Rail Fares

Baroness Clark of Kilwinning Excerpts

Wednesday 5th September 2012 Commons Chamber

[Tom Greatrex]

My hon. Friend makes an important point. The times at which peak and off-peak fares are available can vary greatly between different parts of the country, which can cause immense confusion.

My hon. Friend the Member for Dundee West (Jim McGovern) made the point that people sometimes find that buying separate tickets for different legs of their journey works out cheaper than buying a single ticket. All such issues add complications, which does not help to achieve our objective of encouraging people to use the railways as much as possible.

If the complications become so great that people choose to travel not by rail but by a different mode of transport, that could also make some of the Government’s other commitments and policies harder to achieve. I say that as someone who travels on the west coast main line between Scotland and London. Many of the people who get on the same train as me—especially business travellers on a Monday morning—have in the past frequently travelled to London by plane. They make the point that the investment in the west coast main line over recent years means that now, if they catch the right train, they can complete their journey almost as quickly as they could by air, when they take into account the time taken in travelling to and waiting at airports at both ends of the journey. That has had a huge impact on the use of the train service. The investment has, therefore, been very welcome. Now, however, some of the peak-time fares are becoming more expensive than air fares and, especially as businesses are under increasing financial pressure at present, many business travellers are switching back to air.

The Secretary of State will find that another important part of his portfolio is aviation capacity. As this recent investment has made rail travel more attractive and almost as fast as air travel, it does not make sense that cost increases could now lead to people reverting to air travel. This is also an important issue because these cost increases are having an impact on businesses that are under increasing financial pressure because of the general difficult economic circumstances.

[Katy Clark (North Ayrshire and Arran) (Lab)]

On the question of complex rail fares, does my hon. Friend agree that the Government’s policy of closing ticket offices and reducing their opening hours makes it even more difficult for people? Frankly, the machines that are available at railway stations make it practically impossible to know what is the cheapest fare.

[Tom Greatrex]

My hon. Friend makes another important point, which I hope that the Secretary of State will consider as he reads himself into his brief. My experience of getting from airports to stations, particularly when getting a train from Gatwick into London, is that the ticket machines are quite hard to navigate. It is difficult to find the cheaper ticket, which involves travelling on the non-Gatwick Express service. That is just one example that shows that how the ticket machines are set up seems to drive people towards the more expensive fares. I am not sure how that is regulated, but it might be worth considering in the round along with all the other issues.

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[Mr Binley]

I thank the hon. Lady for that question. I am referring to the McNulty report, which her party’s Government put into effect. McNulty made it quite clear that the British rail sector was 28% more expensive than like-for-like rail sectors throughout Europe. If our costs are that high, I hope that the hon. Lady will be as concerned as I am. The alternative is to keep pulling money out of the pockets of the taxpayer or consumer and I want a more productive and efficient rail industry—[Interruption.]

[Katy Clark]

I was not sure whether the hon. Gentleman sat down because he had finished speaking or because he was letting me intervene, and I am grateful that it was the latter. He is making the point that that comparison is like for like, but surely the key point is that Britain has a very different railway system that is based on the private sector, whereas the cheaper train operating systems to which he is comparing it are predominantly in the public sector.

[Mr Binley]

I thank the hon. Lady for that point. She served with great distinction on the Crossrail Bill—two and a quarter years of toil and effort—and she is clearly knowledgeable on rail matters, as I know from that time. My point is that the comparisons are not mine, but McNulty’s. The report was instigated by her Government. If one does not believe what McNulty said, that is a different matter, but it is the most authoritative report we have had on this subject. Rather than bickering about an area on which I am not overly clear, I am willing to accept McNulty as an authoritative response on this issue. The previous Government did too, so we do not need to get too involved in that sort of thing. I want to ask, therefore, why the previous Government—

[Katy Clark]

Will the hon. Gentleman give way again?

[Mr Binley]

Just for you.

