Passenger Railway Services (Public Ownership) Bill

Lord Moylan Excerpts

Committee stage
Monday 21st October 2024 Lords Chamber

Moved by

[Lord Moylan]

7: Clause 2, page 2, line 15, at end insert—
“(1AA) Before making a direct award of a public service contract to a public sector company under subsection (1A), the relevant franchising authority must provide information to the Office of Rail and Road on the public sector company’s ability to become responsible for the provision of the relevant passenger railway services.(1AB) The information provided under subsection (1AA) must include an overview and analysis of the capacity of the public sector company to provide, maintain and improve the existing level of service. (1AC) Following the receipt of the information provided under subsection (1AA), the Office of Rail and Road must publish an opinion on whether it is reasonably practicable for the public sector company to provide, or secure the provision of, the relevant passenger railway services.”Member's explanatory statement
This amendment requires that the relevant franchising authority provides information to the ORR on a public sector company’s capability to provide adequate railway services.

[Lord Moylan (Con)]

My Lords, I will speak to Amendments 7 and 9, which together constitute this group. Both are concerned with what the Government say they intend to be the effect of the Bill: the improvement of passenger services. Again, they are largely probing amendments, although we would expect the Bill to be amended, if not with a purpose clause, as proposed earlier by my noble friend Lord Gascoigne, then at least with measures of the character contained in these two amendments, which seek to set a safety net, in effect, in different ways, for the services being provided.

Amendment 7 would have the effect that the relevant franchising authority must give to the Office of Rail and Road—it could be to some other trustworthy and credible body, such as the Department for Transport, if it is not the franchising authority—an assessment that the company that will take over the franchise is capable of doing so. People might ask: what company? The company that will take over the franchise as proposed by this Bill will be a shell company—an off-the-shelf company purchased by the Department for Transport; a perfectly ordinary company under companies law such as anyone might buy off the shelf. That already starts to raise questions around why we would think that it had any competence to run a railway. People will say, “Don’t be silly, that is just a form”. The form is an empty-shell company constituted under companies law, but the sole shareholder of that company will be the Department for Transport. In effect, the Department for Transport will be running this service through the shell company that it has bought off the shelf in order for it to be the recipient of the public service contract, which is the only type of contract that the Secretary of State will be able to award.

But the Minister said a little earlier in the debate— I cannot pin it down exactly without looking at Hansard, but I do not think that he will deny that he said it—that one of the main purposes of the Bill was to take out of the Department for Transport a whole load of stuff that it was no good at doing and give it to Great British Railways, because it would be better at doing it than the Department for Transport. Here we have a system proposed by the Bill in which the responsibility for operating a service will be taken from a train operating company with decades of experience of providing the service—perhaps, in some cases, hundreds of years of experience if it is a foreign railway company putting its foot into the British market and providing services to us—given to a company bought off the shelf, which is owned and controlled by a department that the Minister himself said should have functions taken away from it and transferred to Great British Railways. What sort of a mess is this?

That is why, very simply, this amendment asks for an assessment in advance as to whether that company —the operator—is fit for purpose. We are looking not simply at the shell company but at its shareholders and controllers—the people making the decisions. Why should not the public have that level of assurance before a franchise is terminated and transferred to such an entity? That is what the amendment is calling for, and there is a very strong case that it should be done.

The second amendment, Amendment 9, is not the same, but it points in a similar direction. Nothing is said in this Bill about what level of service the new operator will offer compared to the old operator. It is presumably for the Department for Transport or shadow Great British Railways—we do not know—to decide the terms and conditions of the public service contract that it will award. If it is the Department for Transport, it will award the contract to itself or to its shell company; if it is shadow Great British Railways, it will award it to the Department for Transport. Somebody will have to sit down and decide what those terms and conditions are. All we are asking in this amendment is that the services offered to the public should not be of a lower standard than they are under the existing franchise.

That is not to say that there is not the possibility of some sort of public consultation. That is what we have inserted. We have said that you can lower the services but that you have to consult publicly in advance. At the moment, that would be true on a transfer of a franchise. We have had no assurance from the Government that there will be a public consultation on the termination of a franchise and the award of a public service contract directly to one of the Department for Transport shell companies.

