Network Rail

Claire Perry Excerpts

Tuesday 13th January 2015 Westminster Hall

[Mark Reckless]

My hon. Friend the Member for Clacton (Douglas Carswell) spoke to me yesterday, and I spoke to the Minister. I understand that agreement is forthcoming from her as well as myself.

[The Parliamentary Under-Secretary of State for Transport (Claire Perry)]

That is correct, Mr Crausby.

[Mr David Crausby (in the Chair)]

It has been agreed. I call Douglas Carswell.

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[The Parliamentary Under-Secretary of State for Transport (Claire Perry)]

It is a pleasure to serve under your chairmanship, Mr Crausby. I am delighted to have the opportunity to respond to this debate. I congratulate the hon. Member for Rochester and Strood (Mark Reckless) on securing it. This is a really important issue, and he and his colleague, the hon. Member for Clacton (Douglas Carswell), were right to raise it on the Floor of the House last week. I am sure that the constituents of the hon. Member for Rochester and Strood will be delighted with his new-found interest in the railways. It did strike me, in doing some digging, that before last week he had made only two mentions of his local trains in this Parliament. One was to express his profound support for HS2 and what it would do for his constituency, and one was to talk, quite rightly, about the inexcusable fact that constituents on his local franchise were paying RPI plus 3%—a policy that this Government have ended.

[Mark Reckless]

The Government’s ending of RPI plus 3%, for which my constituents were used as guinea pigs, and going to RPI plus 1% and now RPI is a positive thing that I very strongly welcome. Did the Minister consult her right hon. Friend the Member for Chipping Barnet (Mrs Villiers) on the many discussions that I had with her about the railways when she was the Minister responsible?

[Claire Perry]

No, I relied on the public record, which I think it is important to do. In fact, the hon. Member for Clacton has spoken more in the last week on the railways than he has done in the entirety of this Parliament, because I can find no record in the public discourse—

--- Later in debate ---

On resuming—

[Claire Perry]

I am sure the constituents of the hon. Member for Clacton are delighted that he has finally spoken up on railways, because my little trawl suggests that he has not mentioned railways in this Parliament.

[Douglas Carswell]

When I was a Conservative Member of Parliament, I was bound by the Whip, and of course the Minister and her boss in the Department for Transport were then running the Whips Office. It was therefore much more difficult for me to speak freely in the interest of my constituents, and I am grateful that I am now at liberty to do so.

[Claire Perry]

The hon. Gentleman suggests that he could not have asked questions about fares, services and station refurbishments, but he managed 42 mentions of the EU. It is rather depressing that his last comment on the railways dates from seven and a half years ago. Presumably, he could have spoken in that Parliament—no matter. I am delighted to welcome his nascent and new-found interest in the railways, which raises several questions. What is his party’s policy? The UK Independence party’s 2010 manifesto, of course, called for three high-speed lines, not two, with no mention of cost control. We will leave that point and move on.

I propose to make three sets of remarks this afternoon. I will first canter through Network Rail’s current governance structure and correct the hon. Member for Rochester and Strood, or at least answer some of his questions. Secondly, I will ask whether there is any evidence of governance failure. Lastly, I will review recent events, on which there are valid questions that we all need to ask.

In December 2013, as the hon. Gentleman knows, the Office for National Statistics made an independent decision to reclassify the Network Rail balance sheet from the private sector to the public sector, which changed nothing in terms of operational performance; it was an attempt to put public debt on the public balance sheet, which I strongly support. The reclassification does not change the industry structure or the day-to-day operations of the rail network, and it has no effect on fares, performance, punctuality, safety or timetables.

[Douglas Carswell]

Will the Minister give way?

[Claire Perry]

It would be helpful if I could make a little progress.

