Examination of Witnesses (Questions 140-159)|
4 FEBRUARY 2009
Q140 Mr Hollobone: What effectively
can you, as consumer organisations, do to train companies in reflecting
the concerns of the rail passenger because certainly a lot of
my constituents are feeling that there is nothing that they can
do, that there is no alternative train provider and they either
come to London on the train or they drive basically, there is
no competition, the fares have gone up and the service for many
has actually got worse? What can you do with regard to getting
this across to the rail companies and forcing a change?
Mr Foxall: What we can do is we,
firstly, produce the research, so that actually produces the hard
evidence. If you are going to get people to listen to you, in
my experience in this business, you need to be useful, so you
produce evidence which actually illustrates to them what they
have to do and then you seek to negotiate with them to get those
improvements. Now, good companies do actually respond. One has
to say that on the performance side, and there are exceptions,
there are issues like the crowding and capacity issues that you
have described, but on the performance side, companies are very
keen now to work with Passenger Focus to improve their scores
on the National Passenger Survey. I do not think that is an examination
or a test for a better score, but actually they want to drive
those scores up, so publishing how satisfied or dissatisfied passengers
are with various aspects of the service in an objective and strong
way is a great incentive to them to get it right. Judging by the
telephone calls we get as soon as they see the figures, which
urge upon us sometimes to take into account what a bad day they
had in the middle of the survey and things of that sort, it is
very clear to us that they think they are important things that
they want to score well on for their passengers, for themselves
and, frankly, in some cases, for their own bonuses and performance
Mr Hewitson: There is another
area as well. It is trigger points, such as a new franchise, about
trying to influence the Department for Transport's invitation
to tenders to try and get the franchising process to take more
account of the issues we are raising, such as lowering the sort
of range by which fares can increase, offering new products, Carnets,
for instance, the sort of new regular commuter-type products that
many passengers would value, but which are not catered for now.
We have tried to work with the Department on the new South Central,
the new Southern franchise, to try and get the passenger's voice
into the franchising process, and to some success in some areas,
but we need to see how that pans out in terms of the consultations,
but I think that longer-term we can target those points as well.
Mr Bellenger: Can I illustrate
what my colleagues have actually been talking about in terms of
an actual example of an alternative franchise model and that is
the model that was adopted by Transport for London for the London
Overground network. We have consistently argued that the standards
that London Overground have put in on their services are passenger-friendly,
and the results from the National Passenger Survey in the last
quarter show that London Overground is one of the most improved
operators there. Crucially, in the area of value for money, they
are actually now among the top train operating companies for value
for money scores. In fact, they increased their overall percentage
increase in value for money which went up by something like 15%.
Now, that was on a very, very low base, but it has actually put
them now top of the London commuter train operating companies
and it is up there now amongst the likes of Mersey Rail and Northern.
Now, London Overground is a different type of franchise in that
it is operated under the auspices of the Mayor. In this case,
the Mayor actually has control over the fares, so the Mayor could
actually choose to either reduce fares or to increase them, depending
on the economic circumstances. The Mayor is not bound by a formula
of RPI+1 and he does have an ability to vary that according to
the circumstances, and the train operator, because the franchise
is actually very, very tightly specified, can purely concentrate
on delivering the service and they do not have to worry about
what the effect of that is on the fare levels.
Q141 Sammy Wilson: Can I just take
you back to the point you were making about RPI and the fact that
it was determined on the July figure and, therefore, by the time
we get to January, for example, this year, it is well out of date.
Providing there is consistent application though from one year
to the next, is it not a case of swings and roundabouts and is
there not a danger in moving the month in which the figure might
be based and, therefore, is your criticism of having the set month
every year not really a valid criticism?
Mr Foxall: Well, not really. It
is not a question of the month, I think. My criticism is that
we have entered a new era. This whole thing has been constructed
during a period of exceptional growth, great stability and increased
ridership on the trains. We now, by common consent, are entering
a very difficult period and the policies that were adopted during
the previous period clearly, in my view, need to be re-examined
if we are going to go through a different sort of period, so I
am not really arguing that you should choose one month over another,
that is not what I am saying.
Q142 Sammy Wilson: The impression
I got was that you were saying, "Look, because inflation
is now falling, we should really be looking at choosing a different
month rather than July".
Mr Foxall: No.
Q143 Sammy Wilson: So what would
your alternative be then? If it is going to be RPI plus something,
are you saying that that formula should no longer be used? Do
you not accept that, if we go for a formula where you move the
base month around, equally the train companies could argue that
they want it moved to a month which is advantageous to them?
Mr Foxall: I am not arguing that.
Sorry, if that is the impression I gave you, it is not the impression
I intended to give you. We are making no proposal to move the
month during which RPI is scored, that is not what we are saying.