This is one of those issues about which the Government may want to say, ah ha, this will all be dealt with by the great big Bill coming down the rails towards us. That would be a grave mistake, because these issues relate specifically to this Bill and to what will happen the moment it starts to be implemented. As we discussed earlier, this Bill could be the governing statute of the operation of the railways for as much as four or five years, even if the Government have a good headwind behind their new measures and they come forward in time and are implemented reasonably. The public will want to know that our service levels are protected. Will they be consulted? Will the people who run these trains be fit for it, given that we know from the Minister that he does not think that they are fit for much else on the railways? I beg to move.

[The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)]

My Lords, I thank the noble Lord, Lord Moylan, for his amendments.

Amendment 7 considers the capability of public sector companies to take over services and operate them to an appropriate standard. It is clearly a key priority for the Government that services should transfer to public ownership smoothly, without detriment to the quality of service during the transition. For this reason, the transfer of services will take place using established arrangements and processes which have previously fulfilled the Secretary of State’s operator of last resort duties. I remind the noble Lord, Lord Moylan, that this has taken place under the previous Government and their predecessors four times with no obvious risk to the delivery of service.

DOHL is the publicly owned company that already oversees four existing publicly owned operators. It has had significant experience of managing the transition of services from private to public operation in recent years. These transfers have been completed successfully and smoothly despite challenging timescales and circumstances, which have included franchise financial failure and poor operator performance. DOHL is therefore well-placed to manage future transitions and is building its capacity to do so as we speak.

The Government have made it clear that we will transfer services on a phased basis as existing contracts expire. This measured, responsible approach will further de-risk the transfer process. As an additional safety net, the Bill includes provision at Clause 2 to allow for temporary continuation of an existing franchise where the Secretary of State is satisfied that it is not reasonably practicable to complete a transfer in the timescales originally planned. We do not plan to use this power other than in genuinely exceptional circumstances, but it is prudent that it should be available if necessary as a last resort, given that everybody would agree that disruption to passengers should be avoided.

Amendment 7 also seeks to provide a new role for the independent regulator, the Office of Rail and Road. The ORR is the regulatory authority responsible for granting operator licences and for assessing, approving and issuing operators’ safety certificates. This Bill does not change this. In its existing role, the ORR will assess carefully the suitability and readiness of any operator—public or private, passenger or freight—to take over services and to operate them safely, and is experienced in doing so. Considering DOHL’s previous experience and track record, the further safeguards I have described and the existing regulatory role of the ORR, the Government do not see any need to commission further analysis from the ORR as this amendment proposes.

Amendment 9 would require the Secretary of State, Scottish Ministers or Welsh Ministers to undertake a public consultation before specifying or allowing any reduction in service levels at all within a contract with a public sector operator.

I start by saying that the Government want to grow rail passenger demand and revenues; we are not starting out with an objective to cut services. When services transfer to public ownership, as now, we will expect operators to clearly communicate all changes to services. I agree that, if there were to be a plan for material reductions in service levels, this should be the subject of public consultation. However, I cannot support a statutory obligation to hold a public consultation in relation to every change to the timetable or to any other aspect of the service specification that somebody might consider to be to their disadvantage.

If a service is so poorly used that it is clearly unnecessary to carry on running it, and there is an alternative train available at a similar time of day, is it really sensible to expend time and public money on a consultation process? If there is a high-frequency service and a slight reduction at a quieter time of day would enable train and/or infrastructure maintenance to be carried out more efficiently and effectively, does this really merit a public consultation? If, God forbid, there were another global pandemic, or other immediate and extraordinary event that caused a serious reduction in passenger demand, I submit that it would be absurd to suppose that a public consultation would be necessary before reducing service levels.

There should of course be consultation on material reductions in services, but to require it regardless of the scale or impact of a proposed change would impose a disproportionate burden. I therefore urge the noble Lord not to press this amendment and to withdraw the amendment I spoke to first.

