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Cavity Wall Insulation

3.59 pm

Hywel Williams (Arfon) (PC): It is a great pleasure to serve under your chairmanship, Dr McCrea. I applied for the debate because I have come across a number of cases in my constituency where it is alleged that cavity wall insulation has been installed when it should not have been, first because of the climate, which in my constituency is primarily heavy rainfall and prevailing wind-driven rain. I understand that my constituency is a category 4 area—an area in which cavity wall insulation is unsuitable.

In preparation for this debate, I spoke to an industry specialist with decades of experience, and he told me that in his area of the west of England, they just do not install cavity wall insulation at all. I gather from him that the prevailing weather in his area is less extreme than that in mine. My constituency is coastal and mountainous. It faces prevailing westerly winds and we have very heavy rain. I have a number of questions for the Minister, one of which is whether cavity wall insulation should be installed in category 4 areas such as mine that have wind-driven rain.

The 2012 Office of Fair Trading report on the matter contains a great deal of interesting information. If I may be forgiven for quoting at length, page 52 of the report states:

“Consumer magazine Which? reported in April 2011 that it had invited eight companies to assess for cavity wall insulation (CWI) a house that its expert surveyor deemed unsuitable for this due to cracks in the external walls and its location in an extremely wet and exposed area”.

That is typical of many of the houses in my area of north-west Wales. The OFT report continues by stating that those are factors that

“industry guidelines warn could lead to damp in houses with CWI. All eight said the house was suitable for CWI and none warned that CWI might put the house at risk from damp.”

That was in 2011, so I accept that industry practice may have moved on, but that is an important point to make at the start of my speech, because I am mainly concerned with a number of historical cases of cavity wall insulation being installed 25 years ago, say, and people now wondering what redress they have as the system fails, or at least as they suspect that the system is failing.

Secondly, I have been repeatedly told of cases where cavity wall insulation has been installed inappropriately—this is perhaps the main point—given the condition of the building, especially if the rendering was cracked or missing. Buildings vary from area to area, of course. Some places have pointed brickwork, but in my area pebbledash and smooth rendering rule supreme, and they are of course subject to cracks. Once a crack appears, water can get behind the rendering and make its way into the building if the gap between the interior and exterior skins has been bridged by cavity wall insulation. That is the nature of buildings in my area—people pebbledash their houses because of the rain.

Thirdly, I have been told of cases where cavity wall insulation was installed badly and with a low standard of workmanship, leading to cold spots in houses. Essentially that means that when the material was pumped in, some areas were missed, so that, perhaps in the middle of a wall, there was an area with no cavity wall insulation.

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That area is literally a cold spot, and condensation and subsequent fungal growth are suffered haphazardly in the middle of the wall. People are surprised by that condensation because they have insulation, and they cannot understand why it happens. It is rather difficult to remedy that situation. I understand that the system involves drilling from the outside and literally patching the inside by pumping in more material. That is clearly far from satisfactory for the householder, although it might be an effective remedy.

In one case, a householder’s internal plastic cladding made it difficult to assess the location of the cold spots. He had obtained ribbed plastic cladding from a DIY store, as he thought that that would prevent further damp, but in fact it prevented him from seeing where the damp was. That is just one case, of course, so I am not making a general point.

Other constituents have told me that they are considerably worried about water penetration and damage in areas of their house that they cannot access either because that is difficult, or because they are now older or infirm. They might have had the cavity wall insulation installed 10 or 15 years ago, perhaps when they were in their 50s and renovating their house with a view to retirement, and they are now not in a condition to clamber into loft spaces. One lady said that she suspected that she had damp that was caused by cavity wall insulation, but that it was in the cupboard under the stairs. She had not been in there for a while, so I had a look. It was quite black, and the damp was in a very inaccessible place.

I have also been told that although some installers had accepted liability and tried to do something about the damp, their remedial action had been ineffective. In one case, such ineffective remedial action allegedly led to dry rot because water was coming into the house across the bridge of the cavity wall insulation and encouraging that rot. The installers, to their credit, removed the cavity wall insulation—thoroughly they thought—and then employed a specialist company to remove the dry rot, but my constituent tells me that the dry rot has returned, as it is wont to do. She has now decided to take the matter through the courts, but her case is an exception.

I have also been told that some of the remedial action has been carried out to a low standard of workmanship. I recently visited a house on a council estate in my constituency, and as I approached, I saw that the pebbledash rendering was clearly patched—I thought by someone with their eyes closed in the dark. It was clearly a terrible job. There were patches of about 1½ square feet on which there were no pebbles and the appearance of pebbledash had been achieved by making indentations with fingers so that it looked vaguely like the pebbledash next door. The elderly lady who lived there was at her wits’ end and did not know what to do.

