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5.11 pm

The Parliamentary Under-Secretary of State for Transport (Norman Baker): I shall have to give a high-speed reply to get through the various points that have been raised by Members this afternoon. It has been a very good debate, and I am grateful to my hon. Friend the Member for St Albans (Mrs Main) for introducing it.

The coalition Government are delivering the biggest and most ambitious rail upgrade programme since the Victorian era. I would go so far as to say, without hyperbole, that this is the most pro-rail Government that we have had for decades. Despite pressure on budgets, we have made a strategic choice to increase capital investment in those parts of the infrastructure that best deliver sustained and sustainable economic growth, including rail. That is why £18 billion was allocated in the 2010 spending review to deliver an ambitious programme of investment in rail infrastructure and rolling stock.

Our problem now is success: there are more people on the railway now than at any time since 1929, with a network about half the size. My hon. Friend the Member for Northampton South (Mr Binley) is absolutely right; this is all about capacity, which is why we must get on with High Speed 2. We will try to deliver it as soon as we possibly can, and if we can, we will bring it forward, but we will not over-promise on what we can do on that or on anything else.

Many projects are going ahead, including Thameslink and Crossrail. I will not bother listing them all. Suffice it to say that we have a progressive programme of electrification that involves not simply one or two schemes. We want progressively to electrify the entire network and have already announced schemes that were not envisaged by the previous Government.

As Sir Roy McNulty found in his independent analysis of the value for money of the industry, our railway is the most expensive to run in Europe. It is up to 40% more expensive than some on the continent. Taxpayers and fare payers have shared the burden of inefficiency through some of the highest fares in Europe and some of the highest public subsidies, but this high-cost status quo is no longer an option. It is bad for passengers and bad for taxpayers, and we intend to deal with it.

Alongside our commitment to modernise and improve the network comes an equally crucial commitment to drive down costs and improve the efficiency of the railway, which was the third choice to which my hon. Friend the Member for Northampton South referred in his contribution. In large part, that involves addressing the concerns that my hon. Friend the Member for St Albans and others have raised about Network Rail’s accountability and performance.

Sir Roy concluded that efficiency savings of up to £1 billion a year could be achieved by 2018, without radically restructuring the industry, cutting services or compromising quality or safety. However, that will require all parts of the industry to focus attention on driving out waste and driving up efficiency. If they do that, we can have the long-term growth future for the railway that I for one want to see. We also want to end the era of above-inflation fare rises and the RPI plus 1% formula that was introduced and happened year on year under the previous Government.

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Hon. Members have asked about the Command Paper. It will be published shortly—I think that “shortly” is an official word in civil service speak—and will build on the findings made by Sir Roy and set out a blueprint for rail reform. Developing the role of Network Rail will be at the heart of the Command Paper. Although Network Rail is not perfect, it is not Railtrack, and Sir David Higgins is not Iain Coucher, so I hope that hon. Members can take some comfort from that.

The railway needs an infrastructure operator that is responsive, accountable and able to deliver the best possible results for operators, fare payers and the wider population who fund it through the public purse. Equally, Network Rail must be better incentivised. Reform of Network Rail’s structures and governance is therefore a key part of the Government’s rail agenda. Let me give this absolute assurance to the hon. Member for Hayes and Harlington (John McDonnell): we are determined that no changes should be made that would jeopardise the impressive improvements in safety and punctuality made by Network Rail and the rail industry in recent years.

We know about the tragedy of Grayrigg in February 2007. I am not being complacent when I say that that was the last tragic event in which a passenger died. It is worth pointing out that there were four deaths at level crossings in 2010-11. That is four too many, but it is the fewest such deaths that we have had for a decade. Efficiency does not mean compromising safety.

John McDonnell: On Grayrigg, the ORR said:

“the company’s failure to provide and implement suitable and sufficient standards, procedures, guidance, training, tools and resources for the inspection and maintenance of fixed stretcher bar points”

was a key issue that caused that death. The same depot responsible for that stretch of line has just had a 15% cut in its budget.

Norman Baker: The fact that efficiency savings or reductions in numbers take place does not necessarily mean that safety is affected. Obviously, the hon. Gentleman’s point has been well made, and I will take it back with me. Network Rail today is a significantly improved body from what it was in February 2007. None the less, we share the Office of Rail Regulation’s concerns about certain aspects of the company’s recent performance, such as punctuality over the past 12 months, some weaknesses in safety culture and poor implementation of integrated train planning under certain conditions.

