Railways: Franchises

– in the House of Lords at 2:46 pm on 18th January 2007.

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Photo of Lord Chidgey Lord Chidgey Liberal Democrat 2:46 pm, 18th January 2007

rose to call attention to the present franchising system for the railway industry; and to move for Papers.

My Lords, some of your Lordships may remember that a while ago in another life I carried a record in the other place—one might say that I had form—as an opponent of the legislation that was to lead to the creation of Railtrack and the train operating companies. As the Member representing the railway town of Eastleigh at the time, I considered that to be a privilege as much as a duty.

Just for a moment, let me recall the flotation of Railtrack. The launch brochure described it as a one-off chance to buy into Britain's largest development opportunity, with prime location property assets in every city centre in the country. Formerly, we knew those property assets only as railway stations, which served—incidentally, as it seemed in the Railtrack brochure—our national rail network. But time has moved on, and the arguments for and against rail privatisation now gather dust as a matter of record. Railtrack has sunk into the muddy waters from whence it came and, sadly, the Eastleigh railway works, which once employed thousands and around which the town was built, have closed for good.

Before privatisation, the Department of Transport, as it was then, published a booklet entitled Problems with Franchising. The reservations expressed then still hold good today. For example, it said that franchises are difficult to specify, that franchisee behaviour is difficult and expensive to monitor, and that franchises encourage a short-term approach to investment and a tendency to profit-maximise. It is difficult to prevent what I call "end of franchise behaviour syndrome". As a result, there is little incentive to invest in training or equipment as the franchise draws towards its end.

Rail franchises are costly to re-let in terms of time, money and human resources. They are even more costly when government objectives are not clear. In circumstances where the performance of the franchise holder is so unsatisfactory that there is no option but to re-let the franchise, it is the passengers who bear the brunt; where a franchise is being re-let in those circumstances, passengers invariably have to suffer long periods of very poor service.

It should be said at the outset that the situation was not of the present Government's choosing. They were not the authors of the privatisation model adopted for our railways. They were bequeathed a failed and broken system by the Conservative Goverment, which has cost a vast sum of money to attempt to put in some sort of order—sums of money so great that the former managers of British Rail would have been embarrassed by such largesse.

Neither are the current Government proposing another structural reorganisation where train operating companies would take over the management of the track and signalling from Network Rail. The long-term maintenance of long-life engineering assets, such as railway track signalling equipment and the infrastructure that provides the permanent way, is not well adapted to the shorter time horizons of franchising.

However, despite having been bequeathed an unsatisfactory organisation by the Conservatives in the past, it still behoves the present Government to ensure that a franchising system delivers for the public now and for the future. It should be a system that delivers a network of services that have adequate rolling stock; sets fares that do not rise faster than inflation; provides car parks that are readily accessible, adequate and reasonably priced; sets high and rising standards of train punctuality and reliability; and is managed and operated in a manner that ensures that passengers invariably feel safe and secure.

The detailed specification of services should be left to train operating companies, provided they are quite clear that the prices they charge and the quality of services that they achieve are non-negotiable. They must be non-negotiable, as those standards should be a sine qua non of the system. Unless they are achieved, not only will the franchisee lose the franchise, but such failings would ensure that they did not obtain another one.

Unlike the ubiquitous standard phrase in more or less every investment brochure we have ever seen about "past performance being no guide to the future", in the case of the railways past performance is a very strong guide to future performance. In fact, it is probably the very best guide there is. The Government's previous attempts to specify train services in detail are now widely accepted to have led to some serious failures, the most obvious being the debacle of GNER relinquishing the east coast main line franchise as it is unable to meet the financial conditions.

Another example is Great Western trains, which launched a major shake-up of its timetable after winning the Greater Western franchise and having to combine its services with those previously run by Wessex Trains. According to Transport 2000, FGW then proceeded to cut its number of carriages from 133 to 104—a cut of nearly one-quarter, a massive short-changing of passengers.

The Government's cull of train services in the south-west, taking away some 2,000 rail seats a day in the greater Bristol area alone, has caused chaos on the region's trains: chaos for commuters heading for work, turned away because there is no room on their train; chaos for staff unable to move through carriages to collect revenue and carry out their on-train duties; chaos and indeed risk to health for less robust passengers, with reports of people fainting on overcrowded trains.

Julia Thomas of Transport 2000 said last month:

"People are being crammed onto trains like sardines—it's completely unacceptable. The timetable for the region and length of trains has been set by DFT rail 'experts' in London but it is clearly unworkable. First Great Western has their hands tied on this".

South West Trains has adopted a series of options for tackling capacity shortfall, including reducing the number of seats and increasing standing area on trains serving inner suburban routes, treating them as high-capacity "Tube-style" journeys. In addition, reconfigured carriages on commuter peak services are expected to provide some 4,000 extra seats, albeit smaller and less comfortable airline-style seats.

According to the Disability Rights Commission, one of the effects of the Government's policy has been both to drive up prices and cut the quality of service. Disabled people needing assistance are the most vulnerable to cuts in staffing levels. They already face particular problems travelling on overcrowded trains by being unable to stand for anything other than short periods. Wheelchair users are at risk of being unable to even board their train, because wheelchair spaces are too often filled with standing passengers. Access to rail transport is part of the full and independent participation in society for disabled people, a generally accepted core policy objective.

The Government carry the responsibility for improving access, and they have a 10-year investment plan in their strategy, "Railways for All". But the Disability Rights Commission believes that at the current rate of investment it will take some 34 years simply to make accessible those stations that do not currently have step-free access. Surely here is an opportunity to build a duty to make access improvements into the franchise system. Franchise bids should set out access investment plans, which could and should be part of the assessment of the tenders.

The challenge for train operators has been to find extra capacity within the existing network. Every bidder has been required to put forward plans to increase capacity. The one rule that has had to be followed was not to base plans on major infrastructure investment; increased capacity had to be found from within the existing network. In many cases, there are no more peak pathways to be had, and running more trains is not an option. Most peak trains are already running at the maximum length permitted by station platforms. Opening carriage sliding doors selectively can help, but that adds to journey times as passengers slowly move through the trains to find exits from those carriages adjacent to the platform.

There is no doubt that increasing capacity is the biggest issue facing the rail industry. The present franchise system requires train operators to bid according to a contract, with future investment in infrastructure an issue for Network Rail and the Department for Transport. It is both unacceptable to passengers now—and, frankly, short-sighted folly for the future—to place the onus on travellers to be less demanding for the availability of seating and a reduction of overcrowding. Most people will reject the view expressed by the Department for Transport official quoted in the Evening Standard on 17 January, that commuters travelling in peak periods should either accept having to stand or travel at different times. The comment from the Evening Standard was that that was absurd, unrealistic and arrogant, which many people it interviewed agreed with.

In the United Kingdom, passenger journeys by rail represent merely some 6 per cent of all travel by all modes, yet we are already experiencing severe restrictions on capacity in the network for lengthening periods of the day. There is a growing view that, as a response to road traffic congestion and gridlock, together with selective punitive transport taxation to offset global warming, the demand for passenger rail travel could increase as much as five to ten-fold within a decade. It would be, to paraphrase the Evening Standard, absurd, unrealistic and arrogant to think that demand could be met by anything other than a major overhaul of our rail network infrastructure and the design and configuration of rolling stock.

Having said that, it must fall to the Government to offer operating franchises that set a series of non-negotiable standards, backed by an easily understandable series of quality measures. Within those standards fares would not rise and trains would run on time, with very few exceptions accepted. And "on time" would mean what it said, not allowing trains to arrive 10 or 15 minutes late and still be counted as "on time".

The present taste of the Government for short-termism in what is a long-term engineering-based industry has to change. Aligning long-term perspectives with short franchises is impossible. The only solution, if franchising is to stay, is long-term franchises with long initial periods. There can be break points at which the terms can be renegotiated, but franchisees should be aware that they are in a long-term business—as, for example, is Chiltern Railways.

There should also be a rollover mechanism where the franchise would continue to roll forward, provided all the performance targets are exceeded. It should be clear for franchisees that good performance equals continuity in their business. It should be clear, however, that poor performance not only means termination of a franchise but also exiting from the whole franchising process, because past performance will, and must, be a major factor in determining continued access to the process. I beg to move for Papers.

R

Sim, absolutamente! Estamos governados por um cabal de escoseses! Essa vergonha expressa-se em perversas maneiras tal como a negação de electrificação dos caminhos de ferro. Vale a pena por os Escoseses, mas não para os Ingleses. Eles (O Governo) são verdadeiramente perversos e malevolentes!

Yes, absolutely! We are governed by a clique of Scots! This disgrace is expressed in perverse ways such as the denial of rail electrification. It's worth it for the Scots, but not for the English. They (The Government) are really perverse and evil!

Submitted by Robert Battersby

Photo of Lord Snape Lord Snape Labour 2:59 pm, 18th January 2007

My Lords, it is always a pleasure to follow the noble Lord, Lord Chidgey. I have done so in the other place, and I thought he was as fluent in this House as he was there. There was only one item in his speech I would disagree with, and I will come to it in a moment. It is to do with commuters in the southern area of the United Kingdom.

I fear that my noble friend on the Front Bench will not be embarrassed in this debate by an overabundance of praise about the franchising of British Rail and its impact on railway journeys and passengers throughout the United Kingdom.