[Katy Clark]

I am extremely grateful to the hon. Gentleman, who is a good friend. We have sat on many Committees together. My point is that the comparison is not like for like because the train system in Europe is predominantly public sector. That is why it is cheaper.

[Mr Binley]

Some of the comparisons are with companies that are much more privatised, which is perhaps not the impression that the hon. Lady is trying to give, but that is not the point. The point is that I see McNulty as authoritative and so did her own Government. Therefore, we need not to argue about the review, but to use it to the benefit of our consumers and constituents. We need to put pressure on the rail sector to become more efficient and more productive, and to cut costs. It should not be only the taxpayer and the consumer who have to dip their hand in their pocket.

Let us move on, because I want to ask why the Government have not done more to respond positively to the conclusions of the McNulty review, although I was pleased to hear what the Secretary of State said, which intimated that he would be responding to that review, because Labour in government did not. The Labour Government were pleased to tuck it away in a corner of the office of the Secretary of State for Transport and forget it. That was a missed opportunity, which is rather sad.

The Opposition devised an industry structure that created many of the inefficiencies and costs to which McNulty referred. Let me remind Opposition Members that the spirit of the Railways Act 1993 envisaged a far more flexible franchising arrangement, as well as a less complicated intra-industry interface. Under the original arrangements, fares regulation involved a cap below inflation, not above it. If we want to squeeze inefficiency out of a sector, we should not give it price increases above the rate of inflation. That is crazy.

In office, Labour created an additional, unnecessary bureaucracy in the industry and made empty gestures towards a proper strategy. Today’s motion does the same—Labour is continuing in the same vein, which I find rather sad, because I have great respect for the hon. Member for Garston and Halewood (Maria Eagle), the Opposition spokesman. She has a great deal to offer in this area, and some of her remarks suggest that she is willing to make that contribution. I see some connection between those on the two Front Benches, to the benefit of our consumers, and I welcome her comments.

The question is, who should pay for our railways and what can we do to handle the costs? The Government policy that, progressively, passengers should pay a larger share of the cost and taxpayers less, is understandable. I do not want a subsidised, nationalised railway in another form. That is not what I seek, so I understand that view, but I want a Government who ensure that the industry’s unit costs should decline year by year over time. Cost increases below the rate of inflation will do more to impact on that than simply saying again, “You can have more than our consumers and our constituents have year by year in their pay packets.” That will result in costs rising inexorably and people being driven off the railways. None of us wants that.

The McNulty review demonstrated beyond doubt that our railway system is one of the most expensive around and that the competitiveness of the railways as against other transport modes is weak. A recent survey in The Daily Telegraph found that travelling by rail on some routes can cost more than catching a flight. That is cloud cuckoo land. According to the research, it was more expensive to take a train on 50% of popular routes than to fly, including travelling from London to Scotland. That does not make sense.

It has been a thrust of Government policy to encourage more people to use railways. I welcome that, as do many of my constituents, yet the laws of economics dictate that an increase in relative prices will depress demand. That is not a difficult formula to grasp, work out and understand, but the impact on those who use the railways to get to work is particularly bad and particularly expensive.

The situation facing my commuters in Northampton is especially enlightening and in line with many of the comments made during this welcome debate. Northampton is set to expand by more than 56,000 houses by 2026. We shall see whether that happens, because we all know that the construction industry is depressed, but that was the target of the previous Government and it remains, to all intents and purposes, the target of this Government. It really means that we are trying to get out of the south-east and London people who work in that area but cannot afford housing in it, yet what are we doing? The price of an annual season ticket from Northampton to London is £4,756 without the new increase, which will rise to £5,628 for those who need to use the underground. Add an annual season ticket for parking of £815 and we reach more than £6,000. For somebody on £30,000 with a disposable income of £24,000, that is 25% of their disposable income. It just does not make sense.

If we want to move people who work in London and the south-east to areas with less-high-cost housing, we must understand that we need a more competitive rail industry with lower pricing, not higher pricing above the rate of inflation. That is the point that I really want to make.

