Rail Fares
Debate between Brian Binley and Alison McGovern(12 years, 3 months ago)
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Mr Brian Binley (Northampton South) (Con)
It is a pleasure to follow the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), who delivered a sensible speech and made some very sensible points. I had sympathy with many of them. While we are in a congratulatory mood, I also congratulate the Secretary of State. He is held in very high regard and with great affection in the House and people will be delighted to see him emerge from the Whips Office into slightly greater glory in the months to come. I hope that he might be kind enough to pass on my good wishes to his Minister of State, my right hon. Friend the Member for Chelmsford (Mr Burns), who is no longer in his place. They make a good team. I am not sure who will look after whom, but we will see as the months unfold. Finally, will the Secretary of State pass on my good wishes to his predecessor, who was especially kind to Northampton? As he will know, she helped to provide the money for a much-needed new station and we remain deeply appreciative.
The debate is a missed opportunity. I understand and have some sympathy with the need for more regulated rail fares. I understand the need to see such regulation as an attempt to put a brake on the sizeable increase in rail fares that started during the Opposition’s period in government and, sadly, continues under this Government, but the truth is that trying to ban train operators from increasing fares beyond a certain point is an unnecessary diversion. The real issue is why the rail industry has not done more to get to grips with cost. Under the previous Government and so far under this Government, it seems to have been accepted that the taxpayer or consumer should finance the rail sector when no attempt has been made to increase efficiency and production and to lower costs. Every business in this country has had to deal with such challenges over the past five years, many of them to great effect, yet the rail industry seems not to be a part of that process.
We have one of the most expensive rail systems in Europe. Why is the rail sector the only privatised sector not to have made progress with cost reduction since its inception as a privatised operation?
Alison McGovern
The hon. Gentleman said that we have one of the most expensive rail systems in Europe. Is he talking about the cost per journey? We have much more frequent and dense services than other countries in Europe, but did he take that into account?
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.]
Alison McGovern (Wirral South) (Lab)
It is a pleasure to contribute to what has been an informative debate so far. As a precursor to the few brief points I wish to make, I feel that I should make an admission: I come from a long line of railway people, beginning with my great grandfather and including me, as I have previously worked in the rail industry. I make this confession—that my great grandfather, grandfather and father all worked in the rail industry—not to own up to some kind of strange rail geekery, but rather to explain that I understand some of the practicalities of our rail system and know that changes that seem obvious from the outside can actually be quite complicated and difficult to deliver.
Not least among those considerations is the important fact that the UK rail system was the first in the world. We invented railways, and the impact of that is still with us. The system that we have was designed many years ago, and that brings with it some of the costs. We cannot easily make a like-for-like comparison between our system and those of France or Germany; I am afraid that the UK rail system is just different. We must of course look at ways of reducing costs, but it is not all that straightforward.
Alison McGovern
I rarely reject out of hand anybody’s contribution to a debate on so important a subject as the rail industry. I merely make these points as a precursor to what I am about to say. I always feel that we should be cautious in what we say, because I have seen at first hand the complexity of some of the problems we face in running efficiently the kind of extensive rail system we have in Britain.
I want to speak about two things: first, the question of the average fare rise across the fares basket and the restrictions on rises; and secondly, some of the other ticketing issues that rail industry consumers face and what the Government’s ticketing review could consider in order to assist consumers. On the question of the average fare rise versus the cost to travellers of individual fare rises, I have a problem with the Government’s apparent position. The Secretary of State spoke at length only a moment ago about the importance of allowing train companies to raise fares in a way that allows them to maximise yield, but the problem is that that potentially allows significant unfairness. Those whose travel is absolutely necessary for their employment face potentially significant rises, whereas those who have a choice about how they travel are less likely to face those rises. To use an economist’s term, those with an inelastic demand curve—I apologise for my use of jargon, but it may be helpful—are stuck paying ever higher season ticket prices, while those who make up the elastic part of demand can pick and choose, so train companies maximise those yields on what tend to be leisure fares, for journeys that people can choose whether to make. That is the point that many Members across the House are making in different ways.
The problem with allowing average fare rises is that people who cannot choose whether or not to travel by train because they have no practical alternative can be faced with steep rises. The flexibility to do that cannot be allowed. In my view it is not fair. Of course, that is a decision that the Government must make based on the facts. Back in 2009 the then Transport Secretary took a decision, and I support it, because it was about ensuring not only that the train companies were able to do the business they had been contracted to do, but that there was a level of fairness for the travelling passenger.
The Government must think hard about this matter. If consumers who have no practical alternative to travelling by rail are faced with steep fare rises year after year, they will think that it is a significant unfairness to them. Members on both sides of the House have made that point. We need to be clear that this is about different groups of passengers and train companies effectively negotiating their way through to maximise benefits, in some cases for them rather than passengers.
In Merseyside we have quite a specific situation. Travel around the Mersey travel network tends to be more reasonable. However, one of the things we are desperately trying to do is increase job opportunities for people in Merseyside who are perhaps a little further afield. Earlier I cheekily mentioned to the Secretary of State my campaign to improve the Wrexham to Bidston line. It is all about helping people to travel from places in the Wirral and the rest of Merseyside across our city region and further afield, to Manchester or north Wales, to find work wherever it may be.
