Increasing Choice for Rail Passengers

– in Westminster Hall at 4:37 pm on 11th July 2018.

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Photo of Madeleine Moon Madeleine Moon Chair, Defence Sub-Committee 4:37 pm, 11th July 2018

Because of the Division, this debate will last until 5.43 pm.

Photo of John Penrose John Penrose Conservative, Weston-Super-Mare

I beg to move,

That this House
has considered increasing choice for rail passengers.

It is a pleasure to have you in charge of our proceedings, Mrs Moon. It seems that almost no one is terribly happy with how our railways are performing at the moment. Not passengers, who have to suffer delayed or cancelled trains when timetables go into meltdown, as they have done repeatedly recently, causing misery for millions. Not the unions, who have been in an on-off dispute on a variety of routes for months. Not the staff, who have to cope with angry passengers every day. Not the rail firms, who have repeatedly handed back expensive franchises to the Government because they cannot make them work, and not rail Ministers, who face continuous incoming flak, from urgent questions in Parliament to critical headlines and irate passengers who lose thousands of man-and-woman hours battling to get to and from work every day.

That is odd, because until recently Britain’s railways were quite a success story; something to be proud of. Since denationalisation, passenger rail journeys have more than doubled, and we have one of the safest railways for passengers of any major network in the EU. What has gone wrong? Why is everybody on all sides unhappy with where we are today? I argue it is because franchising has run its course. It might have worked in the past, but not any more—at least, not well enough. It has become a brittle, inflexible, fiendishly complicated, expensive old thing that causes misery and frustration for millions and which nobody loves.

The root of the problem is that franchises put train firms, rather than passengers, first, because passengers do not have any real choices when things go wrong. Why should we be at the mercy of a single train company when the timetable melts down? If a train is delayed or cancelled, we ought to be able to switch to a different firm’s service that is still running instead; franchising takes away that choice. If we do not like the service the franchise-holding firm provides—tough. Our only choices are to get in the car, which could mean traffic jams and is not very green, get on a bus, which is usually slow, or just lump it and get back on the train.

It is weird, really. We would not put up with being banned from changing to a different brand of coffee, cornflakes or broadband. We expect to be able to choose between a dizzying array of different car insurers or energy firms. But trains? No.

Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon

Although I agree with my hon. Friend that franchising has severe problems and has run its course, does he agree that one of the central problems is Network Rail and its inability efficiently to allocate track access, and the money it gets for investment and upgrading, to the franchises, as it would do if there was more open access on the system?

Photo of John Penrose John Penrose Conservative, Weston-Super-Mare

I completely agree; Network Rail has all the wrong incentives. I plan to lay out how we might be able to improve them in future. If it had the right incentives to find and to build more capacity, it would be better for Network Rail, the travelling public and rail firms.

If franchising is bust, I will come on to what I think is an alternative in a second. Before I do so, at the risk of perhaps annoying some of my friends in the Labour party, I must pause to say that I am afraid I do not think renationalisation is a valid option as an alternative at the moment. That is not because of the staff, the ownership models or anything like that; it is because politicians, people such as us in this room, no matter whether we are from the political left or right, are generally useless managers of a complicated operation such as a rail system. We take short-term decisions based on elections rather than proper investment cycles, we meddle in details we know little about and we frequently cave in to the vested interests of management or staff at the expense of customers. Anyone who remembers the bad old days of British Rail will know it was a disaster: an uncomfortable, unreliable service with few passengers, starved of investment and with shockingly bad industrial relations. It is pretty hard to argue that it represented some long-lost golden age of rail that we ought to return to.

Photo of John Redwood John Redwood Conservative, Wokingham

Does my hon. Friend agree that there is a lot of misunderstanding in the debate about rail? The fact is that all the track, signals and stations are nationalised and publicly provided, and the small amount of competition is just a competition, once in a while, to run to a timetable that is state approved and controlled, and to standards that are laid down by the state. We effectively have a nationalised monopoly at the moment.

Photo of John Penrose John Penrose Conservative, Weston-Super-Mare

I completely agree with my right hon. Friend. I fear that renationalisation is trying to answer the wrong question when we are starting from a position where we, as taxpayers, own the track and network in the first place. It is time to stop obsessing about the failed and stale old-fashioned options of yesterday, whether franchising or nationalisation, and instead to try a new, better alternative that puts passengers first. Open access rail breaks up the franchises so passengers have a choice of different train companies on their local route. If they do not like one, they do not have to wait 10 years or more for the next franchise to be signed, because a different firm’s train will be along in a few minutes.

Photo of John Howell John Howell Conservative, Henley

I wonder whether there is an opportunity to put into practice what my hon. Friend is talking about with the new Oxford-Milton Keynes-Cambridge railway, and whether what he is suggesting would provide a much better alternative to the existing model?

Photo of John Penrose John Penrose Conservative, Weston-Super-Mare

My hon. Friend is exactly right; it is much easier to introduce open access rail where there is no established incumbent franchise operator at all. I plan to go on and develop that idea on a broader basis along just the line he mentions, but that is a good example to get us started, if I can put it that way.

Open access rail forces train companies to raise their game; therefore, open access services are usually better. They are far less brittle, for a start, because no single company can dictate the entire timetable. Fares tend to rise more slowly. There are fewer delays and less overcrowding. This is not some unproven experiment. If we talk to local people in Hull, for example, where open access is already in place, or the Labour and Conservative MPs who represent them in that area, the verdict is cross-party and pretty unanimous: they all think it is great.

