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Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence


Memorandum by the Association of Train Operating Companies (ATOC) (IT 72)

THE GOVERNMENT INTEGRATED TRANSPORT WHITE PAPER

1. INTRODUCTION

  The Association of Train Operating Companies (ATOC) is the official voice of the passenger rail industry and is a provider of important mandatory and voluntary activities.

  The Association welcomes the inquiry of the Environment, Transport and the Regions Committee into the Government's Transport White Paper "A New Deal for Transport: Better for Everyone" (CM 3950) (and its associated Rail Paper "The Government's Response to the Environment, Transport and Regional Affairs Committee's Report on the Proposed SRA and Railway Regulation", (CM 4024). The Association is also responding to the papers "Travel Choices for Scotland" (CM 4010) and "Transporting Wales into the Future" (Welsh Office).

  ATOC members warmly welcomes and endorse the Government's proposals and stand ready to help implement them. They have a shared objective with Government of attracting more passengers onto rail through improving customer benefits and value for money. The response outlined below is the initial comment from passenger train operators to these published papers based on the information currently available. ATOC feels more clarification is required in a number of areas, and that this will form a focus for further discussion over the detail and implementation of the proposals.

2. SUMMARY OF KEY POINTS

  1. Strategic Rail Authority (SRA) should be strategic, not operational, an "engine for growth" and "railway's champion" in arguing for rail investment. SRA should also resolve conflicts over priorities between different types of operators. More clarification is required of the SRA's interaction with other bodies such as the Scottish Parliament, Welsh Assembly and Greater London Authority, and in promoting local transport plans.

  2. ATO welcomes the establishment of new funding sources and strongly endorses the introduction of congestion charging and non-residential car parking charges with hypothecated revenues in order to fund public transport schemes prioritised in local transport plans. Such hypothecation was clearly backed by ATOC's own MORI poll.

  3. Capacity limitations (i.e., "pinchpoints") should be addressed to meet the reasonable requirements of the train operators and to avoid potential mismatch between passenger growth forecasts and train path capacity.

  4. Train companies welcome the Government's intention to form a positive new relationship, but emphasise a more supportive approach and greater recognition of real gains being made by train companies is required alongside fair criticism.

  5. Train operators readily accept that future franchises will be awarded on the basis of performance. The Government needs to lay down its preferred criteria for renegotiation or extension of franchises at the earliest stage to avoid an investment hiatus. A select number of franchises should be re-negotiated early to avoid bunching as franchises come up for renewal.

  6. ATOC welcomes proposed regulatory changes as answering the call for simpler regulation and avoidance of duplication. The balance between incentives and sanctions must be carefully judged.

  7. Train operators regard safety as paramount and are co-operating fully with the HSC/HSE review. Adequate safety controls should apply to all other modes.

  8. ATOC are guardians of network benefits and will co-operate closely with the SRA to promote, enhance and safeguard the benefits to customers of the network.

  9. On fares, recent research shows average fares (pence/mile) have fallen in real terms over the last three years and this has occurred before further cuts under an RPI-1 per cent formula for regulated fares comes in in 1999 for four consecutive years. This is in contrast to a 21 per cent rise in real terms in 1986-95. Inter-available and through tickets are fully protected and continue to be fully available nationally. Unrestricted walk up fare sales have increased by more than advance purchase fares.

  10. Train operators now offer a wide range of excellent value and locally tailored fares that have been a big contribution to 7 per cent annual growth in rail journeys (twice the rate of economic growth).

  11. The railways now carry more passengers than before the Beeching Axe and more than the BR boom of the late 1980s. The Government's objectives would be more successfully met by the SRA setting the strategy for growth with operational/commercial decisions left with operators.

  12. Train operators endorse and will co-operate in helping the Government to create a national public transport information service. ATOC signed a contract to provide the Rail Journey Information System (RJIS) in July 1998.

  13. On ROSCOs, train operators have concluded that agreement rather than regulation is the best way forward—though effective implementation of codes of practice is required.

  14. Open access rail competition is complex, with both benefits and pitfalls. Co-operation between operators may bring greater benefits than through competition.