The Government look to the Office of Rail Regulation to hold Network Rail to account and to continue to drive improved value for money from the company. As part of that process, the ORR has set Network Rail a requirement to make efficiency savings of 21% in its 2009 baseline by 2014. It will continue to produce annual reports benchmarking Network Rail’s efficiency against its international peers.

The Office of Rail Regulation’s latest annual report states that Network Rail has made progress against its efficiency targets, but that it has more work to do to justify all of its claimed savings. When Network Rail delivers on its current commitments, the ORR expects it to have closed around two-thirds of this efficiency gap by 2014 and the rest by 2019.

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A key part of the McNulty review is to see much closer working and alignment of incentives between Network Rail and the train operators. A number of Members raised that, and it is something that the Government are focused on and it will feature in the Command Paper.

We welcome Network Rail’s regional devolution initiative to focus its business down to the route level and to work closely with train operators. David Higgins is taking forward work on structural reform to form closer alliances with the train operators. Moves towards asset management concessions and improved supplier engagement are vital.

We recognise concerns that Network Rail’s governance has not, so far, provided adequate mechanisms for holding the company’s board to account. That has been particularly apparent in respect of bonuses. The Secretary of State for Transport has been rightly firm on that matter, as indeed has No.10, despite what we have heard this afternoon. We expect bonuses to be dealt with in a responsible and a sensible manner by Network Rail, as we do by others. However, the Government’s powers, which we inherited from the previous Administration, to deal with those bonuses are extremely limited. Let me remind the hon. Member for Barrow and Furness (John Woodcock) that in 2009-10, under the previous Government, Iain Coucher received a bonus of £348,184, and the top seven directors together clocked up £1,347,000.

John Woodcock: The Minister will be aware that the previous chief executive waived his bonus in the 2008-09 period when he was asked to do so by the then Secretary of State, Lord Adonis. When the former Secretary of State for Transport, the now Secretary of State for Defence, raised the issue of those bonuses to Iain Coucher, he was completely ignored.

Norman Baker: The fact of the matter is that we have not inherited powers to deal with those bonuses. This is the Network Rail structure that we inherited, and we are now trying to sort it out.

Let me deal with Network Rail’s performance, which comes within my portfolio. It is not as good as it should have been, and passengers are rightly unhappy when their train is delayed or cancelled, especially when that happens regularly. To be fair to Network Rail, we must put that performance in context. In 1997-98, the annual public performance measure was 89.3%. After the accident at Hatfield in 2000, it fell to 74.2%. Since then, it has risen progressively, and punctuality today stands at 91.7%. I am not saying that that is good enough, but it is not the catastrophic case that is sometimes presented. It is certainly not true that, as the Labour party spokesman said, performance has been declining at an alarming rate. It has not; it has been improving. It has not met the targets, but it has been on an upward trend.

The current high level output specification for the railways specifies a further improvement to 92.6% during the period to 2014, and that is what the Department is focused on, as is the ORR. There is still a lot to do. I am concerned that performance over the last year has been iffy for various reasons, including the previous two exceptionally severe winters and an increase in the number of external events, such as cable theft. What is happening about cable theft is not the full range of the Government’s response, and it is inaccurate to present it in that way. We are simply using existing legislation to

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do what we can. Further measures will emerge as and when we can take them. In addition to cable theft, other issues have affected Network Rail’s performance that I am told were within its control.

Remedial plans have been put in place to enable improvements by the end of the current year, and plans are being developed for the remaining two years of the current rail control period. I am happy to tell my hon. Friend the Member for St Albans that a great deal of work has gone into much better winter resilience, including third-rail heating to prevent the sort of problems that occurred in previous winters, to which she rightly referred. I hope that she will be reassured by the fact that I meet Network Rail and the train companies monthly to examine performance with a specific analysis to ensure that they are keeping up to scratch with their plans.

As has been said, the ORR has published enforcement orders requiring Network Rail to take further steps to improve performance, particularly for long-distance passenger services and freight services. Hon. Members will know of the letter written by the ORR to Network Rail—it is fair to say that the train companies also have responsibility to do their best to ensure that punctuality and performance are maintained—and I simultaneously wrote to the train companies about their responsibilities to ensure that they are doing what they can to maintain performance at their end.

My hon. Friend the Member for St Albans referred to the National Audit Office. Network Rail is officially a private sector company. That classification is determined not by the Government, but by the independent Office for National Statistics, and that is what it has decided. I am not aware of any precedent for the National Audit Office having jurisdiction over private sector companies.