In other cases, liability has been denied. Although householders are convinced that their damp problems are caused by cavity wall insulation, the installers have either gone bust or closed down, or the people who have taken over the companies deny any liability. When people appeal through the industry guarantee scheme, they believe that it operates with a very high bar that prevents proper redress in what they see as a legitimate case. The scheme makes an effort to be accessible, and I am sure it acts to proper standards, but my constituents

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have faced a difficult experience, which might be because some of them are elderly or infirm, or just not familiar with negotiating their way through official-ese. The 2012 OFT report criticised the industry guarantee scheme, and I am not sure whether measures have since been taken to improve the situation.

One company, to its credit, has worked well with me. We have reached a conclusion on some cases, while it denies liability in others. A number of cases are pending or have been referred to the industry guarantee scheme—the Cavity Insulation Guarantee Agency. However, the experience is very unsatisfactory for my constituents, who thought they were doing something good by installing cavity wall insulation, but found that that was not to be the case. The company, which I will not name, was not originally directly involved in the insulation scheme. It took over another company that had closed down, so the practice was not its primary responsibility. Another company that was working in my area has closed down, so any claims for compensation or redress must presumably go to CIGA, the industry-wide body, although there might be problems with doing that.

The situation causes less tangible effects, which some people say are more damaging to the individual than the building. People suffer long-term worry about what will happen to their homes and the possible costs of repair, as they might not be able to afford repairs or clamber into attics. We know that long-term worry has an effect on people’s physical health.

It is alleged that direct health effects arise due to the growth of mould. When I was considering what to call this matter—for the file, as it were—I thought of the Welsh phrase “waliau du”, which means “black walls”, because that is literally what is happening: people’s walls are turning black, and they do not understand why. I have been told that mould growth can worsen children’s asthma.

I must note that my constituents are really bemused, because they were urged to insulate their houses and install double glazing only then to be advised that to avoid condensation, they should leave their windows open. It is peculiar to give people such advice in mid-winter, because by letting out the steam, they also let out the heat that they have taken such steps to conserve.

My constituents believe that they have no means of redress—whether they do or not is another matter—and cannot afford to take civil action. The local citizens advice bureau works hard, but its resources are extremely limited. I have contacted the trading standards office of my local authority, Gwynedd county council. It has taken up some cases, but not all, and not all that have gone forward have been successful. Many of the people affected are of modest means. They were just trying to better their living conditions, to save energy and to do their bit on climate change. The insulation programme began in the 1980s, so people are coming to the end of their 25-year guarantee period without knowing whether their system is still viable. Those people are 25 years older than they were when the cavity wall insulation was installed, and so are less able to pursue their cases.

I came across the case of a young family who bought their house a few years ago only to find later that the cavity wall insulation was failing. However, the installer is unknown, as the installation took place a long time ago and no paperwork came with the house. The family think that they have cavity wall insulation—the walls

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are black—but they know nothing else. Their case is pressing, because they think the insulation was installed 25 years ago, so if there is a guarantee, it will be coming to an end.

My general point is that my constituents subscribed to what many thought, rightly or wrongly, was straightforwardly a Government scheme. Some were told that by the installers, while others assumed that, as the Government were funding the installation, the system was safe and effective, and that the installers were operating to an appropriate standard of practice. The OFT’s 2012 report noted that some people assumed that the installers’ practice was regulated and inspected, and that appropriate quality assurance measures were in place. Those people feel let down and believe that somebody—albeit an ill-defined somebody—should take responsibility.

The Government’s frankly disappointing response to the OFT’s report concentrates almost exclusively on the green deal—I understand why, as it was being put in place—but pays scant attention to the historical problems that concern me today. The OFT emphasised the importance of cavity wall insulation, saying:

“The home insulation sector had a value of around £700-800 million in 2010…Insulation can create important benefits for consumers”.

I do not decry insulation by any means; it is a very good thing. The OFT also said that

“if poor installation causes problems with damp, these may not become evident until a year or more after installation. Monitoring, which is typically done in the weeks following installation, cannot identify these longer-term problems…In relation to regulatory monitoring, Ofgem requires the energy suppliers to inspect five per cent of installations and provide a summary of these inspections to Ofgem.”

Is 5% sufficient? It is only one in 20. I have come across so many cases in a small town that I, a complete layman in these matters, suspect that a more intensive quality assurance system is needed.

Respondents to the OFT raised four issues, including, first, the quality of installation—whether it was installed to a high quality and in suitable premises—and, secondly, whether there is an adequate mechanism for redress if things go wrong. The OFT noted its

“concerns that, although offering an important source of redress, the current arrangements for consumer redress for faulty installation of cavity wall insulation could be improved.”

As I said, the Government’s response concentrated on the green deal.

After this debate was announced, I was contacted by Councillor Brian Heading of Belfast city council—you might know him, Dr McCrea—who told me that cavity wall insulation was widely installed during the housing boom in Ulster. He said that those private and public sector houses are now 30 to 40 years old and in need of renovation, including through the removal or updating of insulation. He told me that he knows of no body that systematically checks the condition of cavity wall insulation properly to assess the scale of the problem. He was keen to say that he suspects that European money is available to the devolved Assembly under the energy programme, so I must ask the Minister whether that is true. He is keen to access any source of money to take the matter further.