3. DETAILED RESPONSE

3.1 The Strategic Rail Authority (SRA)

  1. Train operators welcome the establishment of an SRA. We believe the SRA must be strategic and not operational—and that this is well reflected in the Government's proposals.

  2. ATOC believes the SRA should be an "engine for growth" and a source of pump priming funds. The proposals to set targets, to provide investment funding in order to overcome capacity constraints, and promote local partnerships are all consistent with this model.

  3. ATOC sees the SRA as the "railway's champion" in arguing the case for rail investment with other Government departments and bodies such as Regional Development Agencies.

  4. Train operators look to the Government to set the strategic overview for the pattern of services required by national transport, environment and economic policies. Franchises are contracts that are flexible enough and disciplined enough to be used to implement a chosen strategy.

  As the paper makes clear, it is for the Government and the SRA to specify which services they wish to purchase. Train operators are more than willing to provide this specified service for a fair return.

  5. Train operators recognise a potential conflict of priorities between different types of operators, e.g., between passenger and freight trains, and high-speed and stopping trains. An SRA can play a useful role in helping to resolve such conflicts, with due regard to commercial imperatives but without getting involved in the minutiae of operational planning and control. ATOC looks to the SRA to ensure that both passenger and freight growth is optimised.

  6. The SRA's role in the delivery of network benefits which are of genuine value to the passenger is welcomed. Train companies will be very willing to co-operate in order to satisfy their customers.

  7. Similarly in regard to fares the SRA will need to acknowledge the differing needs of different sectors of the market, both regionally and locally, and different segments of the population. One of the advantages of the devolved operating units is the closeness of them to their markets. This valuable bond should not be stifled by centrally imposed national programmes, or value for money for customers with local needs may be compromised.

  8. More clarification is required too of how the SRA will interact with other bodies, such as the new Greater London Authority, Scottish Parliament, Welsh Assembly and others. Though this will become clearer through the process of evaluation and development, at this stage there seems to be a risk of bureaucratic muddle if boundaries are not tightly defined. For example, the Scottish Executive will have responsibility for the funding of rail services in Scotland, and the relationship with the SRA and exact division of responsibility needs clarification.

  9. Further details are welcomed of the SRA's role in helping to promote the railway within an integrated transport system. ATOC has argued for a more generic attitude-changing Government advertising campaign to promote public transport.

  10. Train operators are enthusiastic about the pursuit of growth, and franchise contracts already anticipate TOCs achieving a 25 per cent increase in passenger numbers over the length of their franchise periods. More details of how targets will be arrived at by the SRA would be helpful, and what action will be required to assist Railtrack in providing the necessary track and signalling capacity.

3.2 Public Transport Investment: New sources of funding

  1. Train operators are delighted at the Government's establishment of new funding sources for investment in public transport—£100 million pledged for an Infrastructure Investment Fund with extra funds for Rail Passenger partnership Schemes and to establish 150 new public transport plans. ATOC believes investment is the key to delivering better public transport and to cater for desired growth in rail travel.

  2. ATOC regards the introduction of congestion charging and non-residential car parking charges, with the revenue stream derived being hypotheticated to fund public transport schemes prioritised in local transport plans, as a vital component of a solution to road traffic congestions.

   ATOC's own MORI survey (May 1998) indicated that there is a strong need for radical action: 92 per cent of people think road congestion is a serious problem, 89 per cent think the Government should make it a high priority, and 76 per cent would be happy to see car use restricted if there was a better integrated transport system.

  The importance of hypothecation is vividly illustrated: 71 per cent would support an extra tax on vehicles entering urban areas—as long as the money raised is used to improve the public transport system; but 75 per cent would oppose a congestion tax—if the money just goes to the Treasury.

  3. Such road regimes would help rebalance public understanding of the true costs of different modes of transport.

  4. ATOC members identified capacity limitation or "pinch-points" on the network as part of the evidence given to the Environment Transport and Regional Affairs Committee (in the transport Sub-Committee's previous inquiry into the SRA and Regulation). The majority are those identified as Annex F of the White Paper. The focus of an Infrastructure Investment Fund in addition to Railtrack investment will provide funding for important projects of strategic value but with longer term paybacks. These are sort of important projects which franchise term investment lengths do not made commercially feasible.

