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Rail Reform

Volume 541: debated on Thursday 8 March 2012

With permission, Madam Deputy Speaker, I would like to make a statement on the railways. Our rail network matters—to our quality of our life, our national well-being and our country’s future prosperity. For this Government, it is a simple equation: good transport equals good economics. But, too often, we find ourselves frustrated and disappointed when the cost, punctuality or comfort of rail travel do not come up to scratch. I believe that the Government and the rail industry can and must do more for passengers and taxpayers. Of course, investment has a huge part to play, too. That is why we have been investing in our transport infrastructure, which is one of the best ways to support business, generate growth and create jobs. For rail, that has meant the biggest modernisation programme since the Victorian age, with £18 billion invested in this spending review alone.

However, it is not enough only to invest in the railways; it is also vital to make sure that they are set up for success. So, today, I am setting out our plans to do precisely that, with the publication of our rail Command Paper, “Reforming our Railways: Putting the Customer First”. I have taken the “Ronseal” approach to the name, as the strategy will do what it says on the tin: put the customer first. The hallmarks of our railway must be high standards and low costs. It must be a railway that offers the best services and the best value. That means a rail network that is efficient, effective and affordable. Nevertheless, in his rail value-for-money study, Sir Roy McNulty concluded that our railways are among the most expensive in Europe, despite the strong and steady growth in the number of passengers using them. Sir Roy identified inefficiencies worth £2.5 billion to £3.5 billion a year—of course, the people picking up the tab for that costly inefficiency are passengers and taxpayers, so reform is long overdue.

Passengers rightly want to know that we have a plan to end the era of the inflation-busting fares seen over recent years, and taxpayers rightly want to see railway subsidies reduced to help us to tackle the fiscal deficit. My message to everyone today is clear: the days of spiralling and unjustified rail costs are coming to an end. Under this Government, the rail industry will be able to compete for future investment only if its long-term cost issues are addressed and if it can earn the right to grow. I am pleased to say that Network Rail is already due to deliver £1.2 billion of efficiency savings by 2014, with at least a further £600 million expected by 2019. But, as Sir Roy so clearly set out, we need to go further. The railway as a whole needs to become less dependent on Government subsidies, which is why we want the industry fully to close the efficiency gap of £3.5 billion per year identified by Sir Roy by 2019. We are about managing and reducing costs, balancing budgets, targeting investment where it can drive long-term growth and jobs, and delivering more capacity and better service for the investment that goes in.

The time is right for reform. I believe that we are in a good position to build on recent efficiency gains to improve the performance of the industry further and to improve the passenger experience. The programme of work that will decide rail outcomes and funding for the five-year period from 2014 is now well under way, and that sits alongside a period when we will see the biggest round of re-franchising since the privatisation of the industry. Both represent a further opportunity to change our railways for the long-term better.

Today’s Command Paper sets out our ambitions for Britain’s railways, and the agenda for change that both the Government and industry will follow in the months and years ahead. By reforming the industry, we will achieve substantial savings. Those savings will allow us to cut and then abolish above-inflation rises in average regulated fares, and they will ease the burden of the railway on the broader public purse. I believe that, taken together with my decision to limit the most recent increase in regulated fares, that will have a positive long-term impact on household budgets.

For reform to be really effective, there needs to be closer collaboration between the infrastructure managers—in other words, Network Rail—and those who provide passenger services, which are generally the train operating companies. Only through better joint working will we reduce costs and improve the customer experience. The industry is already pushing for better alignment between track and train. We look forward to the industry bringing forward partnerships that are equipped and incentivised to deliver not just better services, but better value. The rail industry, led by the Rail Delivery Group, has also declared itself willing and able to respond to the strategic and operational challenges that the railway faces. Such leadership across the industry will be essential if we are to get the most out of our reforms.

