Rising Cost of Transport

Mark Lazarowicz Excerpts

Wednesday 9th January 2013 Commons Chamber

[Ian Mearns]

There is an awful lot about current fare structures that is desperately unfair, particularly for people on low wages and those trying to get jobs, and particularly in a region such as the north-east, where many have to travel to get work.

As the independent report stated in September, a railway company that was temporarily renationalised by the Government three years ago reported increased profits and an improvement in passenger satisfaction. DOR, which took over the running of the east coast line from National Express, said that its operating profit increased by 7% in the year to March to £7.1 million. Turnover for the year amounted to £665.8 million—an increase of £20 million—leaving a profit before tax and service payments to the Department of £195.7 million. That was an increase of £13 million. Putting that against the £240 million proposed investment in the east coast main line makes the amount look extremely modest indeed.

I have a great deal of respect for east coast main line as a franchise. I sympathise with its staff, who often work in difficult circumstances, dealing with the failures of creaking infrastructure and worn out rolling stock and equipment, yet an awful lot of what the travelling public have to put up with on the east coast main line could be avoided through some relatively modest investment, which would be entirely affordable given its profits.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

My hon. Friend mentions the east coast main line staff, who do indeed provide a good service to passengers. I am sure that he, like me, frequently comes across people who are confused about whether they have the right ticket for a journey—a train might be late or they might get on the wrong train. The poor staff then have to deal with the problems that that creates. Is that not an example of the kind of complication that drives away passengers and often makes them go for higher fares rather than cheaper ones?

[Ian Mearns]

Indeed, and one criticism I would make of the last Government is that they did not sort out the complicated franchising system, which has left us with a complicated rail ownership programme across the country.

The Chancellor of the Exchequer proudly announced investment in infrastructure as a means to unlock growth. However, analysis by the Institute for Public Policy Research shows a biased picture. The think-tank examined the data, detailing the projects to be brought forward as part of the national infrastructure pipeline. Of the projects that were identified as benefiting a particular region and where public funding was involved, it found that London and the south-east accounted for 84% of planned spending, compared with 6% in the north. That equates to some £2,700 a head for each Londoner, which is more than the total for all the other regions combined, which includes £201 a head for Yorkshire and Humberside, £134 a head for the north-west and just a fiver for the north-east of England. My constituents do not believe those figures, but they are absolutely right. Why, if we get a meagre £5 of investment per head, should we pay extortionate rises in rail fares, which have risen nearly three times faster than wages since the recession? In fact, between 2008 and 2012, average rail fares increased by 26.6%, with wages rising by just 9.6% over the same period. Recent research by the think-tank Transport for Quality of Life has shown that UK rail fares are the most expensive in Europe and that rail privatisation is costing taxpayers £1.2 billion a year, with train operating companies making large profits on the back of public subsidies.

Speaking of profits, I was appalled to learn recently of a dispute over pay involving east coast main line and a subsidiary company called ISS—International Service System—which centred on its cleaning staff. Cleaners were being paid £6.08 an hour—a figure that is below the national minimum wage and is, I believe, illegal. On top of that, they got no pension scheme, no enhancements for unsocial hours, bank holidays or weekends, no sick pay above the statutory minimum and no travel allowances. The east coast franchise, which likes to promote itself as a first-class service, was treating employees of its contract cleaning company in a third-class way. ISS is a huge multinational company, with more than 500,000 employees worldwide, 43,000 of whom work in the United Kingdom. It is disgusting that it was able to do that to its hard-working employees. Indeed, following on from yesterday’s debate, this has a knock-on effect, as the Government have to fork out in-work benefits to many of these people to subsidise the industry.

Pressure must be put on Network Rail by the Government to ensure that north-east services get a fair allocation of resources. Connectivity, particularly by rail, is essential to the economic prospects of regions such as the north-east. Despite their stated commitment to reduce the deficit, the Government still find themselves, month after month, deepening the crisis yet further. When will they recognise the essential link between investment in growth, particularly in regions such as the north-east, and their prime aim of deficit reduction? The two are absolutely connected.

--- Later in debate ---

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

The starting point for this debate has to be the fact that Great Britain has some of the highest rail fares in Europe. I recognise, of course, that to pay for investment in the rail network the passenger—the fare box—will have to make an important contribution to the funds required. However, the passenger should not be asked to pay an unfair burden, and one way in which we can ensure that passengers are not forced to pay more than they need to is by ensuring that the revenue earned from the network is actually used for the benefit of the network—for the benefit of passengers—and is not siphoned off out of the system.

The evidence from the decades of the privatisation regime, instituted by a previous Conservative Government, is overwhelmingly clear. That approach has meant that billions of pounds has passed out of the system, away from passengers and away from possible benefits of infrastructure investment. Instead, the benefits have been in the form of big profits for many of the companies involved, not just train operating companies but those with ancillary roles in the system, including some of the providers of rolling stock, to mention just one example. This has not just been about money flowing out through large profits; it has also been about operating inefficiencies being brought into the system. Again, those have been to the detriment of passengers and, in their own way, have led to fare increases.

[Mr Andrew Turner]

Can the hon. Gentleman explain why such inefficient companies win these contracts?

[Mark Lazarowicz]

Let us leave aside the fact that there are not many operators in the field to bid. I am not saying that an individual operator is necessarily inefficient, but that the system as a whole leads to inefficiencies as well as to profits being paid out to private companies when they could be invested in the system.

I said that not all companies are inefficient. One example that showed the difficulties and negative effects of privatisation at their highest was the disaster of Railtrack, which was linked not just to private ownership and that company’s motivation in its operations but to the fragmentation of the operators and Railtrack’s distance from the train operating companies. That example also shows how some of the damage caused by privatisation began to be turned around. It is not a perfect organisation, but the publicly owned Network Rail has managed to repair some of the damage caused by fragmentation of the system and we have seen a safer railway network and better value for the taxpayer, for passengers and for other users of the rail network in the costs of maintaining the system.

