Railways: Fares

Baroness Sugg Excerpts

Tuesday 12th December 2017 Lords Chamber

[Baroness Randerson]

To ask Her Majesty’s Government what assessment they have made of the impact of increases in train fares due to be introduced in January 2018.

[The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)]

The Government understand the concern about the increase in the cost of rail fares and the impact this can have on people’s budgets. Our railways need substantial investment to ensure they are fit for purpose for the 21st century. Despite record levels of investment, the Government have ensured that, since 2014, regulated rail fares have risen no faster than retail prices. We of course continue to monitor our rail fares policies closely and keep them under review.

[Baroness Randerson (LD)]

My Lords, in January rail fares will go up by 3.4%, at a time when wages are already failing to keep pace with rising inflation because of the impact of the falling pound following the Brexit vote. For instance, an annual season ticket from Swindon to London will increase by £304. For many years now, the Government have frozen fuel duty to help motorists, so will the Minister agree that the Government should now freeze rail fares for the coming year to help rail passengers?

[Baroness Sugg]

The noble Baroness mentions the freezing of fuel duty, which is obviously widely welcomed by motorists, following the Budget. I am afraid that we cannot freeze rail fares because by doing so, we would have to decrease investment in our railways, which is sorely needed.

[Baroness McIntosh of Pickering (Con)]

Can the Minister explain why, exceptionally, rail fare increases are tied to RPI, when every other cost of living increase is tied to CPI?

--- Later in debate ---

[Baroness Sugg]

My Lords, the retail prices index is widely used across government and is the consistent general indexation approach adopted across the rail industry. Franchise payments, network grants and franchise financial models are all indexed at RPI. Of course, we are all very aware of the pressures on people’s incomes and we carefully monitor how rail fares and earnings change and keep reviewing how fares are increased.

[Lord Adonis (Lab)]

My Lords, can the Minister confirm that the extraordinary decision to bail out the Stagecoach/Virgin Trains East Coast franchise could cost the taxpayer more than £1 billion? Could she estimate for the House what impact that might have on rail fares after 2020?

[Baroness Sugg]

My Lords, VTEC has paid all its premiums in full to date, and we expect it to continue to do so as long as the contract continues. As with all recent franchise contracts, when entering into the east coast contract Stagecoach committed to inject additional funds into the business at its own expense, and we will hold it to that commitment in full. From 2020, there will be a new east coast partnership, one of the first of a new generation of integrated regional rail operations. That will include appropriate contributions from the private partner under a long-term competitively priced procured contract. I do not recognise the figures that the noble Lord uses.

[Lord Skelmersdale (Con)]

My Lords, can my noble friend explain to me why, in economic terms, the cost of travel appears to be inelastic, and we have seen many trains overcrowded in recent years?

[Baroness Sugg]

My Lords, passenger use of the rail network has doubled since privatisation, which is to be welcomed. As I said, the Government’s use of the RPI is consistent with general indexation on rail industry costs. We are trying to keep fares as low as practically possible, while maintaining the level of investment that our railways need to deal with the overcrowding my noble friend mentions.

[Lord Bradshaw (LD)]

Is the Minister aware of the fares that are charged to commuters in France, Germany and the Netherlands, and the proportion of those met by public funds as opposed to making the customer pay more?

[Baroness Sugg]

My Lords, I have indeed been looking at the comparison between the UK and Europe. I understand that it very much depends on which rail fare you are looking at; many fares are similar or even cheaper in the UK. Britain has seen the biggest shift to rail from other transport of any railway in Europe since 2009. We have comparable punctuality and higher than average customer satisfaction, and we are investing more in rail than any country in Europe. We are currently delivering the biggest upgrades to our network since the Victorian era.

[Lord Rosser (Lab)]

Could the Minister confirm that the Government have locked themselves and rail passengers into the yearly increase in regulated fares being related to the normally higher retail prices index figure for at least the number of years that each existing franchise is due to continue, since that is part of the franchise agreements with train operating companies? What amount of compensation in total would have to have been paid to train operating companies for lower than expected fare revenue if the Government had decided to agree to this coming January’s increase in regulated fares being related to the increase in the widely used—not least by government—consumer prices index, rather than the higher retail prices index?

[Baroness Sugg]

My Lords, the noble Lord is right to point out that our current franchise agreements are negotiated on the RPI increase. I say again that we recognise the effect that has on people’s incomes and keep it under review. We welcome the fact that we were able to reduce this from RPI plus 1 in 2014. I am afraid I do not have the figures to hand, and I am not sure they would be available, on the compensation that would need to be given if we used CPI rather than RPI.

[Baroness O'Cathain (Con)]

My Lords, not only is the whole area of train fares very complicated, it is actually discriminatory. Many people in this country do not have access to the internet or computers and they find trying to get deals on train fares almost impossible. They also find—as do I—that the stations are not always accessible. Staff are training, or sick, and we stand there in the rain waiting for the train. It is not a good picture.

[Baroness Sugg]

My Lords, I recognise that the fare system can sometimes be complicated and illogical. Many tickets are now bought online, but for those who do not use the internet the Rail Minister is working with the industry on a fares and ticketing action plan. Among other things, they are working on reducing jargon and improving the vending machines at stations. They have extended the availability of advance purchase fares, which you can now buy at the station on the day of travel. For those who do use the internet, we are working with online retailers to ensure that they provide the best information online. We are also introducing smart ticketing to make it easier and more convenient to purchase cheaper tickets.