The noble Lord, Lord Chidgey, rightly said that the most outstanding and successful franchise was Chiltern Railways. Those of us who have worked in the railway industry can say, without being disparaging, that it is an easier railway to work than some. The noble Lord put his finger on the reason behind the success of Chiltern Railways when he spoke about the length of the franchise. With a 20-year franchise, Chiltern Railways has been able to spend a considerable amount of money on improving the infrastructure of the railway on which it operates. Shortening the franchises in the way the Government have done has not been helpful for the future of railway travel in the United Kingdom.

I should have started my speech by referring to my entry in the Register of Members' Interests; it is not 100 per cent correct, as I said yesterday. I have retired from my position with the National Express Group, although I still hold a declarable shareholding in that company.

There was one aspect of the noble Lord's speech with which I take issue. I know the difficulties behind this, but it is about time that Governments of any political hue started telling commuters in the south of England that there is no alternative to standing for short journeys in the morning and evening rush hour. The days when it was possible to add a few carriages behind a steam locomotive are long gone. The trains that are used almost exclusively in the south of England, whether diesel or electric-powered, are multiple units. They carry their own power generation or they receive power from the overhead electric lines. They are far too expensive to be left in a railway siding for 20 out of 24 hours or to run with not many people on board for the bulk of the working day.

For that reason, we have to tell commuters in the south of England that season ticket holders in particular are subsidised, by and large, by travellers on the railway system in the rest of the United Kingdom. They might not agree with that—many of them might not accept it—but it is a fact and should occasionally be put on the record. Perhaps it will be easier to put it on the record in your Lordships' House than it is down the Corridor, where it might be necessary to seek the approval of those same commuters at a future election. However, it needs to be said.

Will my noble friend explain the situation regarding the east coast main line from King's Cross vis-à-vis the west coast main line from Euston? I put the two together because, coincidentally, at around the same time, the east coast main line is to be refranchised while Virgin wins back control of the west coast franchise after a period of running the west coast as a management contract. What is the difference between the two lines and the way in which they have been treated? My reasoning behind that question is this: under the headline,

"As GNER enters management contract, rival VT emerges from one",

RailwayMagazine points out that Virgin won the original 15-year franchise in 1997, but what the magazine calls,

"appalling project management under Railtrack, cost over-runs and the fact that £350m was wasted in an abortive bid to develop the signalling", led to Virgin being unable to fulfil its franchise obligations, so it is permissible for the franchise to be temporarily suspended.

Over on the east coast main line, the argument that GNER put forward 18 months or so after winning the franchise was that following an unexpected drop in revenue as a result of the July 2005 terror attacks, a steep rise in fuel and electricity costs and financial problems with its parent company Sea Containers, as well as the open access row that is still rumbling through our courts, GNER was unable to fulfil the terms of the original franchise and wished it to be renegotiated. That was refused. Why should those extraneous factors weigh so heavily in favour of Virgin Trains and be swept aside for GNER? I am not a regular traveller on GNER but on the few occasions I have used it, I have had great admiration for the quality of the service, and I would hate to see that quality of service diluted under the present circumstances. I travel regularly on Virgin and I cannot sing its praises quite as often as I would GNER's—I put it no higher or lower than that.

It is bizarre, to say the least, that the Government's decision means in effect that those of us who wish to travel to Glasgow, for example, by Virgin Trains will, under its new franchise, receive between £6 and £7 each in subsidy because of the payments made to Virgin, whereas those of us who travel to Glasgow on the Great North Eastern Railway will pay about the same amount to the Department for Transport because of the contract that supersedes the original franchise for GNER. I am no accountant—this may all make perfect sense and my noble friend may explain it in simple terms for a simpleton like me. However, I am struck by what I can only describe as the late Enoch Powell thing—perhaps this is all to do with money supply and, to use that terrible cliché of modern life, "what goes around comes around". It seems a bizarre way to run a system to subsidise a trip to Glasgow by one line and penalise a trip to the same city by another. No doubt there is a simple explanation and I will be delighted to hear from my noble friend what it is.

It is also bizarre that on a day like today, with high winds, we should be debating franchises when there is virtually a blanket 50 mph speed restriction on much of our railway system. Although this is not, strictly speaking, a matter for this debate, I hope that my noble friend could persuade those in Network Rail responsible for the maintenance, care and upkeep of our overhead lines to take a trip to Switzerland to see how the Swiss manage to string wires up the sides of mountains; their wires do not blow down in anything other than a gentle summer breeze. There seems to be some structural problem in the United Kingdom that leads to these heavy speed restrictions on a day like today.

I hate to bore noble Lords with stories of my railway career, but I should like to digress for a moment. Fifty years or so ago, when I started in a railway signal box, the wind blew then, the signals were lit by oil lamps and the trains were drawn by steam locomotives, but I do not ever remember a 50 mph speed restriction because the wind was blowing.

My noble friend and I clashed—very mildly—recently about the award of the franchise to First Great Western. I asked, not unreasonably, I thought, why the train operating company with the worst punctuality record should beat the train operating company with the best—it happened to be the one I worked for, but no matter—in the new franchise bidding. I had nothing to do with the bid and my salary was in no way dependent on its success or otherwise. I was slapped down by my noble friend as a bad loser. I might be a bad loser, but he chose a particularly bad winner. I do not know anybody who travels on First Great Western who is particularly happy about the standard of service that they receive.

There was a letter in yesterday's Times from the managing director of First Great Western, a lady called Alison Forster. She said that the company is due to return carriages to the train-leasing companies. When people are standing on each other's heads, as we have already heard, it seems bizarre, to say the least, even to think of returning carriages to the train-leasing companies, but no doubt there is a simple explanation for that as well, which we will hear this afternoon. The letter continues,

"but we will not do so until local performance and seating capacity issues have been resolved ... We are currently investing more than £200 million to improve our trains and stations. The refresh programme for our high-speed train fleet is well under way and this will provide a dramatically improved interior for customers as well as many extra seats".

If I decided to put new seats and a stereo system in my motor car even though the wheels had fallen off you would think that my financial priorities were distorted, yet that seems to be the financial view of First Great Western—put some leather seats in first class, pack a considerable number of extra passengers into standard class, paint the carriages in bright colours and everyone will be happy. The fact that the trains are doing only 50 miles an hour—when they go anywhere at all—apparently does not worry the current management of First Great Western, although one of its regular passengers told me that 50 miles an hour would be a slight improvement on its day-to-day performance. Perhaps my noble friend was right in the first place to give the franchise to First Great Western and I was wrong.

Looking round the country at the franchise procedure, it gets more and more odd. The franchise with the best punctuality record—this causes me embarrassment but I will say it anyway—is Midland Mainline, operated by the National Express Group, by coincidence. Instead of praise for the new franchising agreement, Midland Mainline is to be virtually abolished. Bits will be festooned upon it like some strangely growing Christmas tree and it will be called the East Midlands franchise. One of the cities that it serves, and serves rather well, which is why it is at the top of the punctuality table, is Nottingham, but under the Government's present franchising proposals, the number of trains between Nottingham and London St Pancras will be reduced. What is the thinking behind that decision? Perhaps I am missing something obvious about government transport policy.

Gatwick Express is a similar story. Again, I am reminded of National Express, but are we seriously going to take away a dedicated service to the second London airport to cater for extra commuters from along the Brighton line and similar areas? Sir Richard Branson has already made it quite plain that, if we do so, he will ensure that passengers on his airline flying in for the London Olympics will be bussed from Gatwick Airport to the Olympic site. We surely must be alone in the whole world in proposing to withdraw a dedicated airport service, particularly one such as Midland Mainline, which pays a premium to the Government. By and large, the Treasury watches money that is spent, particularly within the railway industry, like a hawk, but it is apparently dedicated to abolishing the franchises that pay money to the Treasury and draping extra trains and responsibilities on those franchises that do not.

Finally, in the context of this debate on franchising, why is there never any specification for electrification when franchise applications are sent out? We heard from the noble Lord, Lord Chidgey, how expensive it is to complete franchise applications. Up and down the country, thousands of hours of valuable management time are spent completing these extremely complex applications, yet there is never any mention of further electrification. Indeed, Mr Tom Harris, the Minister responsible for railways in the other place, promised some suggestions later this year about further electrification in the United Kingdom, but was not speaking too optimistically about the prospect. However, in the current edition of Modern Railways I noticed a paragraph headed:

"Scottish Executive rail proposals include electrification"

Scotsmen in Scotland are in favour of electrification, but Scotsmen holding ministerial posts in England are not. Perhaps only the Scots deserve electrification and I have missed something else, but I hope that my noble friend can provide—

Photo of Baroness Crawley Baroness Crawley Government Whip, Baroness in Waiting (HM Household) (Whip)

My Lords, will my noble friend draw his remarks to a close?

Photo of Lord Snape Lord Snape Labour

My Lords, I will indeed apologise; I thought that I had 16 minutes instead of 14.

We are drifting towards some sort of easyJet railway where you pay in advance if you want a seat. That is not the right way forward and I hope that my noble friend will come up with some suggestions this afternoon that will alleviate the obvious inconvenience being caused to thousands of railway passengers in the United Kingdom.

