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26 Apr 2007 : Column 357WH—continued

As the hon. Member for Stroud (Mr. Drew) has pointed out, at some stations there are no ticketing facilities, and some passengers have to pay fares on board. Research shows that in a number of cases, because of overcrowding, revenue cannot be collected. I believe that the technical term these days for the personnel involved is not train manager or ticket inspector, but probably revenue protection officer, but none the less Passenger Focus found that on the routes that it examined 23 per cent. of its researchers were unable to buy a ticket at all. Over the weekend that figure rose to 58 per cent. That highlights the importance of the need for train operating companies to ensure that, before considering revenue increases, they collect the revenue that is already due to them. If the Government are to allow the rail companies to put through above-inflation fares, they should surely be establishing better mechanisms for collecting fares from existing customers with the TOCs within the franchise. For some people paying on the train seems to equate to free travel, and it cannot be acceptable to penalise travellers and passengers who are honest. A factor involved in the inability to collect revenue on trains is the fact that on the majority of routes trains are too overcrowded to enable rail staff to do their job properly.

That brings me to a central point about rail fare levels and value for money. More passengers are travelling on our networks now than there were before Beeching.
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That is a matter of fact. However, record patronage should not be an excuse for ignoring the problems of overcrowding. The Select Committee, in the report, accused the then rail Minister, now the Under-Secretary of State for Defence, the hon. Member for Halton (Derek Twigg), of “breathtaking complacency” for saying in evidence that he believed passenger satisfaction with the railways would go up. He was of course ignoring—I think that the report made this clear—the two sources of passenger dissatisfaction: overcrowding and the consequent perception of the fare’s value for money.

In its most recent publication on national rail trends, the Office of the Rail Regulator said that passengers are less satisfied with the level of overcrowding as demand continues to increase. That is something of an understatement. In recent months there have been protests and boycotts, as has been mentioned, about overcrowding and above-inflation fare increases. There is no official train capacity limit nationally, and there are specific targets only for peak commuter traffic into London and the south-east. That measurement is carried out, as I understand it, only once a year. The Government have set acceptable levels, but there is no current enforcement and no penalties if limits are broken.

Half the operating companies, however, are at the moment breaching the capacity limits on journeys into London during the London peak. South West Trains is now reaching a level 30 per cent. higher than what is suggested as the acceptable peak in the morning. In the afternoon, half the TOCs break the overall capacity limits, although they do so to a lesser extent than in the morning. Network Rail estimates that 70,000 passengers travelling into London must stand during what is now classified as the three-hour morning peak. However, things are somewhat worse when one looks behind those figures. Of those 70,000 people, 50,000 travel in the peak period between 8 and 9 am. There is a clear pattern of overcrowding.

Overcrowding is a problem across the railways, and research carried out four or five years ago showed that six out of the 10 most overcrowded routes are in the north. Indeed, there is a risk that current levels of crowding could reverse some of the improvements that have been made as a result of investment through Network Rail. The necessity for trains to wait longer at stations may lead to journeys being rescheduled to take longer. A key point, of course, is that, with overcrowding now a serious and endemic fault of our railways, it is hardly surprising that people are dissatisfied with the value that they get from the increasing train fares. The Passenger Focus survey showed that less than half of the people involved are satisfied that they are getting value for money on their routes. Complaints about fares come second only to complaints about train service performance, and the gap between the two has closed dramatically over the past year.

The railways have undergone record growth, but if there are more and more passengers on the railway, more and more capacity will be needed. Overcrowding has risen to unacceptable levels, and it is the fault of the Government that there has been a failure to meet the capacity challenge. The Government have recognised that challenge, but much of what will be put in place will not happen until 2014.

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The Parliamentary Under-Secretary of State for Transport (Mr. Tom Harris): Forgive me for intervening so early, but that was a point of misinformation, which should perhaps be clarified from the start, because it has been repeated by the hon. Gentleman’s Front-Bench colleagues. The investment in extra capacity planned for the next control period, 2009 to 2014, starts in 2009. The new trains will start to be delivered from next year.

Stephen Hammond: Let us press the Minister on that point. There has recently been an announcement about new trains for the inter-city express programme, and the figures given are between 500 and 2,000. Is the Minister telling us that we can expect 2,000 in 2009, or are we expecting 500? I do not know, because the announcement did not make it clear. It says that there will be between 500 and 2,000 new carriages to attack the capacity problem. The point is that 500 would be a basic replacement level, but 2,000 would make a difference. There is no timetable in the period in question. That is just one example.

Angel Trains, as the Minister will know, because he is the biggest buyer of trains, is the country’s biggest train leasing company and has said that it could deliver the trains in 2010. Is that what the Minister has just told us? Is that when those trains will be delivered? It would be delightful to hear from the Minister whether that is what he means when, in answer to my saying that the new capacity will not come about before 2014, he says it will happen at some time in the control period.

