Britain’s Railways

Baroness Vere of Norbiton Excerpts

Monday 24th May 2021 Lords Chamber

[Baroness Randerson (LD)]

My Lords, I strongly welcome this long-overdue plan for reform and thank Keith Williams for his work on this. My only regret is that it has taken this long to get here. The industry has been crying out for reform for many years; one in three trains was late in the last year before the pandemic and two-thirds of contracts since 2012 have been awarded to single bidders—hardly a sign of a vibrant, competitive industry.

However, unlike some, I do not believe that the answer lies in a return to British Rail, which ended in stagnation and closures and as the butt of rather predictable jokes. This Statement harks back to the glory days of the 19th century, but the last 60 years have all been a bit of a mess. For a long time, the Transport for London contract structure has been touted as the answer, with the appropriate balance of risk for private contractors yet a fully integrated service. However, Transport for London has said publicly that it took it two decades of experience to get to the ideal contract model.

This is welcome, but it does not mean it will be easy—I do not for a minute imagine that the Minister thinks it will. The sheer scale of the thing is a problem. Great British Railways will be a massive organisation, bringing together Network Rail, many other DfT functions and some of the Rail Delivery Group functions. Currently DfT has three director-generals to cover rail services alone. The new organisation will be enormous and complex, and freedom from direct government interference will be essential for success.

The first problem is that, despite the name, Great British Railways is not really British, because it does not cover most of Scotland, Wales, Northern Ireland or London. Those have devolved services. So, my question is an important one: how will GBR liaise and link in with those other services? It is essential that that link is smooth and coherent. And what about the devolution of services to local authorities, which has been encouraged lately? Local authorities can add a great deal to the standard of service. There must be a role for them in order to raise the threshold. I rather feel that the word “Great” will be at the mercy of headline writers the first time something goes wrong—but I think there is the potential to get a coherent picture of the whole, so long as devolution is taken fully into account.

In interviews, the Secretary of State has indicated the likelihood of fare rises. First, how much power will the Department for Transport have to intervene and dictate fare rises? Secondly, is it wise to raise fares at a time when the Government are trying to reduce emissions and rail services are desperately trying to attract passengers back after the pandemic? Fares are up 50% in real terms since 1997; they are the most expensive in Europe. I welcome the details on flexible season tickets and other long-overdue innovations, but the Government predict savings of £1.5 billion within five years—so are fare rises justified?

The Minister will tell us again that taxpayers have subsidised the railways to the tune of billions of pounds in the last year. In fact, they have subsidised train operating companies, not the passengers themselves. Taxpayers also subsidised Eat Out to Help Out, but the Government are not expecting restaurant customers to pay more now to refill government coffers. So I put in a plea: rather than raising fares, now is the time to reduce them for a short period, to lure people back on to the railways and, as new travel and working patterns emerge, to encourage new leisure rail users?

Finally, freight. The combination of recentralisation, better co-ordination and the current lower passenger numbers provides a big opportunity for bold steps to improve and increase freight services. But that needs capital investment, too; will we get it?

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

I thank the noble Lord, Lord Rosser, and the noble Baroness, Lady Randerson, for their generally—I think—fairly positive welcome for these proposals. The noble Lord, Lord Rosser, had a long list of Great British XYZ, and perhaps I may say, as we come out of restrictions, I feel we have a Great British bounce back coming along. So, what are we going to do about our railways and Great British Railways, which will be one of the “Great Britishes” that will be so important to us as we go forward?

The noble Lord, Lord Rosser, seemed to be a little bit muted on the subject of the changes we have proposed. I do believe that we are proposing a once-in-a-generation change. It will be a massive transformation of the current way our railways operate, and it will lead to very significant improvements in service to passengers. But the noble Baroness, Lady Randerson, is absolutely right: it will not be easy. This is a national infrastructure with national services; it is hugely complicated now and will continue to be in the future. We know that. It will not be easy.

So the scale of transformation will have to be taken in bite-size pieces, and we will have to think about how the development of these phases will happen. Andrew Haines, who, as we all know, is the current chief executive of Network Rail and a well-respected industry leader, will be developing these interim arrangements for Great British Railways. It is important we do that. We could not have done it before because we had not announced the White Paper, and we will be establishing phases for the delivery of Great British Railways and all the phases that have to happen in between. We will be working collectively and collaboratively with the sector, and that is really important.

On the DfT side, I am well aware that there are an enormous number of very talented people in rail. We will continue to support Great British Railways as much as is needed in the short term. The DfT will establish the rail transformation programme, which will assist Andrew Haines and the wider sector as we make these changes.