Photo of Lord Teverson Lord Teverson Spokesperson in the Lords (Climate Change), Environment, Food & Rural Affairs, Whip 3:14 pm, 18th January 2007

My Lords, having sat through the bus debate yesterday and the franchise debate today, I know more about the career of the noble Lord, Lord Snape, than that of any other Member of the House other than my own. That could be quite intimidating because I am merely a user of the rail system, although I was in the freight industry, more on the road side, for 20 years. I remember that we used to try even then to get freight on to the rail system. I was based in the south-west and we used to ring up the local Freightliner depot. I remember my operational staff pleading with the railway to take our freight to where we wanted it to go. I am pleased to say that that part of the industry is now, if anything, suffering from too much demand rather than not enough.

I shall be brief and raise only two points. One is the area of competition. As we know, in the economy more broadly, competition between businesses usually raises the quality of products and customer service, and ensures that those that fail eventually disappear from the marketplace because they are not able to provide the quality of service that their customers—in this case passengers—require. One of the big problems of the franchising system is that there is an intense point of competition during the long and expensive process of franchise bidding, but once that happens you move from that snapshot to a period of regulation and trying to make sure that the right standards and quality of service are produced. As we have seen, the results of the franchising system so far have been very patchy.

Being down in the south-west, I do not wish to bore the House, as the noble Lord said before, by talking about First Great Western. However, I was aware of how the First Group effectively improved its services in the run-up to the franchise bid. It met local business and consumer groups and listened to make sure that it understood what was required. It did that very effectively indeed. I know that that was not how the decision was made; it was probably made completely on price. But, maybe through bad management or through changing timetables, once that process has been gone through, it is in the bag. Certainly, to us as the travelling public, it looks as if when they have the franchise they go back to doing the minimum of what they can do. It is as if they think, "We need to make sure that we maintain our margins, and never mind the service because we have—in this case—some 10 years of the franchise". How can we, in this area, ensure that there is a continuing pressure of competition on franchise operators or, at least, effective control by the rail regulator or the Department for Transport to ensure that the service quality and delivery for passengers continues over that franchise period?

Coming back to my own modest career in transport, I managed a national road freight distribution business for a number of years. One of the more interesting things that I had to do and quite enjoyed was to negotiate a budget with the managers from the 25 depots from around the United Kingdom each year to ensure that they provided the right level of profit and so on. The first time when they came forward with their forecast for the next five years, they would say, "It will be really tough for the first two years and we will make losses—but look at the figures in years 3, 4 and 5". I knew that if I accepted that, by the time year 2 came around and I went through the same negotiation, the forecasts for the next year would have gone low or into the red and the ones for the future would be high. It is called hockey stick management; you forecast pain and grief in the short-term to buy yourself some time and say that everything will be great in future.

With a view to speaking in this debate, I looked up rail franchises on the web and came to the Department for Transport site. There I came across a table that related to the payments and subsidies that would be given to the three last franchises that were put out at the end of 2005 and awarded in 2006. I think they were Greater Western, Integrated Kent and Thameslink. Strangely enough, when I added up what those businesses asked for in the first four years of the franchise and looked at what would be the situation in the last four years—surprise, surprise! In the first four years, we the taxpayer would have to give those three franchises £350 million—but the good news was that in the last four years of those franchises they were going to give us £1.4 billion. If I had been given that sort of strategic plan in a business situation, I would have laughed my head off and said "Go away and think about it again and come back to me in two weeks with a proper financial plan". I know that this is not as simple as that. I know that the Government are proud—and rightly perhaps—for not renegotiating the franchise for Sea Containers and the east coast main line. But what is the temptation for those franchises when it comes to year six, seven, eight or nine, to say, "I'm sorry Minister, we got the sums wrong, thank you for the £350 million but now we would like someone else to take over the job"? How does the Minister see the situation?

Photo of Lord Rosser Lord Rosser Labour 3:21 pm, 18th January 2007

My Lords, I congratulate the noble Lord, Lord Chidgey, on securing this debate about an industry in which I spent my working life. I shall not be able to match my noble friend Lord Snape in either his wit or the length of his speech.

The railway industry has had major successes over the past decade. There have been significant increases in the number of passengers and levels of freight traffic, and major investment in new rolling stock and the infrastructure. The railway industry cannot be as customer-unfriendly as some seek to suggest. Ten years ago there were question marks over the future size of the network, future levels of capital investment and financial support. Now, following major investment, steady and sustained economic growth and increasing congestion on our roads in the light of that growth, we find few who argue that the network should be cut back and frequency of services reduced. However, success brings its own problems.

There are capacity issues on some heavily used parts of the network, when measures that can be taken to increase capacity further, without considerable additional increases in the level of capital investment, are limited. I appreciate that when franchises come up for tendering or retendering, part of the specification may include a requirement to increase capacity. However, the decisions on what capacity increases to specify must be conditioned to a considerable degree by the further investment that can be provided rather than based on an assessment of meeting the actual increase in passenger usage that could be anticipated on routes that are already at or near capacity.

It is of course true that, nationally, a low level of journeys is made by rail compared with those made by the private car. However, it is precisely on those rail routes where there are already capacity issues that the percentage of journeys being made by rail compared with those made by the car is not low. Therefore, an argument that rail is not a major player on these specific transport corridors is not valid

In particular, there are significant capacity issues on a number of commuter routes in London and the south-east, on parts of the east coast main line and probably, in the not too distant future, on parts of the west coast main line. There is widespread acceptance that London's position as the major international financial and business capital will be at risk if quality public transport links are not available. Instead, festering capacity problems in key parts of the rail network in London and the south-east put continued achievement of that goal in jeopardy. The anticipated house-building programme in London and the south-east is also likely to generate increased demand for rail travel, including on those specific routes that are already facing capacity issues.

At some stage, if the economy continues to grow as we hope, decisions will have to be made on whether considerable further capital investment will be made available to meet the continuing increase in demand for travel on heavily used parts of our rail network. If we find that we cannot give those key, heavily used and economically significant routes that further increased priority in the competing demands for finite capital investment, we will have to accept that some of that projected demand will be choked off by fares policies and the adverse effects of capacity problems on the quality of service provided. There will be an economic and an environmental price to pay for this, which the Eddington transport study appears to state is likely to be greater than the cost of the investment required.

One can see the role that the rail franchising process can play in encouraging and requiring some further investment and improvements in the quality of rail services, but there are limits to what it can achieve in this area. A recent issue relating to the east coast main line franchise is a case in point. The successful tenderer for the renewal of the franchise was not able to increase the frequency of services from London to Leeds as provided for in its successful bid because of subsequent decisions by the Office of Rail Regulation in favour of open access operators, which used up the limited spare track capacity available at the southern end of the east coast main line. What happened in this instance also suggests that some unfortunate conflicts between different bodies involved exist in the franchising process, particularly where there are shortages of capacity.

Costs are of course important in the franchising process, although it is not always clear when one assesses bids how the balance is drawn between costs and service quality, quality of management, and track record in successfully running rail services, and how the final judgment is made on which tender should be accepted. Perhaps there should at least be a review of whether we have got right the current balance between commercial confidentiality and transparency in the franchising process.

One of the key areas of costs is Network Rail and its charges. Now that we have moved on from Railtrack and its approach, and instead have Network Rail, which took maintenance of the track that it owns and for which it is responsible back in-house, we have seen reductions in, and greater control over, costs. However, apart from knowing that Network Rail can undertake track maintenance rather more efficiently when it does it itself than when working through contractors, we do not really have any proper benchmark against which to assess Network Rail's performance.

Merseytravel has been pressing unsuccessfully to take on overall responsibility for the maintenance of the infrastructure of Merseyrail in addition to the operation of the services. While there are arguments both for and against such a move in respect of this small and largely self-contained piece of the railway network, going down that road would have given some sort of comparative benchmark against which to assess Network Rail.

Since this is not the approach that was adopted in this instance, will the Minister say anything in his response about whether it is considered that the current franchising system provides an effective benchmark for Network Rail's costs and performance in addition to the benchmark that it can provide for the costs and performance of train operating companies? I appreciate that the Office of Rail Regulation is involved, but it, too, sees the effective benchmarking of Network Rail's costs and performance as an issue. Bearing in mind that the amount of money available for future capital investment to meet increasing demand in certain heavily used and economically crucial parts of the system is finite, the need to be able to test that we are getting value for money from Network Rail is crucial.

One of the points made in the recent Eddington transport study was the fundamental importance of technological progress if the link between economic success, energy use and greenhouse gas emissions was to be broken. That comment of course applied across transport as a whole, and the study made the point that since travel plays,

"a fundamental role in supporting economic success and people's quality of life, and as extensive personal mobility extends to most of the population, simply stopping growth in transport demand is not a realistic scenario".

I am not clear on the extent to which the present franchising process is being or can be used to further technological progress in the rail industry to meet the greenhouse gas challenge and to maximise the performance of the current network, both operationally and on cost. Is the franchising process, for example, being used to encourage the development and use of cleaner fuels and to reduce consumption per mile? The railway industry cannot afford to rest on its laurels as far as its environmental advantages are concerned, because other modes are making progress in this area.

British Rail had a widely acclaimed railway technical centre, but one senses that over the past decade, with the fragmentation of the industry, that clear focus may have diminished. I hope that my noble friend will provide some reassurance on the priority given to technological innovation and development and indicate whether the franchising process is seen as an important lever for significant action and progress.