[Lord Moylan (Con)]

My Lords, will the Minister state at the Dispatch Box not that there should be a public consultation in the event of a material reduction of services on transfer of a contract but that there will be? If so, I would be very happy to leave the matter there. I would like to give him the opportunity to say that it is the Government’s policy that there will be a consultation if there is a material reduction in services on transfer.

[Lord Hendy of Richmond Hill (Lab)]

In response to the noble Lord, I do not see those circumstances arising. However, I will take the point away and consider it during the progress of the Bill.

[Lord Moylan (Con)]

I note that the Minister has not been able to give that commitment. With that, I beg leave to withdraw my amendment.

Amendment 7 withdrawn.

--- Later in debate ---

Moved by

[Lord Moylan]

8: Clause 2, page 2, line 15, at end insert—
“(1AA) Every contract made in accordance with subsection (1A) must place a duty on the public sector company to publish a plan for investment for innovation across all aspects of its operations, including but not limited to—(a) operational efficiency;(b) fares and ticketing;(c) stations and onboard services;(d) passenger information; and(e) digital transformation.”Member’s explanatory statement
This amendment requires all public sector companies awarded a contract to publish a plan for investment in every operational aspect of the railways.

[Lord Moylan (Con)]

My Lords, I think we are getting to the point where every question has the same answer, which is essentially either, “It is in the manifesto”, or “We’re going to tell you about it in the future”, or “How dare you imagine for a moment that anything could go wrong on our watch?” I suspect that this is where I am going to end up with this amendment.

The amendment is very simply stated. It requires that, before there is a transfer to a public sector operator, an investment plan should be published so that we know what will happen on the railway. The proposition is so simple, so self-evident and so straightforward that it hardly requires argument, and it certainly does not require any great explication. With that, I beg to move.

[Lord Teverson (LD)]

My Lords, I did not speak at Second Reading, but I often speak on issues around public investment. One of the things that concerns me greatly about this move, although generally I might be in favour of it, is that, internationally, public investment in this country tends to be extremely low. In fact, over the last 25 years, the average public sector investment is 1.8% of GDP, which most of the time is well below our equivalent G7 nations. However, if you look on it year to year, the graph is a rollercoaster that Alton Towers would probably be favourable to, because it goes up and down, up and down.

I was privileged—it was a great company—to work in the public sector for a short period of time in the transport sector, not on the railways but in another area. Certainly, one of the concerns we heard very regularly from organisations equivalent to us within the public sector—I was in the freight sector, which was so small that the Treasury did not worry about it—was that investment in the public sector operating companies tended to vary year by year depending on what the Treasury felt was possible in terms of public investment, which completely disrupted a regular, predictable and sensible investment programme in what were effectively commercial public enterprises. I would like to hear from the Minister how there will be effectively that barrier between what the Treasury wants to do year to year and the genuine needs of public sector railway companies to offer a consistent and improving service to the travelling public.

[Lord Hendy of Richmond Hill (Lab)]

I thank the noble Lord, Lord Moylan, for his Amendment 8, which would require public sector operators to publish plans for investment and innovation. I would dispute the proposition that a move to public ownership will produce a decrease in investment. As I have previously said, currently no meaningful private sector investment is being funded by franchising.

[Lord Moylan (Con)]

I have not said that a move to public operation would reduce investment, nor have I argued it either here or anywhere else. The question put by the amendment is quite different to that.

[Lord Hendy of Richmond Hill (Lab)]

I thank the noble Lord for his intervention. I did not say that he had made the assertion; I was disputing the proposition that a move in that way would produce a decrease in investment.

As I said, no meaningful private sector investment is being funded by franchised operators at present, so we are losing nothing by moving to a public ownership model. The Government are already reimbursing the legitimate operating costs of private sector operators and receiving the revenue. Even before the Covid pandemic, the main private investment in our railways was in rolling stock, generally funded by the rolling stock market, not by train operators or their owning groups. Given that the rolling stock market is not impacted by the Bill, there is no reason to see that change.

