The future of rail: Improving the rail passenger experience Contents

3TSGN—lessons for transparency and accountability

57.The level of dissatisfaction with services on GTR’s network has been such that there have been numerous calls for the company to be “stripped of the franchise”.65 There are precedents for a franchise being removed from an operator before the end of the agreement period: for example, in 2007 the Government terminated GNER’s agreement to run services on the East Coast Main Line.66 Below we consider GTR’s contractual obligations, the DfT’s monitoring of the contract, and the options available to the Department should poor performance continue.

Could GTR be “stripped of the franchise”?

58.As noted above, GTR breached its contractual cancellations benchmarks in July 2015. This constituted a contravention of the franchise agreement, and resulted in GTR’s agreement to implement a Remedial Plan from February 2016, the first level of enforcement action available to the DfT for GTR’s poor performance. Financial penalties against the company are available as a second level of enforcement action—GTR has been fined around £2 million for breaching contractual performance benchmarks.67

59.In specific circumstances the DfT could terminate GTR’s franchise agreement, but on 11 July, the then Minister told us that:

[ … ] GTR is not in contractual breach of its franchise. They have been penalised for some short formation trains and some cancellations, but they are not technically in breach of their franchise.68

60.Possible termination events include where GTR’s performance is equal to or worse than the Default Performance Level for a particular benchmark for:

(a) any three consecutive Reporting Periods;

(b) any four Reporting Periods within a period of 13 consecutive Reporting Periods; or

(c) any five Reporting Periods within a period of 26 consecutive Reporting Periods.

61.The revised cancellations benchmarks, as agreed in the Remedial Plan, are as follows:

Table 2: Revised GTR cancellations benchmarks, from February 2016

Franchise Year / Reporting Period

DfT Year / Reporting Period

Breach Performance Level (%)

Default Performance Level (%)

Period 11

Period 5

2.40

2.70

Period 12

Period 6

2.40

2.71

Period 13

Period 7

2.41

2.71

Year 3

Period 1

Period 8

2.40

2.73

Period 2

Period 9

2.41

2.73

Period 3

Period 10

2.42

2.73

Period 4

Period 11

2.42

2.75

Period 5

Period 12

2.42

2.75

Period 6

Period 13

2.42

2.75

Period 7

Year 3

Period 1

2.39

2.69

Period 8

Period 2

2.36

2.65

Period 9

Period 3

2.33

2.62

Period 10

Period 4

2.27

2.59

Period 11

Period 5

2.24

2.53

Period 12

Period 6

2.21

2.49

Period 13

Period 7

2.18

2.46

Year 4

Period 1

Period 8

2.13

2.40

Period 2

Period 9

2.10

2.37

Period 3

Period 10

2.05

2.31

Period 4

Period 11

1.99

2.26

Period 5

Period 12

1.94

2.20

Period 6

Period 13

1.89

2.12

Period 7

Year 4

Period 1

1.81

2.06

Period 8

Period 2

1.75

1.97

Period 9

Period 3

1.70

1.91

Period 10

Period 4

1.62

1.84

Period 11

Period 5

1.55

1.77

Period 12

Period 6

1.50

1.70

Period 13

Period 7

1.44

1.64

Year 5

Period 1

Period 8

1.39

1.57

Period 2

Period 9

1.31

1.48

Period 3

Period 10

1.27

1.44

Period 4

Period 11

1.23

1.39

Period 5

Period 12

1.16

1.32

Period 6

Period 13

1.12

1.27

Source: Govia Thameslink Railway, Remedial Plan, February 2016 [Appendix 1 to Schedule 7.1 of TSGN franchise agreement]

We were not aware of any published data specifically on GTR’s performance against these benchmarks in each Reporting Period; it was therefore impossible for us to assess with certainty from published data whether GTR’s performance since the Remedial Plan could constitute grounds for termination of the franchise agreement. Network Rail’s train operator performance data showed that 6.9% of GTR’s trains were cancelled or significantly late (CaSL), calculated on a moving annual average basis, as at Period 4, 2016/17.69 We surmised from this that GTR might have exceeded the breach and/or default level for cancellations, although it should be noted that due to differences in definition between CaSL and “cancelled”, as defined in the franchise agreement, there is no direct read-across between the two figures.