I am aware that government and industry are working together to create a technical strategy and that a White Paper setting out the long-term needs that the railways will have to meet is pending. I hope that if detailed answers cannot be given today, the points that have been raised will be addressed in the work that is being undertaken. Success can create problems and the railway industry has flourished under this Government. However, that success can be maintained and continued only if the problems that have now arisen, particularly over capacity in certain parts of the network, are addressed in a way that seeks to meet further anticipated demand, rather than stifle it at a potentially major economic cost to the nation.

Photo of The Earl of Glasgow The Earl of Glasgow Spokesperson in the Lords, Transport 3:31 pm, 18th January 2007

My Lords, I hope that the House will forgive me if I use this opportunity to talk less about the franchises themselves, of which I am fairly ignorant, but rather about the railways, for which I have a passion. I agree with many of the points made by the noble Lord, Lord Rosser, which reflect many of the things that I shall say.

I have long believed that transport should be given a much higher priority in government thinking. It should be right up there with inflation, education and the health service. Yet, I am unaware of any coherent national transport policy—nothing that looks very far into the future, anyway. Of course, a number of short-term measures are being implemented and considered—congestion charges, motorway charges, all sorts of motoring charges, green taxes on aircraft and so on. On the railways, the policy seems to be to modernise and improve the existing network—cleaner trains, more punctual trains, more modern rolling stock and, of course, safer railways. That is all necessary and admirable, but it is nothing like enough.

Our transport system is facing potential gridlock. Every year, as the noble Lord, Lord Rosser, said, there are more reports of greater and greater congestion at some time or in some parts of the country—congestion on the roads, congestion at the airports and overcrowding on trains. Already, there are stories of passengers having to stand on trains for over an hour, because all seats have been taken. My noble friend Lord Chidgey pointed that out.

If we are going to take the threats of global warming seriously, and we need to make drastic cuts in our carbon emissions, we should not be planning to expand the road network or build more airports or runways. We must surely be planning the expansion of the railway network. It is the only means of transport that is relatively and proportionately eco-friendly. Besides, in normal circumstances, it is the most pleasant and least stressful form of travel. Already more people are choosing to travel by train. This is good news, but I suspect that it is the result of greater frustration caused by other forms of transport. Surely, for environmental reasons, we should be actively encouraging people to travel by train, rather than by air, car or bus. The train is by far the most energy efficient of our power transport.

It seems that we are already planning for more trains, longer trains and more frequent trains to cater for some of the extra people we hope to price off the roads, but do we have the necessary capacity to accommodate these extra numbers, particularly the increasing numbers we expect to attract in the future? The answer is almost certainly no. It is transparent that the only possible solution to future transport problems is a vast investment in the railways. When I say that, I do not just mean more carriages on trains, longer platforms, or quieter stations made safer for single women at night, although these are all important short-term measures. I mean more railways—and that means new lines.

If Crossrail gets government approval it will be a start. In particular, we need to plan a new line that will provide a high-speed rail service from the north to the south of the country. I am talking about a new line; something that would make internal travel by flight unnecessary—maybe a line that links up with all the major British airports. The journey from London to Glasgow would have to become quicker by rail and be made at a cost at least comparable to that of the airlines. At present, Glasgow to Stansted by air is much cheaper and faster than Glasgow to London by rail. So many of us—me included—decide to take the plane instead of the train, which we would much prefer in other circumstances. I sometimes wonder whether the Government take the dangers of carbon emissions and global warming seriously or whether they just pay lip service to this problem.

A hugely more efficient train service, capable of taking twice as many passengers as today, must be in place in 10 or 15 years' time. The Government must start planning for that now. Their present position appears to remain a cautious one. Officially they say that, because they do not know what the future will bring, they are not yet prepared to commit themselves to any major irreversible investment in the railways of the future. Surely this Government must show more courage and vision.

On a slightly different issue, related to the franchises, I find the Government's present attitude towards our semi-privatised railway service rather curious, almost schizophrenic. Not so long ago the Labour Party, with the full support of the Liberal Democrats, was fighting to keep the railways within the public sector. At one time it even promised to renationalise the railways if it came to power. This no longer seems to be the Labour Party's view. The Department for Transport now seems to rejoice in the current semi-privatised, semi-government-controlled system, constantly praising the train operators for investing in new rolling stock, while still having them there to blame for imposing the damaging fare increases that threaten to price people off the railways.

All sorts of wheeling and dealing seem to go on between the Department for Transport and the train operators, in which the major concern now—apart, of course, from safety—seems to be the Government's acceptance that the operators must make a decent profit for their shareholders. There is nothing wrong with that as such, but surely the overriding concern of the Government—particularly a Labour Government—should be to see that the national railway network provides an essential service to the public, a service that benefits business, tourism, freight and any citizen who wants to travel from one part of the country to another. If rail fares are allowed to become any more expensive, rail travel will no longer be accessible to everyone. That would be a terrible indictment of a Labour Government.

I have one hope, which is that, through wheeling and dealing with the franchise-holders, the Department for Transport might be able to source the sort of money needed for the major investments necessary for the future of the railways. When I say the future of the railways, I mean also the future of Britain's whole transport system.

Photo of Lord Faulkner of Worcester Lord Faulkner of Worcester Labour 3:39 pm, 18th January 2007

My Lords, this is the second occasion on which I have had the good fortune to follow the noble Earl in a debate on railway policy. I remember saying in the previous debate that I agreed with every word the noble Earl had said; I can almost say the same of his speech today. The sentiments he expressed on behalf of the railway industry are certainly shared by a number of Members of this House. I should like to join others in congratulating the noble Lord, Lord Chidgey, on his success in securing this debate today and giving us the opportunity to discuss railway franchising.

It is precisely one year and two days since I asked an Unstarred Question in your Lordships' House on what the Government were doing to provide capacity to meet the increased demand for rail travel. Noble Lords will be relieved to know that I do not intend to repeat the speech that I made then, although many of the arguments that I and others who spoke in that debate put forward apply with equal or even greater force today. Increasing capacity to cope with the demand for rail travel has become an even greater priority, as a number of speakers have already said.

What has moved on is the debate on climate change, particularly since the publication of the Stern report. The case we made a year ago for promoting the use of the railways to combat CO2 emissions has been greatly strengthened and enjoys wider support than it did. Most people accept that the best thing that the railways can do for climate change is to carry more people. On the basis of passenger kilometres, the rail system already generates about 50 per cent less CO2 than cars and 75 per cent less than domestic air transport. In the case of Eurostar—a very special case—a full train uses one-tenth of the carbon emissions of a flight from London to Paris or Brussels.

Over the past 10 years, there has been a greater reduction in carbon intensity from the railways than from cars, and that trend is likely to continue. It results from trains carrying more passengers, combined with the benefits of things such as regenerative braking on electric trains and low emissions from the newest diesel engines. This improvement has been achieved, even though trains are heavier than they used to be, first, because they are predominantly air-conditioned; secondly, because they are stronger to protect from collision damage; and, thirdly, because new trains are fitted with retention tanks for train lavatories. I am sorry that the noble Baroness, Lady Wilcox, is not in her place, because the latter is a subject that she has brought to the attention of your Lordships on a number of occasions.

At the same time, the rail industry continues to improve its environmental performance through the extension of regenerative braking and initiatives such as the use of biofuels. Virgin, for example, claims that its Pendolino trains on the west coast main line return 17 per cent of the electricity that it needs back to the National Grid, which, in a press release that came out this week, Virgin says is,

"enough to provide power for a year to all the houses in a town the size of Motherwell".

The other significant development over the past year, referred to by the noble Earl, was the report from Rod Eddington. I think it would be fair to say that reaction to the Eddington report has been mixed. The Association of Train Operating Companies put on a brave face and welcomed it because it confirmed the link between transport infrastructure and economic growth. Transport 2000 liked its support for road pricing but, like me, was deeply disappointed with much of the rest. First, the Eddington report said virtually nothing about creating new rail capacity by building new lines, particularly a north-south route from Scotland to the south of England, referred to by the noble Earl, Lord Glasgow. Secondly, it did not put forward a coherent plan to reduce the growth in demand for air travel, which in my view is an absolutely essential prerequisite if we are to be serious about climate change control; instead, it supported continued airport expansion in the south-east.

"Carry on flying regardless" is not a credible transport policy, and I hope we hear no more of that from Ministers or, indeed, from anyone else with influence in this area. The one area where there is a growing measure of support and consensus is on the subject of road pricing. I certainly commend the Transport Secretary, Douglas Alexander, for what he said about that and for pinning his colours so firmly to this mast. This is one of those issues where the Government have to be prepared to stand up to the motoring lobby.

I should mention one other significant political development over the past year—the change of policy on the part of the Conservative Party towards the railway system and its structure. It published a paper snappily entitled, Getting Around—Britain's Great Frustration. It contains this sentence:

"We think that an important part of the problem lies in the structure of the industry that exists today. We think, with hindsight, that the complete separation of track and train into separate businesses at the time of privatisation was not right for our railways".

Words fail me. Those of us who were working in the industry at the time of privatisation—I should declare an interest as a former adviser to the British Railways Board for about 20 years—will remember that the creation of Railtrack was not some casual by-product of a plan for the railways as a whole. It was absolutely central to the Conservative Government's thinking that because railway managers were so useless at controlling costs, there were huge savings to be made in railway infrastructure, such as cutting down on maintenance, regarding railway stations as shopping arcades—the noble Lord, Lord Chidgey, referred to the fraudulent prospectus on which Railtrack was floated—and so on. That legacy bedevilled the industry for years and only began to be got right by the abolition of Railtrack and the creation of Network Rail.