Photo of Daniel Poulter Daniel Poulter Conservative, Central Suffolk and North Ipswich

I am sympathetic to my hon. Friend’s point; he is making a good speech and I congratulate him on securing the debate. He is right to say that renationalisation of the franchises is not a panacea for improving reliability and quality. He is making some good points about open access rail improving competition, which I am not unsympathetic to, and putting the passenger first; but what about those areas where there is potentially a non-profitable railway line? Would passengers perhaps be the losers in that situation rather than the winners, and would a reduced service be the result?

Photo of John Penrose John Penrose Conservative, Weston-Super-Mare

That is a crucial point. The answer is that if we do any system wrong then passengers could lose out. It is perfectly possible to organise open access rail in a way that avoids the problem that my hon. Friend rightly points out could exist. If he will bear with me for a second, I plan to develop that point a little further, but he is absolutely right to point out that it is a potential difficulty if it is not properly designed in.

In principle, the reason that open access works is that it treats trains like air travel. Heathrow or Gatwick let you fly to Paris or Rome on a choice of different airlines, not just one. Why can we not do the same for our railways? Franchises would stop collapsing, because we would not need them anymore. Rail firms would experiment more creatively with new routes that passengers are not getting at the moment, and if one firm was crippled by strikes, we could still get to work on another firm’s trains.

So what is the obstacle? What is stopping us from getting on and doing that tomorrow? The answer is: not much, apart from the existing franchises, which brings us to the point that my hon. Friend John Howell raised. Any rail firm that has paid a very large amount of money to buy itself a monopoly on a particular route will understandably be unhappy if someone suggests it ought to face competition from another operator as well. That is not what it paid for, nor is it what its contracts say. However, what happens when those existing franchises end or do not exist to begin with, when they reach their contractual end dates, or when the franchise-owner decides it cannot make them work and hands them back, as has just happened—again—on the east coast main line? What then?

At that stage, at that moment, there is an opportunity. There is no one with a vested interest in protecting an existing franchise investment, or with legal contractual franchising rights, on that route. We can change the system completely. Ask train companies about open access competition on a route where they own a franchise and, understandably, they will bridle; but ask them the same question on a route where there is no incumbent, and their reaction changes profoundly. Let us take the opportunity that every franchise end point can offer and steadily, progressively, route by route change things for the better.

We could start with the east coast main line. We should auction track slots, so Network Rail suddenly has a huge incentive to find and build more capacity on the network, as my hon. Friend Stephen Hammond said. We should let train firms try out new services, to connect places that are not linked at the moment or to run existing services more efficiently. We should bundle some slots together for peak commuter services into cities such as London or Bristol, or for less economic stations, as my hon. Friend Dr Poulter said, and expect some to need reverse auctions, where we are minimising a subsidy rather than maximising income, as a result.

We should stop specifying which rolling stock train firms have to use in minute detail, down sometimes to the design of the fabric on the seats, and replace reams of complicated legal paperwork with a few simple, easily measured common standards of good-quality train performance, safety, overcrowding and reliability, which every train firm has to hit. That would turn open access from being a bit-part, marginal add-on to franchising into the main event—the central, mainstream way of organising and running the entire rail network. It would be simpler, less brittle, more creative and flexible, and better value for money for passengers and taxpayers alike. It would be more efficient in the way it used the network and how it invested scarce resources in track or rolling stock. Best of all, it would, at long last, put the passenger first. I look forward to the Minister’s enthusiastic response.

Photo of Bill Grant Bill Grant Conservative, Ayr, Carrick and Cumnock 4:49 pm, 11th July 2018

It is a pleasure to serve under your chairmanship, Mrs Moon. I thank my hon. Friend John Penrose for securing the debate.

Railways are one of the great examples of this country’s industrial and innovative spirit, which is often symbolised by the Forth rail bridge in Scotland. It was designed by Sir William Arol, who for many years resided in Ayr in my constituency. Examples of the revival of our railways in the last two decades, after half a century of almost unremitting decline, are an achievement that warrants more recognition. Since privatisation in 1995, the number of rail passengers in the United Kingdom has more than doubled—way beyond our expectations—and has surpassed all previous records. Britain is once again a nation that runs on its railways.

However, that achievement brings new challenges. We have more rail passengers, and they want and deserve a better service and seek better value for money. To achieve that, we cannot go back to the old system that saw passengers desert the railways for other means of transport. We must instead build on the progress that we have made.

The principle behind privatisation is that competition delivers more investment, better services and better value for the customer, which, to a degree, can be proven. While the situation has improved since the days of British Rail, which I remember well, there is still a shortage of genuine competition on our railways. The vast majority of rail services in this country are run by franchises—essentially time-limited monopolies granted by the Government. It is easy to see how this system limits competition, especially in Scotland, where the overwhelming majority of services are provided by one operator, Abellio ScotRail, which has a Dutch parent company. Abellio took over the ScotRail franchise in 2015, but questions already have to be asked about its performance. We could in parallel ask about Network Rail’s performance.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Energy)

Does the hon. Gentleman support calls from the Scottish National party that responsibility for Network Rail Scotland be devolved to the Scottish Government, so that Network Rail does not answer to two different Governments?

Photo of Bill Grant Bill Grant Conservative, Ayr, Carrick and Cumnock

My simple reply to that is no, I would not support that at all. Network Rail works by being interconnected throughout the United Kingdom.

