Lord Snape
To ask His Majesty’s Government what is the impact on rail capacity of open access rail services.
The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)
My Lords, in the right circumstances, open access operations can provide benefits such as improved connectivity and choice for passengers, but they can also increase costs to taxpayers and create additional performance pressures on an already constrained network. Large areas of the network are already operating at full capacity, and additional open access services can exacerbate constraints along the busiest corridors of the network and impact operators’ abilities to operate revenue-generative services that would reduce taxpayer subsidy.
Lord Snape (Lab)
My Lords, I am grateful to the Minister for that response. Can he assure me that any further applications for open access trains will not prejudice the existing train paths, particularly on the east and west coast main lines, and particularly train paths reserved for freight trains, if the Government are to meet their target of increasing rail freight by 75% over the next few years? Further, does he believe that the fact that open access trains enjoy a different charging regime from the companies that run the majority of services, including the state-owned companies, leads to a more profitable situation for open access trains, and will he do anything about it?
Lord Hendy of Richmond Hill (Lab)
My noble friend is correct. Both the east coast and west coast main lines are now heavily constrained, and under the current arrangements the regulator, the Office of Rail and Road, has recently declined most of the additional applications for train paths simply because there is no room. He is also right to suggest that we need to leave room for increased freight operations. There is a general consensus that more railway freight is good for the economy and the environment, and it would be right to leave paths for freight expansion.
In respect of his question about profitability, it was recently reported that FirstGroup’s open access business achieved a 32% operating profit in the 2024-25 financial year. These profits arise because open access operators do not pay the full cost of accessing the track, and nor do they have to meet public service obligations to operate the services that most people need. This allows them to offer reduced fares and provide journeys only between the most profitable locations. Currently, Lumo is the only open access operator that contributes towards fixed costs via an infrastructure cost charge, which leaves taxpayers to fill the shortfalls. The railways Bill will propose to change the arrangements for access and will consider what needs to be done further in respect of charging.
Lord Grayling (Con)
My Lords, the Minister just said that the ability to grow open access is constrained by the lack of capacity on the network, yet he says that the Government intend to increase rail freight by 75%. How are both of those true?
Lord Hendy of Richmond Hill (Lab)
I am surprised that the noble Lord does not know the answer to that, as one of the many former Secretaries of State for Transport in the Chamber. The answer is that there are protected freight paths on all the main lines that are likely to carry freight, in order that freight operators can respond to short-term demand measures—which they do frequently, changing trains on a daily and weekly basis—and have room for expansion. It is important that they are left to do that. Otherwise, there is no chance of freight expansion and the commercial freight businesses would be damaged.
Baroness Pidgeon (LD)
My Lords, under the new world of Great British Railways, will the Government allow existing open access operators to continue their current routes beyond the permissions granted by the ORR, even with a new charging regime?
Lord Hendy of Richmond Hill (Lab)
The noble Baroness has a good point. The regulator necessarily needs to give a successful open access application sufficient time to recover the significant costs of rolling stock. Many of these arrangements run for at least 10 years, and it would not be right to curtail those activities. Serious investment has been carried out to allow them. What happens in the future we can debate during the passage of the railways Bill, but for the moment those open access operations that have 10-year or similar periodicity will continue.
Lord Tunnicliffe (Lab)
My Lords, I spent 32 years of my career working in the public sector and came to understand that the objective was the needs of the customer, value for the taxpayer, protection of the environment and having regard for society in general. Open access, on the other hand, tends to create conflict, encourages gaming the regulator and inhibits evolutionary change. Will the Minister exercise extreme caution when considering open access bids?
Lord Hendy of Richmond Hill (Lab)
I listened to my noble friend with care and respect because he has significant prior experience in running railways. He is right that we should be careful, because we are dealing with only 1% of the passengers and the rest of the network has 99%. We should be careful to allow people to innovate where innovation is a good thing and where there is space for it. We should not allow innovation where it is not a good thing, costs taxpayers money and cannot be accommodated on a very constrained network.
Lord Moylan (Con)
My Lords, a lot of people listening to this might think it quite disedifying and perplexing to hear this hate fest against open access services, which are the most popular with commuters, drive down prices where they exist and give consumers what they are looking for. Under the Government’s proposals, the decision on whether open access will be granted for new or continued services will be transferred from an independent regulator to Great British Railways, which is an interested party as a provider of competing services. Does the attitude expressed by the Minister not show how unfit for that purpose the new Great British Railways will be when it starts with such an antagonistic disposition?
Lord Hendy of Richmond Hill (Lab)
The noble Lord has drunk his own Kool-Aid on this. I made it quite clear that there are benefits to be provided. He also needs to do a bit of careful research, because there are very few commuters on open access services. Commuting is one of the things that has a high fixed cost and generally does not cover the cost of its operations. Open access is successful for people making long-distance journeys irregularly, and some of the operators are very good at it.
The noble Lord also referred to the future railways Bill. We have already made it quite clear that Great British Railways needs to be the body that decides who implements the timetable. Currently, there is not one. It will have to have some rules for access to the railway, which will be developed from the current rules and will be consulted on. If third parties believe that they have been disadvantaged by GBR not following its own rules, or doing something in the wrong way, our proposal will be that they have the ability to appeal to the independent regulator. I think that is perfectly fair, but I also think it is really important that your Lordships’ House recognises that nobody is currently in charge of the national railway timetable except the Secretary of State and me. Outside North Korea, that is really not a good circumstance to have.
Lord Young of Cookham (Con)
Further to the question by the noble Lord, Lord Tunnicliffe, can the Minister confirm that train operators offer choice for travellers, jobs for those in the railway industry and direct links to London from stations not served by other operators? Will he condemn the words of Mick Whelan, the general secretary of ASLEF, who described open access operators as “parasites”?
Lord Hendy of Richmond Hill (Lab)
I think the railway trade unions are quite capable of speaking for themselves. The noble Lord is right: I did say that open access provides benefits such as improved connectivity and choice for passengers. It does provide jobs, although the House might like to note that Hull Trains has been in dispute with its own drivers since February—a dispute that shows no signs of being resolved and results in a reduced service, for which the operator, which is owned by FirstGroup, has no substitute.
Earl Attlee (Con)
My Lords, the Minister told us that the west coast main line either is out of capacity or will be very shortly. Why have the Government acquiesced to the previous Administration’s curtailment of the HS2 project?
Lord Hendy of Richmond Hill (Lab)
The curtailment of phase 2a of HS2 was a peremptory decision taken with little thought and, I suggest, no good information. The result is that, as the noble Earl says, the west coast main line is currently full, as decided independently by the regulator, which declined all the applications for open access on it. This Government have to consider very carefully what we now do with the results of that peremptory decision. Cancelling a railway to Manchester in Manchester is a pretty crazy thing to do, but that is what happened. We will be back in due course to say what our proposition is, having thought about it a good deal more carefully than the last Government did.