Increasing Choice for Rail Passengers

Lord Johnson of Marylebone Excerpts

Wednesday 11th July 2018 Westminster Hall

[The Minister of State, Department for Transport (Joseph Johnson)]

It is a pleasure, Mrs Moon, to serve under your chairmanship.

I start by congratulating my hon. Friend the Member for Weston-super-Mare (John Penrose) on securing this import debate, which, as he is aware, follows hard on the heels of a similar debate yesterday. We wait months for a debate on open access, then two come along at once. He made a terrific and really powerful speech, and I very much look forward to addressing in my remarks some of the points that he and other right hon. and hon. Members raised.

First, I will say that I and the Government are truly grateful to all the staff on the railway network. In about 90 minutes, I am sure that many of them would want to watch England play Croatia in the World cup semi-final, but instead they will be performing sterling duties, keeping the railways running and the trains moving. I just want to register for the record how grateful I am to them for that. This is a debate about choice and competition, and those members of staff will not necessarily have that choice later on today.

The choice to be able to travel by rail at all is one of the most important things that we can offer people. Whether they travel to commute to work, to do business or to connect with friends and loved ones, we want to offer people the choice of a wide range of journeys and services, and the railway has been steadily delivering more and more of that choice. The number of passenger journeys on offer in Great Britain has increased by over a quarter since privatisation and, as my hon. Friend the Member for Ayr, Carrick and Cumnock (Bill Grant) said earlier, passenger numbers have more than doubled.

Since 2015 alone, we have opened 21 new stations on the national rail network, including in communities such as Bradford, Midlothian and Devon. These stations offer new journey opportunities and relieve the urban congestion that slows down growth.

Having just heard the remarks of the Opposition Front-Bench spokesperson, the hon. Member for York Central (Rachael Maskell), I believe that she would do well to heed the concerns that were conveyed by the hon. Member for Keighley (John Grogan). I believe that he is absolutely right to be concerned about the loss of choice that would undoubtedly result from the policy of wholesale nationalisation of the entire railway network advocated by the Labour party.

Our commitments to go further and to make further investment will meet demands for more capacity on the network. That was a point spoken to powerfully by my right hon. Friend the Member for Wokingham (John Redwood). He was absolutely right to ask the important questions that he did about how we can deliver more capacity more efficiently, and he made important and valuable points about the need to accelerate the roll-out of digital signalling and the development of the digital railway in general, and also about the need for further investment in passing loops. I reassure him on digital signalling that we absolutely recognise the benefits that he spoke of, and that the roll-out of digital signalling across the UK is under way. Emblematic features of that roll-out are in parts of the Thameslink programme, for example, and in Crossrail.

We are also committed to giving passengers the choice of how to pay for their journey, including smart cards, contactless cards and mobile phone payments. The railway also offers passengers a range of times at which to travel and flexibility over when they want to return, all provided for through a single, joined-up ticketing system. So we are fully behind the idea of offering passengers choice and our strategic vision for rail, which was published last November, set out our plans to offer even more choice.

My hon. Friend the Member for Weston-super-Mare spoke about a further type of choice in his remarks—indeed, it was the focus of his remarks—and that is choice of operator. For many journeys, passengers have a choice of operators. However, it is not always practical or efficient to have multiple operators running on the same route. On many commuter routes, having a single operator is the best way to meet passengers’ preferences. This was recognised by the Competition and Markets Authority in its 2016 report on passenger rail competition. Passengers on these routes generally want a “turn-up-and-go” service, whereby they can get on the next train. With multiple competing, non-franchised operators, this would not be possible, because passengers’ tickets would only be valid on one operator’s services.

However—I am about to make remarks that I believe my hon. Friend will find more encouraging—I agree that there is a place for choice between operators in some specific cases. That is particularly so on inter-city lines, where travel is often more discretionary; for example, where people are visiting family and friends, or indeed many of the great tourist destinations that the UK has to offer, including, obviously, Weston-super-Mare, which is a place close to my heart. These passengers often book in advance and take a specific train, allowing them to choose a service that best suits their needs.