Photo of Bill Grant Bill Grant Conservative, Ayr, Carrick and Cumnock

That is correct, and it was a fair comment. ScotRail cannot be blamed entirely, because Network Rail is a key player in the movement of rolling stock within the United Kingdom, including in Scotland.

Under the franchise, ScotRail is supposed to move towards a punctuality target of 92.5%, but in reality it is going backwards. Since August 2017, punctuality has dropped from 91.2% to just 88.7%. That is only if we count trains that are four minutes and 59 seconds late as being on time, so it may be that the figures are slightly skewed.

While getting the most out of franchise arrangements is important, fostering greater competition and giving commuters more choice is also crucial to improving the quality of service for commuters. There are already a number of open access operators, as was mentioned. Grand Central and Hull Trains are consistently at the top of the passenger satisfaction rankings, and the presence of open-access competition has led to more passenger journeys, higher revenues and lower fares, which suits commuters.

The fact is that competition works, and we should look at what we can do to enhance it, not stamp it out. I therefore call on all parties involved—the UK Government, the Scottish Government and Network Rail—to consider what action they can take to break down barriers and secure more open access operators running more services on the United Kingdom’s railways. That is not only because open access operators tend to run good services, but because, through competition and choice, they can be a wake-up call to the franchise operators.

ScotRail and the franchises across the UK could do with being kept on their toes, not only by the looming threat of the next franchise renewal but by open access challengers. Our railways have the potential to be an even greater British success story, but only if we avoid the trap of nostalgia. We should not go backwards to nationalisation but focus on what will work in the 21st century. More competition and choice will help to bring better services to commuters in all parts of the United Kingdom. Open access operators are the next phase in the successful journey of Britain’s railways.

Photo of Madeleine Moon Madeleine Moon Chair, Defence Sub-Committee

Before I call the next speaker, I remind Members who have indicated a desire to speak of the usual convention of either approaching the Speaker’s Office, notifying the Member who has secured the debate or passing a note to the Chair.

Photo of John Grogan John Grogan Labour, Keighley 4:54 pm, 11th July 2018

I stand corrected and admonished, Mrs Moon. The quality of the debate inspired me to make a contribution.

I consider myself to be a democratic socialist and also a great believer in competition, and I do not necessarily see a contradiction between the two. One good thing that came from the Railways Act 1993 and the privatisation of the railways was the creation of open access operators. I could not say that it was a bad thing, because I used to be the Member for Selby, which previously had no direct rail link to the great city of London. As we have already heard, Hull Trains established itself as the pioneer of open access. It initially ran, I think, four journeys a day to London; it is many more now. In terms of the links between Selby and the world, seeing that direct link from London King’s Cross to Doncaster and then to Selby and to Hull was like having, to reference an earlier debate, a second division football team, in the effect it had on the town’s attractiveness.

John Penrose is absolutely right: those who have always opposed open access operators are Governments of both colours, who have never made it easy for the operators—I think the current Government are looking at it afresh—and the franchise holders. I am delighted that the excellent shadow rail Minister, my hon. Friend Rachael Maskell, is here. The citizens of York benefit from Grand Central train services. I remember, under a Labour Government, going to the Office of the Rail Regulator and saying, “This is your chance to be heroes.” Everyone said that the rail regulator could not possibly find a path on the railway for that Grand Central service, but it stood up and said that there was space, and we therefore had Grand Central services.

I understand that, from 2021, there will be a service on the east coast main line to Scotland from London, calling at Morpeth, promising £25 fares to Edinburgh. Some lines are easier to run open access services on than others, for a variety of reasons, and even though only 3% of services across the country are run by open access operators, the east coast main line has benefited from that price competition. Any dominant provider—to be honest, it does not matter whether state or private—will become complacent and find it hard to innovate. That is as true of the current franchise holders as it was of British Rail. I fully support the Labour party’s policy of taking that franchise back into public ownership, because I am a great believer in a mixed economy. There was a moment under a Conservative Government when the state provided services on the east coast main line, and consumer satisfaction was high, but the open access providers pressed it and kept it honest.

I say gently to my party, as we develop our policy, that it may not be popular. If at the next election it looks as though we are about to form a Government, my constituents will ask whether the policy will mean the end of the Grand Central service from Bradford to London, and people in Selby will ask whether it will mean the end of the Hull Trains service to London. I hope the answer to those questions will be no. With those remarks, I sit down, admonished.

Photo of John Redwood John Redwood Conservative, Wokingham 4:58 pm, 11th July 2018

I strongly support the proposition of my hon. Friend John Penrose—that we could do with more competition and choice on the railways. The Hull example is great, and I am pleased that it has cross-party support. That city was not well served by the existing monopoly system. It allowed competitive challenge and granted an extra service, and everybody seems happy with it.

That example demonstrates that it is possible to introduce competitive challenge into what is effectively a nationalised monopoly system at the moment. We had rather more competition and choice in the early days of franchising, when it shook things up and improved services, but it is clearly not doing that to any great extent anymore, because successive Governments have wanted more control and authority over the detail and specification of the franchises. In the only competition that there has been, one or two bidders have bid too enthusiastically, and we have then had the embarrassment of their walking away. People rightly ask what they added and whether they were genuinely at risk if they were able to walk away. They would say, “Well, Network Rail didn’t deliver the capacity we were promised, so we weren’t able to deliver the services,” and they would say that the rest of the structure—the controls over timetabling and specification down to the kind of minutiae that my hon. Friend mentioned—made it impossible for them to achieve the changes or innovations that might have led to a profitable service for them and a better service for the customer. There is, therefore, quite a lot of common ground between the parties that the existing system needs considerable change. As my hon. Friend rightly said, we have all had experiences of broken and bad services in recent months, and our constituents have been let down all too often when they have tried to make the journey to work.

