Rail 2020

Debate between Ben Gummer and Lilian Greenwood

Wednesday 3rd July 2013 Commons Chamber

[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.