[Jim Shannon]

One of the greatest burdens for people in employment is that 30% of their wages can go on travel. People are travelling further, too, to get jobs and employment. Does the hon. Gentleman feel that consideration has been given to those people who regularly use public transport, be it bus or rail, to get to work?

[Mark Lazarowicz]

Absolutely. That is an example of how increased rail fares damage people daily and effectively worsen their standard of living.

The most recent example of the damage caused by the privatised regime on the railways has been the fiasco of the west coast main line franchise. That fiasco is likely to land the Department for Transport—and therefore the taxpayer—with a bill for hundreds of millions of pounds, which could have been spent on improvements to routes, stations and rolling stock. In contrast, we have the experience of the east coast main line, to which my hon. Friend the Member for Gateshead (Ian Mearns) referred earlier. Bringing the franchise into the public sector has been good business for the taxpayer and the directly operated company has brought money back into the public sector. In the last year, it has brought a premium of almost £200 million into the Department, which has gone back into the public sector rather than being siphoned off into a privately owned company.

The problem is that there is an inherent difficulty in the tendering system that operates on the railways under the privatisation scheme introduced by a previous Conservative Government. In order to bring about long-term investment and security, a Government will want to see long-term tenders, but the longer the tender the less reliable any prediction of future traffic and income can be. That leads to a risk of the tender becoming either a loss-maker, with the operator seeking to hand it back to the Government and to make them pick up the tab, or one in which excessive profits are reaped by the private operator. The system itself is at the heart of the problems with the railways and of the fact that money that could be used to benefit our passengers has unnecessarily flowed out of the rail system.

I want to concentrate on the east coast main line, which is of particular relevance to my constituency and to communities further south along the line. I urge the Government to drop the ideology and to choose the option that works and that will keep prices down for the traveller. They should keep the east coast line, which is successfully operated by Directly Operated Railways, in the public sector. I would rather that that was done on a permanent basis, but if the Government, for ideological reasons, are not prepared to do that, they should at least give the operators a long-term contract rather than leaving a sword of Damocles hanging over the company, the staff who work for it and the passengers and communities that rely on it.

The Government could also take the opportunity to allow Directly Operated Railways’ east coast line to be a genuine public sector comparator for the rest of the network. If the Government will insist on reprivatisation for the west coast main line, they should at least ensure that a public sector bid can be put on the table as a comparator against which we can judge which provides best value for money for the taxpayer and the best services for the passenger. That is the way forward. Let us start putting passengers first and make sure that they get the benefit of investment rather than the companies, which have taken too much out of the railways for too long since privatisation was introduced by a previous Conservative Government.

[Iain Stewart (Milton Keynes South) (Con)]

I am pleased to have the opportunity to contribute to the debate. This is an important issue; there is a serious debate to be had about how we finance investment in the rail industry in future and about the cost of transport today. Like hon. Friends who have spoken, I will have no problem in voting against the Opposition motion; with depressing predictability, it is rather opportunistic, denies their record and contains few concrete proposals for the future. I asked the House of Commons Library for figures on how much rail fares increased between 1997 and 2010. The answer was 56% for local and regional operators and 98% for long-distance trains. Rail fare increases did not begin in May 2010.

My first main point is that although the debate on rail fare increases is important, the reporting is not always helpful or accurate; the headline turn-up-and-go “Anytime” rail fares are often cited and from that it is extrapolated that Britain has the most expensive rail system in Europe. However, those tickets account for less than 20% of ticket sales. When we look at the whole series of available fares, the position is not as straightforward.

In preparing for this debate, I looked at the Virgin Trains website for a hypothetical journey from Manchester to London. Yes, if I wanted to travel in peak time, turn up and go, a single would cost £154—a large sum. However, a wide selection of other fares for the same journey, as low as £12.50, was available on a wide range of trains. The point is that we have to look at the whole mix of fares, not just the headline ones.

We do not have the same debate in the airline industry. The difference between the cheapest and most expensive air flights on the same route, say to New York, is enormous—from a couple of hundred pounds to £1,500 if someone wanted to turn up and go.

[Mark Lazarowicz]

I am sure that it is possible to get a £12.50 fare from Manchester on Virgin Trains on some occasions. However, does the hon. Gentleman not accept that that £12.50 will be valid to London Euston, but if he wants to go to Brighton, Dover or the south-west of England with a different operator, he will not be able to get a through ticket at that rate? He will have to get two separate tickets, which might cost more than a single through ticket, because he will not be able to get a cheap through ticket.

[Iain Stewart]

I accept that there is an unnecessary complexity in the rail ticketing system. The Transport Committee has looked at that issue and will continue to do so. If the hon. Gentleman will forgive me, I will not go too far down that path, as time is limited, but he has made a valid point.

The comparison with Europe is interesting. A very good website called “The Man in Seat Sixty-One” does an independent comparison of European rail fares. Yes, when you look at the “walk up and go any time” fares, the UK is substantially more expensive, but on other tickets, including buying the day before, Britain is either on a par with France, Germany or Italy or very often considerably cheaper.

I mention that because when we talk about rail fares, we need to differentiate between passengers compelled to travel at a particular time of day and the vast majority who have some flexibility over when they travel. The Opposition are right to highlight in the motion the issue of super-peak tickets, but they miss an important point. I completely accept that some passengers will not be able to change their time of travel, but others can. A super-peak ticket should not be designed to increase prices but to give rail operators the flexibility to discount other peak-time travel and encourage passengers to travel slightly later or earlier if possible.