My own experience is that I often visit cities and towns around our country, because I love our country and I wish to stay in touch with more of it than just my constituency, and often when I am trying to get back to London to do the rest of my job, I book myself on a fast train and some previous service has been delayed. There may have been a driver problem with a slow train; more often, there will have been a big signalling problem earlier in the day. Then, not only is our service delayed when it arrives, but it gets progressively more delayed into London, depending on how far out we started, because it gets stuck behind stopper services that are themselves delayed, and then everyone is extremely frustrated and the businesses are in the dock for failure to deliver. That is particularly hard for the franchise company if it is indeed a Network Rail failure. It is more fitting that it should get the anger of the travellers if the issue was its own inadequacy at managing.

I therefore have a lot of sympathy with what my hon. Friend says, but I want to explore the most difficult part of his proposition. I am all in favour of open access and different competition. I agree with him that if people can offer services that the public actually want, rather than having to accept a managed best guess—probably over-managed by the Government—that would be better. I am just a bit concerned about how the network monopoly would still operate. My hon. Friend makes a very good point: he says that if there were open access to the network, presumably it would still be a public sector monopoly, but it would have an incentive to provide more capacity, because obviously the more open-access services it ran on its tracks, the more revenue it would gain. We would hope that it would behave in a positive way, even though it was a public monopoly, and would see that that was its main aim, and we presume that a Minister would instruct it that it needed to provide more capacity.

We first need to ask ourselves how we could get the extra capacity in our current system at a sensible price, whatever model of ownership and running the railways we might want, and then we need to look at how a particular model might operate. It seems to me that there are two relatively good-value and straightforward fixes for capacity that we need to do more of. I do not myself think that we can carry on with the idea that we will simply build new railway lines. The High Speed 2 expenditure is a very wasteful way of doing that and it will also do quite a lot of commercial damage to the routes that it takes on when it opens up, so we will have excess capacity on that particular set of routes and still be chronically short of capacity everywhere else. We are chronically short of capacity particularly at peak times into main cities, and the best thing the railway can do is move an awful lot of people at roughly the same time, when it has a clear advantage over the roads. We chronically lack capacity when it could do a really good job and provide an answer for people who are prepared to pay very high sums of money for a season ticket in order to carry out a job that often is not that well paid. They expect, in return for that, reliability and a seat on a train, which is a luxury that many of them do not get under the current system.

As I have said, there are two ways in which we can expand capacity more quickly. The most important, which the Government are now experimenting with—I urge them to go further and faster—is the wholesale adoption of digital signalling. According to my understanding of the technology and the expertise in the industry, it would be quite easy to get a 25% increase in capacity by introducing digital signalling. If we fly in a light aircraft over Britain at the peak time in the morning or evening, we will see completely clogged main roads into and out of the cities and largely empty railway track into and out of the cities because there is typically a 2-mile gap between the trains, for very good safety reasons. But with digital technology, it would be possible to run a really safe railway and have fewer gaps between the trains. Of course I want a very safe railway, and largely we have a very safe railway; we want to be able to take that for granted. However, given that the trains should all be going in the same direction on the same piece of track, and given that through the signalling system they should not be intersecting with one another in the way road traffic does, it should be possible to run more trains on a continuous piece of track with clear visibility, a satellite system and a digital communications system, which would act as a restraint were two trains to get into the wrong place. They would be able to see each other electronically, and there could even be automatic override, although I think drivers are quite capable of keeping the trains safe, and that is one of their main functions in such a situation.

I therefore urge the Minister to roll digital signalling out more quickly, and we may be able to go on from a 25% capacity uplift to a rather bigger capacity uplift, because the tracks remain remarkably empty when one is standing in quite a busy station, waiting for a train. It can be a very long wait, and not much else happens. We think to ourselves, “If this were a main road, I would have seen a thousand cars by now,” and we have seen two trains. We think to ourselves, “This is crazy. We have these fabulous routes. There must be a safe way of developing them.” And the great news is that there is, because digital technology, satellites in skies and the ability to know exactly where things are give us that capacity.

The other thing that I think is needed, to deal with the problem of the people going long haul needing a different pace of train on a single piece of track that also has to take stopper trains, which go much more slowly, is a bit more investment in bypasses. We do not need very long sections of track; we just need regular sections of track where we have double-tracked where there was a bit of spare land—there is quite a lot of waste and spare land around the railway system—so that the fast trains know that they have to go only another 3 or 4 miles down the track and there will be a short bit of track, with appropriate signalling, where they can get past the slow train without any problem. Then we would undo some of the damage that has been done by the timetable disruption through the absent driver, broken signal, broken rail or whatever it is that has caused the problem that day.

