Williams-Shapps Plan for Rail

Martin Vickers 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.

[Stephen Hammond (Wimbledon) (Con)]

My hon. Friend’s analysis of what the Government are creating is correct, in that it would be very good if Great British Railways were to be the guiding mind. The trouble is that it looks as though there will be centralised control of the system, driving out private sector initiative, driving out investment and underpinning the underperformance of Network Rail, to which at least 78% of the current delays on our railways are directly attributable.

[Martin Vickers]

My hon. Friend the former Minister identifies some of the downsides, although, as I mentioned earlier, there is no perfect solution. My next sentence was going to be that creating a big, monolithic public body will not solve all the problems unless there is a mix of public and private working together. The private sector has more than doubled passenger numbers in the past two decades, has increased services by more than a third since 1997, and has increased jobs by 27% since 2011. The private sector must have a role.

I recognise that the private sector has not got it all right. There are significant concerns today around particular services linked to industrial action and rest-day working agreements. I was a keen advocate for TransPennine Express to lose its franchise and for the service to be taken under the wing of the OLR until a new private operator could be found. But colleagues across the House must look to pragmatic solutions to fix the railways, with the private and public sector working together. We need to create a market in which the private sector can deliver for customers. We need to let customer-facing operators act in the interests of the customer, not constantly seek permission from the centre. That is not an ideological argument, but one based on reality: command and control from the centre is not helping the sector to bounce back after the pandemic. If we get the balance right, a public-private partnership will enable operators to deliver for customers.

As chair of the all-party parliamentary group for rail, I hear from all manner of stakeholders in the rail sector, including operators, trade associations, those involved in the supply chains, community action groups, industry journalists and, of course, passengers. It is clear that the vast majority agree that legislation is required to make the public body a legal entity and give it the powers necessary to be truly effective. In November 2019, the all-party group published a report, “Rail Reform: A Guiding Mind”, which called for a similar body. The report was presented to the then Rail Minister. I recognise that the next parliamentary Session will be tight, but a Bill to establish GBR would be relatively thin and ought not to be controversial. I urge the Minister to lobby within his Department to ensure that a Bill appears in the King’s Speech.

Having said that, and without wanting to give the Minister the impression that anything other than a Bill is the preferable way of underpinning the long-term success of the railways, some important reforms can be done in the meantime without legislation. The national rail contracts are one of the last vestiges of the pandemic. They were right in a crisis, but now they need to evolve to provide operators with more flexibility to use their commercial nous and attract customers back. That would restore some financial sustainability and allow the Government to spend more on other priorities.

The independent economic expert body Oxera estimates that the Treasury is missing out on as much as £1.6 billion over two years because of restrictive contracts for operators. That reduces operators’ ability to drive the recovery of passenger numbers. Money is also being lost through the lack of ticket checks on board. Many commuters will be aware of journeys on which their tickets are checked once in a blue moon. That means they could travel for free, knowing that if they did happen to be caught, the savings they would have built up would vastly outweigh any fines they might have to pay. However, at present there is no incentive for rail operators to ensure the collection of fares.

Beyond reforms to the current National Rail contracts, we must look ahead to the end state, as envisioned by Keith Williams, and the passenger service contract, which must be flexible enough to reflect the varying rail market. The public instinctively understand that when they book a flight earlier, the ticket should be cheaper than if they were buying it closer to when they travel. That approach needs to apply to longer-distance rail journeys.

For shorter commuter journeys, we need to introduce more turn-up-and-go services with tap-in, tap-out technology and some degree of flexibility for operators to entice customers on quieter days. I was delighted that in the George Bradshaw address, the Secretary of State signalled that this anti-one-size-fits-all approach is being adopted for future contracts. As a key principle, the future passenger service contracts should be developed to reflect the geography and markets that they serve. They should incentivise operators to use all their creativity and capability to deliver the best possible outcomes for taxpayers by growing revenues and reducing costs.

The Government also need to drive forward fares reform, which the public rightly and understandably care greatly about. Why has it been 18 months since the Government announced the tender for the consolidated online retail solution to deliver radical and long-awaited fares reform? Can we get on and start the tender process? As the Minister knows, it does not need legislation. The prior information notice for CORS was published in December 2021.

The Government have announced one measure relating to fares: a single-leg pricing trial extension on LNER. That is something that should be rolled out more widely to private sector operators. The use of single-leg pricing removes the anomaly of some single tickets being almost as expensive as a return ticket. It means passengers can more easily choose when to travel in the knowledge that the fare offers value for money. For example, if someone commutes in at peak-time in the morning, but then attends an event after work and comes back off-peak, why should they pay for a peak-time return? This is a good step forward that ought to be utilised more widely.

Moving on to freight, I had the pleasure of hosting a cross-party parliamentary reception on this issue in March. Freight makes sense for the environment and the economy. The longest freight trains can ease road congestion by removing up to 129 heavy goods vehicles from the road. If the Government set an ambitious target to treble rail freight by 2050, the sector would deliver nearly £5.2 billion in economic benefits as a minimum. The freight sector would flourish by setting a supportive policy environment and also by opening the east-west freight corridor, which, as I have pointed out on numerous occasions, would be beneficial to industry and the development of the Humber freeport, and would take a significant number of HGVs off the M62.

I want to highlight the Luxembourg rail protocol, which is making progress internationally and is expected to come into force towards the end of the year. However, the UK is yet to ratify it. There has been extensive engagement with the DFT and the Great British Railways transition team, with the DFT including it as part of a consultation last year. Will the Minister confirm today the Government’s position on the protocol? Is he still supportive in principle, and when will the Department issue a response to the consultation? Is there a particular legislative vehicle envisaged to see it implemented? Those involved in the protocol from the UK perspective would appreciate clarification.

The rail model is broken, and both legislative and non-legislative reform is crucial. Misdiagnosing the problem will not make it any better; it will make it worse. Over-centralisation is not in the interests of passengers, the economy or the environment. All parties have identified the need for a public body, but it is important to get the design right and ensure that the private sector is allowed to do what it does best with the package of reform I have outlined today. Along with much-needed changes to ticketing and fares, the Government can deliver rapid and much-needed improvements for passengers, trade customers and the taxpayer.

I know the Minister would be disappointed if I did not raise a couple of local issues, which I have spoken to him about on many occasions. One such issue is the return of the direct train service from Cleethorpes to London King’s Cross. Perhaps he could update us on that. Another issue, which I have not raised with him previously, but perhaps he could look into for me, is that for the past 30 years there has been a Saturday-only train from Sheffield via Gainsborough and Brigg to Cleethorpes, with three trains each way. A few weeks ago, Northern announced that it would make that a daily service, which on the face of it is welcome, but it appears to be more for the convenience of the operator than the passengers, because the one train to Cleethorpes arrives at 11.14 am and the return train is at 1.20 pm. An hour and a half in Cleethorpes is simply not good enough; people need at least a week there to enjoy all the facilities. More seriously, one train arriving mid-morning with a return train at, say, 6 pm would be sensible, but allowing people 90 minutes in Cleethorpes or Grimsby is not ideal if they want to do some shopping.

[Yvonne Fovargue (in the Chair)]

I will move to the wind-ups at 5.9 pm.

--- Later in debate ---

[Martin Vickers]

I think it is fair to say that it has been a lively debate, with contributions from many colleagues. That shows how rail issues always arouse the passions of hon. Members. In contributing, they highlight the interests of their constituents. It has been a helpful debate. I thank the Minister for his response, which I think continues the debate. I hope that as we move forward, the guiding mind, which of course is the Minister, will produce some results.

Question put and agreed to.

Resolved,

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