The Government, of course, wish to see innovation and investment in areas such as those described in the amendment. In fact, the public sector is already demonstrating its commitment to innovation. We have committed to reviewing the overcomplicated fares system, with a view to simplifying it and introducing digital innovations. Change is already being delivered: for example, by the slightly delayed, extended pay-as-you-go in the south-east and fares reform on LNER. Public ownership is essential to progress these fares and ticketing innovations and other reforms. Unlike under franchising, with public ownership we will be able to get these sorts of reforms done without needing a commercial negotiation with up to 14 different operators, each seeking to boost their profit at the taxpayer’s expense in return for agreeing to implement those reforms.

However, the Government do not consider it appropriate to spell out detailed requirements such as these in the legislation. To do so would constrain future flexibility to adapt operators’ obligations to suit changing circumstances. It is not necessarily the case that constant investment and innovation across all these different aspects of the customer offer is the right approach. The focus of innovation should be on those areas where improvement is most needed at any point in time, and not those that are already working well. Moreover, it will not be coherent for passengers, nor efficient for the taxpayer, if up to 14 separate publicly owned operators in England, plus those in Scotland and Wales, are each pursuing their own separate innovation and investment strategies across all these different aspects of the passenger offer.

A key purpose of our wider reforms, starting with the establishment of shadow GBR, will be to drive a much more coherent, cross-industry approach in areas such as those described in the amendment. GBR will be the right body to consider investment across the railways, and I ask noble Lords to wait to consider the Government’s proposals on GBR in the coming months, though I feel very confident that a coherent guiding mind for the railways will produce a longer-term and more consistently argued approach for investment than has been true in the past.

In summary, I support the underlying sentiment that investment and innovation are needed to drive improvements in many aspects of the passenger offer, but the proposed amendment is not the right way to deliver it. I offer my reassurance that investment and innovation are critical to our plans to reform the railways, but I urge the noble Lord to withdraw his amendment.

[Lord Hendy of Richmond Hill (Lab)]

A coherent guiding mind is far more likely to produce a long-term business plan for the railway that justifies future investment than the previous fragmented system. Very few of the owning groups or train operating companies have ever made any significant investment. The principal investment that has been made in passenger services is with the rolling stock companies, whose position is unaltered in the proposition of this Bill.

[Lord Moylan (Con)]

My Lords, I come away from each of the Minister’s responses slightly more baffled and frustrated than I was before. Let us try and get clear what I think he is saying. This in part is my attempt to frame at least a model answer to the question raised by the noble Lord, Lord Teverson.

At the moment, the Minister would say that there are in principle three sources of investment in the railway. There is what is put in by the private sector—that happens to be a nil set, the number is zero, but in principle it is there. There is what is provided by the private sector for the purpose of acquiring trains for the purpose of leasing them out—that is unaffected by the Bill, so that is not going to change, and nor is there any suggestion, incidentally, although I may be wrong about this, of course, we wait to see, that that is going to change as part of the Great British Railways Bill coming down the track. Then there is the part that is put in directly by the Government and that is currently negotiated by Network Rail in a series of five-year control periods. I forget where we are in the current control period, but we are vaguely half way through a five-year control period.

So, in the future, what is the Minister holding out to us that is going to be different? The contribution from the train operating companies will continue to be zero, because they are now going to be simply shell companies or part of that. He is quite clear we are not losing or gaining anything on that particular front. There will be no change to the way in which the roscos are set up for the purpose of leasing trains. So everything is thrown back on the comparison with the Network Rail negotiations in relation to the current control periods. Somehow, because that is Great British Railways, it is going to be transformed.

We have just heard that it will be longer term, so it will not be a five-year control period, it will be a 10-year control period or a 15-year control period. That might be very desirable—but why? Why is the Treasury going to agree to a 10 or 15-year control period or whatever the number is beyond the five years that exist? And if it is not going to be a larger sum—he did not say a larger sum—it will at least be a more efficiently deployed sum, so that every pound will buy a little bit more than it would have bought under the current arrangement? Again, the question is: why?