  5. It is important to ensure the infrastructure capacity provided by Railtrack meets the reasonable requirements of the train operators and their customs, to avoid a potential mismatch between passenger growth forecasts and train pact capacity.

  6. The 25 franchised train operation companies already have strong local relationships with local authorities and use groups (please see Appendix ). These are vital and must be built on in order to develop the Rail Passenger Partnerships the government has envisaged. Train operators welcome the opportunity to develop better local and regional rail services in co-operation with such bodies.

  7. More details are required on the funding and criteria for the success of such partnerships, so that train operators can prepare to play a highly active part in participating in and driving such schemes.

3.3 Franchise Management, Re-letting and Extensions

  1. Train operators very much welcome the Government's intention to form a positive new relationship with train operators and also their emphasis on combining pragmatism with a strategic view based on our substantial common goals. Train companies stress that this will necessitate a more supportive approach and a greater recognition of the real gains being made alongside the criticism—where that if fair and justified.

  2. ATOC believes that it is essential for the Government to lay down its preferred criteria for the award or extensions of franchises at the earliest stage, to allow train operators to plan well ahead, and to avoid an investment hiatus in the intervening period.

  3. ATOC believes a substantial passenger dividend in terms of enhanced investment in new trains, better stations, more services, can be gains from the re-negotiation of franchises where appropriate.

  4. Train operators fully accept that the Government will award future franchises on the basis of performance. The train operators' commercial objectives coincide with the Government's political and economic objectives, which are to attract more passengers to rail. Train operators readily believe that the service delivered to the passenger is the most important basis on which to judge a train company's success.

  5. But such criteria must be fairly applied and take into account the large variations inherent across different franchises which were different in nature at the start and correspondingly require varying levels of investment, and the performance of the infrastructure provider.

  6. Train operators suggest that Government should re-negotiate a select number of franchises quickly, and, if necessary, in advance of the SRA, to avoid the bunching of franchise re-letting and to spread the impact of investment uncertainty predicted at the end of franchise periods.

  7. Train operators are already heavily incentivised and motivated through OPRAF and the fare box, to increase their customer carrying through improved service, which both the Government and train companies wish to see.

3.4 Regulations Regulators and Sanctions

  1. We welcome the proposals for the new regulatory structures, as answering ATOC's call for simpler regulation and the avoidance of duplication. ATOC also welcomes a continuing role for an independent Rail Regulator, particularly with the emphasis on monopoly markets, as train operators recommended to Government.

  2. Train operators applaud moves to prevent any penalties levied leaving the rail industry through payments back to the Treasury's Consolidated Fund. This can create a vicious circle: where penalties, which may have to be found from investment funds, are lost to the industry in entirety.

  3. In assessing sanctions, the Government should weigh up the relative benefits of securing extra investment for the gain of passengers in the place of financial penalties, which may act to deter investment. Fines may not be the best sanction available for passengers, the Government, nor train company investors.

  4. The balance between incentives and sanctions needs to be carefully judged.

3.5 Rail Safety

  1. Train operators regard safety as paramount, and every train company has safety as their top priority.

  2. Train operators welcome the HSC/HSE reviews, and are co-operating fully with them.

  3. Train operators are encouraged at the Government's recognition that "the long improvement in rail safety is continuing" (in contrast to many misinformed media reports). The train operators are not complacent and are very willing to co-operate to enhance justifiable safety measures across the rail network.

  4. Train operating companies also look to the Government and the new Integrated Transport Commission to ensure that adequate safety controls apply to all other modes.

3.6 Network Benefits

  1. ATOC are the guardians of network benefits, with responsibilities for core functions such as through and inter-available ticketing, the National Rail Enquiry Service, revenue allocation between operators, national Railcards and industry-wide initiatives and codes of practice. Examples of ATOC's co-ordinating role over network benefits are given in Appendix 2.