Rail franchises will be reformed, with greater transparency on costs and efficiency—again, that is to ensure the best value for fare payers and taxpayers. Franchises will be longer, giving train operators the flexibility they have been asking for—more time to make the biggest investments—to deliver what passengers want, within a sustainable budget. We will also move to a more transparent, modern and flexible approach to fares and ticketing. We are launching a consultation today to take views on how those key aims can be achieved; it is time to bring fares out of the 1970s and into the 21st century. We will expand smart ticketing to give more passengers the kinds of benefits that travellers in the capital already enjoy with Oyster cards. Working with industry, we will roll out smart ticketing across England and Wales, and across different operators, thus increasing convenience for passengers. Smart ticketing is also pivotal to introducing a more flexible system tailored to customers, with a wider choice of tickets and season cards, as we recognise the reality that not all journeys take place five days a week during rush hour.

If we duck the reform challenge, it will not just be rail users and the public purse that pay the price; ultimately, the rail industry and the wider economy will suffer, too. So we want everyone working in rail, be it management or front-line staff, to help to make these reforms work. By reducing costs and increasing demand—set alongside this Government’s huge investment in railways—there is genuine potential to boost jobs across the industry.

Of course, it is important to reform governance, too. Network Rail is giving greater decision-making powers to its regional route directors, making it more responsive to local conditions and increasingly focused on day-to-day train operations at the local level. We welcome Network Rail’s efforts to find new and more efficient ways of managing its assets, including long-term concessions to third parties for the management of parts of the network. Network Rail is also rightly taking steps to reform corporate governance, including its management incentives package, so that it is more accountable to passengers and freight customers. I would also like to welcome its sensible decision, to be announced shortly, voluntarily to appoint a public interest director, who will ensure that the concerns of taxpayers are fully reflected at board level and help to strengthen the role of members.

It is time to give communities more control over local services, so today we are also consulting on devolving decisions about the railway to sub-national bodies. Our joint consultation with the Office of Rail Regulation on a greater role for the ORR in regulating passenger franchises closed recently. With a smarter regulatory approach, our aim is to remove Government from day-to-day industry involvement by adopting a more unified regulatory structure for the railways and we will publish our conclusions in due course.

Facing up to reality, saving fare payers and taxpayers £3.5 billion a year, reforming our railways and putting the customer first: that is what the Command Paper is all about. By working together on this package of reform, I believe that industry, the regulator and Government can generate the savings and the change we need. Lower costs, better services and ticketing that offers greater choice and flexibility, as well as a rail industry built to last because it is efficient, effective and affordable: that is what the Command Paper will deliver and I commend it to the House.

I thank the Secretary of State for advance sight of her statement and repeat our thanks to Sir Roy McNulty and his team for their work. We did not agree with all his conclusions and, if we had been in government, we would not have accepted all his recommendations. It was a valuable piece of work, however, that is helping to drive a number of reforms in the industry that we welcome.

Passengers have every reason to be concerned about the direction that the Secretary of State has just set for the rail industry, with year after year of inflation-busting fare rises, ticket offices closed, fewer staff on trains and at stations and cuts in investment in the rail network. In each case, the interests of private train companies are being put before those of passengers and the principle that we established in government of a clear separation of infrastructure and maintenance from private profit is being abandoned, for the first time giving private train companies the whip hand over Network Rail. That is a dangerous experiment that takes the industry on the road to breaking up and selling off Britain’s railway infrastructure, all because this is a Government who are simply unwilling or unable to stand up to vested interests on behalf of passengers. [Interruption.] The question that the Government have yet to answer is this: if we are all in this together, why is the burden yet again to fall on the fare payer and not on those who are already making huge profits—[Interruption.]

Order. The Secretary of State was listened to politely without Front-Bench heckling and I expect the shadow Secretary of State to be heard without heckling from those on the Front Bench or anywhere else.

Thank you, Madam Deputy Speaker.

The question that the Government have yet to answer is this: if we are all in this together, why is the burden yet again to fall on the fare payer and not on those who are already making huge profits that are lost to the industry and that help to drive up the cost to the taxpayer of running our railway?

We cannot support these reforms. In the coming weeks we will set out our own alternative approach to reforming the rail industry, but for today I would be grateful if the Secretary of State answered a number of specific questions of concern to passengers and commuters about her proposals.

