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Deeply regrettably, the Government have almost entirely dismantled the system of rail fare regulation that they inherited. They have, in effect, created for the rail operating companies an open-house situation in terms of the rail travelling public. Worse still, at the same time as dismantling the system of rail fare regulation, the Government have, in a very well concealed manner, fundamentally reversed the policy that has been followed throughout the entire post-war period on rail subsidy of commuter lines into London. Everybody knows that it is not possible to operate a peak demand system economically; if we pay for the peaks, we will have a great deal of uneconomic extra capacity that will be on the railway lines for the rest of the day, and the staff to man it. For that reason, successive Governments since 1945 have found it necessary to ensure that the rail companies running commuter services into London have a measure of Treasury subsidy. What the Government have done—very little attention is paid to this, because they have kept it well concealed—is embark on a process of reducing year by year the level of taxpayer subsidy, and they are going even further than that. They are going from reducing subsidy to the point of elimination to requiring train operating
companies also to pay a premium—in effect, a tax—back to the Treasury for the privilege of operating the franchises.
That situation was exposed to me by the managing director of Southeastern, Charles Horton, who wrote to me on 23 July 2008 as follows:
“With regard to subsidy, that given to Southeastern started at £139.9M in year one and will decline to £24.7M in year seven. In year eight, we will be expected to pay a premium of £9.3M to the DfT to operate the franchise.”
I put it to the Minister that it is outrageous for the Treasury not merely to have discontinued paying any subsidy to inherently uneconomic railway lines—the commuter lines into London—but to go further by taxing the rail operating companies for the privilege of operating the franchises. This is a gross stealth tax on the rail travelling public who journey into London. The policy should be stopped and reversed.
I have referred to the position of Southeastern, but Southern, too, provides a major commuter service, including the Uckfield line in my constituency. Southern’s franchise is up for bidding, so will the Minister tell the House whether those making bids are being asked to do so on the basis that they will have no subsidy from the Government and possibly at the end of the franchise period will also be asked, like Southeastern, to pay a premium—a stealth tax—back to the Government and the Treasury that can be financed only out of the pockets of the luckless rail travelling public? I must put it to the Minister that the Government’s policy, as far as the thousands of commuters in the south-east are concerned, is resulting in one very clear trend: our commuters—our constituents—are paying ever more for ever less.
10.7 pm
The Parliamentary Under-Secretary of State for Transport (Paul Clark): We have had a good and wide-ranging debate, and I am delighted to congratulate the hon. Member for Bexhill and Battle (Gregory Barker) on securing it, because it has given us a real opportunity to discuss the issues facing rail operations in the south-east. As has been shown today, he, like many other hon. Members, has a keen interest in the subject. I include the hon. Member for Croydon, Central (Mr. Pelling), who said that some Labour colleagues whose constituencies lie to the north of his had been arguing about rail travel. I assure him that other hon. Members have raised various issues, including my hon. Friend the Member for Hastings and Rye (Michael Jabez Foster), who just before Christmas addressed regeneration and travel in his constituency.
I intend to deal with as many of the points raised as fully as possible in the time available, but I must say at the outset that over the decade that we have been in government there has been a 50 per cent. increase in the number of people travelling on the railways. Secondly, unprecedented levels of investment have gone into our railways, day in, day out, to rectify the substantial underinvestment that had lasted for decades. In addition, there has been investment in rolling stock, and in High Speed 1, which has been pilloried by Conservative Members. It was the first new railway line to be built in this country in more than a century, and it was delivered on time and on budget.
I remind right hon. and hon. Members that my right hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), who was then the Deputy Prime Minister, came to the House to announce the renegotiation of that contract, because it was in a mess when we picked it up. He ensured that we ended up with a high-speed line that is providing essential services to businesses and individuals in the constituencies of Members who have spoken in the debate. It is used for leisure and business purposes, and it brings us into the 21st century.
Let us remember that the privatisation of the railways happened in 1995-96. I noted carefully the comments of the right hon. Member for Tonbridge and Malling (Sir John Stanley) about why he did not support his own party’s Government on the privatisation Bill, to which I shall return shortly. Since the privatisation was forced through, contracts have always governed what rail operators that are private companies can and cannot do. We have sought to renegotiate those contracts to end up with a balanced situation with better punctuality, better reliability and more investment. There is also regulation of fares—we have not abandoned that requirement.
We have sought to find a balanced position, and the current position answers many of the points made by Opposition Members. Those who have been honest have said that their constituents say, whether in surveys or to them in person, that there have been improvements to the service that we provide, to rolling stock and to reliability. I shall come to the issue of “padding”, which the hon. Member for Lewes (Norman Baker) mentioned. Such improvements cannot happen without investment in the rail services that are so important to the constituents of the Members present, including mine in Gillingham and Rainham.
