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Stephen Hammond: We should be clear about what that statement said. It indeed said that First Great Western had underestimated the number of required carriages, but it went on to point out that that was partly attributable to the problem of getting back carriages that had been available to the previous franchise and that had been sent off for maintenance. It did not say that the Government had not issued a requirement; it said that First Great Western had made a serious error in relation to the sufficiently early return of the carriages that had been sent for maintenance. That is a different point.

Mr. Harris: I am a little weary of dwelling on the present point for too long, as it is not directly about fares. It remains the case that the Government cannot fairly be accused of telling First Great Western to remove carriages.

The hon. Gentleman made a different, substantive point, which I saw coming from so far off that I think I passed it on the way to the office this morning. He said that the root cause of fare increases is the franchise system, and he started his usual diatribe against the premiums that are paid by some of the train operating companies. He suggested that it was a bad thing, and that the Department should not be levering premiums out of TOCs.

Stephen Hammond rose—

Mr. Harris: As there is plenty of time, I give way to the hon. Gentleman.

Stephen Hammond: The Minister was keen to put matters categorically on record earlier, so I shall do likewise. I did not say that it was a bad thing, nor did I make a value judgment; I merely stated that the premium was a cause of fare increases.

Mr. Harris: That is a fascinating insight. The hon. Gentleman says that premiums are the cause of fare increases, but he is not prepared to say whether that is good or bad. That is a remarkable admission from the Conservative Front Bench. It is interesting that his right hon. Friend the Member for Witney (Mr. Cameron) proposed a startlingly innovative policy on premiums just last week. He did not suggest that they should not be paid, even though he has obviously been told by the hon. Gentleman that premiums are the cause of fare increases. He ignored that, and suggested to the Government that, instead of the premiums going to the Treasury—into the pot of money that the Government spend on all sorts of things—they should go to the DFT so that they could be spent on rail.

That was real blue skies thinking by the right hon. Gentleman. Given that we have been doing that very thing with premiums for many years already, and that the premiums have never gone to the Treasury, I am surprised that the hon. Gentleman has not been called into his leader’s office to explain why he did not brief him on what already happens in the DFT budget.

The right hon. Gentleman once again finished with a punchline: he said that there was too much Government intervention in relation to railway industry specification. I wonder whether the hon. Gentleman is aware that, since I was appointed, I have
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had meetings in my office with a steady stream of Conservative Back Benchers, who were not there to tell me that we specify too much, but invariably to tell me that they want me to interfere more in the railway network and in the workings of train operating companies, and to try to ensure that I use my influence to instruct those companies to provide more services in their constituencies. We have all heard of joined-up government, but I want to see some joined-up opposition.

Stephen Hammond: That is an interesting point. However, rather as the Government frequently wish that all their Back Benchers would exactly follow everything that the Government say—

Mrs. Dunwoody: As they all do.

Stephen Hammond: The hon. Lady says, “As they all do.” That has not always been my recollection, nor indeed is it necessarily what the voting record indicates. Not all the Back Benchers who go to the Minister represent official party policy, therefore, whereas it is official party policy that has been stated today.

Mr. Harris: I do not wish to contravene either the rules of ministerial office or the conventions of the House by naming any of the people who have come to see me; I simply observe that they were not all Back Benchers.

I shall use the short time available between now and the end of the debate to make my prepared comments.

The Government recognise the importance of the rail network to the social, economic and environmental well-being of this country, and we intend to make sure that the network plays a full and increasingly important part within an integrated national transport system. We are working with the train operators and with Network Rail to tackle the various issues that need to be addressed: capacity and overcrowding, service quality and on-time performance, and other issues, including matters of fares and ticketing.

Our efforts, and those of the men and women who work for Britain's railways, are showing results. On-time performance across the network has reached 88 per cent. and is still climbing, passenger numbers have increased by more than 40 per cent. since 1995, and the number of passenger kilometres is currently higher than at any time since 1946. Slam-door trains south of the Thames have been consigned to history, and service frequency on many routes across the country has been increased or even doubled.

Modernisation of the southern part of the west coast main line has been completed, and the new service is steadily drawing passengers away from planes and motorways and on to the trains. The final section of the channel tunnel rail link—now, I believe, to be called, High Speed 1 and High Speed 2—will open, on time and on budget, in November, further speeding up Eurostar and ready for high speed trains to start running into Kent on domestic services in 2009.