On fares, the National Audit Office has warned that the Government’s fare rises, which are adding to the cost of living crises facing households, are just as likely to increase the profits of train operators as reduce costs for the taxpayer. Will the Secretary of State confirm that the entire cost of holding fare rises at just 1% above inflation for the rest of this Parliament and strictly enforcing that cap would be less than the £543 million her Department handed back to the Treasury as a result of an underspend last year? Will she therefore abandon plans to increase fares by 3% above inflation in 2013 and 2014?

The Secretary of State said today that the days of above-inflation fare rises are coming to an end, so will she explain why the tender documents for the new franchises assure bidders that they can increase fares by up to 6% above inflation every single year of those 15-year franchises? Will she confirm that, under the plans she has set out today, train companies will be given even more freedoms on fares, including the right to introduce a super-peak ticket, which will hit hard-pressed commuters in particular?

I welcome the commitment to extend smart integrated ticketing that can be used on trains and buses, enabling the rest of the country to catch up with London. The fact that that will enable part-time workers to benefit from new flexible season tickets is particularly welcome, but will the Secretary of State explain how that will work outside London if she remains unwilling to take steps to regulate the bus network outside the capital as we proposed?

On the level of services, will the Secretary of State explain why the inter-city west coast franchise tender document allows daily service reductions of up to 10%? Will that not lead to even greater overcrowding than passengers already face? Will she explain why the final tender documents for the new franchises have also watered down the performance obligations since the earlier draft? The requirement to improve performance over the life of the franchise has been replaced by a requirement to do so unless

“good evidence can be provided as to why this is not achievable.”

Surely passengers expect the Government to insist on improvements, not simply to police the excuses that the train operating companies come up with.

Does the Secretary of State understand the concerns about the train companies’ new freedoms to close ticket offices and cut the number of staff on trains and platforms? Will she explain why the new franchises ask bidders only to consider maintaining the same level of CCTV on trains?

The structural reforms to the industry are also deeply worrying. Does the Secretary of State understand the concerns that the restructuring she proposes has a massive accountability gap at its heart? Genuine backing for devolution, which the Government have ducked today, would see transport authorities deciding the best way to deliver rail services in each region. Should that not permit alternatives to the existing franchise model to be explored, including not-for-profit and mutual options? Does she agree that for devolution to work those authorities need a fair deal on costs, subsidies and risks? This cannot be—as is suspected—about devolving responsibility for cuts.

Will the Secretary of State explain how the decision to allow deep alliances between train companies and Network Rail, with private train companies having the whip hand, fits with the need for democratic accountability? I know the Conservative party is determined to complete the job it started with its botched rail privatisation, but does she not accept that the decision we took to create Network Rail as a not-for-dividend body has served the industry well? Why is she willing to turn back the clock and take us back to the bad old days by creating what are effectively a series of mini-Railtracks? Where is the accountability to passengers, taxpayers and Parliament? How can there possibly be a level playing field in future franchise competitions if the incumbent is part of a single management team? Does she not see the clear conflicts of interest that are evident throughout her proposals?

How will Network Rail continue to support the interests of freight operators and their need to access the network in a system where private train operators manage the network in each region? Will the Secretary of State explain why long-term concessions will not simply add to the costly fragmentation of the industry? Why does she believe that breaking up and selling track piece by piece will improve performance and safety?

This long-awaited rail strategy is a wasted opportunity to address the structural issues left from the botched rail privatisation. Instead of tackling the fragmented structure of the industry that was the legacy of privatisation, the Government are instead creating an even more fragmented and costly structure with more interfaces, more need for lawyers and consultants, less accountability, and, at the same time, more freedoms for train companies to hike fares and cut services, booking offices and front-line staff. Even at this late stage, I hope that the Secretary of State will think again and instead seek to build consensus on the future of the rail industry, based on devolution and genuine local control with communities and passengers in the driving seat, stand up to private companies, not cave in to vested interests, and put passengers before profits. It is not too late for her to do that. I hope that she will think about it.