  2. ATOC is developing a campaign to promote the benefits of the network will improve customer understanding and appreciation of rail travel, and throughout the country.

  3. ATOC will co-operate closely with the SRA to promote, enhance and safeguard the benefits to customers of the network. Train operators are fully committed and many rely heavily on passengers arriving and leaving on other operators' services as well as other transport modes.

  4. Connections are always planned to provide maximum passenger benefit, within commercial realities. Daily operations of connections must be managed to maximise total convenience: to hold a connection for a few customers at one point may lead to many missed connections elsewhere.

  5. Train operators very much welcome the amendments to prohibitions in the Competition Bill to allow mutual co-operation in the interests of connections, timetabling and integration. ATOC takes issue with the description of a fragmented railway; the railway is disaggregated but it has not disintegrated. Train operators work closely together, often through ATOC, for the benefit of passengers. For example, there are voluntary codes agreed for personal security; timetabling, disruptions, connections. All 25 TOCs voluntarily agreed to support the Government's New Deal Photocard and were able to develop and launch the product very quickly.

3.7 Fares Issues

  1. Train operators are very concerned with the lack of understanding over issues of price and complexity of fares—including uncertainty over the stability of fare types. The key facts are:

    —  the cost of rail travel rose by 75 per cent in real terms between 1974 and 1996;

    —  rail fares rose by 21 per cent in real terms between 1986 and 1995 (Source: DETR).

  2. In contrast, major advances have now been made on rail fares. The key facts are:

    —  average rail fares have fallen by 1 per cent in real terms over the last three years, 1995-96 to 1997-98 (pence per mile);

    —  fares regulation has worked: regulated rail fares have fallen over the last three years, whilst unregulated fares have held steady or fallen due to the disciplines of competition (Source: OPRAF research);

    —  from January 1999, key regulated fares (savers/ordinary returns/season tickets) will fall in real terms (by less than inflation)—by RPI—1 per cent every year for four consecutive years.

  3. It is not true that good value discounted fares have taken the place of inter-available tickets. Inter-available and through tickets are fully protected and continue to be fully available nationally.

  4. Nor is it true that unrestricted walk up type fares, such as savers, have been marginalised at the expense of advance purchase fares: these fares, as a percentage of main ticket types, have increased from only 1 per cent to 2 per cent while unrestricted walk up fares have increased from 34 per cent to 37 per cent. (Please see Appendix 3).

  5. One of the key benefits of the new railways is more acute understanding of local market needs. This has been a key contributor to growth of 7 per cent in passenger rail journeys two years running—twice the rate of economic growth. This growth is at a much faster rate than that envisaged for franchises.

  6. Train operators now offer a wide range of excellent value fares. Some examples are listed in Appendix 4.

  7. Rail travel has been grown through understanding the customer's needs and tailoring products and services accordingly. Success in attracting more passengers is better achieved with a "bottom up" approach rather than a "top down" one. We believe that to achieve the Government's objectives successfully will require the SRA to set a strategy (for growth) but allow operational and commercial decisions to be left with the train companies.

  8. The complexity criticised by the Government existed under British Rail. Furthermore, greater choice may necessitate extra complexity.

   Whilst special promotions have added to the choice of fares available, new technology (such as the new Rail Journey Information System) will be able to handle increasing complexity of information accurately and speedily. Good value rail fares are essential to winning passengers to the railways, and there is a concern that too much central control could stifle the very growth it is trying to encourage.

  9. ATOC will be seeking further clarification of the Government's concessionary fares proposals for buses, especially where this might have adverse impact on rail's competitive position, such as along local corridors.

  10. Some train operators are already well advanced in evaluating the benefits of offering a carnet-form product amongst many other product innovations, and ATOC are happy to work with the Government on this. ScotRail already offers a "Flexipass" 10-ticket carnet for travel in the Highlands, for example the £21 Nairn Inverness Flexipass.

