Williams-Shapps Plan for Rail

John Penrose Excerpts

Wednesday 14th June 2023 Westminster Hall

[Martin Vickers (Cleethorpes) (Con)]

I beg to move,

That this House has considered progress on delivering the Williams-Shapps Plan for Rail.

It is a pleasure to see you in the Chair, Ms Fovargue. Reform of our railways has long been a contentious issue. There are countless opinions on the best way to run the rail system—from 100% nationalisation to 100% privatisation, with a plethora of views in between—but one thing the House can agree on is that rail is a good thing. Passenger rail can unlock economic growth across Britain’s regions; it connects communities, and is the greenest form of public transport. There is an ambitious growth target to treble rail freight by 2050, which will deliver huge economic and environmental benefits to Britain. The rail sector is a force for good. It ought to be obvious to anyone that we need more of it, not less.

We can also agree that the status quo is not working. We have an unhappy halfway house between privatisation and nationalisation, which clearly is not working as intended. Across much of our rail network, fares are high, services are poor and passengers are unhappy.

Some elements do work well. One example is open access: on the east coast main line, a public sector operator is competing with private sector open access operators on full revenue risk, which are able to make the best offering to the customer. That has boosted competition, lowered fares, increased the quality of services and created greater innovation. Operators on the east coast main line have recovered beyond pre-pandemic levels, proving that competition, not over-centralisation, is in the customer’s best interests. If we had open access across the network, I am confident that we would be in a much stronger position.

However, open access alone is not a silver bullet that will solve all the problems. Unfortunately, as the Secretary of State for Transport illustrated in his Bradshaw address in February, Britain’s railways operate on

“a broken model…unable to adapt to customer needs and financially unsustainable.”

That is sadly true. The modelling produced during the pandemic was appropriate in a crisis, but is now stalling recovery and pleasing no one. The key to creating a successful railway is correctly diagnosing the problems that the industry currently faces, and prescribing the right solution.

Opposition Members would attribute the woes that the railway faces to the fact that it is not entirely in public ownership. However, that is simply not the case. A perfect storm of factors has converged to create the levels of turbulence that we have become used to. The pandemic disrupted long-established travel patterns, causing passenger numbers to drop as low as 4% at one time. In 2023, they have recovered to around 90% of pre-pandemic levels. However, revenue levels are at around 85% of pre-pandemic levels, with costs fixed at 100%. That is financially unsustainable and needs to be changed.

The temporary contracts introduced during the pandemic are blunting operators’ abilities to attract passengers back, with such contracts making the railway effectively quasi-nationalised, with operators’ hands tied. The Department for Transport has never been so involved in the running of the railways, not even in the British Rail days. The operator of last resort now commands four former franchises, as well as a rolling stock company. Those services are afforded significant freedoms in comparison with normal franchises, and they compete with open-access operators on full revenue risk.

Then there are the Department for Transport-contracted operators, which are on a quasi-nationalised contract with their hands tied and must look to DFT officials to get the most basic things approved. There is also an unacceptable lack of transparency around OLR funding, which ensures that organisations are not operating on a level playing field. The OLR has stated that it

“maintains constant readiness to take responsibility for other train companies…as required”,

but we must implement the reforms required to ensure that that is not necessary. The last thing we need is nationalisation by stealth.

I reiterate that we have a broken rail model with unsustainable finances and restrictive contracts. Further to that, we have industrial action on certain routes, with the public left feeling frustrated and rightly demanding improvement. What is to be done? The nationalised models are supposedly a panacea, where high-quality trains run at cost price for the greater good, never cancelled or delayed, and tying together communities that would otherwise rely on gas-guzzling cars to keep connected.

So we are told, but the reality is the opposite. Bean counters at the Treasury keep a hawkish eye on operations. Their chief concern is the revenue produced by the network. At the first sign of difficulty, revenue has flatlined at around 85% of pre-pandemic levels. Remember: they order the Department for Transport to make savings. They, in turn, have little option but to cut services, staff and customer benefits. This further reduces revenue, compounding the problem, which then spirals out of control. If hon. Members do not believe me, they need only look at a real-world example, not from some far-flung socialist country but from here in the UK. What was the result of British Rail’s reign over our railways? Huge operating deficits, lines starved of investment, and dire need of modernisation, culminating in the Beeching cuts of the 1960s. I fully accept that privatisation is not entirely perfect, but I will not take lectures from the Opposition about the fairy tale of nationalisation.

[John Penrose (Weston-super-Mare) (Con)]

The other thing everybody hated about British Rail was that it was monumentally disliked by its staff. Staff morale was at rock bottom and industrial relations were not great. It was not a worker’s paradise either, even while it was awful for customers.

[Martin Vickers]

I entirely agree.

I concede that even under the current system, the separation of cost and revenue across two departments creates perverse incentives. No business that wanted to grow would structure itself in that way. Only with major reform can we break a cycle of decline.

I hope we can agree that the solution will utilise a public-private partnership to bring train and track back together and provide strategic leadership of the railways. The Conservatives, the Labour party and the Liberal Democrats have all identified the need for a body to oversee track and train, and the rail industry has long called for a guiding mind to co-ordinate the network. That is why the Government are creating Great British Railways, which will be responsible for both track and train, as well as revenue and cost.