Mrs. Dunwoody: No one wants new capacity more than me, but the reality is that the railway industry has a lot of rolling stock mothballed throughout the country for various reasons, some of which are regulatory and many of which are commercial. Angel Trains knows that, and in many instances has been involved. If the rolling stock leasing companies were prepared to change their way of working, as well as their commitment, which I welcome, to new rolling stock, we could, in the event of a problem, undoubtedly use existing rolling stock in the interim, not only to update and improve people’s train experience, but to carry many more people. I am interested in the views of Angel Trains, but I am not altogether convinced that it is being 100 per cent. straightforward.

Stephen Hammond: I am interested to hear what the hon. Lady has to say. Indeed, a great amount of rolling stock has been mothballed or has not been brought back in. If the Government were to allow the TOCs to do so, and if they had not specified that in some of their franchise processes, the stock could have been brought back in. That is the reality of life and why I cannot agree with all that is in the report. The report should recognise the role that the Government play, and not only that which they play in respect of capacity. Within their role in respect of capacity comes a role in fares, and it is hugely important that that should be accepted.

There is a view that the Government are using fares to attempt to deal with overcrowding. Last summer, The Times talked about the new deal that was being put forward between the Department for Transport and
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First Group on a number of the commuter routes north of London. At the time, The Times accused the Government of striking a secret deal with the biggest rail company to double fares on that route as a way of solving overcrowding. Restrictions on fares were certainly placed on people travelling between London and dozens of stations to the north of the capital. Cheap day fares were no longer valid at times when they had normally been valid. That was part of the franchise specification and is why more people were forced to buy more expensive standard returns. That was exactly the point that the hon. Member for Richmond Park (Susan Kramer) was making about the length of the peak period and the shortening of the off-peak periods.

The Government’s decision to award the Thameslink/Great Northern franchise to First Group, would, they said,

However, the Government made no mention of the fare increase, even though First Group had made it clear to the Department at the time that the £800 million that would be paid over the nine years to run the franchise, as the franchise had specified, would depend on restricting cheap tickets and increasing fares. That is the essence of the issue.

The Select Committee report rightly commented that the TOCs have operated a complex fare structure, but the root cause for a number of the fare increases is the Government. At the moment, the Government seem to be saying, “It’s nothing to do with me, guv,” when they are talking about deregulated fares, yet the franchising system that they have imposed is causing fares to rise. Part of that is to do with the length of the franchises, but in the recent tendering period it has been due to the ever-increasing desire of the Government to recoup some of the subsidies that they are paying to Network Rail through the premiums that they are imposing, which are getting the bids up. The vast sums of money that they have spent though Network Rail—we all accept that such sums have been spent—since the demise of Railtrack are being recouped through the franchises. The TOCs are ratcheting up their bids in the knowledge that the overriding point of interest to the DFT and the Treasury is the size of the premium that they are prepared to pay.

Christopher Garnett, the former chief executive of GNER, made the well-publicised comment that it was better to drastically overbid for a new franchise than to underbid and lose it. When those bids are accepted, as the DFT is accepting them, that extra revenue can come only from one source, which is the passenger. That is why fares have risen, why they are rising and why they will continue to rise. The TOCs are a symptom of the fare increases. In almost all cases, the cause of the fare increases is the Government.

Comments have been made about the length of the franchises. The franchises have been re-awarded so that they are tightly specified and the TOCs are left with little room to innovate or to invest. It is clear that the franchising process is part of the reason why we are seeing large fare increases and why the problems in capacity are not being dealt with. Brian Cooke, the
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chairman of London TravelWatch, talking about that first bid for the franchise, said:

Mr. Cooke said that it would have been far better to deal with the overcrowding by adding extra carriages rather than pricing people off the afternoon and evening services, and we agree.

In January this year, regulated fares went up by the maximum of RPI plus 1, which is 4.3 per cent. The highest unregulated fare increase that I have seen, part of which was the harmonisation in London, was 56 per cent. in my constituency for people who wished to travel from South Merton into London. The report advocates greater involvement in the setting of fares through greater regulation. I contend that we need almost diametrically the opposite. There is too much intervention by Government in the setting of franchises and timetables and the micro-managing of our railway system. In many cases, the franchising process is driving the fares so high.

In their response to the Select Committee, the Government cite one of the benefits of not increasing regulation, stating that competition encourages innovation in the railways. I agree, but another Select Committee report on rail franchising states that the Government’s drive to extract higher premiums and their strict specification of franchises has hampered any efforts by the TOCs to innovate.

Paul Rowen: Will the hon. Gentleman explain how a train operating company is subject to competition, when no one else runs its route? That might be the case for a coach or bus operator, but it is certainly not the case for a train company. Does the hon. Gentleman not agree that there is a role for the Office of Rail Regulation?

