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House of Commons Hansard
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Compensation for Rail Passengers
12 July 2016
Volume 613

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I beg to move,

That this House has considered compensation for rail passengers.

It is a great pleasure to serve under your chairmanship, Mr Evans. May I thank the Under-Secretary of State for Transport, my hon. Friend the Member for Devizes (Claire Perry), for being here to respond on behalf of the Government? May I also apologise to her for once again raising an issue involving trains?

My constituency, as the Minister knows, is home to many commuters. We are just under an hour away from London Liverpool Street station, and tens of thousands of my constituents travel on the Great Eastern main line every day. I admit that they have many complaints—short formations; staff members being unavailable; broken toilets; and services disrupted by too much rain, wind, sun and every other type of weather. My Twitter feed is often inundated with criticisms of our train operator; most are valid, and some less so.

All of us in this House know that few things are more annoying than a delayed train. All too often, we have swept this issue under the carpet by saying that at least the trains are clean, and with laptops we can still work, even if we are delayed. We prioritise new rolling stock and free wi-fi as part of new franchises, but let us be clear. We cannot just think of these people as passengers stuck in a carriage going nowhere and being a bit annoyed. They are commuters who cannot make it into work due to factors beyond their control, and job insecurity can follow. They are parents unable to get home in time to have dinner with their children or put them to bed, missing out on something so important to their lives.

I would like to take this opportunity to applaud the Government for recognising this issue and not only investing in our railways but committing to reducing the threshold for compensation to 15 minutes from half an hour. The Government are also extending the Consumer Rights Act 2015 to our railways, which will allow for compensation when the service our constituents receive does not meet expectations. I have some thoughts on this matter—particularly on the urgency of implementation, but I will spare the Minister those on this occasion. Much more needs to be done on making it as easy as possible for passengers to receive any compensation they are owed. I hope the Minister will agree that the end point must be commuters automatically receiving compensation when their train is delayed.

Another issue, which is potentially even more frustrating, is that many franchise holders may be profiting from these delays. As I have mentioned, passengers are currently able to claim for compensation from train operators when they suffer delays greater than 30 minutes. What many probably do not realise is that Network Rail pays out compensation to train operators whenever there is disruption on the track. That compensation is known as schedule 8 payments. The guidance on those payments states that their purpose is to

“compensate train operators for the financial impact of poor performance attributable to Network Rail and other train operators”.

That is not unreasonable; I do not think any of us would believe it is. Given that we do not have vertically integrated lines, Network Rail is responsible for track and signalling. Who would want to take on a franchise if they were financially liable for things beyond their control?

The problem is that there can be a big gap between the amount of compensation train operators receive from Network Rail through schedule 8 payments and the amount of compensation then paid out to passengers for delays. For example, Abellio Greater Anglia—the train operator that runs the line in my constituency—last year received £8.56 million in compensation from Network Rail for disruption. How much did it pay out to passengers for delays that year? Just £2.3 million. That is a subsidy of more than £6 million, and it is not a one-off. East Midlands Trains received £11 million from Network Rail but only paid out £516,000 to passengers. Southeastern received £7.09 million but paid out £1.35 million. Southern, which we know has issues at the moment, received £28.54 million from Network Rail and paid only £1.6 million to passengers. That is nearly a £27 million difference.

I know that train operators would say we cannot compare those figures and that they measure different things, but my response is simple. On seeing the massive subsidies for delays that operators are receiving, the average person will ask, “What incentive do our franchise holders have to push Network Rail to tackle these issues? Why would they demand better infrastructure when they are profiting from my disruption as a commuter?” As I mentioned, I welcome the Government cutting the threshold for when passengers can receive compensation. However, I truly believe we need further reform. We need to deal with the subsidy for delays.

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May I praise my hon. Friend for securing this debate on an extremely important issue and for the research he has done into the figures? It is essential that we highlight what is effectively a double subsidy. After all, it is a subsidy to Network Rail from the taxpaying population who are using the trains to get to work that is going back to the train companies they are already buying tickets from. It seems rather extraordinary that people are now paying twice for delayed trains, not just once.

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My hon. Friend raises a good point. I strongly believe that rail operators should not receive more in schedule 8 payments than their passengers receive in compensation for delays and the cost of handling the disruption, and I have a solution.

One option is to claw back the difference to Network Rail and ring-fence the money for infrastructure improvements in the line, which I am sure the Minister would like. That would tackle the issue by ensuring that the necessary infrastructure was funded and delivered on. However, given that we believe very much in devolution, localism and empowering our constituents, we should ensure that passengers have a say on how the money is used, even if it is not in the form of direct compensation. I suggest that the Government seek to change the terms of our franchise agreements to require that, at the end of every financial year, train operators put any net difference between these amounts into a fund to be controlled by a local railway panel. That panel could be modelled on local highways panels and involve local authorities, businesses and rail passenger groups. It would listen to passengers on how they would like the extra funds to be used to improve their railway, whether it is through extra benches at stations, cleaner trains, stronger wi-fi or more staff.

