacity is to be used most efficiently. At the same time, I think there should be a mechanism, as was in the Labour manifesto, whereby companies can make open access proposals that will be treated on a fair basis by the guiding mind.
It seems to me that the present system does not really work that well as an alternative to the monopoly. Open access operators pay marginal costs, not full costs, for use of the network. There is a risk that, if they are not adding to total passenger use on the route, public subsidy increases if the franchise operators are losing business as a result. That is a real problem. I do not think that the noble Lord, Lord Young, dismisses it. It is a real issue: it is not just the Treasury; it is a public issue as well. I would like to see something like what is proposed in the White Paper, possibly with strengthened rights of appeal. But there is a role for open access.
The key point about the guiding mind is that investment decisions have to be taken on the basis of what maximises use of the railway. There are many cases where open access proposals would make sense only if there is additional investment to provide additional capacity. I would like to see that. I agree that many provincial cities have benefited from a direct link to London, and that should not be taken away. I want to see an end to the Eurostar monopoly with more competition on services to the continent. I strongly support freight opportunities. There was a very good piece in the Financial Times yesterday about how parcel services are going to be operated from passenger stations. All that is to the good. We need a guiding mind, which we are getting through setting up Great British Railways, but we need the possibility of fair open access as well.
Lord Lansley (Con)
My Lords, I am glad to have this opportunity, which my noble friend Lord Young of Cookham has afforded us, to further consider the role of open access operators. Many of us were participants in the debates on the Passenger Railway Services (Public Ownership) Bill, where we had at least two opportunities to talk about this—from my point of view, always in the context of the role that open access operators have played and can continue to play in enabling the passenger railway system to have competition as an element in its activity. As I said during the course of that Bill’s passage, privatisation has not always worked. In particular, it has not worked where there has been an inability to secure competition. The key to privatisation is the link to competition. Where competition can be achieved, it is the most effective potential outcome.
In this particular instance, while the Government are, effectively, taking back into complete public ownership those areas that they regard as not susceptible to competition, it would be a serious mistake to remove opportunities for competition, because they drive innovation and better passenger outcomes. Indeed, in their briefing for the King’s Speech, the Government more or less said exactly that. The question is: are the Government now committed to that?
Only a few weeks after we completed the passage of that Bill, we found that the Secretary of State was sending a letter to the Office of Rail and Road—the Minister kindly sent it to us, to remind us—in effect saying that she had priorities. When I read the letter, I find that her priorities are not the same as what the Government said in their manifesto and King’s Speech briefing. They are particularly focused, and are intended to focus the Office of Rail and Road on what she regards as the difficulties associated with it not covering the cost of fixed-track access, which my noble friend talked about. She said that her expectation was that
“you give due consideration”—
to these priorities—
“whilst respecting your statutory duties. I wish to see the impacts on the taxpayer and on overall performance for passengers—such as potential congestion on the network—given primacy”.
This is clearly in order to say, “Don’t consider all your statutory duties. Don’t consider the statutory duty on competition”.
During the passage of the Bill, the Minister very kindly responded, saying that it was not the Government’s intention to remove the statutory duty for the promotion of competition. There is a real risk that the Secretary of State has put herself in a position where she has asked the Office of Rail and Road not to undertake its statutory function in balancing its statutory duties in considering open access applications.
Happily, the Office of Rail and Road issued its guidance at the end of January and made it very clear that it will continue to balance its statutory duties, and rightly so. I cannot see that it has any option to do otherwise. In my view, the Secretary of State’s letter was wholly inappropriate and should not have been issued. If the Government want to change the decisions being made in the interim by the ORR, they should have issued new guidance. They had the power to do so, but they chose not to.
When we see the Great British Railways Bill and changes to the Railways Act, I hope we will continue to see competition, and the benefit that open access operators can give to the network in promoting competition.
Lord Berkeley (Lab)
My Lords, I am very grateful to the noble Lord, Lord Young, for securing this debate. I have to agree with him, the noble Lord, Lord Lansley, and some of my colleagues that we are in grave danger of losing sight of what we are trying to achieve: a better deal for the passengers and freight customers.
