Rail 2020

Ben Gummer Excerpts

Wednesday 3rd July 2013 Commons Chamber

[Ben Gummer (Ipswich) (Con)]

When Thomas Telford was invited at the end of his career to help with the engineering of some new railway projects, the inventor of this country’s modern road network declined the offer, not because he did not admire railway engineering and the extraordinary speeds that these amazing new machines could achieve—he admired them very much—but because he understood that the railway itself had a necessary monopoly that the road did not. Part of the attraction of the road to Thomas Telford was that once it was built, it allowed someone to travel at any time they pleased in their chosen method of transport, but the railway, for all its brilliance, did not.

That is not to say that the railway is not a useful or brilliant invention. It has been central to the progress and advancement of our country and all developed countries across the world. However, the railway has an intrinsic problem—this is recognised by Sir Roy McNulty’s report, the various commissions instigated by the Department for Transport and, indeed, the Transport Committee report—namely its inability to get the market to work in the normal, functioning way that it would elsewhere.

The interesting thing about the railway is that, over time, it has found different competitors. Despite the fact that its technology is intrinsically the same as that it began with 200 years ago, it continues to compete with road—over the past 50 or 60 years it has competed with it on speed—and increasingly with flight. Rail, as well as its regulation and franchising arrangements, must therefore be seen in its wider context as a competitor with other modes of transport around the country.

It is important to understand why the Government are progressing with the reprivatisation and refranchising of various lines. Ideology is important and has been brought up by several Opposition Members, but privatisation has worked not because of ideology but because it is the most practical and pragmatic way of getting the railways to work. In fact, the entire railway system, which was instigated by the Victorians and which spread around the world to America, France and elsewhere, was a product of private enterprise.

[Caroline Lucas]

Will the hon. Gentleman give way?

[Ben Gummer]

I will in a moment.

The system would not be with us today were it not for the massive investments—many of which failed as a result of the risk of capitalism—that made this extraordinary invention possible. Before I allow the hon. Lady to intervene, I recall that in a previous debate she told me about the efficiency of the German railway system, but when I reminded her afterwards that it is now a private system she could not believe it. One of the reasons this country is having to rebuild the railway network is the decades of underinvestment. That is not necessarily a product of various Governments; it is the natural result of a nationalised system whose control rests in the Treasury’s hands.

[Caroline Lucas]

On that very point, there is still significant state involvement in German railways. What does the hon. Gentleman have to say about the fact that 60% of Britain’s rail operators are owned by European state rail arms? Our high rail fares are being used to subsidise rail services in Germany and beyond, which seems crazy to me.

[Ben Gummer]

The hon. Lady did not admit to the role of the private sector when I spoke to her about German railways. Of course, there is a role for the state—that is what we are discussing. Any railway has a necessary monopoly: only one train can travel at a time and it has to be owned by somebody. Unlike road, it is not possible for two trains to travel on the same track at the same time, so the state has to intervene at some point in order to regulate and subsidise, as it does with road travel.

We have seen the results of privatisation since 1995. Rail travel has increased by 133%. It is at a higher rate than in the 1920s in absolute numbers. Rail freight has also increased to a point that would have been impossible to imagine in the 1960s and 1970s.

[Kelvin Hopkins]

The hon. Gentleman is raising, yet again, a correlation, not a cause and effect. Railway usage has gone up despite privatisation, not because of it.

[Ben Gummer]

The hon. Gentleman is a marvel of this House and is respected deeply by many Members on both sides of the House. However, he must see that the graphs of declining rail use up to 1995, for both freight and passenger, were turned on their heads after privatisation. That is not just a correlative effect, but a causal one.

[Mr Kevan Jones]

I am interested in the hon. Gentleman’s history lesson. He is right that the early railways were pioneered by private enterprise. However, by the time they were nationalised, many of them were in a dire state. That was the case not just in this country, but around the world. Rail passenger numbers went down after the war because there was a rise in car ownership and because of the development of road transport. The reason Germany has good railways is that a British civil servant planned the system after the second world war.

[Ben Gummer]

This is an interesting parlour game and we should pursue it at greater length outside the Chamber. The hon. Gentleman is right that the railways were on their knees after the war. That was partly a result of the war and partly a result of the rise of the car.

It is interesting that this necessary monopoly that was challenged profoundly in the second half of the 20th century is now able to compete successfully with motor vehicles and planes, precisely because of the investment from the private sector. As a result of that investment, the subsidy per passenger kilometre has gone down considerably since privatisation, even though the total subsidy has gone up.

[Mr Marcus Jones]

My hon. Friend is making an important argument. It has been argued that the decline of the railways was caused by the success of the car. However, car ownership in this country has accelerated since 1995. The increase in passenger numbers therefore shows that privatisation has had a huge positive effect on the railways.