I accept that that may not be possible without being subject to judicial review while train operators have existing franchise contracts. Instead, we should make those conditions part of all new franchise agreements, coming into effect on each line whenever the franchise comes up for renewal. No one disagrees with Network Rail compensating franchise holders when there are delays due to infrastructure problems, but it is not right that train operating companies are able to receive more money in compensation for delays than they pay out to their passengers. It is a subsidy for failure. We need to stop rail operators profiting from the disruption of passengers’ lives and end the subsidy they are receiving from delays.

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It is the norm for Members to have the permission of the proposer of the motion and the Minister if they wish to speak, but if both are happy, there is time.

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indicated assent.

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Delighted.

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My apologies, Mr Evans. It is a pleasure to serve under your chairmanship. I am grateful to the hon. Member for Colchester (Will Quince) for securing this debate and permitting me to speak in it.

As the Minister knows, my constituents are currently subject to the most appalling rail services, made catastrophically worse this week by the introduction of the emergency timetable on the Southern railway part of the network, which has seen as many as four out of five trains per hour completely withdrawn from stations in my constituency.

In that context, I would like to raise two issues about compensation. The first relates to the compensation scheme as it currently works for commuter rail services in the metropolitan area in a normal scenario. Even with a reduction to a 15-minute delay for eligibility for compensation, the compensation scheme is still designed for longer journeys. My constituents commuting into central London have a maximum journey time of 25 minutes from the furthest away station in the constituency, so a 30-minute delay is a delay of more than 100% of their scheduled journey time and a 15-minute delay is still a delay of more than 50% of their journey time. In some cases, there has to be a delay double the scheduled journey time before they are eligible for compensation. The compensation scheme needs to be revised in order to be fit for purpose in normal circumstances for commuter rail services in London.

The second issue is the utter inadequacy of compensation arrangements in the context of the current Southern railway emergency timetable. To claim compensation at all, passengers need to demonstrate proof that they have taken the journey that they set out to take. This week in my constituency, all trains stopping on the Southern railway network in my constituency are full. There is no possibility of my constituents taking the trains that they set out to take, because they simply cannot board them. I will add that I was horrified, after reading that Southern rail is advertising a replacement bus service, to learn that no replacement bus service is provided by Southern rail at all. It is asking passengers to get on existing and already overcrowded Transport for London bus services. Essentially, it is just asking passengers to make their journey by any other means possible. My question to the Minister is this: how are my constituents to be compensated in the current context for what is in effect the large-scale withdrawal of commuter rail services from south-east London?

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It is always a pleasure to serve under your chairmanship, Mr Evans. If my hon. Friend the Member for Colchester (Will Quince) will forgive me, I will try to address directly the points made by the hon. Member for Dulwich and West Norwood (Helen Hayes), because of course the Southern rail situation is very much at the front of my mind and the minds of others.

The hon. Lady knows that the emergency timetable was put in place to try to restore some reliability to the services. It was almost impossible for someone to know whether they could actually get on a train and get home, and a decision was taken—I am sorry it has affected the hon. Lady’s constituents in that way—that where there were alternative services, whereby people could make an alternative journey on an additional service, the services would be withdrawn temporarily in order that 85% of the services could run. I was not aware that the replacement bus services to which she referred were actually just an invitation to take a bus journey, so I will certainly take that up, because I had reviewed carefully the planning of alternative provision and was told that it was satisfactory.

The hon. Lady’s point about compensation is well made. From my right hon. Friend the Prime Minister downwards, there have been conversations about how to target compensation for a sustained period of disruption. As the hon. Lady knows, back in April, when we met, performance on the whole network was running at about 84%. That was not good enough, but it was certainly on an upward trend. Since then, a whole series of issues, particularly in relation to industrial action, have caused the service in effect to become completely unreliable. I welcome the company’s commitment to reliability. The determination to get the majority of people to work and home in a more predictable pattern is good, but I take her point about compensation seriously, and although I cannot answer it today, I will certainly come back to her in the weeks ahead.

Let me turn to the substance of my hon. Friend’s debate. I congratulate him, as my hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) did, on once again being an extremely eloquent and well informed presenter of his arguments. He is always a joy to work with and to listen to, and although I may not have all the answers, he certainly always prompts me to go away and think even harder about the problems. I am also grateful for the other views that were expressed.

The logic of my hon. Friend the Member for Colchester is of course impeccable. When we look at the numbers, it does seem very bizarre that companies are paid compensation by Network Rail that they then do not pay out fully to customers. He and I know that behind the very clear logic is a whole series of complicated financial relationships relating to a future earnings hit to franchising, and relating to the fact that many franchises are not in a premium-paying position. They are subsidised by the taxpayer because of the social benefit of rail, so simply to say that the money should automatically be paid out to passengers risks unpicking the financial relationships and contracts that sit behind the railway system today.