The regeneration and growth strategies in places such as Northampton risk being derailed, if I might use that term, unless we get this sorted. I make a plea. The Secretary of State understands that point well and knows that commuters from Northampton have already been forced to pay out a quarter of their disposable income, but that price is going up. I know that he understands the problem, which is not only about Northampton. It is about Brighton, Nottingham and other areas that are suffering from the same difficulties.

My constituents have a right to ask what the rail industry is doing to get to grips with its cost base. There are efficiencies that the industry could and should make to bring unit costs down. Staffing levels are unnecessarily high, ticketing and retail arrangements impose operational costs and inefficient deployment of staff, and industrial relations remain problematic and expensive for franchise operators. Therefore, why is the industry not doing more to grasp the challenges of McNulty and why are we not pressurising it to do exactly that? The message from the debate, and from Opposition Front Benchers and Ministers, should be that we have an inefficient rail industry, proved beyond doubt, whose costs have forced up rail prices to the point where they are becoming exclusive to people who can afford to pay and deter many who find it difficult to pay. That is not what we want from our national rail industry.

The industry, the previous Government and this Government have found it too easy to pass on ever more costs to consumers. Neither taxpayers nor hard-pressed rail users should be prepared to tolerate that, and nor should we, but what is needed is not regulation, but a proper focus on efficiency so that the industry takes responsibility for its costs, which every other sector in this country has had to do over the past five years.

I will make one final point. Rail costs are an integral part of business costs because—this point has been made and is relevant—London is the hub of British business, no matter how much we might want to change that, and businesses must travel again and again to London in any given period to sustain and hopefully grow their business. Growth is clearly the only game in town, as we learnt yesterday, and I pray that the Government take on board some of the criticisms that have been made about their growth policies over the past two and a half years. The truth is that unless other Departments see a role in this respect, we will not get the growth we need because costs will keep rising, and the railway costs are an important part of that formula. I know that the Secretary of State understands that and I look forward to him having a massive impact in that regard.

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[Dr Julian Huppert (Cambridge) (LD)]

I welcome the new Secretary of State for Transport to his role. I also pay tribute to the work of the former Secretary of State, the right hon. Member for Putney (Justine Greening), and wish her the best of luck in her new, very important role in heading up the Department for International Development. It was a great pleasure to work with her to try to achieve many of the things to which we both aspire. I hope that that work can continue with the new Secretary of State and the other new Transport Ministers, whom I welcome to their roles, and the Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker), who, I am delighted to say, is still in his role, holding the Department together in so many ways.

One of the issues on which we will have to work together is rail fares, which are quite simply too high. Under the previous Labour Government we saw year-on-year rail fare rises, and we now have one of the most expensive railways in the world. In their 13 years, rail fares went up by an astonishing 66% in cash terms—well above inflation—and in some years there were even greater increases. In 2007, for example, they allowed Stagecoach South West to increase fares by a massive 20%. Fares are too high already, but even now Labour and the Conservatives continue to argue for above-inflation rail fare increases. Although it was good to hear the new Secretary of State say that he aims to end the era of above-inflation increases soon, I hope that it will be very soon.

I will not support the motion because I do not agree with Labour Members that fares should be allowed to go up by more than inflation, which is what their motion says. It calls for a 1% above inflation rail fare cap, whereas Liberal Democrats believe that rail fares are too high already and should be reduced in real terms—that is, capped at less than inflation. We have argued that consistently and will continue to do so. It is time to end the era of above-inflation fare increases for ever.

The last-but-one Transport Secretary—I believe that 24 living people have had that job—instituted a policy of RPI plus 3%, which is well above inflation. Thanks to pressure from Liberal Democrats and others, and arguments won by the former Secretary of State, we managed to reduce that, and fares rose by only 1% above inflation—the average of the Conservative and Lib Dem proposals, and exactly what Labour advocated and advocates today—rather than by 3%. I congratulated the former Secretary of State on successfully winning that argument with the Chancellor last year. I have continued to work with her and other Ministers to try to press it. It was kind of the shadow Secretary of State to read out my words, confirming that I continued to press the former Secretary of State and will keep going with the new Secretary of State. I was delighted when the former Secretary of State announced in August:

“I am keen to see what we can do to keep fares down to something affordable. I will be looking at whether there is a way of doing this in the autumn.”