There was a very good article in the Daily Telegraph yesterday, quoting people from freight—I shall mention that in a minute. It goes on to say that Great British Railways will do a good job in co-ordinating but more than one body is involved. There is the infrastructure manager, which will still be owned by the Government. There are the government-owned railway undertakings and open access railway undertakings, and there is freight. That is not a monopoly; it is four different groups of people who need some independent body, which at the moment is the Office of Rail Regulation, to determine who gets priority on the track.
It is very easy to say that there is no capacity on the track. I did not have much chance this morning to read the 30 pages that the Minister sent us yesterday, but access is very difficult in some places, as noble Lords have said. To cite the Daily Telegraph, Tim Shoveller, the chief executive of Freightliner, said that,
“giving a state-run passenger railway the responsibility to allocate routes would undermine its ability to compete with HGVs”.
He says that Great British Railways will
“inevitably favour route applications for its own passenger services”.
That is just a normal way of doing business—and this is why it is so important to have an independent regulator with statutory duties to be able to make decisions on behalf of the whole sector.
My noble friend the Minister’s latest suggestion was that the regulator would be able to recommend to Great British Railways. Recommending to government, as we all know from experience, sometimes works but not always. It is about sustaining investment in the private sector, which is still there in the rolling stock companies and in freight—all freight is in the private sector—and still there in the open access. The last thing about that is that government in this format does not have sole discretion as to which stations should be served and which trains should run where. This is a matter on which many people have different views, and I am sure that many noble Lords will keep on talking about it today.
The Minister needs to think again and retain the role of the Office of Rail Regulation as a statutory consultee in something that to most of us is a competition issue. It needs to be fair and seen to be fair—and I hope that my colleagues in the Department for Transport will look at this and not insist that they can trample over the Office of Rail Regulation and get what they want, because they would rather have an extra train to Edinburgh when, in fact, you could have cancelled one of LNER’s trains and allowed Lumo to go in. Who is to say which is better? It is for the regulator to decide. I look forward to my noble friend’s comments.
Lord Gascoigne (Con)
It is a great pleasure to follow the noble Lord. I reassure the noble Lord, Lord Liddle, that he is not alone in feeling a little nervous in speaking today. Like everyone else, I congratulate my noble friend Lord Young on securing this debate. It is an honour to briefly take part in what feels a bit like a relaunch of the band that we had for the passenger railway services Bill.
Like others, I express my gratitude to the Minister for circulating the notes yesterday. Today I would like to talk about the future confidence in open access. As recently as last month, the Minister in the other place said that open access operators “can also abstract revenue”. It is not the first time that such words have been mentioned. There are also examples of new bids being opposed by DfT. When you combine that with the noise and broader sentiment of the wider public ownership reforms, a narrative—at least to me—begins to build that one day, despite all the assurances, the beady eye of government will fall on them as the last bulwarks of capitalism, which have escaped public ownership up to now.
As has been touched on, investment from a private sector entity requires certainty if it wishes to invest and even expand. That made me think of one related example that is in the news: Heathrow. I am obviously not involved in the discussions on expansion, but surely a key part of the success of the current, and potentially larger, airport will require long-term assurances of open access, not only as part of the feasibility of the proposed expansion but for the success of what would become a larger airport, and having the connectivity it needs. The same issue of certainty applies to all providers, to secure investment and, ultimately, a better service.
What assurances can the Minister give to existing services that open access is here to stay? Current open access providers may well be safe for now, but what happens when their agreements come up for renewal? The Government state that economic growth is their priority, so when there is a discussion on the so-called abstraction of a provider, do they take into consideration the wider financial benefits that these services provide to areas as well as the negative impact that the withdrawal of the service would have on the cost to taxpayers in providing an alternative?
I am also grateful, as ever, to the Minister for recently forwarding a copy of the current rail consultation document. I do not wish to rehash the debates that we had on the rail Bill, and I am sure the Minister is unbelievably delighted that when the GBR Bill comes forward we will have plenty of the opportunities to talk about wider reform. Can the Minister give any indication of when that Bill will be introduced and when the Government see it taking effect?
Is not the point of the whole reform agenda to fix problems with our rail system? Today the Government announced that they are cutting NHS England, which has around 13,000 staff, and they are doing so for efficiency reasons. Later this year—soon, we hope—we will see GBR, but when you combine Network Rail and the TOC staff, you are potentially seeing over 80,000 staff. What assurances can the Minister give that, when we see this reform, there will be speedy change and costs will be kept down, when we have such a vast quango?