Obviously, I listened with interest to what the hon. Lady said and I hope that she will at least accept that the current situation, with a rail industry that Roy McNulty says costs £3.5 billion more than it needs to owing to inefficiency, is something that we should tackle. I note that she says she is going to come forward with an alternative and it is important that she does that because if she is turning her face against this approach, she is saying that it is okay for fare payers and taxpayers to pay that £3.5 billion in perpetuity. I think that is broadly what she was saying, but I shall await with interest her alternative proposal, which she needs now to provide.

The hon. Lady talks about the burden falling on the fare payer, but that is exactly what happens now. That is one reason why there has been so much pressure for fares to go up year on year. Let me remind her that her party also recognised that problem, which is why it commissioned Sir Roy McNulty to do that work and why it struggled with the issue too, itself overseeing years of above-inflation rail fare rises. What all of us in the House should be looking towards, with the strategy we have produced, is how to tackle these issues. We want fares to remain affordable. I have stressed on a number of occasions and at several points in the documents we have released today that it is absolutely key that we make sure that fares remain affordable. The underlying objective we are trying to achieve is the end of inflation-busting fares. We also want to cut down on the level of public subsidy, as we would prefer that money to go towards reducing the deficit or into investment in other areas.

I am pleased that the hon. Lady welcomes the flexible season tickets. If we are able to push forward on smart ticketing across the country, people will be able to use that sort of ticketing not only on the railways but potentially on buses too. The Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker), who has responsibility for buses, will be producing a strategy that includes all those opportunities in the coming weeks.

The hon. Lady mentioned ticket offices. I understand that many passengers strongly value the face-to-face channel that a ticket office provides, as can be seen in the documents. However, I remind her that when her party was in office there were large-scale reductions in ticket office opening hours. In 2009, Labour Ministers approved cuts to opening hours at 70% of South West Trains ticket offices. The Command Paper has a section on how we want stations to improve, including by having crèches at stations where that is a sensible idea. Face-to-face channels are important for people buying tickets, which is why one of the ideas in the paper is to investigate whether people could buy tickets at their local post office, library or shop, as people can with Oyster in London. All those things should mean that people have more, rather than fewer, opportunities to buy tickets face to face.

In the rest of the fares and ticketing consultation—and I stress that it is a consultation—there are some really good ideas for moving ticketing into the 21st century, including on how we can make sure that the approach to ticketing reflects working practices today and the fact that people work flexibly and part-time, rather than expecting them to fit into a ticketing approach that would be better placed in the 1980s.

I am pleased that the hon. Lady asked about devolution and decentralisation because that is possibly one of the most exciting parts of all this in the long term for local communities. It opens up an important debate about how franchises might be more spec’d up in the long term and controlled by local communities. I assure her that this is about giving local communities opportunities, not about passing on some underlying problem. Indeed, the Government are absolutely clear that we need to tackle the underlying problem of inefficiency in our railways. That is what the document is all about.

The hon. Lady raised concerns about alliancing. I think that getting the industry to work together is a common-sense approach to tackling some of the inefficiencies that exist, which are directly funded in the end by fare payers and taxpayers. Today, when asked, she was not able to rule out her party wanting to renationalise the railways, but I think that we need to make the pieces of the jigsaw fit together better. Simply throwing them up in the air again would only waste time and make it harder for the industry to take the responsibility that we want it to, and I do not think that that would be the right way forward.

Finally, I understand the hon. Lady’s concerns about freight and we are absolutely committed to making sure it is a core part of the network going forward. One of the underlying reasons for high-speed rail is to make sure we have capacity on the core network for freight. We need to make sure there are safeguards in place regarding any of these changes so that the freight industry can continue to do what we want it to, which is to re-mode on to trains.

Order. I am sure the whole House is very grateful for the Secretary of State’s comprehensive reply to all those points. I hope therefore that there will now be short questions and brief answers, so that we can get all Members in.

I welcome the thrust of my right hon. Friend’s statement, but can she offer me some encouragement that the West Anglia line, which has lacked capacity improvements since its third and fourth tracks were torn up in the wake of the Beeching report, now has a better chance of having its track capacity enhanced?