What we are saying is that, since we are entering a different
period, the presumption that you can have the sort of increases
that you had in the past and the kind of construction that you
had in the past needs re-examination. In particular, I am looking
at this business of having a basket and being able to charge fares
within an average which actually can vary quite widely. I think
that is a very particular point and, as I say, has a particular
bad impact on people, so I am not suggesting that you choose a
particular month. Incidentally, it is very difficult to do anything
about this; this is a construct of the system. We have several
franchises all with somewhat different arrangements in relation
to fares, they will run over quite a long period of time, they
are going to be renewing at different times, they are contracts
with the Government and, to change this, you would have to re-negotiate,
so what I am really saying to the Government is, "Look at
this. Look at what impact it is having on passengers and look
at the signals you are giving about the price of travelling on
Q144 Sammy Wilson: Will you also
accept, since price is really a signal to consumers and will have
an impact on demand, that simply the managed demand on popular
lines, et cetera, to use pricing as a rationing device, if you
wish, it is essential, and it is perfectly acceptable, that where
companies identify, "There's a popular line. We don't have
the capacity. We've got to ration the places on those trains",
you go for higher price increases there? It may be tough on the
passengers on those lines, but, if prices act as a single new
mechanism, is that not an appropriate way of using them?
Mr Foxall: Clearly, what you need
to do is tackle capacity, so we had best put that on one side
for a moment. I think what you need is a transparent process.
If these price increases were being used in a sane way, a transparent
way so far as the customers are concerned, to shift patterns of
commuting or to shift patterns of travelling, that might be worth
an argument. I am not saying that we, as passenger representatives,
would think that would be a great thing to do, but I am saying
that it might be worth inspection. What is happening at the moment
and what it feels like from the passengers' side is that randomly
I get a very large increase of the kind that we have just had
described and it affects me, it affects my ability to travel to
work and it is a significant sum of money, particularly if you
are commuting in the South East and as large or getting to be
as large as your mortgage. It is the second-largest thing you
probably pay out as an annual bill and, if it, therefore, has
to randomly increase in price, that is very unsatisfactory. If
we want to use it as a different sort of mechanism, then let it
be a transparent one, let us agree on it and let us understand
what is going to happen so that passengers have a chance in making
choices and judgments.
Q145 Sammy Wilson: So how would you
see that transparency being achieved?
Mr Foxall: Well, fortunately,
I do not run the railways and it is not may job to make government
policy. What I am doing here is drawing attention to the problems
the existing system has thrown up and how more acute they are
at the present time as we go into a period of recession. That
is my job.
Q146 Sammy Wilson: Yes, but you are
also representing passengers and, if you are saying, "Look,
the problem is that we don't have transparency", I think
that there probably is some onus on you to say, from the passenger
point of view, "This is what we believe should be done to
ensure that that transparency is achieved".
Mr Foxall: We will have some proposals
in the report that I referred to earlier on which we will publish
shortly, and the Committee will have an opportunity to see those
proposals, but I am not in a position this afternoon to run through
them in detail
Q147 Mr Martlew: Nobody, for example,
is in favour of putting prices up, I think, so you have got an
easy job to that extent. You all accept that the subsidy has gone
up from, I think, just over £1 billion ten years ago to about
£5 something billion now, so there is a massive amount of
public money going into the railways. My constituency, unlike
the South East, has a public transport system that is based on
the buses and probably a lot of my constituents in a year will
not travel on a train whatsoever, although £5 billion of
public money is going in. We are talking about spending, is it,
£11 billion on Crossrail, goodness knows how much on Thameslink
and we are hopeful for a new high-speed line and we are talking
about putting that to Heathrow. If the money does not come from
the fares, where does it come from? Does it come from my constituents
who do not use the trains at all, or do we actually not raise
so much money and hold back on these major infrastructure developments
that we need?
Mr Foxall: That is an exceptionally
fair point and it is the reason why, in previous years, we have
not argued strongly about the regime that has existed in terms
of deciding what went into the fare box and what came from passengers
because that is a decision that gets taken here in Parliament
effectively. What I am saying is that we now have a crunch point,
that is all, we have a change of circumstance.
Q148 Mr Martlew: You can over-exaggerate
that though. If presume that there was not, what is the answer
to my question? Presume that there has not been a change of circumstance,
what is the answer to my question? Do we take more out on the
taxpayer and keep fares low, or do we actually stop development
on the railways?
Mr Foxall: I think it is an extremely
difficult question for me to tackle.
Q149 Mr Martlew: You can try to answer
Mr Foxall: I will try to answer
it, but, in a sense, simply representing passengers, the passengers'
position is this: that they are prepared to pay for what they
regard as a value-for-money service and they tell me, in their
surveys, that they are not getting value for money. I am telling
the Government, and I am repeating to this Committee, what they
tell me. It may well be that you have a very valid point by saying
that we should not subsidise the railways, but that is a decision
Q150 Mr Martlew: What I am saying
is that there is a massive subsidy going in and what appears to
be being said by yourself is that there actually should be more.
