Rising Cost of Transport

Jim Shannon Excerpts

Wednesday 9th January 2013 Commons Chamber

[Mrs Ellman]

People often travel at peak times because those are the times when they have to get to work. They have no choice. However, there are other ways of addressing the question of demand, and I shall say something about them later.

The report also talks of the importance of achieving efficiencies, although we think that the aim of making efficiency savings of £3.5 billion by 2018, as McNulty recommends, is a challenging one. The bringing together of different parts of the rail industry in the Rail Development Group, and through other means, is welcome, but it is important for the industry then to work in the interests of passengers and the taxpayer, not just in its own interests. It is also important for it not to cut corners and put safety at risk in order to achieve efficiencies. We have high safety standards which should not be jeopardised, and strong regulation is particularly important for that reason. The regulator needs to be able to act firmly and decisively.

Members have mentioned other means of achieving efficiencies and reducing fares, or at least reducing the rate of increase in fares. We need to think about smart ticketing and innovation, and about introducing more flexibility in the way in which fares policy is drawn up and implemented, which has been sadly lacking. There should also be more transparency in the use of public funds. It is extremely important for the rail service to receive a public subsidy, because it is a public service, but it is equally important for the £4 billion public subsidy going into the system this year to be dealt with in a way that people understand, so that they can assess whether it is being used effectively. Not all the information that we have at present enables them to do that.

[Jim Shannon (Strangford) (DUP)]

Will the hon. Lady give way?

[Mrs Ellman]

I am sorry, but my time is very limited.

Some information has been published about the subsidy for the London North Western route, which, we are told, amounted to £1.2 billion in 2010-11. That is a significant proportion of the £4 billion that is going into the overall system. The area covers wide expanses, including the west coast main line run by Virgin and Cumbrian rail services run by Northern Rail. We have been given an overall figure—a very major figure—but we do not know how the subsidy is allocated between different services, or indeed between different parts of the country. That is just one example of the need for more transparency so that we can assess whether subsidies are effective.

I welcome Network Rail’s recent announcement that more than £35 billion will be invested in the next control period, 2014-19. However, the Committee will look at the figures in detail and consider what they actually mean, and the rail regulator will look at them as well before anything is finally approved. It should be noted that although the announcement of more much-needed investment in the rail system has been welcomed, passengers have expressed the fear that they will have to pay for it through even higher fares, which renders the need to look again at a policy on regulated fares even more urgent. The Committee has asked Ministers to do that.

In due course there will be an opportunity to discuss the Committee’s complete findings, and we will do more work on rail franchising and rolling stock acquisitions, another important area in respect of savings. I hope my comments this afternoon have helped to inform the debate. Rail is increasingly popular and a good service is currently offered, but there is increasing concern about fare levels, and we must address that.

--- Later in debate ---

[Mark Lazarowicz]

Let us leave aside the fact that there are not many operators in the field to bid. I am not saying that an individual operator is necessarily inefficient, but that the system as a whole leads to inefficiencies as well as to profits being paid out to private companies when they could be invested in the system.

I said that not all companies are inefficient. One example that showed the difficulties and negative effects of privatisation at their highest was the disaster of Railtrack, which was linked not just to private ownership and that company’s motivation in its operations but to the fragmentation of the operators and Railtrack’s distance from the train operating companies. That example also shows how some of the damage caused by privatisation began to be turned around. It is not a perfect organisation, but the publicly owned Network Rail has managed to repair some of the damage caused by fragmentation of the system and we have seen a safer railway network and better value for the taxpayer, for passengers and for other users of the rail network in the costs of maintaining the system.

[Jim Shannon]

One of the greatest burdens for people in employment is that 30% of their wages can go on travel. People are travelling further, too, to get jobs and employment. Does the hon. Gentleman feel that consideration has been given to those people who regularly use public transport, be it bus or rail, to get to work?

[Mark Lazarowicz]

Absolutely. That is an example of how increased rail fares damage people daily and effectively worsen their standard of living.

The most recent example of the damage caused by the privatised regime on the railways has been the fiasco of the west coast main line franchise. That fiasco is likely to land the Department for Transport—and therefore the taxpayer—with a bill for hundreds of millions of pounds, which could have been spent on improvements to routes, stations and rolling stock. In contrast, we have the experience of the east coast main line, to which my hon. Friend the Member for Gateshead (Ian Mearns) referred earlier. Bringing the franchise into the public sector has been good business for the taxpayer and the directly operated company has brought money back into the public sector. In the last year, it has brought a premium of almost £200 million into the Department, which has gone back into the public sector rather than being siphoned off into a privately owned company.

The problem is that there is an inherent difficulty in the tendering system that operates on the railways under the privatisation scheme introduced by a previous Conservative Government. In order to bring about long-term investment and security, a Government will want to see long-term tenders, but the longer the tender the less reliable any prediction of future traffic and income can be. That leads to a risk of the tender becoming either a loss-maker, with the operator seeking to hand it back to the Government and to make them pick up the tab, or one in which excessive profits are reaped by the private operator. The system itself is at the heart of the problems with the railways and of the fact that money that could be used to benefit our passengers has unnecessarily flowed out of the rail system.

I want to concentrate on the east coast main line, which is of particular relevance to my constituency and to communities further south along the line. I urge the Government to drop the ideology and to choose the option that works and that will keep prices down for the traveller. They should keep the east coast line, which is successfully operated by Directly Operated Railways, in the public sector. I would rather that that was done on a permanent basis, but if the Government, for ideological reasons, are not prepared to do that, they should at least give the operators a long-term contract rather than leaving a sword of Damocles hanging over the company, the staff who work for it and the passengers and communities that rely on it.

The Government could also take the opportunity to allow Directly Operated Railways’ east coast line to be a genuine public sector comparator for the rest of the network. If the Government will insist on reprivatisation for the west coast main line, they should at least ensure that a public sector bid can be put on the table as a comparator against which we can judge which provides best value for money for the taxpayer and the best services for the passenger. That is the way forward. Let us start putting passengers first and make sure that they get the benefit of investment rather than the companies, which have taken too much out of the railways for too long since privatisation was introduced by a previous Conservative Government.