The sort of answer we get is, “It is all going to be absolutely wonderful. It will be different and it will be wonderful, but it’s going to be the same and I can’t explain why”. That is where we seem to be left the whole time. Anyway, with that, I beg leave to withdraw my amendment.

Amendment 8 withdrawn.

--- Later in debate ---

[Lord Moylan (Con)]

In speaking to these amendments, I say first that I thought the speech just made by the noble Baroness, Lady Pidgeon, was extremely sensible and contained a great deal with which I agree. It asked a series of important questions of the Minister. I have been around just long enough to have realised that getting actual answers to questions in Committee in your Lordships’ House is a pretty remote prospect, but these questions are of such importance that the Minister might make a bit more than the normal effort to address them.

I draw attention to Amendment 49 in my name, which raises the question of minimum service levels, which the last Parliament enacted as means of ensuring continuity of some service on the railways if strike action were to take place. The Government have not said whether they intend to avail themselves of that legislation and in what circumstances, but nor have they said they are going to repeal it. Many passengers in the country at large, looking to this as a means of protecting them from the ravages of what is sometimes thought to be excessive and persistent industrial action, would expect the Government to have a clear view on when they are going to use these measures—or even if the answer to that is “never”. I hope we can get a straight answer from the Minister on that.

I turn to Amendment 18 in the name of my noble friend Lord Young of Cookham, which relates to an independent pay review body. That amendment or something similar was discussed in the other place when the Bill was before that House, and the Minister in fact gave some encouragement, saying that the Government would at least look at it as part of the great reform Bill coming down the tracks towards us. I would like to hear whether government thinking has developed in any way since then and if there is anything the Minister can add to it.

On the face of it, the amendment deals primarily with agreeing and setting, in a semi-binding way, the pay rates and terms and conditions for railway staff analogously to those in other parts of the public sector. After all, it is the Government’s policy that these people should now be public employees. They should come under a single employer, a single brain and a single wallet, so it would be an independent pay review body along those lines. However, my noble friend Lord Young of Cookham took the amendment in another direction as well and made an interesting point, one also made by the noble Baroness, Lady Pidgeon: how are the Government going to amalgamate, smooth out or harmonise the varying terms and conditions and rates of pay that exist among the different train operating companies as currently constituted, as they bring them under this great big umbrella? Is there going to be a levelling up all round?

Will there be a cost to the public purse? The Government have claimed that the Bill involves no cost to the public purse, but it is patent that, if you employ a large number of people and end up adjusting their pay scales on the grounds of equity, and if those pay scales tend on average to be higher than before, a cost has been incurred directly as a result of the Bill and the action being taken under it. How is that cost to be dealt with? Where is it to come from? Why are the Government not being honest about the Bill involving costs of that character? This is a point we will return to, I am sure, when we come to look at other liabilities being transferred to the Government as a result of proposals in the Bill, as we will do later in this Committee. I invite the Government to think about this seriously, because these are important issues and they should be looked carefully.

Finally, and taking account to some extent of the lateness of the hour, when we started debating this group it was my intention to rise to offer some level of support to the amendment tabled by the noble Lord, Lord Berkeley, relating to minimum rest days. But the comprehensive and unremitting demolition of his position advanced by the noble Lord, Lord Snape, was so persuasive and irresistible that I have decided to abandon that effort.

[Lord Snape (Lab)]

I am grateful to the noble Lord for his kind words. I would just refer him to the proposed new clause to be inserted by the amendment in the name of his noble friend Lord Young, which is headed “Independent body to advise on pay and terms and conditions of employment for employees of public sector companies”. I make it that, during this debate, the party opposite has proposed no fewer than seven different bodies, groups, organisations or committees—call them what you like. As the Opposition rails regularly against too much bureaucracy, I am astonished that they want to create yet another body. In the event of a pay dispute, does the noble Lord not agree that that is why, many years ago, we created the conciliation and arbitration service? Such matters are better referred to it—we are surely running out of lawyers to sit on all these bodies—rather than creating yet another bureaucratic organisation.