Before Mr Grayling and his colleagues go too far down this track, I urge him to read the book, written by the late Gerald Fiennes in 1964, I Tried to Run a Railway. It contained the sentence:

"When you reorganise, you bleed".

It is not helpful for there to be endless press speculation about radical change in the railway structure. It is destabilising for the people working in the industry because they have seen endless reorganisations over the past 25 years, and it bedevils management thinking and investment decisions at a time when the focus should be on delivering a service to passengers rather than on what the next restructuring might be.

Vertical integration could possibly work if we went back to a wholly publicly owned railway, operated by Network Rail, if you like—you might in those circumstances call it British Rail. But I do not think that that is what the Conservative Party is proposing. Maybe the noble Baroness will share her party's thoughts with us.

Some local train operators could perhaps take responsibility for the tracks they run over. My noble friend Lord Rosser referred to the case that Merseytravel has been putting forward for what it calls full local decision-making for rail services in Liverpool and the surrounding area. How on earth could that work on routes that have many operators, such as the west coast main line or much of the network served by Central Trains? Where would that leave the freight operators?

One thing is certain: you cannot expect train operators to invest in their track, signalling and stations if the length of their franchise is as short as six or seven years. One of the lessons we have learnt from the franchising arrangements so far is that if we are to expect a real improvement in passenger facilities, such as new trains, new ticketing technology, more stations, station refurbishment, experiments on re-opened lines, and so on, the franchises must be longer than we have been used to up to now.

A further advantage of granting longer franchises is that it would encourage the TOCs to own rather than lease their rolling stock. That would be a way of tackling the problem of the excess profits now being made by the rolling stock leasing companies.

I understand that the Department for Transport reckons that the ROSCOs are making excess profits of £100 million a year. The Office of Rail Regulation puts the figure at £175 million—equivalent to, according to a Department for Transport spokesman quoted by the estimable Roger Ford in January's Modern Railways,

"an annual eight per cent increase on all season tickets", and,

"around £2 billion over the lifetime of the train leases in question".

There is a strong possibility that the ORR will refer the leasing of rolling stock for franchised passenger services to the Competition Commission for an investigation under Section 131 of the Enterprise Act 2002. If that goes ahead it will produce some very interesting answers. Rather less comfortable for the Government is the way in which the ORR is questioning the entire franchising structure, as this will throw up some difficult issues for them.

At the heart of this debate is the question of whether it matters more for the franchisees to be able to keep up their premium payments to the Government rather than provide the best possible improvements in passenger service. Over the 10 years of franchise services, the government and PTE grants to the TOCs have fallen by 39 per cent to £1.3 billion. The number of franchises paying a premium has increased from four to seven, while the number receiving a subsidy has fallen from 21 to 14. For the Government and the Treasury that is presumably good news. They are conscious that, despite the move towards premium payments by train operators, the railways as a whole are costing four times as much as they did under British Rail, so anything to get that cost down is worth while. If they can recover money from the TOCs—which effectively means the fare-paying passengers—the policy is working in those terms.

However, it is not as simple as that. We have already heard that some TOCs are in difficulty. The problems at GNER have been widely publicised. Those running First Great Western will have found their ears burning with some of the criticisms they have heard today and in the exchanges on the Question of my noble friend Lord Berkeley in the House on Monday. To cancel services on branch lines through a shortage of rolling stock, as they did a couple of weeks ago, is certainly not acceptable. Nor is it acceptable to run trains so short that they are severely overcrowded.

On overcrowding, there is one point to be made in First Great Western's defence. There is something crazy about a situation where hiring an extra coach for a local service cannot pay for itself, because even 100 passengers would not produce enough revenue to pay the leasing charges. I am told that even the most modest diesel railcar—the class 153—costs £105,000 a year to lease, and you need a lot of passengers a lot of the time to earn that amount. It makes no sense for First Great Western to send back all its Adelante express diesel trains, or for South West Trains to give up using its popular class 442 electric stock, on the grounds that the leasing charges are too high. This is a clear example of how the pursuit of premium payments by the TOCs is working against the interests of the travelling public.

These are legitimate concerns which the Office of Rail Regulation and the department must address. Against that gloomy picture, however, it is worth drawing attention to some positives about Britain's railways. We run nearly 20,000 trains every day; 20 per cent more than 10 years ago, and more than any other European country except Germany. Last year, 1.1 billion passengers were carried, more than at any time since 1957 when the network was almost twice as large as it is today. That is also 37.5 per cent higher than 10 years ago.

I hear what noble Lords say about the recent increase in fares, but there is no reason to believe that demand is falling off. Increasing numbers of people prefer to travel by train, because the alternatives are congested roads and parking restrictions for car users, or security nightmares and flight delays at our airports. It was interesting that Virgin claimed that delays on the west coast main line are now significantly less than delays experienced by airline passengers to Edinburgh or Glasgow.

I conclude by paying tribute to my noble friend Lord Davies. A whisper has reached me that he may not be speaking on transport issues in this House for much longer, as he is moving on to—I hope—better things. It has been a privilege to have the opportunity of debating railways and other transport issues with him over the time he has been responsible for them. I certainly wish him well in what he is going to do next.

Photo of Lord Cotter Lord Cotter Spokesperson in the Lords (Small Businesses), Trade & Industry, Shadow Spokesperson (Business, Innovation and Skills) 3:54 pm, 18th January 2007

My Lords, I thank the noble Lord, Lord Chidgey, for providing us with the opportunity for a debate on a subject of great concern to many of us this afternoon. I declare an interest, not as an expert like the two previous speakers and others but simply as a user of the rail service.

In particular, I shall address the First Great Western Franchise, which I use regularly. Many concerns have been expressed about it, and some of them bear repeating. I shall start with the issue of punctuality. I note that, during Questions on Monday, the Minister, referring to First Great Western, said that,

"punctuality even in the south-west was at 85 per cent, which is the norm across the network".—[Hansard, 15/1/07; col. 437.]

When was it at 85 per cent? The Office of Rail Regulation gave different figures, which show that First Great Western is the worst performing long-distance train operating company and that only 73 per cent of its trains arrived on time between July and September 2006. I can attest that, on the last five trips that I have made, four of the trains were cancelled or late.

We are seeing a much reduced service at the same time as fares are going up. That is a matter of concern, and it raises the question "Why?". As a user, I do not understand all the intricacies, but it seems clear that higher prices should produce a better service. I am not alone; I understand that there will be a fares strike on Monday starting at Bath, which is on the route that I use. It will be interesting to see what happens because it takes something for people to feel so incensed that they are not prepared to pay the fare.

Going back to the issues that I am concerned with, in the Bristol area, we have seen a reduction in services, which has concerned me and other people in the area. The service that I use goes from Bristol on the Weston-super-Mare route. I usually use Yatton, which is en route. The timetable introduced in December has resulted in a number of through trains that picked up passengers at Weston and Yatton being abandoned, with the result that more people have to change at Bristol. It is dismaying to change and find that the train is made up of only one or, if you are lucky, two carriages. I say "if you are lucky" because I have even been on a two-carriage train where I was one of the lucky ones to get on at Bristol Temple Meads when other people were unable to do so and people were not able to get on at the next station and so missed the service. As my noble friend Lord Chidgey and other noble Lords said, the result of such services is that many people have to stand or cannot get on.

It is easy to say that people should expect to have to stand for so-called short trips, and that has been said recently, but that does not go beneath the surface. Many people who have to stand are elderly and infirm, and it is virtually impossible for them to cope. Why is the foolish use of one or two-carriage trains allowed? Who calculates how many people will travel at a particular time? In this day and age, with all the resources that we have, including computers and records, it is not rocket science to make a reasonably accurate estimate, based on previous figures, of how many people are going to travel at a particular time and to provide accordingly.

As a rail user and not a rail expert, I am confused about who is responsible. The Government say that it is the rail companies, and the rail companies say that it is the Government. Are they both right? Is it true that charges in this country are two to three times higher than those on the European mainland? I do not know, but it is often said. Is it true that subsidies are higher than ever in this country? No doubt, those who know about these matters can explain.

I am not alone in being surprised by the statement that people should be expected to stand. Just to re-emphasise that point, the Disability Rights Commission says that,

"Access to rail transport is fundamental to full and independent participation in society for disabled people and people with long-term health conditions".

On the peripheral matter of catering, which is a point of some importance, I was very impressed a few months ago when First Great Western came out with a highly glossy, well produced leaflet praising their catering. They were slapping themselves on the back for the standards that they offered and so on in their catering services. Then, shortly before Christmas I read a report saying that the company was talking about doing away with buffet cars and substituting a trolley service only. A railway official said that that was, of course, in response to public demand. Whether that will happen or not, I am certainly concerned about it.

A short while ago, the noble Lord, Lord Snape, rightly spoke of picking a loser in choosing First Great Western; well, passengers are certainly losing. When First Great Western's accounts come out, in due course, I will be interested to see whether they are losing on it or in fact making a profit at our expense. The noble Lord mentioned travelling at 50 miles per hour, and I can offer a further advantage in that, if you are trying to consume a cup of tea or coffee, it is much easier to do so at 50 miles per hour than at 120, when you are bumping around. Still, that is not the real issue. I am sorry to come down so strong on First Great Western, but it is our duty to highlight the issues on the Floor of the House. So, as my noble friend Lord Teverson said, it seems that once First Great Western had it in the bag, things have gone wrong.