Finally, I have also been contacted by representatives of a company in Lancashire that has a patent process for insulating houses from the outside with a coating. It

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also removes cavity wall insulation, albeit with difficulty. Full VAT is payable on its services but, in the company’s view, it would be reasonable to charge the lower rate. I concede that this matter may be for the Treasury, rather than the Minister, but I think it is a fair point. At the 2008 ECOFIN meeting in Helsinki, it was decided that countries can reduce the VAT rate from 20% to 5% for labour-intensive industries. The removal and renovation of botched cavity wall insulation would seem to be a prime candidate for a VAT reduction.

I will be grateful for the Minister’s response to my points, although I concede that I have made many of them. If she cannot respond today, I will be glad to receive a written reply when she has had time to consider the matter further.

4.18 pm

The Parliamentary Under-Secretary of State for Energy and Climate Change (Amber Rudd): I congratulate the hon. Member for Arfon (Hywel Williams) on securing this debate on a subject that is very important to his constituents and to people suffering from cold homes generally.

The Government recognise that improving domestic energy efficiency helps consumers control energy bills and reduces fuel poverty. Of course, it also contributes to our challenging carbon reduction targets. We aim to reduce greenhouse gas emissions by at least 80% below 1990 levels by 2050. To drive up domestic energy efficiency, we have put in place a long-term and progressive programme focused on enabling consumers to improve the energy efficiency of their homes. We have set ourselves a target of ensuring 1 million homes make energy efficiency improvements by March 2015. The programme is innovative: the energy companies obligation, the green deal, the green deal home improvement fund and the renewable heat incentive are all world firsts. It takes time to establish and embed new markets, and to understand how incentives can work best with the grain of the market and in tune with our great diversity of households.

We have made significant progress. In total, around 797,000 homes had been improved by the end of August this year. There is still much to do and our programme reflects key underlying challenges: much of the easy energy efficiency work has been done; nearly all homes have had at least some loft insulation, although many could benefit from having it topped it up; and most of the easiest cavity walls have been filled. However, we need to move away from a culture of unsustainable grant-dependency to a different model—a more market-based approach. Our long-term aim is for consumers to be motivated to improve their homes and to be ready to meet some of the costs, with real and effective help for the most vulnerable. This is good for all bill-payers as subsidy goes where it can have most effect, and good for our economy as innovative businesses enter the market and develop better and cheaper products.

That is especially important as we start to tackle more expensive improvements, such as solid wall insulation. Only around 3% of about 8 million homes with potential solid wall insulation have been done, and yet the carbon saving from such improvements can be 10 times that of loft insulation. These challenges are not confined to the UK; other countries are closely watching what we are doing.

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Cavity wall insulation has been a hugely popular measure, with around 2.6 million installations taking place under the predecessor to the ECO—the carbon emissions reduction target—between April 2008 and April 2012. Also, cavity wall insulations have accounted for 36% of all measures installed under the ECO.

Cavity wall insulation can be a highly effective means of improving the energy efficiency of homes, offering the potential for an average of 10% in energy savings. The vast majority of installations in homes have been successful and one leading industry body estimates that less than 1% of cavity wall insulations have caused consumer dissatisfaction. I know that British Gas is one firm that is now offering to install cavity wall insulation for free in nine out of 10 suitable properties, regardless of whether the occupant is a British Gas customer. This is a huge opportunity for consumers who could benefit from this measure.

However, it is important to recognise that cavity wall insulation is not suitable in certain areas of the UK, for example areas where wind-driven rain is prevalent, owing to increased exposure. The official British standard wind-driven rain index highlights the constituency of Arfon and surrounding areas as being high on the index, so the hon. Gentleman’s concerns about the suitability of properties in his constituency for cavity wall insulation may be well-founded.

Dampness in properties with cavity walls is almost always caused by rain rather than condensation, unless there is a problem with internal wall insulation. Rain gets into the cavity via a poorly maintained external wall—for example, rain can leak down pipes, gutters or poor pointing.

To establish whether cavity wall insulation should be installed, pre-installation surveys are essential, and the quality of the external brickwork is very important in areas of wind-driven rain. Surveys of the proper quality and robustness will identify those properties for which cavity wall insulation is suitable. Where cavity wall insulation is recommended, correct installation is of the utmost importance, as is the ongoing maintenance of the property. If these conditions are met, cavity wall insulation will be effective.

I am not in a position to comment on individual cases, although I appreciate that the hon. Gentleman specifically did not give any. However, I recognise the distress that this problem has caused a number of householders; we have corresponded on the matter. It may be helpful if I outline the consumer protections that are in place and the redress route for consumers.