The noble Lord, Lord Rosser, talked about how the blame for delays will not disappear. I agree. I asked exactly the same question about big birds and little birds, and whether you could be blamed for one and not the other. I am reassured that it will be vastly simplified and will not be as complicated and long-winded as it is now.

The noble Lord went on to mention the incentives regime. It is important that we have a really firm and accountable incentives regime, because we must lift the quality of services for the passenger. Therefore, we will incentivise high-quality, punctual services. We will ask operators to manage costs and to attract passengers. From a ministerial perspective, we will hold Great British Railways to account and it will hold the holders of the passenger service contracts to account via statutory powers and the ability to issue binding guidance—for example, on any of the elements the noble Lord mentioned.

We believe that there should continue to be private sector investment in rolling stock, but the noble Lord highlighted the slight tension that exists. We will ask Great British Railways to take a strategic approach to the overarching issue of rolling stock. It will look at supply chain sustainability, for example, and how to generate high-value jobs in the UK, but the TOCs will still be responsible for procuring value from the market and improving the passenger experience when the trains are running.

Devolution is a very important part of improving our transport system. I am speaking specifically about devolution to the local transport authorities. That would include the metro mayors. We are extremely keen to work with the metro mayors on devolution. The White Paper publication is a significant landmark as we start the process of these implementing reforms, but it is obvious that they cannot be devolved immediately. We will work together to think about how the structures with the metro mayors and the smaller local transport authorities will work and where they will be able to take a greater level of control of the services in their area.

Scotland and Wales are both extremely important in this regard. Both will exercise their existing powers and be accountable for them. The infrastructure is, of course, all owned by Great British Railways, with the exception of some of the valley lines in Wales, and we will work in partnership with Transport Scotland and Transport for Wales. We would expect a good relationship with them, because it is so important for the services to improve.

Great British Railways will have a five-year business plan, which will be drafted in the context of a 30-year strategy. It will set out the infrastructure funding settlement for that five years and the level of operational subsidy. This will give certainty and stability to the network as a whole.

The noble Baroness mentioned fare rises. I suspect that my Secretary of State would not rule them out, but we have to simplify the current mass of ticketing options and prices and the endless bits of paper that you have to carry around with you. We will look to introduce more pay-as-you-go, more contactless payment and more digital ticketing as soon as possible.

The noble Baroness mentioned some short-term incentives to get people back on to the trains. The Department for Transport has commissioned Network Rail to look at this. It has set up the rail revenue recovery group, which we will look to for advice on short-term and long-term interventions on fares. This links back into the recovery in demand, because we want people to come back to the trains and we hope that the number of passengers will grow further. Financial sustainability is linked to demand but not necessarily on a very firm basis, because it depends on how much passengers are paying.

Therefore, it is the case that we have to make sure that our railways are financially sustainable in the long term. On one side, we will look at how we can improve services to passengers, as well as at fares, and on the other side we have to look at how we will modernise the system with regard to some areas where there might be changes to the ways in which people work. We want to develop skills and perhaps use them more effectively within the system. That will be up to the industry, working with the unions, to develop the best and most highly-skilled workforce that we can for our industry.

I hope that I have been able to answer the questions asked by the noble Lord and the noble Baroness. I thank them genuinely for their positive engagement, and I am sure that there will be more questions to come. I look forward to comments and questions from all noble Lords, and I hope that they will consider joining me at the all-Peers briefing section with the Rail Minister on Wednesday.

[The Deputy Speaker (The Earl of Kinnoull) (CB)]

My Lords, we now come to the 20 minutes allocated for Back-Bench questions. I ask that both questions and answers be kept short.

[Lord Haselhurst (Con) [V]]

My Lords, I remind the House of my interest as chair of the West Anglia Taskforce. Does my noble friend except that this railway, having only two tracks, demonstrates the impossibility of satisfying the competing needs of Transport for London, Hertfordshire and Essex commuters, freight operators, the advanced industries around Cambridge and the operators of Stansted Airport? Will the creation of GBR offer a better prospect for the restoration of the two extra tracks that were torn up after the Beeching report?

[Baroness Vere of Norbiton (Con)]

My noble friend raises an important point and highlights why Great British Railways is so desperately needed, in that we have so many different operators and indeed types of train services—be they passenger or freight—trying to access limited track in certain areas. It is the case that we will continue to invest tens of billions of pounds into the railways on new lines, trains, services and electrification; we want to provide the stable foundation for innovation and future investment. My noble friend mentioned the Beeching closures. The £500 million Restoring Your Railway Fund remains open, and any ideas should be forwarded to that fund.