Temporary revised timetable; “official and unofficial industrial action”; and “force majeure”

62.A significant complication in attempting to assess whether GTR is meeting its contractual obligations is the implementation of a temporary, revised Southern Railway and Gatwick Express timetable from 11 July 2016, and the extent to which the necessity for its introduction was due to factors beyond the company’s control (known as force majeure).

63.GTR claimed that the revised timetable, which removed 341 (around 15%) of Southern’s services, was necessary “in order to give our passengers more certainty and to help them plan their journeys.”70 Dyan Crowther emphasised that the temporary timetable was designed to “reduce the impact of [ … ] cancellations caused daily by high levels of train crew sickness and a reduction in the uptake of overtime.” It was initially expected to run for four weeks, while train crew availability was kept under review.71 On 5 September, eight weeks after the announcement of the revised timetable, 119 of the removed services were reinstated.72

64.Charles Horton repeated an earlier claim that a substantial increase in train crew sickness absence since the start of the RMT’s industrial action amounted to “unofficial industrial action”.73 This claim was rebutted by the RMT, which suggested that the increase in sickness absence was a consequence of increased stress levels amongst staff during the industrial dispute.74 Mick Cash of the RMT also alleged that GTR had cancelled a number of services due to “absence of train crew” when in fact train crew were available to run the trains.75

65.We asked the Department whether it had sanctioned the revised timetable and the temporary removal of 15% of Southern’s services. It told us that it had not—”the company was responsible for determining the revised timetable”.76 We wanted to know whether GTR’s performance would be measured against the revised, temporary timetable—with the effect of temporarily lowering its performance benchmarks by reducing the number of services it was required to run—or the original timetable. The DfT told us that:

Performance is measured against the original (permanent) timetable. However, it must be noted that the operator may be able to claim force majeure where extraordinary circumstances prevent it from operating the published timetable.77

66.Unofficial industrial action is listed in the franchise agreement as a possible force majeure event; this is a standard clause designed to protect operators from the effects of events that are beyond their control, where they have taken all reasonable actions to mitigate the effects on passengers.78 In oral evidence on 20 July, the Minister and senior DfT officials were unable to confirm whether GTR had claimed force majeure in relation to any breach of contractual benchmarks. It subsequently came to our attention, however, that the Department had previously confirmed, in a Parliamentary Answer on 11 July, that GTR had applied for force majeure on the grounds of “official and unofficial strike action”. The DfT subsequently told us that it was “in the process of analysing those claims” but that “it is too early to say what effect the force majeure claims, if accepted, will have on GTR’s performance benchmarks.”79

67.We wrote to the Department on 23 August, expressing our complete dissatisfaction with its answers to our questions. We asked the Department to set out:

68.We received the Minister’s reply on 6 September. He told us that it was “difficult to provide simple and clear answers”, because of the “exceptional circumstances under which GTR’s performance is being evaluated”. The data provided made clear that GTR’s actual performance against its cancellations benchmarks is now significantly in excess of the contractual breach and default levels: cancellations exceeded the default level in Reporting Periods 3 and 4, 2016/17 (29 May to 23 July).81 Data subsequently provided confirmed that cancellations exceeded the default level in Reporting Period 5 (24 July to 20 August).82 In normal circumstances this would be grounds for termination of the contract; however, GTR had made claims for force majeure in relation to official and unofficial industrial action in each Reporting Period since 28 April 2016.

69.The Minister’s letter of 6 September stated that:

The circumstances that have led to GTR submitting their claims for force majeure are exceptional in their complexity and unprecedented in scale. This is reflected in the volume of information GTR is providing to the Department. The Department is processing the claims consistently with the contract to ensure that passenger and taxpayer interests are protected.

