Increasing Choice for Rail Passengers

Alan Brown Excerpts

Wednesday 11th July 2018 Westminster Hall

[Bill Grant (Ayr, Carrick and Cumnock) (Con)]

It is a pleasure to serve under your chairmanship, Mrs Moon. I thank my hon. Friend the Member for Weston-super-Mare (John Penrose) for securing the debate.

Railways are one of the great examples of this country’s industrial and innovative spirit, which is often symbolised by the Forth rail bridge in Scotland. It was designed by Sir William Arol, who for many years resided in Ayr in my constituency. Examples of the revival of our railways in the last two decades, after half a century of almost unremitting decline, are an achievement that warrants more recognition. Since privatisation in 1995, the number of rail passengers in the United Kingdom has more than doubled—way beyond our expectations—and has surpassed all previous records. Britain is once again a nation that runs on its railways.

However, that achievement brings new challenges. We have more rail passengers, and they want and deserve a better service and seek better value for money. To achieve that, we cannot go back to the old system that saw passengers desert the railways for other means of transport. We must instead build on the progress that we have made.

The principle behind privatisation is that competition delivers more investment, better services and better value for the customer, which, to a degree, can be proven. While the situation has improved since the days of British Rail, which I remember well, there is still a shortage of genuine competition on our railways. The vast majority of rail services in this country are run by franchises—essentially time-limited monopolies granted by the Government. It is easy to see how this system limits competition, especially in Scotland, where the overwhelming majority of services are provided by one operator, Abellio ScotRail, which has a Dutch parent company. Abellio took over the ScotRail franchise in 2015, but questions already have to be asked about its performance. We could in parallel ask about Network Rail’s performance.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Does the hon. Gentleman support calls from the Scottish National party that responsibility for Network Rail Scotland be devolved to the Scottish Government, so that Network Rail does not answer to two different Governments?

[Bill Grant]

My simple reply to that is no, I would not support that at all. Network Rail works by being interconnected throughout the United Kingdom.

[Alan Brown]

You just criticised Network Rail Scotland.

[Bill Grant]

That is correct, and it was a fair comment. ScotRail cannot be blamed entirely, because Network Rail is a key player in the movement of rolling stock within the United Kingdom, including in Scotland.

Under the franchise, ScotRail is supposed to move towards a punctuality target of 92.5%, but in reality it is going backwards. Since August 2017, punctuality has dropped from 91.2% to just 88.7%. That is only if we count trains that are four minutes and 59 seconds late as being on time, so it may be that the figures are slightly skewed.

While getting the most out of franchise arrangements is important, fostering greater competition and giving commuters more choice is also crucial to improving the quality of service for commuters. There are already a number of open access operators, as was mentioned. Grand Central and Hull Trains are consistently at the top of the passenger satisfaction rankings, and the presence of open-access competition has led to more passenger journeys, higher revenues and lower fares, which suits commuters.

The fact is that competition works, and we should look at what we can do to enhance it, not stamp it out. I therefore call on all parties involved—the UK Government, the Scottish Government and Network Rail—to consider what action they can take to break down barriers and secure more open access operators running more services on the United Kingdom’s railways. That is not only because open access operators tend to run good services, but because, through competition and choice, they can be a wake-up call to the franchise operators.

ScotRail and the franchises across the UK could do with being kept on their toes, not only by the looming threat of the next franchise renewal but by open access challengers. Our railways have the potential to be an even greater British success story, but only if we avoid the trap of nostalgia. We should not go backwards to nationalisation but focus on what will work in the 21st century. More competition and choice will help to bring better services to commuters in all parts of the United Kingdom. Open access operators are the next phase in the successful journey of Britain’s railways.

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mrs Moon. Like other hon. Members, I congratulate the hon. Member for Weston-super-Mare (John Penrose) on initiating the debate and putting forward new ideas and thinking on the operation of the rail system. One thing that I think we can all agree on is that, as the hon. Gentleman said in his opening remarks, the existing franchise system is absolutely broken. There are too many direct awards, which means a lack of competition and less pressure on prices. We have had the east coast main line shambles. No matter how we dress it up, Virgin Trains East Coast has been able to walk away owing the taxpayer £2 billion. That is a £2 billion write-off of bad debt. There are also the ongoing issues with Southern Railway, and of course there are the latest timetabling issues, so there is no doubt that the franchising system as it is operating under this Government is not working; it is not fit for purpose.

The hon. Member for Weston-super-Mare stated his belief that franchises put train companies first, rather than passengers. I certainly agree that train companies—obviously—have to make profits, but I would suggest that with open access there would still be companies that would have to make profits, so they might still be driven to display the same behaviours.

[John Penrose]

Nothing says that open access has to be among profit-making companies. There could be not-for-profits and publicly owned companies, providing that they all compete with one another on a level playing field. I just want to reassure the hon. Gentleman about that.

[Alan Brown]

As a complete free marketeer, I welcome the fact that the hon. Gentleman is saying that we can have not-for-profit and public sector involvement. I agree with that sentiment.