I do not want to be accused of pretending that the railway industry in Britain is a perfect model, that nothing ever goes wrong, and that the Government are 100 per cent. satisfied with it. Sadly, however long I am
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in this job, I suspect that I will never be able to utter those words in honesty. However, I believe that the progress we have made has been significant and should be welcomed by the House. There is still much more to do, of course, especially if we are to meet the challenge of the further growth in passenger numbers that is predicted for the next decade. However, if all that I have mentioned is, as the media would have us believe, some sort of failure, then perhaps the country could do with some more such failure.

Having said that, this debate is about fares and ticketing, and I welcome the chance to explain what the Government are doing to address those issues. Let me say at the start that the Government do not agree with every opinion expressed in the Committee’s report, but many of its recommendations are well thought out and well made.

My hon. Friend the Member for Crewe and Nantwich has rightly pointed out just how complex fares can be and has suggested that a unified fares structure should be introduced throughout the country. I agree, and we are working with train operators to see whether we can do just that. We are discussing a simple, logical fare structure, with a straightforward choice of three or four fares on each route, with consistent terms and conditions and easily understandable ticket names that, to quote from a well known advertising campaign, do exactly what they say on the tin. Work is still in hand and I am confident that ongoing discussions with the industry will bear fruit sooner than most of us expect.

There has been speculation about the future of Saver fares, which my hon. Friend raised. All options for the national fares structure currently under discussion include retaining and, in some cases, expanding the role of flexible walk-up Saver-type fares at affordable prices. Those tickets are extremely popular, and the flexibility that they provide gives rail a significant commercial advantage over air travel and allows it to compete effectively with the private car. It is in both passengers’ and railway companies’ commercial interests to keep such fares.

The new national fares structure will build on several initiatives that have already been implemented to make rail fares simpler. In March this year, National Rail Enquiries revised its website to simplify the way in which fares are presented online, so instead of a confusing list of every possible fare, only the cheapest fare in each of three categories—fully flexible, flexible with restrictions, and advance purchase—is shown. The new ticket names to be adopted under the proposed national fares structure will slot neatly into those three categories. The passenger retains a choice of fares, but that choice is now presented in a way that, I hope, they will understand easily.

In January this year, we simplified rail fares throughout London: 97,000 separate sets of station-to-station fares were replaced with one simple set of zonal rail fares, and the same price now applies between any two stations in given zones, whatever the route and whatever the operator. At this point, I ask the hon. Member for Rochdale whether he agrees with his hon. Friend the Member for Kingston and Surbiton (Mr. Davey), who, during a debate in this place on Waterloo International, opposed that change. As the hon. Member for Rochdale has said in this debate that
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his party favours moving to smart ticketing forms of paying fares—I am delighted that he is on board on that one—I wonder whether he agrees with his hon. Friend on whether it was a good or a bad move to go from the 97,000 fares that were available before 1 January this year to the 21 that there are now. He might want to discuss that with his hon. Friend the next time he sees him in the Tea Room.

The new fares in London use exactly the same familiar zones used by London buses, London Underground and the successful multi-modal Travelcard fares. Those new London zonal rail fares not only simplify rail pricing in London, but will pave the way for smartcards to be extended to national rail services in London over the next few years.

London will not be the only city benefiting from the introduction of smartcards. We have specified the introduction of modern smartcard ticketing systems on five new franchises: the South Western, East Coast, Cross Country, West Midlands and East Midlands franchises. Specifying the standard smartcard format produced by the Integrated Transport Smartcard Organisation, or ITSO, means that those smartcard systems will be compatible with one another and can form the foundation of a truly national integrated ticketing system. As with the successful London Oyster smartcard, instead of queuing at the ticket office, passengers can touch in and out, saving time and adding convenience. The same smartcard may also work on connecting buses, trams or underground trains. I understand that it is a foul calumny to suggest as a national newspaper did that the right hon. Member for Witney is so posh that he thought the Oyster card was a luncheon voucher.

Our vision is a railway with simple, understandable ticketing, making use of the potential that modern technology offers, and integrated not only across the rail network, but with other forms of transport. If I have addressed ticketing, I will say something about fares.