[Lord Craig of Radley (CB) [V]]

[Inaudible]—the experience, particularly of Southern, has been blighted from time to time by industrial disputes. What involvement have the rail unions had in helping to formulate these new plans? Post Covid, many people may continue to work part-time from home, reducing passenger numbers below the 2019 figure of 1.8 billion per year. What assessment have the Government made of this likely reduction?

[Baroness Vere of Norbiton (Con)]

On the first issue raised by the noble and gallant Lord, Keith Williams met with the general-secretaries on a number of occasions while he was carrying out this review. As I previously mentioned, we need to create an efficient and sustainable railway; that is in the interests of passengers, taxpayers and the workforce as a whole, so we will of course continue to work with the unions to achieve that as we take these reforms forward. On future demand, we are confident that people will return to the railways, and in line with the road map we will continue to work closely with the sector on measures to enable people to come back again, and to come back quickly. This includes the introduction of a flexible season ticket, which will be introduced across the network and which will make it easier for those people who commute, say, two or three days a week. It will make that more cost effective for them, and that will be introduced to coincide with the final step of the Government’s road map out of lockdown.

[Lord McLoughlin (Con)]

My Lords, I draw attention to my interests as set out in the register. I welcome the Williams report, but we should recognise the very great changes that were brought about by privatisation. Up until 1992, the number of people using our railways was 700 million. In 2019, it was 1.9 billion. That was a tremendous success, which was partly brought about by engaging with the private sector so that we got better services across our railway network. While I accept the necessary changes that the Secretary of State and my noble friend have set out, will my noble friend also acknowledge the very important part played by the private sector, and will she say that the private sector will be very much seen as partners in the way forward?

[Baroness Vere of Norbiton (Con)]

My noble friend is absolutely right: during privatisation, passenger numbers more than doubled, so the involvement of the private sector has had a transformational impact on the way that we run our railways today. This Government want to keep the best elements of the private sector. We want to keep its capacity for innovation and work with it to drive growth in the railways. We will do that by having these new contracts for passenger operators, with strong incentives to run very high-quality services.

[The Deputy Speaker (The Earl of Kinnoull) (CB)]

The noble Lord, Lord Adonis, has withdrawn, so I call the noble Lord, Lord Bradshaw.

[Lord Bradshaw (LD) [V]]

My Lords, I believe it is very important that a clear distinction is made between what Ministers do and what Great British Railways does. It is important that they do not tread on each other’s feet, because that will lead to disputes and trouble. A clear financial target, preferably for three or five years so that the industry can make trade-offs without constant Treasury interference, will give the freight railway a chance to do what it does best. An electrified freight railway will make huge inroads into the amount of fuel we burn with lorries. Lastly, we need to follow best practice in using data to improve the passenger experience. Do not level down to the standards of the worst performer; rather, level up to the standards of the best.

[Baroness Vere of Norbiton (Con)]

Those were some very interesting observations from the noble Lord, who is clearly well versed in the railways. He is right that we need to make sure that Ministers’ responsibilities are separate from those of Great British Railways, which is why we are proposing strong levers to hold them to account, but will not meddle in the day-to-day running of the organisation. So there will be statutory powers and the ability to issue binding guidance in specific areas, which will be important.

The noble Lord mentioned planning, and I have already pointed out that there will be five-year business plans within the 30-year strategy. He also mentioned freight, which is a very important part of this. It is often a forgotten area of the railways, and we believe that it will benefit from the national co-ordination that Great British Railways will bring. His last point was on data, which is one of the key areas where we feel that we can improve customer satisfaction. Historically, data has been held by the train operating companies and not shared as well as it should have been. By putting all this data and responsibility for revenues within Great British Railways, we will necessarily bring together all the data. We believe that from that we will not only simplify tickets but think of better ways to use that data to provide more value-for-money services for passengers.

[Lord Davies of Gower (Con)]

My Lords, as a frequent user of Transport for Wales and GWR from west Wales to London, I very much welcome this Statement. It is good to see the travelling passenger put at the forefront, in ticketing and the adoption of modern, flexible ways to pay. I note the comments that close collaboration is promised between Great British Railways and the devolved nations. Can the Minister perhaps elaborate on how the new ticketing system will integrate, for ease of use by the travelling public, with the payment systems of the now nationalised Transport for Wales and the proposed south Wales metro scheme? What conversations have the Government had with the Welsh Government on this?