Finally, as has been touched on, the consultation refers to the importance of freight and says that there would be a growth target, which the previous Government also talked about. Does that mean that that target would be included in the Bill when we see it?
Lord Mann (Lab)
My Lords, this is a debate when we can again lament the passing of the great Lord Prescott. I came down this morning on a Prescott express. One of the greatest, most transformative achievements of the last Labour Government was Hull Trains and the way it transformed the economy in the area that I represented. I do not think that, I know it—I live there.
Since the 1850s, there has been no train from Worksop to London, other than the royal train occasionally stopping there—none, for any passenger. There is a proposal for it to be brought in by Hull Trains. A letter of 4 February says, in reference to the “Hull Trains 27th Supplemental Agreement”:
“DfT analysis suggests that the proposed Hull Trains London-Sheffield services”—
the one that would connect Worksop directly to London for the first time in nearly 200 years—
“does not meet the threshold … We estimate abstraction of approximately £1.77m per annum … with EMR most negatively impacted”.
I am mathematical economist and I should like the Minister to give me the entire economic analysis and the presumptions it is based on. That says that people from Worksop go via Sheffield to London. I know the train drivers; my office was next to the train station in Worksop. I had to decide how to get to London by train. The ASLEF national negotiators—quite a number of them because of freight—were based in Worksop and had to make weekly, often daily, decisions about how to get to London by train. Huge numbers of staff from the railway industry live in Worksop and they were in the same situation. None ever went via Sheffield. It is simply not true. I stood at the station as an MP regularly, often constantly surveying the commuters. I know who goes into Sheffield and who goes the other way. I know where they park. I know most of the people by name. They do not go that way, so that figure is based on false assumptions and false economics.
The truth is that the Government are meant to be about levelling up. When I brought businesses into my area, I argued the case for a direct train service via Retford into London—if I could have done that via Worksop, it would have been even better—and it succeeded, with major companies coming in. That was the argument—I was there; I was making the argument with those companies. Laing O’Rourke is on the Sheffield side of Worksop, by the way. There is huge new investment on that industrial estate, including it. Cerealto, which came from Spain, is there. All they wanted was an improved service down the east coast main line. No one considered the East Midlands Railway.
I have nothing against Sheffield or that route. Point to point, it is dramatically longer, which might be the reason why people went the other way. The other route is far quicker and far shorter. The Hull Trains model has brought huge economic benefits. It has shifted the housing market. The Government want loads more houses with loads of land. That area is happy to have housing. It wants nuclear fusion there, which will involve massive investment—billions—and 3,000 new jobs. Again, connecting Worksop to London is an economic objective even more than a social one. It is convenient for getting down to the football, the theatre and all that kind of thing that people might want to do, but it is about the economic basis of it. I know every single major company that came in—I was there—and I know that this was part of the argument. These figures are wrong. There needs to be that flexibility.
Baroness Pidgeon (LD)
My Lords, I thank the noble Lord, Lord Young of Cookham, for bringing this timely Question for Short Debate. It is a topic of much conversation in transport circles, as this debate shows. Open access railways have allowed private companies to operate train services independently of government contracts, and to date they have been competing with franchise services. However, they are going to be competing with the publicly run Great British Railways services, and that is where the rub may be.
My noble friend Lord Bradshaw and the noble Lord, Lord Berkeley, flagged some serious questions about regulation, which I hope we will hear clear answers on today. Noble Lords will recall that, at all stages of the passenger railway services Bill—it feels like a reunion here today—my colleagues and I stressed from the Lib Dem Benches that we were agnostic as to who actually runs the railway. We want real improvements, centred on the passenger.
As I read the DfT’s consultation paper, A Railway Fit for Britain’s Future, the Government are clear that a new, simpler framework will enable GBR to take decisions on the best use of its network. It goes on to say:
“GBR will take access and charging decisions in the public interest”.
In addition to those obligations, the Secretary of State can issue specific directions and guidance on access to and use of the railway when relevant. Presumably, those directions could be for no open access passenger services at all, as I think the noble Lord, Lord Tunnicliffe, and the RMT would support. Presumably it would be at the whim of whoever is Secretary of State, depending on what their view is of open access and what is allowed.