The installation of cavity wall insulation must meet the requirements of the statutory Building Regulations 2000. The materials used to insulate cavity walls are also subject to specific standards. There is a range of qualifications and training for installers, but installers should follow British Board of Agrément or British Standards Institution regulations. Under the green deal and ECO schemes, installers must undergo a rigorous authorisation process to become authorised participants. They must then comply with a publicly available specification, which sets out requirements for the installation of energy efficiency measures in existing buildings, including cavity wall insulation. Furthermore, as the hon. Gentleman said, Ofgem requires ECO installers to contract independent

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inspections of 5% of all measures installed, including cavity wall insulation, to ensure that they meet required standards.

All insulation material installed under ECO’s predecessor scheme—CERT—was required to meet the regulations of the BBA or another UK Accreditation Service-accredited technical approval body for their thermal performance. In addition, all installers should have undertaken an inspection of the property to determine its suitability for cavity wall treatment. Moreover, all cavities insulated under CERT should have received a Cavity Insulation Guarantee Agency 25-year guarantee. This guarantee offers the assurance that defects will be fully investigated and rectified free of charge where that proves necessary, and I point out to the hon. Gentleman that the guarantee outlasts any company that may be liquidated.

I now turn to the general area referred to by the hon. Gentleman—his constituency and the surrounding areas. If the measure was installed under one of the predecessor schemes to the ECO—CERT or the community energy saving programme—consumers must first rely on the 25-year CIGA guarantee. If more than 25 years have passed, I recommend that the constituents consider seeking a new scheme, or going to their energy supplier to see what assistance it might be able to offer. If there is no effective guarantee in place, the energy company that originally funded the measure can be approached; it may be able to assist. Ofgem may help to trace that company. If Ofgem cannot help, a consumer may obtain further guidance from a local trading standards office or seek professional legal advice.

For vulnerable or low-income consumers, Citizens Advice may prove a useful contact. I note that the hon. Gentleman referred to his local citizens advice bureau. Nevertheless, if a group of citizens in his constituency are particularly affected by this issue, Citizens Advice might be a helpful sign-pointer or might give additional advice about other sources of support if it feels that the guarantee has not been properly looked at.

On learning of the hon. Gentleman’s concern about his constituency and the surrounding areas, staff in my office made inquiries and they have assured me that they have engaged with complainants on a case-by-case basis, and with the energy companies involved, and considered liability where that is appropriate. If he would like to pass me details about certain cases, I will take this issue up with CIGA, to ensure that the energy company responsible sticks to its obligations. I also understand that he has been in contact with CIGA; if he needs any assistance with that process, we will be delighted to follow up.

Cavity wall insulation is one measure that consumers can utilise to improve the efficiency of their homes. The successful implementation of our programme is dependent on encouraging consumers to take decisions to retrofit their homes with a range of measures that they can trust to deliver savings in energy consumption and in bills. I suggest that the hon. Gentleman encourage his constituents to consider other measures that may assist them in keeping their homes warmer for less.

We have put in place a robust framework that defines what measures are legally eligible for use within the green deal, alongside a robust methodology for estimating the savings that can be realised. To ensure that we are promoting the maximum number of energy efficiency

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measures possible and taking account of developments in energy efficiency product technology, we are committed to keeping our framework under review.

Earlier this year, we amended the Green Deal (Qualifying Energy Improvements) Order 2012 to allow two additional energy efficiency improvements to be installed under a green deal plan: more efficient circulator pumps; and storage waste water heat recovery devices, which are attached to baths or showers. Additional measures will also be included soon. There are energy efficient luminaires, including the first use of modern LED lighting in domestic properties; the use of replacement glazing panels for double-glazed windows; party wall insulation; and more efficient storage heaters.

My Department recently took over responsibility for household appliances. The cost of running household appliances has tumbled and in some cases halved, as tougher minimum performance standards have led to industry innovation and more and more energy-efficient products dominating the market.

Looking ahead, the smart meter roll-out will be an investment programme to modernise our outdated metering system and bring it into the digital age. I hope that when the hon. Gentleman’s constituents have their smart meters installed, it will make them more inclined to be aware of the opportunities for energy-saving devices and installations that are still around, which we hope can help them to make their homes warmer for less. The programme requires energy suppliers to complete the roll-out of smart meters to domestic and smaller non-domestic premises in Great Britain by 2020—

Dr William McCrea (in the Chair): Order.

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South West Trains

4.30 pm

Mr Dominic Raab (Esher and Walton) (Con): It is an enormous pleasure to serve under your chairmanship, Dr McCrea, for what I think is the very first time. I would certainly remember if I had served under you before. May I take this opportunity to welcome the relatively new Minister to her job? I am sure she will bring her characteristic gusto and gumption to the role.

I raised the issue of value for money on South West Trains with the Minister’s predecessor in a similar Westminster Hall debate in March 2013. I have to say with an element of regret that the service is not getting significantly better 18 months on. I say that not only from the clear data available, but as a commuting MP. I stand on the platform with my constituents, directly accountable to them, paying an ever-increasing fare both for the service on the train and for the parking at the station. Together we have experienced the steadily increasing overcrowding of a prime commuter route.