3.8 Role of New Technology—Information Systems and Smart Cards

  1. Train operators fully endorse Government's commitment to a national public transport information system, and are very willing to work in co-operation with Government to assist them in meeting that target.

  2. Such a system covering rail and many interconnecting bus and ferry services already exist. Significant improvements are also in hand. ATOC signed a £25 million contract with ICL in July 1998 for "RJIS"—the Rail Journey Information System. RJIS will provide faster, more accurate and far more comprehensive information at railway stations and inquiry centres. The extensive "data warehouse" will be made available for Internet and other information service access. Details of station facilities, such as tax availability, bus times and disabled access would all be available.

   Such rail based systems will be the cornerstone of any future integrated public transport information system.

  3. Some operations are already evaluating smartcard tickets and "ticketless travel" initiatives.

  4. ATOC has already drawn attention to the need for encouragement to be given to fellow integrated transport operators, particularly some local bus companies, to provide regular an d accurate timetabling, routing and fares information in order to make a public transport information service workable.

  5. Other transport providers will need to develop a modal system to similar delivery standards. Integration will require significant resources and management.

3.9 Rolling Stock Leasing Companies (ROSCOs)

  1. Having evaluated the more detailed case for regulation of ROSCOs, train operators concluded that the best way forward was through agreement (with sufficient safeguards) rather than through regulation.

  2. Train operators will continue to work closely in consultation with the Regulator to ensure a fair leasing market through effective implementation of codes of practice; and will review their position on the basis of that experience.

3.10 Open Access Competition on the Railways

  1. Open Access competition is a complex issue, with considerable potential benefits to customers but also with serious potential pitfalls. Train operators vary in their support for open access, depending on their ability to operate extra services and the potential impact on their own franchise areas. Greater benefit to the network may be achieved through co-operation between train operators (such as the new GWT/Thames Trains Oxford to Bristol service) rather than through competition.

  2. The illustrated criteria of limited competition subject to safeguards (not allowing undermining of existing services supported by taxpayer nor of reducing network benefits) we regard as sensible.

  3. The viability must be judged on the potential of added value to customers (and on the impact on existing services and on the current contracts).

3.11 Planning Issues

  1. ATOC welcomes the review of planning policy guidance laid down in the White Paper, particularly the provision of a proper framework to deliver integrated transport policy at local levels.

  2. Land use planning is an essential determinant of patterns and modes of transport use. It is essential that planning policy, particularly at local and regional levels, acts to deter the kind of development which necessitates excessive car use—such as out of town shopping, leisure, office and hospital developments. Such developments can deprive people of choice—particularly the one-third of households without cars—and require others to become totally dependent on their cars.

  3. A tightening of PPG 12 and 13 is desirable to protect more successfully rail corridors which may have future potential in the light of local transport plans and additional infrastructural investment.

  4. Establishing an SRA, in partnership with local authorities, can ensure a proper strategic view of the future use of such corridors. If property is built across rail routes, the consequences can either be extremely expensive to rectify or totally frustrate restoration of rail lines.

  5. Action to help encourage better liaison and participation with local bus partner operators is welcome.

3.12 Commission for Integrated Transport

  1. ATOC is interested to note the proposed establishment of such a Commission, and would be more than willing to serve as a member of such a Commission, if helpful, and to contribute from our sources of information.

  2. We feel clearer guidance is needed for the Commission's relationship with the SRA, and of any inherent overlap or capacity for confusion, particularly in the setting and monitoring of targets. Further details are required of how the Commission would seek to "foster consensus" among practical providers, such as train operators.

3.13 Sale of British Railways Board (BRB) Lands

  1. ATOC have been actively involved in the campaign to tackle the problems inherent in the sale of railway lands by the BRB—as part of the Railway Lands group led by Transport 2000. We therefore welcome the supervision of land sales to allow a considered reappraisal of sites. ATOC was a co-signatory of the joint letter sent to ministers by the GROUP alerting them to the issue. All train operating companies have been asked through ATOC to highlight present and future land sites of potential concern and, for example, there is a concern that a supermarket development at Borough Green (Kent) would compromise plans to expand important rail car park facilities.


 
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