The only thing that is certain is that open access operators will have to fully pay towards long-term maintenance costs for the network and central support costs, which is something we would probably all agree with. However, the only open access that seems to be protected is around freight services—although, if you talk to the freight sector, it is not confident in that at all. There is nothing in this paper that suggests there is any future for open access operators. What assurance can the Minister give the sector today about its future? Even if the Government do not want to see any new open access operators, what guarantee can they give to the routes that already exist today, which, as we have heard, do so well serving places such Hull, and despite the quote that the noble Lord, Lord Liddle, read from the Labour manifesto, which showed some commitment to open access?
The other issue I want to pick up, which is the crux of this debate, is that it may come at a cost to the taxpayer in attracting passengers away with open access trains, as the noble Lord, Lord Gascoigne, pointed out. The contribution from the noble Lord, Lord Young, provided contrary evidence that that was going to be a threat. I thought that I would add some international experience. Last year, a European Commission study looked at Spain, France, Sweden, Italy, Austria, Germany and other examples of rail on the continent. It showed that ticket prices decreased overall with the introduction of open access competition; that frequency has increased hugely on routes such as Vienna to Salzburg and Stockholm to Gothenburg, as well as in other places; and that the more trains there are available, the more passengers will see trains as a viable option and will demand increases. It has shown that open access really can add to the railway.
I conclude my remarks by saying that open access operators have a role to play in our future rail system, as long as they pay their way. They can also see investment in rolling stock and innovation in a way that will be healthy for the passenger. At the end of the day, what do we want? We want a service that is reliable, affordable, efficient and passenger-centred. I look forward to hearing the Minister’s response to this debate.
The Earl of Effingham (Con)
My Lords, I thank the noble Lord, Lord Young of Cookham, for securing this important discussion.
His Majesty’s Government’s approach to railway reform has raised concerns, in particular around the potential risks of phasing out existing open access operators and rejecting new ones. Open access operators such as Lumo, which has a 96% customer satisfaction rating, have consistently delivered some of the highest levels of passenger service. On the basis that His Majesty’s Government’s stated commitment is to place passengers at the heart of the railway reforms, we naturally assume that they would wish to encourage and support open access operators, rather than restrict their role.
A fundamental aspect of the open access system is its ability to introduce new direct routes and foster competition, ultimately enhancing the passenger experience. Of course, this must be weighed up against the potential impact on taxpayer-funded operators. To ensure a fair balance, the Office of Rail and Road applies the “not primarily abstractive” test, requiring new services to generate at least 30p of new revenue for every £1 abstracted from existing operators. This test ensures that open access services contribute genuine growth to the industry, rather than merely diverting passengers from other operators.
Let us take as an example Lumo, which launched in 2021 between London and Edinburgh. Since its inception, Lumo has generated more than 6 million new rail journeys, which noble Lords will agree is a remarkable achievement. It has driven a significant modal shift from air travel to rail travel. Nearly half of all journeys on this route are now made by rail, up from one-third in 2019.
Crucially, Lumo’s success has not come at the expense of existing operators. Revenue on the London to Edinburgh corridor increased by 55% between 2019 and 2024. Moreover, LNER’s own revenue has grown, demonstrating that Lumo has expanded the overall rail market, rather than siphoning off passengers. Similarly, Hull Trains, which has operated between London and Hull since 2000, has been a resounding success. By 2010, revenue on its route had increased by nearly 300%, and, for every £1 of revenue abstracted from other operators, Hull Trains generated an additional 51p to 67p of industry revenue—far exceeding the ORR’s minimum threshold. Since 2019, Hull Trains has seen a 42% growth in passenger journeys, significantly outpacing other operators. This success has been supported by investment in new rolling stock, enhancing capacity and service quality.
Although some may view the abstraction of revenue from taxpayer-funded operators negatively, it is vital to consider the broader benefits that open access services provide. Free markets and increased competition lead to lower fares, faster journey times and substantial value-of-time benefits for passengers. Open access operators consistently achieve higher passenger satisfaction, thanks to their agility and customer-focused approach. Even when accounting for lower fares, open access operators on all three routes examined have generated revenue well above the 0.3 NPA threshold set by the ORR. His Majesty’s Official Opposition suggest that the evidence speaks for itself.
His Majesty’s Government are vocal on the subject of growth, investment, passengers and the environment, so I must ask the Minister this: will they please put passengers first? The ORR has praised open access because of the black-and-white data.
