West Coast Rail Franchise

Debate between David Mowat and John Stevenson

Tuesday 14th June 2016 Westminster Hall

[John Stevenson]

My right hon. Friend makes a valid point. Indeed, we must not lose sight of the fact that there should be integration within our transport system, between the railways, the airports and the road and bus networks.

The important thing about the new franchise is that we get it right. It needs to be right for passengers, fair for the taxpayer, right for the industry and right for those who work in the industry—we must not overlook their contribution to the network. Therefore, the level and quality of service, investment in all aspects of service and ticket pricing are some of the key issues. I am sure that other Members will have their own issues, but I want to concentrate on four in particular.

First, there is the customer and service level. It is often the small things that matter, particularly to passengers and customers, and there is key evidence of issues that customers want the forthcoming franchise to address. These include car parking—the pricing, the number of spaces and the availability at key times. Another issue is luggage and storage on trains. Many people have commented that the storage is at the end of each carriage and they would prefer it to be closer to where they are sitting. They have also commented that there should be more space for luggage. Toilet facilities and wi-fi clearly need improvement. Wi-fi has improved at stations, but there is definitely an issue—I speak from personal experience—on the trains themselves, and customers are keen to see wi-fi improved.

Then we have congestion. Carlisle, I have to confess, is a quiet station compared with many others, but at Euston there is what many call the Euston sprint—people charging for the train, sometimes in an unedifying manner. There is clearly room for improvement on that in the franchise in the future. Customers’ views and opinions need to be heard, and there needs to be an appropriate conduit between the customer—the passenger—and the train companies and, indeed, on into Government. In my own experience, customer care has been positive overall, but customer service questionnaires demonstrate that there is still a lot of room for improvement.

Then we have ticket pricing. What is the Government’s overall aim? What balance do the Government want to see between the taxpayer and the passenger? What about the link between the retail prices index and the consumer prices index? What about competition? Those issues need to be addressed in the forthcoming franchise. I appreciate that revenue raising and the balance between the taxpayer and the passenger are important for the Government, but they are also important for the passenger and the taxpayer.

[David Mowat (Warrington South) (Con)]

I congratulate my hon. Friend on leading the charge on this issue. The things he has listed are best addressed if there is proper competition in the franchise process. Does he agree with me and the National Audit Office that unless the Government get at least three or four participants in the bidding process, there will be a risk of inadequate competition? Does he also agree that, although Virgin has given an adequate service—in some ways, a good one —the Government must ensure that it does not have too big an incumbency advantage in the bidding process?

Pension Industry

Debate between David Mowat and John Stevenson

Tuesday 21st February 2012 Commons Chamber

[David Mowat]

I thank my colleague for that intervention. I was just about to say that the average pension pot for the people in the sector I mentioned is of the order of £35,000 a year. That is enough for a pension of about £1,500 a year.

The third segment of potential pensioners are those for whom no provision whatever has yet been made. The Government are correctly trying to reach them through auto-enrolment. This segment contains the most unsophisticated consumers who need the most protection.

It is right, as the industry says, for people to save more, but when their funds are eroded by unnecessary costs and when annuities provide such poor value, many people in these groups say, “why bother?”. Up to a point, they are right, but this is the tragedy: we must save more, yet the Government have not put in place the environment that is necessary for effective saving. What that means in policy terms is that the Government are inheriting under-pensioned retirees, with all that that means for social security, despite the fact that the Government spend £33 billion a year in pension tax relief. This tax relief that should be subsidising retirement prosperity is, frankly, being siphoned off to fund managers through investment and annuity overcharging. I shall talk first about the fund management industry and then about annuities.

The Financial Services Authority has recently published statistics estimating that 31% of pension pots go in charges or fees. Clearly, the decision on which pension to purchase is, along with buying a house and buying a car, one of biggest decisions in people’s lives, yet they do it from a position of ignorance. The reason why the market does not work is that there is a massive asymmetry of information between providers and buyers and therefore of buyer confidence.

The area is complex, but the whole problem is compounded by an opaque fee structure, which is indicated by the types of charges relating to pensions—entrance charges, platform charges, annual charges, exit charges and, indeed, churn charges. Some of these appear in published overall cost figures and some do not. For example, the churn charge is not included by pension fund managers in the cost structure of what they call the TCR—transitional corresponding relief—ratio of a fund. This can be responsible, according to Money Management, for changing a 31% figure into a staggering 53%. That means that 53% of the money going into pension funds goes in charges. If we examine the average degree of churn in a pension fund, we find a rate of 128%, meaning that every equity in it is churned every seven months. Warren Buffett takes the view that equity should be held for a lot longer than that. Frankly, holding it for something like seven months is simply not right.

[John Stevenson (Carlisle) (Con)]

Does my hon. Friend agree that this is one reason why the pension industry never really embraced stakeholder pensions, as they would effectively put a cap on the amount the industry could make out of pensions?

[David Mowat]

I am coming on to stakeholders and to caps. I want to ask the Minister some questions about those issues.

The industry defends itself by saying that active funds are worth paying for, claiming that higher charges are fair enough if better returns are secured, but the reality is that no correlation has ever been published to show a relationship between charges and returns. The consultants Lane Clark and Peacock recently issued a report to demonstrate that. Even if there were such a correlation, the fact that the charging regime is so opaque means that the punters could not get to grips with it in the first place. One of the many consequences is that this industry has failed to consolidate. I looked at a platform provider this morning and found that I could have bought 5,000 funds. There is no reason for that other than the fact that this industry has not been exposed to market forces.