I believe that the performance on that line is starting to improve, but the document we are issuing today is all about making sure that train operating companies are in a position to deliver, and are working with Network Rail to deliver, better services for passengers in a more efficient way.

I welcome the Secretary of State’s willingness to look at the rail sector overall, but how much funding do the Government intend to remove from supporting the rail service? Will she explain exactly how the spiralling cost of rail fares will be addressed, overcrowding will be reduced and extra capacity can be produced where it is required, such as across the north?

We recognise that we need to tackle the underlying inefficiencies in the railways, which Sir Roy McNulty identified as totalling around £3.5 billion. I also recognise that some of the network provides a broader public good and that there will therefore be a need for public subsidy. However, we need to make sure that that represents good value for taxpayer money. We are concerned about overcrowding. That is why we are investing in 2,700 new carriages, which will provide extra capacity. That is why the overall £18 billion of investment going into the industry is so crucial; that is one way in which we can improve performance. Of course, making sure the industry is financially sustainable is absolutely critical too.

Can the Secretary of State confirm that plans are progressing for the electrification of 800 miles of rail track? How does that scale of ambition compare with the achievements of the previous Government?

That is an interesting question. I think we all understand that electrification can bring a broad set of benefits. The previous Government electrified 39 miles of line in 13 years—that is about 3 miles a year—and we have already announced that 800 miles of line are to be electrified. I hope that answers the hon. Gentleman’s question.

Does the right hon. Lady accept that in this industry successive Secretaries of State have found that announcing efficiencies is much easier than actually achieving them? If we do not achieve them, fares will go up or investment will suffer. Does she accept that it is absolutely essential to continue the investment that started 10 years ago, which included upgrading the west coast main line—something that had not been done for 30 years—because the east coast main line and commuter services will need to be upgraded? We must not forget the lessons of the 1990s, when 10 years of no investment had absolutely catastrophic consequences for the industry.

I think that the right hon. Gentleman is right. One problem in the past has been that, every time a Government have wanted to drive efficiencies in the rail sector, they have rearranged the whole railway structure, whereas what we need to do is get the pieces that are there working better.

The right hon. Gentleman mentioned the west coast main line, which is a good example of how things can go wrong. It was pencilled in to cost £2 billion; it ended up costing £9 billion and took significantly longer than was anticipated. It is a good example of why we cannot go on like that and why we have to work with the industry and challenge it to work better itself.

Exactly. Does the Secretary of State agree that politicians are useless in any industry at picking winners, and will she reassure us that this Conservative Government remain committed to a privatised industry in which competition and a market-driven approach have driven record growth in numbers, and that there will be no return to the bad old days of British Rail with stultifying ministerial control?

I am disappointed in the statement. In the time I have been in the House, I have never heard a ministerial statement so lacking in substance. This is not a statement; it is a coincidence of ink patterns on a bit of paper. The Secretary of State says that she wants £3.5 billion of efficiency savings by 2019, but she has not given us a single way of saving one penny. Was she even in the House yesterday when the Prime Minister told the nation that government was about making tough decisions? Where is a single tough decision in this statement? She does not have any solutions; all she has come up with is a series of clichés and warm words put together by civil servants not wanting to offend anyone.

I recommend that the hon. Gentleman read the documents that we have published, which have a lot more of the detail that he wants. I am not going to take any lectures on tough decisions from someone who, when asked about Network Rail bonuses, said:

“Bonuses … are a matter for the company’s remuneration committee, not for Ministers.”—[Official Report, 24 June 2008; Vol. 478, c. 174W.]

I do not think that showed any backbone whatsoever.

I warmly welcome my right hon. Friend’s statement today and the approach to our railways. Does she agree that we need more reliable journeys and better passenger experiences on all our trains, but particularly on our commuter routes? May I urge her to help to enhance access to stations and to improve the resilience of the network in winter weather?

The industry has put substantial investment into improving winter resilience, and of course, having done that, as we could have guessed, we have had one of the mildest winters in recent years. We are much better prepared to keep the trains running in snow and bad weather than we were in the past. Reliability and punctuality are incredibly important. Today’s statement is as much about that as anything else, because a more efficiently run railway will be able to perform better.