However, I completely agree with my hon. Friend that, for too long, people taking train services have been almost treated as an afterthought in the system. One of the things that I have been so pleased to see in my last two years as Minister with responsibility for rail is that customers are being put front and centre of the franchising process. My hon. Friend will know from the current franchise competition on his line of the absolute commitment to delivering a much better service on brand-new trains and contracting for that. It is not contracting for the inputs—“Do you clean your stations; do you buy trains?”—but considering what the service actually looks like for customers. That is the start of a long focus on customer satisfaction that we all need to get to.

I will touch on the technical points about schedule 8 just in case there is one fact that my hon. Friend does not know, although I suspect that is unlikely, given that he is right across this brief. Schedule 8 payments compensate train operators for delays of which Network Rail is the cause. That is a contractual and commercially confidential element set up between Network Rail and each operator, overseen in this case by the regulator, not the Department. It does not include provision for additional costs, so train operators may argue that they pay out almost from a separate pot to compensate for provision of alternative bus services or, indeed, other compensation payments.

The compensation regime across the country is based on the passengers charter. As hon. Members will know, there is a discrepancy between some operators, which pay out on delay repay—I will address later the point about delay repay 30—and those that are still on the national conditions of carriage, which is a slightly less generous regime. Hon. Members will know that the Government are determined to get all franchises on to the same basis through the process of negotiating about franchising. Actually, we want to accelerate that through negotiations and perhaps not just wait for the franchises to come up for renewal. Interestingly, the headline compensation numbers for delay repay show that they are among the most generous in Europe, certainly when compared with other transport systems. People do not get a compensation payment if, for example, their long-distance coach is delayed; they just have to sit there and suck it up.

There was a proposal earlier this year. I was advised that we should have a permanent exemption for the railway industry from the Consumer Rights Act 2015, which I completely rejected, because in my view train companies are simply providing customers with a service. In this case, it happens to be taking a train from A to B. There was no logic in providing a permanent exemption, so I have granted basically a one-year grace period for the industry to get itself aligned before that Act comes completely into force. Of course, the work that Nicola Shaw has done for the Department, whereby she proposes aligning Network Rail’s route provision much more closely with the operating companies and joining that up, is another way of ensuring that those companies deliver a much more flexible and responsive service.

Currently, as was pointed out by the hon. Member for Dulwich and West Norwood—I consider the hon. Lady a friend—we have a T-plus-30 trigger point for delay repay, which is not appropriate for many metro-style journeys. The other problem is that not everyone claims. Indeed, estimates suggest that only 12% of those who are eligible actually put in a claim.

The Department has been doing two things: first, it has been looking at how best to introduce a T plus 15 for delay repay, which I hope to be announcing shortly. I am not sure what the average journey time is for the hon. Lady’s constituents, but there is the possibility that it will capture at least some of them. Secondly, the Department has been looking at improving how compensation is paid. For example, compensation used to be paid in vouchers, which seems ridiculous in a world where people use cash or cards. That has been changed so that all passengers can receive compensation in cash instead of in rail vouchers.

We are also very much committed to the idea of automatic compensation, and I want to highlight the work that c2c has done on the Southend lines. It will be of interest to the hon. Lady, because c2c customers who are using its automatic payment card—about 25% of season-ticket holders—start to receive compensation if their train is delayed by even a minute. It is a pence-per-minute deal, so it means that their time is valuable. I think it starts after two minutes of delay—the clock is ticking and they receive compensation—and we want to see that right across the industry. Hon. Members will also be aware that Virgin Trains West Coast has introduced automatic compensation. If someone books a ticket through their website, they do not have to do anything to claim should the train be delayed; the money will automatically come through to their account.

There has been a lot of progress in the industry on compensation, but I absolutely recognise the point that my hon. Friend the Member for Colchester has made. I am very keen to think about—either through franchising or through some of the alternative structures that Nicola Shaw suggested—how we can hold money that is paid out for poor performance in a way that targets it more specifically towards improvements on the line. My hon. Friend knows that I am sympathetic to the spirit of his proposal. It is a question of how we make it work in the often byzantine world of current railway structures.

Ultimately, what customers want is not to have to faff around with compensation claims; they want a reliable service that they can depend on to get to work and to get home. A major change that we are starting to see is about capturing the value of that reliability. I hope hon. Friends and hon. Members in the Chamber will have noticed the move among those in the industry to stop talking about punctuality as a train that arrives between five and 10 minutes late, focusing instead on the “right time”. If we arrive 10 minutes late to a debate, we are late, even though, in train terms, we are perfectly on time and everything is normal. I want to flag up the recent industry-led proposals to move to a “right time” railway and to measure performance and compensation claims from the “right time”, which the industry is moving rapidly to introduce. Ultimately, we want a “right time” railway, where people are confident in its reliability. That is what is driving this Government’s record investment in rail, but I am very sympathetic to all the points that have been made today, because if customers do not see and feel that benefit, we are not all collectively doing our job.

Question put and agreed to.

Sitting suspended.