[Ben Gummer]

I agree completely with my hon. Friend. I will come on in a second to the link between his constituency and mine.

[Mr Kevan Jones]

Will the hon. Gentleman give way?

[Ben Gummer]

I will give way in a while, if I may.

The Government are continuing a strategy. There are, rightly, arguments about whether the franchising process was got exactly right, but to my mind, John Major’s privatisation of the railways was one of his most significant acts. It has transformed the way in which—[Interruption.] Opposition Members laugh, but they ignore the fact that we now have some of the safest railways in Europe, second only to Luxembourg, which we did not have before privatisation.

[Alison Seabeck]

indicated dissent.

[Ben Gummer]

The hon. Lady shakes her head, but she should listen to the facts. We have the fastest rate of passenger growth in Europe. We have the safest railways in Europe after Luxembourg. That is the result of privatisation, which has made a significant difference.

The ideologues are the Opposition Members, including the shadow Secretary of State for Transport, who espouse the ideology that dare not speak its name. She wants gradually to bring the railways back into public ownership and undo the extraordinary progress that has been made.

[Mr Kevan Jones]

The hon. Gentleman has a very selective view of history. He obviously does not remember—perhaps he was still at school—the period between privatisation and the effective renationalisation of Network Rail, when there were a number of tragic rail accidents in this country because of the inefficient way in which privatisation was carried out and the lack of investment. He must take into account that the effective renationalisation of Network Rail was how the investment was got right.

[Ben Gummer]

I am giving a bit of history because it does inform our discussion of the franchise process, which is the core of the report. I am not going to start trading statistics, but over the period of Railtrack, rail safety improved and we were going up the European safety league table. The reason so much money had to be invested—very successfully with private help—was the years of underinvestment by a series of Governments, Conservative among them. I disagree with the hon. Gentleman’s intervention on that point, not least because the facts on the safety of the rail network under privatisation speak for themselves.

How do we get this franchise system to work so that rail companies can compete with their natural competitors, the motorways and the airlines? I plead with the Government to do as much as they can. I know that the advice they have had recently has been to shorten slightly the long franchises that have been planned, but the longer the franchise rail companies can get, the better their ability to invest in rolling stock, customer service and improving the capacity and punctuality of their services.

Those of my constituents who have had the misfortune of having to commute on the Ipswich to London line for a long time will say that the best improvements they have seen were under the first franchise—as I am sure my right hon. Friend the Minister will agree—which was quite long and had the loosest possible terms. It allowed the then Anglia franchisee to put maximum efforts into improving performance. The last Government did many good things in rail, but one of the bad things was to have far too tight a control over the franchises, stipulating to the dot and comma how the services should be delivered. Unsurprisingly, the bidders for those franchises went in at the lowest possible price, bidding on the specification provided by the Government, and the improvement in service flattened and, in some cases, reversed. We need as loose a franchise framework as possible, and as long as possible so that the private sector can invest as fully as possible in the services without being second-guessed by the doubtless otherwise brilliant officials at the Department for Transport.

We need to see other improvements, and I am glad that the Committee recommended them in its report. We need transparency in subsidy. The system is still not good enough at identifying where subsidy goes. I have tried to understand how much subsidy goes in to the great eastern main line. Network Rail and the Office for Rail Regulation are not good at disaggregating subsidy in sufficient granular detail. I have questioned them about control period 5, but it is almost impossible to get a decent idea of the quantity of subsidy or public investment we are likely to get in our line, which makes it very difficult for us, as public representatives, to fight for our constituents.

Transparency is also important for the way in which the franchise system develops. When privatisation was introduced, there was only one profit-making line in the UK and there are now many that turn a surplus. Effectively—and I know that the Minister disagrees with me slightly on the detail of this—fare income is transferred from one part of the country to another. Roughly £30 of the £74 standard fare ticket from Ipswich to London is paid in premium which is moved, effectively, to those parts of the country that need a subsidy. That is unfair on my constituents, especially those who are paid the same bad wages that some people in subsidised areas are paid. They rightly demand a social subsidy so that they can get their rail service for less than they would otherwise.

If a lot of our fare income is being moved to other parts of the country, it makes it difficult for us to get the investment we need. We should have more transparency about how the premiums are moved so that we can achieve some sort of parity for investment.