That is the Government’s stated policy, and they tell us they believe in it. However, with rail fares continuing to increase—my hon. Friend the Member for Rhondda (Chris Bryant) made this point eloquently—those on the lowest incomes will not have an option. They will be unable to take a decision to make what is currently a 90-minute journey from Bebington, Birkenhead, other parts of the Wirral, Southport or the wider Merseyside area to Manchester and other cities, because once they have made that further journey it will be just too expensive. That runs absolutely counter to everything we are trying to achieve to drive up the economic performance of our northern cities. The Government must think carefully about whether their approach to rail fares is not actually against the drive of what they are trying to do across Government.
Secondly, we need to think carefully, perhaps as part of the Government’s ticketing review, about how to ensure that the sale of train tickets and rail travel in general works for the customers, who pay significant amounts. I am particularly interested in how the current set-up harms people working for businesses and organisations who do not use the railways frequently enough to be considered regular or daily users, or even commuters, but do use them frequently enough for there to be a significant impact on their business.
The Government need to pay attention to a couple of aspects. The first is what a peak time is. When I was growing up, it seemed as if we always knew what the peak times were and that they stayed the same year after year. That may be the effect of the rose-tinted glasses of hindsight; perhaps things were different in reality. However, now peak times seem to change all the time.
If a person is travelling on different parts of the network, things can get difficult. For example, if their business, like many businesses in Liverpool and the Merseyside city region area, requires them to go to London one week and Leeds the next, it will be difficult for that person to find out whether the peak times are the same everywhere. The member of staff at Eastham station in my constituency may or may not have in their head the relevant peak times for the ticket.
Finance (No. 2) Bill
Debate between Brian Binley and Alison McGovern(14 years, 2 months ago)
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Mr Brian Binley (Northampton South) (Con)
I cannot let this opportunity pass without saying how good it is to follow the hon. Member for Bassetlaw (John Mann). He always speaks honestly, from his own, rather unique perspective, and he enlivened the first match of the season—to my mind anyway. However, he is the only man I know who can play for both sides in the same match, and I enjoyed his contribution.
The Minister talked about the need to support businesses large and small. You will know that I share that view, Mr Deputy Speaker, because therein lies the nub of whether the Budget strategy will succeed or fail. A flourishing business sector is vital to a sustained economic recovery, and small and medium-sized enterprises are a major element in the growth agenda. They are responsible for slightly more than 50% of the private sector work force, and they are the sector that will provide the jobs and wealth to make the Budget strategy work, given the opportunity. Sadly, however, the economic downturn hit the sector especially hard. SMEs were in the process of growing 2 million jobs over a 10-year period, when at the same time UK plc was shedding 1.5 million. If ever there was a trend to prove that SMEs are capable of creating growth, those figures ought to bring us comfort. The downturn exposed their vulnerability, however.
Everyone knows that we need to mend the roof while the sun is shining, and to stock up the larder during the good times—everyone, that is, except the members of the previous Labour Government. They told the regulators to apply a soft touch, and they failed to keep an eye on the big picture. As a result, banks were over-leveraged, bad debts mounted, asset lending ratios got out of kilter and banking institutions became unstable, resulting in a global recession. Many small business men saw it coming, and many of them took action. My company was one of those that acted at the appropriate time. Sadly, however, our recently deposed Prime Minister failed to do so. How could he, when he so arrogantly believed that he had done away with bust? No statement made in recent years will come back to haunt a man as much as that one will continue to do.
Sadly, the regulators are now overcompensating for their negligence by making heavy demands, especially on the very sector in which growth is most likely to occur—the SME sector—and things will get worse unless we do something about it. The Basel Committee on Banking Supervision has recommended that banks increase their capital reserves even further. Banks are being asked to increase their common equity as a percentage of core capital. However, just as the pendulum swung too far in the good times, so it is swinging too far in the opposite direction now, and that is having an adverse effect on lending to small businesses. Banks have already taken major steps to increase capital reserves, and there is every chance that the Basel proposals will be approved in December. That would take more money out of the economy and lock it up in bank vaults just at the time when business needs more working capital to finance growth.
Alison McGovern
What would the hon. Gentleman say to the representatives of small businesses in Wirral, to whom I speak regularly, who are concerned that they will no longer be able to benefit from investment allowances or benefit to the same extent as big businesses from the Government’s recent cuts in corporation tax?
Mr Binley
As the founder of two small businesses, I can tell the hon. Lady that investment benefits are not the major concern. The major concern is the ability to get money from the banks to act as working capital. I can see that the incentives those benefits provide are helpful, but they are not the core problem that small businesses are facing at the moment. The truth is that the Government will have to review a number of areas of policy in order to deal with the core problem.
I was saying that the banks were building up their capital assets to a dangerous degree. J. P. Morgan has recently announced new rules that will increase its risk-weighted asset base by 25%. Research also suggests that Barclays will achieve an even greater increase, of some 44%. Of course banks must be soundly based and properly regulated, but we have to get the balance right. All the evidence suggests that the capital reserve build-up has a sizeable detrimental effect on the ability of SMEs to capitalise on growth opportunities. As I said earlier, that will threaten the Budget strategy, unless the Government deal with the problem, and I hope that the Economic Secretary will come back to me on this matter.
Research by the Federation of Small Businesses suggests that 24% of SMEs are already having difficulty coming to terms with current increases in the cost of money, and the new capital requirements will compound that situation. This could not come at a worse time. More businesses are in danger of going to the wall through overtrading during the upturn than folded during the downturn.