Mr Foxall: No, can I correct you.
I am presenting an argument which comes from passengers. I think
the Government has to decide what it wants to spend on the railways.
Q151 Chairman: Does anyone else have
a view on who should pay?
Ms Grant: I think Colin is quite
right, that that is a political decision that has to rest with
the Government of the day.
Mr Martlew: That is a cop-out.
Q152 Chairman: Do any of you want
to say what your decision might be?
Ms Grant: I just want to concur
with Colin's point, that in the short term we are stuck with this
system that we have of franchising and it is a system which is
currently under pressure and we are beginning to see signs of
pain in the system in London, and in our area we are beginning
to see ticket office closures, really quite drastic cuts in the
opening hours of ticket offices by First Capital Connect and South
West Trains recently and we are starting to see shorter trains
which is going to mean more overcrowding, so it is a question
of who really bears the brunt of this pain in the system. Is that
going to be borne by the passenger in terms of higher fares and
reduced services, is it going to be borne by the taxpayer through
increased subsidies or changes in franchises, or the third area,
which I notice members of the Committee were pressing earlier
on, is whether or not the companies should bear some of the pain
in terms of some reduction in their profits in this period of
extreme strain? I think there are issues about the transparency
with which the travelling public and indeed the taxpayer are able
to find out about the level of those profits and what shareholders
are taking out of the system. I think, from the passengers' point
of view, this is all very opaque and people do not understand,
and I think there must be a suspicion that passengers are being
asked to pay to maintain the profitability for shareholders and
for the train operating companies.
Q153 Mr Leech: I would just like
to come back to a point you made before about more flexibility
with fares and having a basket of fares being a fairer way than
the RPI+1. Would that not lead to a lot more confusion if there
were a whole host of different fares and not necessarily better
transparency on fares for passengers?
Mr Foxall: When I was referring
to a `fare basket', what I was talking about was the way in which
the train operating companies are allowed to calculate the increases
that they apply, and that is how the average applies, it applies
to a basket of fares, so I was not proposing that we should have
a new fare system. We have some views in that direction which
we will be producing in the report, but I did not propose that
we have a range of different fares in my answer, I was merely
describing the existing system where the average increase is spread
across many different individual tickets and prices are allowed
to vary so long as an average is maintained.
Q154 Mr Leech: What would you think
about the RPI figure being based over a 12-month period rather
than just an individual month?
Mr Foxall: In the long run, I
am not sure it makes a huge amount of difference. You get aberrations
from time to time, but I am not sure that this particular one
was an aberration. We have a disconnect, we have a change, that
is all I am saying, between where we were in terms of inflation
and where we are going in terms of inflation, and that makes a
difference to all of the presumptions that are built into these
Q155 Mr Leech: So you do not think
it would make much difference at all?
Mr Foxall: I do not think it would
make a huge amount of difference, no.
Q156 Mr Leech: In terms of keeping
fares low, would we not be better just extending the number of
open access operators and increasing competition?
Mr Hewitson: I think competition
can make a real difference to fares. It is quite hard to find
genuine examples, but certainly when Grand Central set its fares,
we saw moves by National Express East Coast, and where you have
genuine competition; where passengers have a genuine choice, you
still see increases but the rate of the increases is probably
different. The issue sometimes with open access is how you dovetail
it into a system so that the passenger has as seamless a journey
as possible so that they do not have to have a red ticket for
a red train and a blue one for a blue train. That sort of inter-availability
and an ability to just jump on the next train is important. It
is important that that flexibility does not come at a huge premium.
That is where open access needs to be dovetailed into a system
of co-ordination as much as competition, and balancing those is
Q157 Mr Leech: Is there any evidence,
though, in the recent price increases that there have been lower
increases on specific journeys where there is direct competition?
Mr Hewitson: I would have to have
a look, I am sorry I do not know that.
Q158 Mr Leech: Does anybody else
have any comment on that?
Mr Bellenger: We would have to
come back to you on that.
Chairman: I think it might be helpful
if you could look at that. I think it is an important question.
Q159 Sir Peter Soulsby: Could I ask
you the same question I have asked the operating companies which
is about the argument that seems to be accepted, at least to some
extent, in the Department for Transport about moving towards different
ways of pricing tickets, particularly the so-called airline ticket
pricing. Do you think that there is some scope for a significant
increase in that or is it always going to be just soaking up some
of the additional capacity on a rather limited basis?
Mr Rowson: Perhaps if I start
off on that one. For those of you who are not aware, the primary
focus of our business is retailing tickets over the internet.
About 80% to 90% of the tickets we are selling now follow the
airline model in terms of single leg pricing, advance purchase,
valid on the specific train that the customer has nominated. Our
market perhaps makes up around 16% to 17% of the non-season ticket
market. It is clear that that particular sector is now dominated
by the airline-style model.