You will be pleased to know that this will be a short speech, Mrs Moon. In conclusion, open access, competition and choice can make a difference, but we need to tackle the capacity problem. Perhaps my hon. Friend is right to say that we can do that with a monopoly provider, or perhaps we have to look at models whereby individual dominant players on a route network with open access take responsibility for the capacity provision with the regulator, because we need to ensure what whoever holds the track not only has a theoretical incentive to provide more capacity, but actually wants to provide more capacity. We may need a market model for that, because up to this point Network Rail has been bitterly disappointing, very backward looking and slow at answering what the public want, which is a lot more peak-time capacity into our towns and cities.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Energy) 5:07 pm, 11th July 2018

It is a pleasure to serve under your chairmanship, Mrs Moon. Like other hon. Members, I congratulate John Penrose on initiating the debate and putting forward new ideas and thinking on the operation of the rail system. One thing that I think we can all agree on is that, as the hon. Gentleman said in his opening remarks, the existing franchise system is absolutely broken. There are too many direct awards, which means a lack of competition and less pressure on prices. We have had the east coast main line shambles. No matter how we dress it up, Virgin Trains East Coast has been able to walk away owing the taxpayer £2 billion. That is a £2 billion write-off of bad debt. There are also the ongoing issues with Southern Railway, and of course there are the latest timetabling issues, so there is no doubt that the franchising system as it is operating under this Government is not working; it is not fit for purpose.

The hon. Member for Weston-super-Mare stated his belief that franchises put train companies first, rather than passengers. I certainly agree that train companies—obviously—have to make profits, but I would suggest that with open access there would still be companies that would have to make profits, so they might still be driven to display the same behaviours.

Photo of John Penrose John Penrose Conservative, Weston-Super-Mare

Nothing says that open access has to be among profit-making companies. There could be not-for-profits and publicly owned companies, providing that they all compete with one another on a level playing field. I just want to reassure the hon. Gentleman about that.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Energy)

As a complete free marketeer, I welcome the fact that the hon. Gentleman is saying that we can have not-for-profit and public sector involvement. I agree with that sentiment.

I think, however, that the hon. Gentleman has over-simplified how this could work. It was suggested that if one train company is not operating to satisfaction, a passenger can switch to another train company, just like shopping for coffee. I have a funny feeling it will not be that simple for widespread open access. We have heard the benefits that open access can bring, but the reality is that train operators will still be bound by the same constraints of the existing network, particularly station capacity at mainline stations. There therefore might not be the flexibility to have so many train operators competing. Slot access has to be managed. We must also consider the movement of freight on the rails. There are a number of elements that need to be understood and factored in, which might restrict open access slot availability.

It was suggested that that might incentivise Network Rail to build more capacity. At the end of the day, however, if that is an incentive for Network Rail, the taxpayer still has to fund Network Rail upfront for the costs or Network Rail will have to borrow against optimistic future track rental fees. There is a risk, therefore, that it will not incentivise Network Rail to start duplicating rail networks across the UK.

It was also said that this would be comparable to the way we shop around for air services. I do not think that is comparable. The constraints on Heathrow stifle competition just now. There is not the widespread competition in air routes that everybody would like to see. Particularly for connectivity in Scotland, passengers do not have the choice that we would like. Again, it is a slightly idealistic comparison. Having said that, I welcome the suggestion. It has merits and it can work, but it will not be able to work as an entity by itself, because we will still need to protect the less-profitable routes. I suggest that it would need to be part of the mix, but I would not dismiss it out of hand.

Bill Grant, in my opinion, wrongly conflated cause and effect with the end of British Rail—franchising was brought in, and suddenly passenger numbers rocketed and all the rest of it—but that was because Government constraints on investment in the rail rolling stock were lifted. There was therefore investment in the rolling stock, which the franchises were allowed to do, but that investment was still paid for by a combination of train users and the general taxpayer, because many franchises are subsidised. It was a direct consequence not of privatising British Rail and breaking up the rail network, but of allowing that investment to take place. Too often, many Conservative MPs seem to think that franchising the system created magic money. They seem to think the franchises were like the Prime Minister’s magic money tree, but they are not. It is always funded from somewhere —that is, from the general taxpayer.

Photo of Bill Grant Bill Grant Conservative, Ayr, Carrick and Cumnock

I think the hon. Gentleman is distorting what I was saying. I clearly said that passenger numbers had doubled. In life, we have to deal in facts. That was a clear fact, and I went into the details and the reasons why. The trains certainly did improve in quality. I use them on a weekly basis, going north to south. The quality of the train rolling stock is very good.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Energy)

I thank the hon. Gentleman for clarifying. I remind him, however, that he repeatedly spoke about the bad old days of British Rail. I am just reminding him that those so-called bad old days were because the Government would not allow any investment, so it was not necessarily a function of British Rail being a national rail company.

The hon. Member for Ayr, Carrick and Cumnock also mentioned the Scottish Government working with the UK Government, with which we all agree. I would point that in terms of funding for control period 6, the UK Government just told the Scottish Government what funding they were getting. There was a big shortfall. There was no consultation on how that would happen. There has been an ongoing, constant refusal to devolve Network Rail. We have seen recent events, such as with the fisheries White Paper, on which there has been no consultation with the Scottish Government. I agree that it would be ideal if the two Governments could work better together, but I suggest that there is a clear fault line. The UK Government are imposing stuff on the Scottish Government and not consulting.

We heard a last minute entry into the market, as it were, from John Grogan. He highlighted the benefits of competition and open access slots in his area. That is important. It was good to hear how that has benefited his constituents. Like him, I welcome the potential future Scotland-London link-up and the predicted lower rail fares. That can only be good for passengers travelling on the east coast main line. As he has a wee habit of doing, there was a slight bit of friendly fire against Labour’s policy of nationalising rail, because he is concerned about what that would mean for the open access slots for his constituents. I look forward to the shadow Minister’s response on that.