Under the terms of the Railways Act 1993, as subsequently amended, Network Rail is subject to scrutiny and regulation by the ORR, which has access to information that it needs from Network Rail, properly to assess the company’s performance and efficiency. The ORR is part of the public sector, so it is subject to National Audit Office scrutiny. The National Audit Office and the Public Accounts Committee have recently undertaken audits of the Office of Rail Regulation, taken evidence from Network Rail and others and produced reports on the regulator’s effectiveness.

We note and endorse the conclusions that the ORR must take steps to ensure that it has the capability that it needs properly to hold Network Rail to account and to drive it to close the efficiency gap with leading European comparators. I have sought assurances from the ORR that it will take such steps. Hon. Members have referred to the consultation that is taking place on the ORR’s powers. Any plans to expand the ORR’s role take account of its performance to date and its future capability, as well as comments that are received as part of the consultation process.

As a private sector company, Network Rail is not subject to the Freedom of Information Act, nor could it be without primary legislation. However, Network Rail has promised that it is in the process of developing a voluntary information rights code, which will mirror many of the provisions in the Freedom of Information Act. We welcome that initiative and believe that, if properly implemented, it will provide an alternative to

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legislation. We expect the company to introduce the code alongside a broader package of Government reforms later this year.

My colleagues and I in the Department for Transport, including the Minister of State, Department for Transport, my right hon. Friend the Member for Chipping Barnet (Mrs Villiers)—I am grateful for the comments about her accident, and I am happy to say that she is recovering well—will keep the matter under close scrutiny.

Hon. Members raised a number of specific points, but I must give my hon. Friend the Member for St Albans time to respond properly. If there are any points that I have not dealt with, I will write to the relevant hon. Members.

5.25 pm

Mrs Main: I thank the Minister for his rather rushed response. I accept that he was under pressure of time. I look forward to seeing his written response to any other points that were raised. This has been a valuable and conciliatory debate. As my hon. Friend the Member for Northampton South (Mr Binley) said, it is not about a blame game; it is about ensuring that we have the railway service that our constituents deserve and that the country deserves for its prosperity and future.

We have the weird scenario of a private company supposedly supported by taxpayer’s money. I hope that we will end up with something better in future, but I am not sure what the eventual and, we hope, better child will be following privatisation, then full access to public funds and now the chimera that I described earlier. My hon. Friend the Member for Reading East (Mr Wilson) was very defensive about Network Rail and praised it, but he started his speech by saying that 60.4% of delay attributions were its direct responsibility. He was very kind to Network Rail, but he recognised that it has some things to answer for.

My hon. Friend the Member for Northampton South made a powerful speech. I understand his passion for HS2, but he made a powerful business case for things to be much better than they are. I think that all hon. Members agree with that.

I thank my hon. Friend the Member for Suffolk Coastal (Dr Coffey) for her incisive view, particularly of level crossings. My mind was boggling that someone might have to walk through them and shut the doors after them.

Hon. Members today have raised serious concerns about Network Rail. I was concerned when the Minister said that the Office of Rail Regulation has been expected to do more, given that the Public Accounts Committee said in 2011 that it doubted whether the regulator could exert sufficient pressure on Network Rail’s performance. The Minister is optimistic and I am sure that he will be sitting on its back and beating it up when necessary, but the public’s perception is that it is a toothless tiger. I suggest that he does not give it too long to get its house in order. If it is not delivering, something else must be put in its place quickly. We cannot expect Network Rail to carry on as it is.

It was apt that bonuses were referred to; they were also referred to in the House, and I gather that there is a statement on them today. It may not be possible to prevent the directors of Network Rail from receiving bonuses, but they could stand shoulder to shoulder and

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decline them. I suggest that, if they are arguing vociferously for a new structure that awards bonuses of 500% of their salaries, they think again after this debate and the Prime Minister’s statement, which I cannot anticipate, but I know the views of many colleagues in the House and those who supported the early-day motion. I also know that the public are disgusted by reward for failure. If Network Rail turns itself around within a short period, the directors could expect to apply for bonuses, but now is not the time, and they should stand shoulder

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to shoulder with the travelling public and decline bonuses. Although they can have them, they should say that they do not want them.

This debate has been valuable. I look forward to the White Paper, and I hope that we will see a way forward for our rail services in the future.

Question put and agreed to.

5.29 pm

Sitting adjourned.