Based on the 2013 data published last month by the Department for Transport, I was not surprised to learn that one particular service that I regularly use—the 7.32 am from Woking to Waterloo—has the largest number of passengers in excess of capacity of any service in the entire country. By the time it arrives at Esher at 7.52 am, it is packed to the gunnels. According to the official data from the Department, it has 540 passengers over the specified maximum capacity limit, amounting to a 73% breach of the ceiling. It is little wonder the Daily Mail has dubbed the service the “sardine express”.

It is not just one train or some extraordinary occurrence. The 7.32 am has consistently appeared in the top 10 overcrowded peak services in recent years. Nor is it a particularly freak time. For example, the 7.02 am service is almost as packed. My experience as a commuter tells me that acute overcrowding is a serious problem for at least half an hour at peak commuter times in the morning. I get on the service at Esher station. I know first hand how rammed the carriages are. Occasionally—I saw it recently—it is sometimes even impossible to get on the train, which has all sorts of implications. It is not only inconvenient, but there are economic costs to businesses and to people in their personal lives. Clearly, the Surrey network feels the pressure of a very high volume of commuters.

Caroline Dinenage (Gosport) (Con): I congratulate my hon. Friend on securing this important debate. Does he agree that overcrowding is not the only problem? The Minister might be surprised to know that I never get complaints about the quality of the railway in the Gosport peninsula, because we are the largest town in the UK not to have any railway or indeed any station. However, we do get complaints about the Portsmouth service, which is not only overcrowded, but inadequate. It has slow journey times on a 1930s infrastructure, and eye-watering prices.

Mr Raab: My hon. Friend has raised her point with typical cogency and precision. I do not know all the facts of the case of that line, but I am not surprised, given my experience of South West Trains. She is certainly right that overcrowding is not the only problem, and I will come to some of the others. The overarching point, as my commuters tell me, is value for money.

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Caroline Nokes (Romsey and Southampton North) (Con): I, too, congratulate my hon. Friend on securing this important and, it appears, annual debate. He is moving on to an important point. One of my constituents said to me this morning that they would accept consistently increasing prices if the quality of service improved, and concluded by saying, “That is not the case currently.” Does my hon. Friend agree that the nub of the problem is that commuters are paying more for what they see as a worse service?

Mr Raab: My hon. Friend is absolutely bang on. That is the crux of the matter. We have heard interventions already about other parts of the country. I can speak for Elmbridge and for Surrey, but it is interesting to hear that the problems are systematic and not parochial.

Clearly, the Surrey network feels the pressure of a high volume of commuters. In Elmbridge borough alone, some 12 million people use our stations. The number of recorded journeys almost doubled between 2002 and 2010, so demand is high and increasing. Fares will rise by 2.5% again in the new year. The Minister will say that that is not a real-terms increase, so we thank heavens for small mercies, but none the less it is an increase. The fares are already some of the most expensive in Europe. A season ticket for the 25-minute journey from Esher to Waterloo currently costs just under £2,000, and many pay a good deal more.

What is hard to explain, let alone justify, to many passengers—I think my hon. Friends were making this point—is the enormous subsidy that they pay as passengers for other lines across the country. That is largely hidden from view. Of course, redistribution of wealth is a natural function of general taxation—it is the stuff of politics and Parliament to debate how much or how little there should be—but I doubt that many are aware of quite how stark the impact is. Certainly, in my area, Surrey residents contribute £6 billion to the Treasury, and we get back less than £1 billion in services. The point is that, on top of that redistribution of wealth via general taxation, Surrey rail passengers, through their fares, are not just paying high fares for the services that they use. They and many others using South West Trains are paying a whopping subsidy for investment in the rail network across the rest of the country.

In 2013-14, South West Trains passengers paid the Department for Transport the highest premium for their rail service at 5.2p per passenger per kilometre. That compares to the 13.1p subsidy doled out by the Government to Arriva Trains Wales, or the 2.8p subsidy received by London Midland, and the 2.2p subsidy received by Southeastern. Some train companies are therefore paying an inordinate amount for the right to run the service while others are effectively receiving a subsidy.

Over the past four years up to 2013-14, South West Trains passengers have effectively coughed up the largest subsidy to Government coffers of any train operating company, totalling just over £1 billion. That is the scale of the subsidisation of other lines by my commuters and other passengers using South West Trains. That is more than £1 billion over and above what is redistributed via general taxation. It is a staggering amount.

Aside from the scale and the volume or the amount, no one can explain to me how this allocation of premiums and subsidies across the train operators is calculated. I have looked at the franchise contracts for the train

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operating companies. They do not disclose the information. We are told it is too sensitive, and the Minister’s predecessor could not explain what the allocation or criteria are. It looks arbitrary in terms of the relative wealth of the areas concerned. For example, Southeastern received £97 million in 2013-14 to run the service, compared with South West Trains, which paid £312 million for the right. Will she, if she can, explain in plain language that my constituents can understand how the allocations—the premiums and the subsidies—are worked out? How are they calculated and how are they justified? In particular, how can they be justified given what we have heard about overcrowding, particularly on South West Trains?