I think, however, that the hon. Gentleman has over-simplified how this could work. It was suggested that if one train company is not operating to satisfaction, a passenger can switch to another train company, just like shopping for coffee. I have a funny feeling it will not be that simple for widespread open access. We have heard the benefits that open access can bring, but the reality is that train operators will still be bound by the same constraints of the existing network, particularly station capacity at mainline stations. There therefore might not be the flexibility to have so many train operators competing. Slot access has to be managed. We must also consider the movement of freight on the rails. There are a number of elements that need to be understood and factored in, which might restrict open access slot availability.

It was suggested that that might incentivise Network Rail to build more capacity. At the end of the day, however, if that is an incentive for Network Rail, the taxpayer still has to fund Network Rail upfront for the costs or Network Rail will have to borrow against optimistic future track rental fees. There is a risk, therefore, that it will not incentivise Network Rail to start duplicating rail networks across the UK.

It was also said that this would be comparable to the way we shop around for air services. I do not think that is comparable. The constraints on Heathrow stifle competition just now. There is not the widespread competition in air routes that everybody would like to see. Particularly for connectivity in Scotland, passengers do not have the choice that we would like. Again, it is a slightly idealistic comparison. Having said that, I welcome the suggestion. It has merits and it can work, but it will not be able to work as an entity by itself, because we will still need to protect the less-profitable routes. I suggest that it would need to be part of the mix, but I would not dismiss it out of hand.

The hon. Member for Ayr, Carrick and Cumnock (Bill Grant), in my opinion, wrongly conflated cause and effect with the end of British Rail—franchising was brought in, and suddenly passenger numbers rocketed and all the rest of it—but that was because Government constraints on investment in the rail rolling stock were lifted. There was therefore investment in the rolling stock, which the franchises were allowed to do, but that investment was still paid for by a combination of train users and the general taxpayer, because many franchises are subsidised. It was a direct consequence not of privatising British Rail and breaking up the rail network, but of allowing that investment to take place. Too often, many Conservative MPs seem to think that franchising the system created magic money. They seem to think the franchises were like the Prime Minister’s magic money tree, but they are not. It is always funded from somewhere —that is, from the general taxpayer.

[Bill Grant]

I think the hon. Gentleman is distorting what I was saying. I clearly said that passenger numbers had doubled. In life, we have to deal in facts. That was a clear fact, and I went into the details and the reasons why. The trains certainly did improve in quality. I use them on a weekly basis, going north to south. The quality of the train rolling stock is very good.

[Alan Brown]

I thank the hon. Gentleman for clarifying. I remind him, however, that he repeatedly spoke about the bad old days of British Rail. I am just reminding him that those so-called bad old days were because the Government would not allow any investment, so it was not necessarily a function of British Rail being a national rail company.

The hon. Member for Ayr, Carrick and Cumnock also mentioned the Scottish Government working with the UK Government, with which we all agree. I would point out that in terms of funding for control period 6, the UK Government just told the Scottish Government what funding they were getting. There was a big shortfall. There was no consultation on how that would happen. There has been an ongoing, constant refusal to devolve Network Rail. We have seen recent events, such as with the fisheries White Paper, on which there has been no consultation with the Scottish Government. I agree that it would be ideal if the two Governments could work better together, but I suggest that there is a clear fault line. The UK Government are imposing stuff on the Scottish Government and not consulting.

We heard a last-minute entry into the market, as it were, from the hon. Member for Keighley (John Grogan). He highlighted the benefits of competition and open access slots in his area. That is important. It was good to hear how that has benefited his constituents. Like him, I welcome the potential future Scotland-London link-up and the predicted lower rail fares. That can only be good for passengers travelling on the east coast main line. As he has a wee habit of doing, there was a slight bit of friendly fire against Labour’s policy of nationalising rail, because he is concerned about what that would mean for the open access slots for his constituents. I look forward to the shadow Minister’s response on that.

Lastly, we heard from the right hon. Member for Wokingham (John Redwood). He said towards the end that he had made a short speech, but I thought he was in danger of speaking longer than the lead sponsor of the debate. Given how long I have been speaking, however, I am maybe being a wee bit hypocritical, I admit. He highlighted the failings of Network Rail. Other hon. Members did so in interventions, too. I remind them that Network Rail is answerable to the Secretary of State, so when we talk about the failings of Network Rail, it is an admission of the failure of the UK Government and the Secretary of State for Transport. They seem to agree with Opposition Members that the Transport Secretary is not up to the job.

As I said, there is some merit in open access, but I do not think it is a one-size-fits-all solution or that it will be the panacea for a new smoothly operating Network Rail. There is no doubt that profitable routes will be cherry-picked. We need to protect non-profitable routes. I also have concerns, if it was too widespread, about what this could mean for investment in rolling stock. Rolling stock investment has a long payback period. That is what is supposed to underpin the franchise system at the moment. Franchise holders get a longer award, which allows them to borrow to invest in the rolling stock, so if there are not any longer award periods, there is a risk that there will not be that long-term investment.

On passengers’ general choices, I challenge the UK Government to speed up the connection of High Speed 2 to Scotland—at the moment, as we know, it will stop at Crewe—and to look at improved investment in the existing network north of Crewe. That is really important.

Competition is good. I welcome the fact that the hon. Member for Weston-super-Mare acknowledges that we can and should have public sector involvement. There cannot be too much open access. It cannot be massively increased while we have the existing franchise system, so the Government would need to do a complete overhaul of how the rail system operates. Given the failures of the franchise system, that overhaul is long overdue.