Lastly, we heard from John Redwood. He said towards the end that he had made a short speech, but I thought he was in danger of speaking longer than the lead sponsor of the debate. Given how long I have been speaking, however, I am maybe being a wee bit hypocritical, I admit. He highlighted the failings of Network Rail. Other hon. Members did so in interventions, too. I remind them that Network Rail is answerable to the Secretary of State, so when we talk about the failings of Network Rail, it is an admission of the failure of the UK Government and the Secretary of State for Transport. They seem to agree with Opposition Members that the Transport Secretary is not up to the job.

As I said, there is some merit in open access, but I do not think it is a one-size-fits-all solution or that it will be the panacea for a new smoothly operating Network Rail. There is no doubt that profitable routes will be cherry-picked. We need to protect non-profitable routes. I also have concerns, if it was too widespread, about what this could mean for investment in rolling stock. Rolling stock investment has a long payback period. That is what is supposed to underpin the franchise system at the moment. Franchise holders get a longer award, which allows them to borrow to invest in the rolling stock, so if there are not any longer award periods, there is a risk that there will not be that long-term investment.

On passengers’ general choices, I challenge the UK Government to speed up the connection of High Speed 2 to Scotland—at the moment, as we know, it will stop at Crewe—and to look at improved investment in the existing network north of Crewe. That is really important.

Competition is good. I welcome the fact that the hon. Member for Weston-super-Mare acknowledges that we can and should have public sector involvement. There cannot be too much open access. It cannot be massively increased while we have the existing franchise system, so the Government would need to do a complete overhaul of the how the rail system operates. Given the failures of the franchise system, that overhaul is long overdue.

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Transport) 5:18 pm, 11th July 2018

It is a pleasure to serve under your chairmanship, Mrs Moon. I know what an interest you and other south Wales MPs have in the rail network, not least since we saw the announcement of de-electrification last summer.

I thank John Penrose for bringing this debate to the Chamber. There was another debate on the same subject only yesterday afternoon. It is interesting to see how many Back Benchers and members of the Conservative party now recognise that the franchising system simply is not working. We have been saying for such a long time that it is failing and has no mechanism for success.

I am glad that that recognition is there. It has been brought to the fore over the last two months with the complete meltdown of the timetable and the real pain that that has put the travelling public through. The chaos continues even today. We have a new timetable coming in this weekend. We are holding our breath to see whether that will make a difference. Quite frankly, the public has had enough and wants change. They have said that they want a nationalised railway, and I will touch on what that means for the future.

I agree with the hon. Member for Weston-super-Mare, who wrote in The Telegraph that the chaos and the franchising system are

“symptoms of a broken rail franchising system that’s so brittle and inflexible it’s causing misery for millions. Franchises put train firms first, rather than passengers”.

That cannot be the case when we are talking about a public service. I will depart from agreement with him at that point, as he might expect.

I want to pick up the point about the range of options that would be available if there was an open access system, and the thinking that if someone’s train did not arrive on time, they could simply pop on to another train. We know that does not work at the moment under open access, and in fact, there is real frustration among the travelling public that they have to buy a new train ticket or wait at the station until that operator sends another train. Open access will not solve the ills that have been described.

The fragmentation across the railway system has failed, and bringing more operators on to the system through open access would mean more fragmentation, which is the last thing that the rail system needs. The whole rail industry is clearly saying that we need to bring the rail system together. In particular, its focus has been on bringing track and train together to ensure that wheel and steel connect, so there can be a conversation about what happens on the infrastructure and between the trains that run on it. That has universal support. I agree with the Government, who have also said that that is absolutely essential. Bringing more competition and more rail operators on to the rail operating system will further fragment those relationships.

I want to pick up the challenge about the creativity of new routes. Those opportunities will exist under any system. The complexity sits in the fact that many of those routes cross traditional route lines—the main lines—so they become more complex for timetabling. We need integration, rather than fragmentation, to address those challenges.

Labour has clearly said that we would introduce a programme of nationalisation of the railway system, but I want to make it clear to all hon. Members that that is not going back; it is moving forward to a new system of nationalisation. Just as hon. Members have articulated that they want new private-market models operating on the railways, there is no one system of nationalisation. That is what we have focused on in developing our model. We have worked closely with the rail industry, rail operators—who are embracing what we are saying—and people working across the infrastructure, and we have looked at examples globally, on how best to run the railway system in the future and how to put in the challenge, opportunity, enhancements and vital long-term investment to ensure that we have a system that works best for the future.

As Alan Brown said, we need only remind ourselves that the fact that more people are on our rail system is because in 1997, a Labour Government came in and invested in rail services, which had been so starved of resources that British Rail was run down in its final days. It is about ensuring that resources go to the right place in the system to revitalise the railways. We will see that under a new rail structure.

So much of this is about where the money flows. We must remember that private train-operating companies do not own the trains; they lease them from the rolling stock leasing companies. They lose between 30% and 40% in the additional charging by the ROSCOs on the back of those trains. If we owned our rolling stock, we could put that investment back into the rail service, which is exactly what we need to do. A report from the industry says that 30% is lost because of the Government’s on-off decision-making. I agree with the hon. Member for Weston-super-Mare that we do not want political interference in the running of our rail. The level of political interference today across the rail system is extraordinary, with the Secretary of State at the head and making decisions about which lines will be electrified.