[Baroness Vere of Norbiton (Con)]

Our engagement with Transport for Wales and the Welsh Government has been very significant and over a long period, both at ministerial and official levels. Next, we want to develop a joint working agreement with Transport for Wales and Great British Railways, so that all issues around fares, not only within Wales but for cross-border services, can be considered in the round. We would like them to join us in sharing data and using the single website and app to purchase tickets. We cannot force them to do that, but we look forward to having a close working relationship as we take this forward.

[Lord Harries of Pentregarth (CB) [V]]

Does the Minister agree that rail fares are already far too high—the highest in Europe—but that if they are to be kept at a reasonable level, it is necessary for railways to carry more passengers? This means increasing the capacity and more investment. Are the Government willing to put in the necessary investment? Of course, this would also be highly desirable from an environmental point of view. I understand that Chiltern Railways—which in my experience has always been very efficient—has in fact put in a lot of investment in recent years. I wonder what lessons there are to be learned from its example.

[Baroness Vere of Norbiton (Con)]

I think there are lots of ways to attract passengers back on to the railways, and investment in improving capacity is one of them. Of course, that is why the Government are investing many billions of pounds in HS2, which will release capacity on other lines to enable more short-distance services to be put into place. But it is not just about those mega-projects; it is about the small and urgent network capacity upgrades that we can make, and the Government continue to look at these. I reassure the House that the RNEP—which sets out which projects the Government will take forward over what sort of timeframe—will be published soon, and that will set out all the schemes under consideration.

[Lord Snape (Lab) [V]]

Does the Minister accept that we have spent many years listening to Conservative Ministers extolling the virtues of franchising, yet the White Paper acknowledges, in effect, that the franchising system has been an expensive failure, the abolition of which is long overdue? On rail freight, what actions will Ministers take to ensure the future success of the rail freight industry if we are to achieve a meaningful transfer of freight from road to rail and reduce the number of heavy goods vehicles on our roads? Will Ministers reject the RHA’s incessant demands for bigger and heavier lorries on our overburdened road network? Does the Minister agree that, properly encouraged, rail freight could make a significantly greater contribution towards the Government’s carbon reduction targets?

[Baroness Vere of Norbiton (Con)]

I cannot agree with the noble Lord that franchising has been an expensive failure. We have seen an enormous growth in passenger numbers as a result of the involvement of the private sector, and I think that has given us a really firm foundation from which to go better. However, rail freight is a topic that we can probably agree a little more on. I believe that it will benefit from this national co-ordination, as I said earlier, and we will consult closely with the freight industry to find out what challenges it has and how we can help it by making changes. We will introduce a new rules-based track access regime, which will have a statutory underpinning. That will be relevant for both freight and open access operators. We believe that that will yield more goods going by rail freight, and we will engage with the industry to make sure that this is the case.

[Lord Beith (LD)]

My Lords, train operators run many stations. If a train operator such as LNER runs stations well, enhancing facilities to support customers and promote its services, would it not make more sense to contract it to continue to do it, rather than doing what the Government propose in this White Paper, which is to transfer station management entirely to this behemoth of an organisation—Great British Railways—where it may well be administered from some distance away? We would end up with two lots of staff on the platform, with one administered from a great distance.

[Baroness Vere of Norbiton (Con)]

The noble Lord raises an interesting point about stations. Stations are a great asset, particularly in local communities, because sometimes they are not just railway stations. Certainly, I would like to see many more of them being developed into integrated transport hubs where we could have buses and active travel interventions as well, so that they connect much more into transport for the local community. Obviously, how station ownership and operation will pan out in the future will be subject to a fair amount of work. For example, some of them may end up being run by local government or local transport authorities, and we will be able to say more on that in the levelling-up White Paper.

[Lord Young of Cookham (Con)]

Can my noble friend confirm that the key objectives of privatisation—which could have been called the “Young-Major plan for rail”, had modesty not intervened—will be retained? These objectives are: no monopoly in the train operating industry but new entrants encouraged; the capital costs of the passenger rolling stock and freight rolling stock borne by the private sector, not the public purse; and passenger service contracts being constructed to reward efficiency, quality and passenger growth. None of those characteristics is available under full nationalisation.

[Baroness Vere of Norbiton (Con)]

Bring back the Young-Major plan for rail greatness is what I say. I can absolutely confirm all those things to my noble friend. We are retaining the original objectives of privatisation to make sure that passenger services are awarded following a fair competition. We had to strip out some of the complexity of those competitions to allow train operators to bid on a simpler basis, and we think we have achieved that. We will open up new opportunities for private sector involvement where we can.