I am sure that the new Secretary of State, with all his vast experience in the ways of operating within Government and the Whips Office, will prove equally adept at obtaining the funds that are needed so desperately to ensure that price rises are reduced, and I look forward to working with him to achieve that.

We need to look at why fares are so high and how we can reduce the costs of the railways. Why do commuters in Britain suffer some of the most expensive tickets in Europe on some of its most crowded services? We have already heard some comments about this. I pay tribute to the interesting suggestions of the hon. Member for Wirral South (Alison McGovern), particularly on printing more information on tickets. That is an excellent idea and I hope that the Department for Transport will listen to it and take it seriously.

At the fundamental level, the main problem is chronic underinvestment in our railways. Government after Government have invested far too little in our most important transport network. Infrastructure spending has not kept up with demand. That has forced the railways into a downward spiral. An overcrowded, inefficient and unreliable service becomes far more expensive to run. The Office of Rail Regulation estimates that UK railways are up to 40% less efficient than their European counterparts, despite the cost of tickets. This cycle forces up fares and reduces the level of investment available, making for more expensive railways and a less good service.

[Katy Clark]

I agree with the hon. Gentleman, in his capacity as Liberal Democrat spokesperson, that historically there is a massive problem with underinvestment on Britain’s railways, but does he accept that the fragmentation of Britain’s railways and the role of the private companies compounds the problem greatly?

[Dr Huppert]

I thank the hon. Lady for her comments. She has been fairly consistent on this issue, which is not true of all those in her party. I was interested to note that the shadow Secretary of State carefully avoided making commitments on how the railway system is operated. At the time of privatisation, I was concerned about some aspects. For example, if I want to travel from Cambridge to London, I do not care if it is cheaper to go to Liverpool because I am trying to go to London. It may be cheaper—or wonderful—to go to Liverpool, but it is not the trip I wish to make. Having said that, renationalising now would create a huge amount of complexity in trying to move to that new world. I am not persuaded that it would be the right thing to do, but I would be happy to discuss it further with the hon. Lady.

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[John McDonnell (Hayes and Harlington) (Lab)]

The new Secretary of State is not in his place, but I welcome him to his new position. He said that it is somewhat daunting for him to have on his first day a debate about rail fares. All I can say is: wait until we get on to aviation. I look forward to introducing him to some of my friends: Bob Crow at the National Union of Rail, Maritime and Transport Workers, Mick Whelan at ASLEF and Manuel Cortes at the Transport Salaried Staffs Association. On a serious point, I am sure that the trade unions will show a willingness to meet the new Secretary of State on a regular basis and to work together to improve the system. If hon. Members look at many of the submissions received by the Transport Committee in recent years, particularly from the RMT, ASLEF and TSSA, they will see that many of the issues raised and many of the ideas proposed, particularly on ticketing, have been reflected in contributions by Members from all parties to debates, particularly those centring on fares.

The agenda needs to be worked on jointly with the Government. The focus is on fares as the major problem that passengers bear the brunt of. I believe that the role of the House is to protect our constituents—the travelling public—against many of the companies that are profiteering at their expense. The hon. Member for Northampton South (Mr Binley) gave an example of price increases in his constituency, where people are paying anything up to £6,000 or £7,000 a year to commute, and of how that is becoming an impediment to them maintaining work. That is happening right across the country, so I welcome the Government’s ticketing review and refer them to the evidence that the RMT has already provided to successive Transport Committee reviews of ticketing, in which we have emphasised the problems of the complexities of pricing.