We have limited most fare increases to an overall RPI plus 1 per cent. cap. However, that cap is applied to a group of fares called a basket, and individual fares may increase by up to 5 per cent. more than that as long as the overall cap is not exceeded. I emphasise that it is a cap—it is up to the individual train operating companies, and they do not have to increase prices by that much. They have that flexibility to vary fares in their fares basket, allowing an increase of up to 5 per cent. above the overall cap.
There are two exceptions to that. Southeastern has a higher overall cap of RPI plus 3 per cent. for five years from 2007, in recognition of the fact that almost £693 million has already been invested in new trains for Southeastern passengers and in the infrastructure needed to support them. Those are not the high-speed trains that are coming into service in December but replacements for the old slam-door stock. The only Member to refer to that old stock in his contribution was the hon. Member for Croydon, Central, but I am sure I do not need to remind Members that Southeastern services had some of the oldest rolling stock. The old slam-door stock from the 1960s and ’70s was unwanted by our travelling constituents and by those who used the services. That replacement had to be paid for in a sensible way. The current regime also addresses the historically low fares on Southeastern, normalising them with those for similar services.
The right hon. Member for North-West Hampshire (Sir George Young)—I am sorry that he is no longer in his place—said that the cap used to be RPI minus
1 per cent. Indeed, it did. I could take hon. Members back to the days when a franchisee invariably missed targets, which meant that every time targets were met for season ticket holders, they got a 5 per cent. rebate and the subsidy from the public purse went up. All the time that that was happening, there was a reinforcement of the under-investment in our rail service that, with due respect, we got so used to under the Government led by Conservative Members during those years. That was the situation we faced with the service on the Kent and Sussex lines. There had been substantial under-investment and the franchisee moneys that were coming in through the fare box were falling as a result.
Hon. Members should not think that Southeastern is the only company to have a franchise set at RPI plus 3 per cent. Indeed, the other exception is the Northern Rail franchise for the West Yorkshire passenger transport executive area, where fares, for similar reasons, are set at RPI plus 3 per cent. Leeds fares have a higher cap, like those for Southeastern, from 2007 until the end of the Northern franchise and that money has funded investment in additional trains in and around the Leeds area.
Gregory Barker: Are the members of the other community who have had the additional premium put on their fare increases paying for services that they will see the benefit of or are they, like my constituents and so many others who are being represented here tonight, paying for improvements elsewhere?
Paul Clark: It is unfortunate that the hon. Gentleman did not listen to what I just said. The RPI plus 3 per cent. is invariably there to cover the £690-odd million that is being invested principally in replacing rolling stock, such as in the case of the slam-door services. It is not for use on the Javelin trains that many hon. Members referred to.
The hon. Member for Tunbridge Wells (Greg Clark) and others said that their constituents will have no use of the High Speed 1 service. The hon. Gentleman will be aware that although his constituents may not have direct access to that service, nine trains run in the morning peak to London Bridge and nine run to London Charing Cross and from December 2009, when the high speed trains come into being, the frequency of that service will increase to 13 and 11 trains respectively. Additional services will be operated because the introduction of High Speed 1 elsewhere will free up capacity, so capacity improvements will occur through the investment in High Speed 1 and domestic services.
Greg Clark: The Minister will recall that I mentioned that there was that prospect in December. Of course, the benefit of that increased capacity will be swept away if the trains are going to be 20 per cent. shorter.
Paul Clark: I shall certainly come to the issue of the reduction in the length of the trains and the steps that I took as soon as I heard that that was the case.
Mr. Gale: The Minister has referred to an increase in some services from some places. Does he accept that from east Kent there has been a diminution of the services to Victoria and Cannon Street?
Paul Clark:
Clearly, there is a need to manage the demand from the hon. Gentleman’s constituents and from the constituents of other hon. Members. People travelling by train clearly find it an attractive option, because the number of people doing so has increased
substantially. I have already said that the travelling public have increased by 50 per cent. over the past decade. One way of increasing the number of spaces is to increase the route options through measures such as High Speed 1 or to increase the length of trains, notwithstanding the comments that have been made by the hon. Member for Tunbridge Wells.
Let me move on to one or two other items, as I shall come back to the issues that have been raised so far. I have said already that the RPI minus 1 formula was leading to substantial under-investment and that we could not have had the improvements that have been made if we had retained it.
The hon. Member for Bexhill and Battle said that there had been a decade of under-investment in our railways, but one has only to look at the record that I have set out to see that that is clearly nonsense. The High Speed 1 and rolling stock changes that I described have been accompanied by the £8.8 billion that has been put into the west coast main line. In addition, £10 million has been devoted to increasing the number of carriages, and more carriages will be delivered under the fiscal stimulus package announced a few weeks ago by my right hon. Friend the Chancellor. Moreover, my right hon. Friend the Secretary of State for Transport announced in the House last Thursday that he intended to look at the further electrification of the great western and midland main lines. All that deals with the hon. Gentleman’s suggestion that the Government have no long-term plans for rail transport or for ensuring high-speed rail links between London and the midlands, and beyond.