I turn now to a discussion of the east of England, and I know that the Minister has a constituency interest there and, therefore, a profound knowledge of the area. Only two regions of England outside London are net contributors to the UK Exchequer: the south-east and the east. Since the 19th century, the eastern region has suffered some of the worst levels of investment. Historically, there has been a poor level of investment in the main line from London to Norwich, with hand-me-down carriages and levels of service that other parts of the country have long forgotten about. The region has contributed to the UK economy in the past five or 10 years, but investment is needed for that contribution to continue. The region is not demanding new motorways or A roads, but investment is required for people to able to get from London, Ipswich and Norwich to the midlands. That would lead to growth that would make a significant contribution to the UK economy.

We are profoundly grateful for the investment that has occurred in the past few years. It was promised for many years, but not delivered. We will soon have a direct line between Felixstowe and Nuneaton, the constituency of my hon. Friend the Member for Nuneaton (Mr Jones). Thereafter, I hope we will have a direct line from Nuneaton to Coventry. I hope—the Minister will speak on this later—that there will be a new bypass loop north of the Minister’s constituency of Chelmsford, which would release capacity and improve performance between London and Norwich. All of these plans, in addition to Ely North junction, have been long promised and long talked about. They are at last being delivered, and for that we are very grateful. However, we need new trains on the new track; not now, not immediately or in the next few years, but within the new franchise that will be set in 2016. We need the new trains that have been provided to the rest of the country and have been denied to us. Whenever the rest of the country is finished with a new train, it is passed on to East Anglia. That is no longer good enough.

[Mr Simon Burns]

indicated dissent.

[Ben Gummer]

Well, it has been true since the 19th century. I hope that at some point we will get the new trains that will release the economic potential in Ipswich and Norwich that has so long been denied to my constituents and their forefathers.

We are making good progress. My hon. Friend the Member for Milton Keynes South (Iain Stewart) is now able to say that the railways are in a good place, something that would have been unutterable 10, 15, 20 or 30 years ago. We need investment to continue, we need to release the power of the private sector and we need to be able to continue the miracle of rail privatisation.

--- Later in debate ---

[Lilian Greenwood]

And passengers faced some of the highest fares in Europe, as well as often bewildering pricing structures. The Minister says, “Under your Government” from a sedentary position, but that is precisely why we commissioned McNulty to look at how to achieve efficiencies.

The Committee’s recommendations on financial transparency, fares and ticketing reform and devolution were welcome, but implementation has been delayed by a Department that seems to have been overtaken by problems of its own creation. In the past year, we have witnessed the collapse of the franchising system, which has cost the taxpayer at least £55 million. Those are the direct costs; that figure does not cover the fall in orders that is hurting the supply chain or the uncertainty that still hangs over the industry, nor does it reflect the damage that has been inflicted on the Government’s own efficiency plans—both points well highlighted by my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman).

The Government intend to find £3.5 billion of industry cost reductions by 2019. An annexe to the “Rail 2020” report states that while

“Some of the savings are already in Network Rail’s plans, most of the rest have to be secured by passenger train operators and their suppliers…via the next generation of franchises.”

Does the Minister accept that analysis? If he does, what does he believe the cost to the taxpayer will be in deferred efficiencies, owing to the much extended delays to the franchising programme?

Against that background, Ministers have taken the politically motivated decision to make the privatisation of East Coast their top priority. At the same time as they are agreeing lucrative extensions for private operators, at great cost to the taxpayer—for example, it was recently reported in the trade press that the c2c contract extension came in £17 million over budget—for ideological reasons the Government are disrupting the one stable part of the network. Since the last private operator walked away, East Coast has returned £640 million to the taxpayer and invested £40 million in the service; it makes the second highest contribution of any operator to the Treasury; and it has significantly improved passenger services.

East Coast provides an interesting test of the Government’s commitment to openness. Despite Ministers’ stated intention to improve transparency, they are trying to have it both ways when it comes to East Coast. The Government cannot both laud the Office of Rail Regulation’s breakdown of the industry’s finances, as they did in the formal response to the “Rail 2020” report, and dismiss the figures that show East Coast to be most efficient operator. It is simply not credible.

The Government have even invented a new measure to bolster the comparison between Virgin Trains’ and East Coast’s premium payments while conveniently ignoring subsidy going the other way. As the net payment figures show, East Coast comfortably paid more to the Treasury over the past three years, but Ministers have tried to give the opposite impression. It is not policy led by evidence—it is just the opposite—from a Government determined to push through privatisation, which will not benefit the railways or passengers.

We have seen no progress on fares and ticketing either. The Government’s review was originally due to be published in May, but we are now told that it will be published at some point in the summer. The Minister will surely appreciate the irony when he next lectures East Coast on punctuality. I hope that the review will now bring forward serious proposals for reform, because at present passengers often find it difficult to secure the cheapest tickets, especially from automatic ticketing machines. The definition of peak and off-peak is not always obvious, and as a consequence some passengers find themselves with huge bills through no fault of their own.