On the performance of the companies with regard to their franchises and fares, it is unacceptable that, when a company reneges on its franchise commitments and then seeks to walk away from it, it is then allowed to bid for other franchises around the country. Any company that reneges on its existing franchise should be banned from being able to bid for another and profiteer at the expense of passengers.

[Katy Clark]

Does my hon. Friend agree that this is yet another example in the transport sector of the private sector getting into difficulties and the public taxpayer picking up the purse?

[John McDonnell]

Time and again, when rail franchises have collapsed, they have been brought under public ownership and control. We saw that with the First Capital Connect franchise in the south-east. When that service was in public ownership, it was one of the most efficient and cost-effective services. Unfortunately, the previous Government—this Government pursued this as well—put it out to the private sector again.

The Secretary of State referred in his opening remarks to the investment in electrification and high-speed rail. I wholeheartedly welcome that investment, but I have concerns about the High Speed 2 route. I am particularly concerned about how it has been consulted on. The two-stage approach and the development of the line—the two stages being those that link London to the midlands and to the north—were consulted on separately from the publication of the route to Heathrow, which will affect my constituency. Nevertheless, I welcome the concept of investment in high-speed rail for the future.

Great play has been made in this debate of the issue of reform and its impact on costs and fares. I think that all the rail unions will be willing to meet to discuss the reform of the current system of franchising and of the operation of the railways. I met Roy McNulty on a regular basis. He is a nice old buffer and I do not in any way disparage his commitment or the genuineness of his approach to the review of the railway network, but I have to say that, even under the previous Government, the terms of reference of the McNulty review were specifically limited and that his horizons were, therefore, limited. My hon. Friend the Member for Wirral South (Alison McGovern) has made the point that the comparisons with Europe were hardly straightforward. The comparison was between a franchising system and systems that were largely in the public sector, publicly owned and publicly managed. He was not allowed to look at what public ownership and public control could mean in this country compared with elsewhere. As I have said, the only time that such ownership has occurred here in recent years is when private sector franchises have collapsed and the public sector has taken them over and managed them efficiently and effectively.

The problem with the McNulty review—this has been touched on—is that he envisages, at the most recent estimate, a cut of 20,000 jobs. That will have consequences for services, and many of our constituents have expressed concerns about that.

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[Gordon Henderson]

My hon. Friend is right about investment, but commuters on Southeastern railways have heard the same tired old tune, year in, year out, and frankly they have stopped believing it, if they ever did. We may have the Javelin service into St Pancras, but that is hardly high speed as it spends most of the journey on the tortuous route through Strood and Gravesend.

The letter continues:

“High speed also means higher cost, due to the supplement charged to travel beyond Gravesend. The service into Victoria has deteriorated over the years to the point where most “fast” trains take almost an hour and 10 minutes to travel from Sittingbourne to Victoria”.

Only 30 years ago the journey was 50 minutes, so travel times have gone up rather than down. I suggest that those who support High Speed 2 consider the impact of High Speed 1 on my constituency.

That letter just about sums up the frustration felt by my constituents—frustration that did not happen overnight but has been bubbling up for many years. The motion calls on the Government

“to restore the one per cent above inflation cap on annual fare rises”.

My constituents, however, have had to pay fares linked to the retail prices index plus 3% for many years because that formula was written into the franchise agreement for Southeastern railways, which runs trains in north Kent. That greater fare increase in Kent was to pay for improvements that were allegedly introduced in the area prior to April 2006, although my constituents often wonder what those improvements were. If those improvements were HS1, that would add insult to injury because people find themselves either paying for a superfast service that is not fast and goes to a London station to which few of them want to travel, or paying for a standard train service that takes longer than it did 30 years ago.

[Katy Clark]

Is the hon. Gentleman aware that the invitation to tender for the new intercity west coast franchise allows for increases in rail fares of 8% above inflation in 2013 and 2014, and 6% above inflation for the rest of the franchise? Does he share my concerns that yet again, such increases will not lead to proper investment in the service?