A Labour Government would not be interested in doing that. We want the rail service to run the rail service; we do not want the state to interfere. We will set the strategy, and the nationalised company will run the railways. People who are the experts in running the railways should move forward, rather than politicians who, frankly, make political decisions about the railways, as they are today. That would not happen under the nationalised company that we will put forward to run the railways.

We would structure the railways to ensure that we get that long-term investment, because the cry from industry is that the Government changing their mind about electrification and other projects has meant that it has had to not only gain skills and put apprenticeships on to build up to a programme that the Government said was going ahead, but then lay people off. What a waste of talent, let alone resource. We want a long-term plan. The franchising system and the open access system do not serve that need. The public are demanding that we ensure that investment, so we can plan our infrastructure changes and co-ordinate them with the routes and enhancements, such as the new rails and new opportunities, that we want to bring on to the track. That is what a Labour Government will deliver when we come to power.

One thing that has not even been mentioned in the debate, although I appreciate it is about passenger choice, is that we need to ensure that the rail network is there for freight. Operators across the network also need to have good access to our tracks and the ability to move goods across our country. As we are talking about the future of our economy, it is crucial that those choices are made for the sake of our economy, and that they work.

In the future, we have to say where the investment will come from. Open access is not the answer to longer-term investment in our railways. The franchising system ensures that there is a profit margin that can go to companies, although many are not receiving those profits because, quite frankly, they are failing. The amount of money that leaks out of the system is not acceptable to the taxpayer. With regard to the recent chaos, we could be talking about £1 billion of taxpayers’ money being used to pay the compensation due to that failed timetable. It failed because of franchisers putting in their different demands and everyone wanting their new routes put on to a new timetable, and the Secretary of State changing his mind about his priorities and not leaving sufficient time to put a new timetable in place. The Secretary of State’s decision making and the infighting among the railways has been so costly. That will disappear with our nationalised railway system, because we will not have the barriers that could create that.

Photo of Madeleine Moon Madeleine Moon Chair, Defence Sub-Committee

Order. I hope the shadow Minister is about to wind up. We have to hear from the Minister yet.

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Transport)

I am watching the time. I will not go over my halfway mark.

Photo of Madeleine Moon Madeleine Moon Chair, Defence Sub-Committee

You have gone over your five minutes considerably.

Photo of Madeleine Moon Madeleine Moon Chair, Defence Sub-Committee

In an hour debate, it is five minutes.

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Transport)

No one has ever told me that before, so thank you, Mrs Moon. I will come to my conclusion.

We want to ensure that the rail system works for passengers, that it improves social mobility, that it drives our whole economy forward and that it causes modal shift, to ensure that people are not getting into their cars, as they are today, but back on to the railways. That is why Labour’s model will work, and when we get into power, we will put it in place.

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London) 5:29 pm, 11th July 2018

It is a pleasure, Mrs Moon, to serve under your chairmanship.

I start by congratulating my hon. Friend John Penrose on securing this import debate, which, as he is aware, follows hard on the heels of a similar debate yesterday. We wait months for a debate on open access, then two come along at once. He made a terrific and really powerful speech, and I very much look forward to addressing in my remarks some of the points that he and other right hon. and hon. Members raised.

First, I will say that I and the Government are truly grateful to all the staff on the railway network. In about 90 minutes, I am sure that many of them would want to watch England play Croatia in the World cup semi-final, but instead they will be performing sterling duties, keeping the railways running and the trains moving. I just want to register for the record how grateful I am to them for that. This is a debate about choice and competition, and those members of staff will not necessarily have that choice later on today.

The choice to be able to travel by rail at all is one of the most important things that we can offer people. Whether they travel to commute to work, to do business or to connect with friends and loved ones, we want to offer people the choice of a wide range of journeys and services, and the railway has been steadily delivering more and more of that choice. The number of passenger journeys on offer in Great Britain has increased by over a quarter since privatisation and, as my hon. Friend Bill Grant said earlier, passenger numbers have more than doubled.

Since 2015 alone, we have opened 21 new stations on the national rail network, including in communities such as Bradford, Midlothian and Devon. These stations offer new journey opportunities and relieve the urban congestion that slows down growth.

Having just heard the remarks of the Opposition Front-Bench spokesperson, Rachael Maskell, I believe that she would do well to heed the concerns that were conveyed by John Grogan. I believe that he is absolutely right to be concerned about the loss of choice that would undoubtedly result from the policy of wholesale nationalisation of the entire railway network advocated by the Labour party.

Our commitments to go further and to make further investment will meet demands for more capacity on the network. That was a point spoken to powerfully by my right hon. Friend John Redwood. He was absolutely right to ask the important questions that he did about how we can deliver more capacity more efficiently, and he made important and valuable points about the need to accelerate the roll-out of digital signalling and the development of the digital railway in general, and also about the need for further investment in passing loops. I reassure him on digital signalling that we absolutely recognise the benefits that he spoke of, and that the roll-out of digital signalling across the UK is under way. Emblematic features of that roll-out are in parts of the Thameslink programme, for example, and in Crossrail.

We are also committed to giving passengers the choice of how to pay for their journey, including smart cards, contactless cards and mobile phone payments. The railway also offers passengers a range of times at which to travel and flexibility over when they want to return, all provided for through a single, joined-up ticketing system. So we are fully behind the idea of offering passengers choice and our strategic vision for rail, which was published last November, set out our plans to offer even more choice.