Passengers also rightly feel aggrieved when they have to use a replacement bus service but are not entitled to compensation, regardless of the inconvenience to their journey. Those are the sorts of issues that the fares and ticketing review should be looking at. The Transport Committee was right to call for so-called super-peak tickets to be ruled out. They would penalise those commuters who have no choice but to travel at peak times. I urge the Minister to go further than he had done previously and rule out granting train operating companies the right to redefine peak time periods. I also ask him to give the House a categorical assurance that operators will not be given additional powers to price commuters out of peak time periods.

[Ben Gummer]

There is a technical problem with the hon. Lady’s suggestion. Currently, with the Government setting peak times, we end up with the ridiculous situation that people leaving London to go to Ipswich, Norwich or Chelmsford in the morning are on empty trains and paying £74, but if they are going into London they are of course on packed trains and paying £74. The Government have set the peak time rules for many years, so the franchisee cannot make an elastic arrangement to encourage people to take the train when it is empty and discourage them when it is full. I suggest that that is in the commuter’s interests.

[Lilian Greenwood]

I suggest that the people who stand to suffer as a result of that are those who have no choice about when to travel. If people have a choice, they will not travel on peak trains. Those who have no choice will be stung by having to pay whatever price is asked.

As the McNulty report put it, we have a fare structure that is complex, often appears illogical and is hard for the uninitiated, or even the initiated, to understand. The answer is not new, unreasonable super-peak fares. We fully support the development of smart ticketing schemes, a policy closely linked to the devolution agenda. Transport for London and Centro have demonstrated how strong local transport authorities can successfully introduce smart card schemes, making rail and other forms of public transport more convenient for everyday use. We believe that regional partnerships are best placed to introduce new schemes, drive forward integration with other modes of transport and decide their own priorities for developing local rail services.

However, the pattern of dither and delay from the Department for Transport is also affecting the devolution agenda. Were it not for its extensions to the Northern Rail and TransPennine franchises, we could have seen an earlier decision on devolution, with the new settlement starting next year. We want to see an ambitious model of genuine devolution, learning from the success of continental models, that can be extended to other areas, including the west midlands.

Unfortunately, we have already seen some reductions in local facilities. Although they are not as high profile as the cuts to passenger services we have seen in the past, we are concerned about ticket office closures, especially as some seem to be going ahead by stealth, using the McNulty review as cover. Last year, leaked e-mails from the Department for Transport revealed that Ministers had decided to approve closures and let train operating companies take the blame. That was an unacceptable way for closure decisions to be taken. I hope that Ministers will take note of the Campaign for Better Transport’s “Going Local” report, which drew together evidence from London Overground and Merseyrail. The evidence suggested that staffed stations and ticket offices led to increased passenger numbers, lower levels of fare evasion and increased passenger satisfaction.

There are simply better ways to save money than closing ticket offices. Of course we need more efficient railways. Network Rail has delivered substantial efficiency savings since Labour ended the disaster that was Railtrack, and the rolling programme of electrification, which the last Government committed to, will help reduce operating costs.

However, as McNulty helps to establish, although technology can bring about savings, the greatest challenge is fragmentation. Privatisation has left us a system with a 40% efficiency gap as measured against European comparators. Fragmentation has built in additional unnecessary costs at every level and we need a serious debate about how they can be addressed. On the Government’s response, it is too early to quantify properly the impact of alliancing and there are real concerns over the accountability of the Rail Delivery Group, which must not be used as an excuse to diminish ministerial responsibility.

We must also be alive to the danger that through alliancing, non-dominant operators will be excluded from decision making. That is especially true in the case of freight operators—a danger acknowledged by the hon. Member for Milton Keynes South (Iain Stewart). If there are increased disputes over access rights, that will only generate a higher administrative burden for the regulator.

To conclude, I should say that the Government have tied themselves so closely to the stalled franchising system that they have left the industry in stasis. Awards are being extended for up to four years at a massive cost to the taxpayer, on top of the £51 million net payment that the Government made to operators in the last financial year. The paralysis caused by the collapse of franchising has hit the supply chain’s order books, threatening jobs and skills. Ministers have made restoring franchising a point of political pride, even to the extent of privatising the successful east coast service, instead of seriously examining alternatives. That is what Labour is committed to doing, and why we are conducting a thorough review of the rail industry that is not hampered by ideological baggage.

The “Rail 2020” report made some useful recommendations for reform, but it also noted that there could be a case for structural changes. In the light of the franchising fiasco, we should seriously examine the alternatives, instead of remaining ideologically wedded to the failed models of the past.