[Gordon Henderson]

I share the hon. Lady’s concern because my constituents have a similar problem. The franchise agreement with Southeastern also set out the level of subsidy that it would receive. That is important because the subsidy started at £139.9 million in year one, reducing to £24.7 million by year seven. In year eight, Southeastern will be expected to pay a premium of £9.3 million to the Department for Transport. It does not take a genius to work out that if the Government expect Southeastern to pay them a premium, rail fares will have to rise to fund it.

Who negotiated that franchise agreement? The Labour Government did. Indeed, their stated policy was to recruit more of the cost of the rail service from those who use it, rather than relying on the general taxpayer to subsidise it. It is, therefore, hypocritical in the extreme for Labour Members to complain now about a system of rail fare pricing that they introduced and supported. I greatly fear that spiralling rail fares will have a detrimental effect on commuters in my constituency, and will directly hit hard-working families who are already struggling. The increases will hit even harder people who have recently lost their jobs, such as those at Thamesteel who will have to commute some distance to find a job.

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[Katy Clark (North Ayrshire and Arran) (Lab)]

It is a pleasure to follow the hon. Member for Sittingbourne and Sheppey (Gordon Henderson). I listened with great interest to what he said, and I assure him that I was in a similarly difficult position on many occasions during the previous Parliament. I was proud of the money that the Labour Government ensured was invested in the railways, but I did not necessarily agree with all the policies on the structure of the railways. The hon. Gentleman described rail fare franchising arrangements, and that area needs to be looked at again. It is, therefore, regrettable that no lessons seem to have been learned especially, as I outlined in my intervention, in the invitation to tender for the west coast line.

The general public are clearly outraged by the Government’s decision to increase the annual cap on rail fares to 3% above inflation in January 2013 and 2014. Many commuters will find that the cost of tickets increases by as much as 11% as a direct consequence of the Government’s decision to give back to private train companies the right to increase the cost of some tickets by an additional 5% on top of the increase set by Ministers. The position is slightly better in Scotland, but there, too, we will see significant increases in rail fares that cannot be afforded at the moment.

A number of hon. Members have made an effective business case for why people simply cannot afford increases in train fares at this time. The hon. Member for Brighton, Pavilion (Caroline Lucas) referred to a constituent who has decided that they can no longer work in London as a result of the fare increases, and many hon. Members will have been visited by constituents for whom the cost of transport, whether train and bus fares or something else, has been a prohibitive factor in seeking employment.

Powerful contributions have been made about the need for a simpler ticketing structure because many who use the railways simply do not understand how the current system operates. Government policy, and the direction of travel of some of those managing the railways, seems to be moving towards a situation in which we will rely on machines rather than on people. We have heard about the job losses that may result from the McNulty review, but our constituents do not want a future railway with stations that have no people to treat them as customers and where they have to use machines to buy tickets, where they do not have the security of knowing that staff are present, and where they have to get on trains that have CCTV equipment rather than personnel to help them. If that is the direction of travel, I hope that the new Secretary of State for Transport will bring some common sense to the agenda and recognise that that is not the kind of railway network we want for the future.

Politics is about choices. It will be interesting to watch the debates within the Government over the coming period not only on railways, but on aviation and roads. The Labour Government made a choice in favour of the railways. We might not have done everything we would have liked to do and we might wish we had done more, but there was a commitment to the railways. There are incredibly strong environmental reasons why we need to make the choice in favour of railways rather than other modes of transport, and why we need policies to ensure that people choose public rather than private transport in as many situations as possible. I therefore believe the Government are going in completely the wrong direction with their policy of rail fare increases.

The National Audit Office report on the impact of fare increases on Government income and private train company profits warned of the risk that the benefits of any resulting increase in passenger revenues will not be passed on to taxpayers, but will result simply in increased train operating company profits. A number of hon. Members described how the model of railway ownership takes money out of the railway system and puts it into the hands of those who profit as a result of ownership—the railway companies. We need to look forward to simplified, cheaper railways, but the Government’s decisions in the past couple of months are taking us in completely the wrong direction.