Stephen Hammond: A train company is not subject to daily competition, clearly, but it is subject to competition at the renewal of the franchise. That is the time of competition. The hon. Gentleman and I are not subject to weekly competition for our jobs, thank goodness, but we are subject to review once every four or five years, at which stage we are accountable for our performance. That is the way in which the franchising process works.

I would contend that there is far too much intervention from the Government. The Government’s failure on the franchising process is best demonstrated by a company that bid far too high, had to charge far too much and then found itself in difficulties. Such a company was GNER. Mr. Garnett, the chief executive, had warned the Government that they could face a backlash over the tightening of control over rail franchising. He said that companies were losing the flexibility to run more trains, change timetables and to ensure that revenue was set against the public travel demand.

Mrs. Dunwoody: Did Mr. Garnett explain why he bid the amount that he did?

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Stephen Hammond: I quoted Mr. Garnett earlier, and he said that it is better for a corporate company to overbid seriously and to get the franchise than to underbid and not get it. That is a direct result of the franchising process and the Government and the Treasury’s attempt to recoup through premiums in that process—

Mr. Harris: How does the hon. Gentleman equate that quotation from Mr. Garnett with the comment by senior GNER management that the premium that the GNER franchise was committed to was eminently deliverable?

Stephen Hammond: I do not know. We will wait and see. The Minister might remember that he said in the House at Question Time earlier this year that he expects to get the same premiums out of that franchise—

Mr. Harris: For the record, and I am sorry for having to intervene quite so often, that is clearly and unequivocally what I did not say. If the hon. Gentleman looks back at Hansard, he will see that I made no such commitment. I need that to be on the record.

Stephen Hammond: Of course I accept the Minister’s word on that. I am sure that he will not mind if I go back to Hansard and quote to him exactly what he said.

Paul Rowen: Will the hon. Gentleman give way?

Stephen Hammond: No. Hold on, please. I am sure that if we find that the quote from Hansard is slightly different from either of our recollections, the Minister, being the fair man that he is, will wish to put on record exactly what he said. We will leave Mr. Garnett at that.

It is incontestable and right that the Government spend a huge amount on the railways, which are recognised as a public service, but all the money is going to Network Rail at the moment. Network Rail is not the organisation focused on passengers, so the subsidy is not going to make the experience of the trebling number of passengers a happier one or one that they feel is value for money. The current franchising process is too short, embodies little incentive for extra investment, does not tackle overcrowding and ensures higher fares.

The Transport Committee is right to say that fare structures are chaotic and that if passengers perceive rail travel to be too expensive, it is too expensive in some sense. It is right to criticise the TOCs for their shambolic pricing structure, but the report’s failing is its lack of recognition of the Government’s role in causing the fare increases. It is patently absurd to say that pricing is absurd, because it is determined by commercial considerations rather than considerations of the public good unless one accepts that the franchise documents according to which the TOCs must operate those service—in other words, the commercial reality—are dominated by the Government. The Government are trying to extract premiums from those franchises, so the Government must shoulder some, or in my opinion the greater proportion, of the blame for the recent fare increases.

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The report would have been stronger if it had acknowledged that, but it is none the less welcome. It makes increasingly urgent and important points about the TOCs’ behaviour and the lack of transparency and fair pricing, but it also highlights some of the Government’s failings in relation to the rail network.

3.42 pm

The Parliamentary Under-Secretary of State for Transport (Mr. Tom Harris): I congratulate my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) on securing this debate and providing the House with an opportunity to discuss the Transport Committee’s report on fares. It is an unexpected pleasure to be left with just short of 50 minutes—

Stephen Hammond: An hour and 20, for the record.

Mr. Harris: I am corrected. That is not usually the situation in Westminster Hall. I am usually left with about 10 minutes to sum up during debates.

Before speaking from my prepared notes, I shall comment on some of the contributions, starting with those of my hon. Friend. She made an excellent contribution. It was clear to see that her knowledge and devotion to the railway industry was shining through. I guess that her experience and knowledge of the industry are second to none. She will not expect me to agree with everything that she said; I think that she would be very surprised if I were to do so.

I take issue with a couple of my hon. Friend’s points. When saying that rail travel was becoming more expensive than travel by coach or car, its two main rivals, she suggested that fare increases were a decoy to distract attention from the fares that people actually pay. That is not a direct quote, but she said that she was worried that fares were rising much more quickly than those for alternative transport. I am sure that she is familiar with the piece of information that I am going to quote. It comes from page 5 of the Government’s response to her report. It states:

I understand my hon. Friend’s point. It is valid, and I shall talk later about what the Government are doing to facilitate simplification of the fare structure in the rail industry. However, it is simply not the case that passengers are being priced off the railways. Although fares in general have gone up by 9.3 per cent. over 11 years, that does not reflect what people are actually paying. Passengers, especially regular passengers—I accept that the weakness of this argument is that people who are not regular travellers do not have that expertise—have become expert over the past decade and a half at identifying the cheapest fares and exploiting the system, exactly as they should be doing.

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