The Scottish Government have just closed their consultation with similar proposals that will involve station closures, reductions in staffing and higher fares. What implications will the announcement today have on Scotland, especially in relation to the block grant, with Barnett consequentials, and on cross-border services?

I was up in Scotland only last week, having some helpful discussions about high-speed rail and improving connectivity with Scotland on the railway network. Scotland has a devolved settlement for transport, but I have no doubt that the Scottish Government will look carefully at my proposals today. I am always happy to talk to the Scottish Government about how we can work together to get better value out of those cross-border services.

Is it not curious that Labour Members always choose to gloss over their responsibilities when we debate these issues? It is their report that we are debating—the McNulty report—which says that there are £3 billion of efficiencies to be had. I congratulate my right hon. Friend on the leadership that she is showing in bringing together the Government and the rail networks to achieve better service for our customers.

I appreciate my hon. Friend’s kind words. As the right hon. Member for Edinburgh South West (Mr Darling) set out, we have no mean challenge ahead of us, but we know the direction that we want to travel and how we are going to get there. The key now is to make sure that we implement that and that I work with the industry as it gets on with this.

I think I am the only Member in the Chamber today who served on the Bill Committee that considered the Railways Bill that privatised the railways almost 20 years ago. We were told at the time by Conservative Ministers that privatisation would drive down costs and increase efficiency, but we know now that that was not at all the case. Privatisation cost thousands of railway jobs. I still have hundreds of railway jobs in my constituency, but what assessment has the Secretary of State made of the number of jobs on the railways that will be lost as a result of her statement, nationally and in my constituency?

There has never been a better time to be working in the railway industry. We have record investment going into the industry; it is unprecedented since Victorian times. I have spoken to both Network Rail and the TUC about how we can work harder to develop careers in the railway industry and get more women working in the industry—only 13% of Network Rail’s employees are women. There is a huge opportunity ahead of us, not just for passengers and taxpayers but for staff. I hope that everyone can work together to deliver efficiency improvements from which everyone benefits.

I thank my right hon. Friend and warmly welcome the statement, which shows a clear commitment to improving the existing rail network. However, we cannot completely separate the high-speed rail project from rail reform. Will my right hon. Friend reassure the House that the colossal sums of money being invested in high-speed rail will not in any way minimise the investment going into the existing railway system?

They will not. We have an ambitious programme, as I have said to the House, and high-speed rail sits alongside that. It is complementary, and it is critical that we do not just improve the existing system but look ahead to the capacity that we will need on a new network.

Is not one of the reasons why train fares in Europe are much lower than here that many countries still have public ownership of their railways? Does the Secretary of State accept that the statement is just a green light for the mostly foreign-owned train operators in this country to have a feeding frenzy on raising fares so that they can keep the fares down in their own countries?

I do not accept that at all. I have a huge amount of respect for the hon. Lady, but this is not the time to rearrange the industry in the way that she suggests. We need to look at the pieces and then make sure that they work more effectively together. Sir Roy talked in his report about the different levels of working that the industry could do, and we are keen to see the industry work more closely together. I am sure that when the hon. Lady reads the report she will see some of the potential routes that that could take. I do not agree with her; I think the key to success now is getting the industry to collaborate more and for us to support it in doing that.

McNulty suggested that rail company franchises should be less prescriptive and allow more freedom to respond to the market. Does my right hon. Friend agree that that will bring more investment into services such as the east coast main line, which was left in limbo by the previous Government, and more certainty to my constituents in York, who rely heavily on it?

We need to strike that balance between granting longer franchises so that it is worth train operating companies improving services for passengers and putting in investment even when that takes a bit longer to come through because it is a bigger improvement and a bigger investment. That is absolutely right. My hon. Friend’s other point is well made; things change and we need a flexible franchising approach because, as we have seen, growth in demand and passenger numbers in the past decade has been substantial, so we need to make sure that our franchising can reflect and adapt to that.