Finally, can the Minister please advise the Committee on when we will have sight of the passenger standards authority? What will those standards be, and how will they be enforced? The appetite of the new authority to hold GBR to account is what will matter. How, in tandem, will Great British Railways hold nationalised operators to the same high standards of service that passengers expect and deserve?
The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)
My Lords, first, I congratulate the noble Lord, Lord Young, on securing this timely debate on an important subject. I offer him my wholehearted apologies for the omission of the letter that I sent everybody else; it was an administrative error but I it has, I believe, been rectified. I apologise to him for that.
The context of this debate is the live consultation document, A Railway Fit for Britain’s Future, which was published a few weeks ago and on which the Government welcome contributions. I hope all noble Lords here today will respond to the consultation document. It is not immediately apparent to me that everybody has ready every word of it, from what I have heard—perhaps that is reasonable—but it is important that noble Lords respond to it because it raises some of these subjects absolutely directly.
Having said that, I am not going to repeat large quantities of what is in the consultation document, for the obvious reason that it is in the public domain. People will respond to it; the Government will then consider their responses fully. It would be better if I spent my time looking at elements of the issues in front of us that noble Lords have raised.
I start with the noble Lord, Lord Young, who asked whether I share the RMT’s views. He deftly pointed out, however, that it appears to have two views that are contrary to each other at once. I can therefore say without compunction that I share some of its views but not all of them. It is entitled to its views because it represents the hard-working staff of the railways as their trade union, but they are not the determinants of future government policy.
The noble Lord expressed genuine concern about competition and asked whether I am open to listening to responses to the consultation. I am open to that; I have listened extraordinarily carefully to what noble Lords have said here today, and I believe that aspects of what they have said should influence the way we draft the legislation, following the responses to the consultation. It would be foolish and unnecessary for us to produce a consultation if we did not intend to listen to what people had to say about it.
The other thing I would say about the consultation is that it is over 30 years since a substantive railway Bill was in either House. It behoves us to do a good job this time because it may be a long time before there is another; you never know.
I listened carefully to what the noble Lord, Lord Tunnicliffe, had to say. His descriptions of some of the history were quite correct. I can correct him on only one material fact, which is that Network Rail slid into the public sector with a debt of £54 billion, rather than £34 billion; I remember remarking that it was higher than the national debt of New Zealand at the time I became the body’s chair. The noble Lord was right in describing that, in those days—at the time of the original privatisation of the railway and subsequently—there was some slack. It is true that quite a lot of additional services could be put into the timetable simply because there was plenty of room for them.
I always listen to the noble Lord, Lord Bradshaw, extraordinarily carefully. He was a very senior railway manager when, sadly, I was still at school; he knows perfectly well how to run a busy, complex railway, and his memory is not diminished an inch by the effluxion of time since he did that. I do not think he is entirely correct to suggest that the ORR is concentrated on only one of its objectives—that would be doing it a disservice. But he is certainly entitled to a view about the extent to which it has balanced its objectives. He is indeed right about the east coast main line timetable. I had to answer a Question in the House only two days ago about the level of service at Alnmouth and Berwick. The last Government invested £4 billion to improve the capacity of the east coast main line. It has taken four years to get an agreement on that timetable, and that is because the number of people with rights on the east coast main line is so great that it required a huge meeting of railway operators. In the end, it also required the Secretary of State and I, as Ministers, to make a decision which on any normal railway would be taken by the railway administration. The noble Lord asked whether the ORR’s regulatory assumptions are sound and independently verified. They have been tested twice independently and found satisfactory at least.
The noble Lord, Lord Bradshaw, mentioned freight. The propositions about open access, whatever they are, do not apply to freight where the Government have already stated that they intend to have a target to increase freight. I believe we have also heard here that freight operators are apparently more comfortable with the regime proposed in the consultation paper.
I listened to the noble Lord, Lord Liddle, very carefully. I too want to see more trains on HS1 and through the Channel Tunnel, and the department is working as hard as it can to see that there are more trains and that any obstacles to further competition on the routes through the Channel Tunnel to Europe are removed. There are some things we can do, and we are proposing to do them.