I referred to the sardine express earlier, but that is just one service. In 2013, average overcrowding on South West Trains was the joint third highest in London and the south-east. Overcrowding increased in each of the preceding four years. South West Trains services featured three times in the top 10 most overcrowded services across England and Wales for 2012, and twice again in the Department’s spring 2013 data. To put those raw numbers into perspective, EU rules stipulate that calves, adult goats and unshorn sheep must be transported by train in an area of space of at least 0.3 square metres per unit of livestock, but the new Government standard for commissioning commuter services for humans is now 0.25 square metres, which is significantly less. I understand that the only train company operating to that standard is—you guessed it, Dr McCrea—South West Trains. Can the Minister explain why my constituents, who are paying ever-rising fares and doling out more than £1 billion to improve rail services for the rest of the UK that they will rarely use, do so for the privilege of travelling at one grade below cattle class on South West Trains?

The Minister will understand immediately why in Passenger Focus’s 2014 national survey, South West Trains passengers ranked their service the third worst in the country on value for money, with a bare 37% saying that they were getting bang for their buck. That dropped to 28%—barely a quarter—for peak-time passengers. Just in case anyone thinks that all passengers and commuters grumble, that compares with approval on value for money of 78% with Grand Central passengers and 61% with Virgin Trains passengers. It is not beyond the wit of man or woman.

I recognise that South West Trains will argue that it is playing the hand it was dealt by Government in the franchise agreement. That is the line, and there is obviously some truth to it. The Government ultimately decide on the premium or grant, and that very much conditions and influences the nature of the service that can be run and the resources available. That might, however, be a little easier to swallow if director remuneration at Stagecoach Group, which is the operating company, had not doubled between 2010 and 2014, just as these developments were taking place.

Nevertheless, with the fragmented nature of responsibility for rail services, it has got difficult to get straight answers to straight questions. As an MP, I find it difficult to explain to commuters and constituents why the high fares they pay deliver so little in return. My hon. Friends have made that point. What action has been taken to deliver a fairer deal for my constituents and the many

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others using South West Trains who feel as though they are treated like a cash cow, despite travelling in sub-cattle class conditions?

In particular, what progress has been made on expanding the platforms available at Waterloo into the international terminal that used to service the Eurostar routes? I understand from the managing director of South West Trains that that, at least in the short term, offers the greatest scope for lengthening platforms and trains, thereby easing overcrowding along the lines I have mentioned. Does the Minister agree with that analysis? If so, what is holding up progress in that direction? Will she update me on the options for Crossrail 2? I understand that her officials are looking carefully at the so-called regional option, which would link to the metro option, servicing south-west London, Surrey and Hertfordshire. That would substantially alleviate pressure on existing services, as well as carrying a multitude of other regional benefits. What is her view on the regional option?

Finally, we have been sweating under the franchise agreements signed off by the Labour Government. I have always argued that they bear the responsibility for the framework in which we are operating, but an extension to the South West Trains agreement was agreed in 2013, taking it to March 2019. I am sure the Minister’s Department looked carefully at the terms of the extension. Will she help me explain to my constituents what the premium or subsidy will be between now and 2019? What criteria are being used for that? What are the objective grounds justifying the different rates at which operating companies are being charged or paid?

My constituents have rather stoically endured the immediate frustration of high fares and acute overcrowding. We all know the financial situation the country faces, and that rising demand for rail services will continue for a range of demographic, economic and environmental reasons, but the raw truth is that, when I stand on that platform with my fellow constituents and take the sardine express up to Waterloo, I need to be able to explain in clear language how we will address over the long term the conditions of travel, which are often cramped and uncomfortable. I need to explain how we are going to deliver better value for money. I need to give them some light at the end of the tunnel. I hope the Minister can provide me with a degree of reassurance today.

Dr William McCrea (in the Chair): I call the Minister to give a first-class carriage answer.

4.44 pm

The Parliamentary Under-Secretary of State for Transport (Claire Perry): Another great train analogy, Dr McCrea. It is a pleasure to work with you in your capacity as Chairman.

I congratulate my hon. Friend the Member for Esher and Walton (Mr Raab) on his refreshment of his ongoing assiduous focus on his train services. He certainly brings gusto and gumption to his campaigning on this issue for his constituents. I, like him, feel incredibly strongly about the points he raises, and I am doing my best in this new and enjoyable role, with the help of my superb team, to look at these things on a factual, common-sense basis. I, like him, travel on the train and have to explain to people why we say things are getting better when for some of them they are definitely not.