As I have said, the capital cost of passenger and freight rolling stock will be borne by the private sector. There will be a certain element of a guiding mind when it comes to a strategic intervention on the rolling stock, but this will not preclude train operating companies purchasing their own rolling stock. Obviously, we are replacing the franchises with this more commercially sustainable model of a passenger service contract, which will ensure that we get the right amount of innovation into the system and passengers benefit.

[Lord Faulkner of Worcester (Lab) [V]]

My Lords, I remind the House of my railway interests as declared in the register. I am happy to share the optimism of the noble Baroness for the future of the railway, not least because of the involvement of both Andrew Haines and Sir Peter Hendy in Great British Railways. I have the highest confidence in both, and I believe they will work well to deliver what could be a very successful railway.

I would like to ask the Minister one specific question about the reference in section 4, on page 33 of the White Paper, to a “national brand and identity”. Does this mean that train operators will have to repaint all their rolling stock in new standard Great British Railway colours? Not even British Rail had a common identity for all its passenger trains. The Government may find some resistance to making companies abandon their established, and in many cases attractive, liveries.

May I also ask about the reference to electrification, which I asked about last Tuesday, particularly the references to Oxford, Sheffield and Swansea on page 14? An announcement is promised “shortly” on page 88. How shortly is “shortly”?

[Baroness Vere of Norbiton (Con)]

My Lords, shortly is shortly. I, too, am optimistic about the railways and all forms of transport because they are the great connector. The noble Lord asks about branding. Branding is important because having a coherent, consistent and clearly branded rail network gives passengers greater confidence in using it. Great British Railways will use an updated version of the classic double arrow logo. We also have an updated version of the font, which I think will be widely recognised across the system. However, variants of the national brand will be developed to reflect the English regions and Scotland and Wales, while emphasising that the railway is one network serving the whole of Great Britain. It may well be that, as the noble Lord suggests, there will be slight variants depending on which part of the country the train operates in.

[Baroness Altmann (Con) [V]]

My Lords, are there any plans for environmental targets for Great British Railways, such as carbon emission reductions or progress towards net zero, and incentives for them?

[Baroness Vere of Norbiton (Con)]

The Government are committed to decarbonising the railway as part of our wider, legally binding target of reaching net zero emissions across the whole UK economy by 2050. Our forthcoming transport decarbonisation plan will set out the scale and pace of rail decarbonisation that is necessary for us to achieve that. The rail network enhancements pipeline—the RNEP—will be updated soon, and in that we will have various schemes which will lead to decarbonisation. Indeed, we are working very closely on research to look at how we can also decarbonise the vehicles themselves; for example, by looking at hydrogen trains. The new industry structure, including Great British Railways, will ensure a more co-ordinated approach to delivering our carbon emissions commitments.

[Lord Haskel (Lab) [V]]

My Lords, as the White Paper states, passenger service contracts work well for local, regional and commuter services, but experience here and elsewhere has shown that these service contracts work less well on intercity routes because they allow less room for innovation. Will there be two types of passenger service contract to allow for this? Where will the line be drawn? Will it be just one size fits all?

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

My Lords, there will not be two types of passenger service contract. There will be many types because the noble Lord is right. Some may incorporate revenue risk in due course to encourage innovation and get passengers back on to the railways.

[Lord Moylan (Con)]

My Lords, rail fare income is closely correlated with the economic cycle. The new arrangements involve a complete transfer of fare risk from the train operating companies to the taxpayer. This means that the Chancellor of the Exchequer is going to have to be very indulgent towards Great British Railways, especially in an economic downturn, if falling fare income is not to cannibalise the investment programme. Has my noble friend reached a specific agreement with Her Majesty’s Treasury on its approach to this aspect of funding Great British Railways? If so, will it be in the public domain?

[Baroness Vere of Norbiton (Con)]

The five-year business plan that will be developed by Great British Railways will be in the public domain and it will set out the capital and revenue funding over that period. I agree with my noble friend that passenger demand is challenging to predict as we move out of the pandemic. Evidently there will be risks for the Government as the holder of the revenue risk. The Government have supported the railways to the tune of £8.5 billion in the last financial year. However, on a positive note for the Treasury, we expect that the reform package will deliver savings of around £1.5 billion per year after about five years. That is 15% of pre-pandemic income.

House adjourned at 6.43 pm.