I thank the noble Lord, Lord Chidgey, again for the debate and the noble Lords who have participated. I look forward to hearing good news when the Minister responds.

Photo of Lord Bradshaw Lord Bradshaw Spokesperson in the Lords, Transport 4:02 pm, 18th January 2007

My Lords, my noble friend Lord Chidgey has raised the issue of the conduct of rail franchising at what turns out to be an opportune time. Use of the railways is increasing and will increase, as many noble Lords have said, and, while it is true that only 6 per cent of all journeys are made by rail, a much greater and rising proportion of journeys over 25 miles is made by rail. In fact, in the central London area the figure—including the Underground—is something like 69 per cent. So, rail is hugely important.

There is general agreement among most people who know anything about the subject that rail travel will and must increase if we are to get to grips with the problems of global warming in our congested country. However, as my noble friend Lord Glasgow asked, where is the vision, the flair or the passion that guided the great rail pioneers of the past? I experienced that as a railway manager from working with Gerald Fiennes—to whom the noble Lord, Lord Faulkner of Worcester, referred—Peter Parker, Bob Reid and Chris Green. The present rail Minister at least enjoys his job, and we wish him well. Yet we need advocates who will lead the industry to where we ought to be and where it would have been but for the calamity—I use the word advisedly—of privatisation.

The notion that a new generation of high-speed trains can be designed by a committee led by consultants, rather than railway engineers, really promises us new equipment too late, unsuitable for purpose and over budget. Is it too late to put the rolling stock companies and the train operating companies in the driving seat—possibly two driving seats—to begin with, so that there is a competition in ideas? The high-speed train, which was acclaimed throughout the world as a leader, was designed at Derby by the people in the research centre to which the noble Lord, Lord Rosser, referred. It was designed from start to delivery in five years because another team of engineers was working on the advanced passenger train and the high-speed train people said, "We can do it better, quicker and cheaper than the advanced passenger train people". Such competition in ideas is important. That is why there may be advantage in getting two suppliers and two rolling stock companies, with engineers from the train operating companies, to bring forward these ideas. I do not believe that a Civil Service-led process, employing consultants at huge cost, is likely to deliver what we want.

The railway needs to be available at all times—"24/7" in common parlance—and I know that the transport Minister shares my ambition in that respect. Network Rail must make substantial further economies in the next control period. I acknowledge that this is the responsibility of the Rail Regulator in the next periodic review, but I suggest that its objectives and bonus incentives need to be adjusted to make the railway much more available, as it is on the continent. People want a railway all the time, and passenger use would grow by leaps and bounds if it were so available.

We accept that the franchises must deliver value for money, but value cannot be measured by a single measure of either the highest or the lowest bid, depending on whether it is intended to deliver a premium or be supported by subsidy. John Ruskin said:

"There is hardly anything in the world that some person cannot make a little worse and sell a little cheaper and people who consider price alone are this person's lawful prey".

I ask noble Lords to think on those words and to read them in Hansard. I am sorry, but the prey are up there in the Box and the people who employ them. A franchise bid should offer quality; it should recognise the need to expand and invest. It should recognise punctuality, reliability, safety, security, the ability to park a car, user-friendly stations and information services, and fares that do not rise faster than inflation. This does not happen.

The recent problems with the Greater Western franchise, which were touched on by my noble friends Lord Cotter and Lord Teverson and by noble Lords opposite, are nothing compared with the storm that is about to break around the head of the Department for Transport over the new cross-country franchise. Officials will think that the Greater Western problem is a picnic compared with having to tell people who want to travel from the south towards Glasgow that they must all get out and change at Birmingham New Street in the middle of the period when that station is being reconstructed. It is clear madness to go along that road. The cross-country franchise is already bulging at the seams with people, and yet the department has allowed for only a 30 per cent increase over what was carried last year for the 10 following years.

There are also the appalling prospects around Lincoln. The noble Lord, Lord Snape, mentioned the East Midlands franchise. One may look at the services from Nottingham to London, but the passenger service from Lincoln has been cut to shreds. I remind the Minister that another Minister with responsibility for transport, Gillian Merron, the MP for Lincoln, will no doubt fall under the flak that descends from the skies on her. That all arises because the department's policy is to specify the minimum service level. Unfortunately, the minimum service level, even at the beginning of a franchise, seems to be, from the evidence that we have heard recently, unacceptable to the users, and yet that franchise has years to run.

Franchises contain little opportunity to bid for growth or to show enterprise or imagination. It should be crystal clear to operators that all the quality features and past performance in the franchise area will be judged as well as the money in the bid. Growth in the market and ways of dealing with all aspects of that growth, such as growing passenger aspirations, all need to be evaluated.

I turn to my greatest challenge both to the Government and to franchisees: I would offer a further extension, up to 15 years, subject to the company exceeding all performance criteria at five-year break points in return for substantial extra investment. I do not believe that the Government have the money; I believe that the franchise companies have the money, and I would challenge them, saying, "We will give you extensions, but only if you come forward with real policies to invest in the railways, to invest in rolling stock and to make the system better".

The Minister should use his powers under Section 54 of the Transport Act to give undertakings that additional rolling stock will continue in use at the end of the franchise period. That would encourage franchisees to get some more rolling stock because they would remain confident that it would continue to be used, even if they lost the franchise at the end. That works in the Netherlands, and, because it works there, I am confident that it would work here.

I, too, am unconvinced about the need for structural reorganisation, as has been put forward by Mr Grayling in another place and in the pamphlet to which the noble Lord, Lord Faulkner, referred. However, I vigorously support the inclusion in a self-contained franchise—the Merseyrail franchise—of responsibility for the track. The reason why I agree with that is that I believe that Network Rail must have a comparator organisation. Merseyrail may appear to the Minister to be a very small undertaking, but it has behind it the whole technical expertise of Netherlands Railways, and it would provide good evidence to the department of what it really costs to maintain the railway on Merseyside. I am afraid that Network Rail is using average costs that probably greatly exceed what they spend in Merseyside. Of course, we do not know, because the figures are so opaque. The Minister should lean on Network Rail to set up that independent comparator.

Evaluating a franchise on other than financial criteria is difficult. I know that it gives great comfort to civil servants if everything can be reduced to a simple financial sum, but that does not enable you to evaluate quality, and quality is what the customer wants, what the passenger wants. I do not believe that it is beyond the wit of man to set down an evaluation procedure that brings in the other quality features as well as the money that comes out of a franchise. The Government are mesmerised by the question of how much money they are going to get.

The franchising process is extremely expensive and very bureaucratic. It takes up a huge amount of management time, as the noble Lord, Lord Snape, said, and I would ask that the Government look carefully at what Transport for London are doing in letting its franchises. It is apparently a much simpler, much cheaper process, and I am sure that there must be better examples to be had in the rest of the world.

Before I sit down, let me say that I have enjoyed over the years many debates with the noble Lord, Lord Davies of Oldham. I am very sorry that he is moving. I wish him, as did the noble Lord, Lord Faulkner, the very best of fortune wherever he is going, but I promise him that it will not be as interesting as transport.

Photo of Baroness Hanham Baroness Hanham Deputy Chief Whip, Whips, Shadow Minister, Scotland, Shadow Minister, Transport, Shadow Minister, Communities and Local Government 4:16 pm, 18th January 2007

My Lords, I, too, thank the noble Lord, Lord Chidgey, for generating this debate. Sitting rather solitarily on these Benches, I have been conscious that we have been in the conspiracy of experts. Most of today's speakers seem to have more than a touching relationship with the railways, either through life experiences or the life-enhancing experiences of travelling regularly on them.

Gordon Brown, in speaking to the 2002 spending review which supported the Government's 2001 10-year plan for transport, affirmed that to correct the underinvestment in transport was vital to both the economic prosperity of our country and our quality of life. I think we would all agree with that and we would have been better off if all that had come about. We are now over halfway through the planned execution phase with the state of play a bit more shambolic, as has been demonstrated today. Targets appear to have been conspicuously dropped.

What has happened to the promised infrastructural improvements—Crossrail, Thameslink, longer trains with longer platforms? Instead, seats and lavatories are being removed from trains so as to squeeze passengers into the space and they can only stand up because there will not be room for anything else. They are paying a rapidly increasing price for the privilege of travelling on such an unappealing system.

As we have heard, it is clear that the current structure of the railway network and franchising system is under considerable pressure. It is predicted that there will be an increased demand for rail transport, and not solely because of climate change, though that is certainly going to be a very relevant aspect. People are going to require to travel by train more and more, so if we do not address the problem, it is going to be compounded over future years.

A number of reasons for the widespread problems across the railway network can be identified, ranging from the content of the franchises—and we have heard quite a lot about that this afternoon—to the manner of their allocation, the relationships within the sector, a reluctance to accept accountability and squabbles over apportionment of blame for delayed services. Together these are a major obstacle to successfully moving forward.