The hon. Member for Wealden (Charles Hendry) spoke about inadequate parking, although he said that the service from Uckfield had improved. The Government do not regulate parking: we are sometimes blamed for regulating too much, but this time we have been blamed for not doing enough about providing more parking, which is clearly a matter for the private companies involved. I will not enter into the debate about housing provision, but I will point out that we have changed the regional funding allocation process. Local authorities are now able to look in a far more joined-up way at their requirements for housing, business development and transport, and to make their decisions and organise their priorities accordingly.
The hon. Member for Lewes said that his survey of residents showed that there had been improvements, but that his constituents were concerned about fare rises. That is absolutely understandable, as no one ever likes a price increase. Asked whether they are for or against a rise, people of course will say that they are against it. I recognise the difficulties that people face, especially at this time.
Norman Baker: On a point of clarification, I must tell the Minister that the survey was carried out in December, before the rises came in.
Paul Clark: The hon. Gentleman claimed that the rises were not always known about but, with due respect, I must tell him that it was well known that they were being introduced. They were announced in November, as I well remember.
The vast majority of travel—some 60 per cent.—is undertaken on regulated fares, while any-time unregulated fares apply to approximately 20 per cent. of all travel.
The hon. Member for Lewes made a comparison with our ability to freeze fuel duty, but that is directly under our control. Although it seems to have escaped his memory, I know that he is well aware that we are talking here about private companies, with which the Government have legally binding contracts. They are in a long-term business, and they know that they have to use investment to make the railway work effectively and efficiently.
The hon. Gentleman said that not extending the motorways would allow us to pay for a freeze in rail fares and that everyone preferred having money spent on the railways, but I suspect that people using the M25 might say something else. The difficulty of being in government is that we have to manage a balance between requirements. Our policy on congestion and the targets that we need to meet are set against the background of Eddington’s study in respect of road and rail and in our cities and towns.
Research shows that, between 1996 and 2008, average rail fares paid increased by 4 per cent. in real terms. The hon. Member for Lewes referred to padding. A robust timetable is far preferable to journey times that are not deliverable. The travelling public want to know what time the train will arrive, not some airy-fairy estimate of the time that it might arrive, when in reality the train arrives five, 10 or 15 minutes late because of the complexity of the system and the number of people using it.
The hon. Member for Croydon, Central reminded us that slam-door carriages had disappeared and reported a great improvement in rides and in the environment in his area. In response to a comment from him, I reiterate that fares are not set to pay for the Javelin services. It is intended to extend Gatwick Express services to the south and to add capacity. During peak hours some Gatwick Express services pick up commuters.
The hon. Member for Christchurch (Mr. Chope) argued that the Government were behaving uncharitably by imposing fare increases. One assumes that he voted with the last Tory Government to introduce privatisation of the railways and in order to set up private companies. Is he suggesting that we should tell them that they cannot increase fares? We have introduced a system under which we agreed a cap and which will deliver the investment and the improvements that his constituents will have seen in Christchurch, as have the constituents of other Members in the Chamber.
I entirely agree with the hon. Gentleman about the requirement for the opening of ticket offices. Some people have moved online or to telesales, but my noble Friend and ministerial colleague, Lord Adonis, recently rejected many of the changes proposed by South West Trains because the ticket offices would not be properly staffed. That decision was taken by the Government to protect the travelling public.
The right hon. Member for Tonbridge and Malling was one of three who opposed privatisation because there was not a robust system of fare regulation. There is now a fare regulation process in place to ensure fair and equitable investment in our railways. I remind right hon. and hon. Members that there are only two sources of funding for investment in rolling stock, staff and signalling—the taxpayer or the fare payer.
Sir John Stanley: Will the Minister say how the Government justify requiring the train operating companies to pay a tax by way of a premium back to the Treasury during their franchise period?
Paul Clark: We have put in substantial sums, as evidenced by the letter from Charles Horton, managing director of Southeastern, which the right hon. Gentleman quoted. I find it interesting that Members in the Chamber argue that they should not ask their travelling public to pay for a service that is almost on their doorstep, albeit High Speed 1, yet consider it okay for the pensioner in Yorkshire to subsidise the travelling public in the south-east. We are seeking to achieve a sensible balance.
The Leader of the Opposition announced a few weeks ago that there would be a 1 per cent. reduction in
the Department for Transport’s funding from 2009 if they were in power, which would cost it £840 million. We have been investing in the train service and we will continue to do so. We will not cut that investment, so the travelling public will have a decent service that is reliable—
10.30 pm
House adjourned without Question put (Standing Order No. 9(7)).
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