Compensation for Rail Passengers

Claire Perry Excerpts

Tuesday 12th July 2016 Westminster Hall

[Will Quince]

indicated assent.

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

Delighted.

--- Later in debate ---

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

It is always a pleasure to serve under your chairmanship, Mr Evans. If my hon. Friend the Member for Colchester (Will Quince) will forgive me, I will try to address directly the points made by the hon. Member for Dulwich and West Norwood (Helen Hayes), because of course the Southern rail situation is very much at the front of my mind and the minds of others.

The hon. Lady knows that the emergency timetable was put in place to try to restore some reliability to the services. It was almost impossible for someone to know whether they could actually get on a train and get home, and a decision was taken—I am sorry it has affected the hon. Lady’s constituents in that way—that where there were alternative services, whereby people could make an alternative journey on an additional service, the services would be withdrawn temporarily in order that 85% of the services could run. I was not aware that the replacement bus services to which she referred were actually just an invitation to take a bus journey, so I will certainly take that up, because I had reviewed carefully the planning of alternative provision and was told that it was satisfactory.

The hon. Lady’s point about compensation is well made. From my right hon. Friend the Prime Minister downwards, there have been conversations about how to target compensation for a sustained period of disruption. As the hon. Lady knows, back in April, when we met, performance on the whole network was running at about 84%. That was not good enough, but it was certainly on an upward trend. Since then, a whole series of issues, particularly in relation to industrial action, have caused the service in effect to become completely unreliable. I welcome the company’s commitment to reliability. The determination to get the majority of people to work and home in a more predictable pattern is good, but I take her point about compensation seriously, and although I cannot answer it today, I will certainly come back to her in the weeks ahead.

Let me turn to the substance of my hon. Friend’s debate. I congratulate him, as my hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) did, on once again being an extremely eloquent and well informed presenter of his arguments. He is always a joy to work with and to listen to, and although I may not have all the answers, he certainly always prompts me to go away and think even harder about the problems. I am also grateful for the other views that were expressed.

The logic of my hon. Friend the Member for Colchester is of course impeccable. When we look at the numbers, it does seem very bizarre that companies are paid compensation by Network Rail that they then do not pay out fully to customers. He and I know that behind the very clear logic is a whole series of complicated financial relationships relating to a future earnings hit to franchising, and relating to the fact that many franchises are not in a premium-paying position. They are subsidised by the taxpayer because of the social benefit of rail, so simply to say that the money should automatically be paid out to passengers risks unpicking the financial relationships and contracts that sit behind the railway system today.

However, I completely agree with my hon. Friend that, for too long, people taking train services have been almost treated as an afterthought in the system. One of the things that I have been so pleased to see in my last two years as Minister with responsibility for rail is that customers are being put front and centre of the franchising process. My hon. Friend will know from the current franchise competition on his line of the absolute commitment to delivering a much better service on brand-new trains and contracting for that. It is not contracting for the inputs—“Do you clean your stations; do you buy trains?”—but considering what the service actually looks like for customers. That is the start of a long focus on customer satisfaction that we all need to get to.

I will touch on the technical points about schedule 8 just in case there is one fact that my hon. Friend does not know, although I suspect that is unlikely, given that he is right across this brief. Schedule 8 payments compensate train operators for delays of which Network Rail is the cause. That is a contractual and commercially confidential element set up between Network Rail and each operator, overseen in this case by the regulator, not the Department. It does not include provision for additional costs, so train operators may argue that they pay out almost from a separate pot to compensate for provision of alternative bus services or, indeed, other compensation payments.

The compensation regime across the country is based on the passengers charter. As hon. Members will know, there is a discrepancy between some operators, which pay out on delay repay—I will address later the point about delay repay 30—and those that are still on the national conditions of carriage, which is a slightly less generous regime. Hon. Members will know that the Government are determined to get all franchises on to the same basis through the process of negotiating about franchising. Actually, we want to accelerate that through negotiations and perhaps not just wait for the franchises to come up for renewal. Interestingly, the headline compensation numbers for delay repay show that they are among the most generous in Europe, certainly when compared with other transport systems. People do not get a compensation payment if, for example, their long-distance coach is delayed; they just have to sit there and suck it up.

There was a proposal earlier this year. I was advised that we should have a permanent exemption for the railway industry from the Consumer Rights Act 2015, which I completely rejected, because in my view train companies are simply providing customers with a service. In this case, it happens to be taking a train from A to B. There was no logic in providing a permanent exemption, so I have granted basically a one-year grace period for the industry to get itself aligned before that Act comes completely into force. Of course, the work that Nicola Shaw has done for the Department, whereby she proposes aligning Network Rail’s route provision much more closely with the operating companies and joining that up, is another way of ensuring that those companies deliver a much more flexible and responsive service.

Currently, as was pointed out by the hon. Member for Dulwich and West Norwood—I consider the hon. Lady a friend—we have a T-plus-30 trigger point for delay repay, which is not appropriate for many metro-style journeys. The other problem is that not everyone claims. Indeed, estimates suggest that only 12% of those who are eligible actually put in a claim.

The Department has been doing two things: first, it has been looking at how best to introduce a T plus 15 for delay repay, which I hope to be announcing shortly. I am not sure what the average journey time is for the hon. Lady’s constituents, but there is the possibility that it will capture at least some of them. Secondly, the Department has been looking at improving how compensation is paid. For example, compensation used to be paid in vouchers, which seems ridiculous in a world where people use cash or cards. That has been changed so that all passengers can receive compensation in cash instead of in rail vouchers.

We are also very much committed to the idea of automatic compensation, and I want to highlight the work that c2c has done on the Southend lines. It will be of interest to the hon. Lady, because c2c customers who are using its automatic payment card—about 25% of season-ticket holders—start to receive compensation if their train is delayed by even a minute. It is a pence-per-minute deal, so it means that their time is valuable. I think it starts after two minutes of delay—the clock is ticking and they receive compensation—and we want to see that right across the industry. Hon. Members will also be aware that Virgin Trains West Coast has introduced automatic compensation. If someone books a ticket through their website, they do not have to do anything to claim should the train be delayed; the money will automatically come through to their account.

There has been a lot of progress in the industry on compensation, but I absolutely recognise the point that my hon. Friend the Member for Colchester has made. I am very keen to think about—either through franchising or through some of the alternative structures that Nicola Shaw suggested—how we can hold money that is paid out for poor performance in a way that targets it more specifically towards improvements on the line. My hon. Friend knows that I am sympathetic to the spirit of his proposal. It is a question of how we make it work in the often byzantine world of current railway structures.

Ultimately, what customers want is not to have to faff around with compensation claims; they want a reliable service that they can depend on to get to work and to get home. A major change that we are starting to see is about capturing the value of that reliability. I hope hon. Friends and hon. Members in the Chamber will have noticed the move among those in the industry to stop talking about punctuality as a train that arrives between five and 10 minutes late, focusing instead on the “right time”. If we arrive 10 minutes late to a debate, we are late, even though, in train terms, we are perfectly on time and everything is normal. I want to flag up the recent industry-led proposals to move to a “right time” railway and to measure performance and compensation claims from the “right time”, which the industry is moving rapidly to introduce. Ultimately, we want a “right time” railway, where people are confident in its reliability. That is what is driving this Government’s record investment in rail, but I am very sympathetic to all the points that have been made today, because if customers do not see and feel that benefit, we are not all collectively doing our job.

Question put and agreed to.