My hon. Friend also mentioned the east coast main line in his remarks.

[John Penrose]

Before the Minister moves on—he is being very helpful in trying to cover all the different points—may I just ask him a question? He just mentioned and celebrated the existence of this integrated ticketing system that he is talking about. Does that not rather solve the problem that he is then saying will crop up if we try to have people who cannot turn up and go using different operators on the same line?

--- Later in debate ---

[Joseph Johnson]

To some extent but not entirely— I think that is the answer to my hon. Friend’s question. An integrated ticketing system enables people to buy a ticket for any journey anywhere in the country; it does not necessarily enable them to buy a ticket that is fungible across operators.

My hon. Friend also mentioned the east coast main line, where there are no fewer than 11 passenger operators, including the two open access operators, Hull Trains and Grand Central, which have delivered huge benefits for the communities they serve. Alternatively, take the west coast main line, where Great North Western Railway has recently been granted rights to run open access services between London and Blackpool alongside the franchised operator. That will offer passengers a choice of operators and up to six extra direct services to Blackpool per day, on top of the franchised services already available to them.

My hon. Friend the Member for Henley (John Howell) mentioned the new east coast railway. It is right that we consider all options for that new railway, which is under development, so that we deliver the best outcome for passengers and taxpayers, but we must also deliver all types of service, which a free market on its own would not do. So unless they can make a profit, franchises can get this balance right for everyone.

I am clear that open access is an important part of the railway, and can play a greater role in offering greater choice, in the right circumstances.

[John Redwood]

One day when I was trying to get back from Birmingham to London, I had pre-booked on service A to terminus A and that service was up the spout, so service A very kindly said that I could go on service B—a different company on a different route to a different terminus—and it just honoured the ticket. So there is clearly a way of making these tickets interoperable if the companies wish.

[Joseph Johnson]

My right hon. Friend has made an important observation. We can certainly look at ways to make tickets more fungible, but the purpose of the present integrated smart ticketing system is to enable passengers to “turn up and go”, to use the latest technology and so on. As yet, it has not focused on making tickets fungible between operators, and I am sure that is something that, as the open access policy develops and as open access develops as a feature of our system, will become more prevalent.

As the CMA recommended, however, a greater role for open access requires robust reforms to create a level playing field between different types of operator. At present, as my hon. Friend the Member for Weston-super-Mare knows, open access operators do not pay towards the fixed costs of the network on which they operate, nor do they contribute towards the vital social services that the franchised operators that they compete with deliver. That distorts the incentives of operators and means that we cannot realise the full benefits of competition for passengers.

That is why we are now working closely with the Office of Rail Regulation on its proposals for reforming track access charges in the next rail control period, from 2019 to 2024. These reforms will see open access operators pay an appropriate amount towards the fixed costs of the network where they are able to. We support this move as a vital step in creating the level playing field between open access and franchised operators.

We have also consulted on a possible public service obligation levy. Such a levy would complement track access charging reform, so that open access operators would also pay towards the social services that franchises deliver to many stations. Those stations would not have the levels of service they do today if left entirely to the free market, and the Government offer greater passenger choice through the franchising system to deliver social as well as economic benefits.

[John Penrose]

The Minister is being generous with his time. I suggest to him that he can avoid quite a lot of this regulatory and bureaucratic complexity if he simply switches to auctioning track slots for these things. At that point, the market-clearing price would be discovered. He does not have to set all these other additional points at all.

[Joseph Johnson]

I just observe that the franchising system as it exists today is already a version of the auction that my hon. Friend describes, in the sense that franchise bidders bid a specification that they feel is optimal for that area and the Department then assesses their bids. It is, in effect, an auction in some ways.

A greater contribution by open access operators towards the cost of the railways and a more level playing field should lead to more opportunities for open access services, and thus potentially greater choice for passengers. However, it is crucial that we get the reforms in place first, so that we can start on the right footing. I leave my hon. Friend a moment to wind up.