Paul Rowen: Given the statement that the Minister has just made, is it proposed that that integrated system will operate for concessionary bus fares? If not, why not?

Mr. Harris: I may have to write to the hon. Gentleman about that. My understanding is that that would not be the case, but I am happy to write to him if that is acceptable.

UK rail fares are often compared unfavourably with those in Europe. However, in many cases, the old adage applies: “Never let the facts spoil a good story.” Reports typically compare only the most expensive UK open fares, aimed at business travellers and bought by just 10 to 15 percent. of passengers on a route such as London to Manchester, with the regular fare paid by the majority of passengers in European countries. In fact, 85 per cent. of passengers on a route such as London to Manchester pay reduced fares, at prices broadly comparable with the fares charged for a similar distance in France or Germany, only a few pounds more than is charged for travel on fast trains in Italy, and significantly less than is typically charged in Switzerland. If the hon. Gentleman wants a copy of
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the information that formed the basis of those remarks, I would be happy to provide him with it.

We have also had to put up with reports that suggest that it is cheaper to fly within the UK than take a train. The hitherto well respected Which? magazine ran a report that purported to show that. The small print reveals that it failed to include air passenger duty in its flight costs. Simply adding that to the cost of the flight reverses the conclusions of the report and the message of the resulting news headlines. Which? magazine’s own figures show that taking the train from Birmingham to Edinburgh or from Exeter to Manchester was actually cheaper than flying on four or five of the seven occasions that it checked. From London to Glasgow, taking the train was cheaper than flying on every occasion that it checked—after air passenger duty and the cost of travelling to Luton or Stansted airports were added to the air fare. On some occasions, taking the train was not only cheaper but substantially cheaper.

I must make it clear, however, that the Government do not set rail fares or, for that matter, coach or air fares. We must remember that all of those are private sector industries. Rail accounts for 6 per cent. of passenger miles nationwide—a figure that most people would not consider a monopoly share. As a result, the majority of rail fares are unregulated and set on the same commercial and competitive basis that determines fares charged by airlines or coach companies.

However, we recognise that, in certain areas, train operators have a degree of market power that justifies Government intervention. That includes commuter transport into London and other big cities, where there are few practical alternatives to rail. The Department for Transport regulates most fares used by commuters. That is a not insignificant proportion: more than 40 per cent. of fares revenue comes from regulated fares. Since 2004, we have permitted an annual average increase in those regulated fares of no more than 1 per cent. above inflation. That followed several years of limiting commuter fares to increases below inflation. As a result of our fares regulation, commuter fares remain more than 2 per cent. lower in real terms today than they were in 1996. I would not expect to read that in the newspapers, of course.

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Over the same period, the earnings of the average commuter using those fares have risen well ahead of inflation, along with the general prosperity of the nation. In addition, we must never forget the big picture. In 2005-06, the railways earned approximately £4.4 billion in fare revenue from passengers. That was not sufficient to cover the full cost of the network. To cover the remaining cost of operating and investing in our railways, the taxpayer contributed £4.6 billion in subsidy.

It is easy to assume, as the media and public often seem to, that fares can simply be legislated downwards, with the money coming from private operators’ “profits”. The reality, unfortunately, is very different. The simple truth is that, if fares go down, the £4.4 billion in revenue reduces and the £4.6 billion in subsidy must go up by an equivalent amount to make up for the revenue that has been lost. That unfortunate law of railway finance—of finance in general, I would suggest—applies equally well whether we are making franchise payments to a privatised train company or subsidising a nationalised rail operator. Setting regulated fares therefore involves a balance between safeguarding the interests of passengers and looking after the interests of taxpayers. We believe that, in our approach to UK rail fares, we have looked after the interests of both, and we will continue to do so.

4.29 pm

Mrs. Dunwoody: With the leave of the House, Mr. Jones, I will speak again. This is a good report. At some point, Parliament has to take a number of decisions. I am not talking about individual parties; as a nation, we have to decide what we want to do. If we want a 21st century railway, we certainly have to address capacity, but this report was about fares. It was about the way passengers look at fares, the way the experience of the passenger is tied in to their view of good value, and their experience of day-to-day travel. I think that it is a useful report. I am grateful to the Minister and to everyone else who has taken part for an interesting debate. We may even return to the subject again.

Question put and agreed to.

Adjourned accordingly at half-past Four o’clock.

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