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Payments to Train Operating Companies

Volume 820: debated on Tuesday 15 March 2022


Asked by

To ask Her Majesty’s Government what estimate they have made of the impact on train services of a 10 per cent reduction in payments from the Department for Transport to train operating companies.

My Lords, the department has no plans to reduce payments to train operating companies by 10% and has not assessed the impact such a reduction would have on train services. As noble Lords would expect, we have asked operators to provide credible, efficient and sustainable business plans which will deliver reliable and resilient train services that adapt to passengers’ evolving needs and drive value for taxpayers.

My Lords, will the Minister accept that the twin attacks of a 3.8% increase in rail fares, the highest in almost a decade, together with any reduction in subsidies—I would still like to know exactly how much the Government are prepared to put forward towards our rail industry in the next financial year—will lead to reduced numbers of passengers travelling by train and more congestion and pollution on our roads? Surely that is not the way forward as regards the Government’s carbon reduction targets.

The Government are very focused on making sure that the services we provide for passengers meet their needs. Ridership at the current time is around just under two-thirds of what it was pre-pandemic. There may have been substantial and enduring change, so we are working with the train operating companies, asking them to look very carefully at timetables, remove duplications where possible and look for savings and efficiencies. At the end of the day, we need to provide services that meet passengers’ needs, and they need to be punctual and reliable.

My Lords, if the Government are not cutting subsidies for the train operating companies, can the Minister tell me why services on the west coast main line have deteriorated so badly over the past year or so? Trains are often cancelled, frequently overcrowded and often late. I never thought I would be saying, “Bring back Branson”, but services under Avanti appear to be markedly worse than they were previously. What are the Government going to do to improve the situation?

In the broader scope of things, Great British Railways will be developing the whole industry strategic plan; the call for evidence for that has now closed. We are also asking each train operating company to produce annual business plans, which will streamline the passenger offer, make sure demand is actually met and in balance with the supply, remove duplication, as I said, and ensure that operations are as efficient as possible.

It is clear that government demand in savings running into many millions of pounds will result in cuts in Network Rail’s maintenance budget. We have already seen what a casual approach to Network Rail and the use of outside contractors can lead to in the light of previous accidents at Ladbroke Grove and Potters Bar, and a recent report into the train crash at Stonehaven in 2020 found that a drainage system wrongly built by Carillion, which subsequently went bust, and left unchecked by Network Rail led to the crash. The Rail Accident Investigation Bureau said that the tragedy was

“a reminder how potentially dangerous Britain’s volatile weather can be.”

How did the Government come to the conclusion that now is an appropriate time to make major cuts in maintenance roles on our railways, and will they now reconsider their decision in the interests of safety, which should be the paramount consideration, rather than financial considerations?

Safety is, of course, the priority for everybody who works in the railways, and the tragedy at Stonehaven is deeply regrettable. The Government have no intention of diminishing the work we do on safety and maintenance—it is extremely important—but we must look for efficiencies within the system, because we have seen this significant reduction in demand, we must make sure that we protect the taxpayers’ investment, and that is what we are doing.

My Lords, as other noble Lords have mentioned, the 3.8% increase in rail fares simply adds to the financial pressure on families at this difficult time. Does the Minister accept that, now that the Government have ended the franchise system, with revenue from fares going straight to the Treasury, it is entirely in the Government’s hands what policy they choose to use in future to attract passengers back on to the railways? Does she accept that, for environmental reasons, it is essential that lower fares are used to attract passengers?

Of course we would like to keep fares as low as possible, but we also need to support crucial investment and pave the way for financial sustainability for the system as a whole. When we took the decision on regulated fares, we looked at inflation and chose to peg it to July’s RPI, which resulted in an increase of 3.8%. Of course, it could have been much higher had we used an RPI from a later month. We also delayed the introduction of the increase by two months, which was particularly beneficial for those buying annual season tickets. There are other ways we can encourage people back to the trains, and we are doing as much as we can, working with the train operators. For example, the Book with Confidence intervention was extended to 31 March. That allows customers to rebook their tickets if they are unable to travel, without administration fees.

Can the Minister draw our attention to any statistical evidence for the notion, which is counterintuitive, that a vicious circle is not developing here between cutting services and raising fares?

I do not accept that at all. It is right that we ensure that our services meet the needs of passengers and are punctual and reliable, and that the contribution from the national taxpayer is appropriate. There will be areas of duplication and areas where efficiencies can be found. The Williams-Shapps Plan for Rail states that in five years’ time, savings of about £1.5 billion should be available after simplification and efficiencies. Those are the things we are trying to drive out of the system. We want passenger services to be as good as we can possibly make them because we really would like people to travel on our railways.

My Lords, does my noble friend have a view on the level of unionisation on the railways and what are the consequences of it for the cost of staff and pay?

My noble friend makes a very important point. All noble Lords will have seen that there is a level of unrest among the unions that represent those working on the railways. Sometimes I feel that their behaviour might be potentially counterproductive in the long term. For example, we have strikes at the moment on the London Underground where, because of the pay deal that was reached a couple of years ago, the staff will be getting a pay increase of 8%.

Can the Minister explain how raising fares and cutting subsidies to the train operating companies contributes to one of the key aims of levelling up, which is to improve public transport? I ask her to think about Yorkshire especially in this context.

My Lords, I am always thinking about Yorkshire. The noble Baroness raises an important point. There is an amount of money that will be going into the system, which will be used to service what is at the moment a lower number of passengers. That is where we must get the balance right. We must work with industry to support it on the initiatives and boost demand, also ensuring that the services are there when they are needed. The increase of 3.8%, compared with what inflation is currently, is not significant, given that we could have had a more significant increase had we used an RPI from a later month.

My Lords, I press the Minister a little more on the question asked by my noble friend Lord Rosser about Network Rail’s costs. I understand from many in the industry that Network Rail has been told to cut its costs by 40% in the coming year. That seems an enormous amount, compared with what it is doing at the moment and the need for safety. Can she confirm whether that is true or completely wrong?

I do not have that figure with me, but I will certainly write to the noble Lord with further details around Network Rail’s expectations for the coming years.

Does the reduction in passengers, which the Minister says may well be structural, not further endanger the investment case for HS2?

I do not think that is the case. Obviously there are various scenarios which we consider when we look at HS2. It is a very long-term strategic system. It connects many of our major cities across the country and, provided that we get local transport integrated with that investment with HS2, it will be successful.

There was an article in the paper this morning about closing many ticket offices. Is this likely to happen? If so, is that a better service for the passengers on our rail network?

Ticketing and fare reform is a key part of what we hope to do with Great British Railways. The leadership there will help with the mass of complicated fares which currently exist. We will be supplementing that with £360 million of investment in fares, ticketing and retailing. We will deliver contactless pay-as-you-go in 700 stations in urban areas across the country, including 400 stations in the north, and we will provide digital ticketing across the network and upgrade ticket vending machines. Obviously we will have to look at the number of ticket offices available, but we will also ensure that people get the level of customer support that they need.