The reclassification rightly raises the question what the governance should look like, which is why the framework agreement was published in September 2014. The agreement specifically sets out what the relationship between Network Rail and the DFT looks like, and it tries to achieve two things. First, it tries to achieve a level of operational independence. All political parties, including the hon. Gentleman’s party I am sure, would say that Ministers should not be running trains and that there should be an element of independence and control. [Interruption.] The hon. Member for Clacton is chuntering away from a sedentary position, and I am trying to answer some of the questions. He is not particularly interested in railways, but perhaps he might be after today.

For many people, including the UK Independence party, it is not appropriate to have Ministers and, indeed, officials running the railway network; it is appropriate that Network Rail operates as an arm’s length body. However, it is important to deliver accountability and correct governance and structure. Under the new framework agreement, the Secretary of State for Transport, as a special board member, has levers by which to steer Network Rail, including the right to agree business plans and to approve Network Rail’s remuneration envelope.

[Mark Reckless]

Did the Secretary of State not previously have those powers as a special board member? Are those powers not due to him under Network Rail’s articles of association, rather than under the framework agreement?

[Claire Perry]

The issue is whether they have been exercised, and since this new structure was introduced, they have indeed been exercised. The Department, representing the Secretary of State, has started to do appropriate things such as attending annual general meetings and being involved in board meetings.

[Mark Reckless]

Will the Minister give way?

[Claire Perry]

I will make a little more progress, because the hon. Gentleman has asked a lot of questions.

In extreme cases, the Secretary of State has the power to remove the chair or, indeed, to become the sole member of Network Rail. So what is the role? The Secretary of State determines the rail investment strategy and the statements of funding available, and he works with the Office of Rail Regulation to monitor the timely delivery of major projects. Ministers effectively set the high-level strategic and spending approach to the railways and, ultimately, are accountable for the model of delivery and the operation of rail works for the country and for passengers.

Interesting suggestions have been proposed for improving governance. Crucially—this perhaps has not been conveyed clearly, so let me make it very clear—the Department is completely focused on maintaining and reviewing the appropriate role for governance. If governance needs to change to deliver improvements, it will change but based on the work done up until September 2014, and on the analysis of Network Rail’s board and the role of its public members, the current diagnosis is that it does not need to change to deliver the railway improvements that we all want to see.

The hon. Gentleman asked about the number of public members. As I am sure he knows, the number has been cut from 90 to 45. There was an independent external review of whether those members were carrying out their functions effectively, and it was found that they were performing their duties. On whether there is evidence that Network Rail’s governance is currently failing, it is right to raise those important issues, but I think the diagnosis is that Network Rail’s governance arrangements are working appropriately. We must carefully consider the role of the public members. It could have been said in the past that public members did not have the specific relevant experience to carry out that governance role, but they have now been appointed from relevant sectors and have experience and understanding of corporate governance.

The hon. Gentleman referred to some of the compensation arrangements for senior managers. I am sure, like me, he welcomes the fact that the bonuses paid in this year of Network Rail’s operation will be one tenth of those paid in the last year of the previous Administration. Given that the company’s role in carrying out its business has not changed—as a reminder, it is a company of 35,000 individuals with an income statement of some £7 billion a year, and it has £38 billion of investment proposals to deliver over the next five years— the question for the hon. Gentleman is: how much compensation is appropriate to deliver such highly important investment for the country?

[Mark Reckless]

What has changed, now that Network Rail has become a public sector body and its debt is on the Government’s balance sheet, is that it does not face the market risk of going bust, being insolvent or falling back on itself when its bond obligations cannot be satisfied.

[Claire Perry]

Like me, the hon. Gentleman has a background in finance. He should therefore know that investors will always have considered that debt to have been effectively underwritten by the public sector, so the reclassification is simply a formalisation of what I suspect savvy investors have known for many a year.

There is no evidence that Network Rail’s governance structure is inappropriate or failing. However, I suspect that the hon. Gentleman’s new-found interest in its governance may be a result of the disruption after Christmas at several mainline stations and, more recently, at London Bridge station, which many people living in his constituency use on a daily basis. I am incredibly grateful to him for giving me the opportunity once again to state very clearly what passengers should expect.

