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Rail Fare Regulation

Volume 463: debated on Tuesday 17 July 2007

6. What recent discussions she has had with South West Trains on the regulation of rail fares. (149832)

There have been no discussions about either the scope or the level of fares regulation. There has been some discussion about the forthcoming investment in modern smartcard ticketing, which may require fares regulation procedures to be changed.

In May this year, South West Trains hiked up prices by 20 per cent. for passengers from Winchester and Southampton who arrive in London between 10 am and 12. No such increases were introduced for people travelling from Basingstoke and Reading, where there is competition from First Great Western. What can the Minister do to prevent companies such as South West Trains from fleecing passengers on routes where there is a monopoly franchise?

I of course sympathise with those who find that their fares have gone up by a significant amount. I am sure that the hon. Lady will understand that the Government can intervene in such matters only by extending the scope of regulation. However, there would inevitably be a cost to the public purse, at a time when many more demands are being made on it, both in the rail industry and elsewhere.

I welcome the Minister to his post, not least because he provides an element of gender balance in a Department that is becoming very much a female province in this House. The hike in fares to which my hon. Friend the Member for Romsey (Sandra Gidley) referred is not unique to South West Trains, but it runs contrary to the original plan that the Association of Train Operating Companies would try to attract more passengers by providing a range of options for off-peak travel. Will he therefore consider looking at the model recently adopted by Transport for London? It has decided to take the revenue risk involved in running the north London line franchise, in order to get much more integrated travel and to achieve the goal of getting people to transfer from road to rail, rather than from rail to road.

I welcome the hon. Lady to her new post and point out that, having been there for 10 months, I am now the veteran Minister in the Department for Transport. The price of a regulated fare in Britain is now 2 per cent. lower in real terms than it was 10 years ago. As for innovative ways to get people on to trains, she will be aware that South West Trains has instituted the so-called Megatrain fares scheme that enables people to buy tickets at very low prices. I do not believe that we should change the current structure of the franchising system: there has been enough change in the industry over the past 10 or 15 years, and the system is delivering for passengers.

I welcome the whole ministerial team to their roles. Will the Minister tell us what representations he received from South West Trains about the impact on fares when the DFT set the franchise premium payments up to 2014? Has he made any estimation of how much fares will have to increase to fund the increased premium payments set by his Department?

In welcoming the hon. Lady to her new position as shadow Transport Secretary, I express the hope that she will not go down the cul-de-sac pursued by her predecessor in suggesting that as long as there is a public subsidy to train operating companies all is well and good but that we should never allow a premium to be paid by train operating companies back to the public purse. South West Trains made the Department aware that some off-peak, unregulated fares would have a higher than inflation increase, but even if the company had not told us that, the fact is that as the fares are unregulated we would not be in a position to change its mind. Unregulated fares do exactly what it says on the tin.

Is not the reality that the Minister and his Department are responsible for ratcheting up fares because of the ever-increasing premium payments they demand from train operating companies? South West Trains will be paying almost £250 million a year in premium payments by 2014. In total, the five highest value franchises will be paying well over £1 billion in premium payments by 2014—a more than tenfold increase. Is not the Secretary of State using the franchise system to price people off the railways to deal with the overcrowding problems that the Government have wholly failed to tackle?

The hon. Lady has clearly decided at an early stage to ignore my advice. However, as I told her predecessor, the Department for Transport at no point specifies any level of premium, or indeed any level of subsidy. If the hon. Lady is to stay in her post for any length of time, it may help her to become slightly more informed about the franchising process. I and my officials would be more than happy to meet her and talk her all the way through the process from the early points, so that she can understand exactly how a franchise is let.