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Railways: Fares - Question

– in the House of Lords at 2:37 pm on 31st January 2017.

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Photo of Baroness Randerson Baroness Randerson Liberal Democrat Lords Spokesperson (Transport) 2:37 pm, 31st January 2017

To ask Her Majesty’s Government whether they intend to review the mechanism used to determine annual increases in train fares.

Photo of Lord Bradshaw Lord Bradshaw Liberal Democrat

My Lords, with the leave of the House and on behalf of my noble friend Lady Randerson, I beg leave to ask the Question standing in her name on the Order Paper.

Photo of Lord Ahmad of Wimbledon Lord Ahmad of Wimbledon Parliamentary Under-Secretary (Department for Transport)

My Lords, the annual increase of regulated rail fares is set using the retail prices index figure published for July. This is consistent with the approach adopted across the rail industry. The UK Statistics Authority concluded in 2015 a consultation and review of UK consumer prices statistics. The review recommended moving towards ending the use of the RPI. The Government will await the UK Statistics Authority response before considering further changes to the current mechanisms.

Photo of Lord Bradshaw Lord Bradshaw Liberal Democrat

My Lords, I thank the Minister. In waiting for that response, will the Government consider whether it is right to have a universal increase in fares across all services, regardless of the quality of service for passengers? In particular, it seems to me that London commuters, especially those from south of the river, are facing a situation where the Government are using RPI automatically to increase fares on Southern, regardless of the quality of service being offered.

Photo of Lord Ahmad of Wimbledon Lord Ahmad of Wimbledon Parliamentary Under-Secretary (Department for Transport)

As I have already said, we will certainly look at the findings and will then make an appropriate decision. The noble Lord raises the important point about fare increases, which I know impacts many in your Lordships’ House and many beyond. However, as he will be aware, regulated fare increases are capped at RPI plus 0% for the term of Parliament until 2020.

Photo of Lord Tebbit Lord Tebbit Conservative

My Lords, would it not be rather curious if we adopted the suggestion from the other side of the House? It would mean that we would be raising fares where the demand was lowest, and raising the fares most where the demand was lowest.

Photo of Lord Ahmad of Wimbledon Lord Ahmad of Wimbledon Parliamentary Under-Secretary (Department for Transport)

I think that I follow the thread of my noble friend’s remarks. I agree with him about the importance of giving certainty to those who are affected. We are adhering to the position that the Government have taken, which was a manifesto pledge.

Photo of Lord Snape Lord Snape Labour

My Lords, does the Minister agree that, as recently as 2008, 50% of train fares in the United Kingdom were met from the Treasury, and the same proportion was paid for by the train traveller? As that percentage has now been skewed to 27% by the Treasury and the remainder by the traveller, does that not have some impact on the mechanism for fare increases on an annual basis?

Photo of Lord Ahmad of Wimbledon Lord Ahmad of Wimbledon Parliamentary Under-Secretary (Department for Transport)

Again, the noble Lord raises an important point. If we were to put figures to that, there is about £4.8 billion in government subsidy. He is quite right that the rest comes from rail revenue, which is about £9.8 billion. It is important that there has been a review of the current process; we should await the outcome of that consultation and the Government will then take any necessary decision at that time.

Photo of Lord Dholakia Lord Dholakia Liberal Democrat

My Lords, is the Minister aware that passengers are now using consumer laws to gain refunds from their credit and debit card providers? This is a very worrying practice. Will the Minister issue a clear instruction to Southern that this is its obligation? It should be met and the situation ought to be monitored.

Photo of Lord Ahmad of Wimbledon Lord Ahmad of Wimbledon Parliamentary Under-Secretary (Department for Transport)

The noble Lord is right to raise the important issue of compensation for Southern passengers. The Government are acutely aware of the challenges on that network, as many from across your Lordships’ House have also made clear to me during our debates on this issue. As the noble Lord will be aware we have issued additional compensation schemes but we continue to work with and monitor Southern, and to hold it to account for any issues which arise. If the noble Lord has specific matters or a particular case to raise, I ask him to please write to me.

Photo of Lord Rosser Lord Rosser Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Transport)

Why do the Government keep claiming that the regulated fare increases are needed to fund the investment programme in the railways, when the increase in fares paid by rail passengers is really intended to achieve a continuing reduction in government subsidy, and a continuing increase in the percentage of rail costs that are paid for by hard-pressed fare-paying passengers to well beyond that in nearly every other country?

Photo of Lord Ahmad of Wimbledon Lord Ahmad of Wimbledon Parliamentary Under-Secretary (Department for Transport)

Again, what the Government have done was made clear in the run-up to and during campaigning in the last general election: that what rail users need when it comes to fares policy is certainty. That is why we gave a commitment to have RPI plus 0%, and we are staying true to that pledge.

Photo of Lord Foulkes of Cumnock Lord Foulkes of Cumnock Labour

Has the Minister noticed that the Scottish Government are doing exactly the same as the United Kingdom Government on rail fare increases, proving yet again beyond peradventure that they are still Tartan Tories?

Photo of Lord Ahmad of Wimbledon Lord Ahmad of Wimbledon Parliamentary Under-Secretary (Department for Transport)

The noble Lord always brings a particular viewpoint to our debates here and he has done so again. It is a matter for the Scottish National Party to determine its ideology. However, if it is being won over by the positive agenda of the Conservative Government then I would welcome that.

Photo of Earl Attlee Earl Attlee Conservative

My Lords, does the Minister agree that it is essential to have an RPI formula in order that the train operating companies do not have to try to forecast where inflation might be in several years’ time?

Photo of Lord Ahmad of Wimbledon Lord Ahmad of Wimbledon Parliamentary Under-Secretary (Department for Transport)

My noble friend is right to raise this issue. The basis we currently use, as I have been clear, is RPI. It is important to provide certainty to the market not just for people using the services but, as he points out, for rail companies as well. As I have said, once we see the result of the consultation we will look at this.

Photo of Baroness Altmann Baroness Altmann Conservative

My Lords, can my noble friend explain why we are using the RPI rather than the CPI, as RPI is no longer an official statistic? Pensioner incomes are tied to the consumer prices index rather than the retail price index, yet hard-pressed consumers are having to pay an RPI increase.

Photo of Lord Ahmad of Wimbledon Lord Ahmad of Wimbledon Parliamentary Under-Secretary (Department for Transport)

My noble friend speaks from great expertise, particularly on pensions, and she is right to raise the concern expressed by the travelling public. But I say to her that RPI is consistent with the general indexation approach currently used across all aspects of the rail industry, including franchise payments, network grants and franchise financial models. As she will be aware, those are all indexed at RPI. I have already alluded to the study; let us await the outcome and we will then see how we progress on the way forward.

Photo of Lord West of Spithead Lord West of Spithead Labour

My Lords, 378 years ago yesterday, Charles I was executed. Does the Minister agree that this shows the dangers of any form of taxation, including indiscriminately taxing rail fare users for something that should be provided in another way?

Photo of Lord Ahmad of Wimbledon Lord Ahmad of Wimbledon Parliamentary Under-Secretary (Department for Transport)

The noble Lord again raises an important chapter in history. No matter what challenges the Government face, I hope that that fate does not await anyone.