The Secretary of State made it clear at the time that the disruption at King’s Cross and Paddington immediately after Christmas was totally unacceptable. In my view, the situation was inexcusable. Passengers deserve a reliable rail service, clear information and rapid help if things go wrong. I am sorry that, in this case, they did not get those things.

Across the industry, we have to be able to trust Network Rail’s ability to complete vital engineering works on time, and it is essential that the lessons that started to be spelled out in the report, which the hon. Gentleman slightly traduced, are learned. Work continues on finding the most appropriate time of year to do engineering works. I say again—this was said last week—that Network Rail carried out its busiest engineering programme ever over this holiday period. There were 2,000 work sites.

[Douglas Carswell]

The Minister says that the failures were inexcusable, but she is now excusing the failure. She says that she is sorry for what happened, so what is she actually going to change about Network Rail’s governance to ensure that it does not happen again?

[Claire Perry]

I appreciate the hon. Gentleman’s enthusiasm for railways, which marks a rapid change from his former portfolio of interests.

[Mark Reckless]

Answer the questions.

[Claire Perry]

I am keen to answer the questions, if the hon. Gentleman will allow me to proceed.

As I was saying, an unprecedented amount of engineering work went on over the holiday period, because the main driver of problems on the railways is twofold. First, passenger growth is unprecedented. About 1.6 billion passenger journeys are now made every year, twice as many as before privatisation. Secondly, successive Governments have underinvested in the railways for many a long year.

The hon. Gentleman asked about London Bridge station, as did the hon. Member for Lewisham West and Penge (Jim Dowd). That station is 176 years old, and frankly, it has been ignored, although it is one of the busiest pinch points into London. That work is finally being done, so that residents across the south and south-east can transit in and out of London much more effectively.

[Jim Dowd]

I congratulate the Minister on organising a meeting next week with the principal train operating companies running into London Bridge—Southern and Southeastern. Can she confirm that we will also have an opportunity to consider the position regarding London Bridge itself and the colossal debacle that my constituents and many others have had to experience for 10 days now, with little sign of the problems abating?

[Claire Perry]

I agree with the hon. Gentleman; I think that he uses a good adjective. I have visited the station, and my officials have been there. The Secretary of State himself went there during rush hour. We are extremely concerned that the engineering works, which are fantastically overdue, are delivered in a way that does not inconvenience passengers. That gets to the crux of the matter.

This is not a governance problem; it is a failure to work across industry, with passenger benefit front and central. Enormous operational improvements will clearly be delivered by this Government’s unprecedented £38 billion investment in the railways, which is long overdue and will benefit all Members in this room, but it must be delivered by thinking first and foremost about how passengers will use the network and about the benefits for them.

As we saw in the McNulty report published several years ago, the challenge for British railways is to do what we suggested then and join up the objectives of Network Rail and the train operating companies to carry on this unprecedented amount of investment, as we know can be done across the network. I am happy to reassure Members that the Government are committed across the board not only to ensuring operational independence, but, clearly, to delivering better services for passengers in the running of the railways. I am also happy to reassure Members that we remain committed to our huge programme of planned improvements, including the entire rebuild of Rochester station by the end of this year and £120 million of signalling works in east Kent, which I am sure the hon. Member for Rochester and Strood is rising to congratulate the Government on providing.

[Mark Reckless]

I am indeed. I rise to congratulate the Government and Network Rail on the new station in Rochester, which will be fantastic. The Minister talks about working together with the operators. The new station is half a mile or so closer to London, and significant investment has been put into signalling changes. It would be useful to know how many minutes that is likely to knock off train times from Rochester into London. Can Network Rail and Southeastern work together more closely on planning that for the new timetable?

[Claire Perry]

I do not know the answer, but I am happy to find out and write to the hon. Gentleman.