My hon. Friend the Member for Weston-super-Mare spoke about a further type of choice in his remarks—indeed, it was the focus of his remarks—and that is choice of operator. For many journeys, passengers have a choice of operators. However, it is not always practical or efficient to have multiple operators running on the same route. On many commuter routes, having a single operator is the best way to meet passengers’ preferences. This was recognised by the Competition and Markets Authority in its 2016 report on passenger rail competition. Passengers on these routes generally want a “turn-up-and-go” service, whereby they can get on the next train. With multiple competing, non-franchised operators, this would not be possible, because passengers’ tickets would only be valid on one operator’s services.

However—I am about to make remarks that I believe my hon. Friend will find more encouraging—I agree that there is a place for choice between operators in some specific cases. That is particularly so on inter-city lines, where travel is often more discretionary; for example, where people are visiting family and friends, or indeed many of the great tourist destinations that the UK has to offer, including, obviously, Weston-super-Mare, which is a place close to my heart. These passengers often book in advance and take a specific train, allowing them to choose a service that best suits their needs.

My hon. Friend also mentioned the east coast main line in his remarks.

Photo of John Penrose John Penrose Conservative, Weston-Super-Mare

Before the Minister moves on—he is being very helpful in trying to cover all the different points—may I just ask him a question? He just mentioned and celebrated the existence of this integrated ticketing system that he is talking about. Does that not rather solve the problem that he is then saying will crop up if we try to have people who cannot turn up and go using different operators on the same line?

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London)

To some extent but not entirely— I think that is the answer to my hon. Friend’s question. An integrated ticketing system enables people to buy a ticket for any journey anywhere in the country; it does not necessarily enable them to buy a ticket that is fungible across operators.

My hon. Friend also mentioned the east coast main line, where there are no fewer than 11 passenger operators, including the two open access operators, Hull Trains and Grand Central, which have delivered huge benefits for the communities they serve. Alternatively, take the west coast main line, where Great North Western Railway has recently been granted rights to run open access services between London and Blackpool alongside the franchised operator. That will offer passengers a choice of operators and up to six extra direct services to Blackpool per day, on top of the franchised services already available to them.

My hon. Friend John Howell mentioned the new east coast railway. It is right that we consider all options for that new railway, which is under development, so that we deliver the best outcome for passengers and taxpayers, but we must also deliver all types of service, which a free market on its own would not do. So, unless they can make a profit, franchises can get this balance right for everyone.

I am clear that open access is an important part of the railway, and can play a greater role in offering greater choice, in the right circumstances.

Photo of John Redwood John Redwood Conservative, Wokingham

One day when I was trying to get back from Birmingham to London, I had pre-booked on service A to terminus A and that service was up the spout, so service A very kindly said that I could go on service B—a different company on a different route to a different terminus—and it just honoured the ticket. So, there is clearly a way of making these tickets interoperable if the companies wish.

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London)

My right hon. Friend has made an important observation. We can certainly look at ways to make tickets more fungible, but the purpose of the present integrated smart ticketing system is to enable passengers to “turn up and go”, to use the latest technology and so on. As yet, it has not focused on making tickets fungible between operators, and I am sure that is something that, as the open access policy develops and as open access develops as a feature of our system, will become more prevalent.

As the CMA recommended, however, a greater role for open access requires robust reforms to create a level playing field between different types of operator. At present, as my hon. Friend the Member for Weston-super-Mare knows, open access operators do not pay towards the fixed costs of the network on which they operate, nor do they contribute towards the vital social services that the franchised operators that they compete with deliver. That distorts the incentives of operators and means that we cannot realise the full benefits of competition for passengers.

That is why we are now working closely with the Office of Rail Regulation on its proposals for reforming track access charges in the next rail control period, from 2019 to 2024. These reforms will see open access operators pay an appropriate amount towards the fixed costs of the network where they are able to. We support this move as a vital step in creating the level playing field between open access and franchised operators.

We have also consulted on a possible public service obligation levy. Such a levy would complement track access charging reform, so that open access operators would also pay towards the social services that franchises deliver to many stations. Those stations would not have the levels of service they do today if left entirely to the free market, and the Government offer greater passenger choice through the franchising system to deliver social as well as economic benefits.

Photo of John Penrose John Penrose Conservative, Weston-Super-Mare

The Minister is being generous with his time. I suggest to him that he can avoid quite a lot of this regulatory and bureaucratic complexity if he simply switches to auctioning track slots for these things. At that point, the market-clearing price would be discovered. He does not have to set all these other additional points at all.

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London)

I just observe that the franchising system as it exists today is already a version of the auction that my hon. Friend describes, in the sense that franchise bidders bid a specification that they feel is optimal for that area and the Department then assesses their bids. It is, in effect, an auction in some ways.

A greater contribution by open access operators towards the cost of the railways and a more level playing field should lead to more opportunities for open access services, and thus potentially greater choice for passengers. However, it is crucial that we get the reforms in place first, so that we can start on the right footing. I leave my hon. Friend a moment to wind up.

Photo of John Penrose John Penrose Conservative, Weston-Super-Mare 5:40 pm, 11th July 2018

I thank everybody who has contributed to this afternoon’s debate. There has not been complete cross-party unanimity—far from it—but what we do have is a clear framing of a likely political choice. I encourage the Minister, who has been helpful and encouraging, to go further and faster in this area. At that point, we will frame a very clear political choice between those who want to give passengers more choice through competition and those who want to do it in a different way. At that point, voters would at least then know what they are voting for and choosing on the day.

Question put and agreed to.

Resolved,

That this House
has considered increasing choice for rail passengers.

Sitting adjourned.