[Lord Moylan (Con)]

In response, I say only that seven would be a fantastically tiny number compared to the number of internal boards, committees, liaison bodies and so forth that Great British Railways is likely to require to explain to itself what it is doing, before it even gets round to explaining to the public what it is up to. I regard seven as a very modest and economical number.

[Lord Hendy of Richmond Hill (Lab)]

I thank my noble friend Lord Berkeley for his Amendment 11, regarding rest-day working. Rest-day working provides resilience in response to spikes in leave, sickness and training, and it rewards the workforce when extra hours and days are worked. It can offer benefits to rail employees, as well as to passengers. It is likely that it will always be necessary, to some extent, to effectively deliver the timetable. However, rest-day working should be used where there is an operational benefit and employees are willing to volunteer, rather than trying to mandate in legislation how and where it is used. Our focus is instead on ensuring, as soon as possible, that the railway industry has enough staff to operate services reliably for the benefit of passengers and employees, without excessive rest-day working.

My noble friend Lord Berkeley referenced the new trains on South Western Railway. I say to him that they are now entering service and, further, that Network Rail in fact substantially changed terms and conditions two years ago for greater flexibility and in agreement with the workforce, and that is now reflected in greater efficiency. That deal demonstrates what can be achieved in the public sector.

The noble Baroness, Lady Pidgeon, referred to uncertainty. There can be no greater uncertainty than has existed for the last 30 years on the railway, in which anybody of long service has changed their employer at least once, sometimes several times, while doing the same job. The people whom I meet going around the railway talk about it as “the railway”, many of them because their employer has changed so often that they cannot even remember the name of the company that they used to work for. Some stability in respect of the employers of staff on the railway, many of whom are deeply committed and have had long service, is overdue, and this Bill will move towards it.

Will there be a workforce plan? Yes. Is there one at the moment? No. As the train operating companies come into public ownership, they will have to have a workforce plan. Personally, I am absolutely committed to the maximum recruitment of drivers as early as possible, to the benefit of the drivers themselves and the service that the railway operates.

I also very much thank the noble Lord, Lord Young of Cookham, for Amendment 18, which suggests that an independent body should be established to advise the Government on the pay and terms and conditions for railway staff under public ownership. We are committed to delivering the biggest overhaul of our railways in a generation. It is right that, as part of that process, these matters are considered. Employment conditions are an important issue and one that we are determined to get right.

My officials are at the early stages of exploring a number of options, including a pay review body, so that we can consider the most appropriate approach to meet the needs of a transformed industry. A number of different approaches exist across the public sector, including pay review bodies and wider guidance, and, as my noble friend Lord Snape said, the use of the Advisory, Conciliation and Arbitration Service. We need more time to reach an informed conclusion on the best approach for the rail sector. It would be inappropriate to commit to the introduction of an independent body before that work is completed. In particular, we do not need to do this now in relation to this Bill.

Amendment 49 is in the name of the noble Lord, Lord Moylan. It seeks to require the Secretary of State to produce a report on how public ownership will impact the implementation of the Strikes (Minimum Service Levels) Act 2023. The noble Lord must surely be aware, however, that the Government have already committed to repealing the Strikes (Minimum Service Levels) Act 2023. That is because this Government are committed to strengthening the rights of working people by empowering workers to organise collectively through trade unions.

No relevant employer, under the Strikes (Minimum Service Levels: Passenger Railway Services) Regulations, has chosen to implement minimum service levels under this legislation and, in fact, they will not work. Instead, we will work in partnership with trade unions, as we have done in recent weeks to bring an end to two years of disputes that have meant needless disruption and misery for passengers. So I must say to the noble Lord that the Strikes (Minimum Service Levels) Act will not be implemented for publicly owned services, or indeed at all under this Government—as, in fact, it was not under the last one. The suggested report, therefore, would be redundant.

Finally, I will respond to the points made by the noble Lord, Lord Young, on the classification of the costs of rolling stock for publicly owned train operating companies when I respond to Amendment 19 in group 10 in the resumed Committee stage on Wednesday. I note for now that, whatever the position is, it must already apply to the four publicly owned train companies. I urge the noble Lord to withdraw his amendment.