Perhaps the Secretary of State will agree that one of the best ways to improve efficiency on the railways is to make better use of under-used track? One of the best ways to do that in urban areas is to develop tram trains, which has been done successfully in other countries while we are still considering the possible introduction of a pilot. Can she say when the pilot for the tram train in South Yorkshire is due to start?

I cannot, but I will write to the hon. Gentleman to set that out very soon. I know exactly the project that he refers to and I know that it is in plan. I will tell him exactly when he can expect it to happen.

Will my right hon. Friend confirm that, alongside the action that she is taking with the rail industry to reduce the cost base of running our railways, the £18 billion investment programme of upgrades and improvement, including the Nuneaton to Coventry upgrade announced last year, will go ahead?

Yes, it will. That is one of the reasons why it is such an exciting time to be involved in the industry, because this unprecedented investment is being made. It is a huge opportunity for people working in the industry and for passengers. We will hopefully get the benefits of all those investments and people will really see the difference it can make to their commute and their travel when they get on the train.

I worry about the right hon. Lady using the Ronseal method, because painting over the cracks in the industry might come back to haunt her. One of the implications of the statement is that 12,000 jobs are at risk, mainly those of station staff. In addition, it reintroduces the profit motive to the provision of the infrastructure, which caused the Potters Bar, Hatfield, Paddington and Southall rail crashes. Has there been an independent safety assessment of today’s proposals?

Safety will always be of paramount importance as we consider any of these changes. We are currently spending £3.5 billion, money that is coming out of the pockets of fare payers or taxpayers, and that is pure inefficiency. I think that not being prepared to tackle that is irresponsible. I understand that the hon. Gentleman might have some concerns about my proposal, but is he is saying that passengers should pick up the tab for £3.5 billion? If he does not like the proposal, it is incumbent on him to come up with an alternative.

The response of the unions to the McNulty report was to make some wild claims in my constituency about the closure of the ticket office. Does the Secretary of State agree with me, and with commuters on the Thameslink line in my constituency, that what they want is increased technology that allows them to buy tickets more quickly, simply and easily? They would also like to see staff brought out from behind glass panels in order to increase the personal security for people on the platforms, as we have seen on the tube.

My hon. Friend is right. A variety of people now use the railways, and the ticketing system needs to keep up with that, but I will take this opportunity to stress again that we understand the importance of face-to-face contact, which many customers value when buying tickets. We will ensure that we bear that in mind as we approach any decisions on ticket offices.

Sir Roy McNulty identified fragmentation in the industry as one of the major reasons why costs in the UK are so high. What will her plans to further fragment the industry do to those costs? Will they improve outcomes for passengers or increase the amount we pay in subsidy for the railways?

We are not further fragmenting the industry; we are encouraging it to work collaboratively and more effectively. If by talking about fragmentation the hon. Gentleman is criticising our proposals to decentralise some decision making, I think that he is wrong.

The ticket office at Codsall station was closed a number of years ago and has been replaced by the fantastic Codsall station pub. My right hon. Friend has talked about allowing post offices the opportunity to sell tickets, but will she look at letting the Codsall station pub sell tickets?

That sounds like a good idea that my hon. Friend’s local community might like to take forward. I encourage him to look through the document, which contains a section on how we want to see stations improve more generally.

I had the pleasure of meeting Sir Roy McNulty on two occasions after his early conclusion that our railways are up to 40% more expensive to run than continental railways. I suggested to him that the simple and obvious difference between them is that they are publicly owned and integrated and ours are privatised and fragmented. I suggest to the Secretary of State that we will not overcome our problems or reduce costs until our railways, too, are publicly owned and integrated.

I do not agree with the hon. Gentleman. Realistically, his approach would simply involve throwing the jigsaw pieces back up in the air, which would mean years of delay and uncertainty, and of course passengers and taxpayers would continue to have to foot the bill for that, which I think would be unacceptable. We have today set out a proposal on how we will get a grip on the £3.5 billion of inefficiency. Until the Labour party has an alternative, fare payers and taxpayers would prefer it to get behind our proposals and help to make them happen.