The noble Lord, Lord Lansley, talked about what was in the King’s Speech and what, effectively, the Secretary of State wrote subsequently to the chair of the Office of Rail and Road. Opinions vary on this letter, but I think she and I are clear that what she said in the letter was not that there should be no open access. It did not say that we disagree with it; in fact, the consultation paper says that in the right circumstances, open access has a valuable part to play. But it would be negligent of her, and certainly negligent of me, not to reflect the fact that the railway post-Covid is costing the taxpayer an enormous amount of money. All of us in this Room, whatever political side we are on, cannot celebrate a railway that consumes twice as much public subsidy as before Covid. We need to do something about it. It is proper for the Secretary of State to reflect on the fact that one of the legitimate concerns of both the Secretary of State and, indeed, the ORR ought to be the whole cost of the railway to taxpayers. She talks about a balance: on the one hand, opening up new markets, driving innovation and offering choice to passengers, but also a balance that is mindful of the abstraction of revenue to taxpayers, as well as the charging mechanism. That letter sets out her views, which I do not think are anti-open access; it makes clear the role that the Government believe open access ought to have and the basis on which we are consulting.
The concerns of the noble Lord, Lord Berkeley, were principally about freight, which I have already covered.
The noble Lord, Lord Gascoigne, said that the private sector was under threat. I say to him that, in fact, four-fifths of railway expenditure is in the private sector and, very largely, that will continue. The Government’s proposals to take passenger services into public ownership are not the same as taking the private sector out of the railway. Network Rail spends a huge amount of money with many private sector organisations to maintain and improve the railway and that will continue, as will freight operations and so forth.
The noble Lord also talked about the costs of GBR as a potentially large public body—I prefer that word to “quango”, having chaired two such public bodies. There is a considerable saving to the public purse from managing the railway better. The fact that every meeting on the railway needs 20 people in it to decide anything, because of the proliferation of different contracts, is a huge cost and a huge barrier to effective management of the railway.
As chair of Network Rail, I had a difficulty with the ORR, because we were told at one stage that there was a belief that the law suggested that there were only two dates on which you could change the national railway timetable a year. That is completely inflexible and militates against the public getting a good service from the railways, simply by baking some arthritic processes into what ought to be a dynamic situation to deliver better services to passengers and freight.
The noble Lord, Lord Mann, talked with considerable passion about Hull Trains, and I respect his passion about that because it is clear that Hull Trains has produced a huge benefit for the city of Hull over the years it has been working. His observations about Worksop are probably more difficult, both for him and for me, but one of the issues with some proposals that the department has seen, but which will currently at least be considered by the ORR, is that the department at least considers that they will abstract from other services. The danger, of course, is that you offer a better service to a small number of people and the result of it is a higher cost to taxpayers and/or a reduction in services to others. Those are balances that railway administrations have had on their minds since 1830 or so, and they are considerations that GBR will have to have.
One thing that is obvious to me is that, in the course of further setting out how the new railway will work, you need a really comprehensive access and use policy. The consultation document says that GBR will have to have such a policy, that it will have to behave in accordance with it and, at the end of it, if people believe that it has not behaved in accordance with it, that will be appealable. In certain circumstances, the ORR will continue to be able to direct GBR to do something different.
I completely agree with the noble Baroness, Lady Pidgeon, that it is the passengers in the end—well, it is the passengers to start with—who ought to be the real consideration of the railway. One reason I am passionate about the case for reform is that passengers are not well served by the current circumstances. The railway costs too much to run, it is arthritic and it is slow—as I said, every decision needs huge numbers of people involved. When the east coast main line timetable is put in, it will justify the £4 billion of public investment put into the line because there will be a third train to Newcastle as a consequence. That is good for passengers. It will not affect Lumo, because Lumo will still run and its access rights will continue. Open access can of course add value.
I listened carefully to what the noble Earl, Lord Effingham, said. I must have read most of it before somewhere, in a number of documents principally put out by FirstGroup. The only thing I would say to him is that he is of course right about some of that. There is no doubt that Lumo, which did get open access provision, has made a real difference in the air competition to Edinburgh and it is to be absolutely commended for that. The number of routes on the railway where that is true is very limited, but it behoves us to want open access where it adds to the railway—and to be careful about it where it adds to the total taxpayer subsidy and would otherwise make the railway more congested and less reliable for passengers.
I close by thanking the noble Lord, Lord Young, again for his debate. I apologise once more that everybody else got a letter addressed to him before he did—I am really sorry about that. I thank him for raising the subject and allowing me to respond.