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In one way, my hon. Friend would share with me the view that the huge demand we are seeing, with a doubling of passenger numbers since privatisation—numbers are rising by 5%, 6%, 7%, 8%, 9% or 10% in some parts of the country—is perversely a measure of success. We are seeing the most rapid rise in travel of anywhere in Europe. We have the safest and most punctual railways in Europe. We have the most improved railways in Europe, according to passengers. We are seeing an enormous rise in demand for these services. Clapham Junction, which he goes through and which I know well, sees 23 million people changing trains there every year. The South West franchise area is the busiest railway in Europe, and Waterloo is the busiest station in the UK. I was down there this morning, celebrating the 40th anniversary of the young person’s railcard, and it was teeming.

Caroline Dinenage: Does the Minister agree that it is not just about capacity? The problem is that if we are to see economic investment in the parts of the country and the parts of the south that really need it for regeneration, we need faster and better train routes. The journey between Portsmouth and London takes the same time as the journey from London to Doncaster, which is two and a half times as far. That is just not good enough for commuters on the south coast.

Claire Perry: As always, my hon. Friend hits the nail on the head. I have travelled that route, visiting one of her neighbouring constituencies, and I was struck by the pace at which some of those trains travel.

To return to the particular service mentioned by my hon. Friend the Member for Esher and Walton, the 7.32 train from Woking to Waterloo is, I think, the second most crowded passenger journey in the UK. I have been on that journey. I am in the process of mystery shopping the top 10 most crowded routes to see for myself what they are like. On that particular day, the operating company took four carriages out of the service for operational reasons, because of problems the day before. That meant that we were leaving passengers at the station pretty much all the way along the line.

It is incredibly important that the Government tackle these issues and deliver value for money in the eyes of passengers. My hon. Friends have alluded to that. The good news is that the Government recognise that. For the first time in a generation, we are reinvesting real money in the railways, with £38 billion being spent over this capital period to the end of 2019. That is the biggest investment in rail and rolling stock since Victorian times.

As my hon. Friend the Member for Esher and Walton pointed out, the franchise that we are debating was, like so many others, let under a previous Administration who thought that electrifying nine miles of track in 13 years was good enough. The franchises were let with no provision for growth and investment, which resulted in a huge squeeze for passengers. One of the things I am very proud of is that the Chancellor has for the second year delivered a real-terms freeze on fares, as well as scrapping the flex that enabled companies to put up their prices outside the regulated boundary willy-nilly. This Government understand value for money, unlike the previous Government.

The challenge that my hon. Friend outlined is how to pay for the investment, which gets to his point about subsidy versus premiums across the network. He does

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the analysis, as I do, so he knows that there are two ways to pay for investment in the railway: general taxation and a contribution from those using the railway. Only about 8% of commuters use the railway to get to work; twice as many take the bus and many more still walk, cycle or take their cars. Taxpayers of course contribute substantially to investment in railways through general taxation. In some cases, passengers contribute as well. Taxpayers and fare payers are often the same people, so they are right to feel aggrieved, particularly when their services are not running.

In general, the challenge as to which franchises are in receipt of subsidy and which are generating premiums is an operational negotiation at the time of letting the franchise and as patterns change as services unfold. Overall, however, the McNulty review found substantial operating costs right across the railways—far more than our European comparators—that need to be driven out, which we are working hard with Network Rail and the operating companies to achieve.

My hon. Friends each hit the nail on the head. Passengers often do not feel that they are getting value for money. They travel on slow, crowded trains and cannot understand why timetables get messed up and why the network’s resilience can fail if there is a fatality or some operational problem. All my hon. Friends will be delighted to hear that part of the £38 billion investment commitment is being spent on the South West Trains network. Just a few weeks ago, I was on the platform at Waterloo with South West Trains and its Network Rail alliance colleagues, Siemens and Angel Trains, to announce that 150 new vehicles are currently being made to be put into use on the franchise by the start of 2018. The introduction of the new trains will lead to the cascading of existing fleets, generating enough seats for 24,000 additional peak-time passengers. That is in addition to the carriages that are starting to arrive now which will also deliver additional seats.

My hon. Friend the Member for Esher and Walton made an interesting comparison with the rules for movement of livestock versus the space available for people. He and I have seen how crowded trains can be. It is not like being on a tube train, with another coming along behind. People are being made late for work if they cannot board their train. Part of calculating overcrowding is based on duration of journey. There is a strong expectation that nobody travelling for more than 20 minutes should be standing beyond that point. It is not always achieved, but that is the sort of standard that we seek.

My hon. Friend mentioned the work at Waterloo station, which is not only about new trains but about new platform capacity. Much of the network’s signalling needs to be renewed, which is happening. It is also important that the four unused platforms at the former Waterloo International Eurostar terminal are brought back into service. A few winters ago, I took my children to see the “The Railway Children”, which was a marvellous production featuring a steam train coming into the station. How strange it was that platforms at the busiest station in Britain were being used for theatre rather than letting people get on and off trains. That vital piece of infrastructure is now being restored for railway use and will be able to accommodate longer trains on

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platforms 1 to 4, removing a constraint that has bedevilled commuter journeys from my hon. Friends’ constituencies for many years.