The squabbles influence companies to devote resources to deflecting blame, and therefore fines, at the expense of productive activity. That is a pretty pointless exercise, as it ultimately simply results in the flow of public money from one pot to another at greater expense to the taxpayer. I understand that in the new joint control centre in Swindon—a facility that has been heralded as the embodiment of future working, demonstrating a constructive relationship between Network Rail and the train operating companies—a significant part of the building has been allocated to the "delay attribution team".

That point should not be considered in isolation. There are other examples of processes that are deeply, and indeed expensively, flawed. Take, for example, the bidding process for franchises. Of course we on these Benches support the notion of competition and enterprise in driving up standards; it was one of the fundamental reasons why the original rail reforms were introduced. But the current franchising system is clearly not able to deliver what it was intended to do, which was, in the words of Sir Alastair Morton, the first Rail Regulator, to provide "high-level performance for passengers".

The current franchising system involves companies bidding on train reliability, defined timetables, commitments to improve train and crew reliability, and their operational viability, as well as past performance. But there has been widespread criticism of the Government's policy of auctioning off franchises, as that encourages companies to overbid. Indeed, you have the bizarre situation where a train operating company—First Great Western, which has been referred to a lot today—is actually cutting services and capacity on already overcrowded lines in order to save money so that it can meet the terms of its new franchise.

Christopher Garnett, the former chief executive of GNER, is said to have commented that overbidding for a new franchise is preferable to underbidding and losing out. But his company has lost out; it had to surrender its £1.3 billion franchise on the main London to Edinburgh route, as it could not meet the terms of the 10-year franchise, which required revenue growth of 10 per cent last year.

The Government's acceptance of these exaggerated bids is pointless when it is clear that they can and will not be met. This causes mistrust between companies, tarnishes the industry's already poor reputation and drives the cost hikes in fares that we have all read about of late. Inevitably, it results in massive subsidies, such as the one of £1.4 billion that the Government have had to make to Virgin's London to Glasgow service. An end to this ongoing charade appears to be out of the reach of the current Government. An obvious point to make is that contracts should be awarded not necessarily to the highest bidder but to the company that can demonstrate a feasible, robust plan for enhancing the service that it seeks to operate.

Recently re-awarded franchises have been stifled by tight specification and regulation from the Government, which impedes companies' opportunities to innovate. The Government's interference extends to government involvement in operations to the extent that officials are writing timetables—indeed, we have Douglas Alexander and his predecessor acting almost like modern-day Fat Controllers. In 2006, the House of Commons Transport Select Committee published conclusions supporting this contention. It said that,

"there is little innovation because franchise contracts are so tight that there has been no room for flexibility".

The poorly defined and intrusive role of the Government is undoubtedly a root cause of the problems of the railways. What is required is a strategic framework of the railways, but it is the rail professionals who should run them. Misplaced micromanagement is directly responsible for the flaws and conflicts with the objective of allowing private enterprise to deliver the high-quality services that we all want.

Reference has been made to the vertical integration of the Mersey trains—a number of us must have had a briefing on it. The Minister may want to comment on why that policy did not come about. As I understand it, Network Rail did not produce the necessary information and was not willing to hand over responsibility to Merseyside, but perhaps the Government know a bit more about that.

The entire rail network excludes the needs and rights of disabled people, as has already been mentioned, due to the lack of accessibility at stations and on trains. Regulations do not obligate Network Rail to improve this situation at train stations. The investment in improving access for disabled people is woefully underfunded, and will take decades to restore even basic provision at many stations.

We might all be inclined to support the recommendation of the Disability Rights Commission, which suggests that such improvements should be incorporated into the franchising arrangements, as noble Lords have already said. That would in all likelihood reduce government revenues, but it would provide realistic, fundamentally important service improvements that would end the current discriminatory policy.

A great deal has been said about the capacity of the network—so what about it? As it stands, the current franchising system does not allow for capacity increases to cater for increased demand. That is already a major problem, but it is set to worsen, as passenger numbers are forecast to grow by 28 per cent during the next seven years, according to the Office of Rail Regulation. Meanwhile, capacity is set to grow by only 2 per cent. Already commuters are often unable to fit on trains, as the noble Earl, Lord Glasgow, and the noble Lord, Lord Cotter, said, and have to wait for a later service. Furthermore, that overcrowding is another significant problem for disabled citizens, as many of them are unable to stand for long periods of time, and wheelchair users are often precluded from boarding trains that offer insufficient space for them.

Examples show that some franchisees make no serious attempt to increase capacity. First Capital Connect removed trains from its routes to meet government-imposed franchise specifications, again reducing capacity. South West Trains is ripping seats and lavatories out of its carriages to provide more room—standing room only. Most trains travelling into London suffer from excessive demand and overuse. Overcrowding on morning commuter trains into London has doubled since 1996. As the noble Lord, Lord Rosser, said, if the house-building in the south-east increases, there will be even more demand because that is the only way those people will be able to access London. Meanwhile, fares continue to increase. How does this costly, uncomfortable and congested network offer a viable and attractive alternative to travelling by car? I fear it does not.

These problems are more than a matter of discomfort or inconvenience—they may prove to be fatally damaging to our economic competitiveness. It has been said that a buoyant economy requires free-flowing labour. Privatisation has achieved that goal, delivering 30 per cent growth in passenger numbers and consistently increasing distance of passenger journeys over the past decade. That was our party's success. However, the structure of the railway as it currently stands cannot continue. It offers an unsustainable service that, in the current jargon, is really not fit for purpose. The aforementioned House of Commons Transport Select Committee concluded in a similar vein, suggesting that the structure of the franchising system was a "policy muddle".

If we do not take immediate steps to overcome this problem, our workforce will become disillusioned and move elsewhere and our international competitiveness will be lost. That might solve the problem of overcapacity, but it is fair to say that it would be absurd to end years of economic growth and prosperity for the sake of such a futile and bureaucratic regime. Furthermore, a reliable and attractive rail network provides a credible alternative to travelling by car and taking short domestic flights. It can play a hugely significant role in tackling climate change. As it stands, travelling by rail is highly uncomfortable, obscenely congested and often vastly more expensive than alternative travel.

In conclusion, I shall say that I am also sorry to be concluding our debates with the noble Lord, Lord Davies. He has always managed in this portfolio—and will, I am sure, in his next—to be urbane, equable, knowledgeable and good-humoured. We wish him well in his next portfolio, and look forward to hearing him all over again on a different subject.

Photo of Lord Davies of Oldham Lord Davies of Oldham Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords) 4:29 pm, 18th January 2007

My Lords, I am grateful for the good wishes from various parts of the House, but this debate has been as painful for me as usual in the challenge it has laid down. I did not notice any kindly let-up just because this is the last time I will be speaking on rail, at least for a while, from this Dispatch Box.

I thank the noble Lord, Lord Chidgey, for introducing this important debate. It is at the centre of the issue with regard to rail, which is a very important part of our transport provision. I appreciated the very fair way in which he introduced the topic, knowing, as I do, that he has a keen interest in the West Country and the lines that go from there. Of all the issues in the debate, First Great Western has loomed as problem number one, and I thought he was a little kinder than others in his approach. I will refer to it in due course; I am aware that it is a central point of the debate.

The exercise with regard to franchises is almost bound to create opportunities for members of the public, their representatives in the other place and noble Lords to focus on the worst performances and then to damn the whole system because of weaknesses in certain areas. That is not entirely fair. The noble Lord, Lord Chidgey, introduced the central point of the debate and that was followed by many other noble Lords. I refer to the length of the franchise. I have heard the representations; not for the first time has it been mooted that everything in the garden would be so much better if only train companies had much longer franchises and were therefore able to invest at the requisite level. We are not convinced of that. It would be a very odd perspective if one did not see that there may be an incentive to greater investment if one knows that one is holding a franchise for 15 to 20 years. I can see the attraction of that proposal.

It is also the case, as every noble Lord who has spoken has emphasised, that passengers have rather shorter-term demands than the state of the service in 15 to 20 years. Passengers, rightly, are concerned with what is going on in the here and now. The recurrent themes throughout the debate have been, "Why don't you take the longer-term view and extend the franchise?" and, "Why don't you hold these people to account today for what they failed to do yesterday?". We cannot have it both ways.

The Government think it is important, through the duration of the franchise, that structures are in place to hold the operating companies to account. But I do not think that would be aided by the extension of the franchise to 15 or 20 years, as has been suggested. My noble friend Lord Snape pointed out that it is easy to say that one company does pretty well out of this: Chiltern Railways is a model railway which has a 15-year franchise—therefore, case proven. As my noble friend pointed out, there are particularly felicitous aspects with regard to Chiltern and its franchise which do not obtain across the far more difficult and complex franchises elsewhere in the United Kingdom to make that a particularly good illustration of how we solve the problems.

I maintain that the current franchise system is delivering. I shall come on to the weaknesses in the system and will erect a defence even for the less than defensible, in so far as it is within my power to do so. I will therefore talk about First Great Western in a moment.

The system is delivering. More than 1 billion passenger journeys were made last year, 40 per cent more than 10 years ago. That is a rail system which is responsive. Is it delivering all these passengers to their greatest satisfaction in terms of punctuality and comfort? Of course not. We fall short of that in many ways. Nevertheless, train punctuality is up in general terms from 75 per cent 10 years ago to 85 per cent now.