I welcome my right hon. Friend’s statement and what she said about smartcards. Will she consider extending Oysterisation to outer London towns, such as Harlow, which would benefit commuters? May I also ask her to increase investment in rolling stock, when financial conditions allow, so that we can have more trains at peak times running from London to Harlow and vice versa?

I am sure that my hon. Friend is aware that we earmarked £45 million in the autumn statement to enable us to extend the use of smartcards and Oysterisation further in the south-east. With regard to capacity, we are making a substantial investment with 2,700 new carriages. I would be happy to sit down with him and get his views on how his local area could benefit from that.

Fortuitously, this afternoon I am to meet representatives of Network Rail and Abellio to discuss the deterioration of the service between Colchester and London. Does the Secretary of State agree that the reality and the rhetoric are on different tracks and that if we are to reform our railways and put customers first, the fragmentation of the industry post-privatisation must be addressed? They need to talk to each other more than they do at the moment.

My hon. Friend is absolutely right. That is the whole point of what we are talking about today: greater collaborative working and formal alliancing where we think that could drive better performance and better value for taxpayers’ money. It is time for the industry to step up to the plate and work together to ensure that our railway system is more efficient than it has been in the past.

I warmly welcome my right hon. Friend’s statement. She mentioned the section in the report on train stations—paragraph 4.39. Great Yarmouth, like many towns across the country, has a station that is much in need of repair. May we take it from the report that in future we can look to some new, out-of-the-box thinking on innovative ways to improve our stations for passengers in future?

It is time to think more innovatively. We should look at how train-operating companies can work more effectively alongside Network Rail than they have previously been able to do in order to improve the stations that their passengers use every day.

The Transport Committee in the previous Parliament accused the previous Government of breathtaking complacency. Will the Secretary of State reassure me that the significant savings that will be made as a result of the proposals she has set out today will lead to lower fares, greater reliability and more investment in rail services in general?

We will be moving in that direction. Our aim is first to reduce the above-inflation fares and then to get rid of them. Of course, a huge amount of investment is being made in all the other key things my hon. Friend talked about, which I am very supportive of and, indeed, excited about. I think that it is a great time for the railways. The sort of investment that is being made to improve passenger capacity and experience is unprecedented, and we will ensure that we get every bang for the buck out of it that we can for the public.

I thank the Secretary of State, as I think the whole House will, for making copies of the report available before the statement, which was very much appreciated.

Is it not wonderful that we have heard socialist ideas from the Opposition Benches? They suggest that we should renationalise the railways and everything will be wonderful. Have they forgotten that under British Rail they were managing decline and putting prices up? Under privatisation far more people have wanted to get on the trains, so the solution is to find more capacity, not renationalise.

My hon. Friend is right. We have seen huge increases in passenger demand. What we have heard today is really a battle between the Government Members representing common sense and the Opposition Members, representing the past.

I welcome the Secretary of State’s determination to put the customer first. Does she agree that for too long the railway industry has been imprisoned by provider interest, whether greedy, bank-owned train leasing companies, bonus-hungry managers or dinosaurs and luddites from the trade unions, while the previous Government walked on by? Is it any wonder that our railways are among the most expensive in Europe?

In many respects it has been an impossible situation, and certainly one that cannot continue. We cannot allow £3.5 billion of inefficiency a year to go unchecked and always to be paid for by taxpayers and fare payers. That is what this document and this strategy are all about tackling.

My right hon. Friend will be aware that the RMT has threatened a national campaign of resistance, including industrial action if necessary. What message does she have for those trade union dinosaurs and for the hard-working staff in the rail industry about the potential benefits?

I urge everybody to work with us to improve the railways for the sake of passengers and taxpayers. That is the decision that we all have to take. It is simply unacceptable that every year £3.5 billion of inefficiency is paid for by people across the country who cannot afford it. We have to get a grip on that, and we will do so by working together. I hope that the unions will see that there is a huge opportunity to work with us on this. There is massive investment and there is room for jobs and growth. We just need an industry that is financially sustainable so that that can take place.