Mr Raab: The Minister will want to get through the rest of what she has to impart, but I have two questions. First, given the investment and work going into expansion at Waterloo, has she received assurances or projections from South West Trains that it will be able to alleviate overcrowding by a certain amount as a result of the extra capacity? Secondly, she said that the decision on subsidies and premiums was an operational matter. There must be a public policy on the criteria, rather than there just being a negotiation haggle based on the bids coming in at the time. It must be more than a purely commercial decision. I should be grateful if she could give me some more detail on how the subsidies and premiums are decided, as it is the Government who sign them off.

Claire Perry: The problem is that people can turn up and pay to travel on our railways. It is not like an airline, which shuts the doors once a plane is full. While we hope that additional capacity will immediately reduce overcrowding, if more people choose to travel by train, that capacity will continue to be filled. Part of the problem is that the railways have for too long been treated as something that is in steady state. As my hon. Friend the Member for Gosport (Caroline Dinenage) said, we had not realised the importance of the railways in generating economic growth or just how valuable the services are to people who travel in and around the south-west and other parts of the country. While I cannot absolutely assure my hon. Friend the Member for Esher and Walton that overcrowding will drop by X per cent, this is the biggest investment in platform capacity and rolling stock for a generation. I hope that when he and I again take the 7.32 train, the situation for all busy services on the network will have changed.

The issue of premiums and subsidies is complicated and relates to predicted cost bases and revenues. In some cases, franchises deliver far more in premium, because passenger numbers go up so the amount from fares goes up. In other cases, there are cost relationships with Network Rail, depending on delays and performance. It is a franchise-specific issue, but I agree that it can be difficult to understand the situation in relation to a specific area. The fundamental problem is that we need to keep investing in the railways right across the country and to ensure that we are driving down operating costs. I am sure my hon. Friend has found that if he explains to passengers on the 7.32 or other trains that a bit of their ticket price is going into reinvestment in the railways to give them a better journey experience, they will feel better about it. That is value for money. The problem is paying for something and getting nothing back.

Mr Raab: The Minister is being generous with her time; I know that she has other points to make. It seems to me that it is a raw commercial decision. The fact is that South West Trains passengers will keep paying more and more and South West Trains will keep paying more and more, because there is inelasticity in demand, which ties in with her earlier points. I like to be honest with my constituents and talk to them in plain language. Are the Government saying that the high subsidy—it is called a premium, but it is effectively a subsidy—is what it is because that is what the Government can get away with?

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Claire Perry: No, I am not saying that at all. My hon. Friend and I both know that passengers also pay, as we all do, for the underlying improvements in track, stations and signalling through general taxation as, indeed, do all the people who do not commute via train. There is general investment in the railways from all of us, as well as specific investments. The idea that captive passengers are treated as a commodity is absolutely 180° opposite to how I feel. Passenger experiences and value for money should be at the heart of every franchise and direct award that we let. My hon. Friend will be pleased to hear that that view is shared strongly by my team.

To touch on one of the things mentioned by my hon. Friend, the alliance between South West Trains and Network Rail is crucial to delivering some of the capacity unlocking that we have talked about. It has been a great success and has delivered things quickly, and its maintenance until the end of 2019 has led us to extend the direct award until then. The alliance is working hard to continue to improve punctuality and performance on the Wessex routes.

Value for money is at the heart of the debate. It is great that the Chancellor has frozen fares again for all regulated passengers, many of whom are season ticket holders. Many more things can be done around promotional fares. I do not know whether my hon. Friend has noticed that South West Trains has brought in a whole series of good-value promotional fares for those who have some flexibility about when they travel during 2014, in particular to coincide with the school holidays. It cannot be a coincidence that when I was in Waterloo this morning, I met two of my former neighbours from Salisbury who had travelled up on those great fares and were visiting London as a result.

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My Department’s priority has to be to continue to manage investment in the railways in a way that delivers maximum benefits to passengers and the economy.

Mr Raab: The Minister has touched on all the points that I made; I am grateful to her for assiduously doing that. If she can, will she give me her snapshot of Crossrail 2 and the regional option? Does she have a view on that, or would she like to take it away and write to me later? It is a long-term investment, but it would be good to know her view.

Claire Perry: Crossrail 1 is delivering a huge amount of connectivity and releasing some capacity on our hard-pressed inner-city and inner-suburban services. May I write to my hon. Friend or, indeed, meet him over a cup of tea to discuss Crossrail 2, which is very much in the planning stage?

We have to keep investing and delivering efficiencies and, above all, we have to put passengers and their journey experience at the heart of everything we do. We are not moving air, or lumps of steel, aluminium, titanium or ceramics; we are moving people. I know from experience how miserable it can be to try to get on an overcrowded train and not to be able to do so. That is unacceptable and we must all work towards a new future for the railways.

Question put and agreed to.

4.59 pm

Sitting adjourned.