The noble Lord, Lord Cotter, gave us a diatribe on the ills of First Great Western—and I will be the first to recognise that First Great Western's recent performance, as I said earlier this week, is far from satisfactory, to put it mildly. Therefore, I am not surprised that passengers are demonstrating their frustration at the quality of the service. But the noble Lord said that its punctuality over a month or two was as low as 75 per cent. He is absolutely right, but in all fairness to the rail company, one must take a slightly longer view. First Great Western's performance on punctuality for the past year is 85 per cent—only just at the bottom of the achievements of the rail industry, but it is there. First, that is a good deal better than 10 years ago; and, secondly, it would not be right to say that what is happening on that line and the surrounding area in Bristol is utterly and totally calamitous. I recognise the significant points about its weaknesses, but those problems are not resolvable by the broad point that has come through from noble Lords who are seeking to be constructive in this debate—namely, that the issue revolves around the length of the franchise.

The noble Lord, Lord Snape, entertained us all—on buses one day and rail the next. I am trying to wean him on to aircraft because none of us has recently found anything particularly entertaining about aircraft. He must make a contribution to that debate. The 50 mile an hour restrictions are not universal in the UK. They are applied on Met Office advice according to reports from the Met Office and apply only in those areas where very high winds are present, not across the network as a whole. The noble Lord may as well say that the Swiss are much better at clearing snow than we are. Of course they are, because they have weather systems where they have to provide for their rail system against such extremities. On the whole in Britain, we do not often get 50 mile an hour restrictions on our railway system as a result of winds. However, I hear what the noble Lord says and it will not hurt the railway authorities to hear his diatribe and to consider whether the gantries and structures that sustain our overhead lines are sufficiently robust for us to sustain our trains even in the worst of the weather, which we hope is a short-lived problem.

He also raised the question of the Brighton mainline route. I hear what he ways about not interfering with the Gatwick Express. However, if he brings to my attention the threat that Richard Branson will move his passengers by road via the M25 as his solution during the Olympic Games, all I can say is that his appreciation of our transport system is rather less than I think it is. It sounds an idle threat, but I respect the fact that the noble Lord is saying that we should cherish and recognise the value of a very good service from Gatwick to Victoria. It is a good service and we want to see it sustained. We are trying to see whether the Brighton mainline route can incorporate aspects of that service and provide a better service for commuters who travel from further down the line than Gatwick, but I respect his basic point that any changes must recognise the importance of sustaining an effective route to Gatwick.

The noble Lord, Lord Teverson, also concentrated overwhelmingly on the franchise arrangements. Those arrangements, of which we have had experience over a considerable time, are sophisticated operations. The noble Lord, Lord Bradshaw, emphasised the fact that franchises must include aspects such as punctuality, must look at the investment demands required and must put train operating companies on the spot when they sign up to the specifications. Well, they do—and they do not only put them on the spot when the companies win the franchise. My noble friend Lord Snape said how extraordinarily complex the submissions were; that is because the demands are so great. But there is not just that—there is regular monitoring, too. The train companies are subject to monitoring. As the Minister responsible for rail in the other place said the other day, he has regular meetings with train operating companies to ensure they recognise that we are keeping the closest possible eye on performance. So I do not think there is much more to be said about monitoring the franchises than what we are committed to doing and are doing at present.

My noble friend Lord Rosser always speaks with great authority from his long interest and work with the railways. He referred to the technological dimension, which needs to be taken on board. One worry must be that with the fragmentation of the industry, which is obviously a part of having separate train operating companies, fundamental research into trains could be lost. We have certainly put a great emphasis in our recent franchise competitions on innovative solutions from bidders. We have focused on aspects such as regenerative braking, for example, and made that a specification. We are therefore expecting to introduce necessary technological change into the remit that the rail companies should consider.

My noble friend Lord Faulkner, as always, got to the heart of the significant debate by emphasising the achievements of rail and where it is also necessary for improvements to be made. I would dispute one point, however: air policy is important in transport policy; we can see benefits in weaning people off internal air flights on to the railway, as the railway becomes more competitive and effective. It will not do to suggest that our air policy is formed on the basis that we build, construct and provide where people want to fly. Even under the expansion at Stansted and Heathrow that is contemplated, we will still be two runways short of the likely demand for people flying in 2015. That is not an automatic response to people's demands but a measured response to meet people's needs as best we can while recognising that there are other necessary constraints.

The constraint that my noble friend introduced into the debate is of great importance—namely, climate change and the role that air travel plays in that. As we have explained, aviation is a difficult issue to tackle with regard to climate change, because no one country can tackle it on its own. The Government are not only alert and committed to ensuring that aviation plays its full part with regard to pollution; there is not doubt that part of our transport policy will be, through our increased investment in rail, to ensure that the competition between rail and air internally in the country should greatly improve. And it is improving. If one looks at current journey times from Glasgow via Manchester to London, one sees the benefits of the finally successful, huge investment in the west coast main line, which is making that line competitive with aircraft.

My noble friend Lord Snape and other noble Lords said that there are absurdities about a policy whereby different solutions are produced in different parts of the country with regard to franchising. However, the solutions are different because the problems are different. The problem with Virgin and the west coast main line was not Virgin's investment in trains; it was the fact that the track was not providing the framework in which it could offer the service. Therefore, the Government reasonably took upon themselves the recognition that costs had to be borne until the track was up to standard. The east coast main line is entirely different: there is nothing wrong with the track. There is nothing much wrong with GNER either; it just happens to be a subsidiary of a larger company, Sea Containers, which is in severe financial difficulties, and GNER has a real problem in being able to maintain its commitments. The Government's response to that is straightforward: GNER must keep to its commitments until another franchise can be arrived at, because we owe a duty to the passengers to sustain the service. I reassure my noble friend Lord Snape that they are two very different lines, two different strategies and policies, because they are two very different problems.

I was asked why we could not have vertical integration between track and trains in the Merseyrail area. One can see the obvious attraction of the concept. I have no doubt that if one extrapolates it a long way, one will eventually arrive at British Rail as an integrated system. First, we are a long way from British Rail. Secondly, my noble friend Lord Faulkner was right—he was buttressed by several other noble Lords—in saying that another reorganisation is just what the rail industry does not want. What it needs is capacity to plan against proper objectives and certainties, and reorganisation would not do that job.

The Merseyrail issue is quite straightforward. As the noble Baroness, Lady Hanham, indicated, it takes two to produce a virtual party and one of the players did not want to play. That may be regretted, but one cannot get virtual integration unless both parties see merit in it. Whereas Merseyrail saw great advantages in that position, that was not the case for Network Rail.

I have again been given the greatest sense of foreboding by the noble Lord, Lord Bradshaw. He always makes me shiver to the bones when he describes what chaos will result from certain of the franchise arrangements that we are making. He said, "We haven't seen anything yet. You wait until the new Cross Country franchise is established". I hear what he says. His tales of foreboding may come to pass. I hope that they do not and I am sure that he hopes not, too, because, although of a pessimistic vein, he is a fair man and will acknowledge it when we overcome problems. He exaggerated the extent to which everything will fall on Birmingham New Street as an interchange. With the suspension of the direct routes from Glasgow and Manchester to the south-west, people will have to change trains, but there will be many more changing points than just New Street. Passengers heading to the West Country will be able to change at other places such as Wolverhampton, Banbury, Derby or Cheltenham. Not everyone will have to use New Street as an interchange, although I respect the point that the noble Lord makes. New Street is an important station; it is going through major redevelopment, which will cause problems, and he is right to send out a degree of warning on that.

I have reached the end of my final debate on rail. I have a very sad tale to tell the House: although I do, regrettably, have to yield on the transport brief for a time, I hope to see the concessionary fares Bill through the House. I cannot exactly call it my baby, but it is extremely attractive and I am reluctant to give it up. So, I intend to spend a couple of hours seeing that Bill on to the statute book. Otherwise, this is my last debate on rail. I thank everyone for their good wishes. I have enjoyed our debates enormously, even when I have lost them.

Photo of Lord Chidgey Lord Chidgey Liberal Democrat 4:50 pm, 18th January 2007

My Lords, I thank noble Lords who have contributed to this debate for their generosity in giving their time and for their preparation. The debate has shown the House at its best. The wide range of knowledge and experience that has been brought to it is phenomenal. I have quickly counted that well over half of noble Lords who have contributed have done so on the basis of their knowledge, their professional expertise or their involvement in the transport industry. That is remarkable. Nevertheless, that does not mean to say that we all agree on everything. What would an industry be if we did?

I wish to make one point before I end, in that there is an issue of capacity, as every noble Lord has said. However, we should not confuse usage of the massive urban transport systems in our capital city with the wider needs and demands of our public transport system. It is one thing to be asked to stand in Tube-style travel in urban networks; it is another to be asked to stand on a service that used to be called InterCity—because that is what it is. Standing on those services for over an hour on crowded trains is, frankly, not acceptable in a modern economy such as ours in the 21st century. We should be able to do better than that—although the high increase in the cost of housing in London means that people are travelling further.

It remains for me to give my thanks also to the noble Lord, Lord Davies, for his response to this debate and for the way that he has responded to all the transport debates in this House in his time. I begin to wonder whether he is like a contestant for "Mastermind" and ask what his next specialist subject will be. In the mean time, this debate will continue—clearly—and I close by saying that, perhaps as a mark of the importance of this debate, I have been told that during the course of it Euston station has been closed due to the weather conditions. That may be a metaphor for the future. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.