The Minister told us the Department “cannot state when this process will be concluded”. He expected assessments of the claims to be completed six to eight weeks after the final claim is received, implying that the Department did not intend to enforce the contract while the industrial dispute is ongoing.83

70.We wrote to the Minister again on 9 September, expressing our dismay at the situation, which appeared to disincentivise GTR from bringing about a negotiated settlement to the dispute. We wanted to know why the force majeure claims could not be assessed on a Reporting Period by Reporting Period basis; we saw no obvious reason why the Department’s assessment should be delayed until after the final claim is made. We were also deeply concerned that some of the cancellations benchmarks set out in the Minister’s reply of 6 September did not match those in the published franchise agreement.84

71.The Minister’s reply set out a timeline that showed GTR’s cancellations benchmarks had in fact been amended twice: first, in November 2015, to reflect changes in assumptions between the bidding stage of the contract and the position actually inherited by GTR at the commencement of the franchise; and second, in the Remedial Plan of February 2016, following GTR’s breach of benchmarks in July 2015. Some of the cancellations benchmarks in the published franchise agreement reflected the interim situation, and not those actually used by the Department to monitor GTR’s performance. In relation to the apparent disincentive for GTR to bring about a resolution to the industrial dispute, the Minister insisted:

“Both GTR and the Department have expended a huge amount of time and effort in resolving this dispute, and continue to do so. Acceptance or rejection of the force majeure claims will not shift the entrenched views of the unions. GTR has made very fair offers to the RMT in order to bring about a resolution. These offers have been flatly refused. I have been clear that the way to end this dispute is for the RMT to put the passenger first and withdraw action.”

He clarified that the force majeure claims were being assessed “as they come in”, but GTR had not yet provided enough evidence on which to make an assessment, and the “pace of submission of each claim” had not been “as expected”.85

72.The DfT has a duty to hold train operating companies to account for poor performance; passengers expect and deserve this. The answers provided to us by very senior officials in oral evidence, and the Department’s subsequent written submissions, however, give us little confidence that it has a firm grip on the monitoring of GTR’s contractual obligations.

73.Until we recently managed, after several attempts and considerable time and effort, to extract information from the Department, GTR’s contractual performance benchmarks, and data relating to GTR’s performance against them, were entirely opaque. It is completely unacceptable that changes to the contractual benchmarks were not published in an open and transparent way. It is also unacceptable that the data required to scrutinise GTR’s performance against its contractual benchmarks are not made readily available. The Department’s evasive and opaque answers to our questions hindered our inquiry and delayed publication of this Report.

74.The DfT must take urgent action to increase the transparency of GTR’s performance against its contractual obligations. In the interests of open and transparent scrutiny, we recommend that the Department immediately require GTR to publicly report its performance against each of its contractual performance measures in each Reporting Period since the commencement of the current franchise and on an ongoing basis.

75.Industrial action by the RMT since April 2016 has had a substantial exacerbating effect on GTR’s poor performance. GTR claims that unofficial industrial action necessitated the implementation of a revised timetable, which appears to have contributed to GTR exceeding the contractual default level for cancellations. The Department must carefully and thoroughly assess GTR’s claims for force majeure. We accept that assessment of these claims, particularly where they relate to alleged unofficial industrial action, will be complex and painstaking, involving verification of train crew absences and the actions taken by GTR to mitigate the effects on services. It is unacceptable, however, that the process is being delayed by GTR’s tardiness in supplying the information required to support its force majeure claims. It is also unacceptable that the Department does not intend to conclude its assessment of GTR’s force majeure claims until the current industrial dispute is resolved. There seems little prospect of resolution in the short term; the union has recently announced further strike dates up to and including 8 December 2016. It is essential that the Department provide clarity about whether GTR is in default, as a matter of urgency. We therefore recommend the Department expedite its assessments of GTR’s force majeure claims in the three Reporting Periods to 20 August 2016. GTR should be given a deadline by which to supply the necessary information. Given that the Department requires six to eight weeks to process each claim, we recommend it come to a decision on whether GTR is in default by early November 2016.

Could a different operator run services more effectively?

76.The DfT’s view, repeated on numerous occasions by Minsters and officials, is that no other operator could step in and provide an improved service to passengers on this part of the rail network at this time.86

77.On 1 September, after we had finished hearing evidence, the Secretary of State announced a package of measures intended to “help get the [Southern Railway] service back running as it should.” The package includes:

The board’s plan is scheduled to be presented “in the autumn”, and proposed actions implemented “as soon as possible.”87

78.Transport for London (TfL) told us that it is in discussions about the transfer of inner-suburban London rail services to its responsibility at the end of relevant franchise agreements, including services that are currently part of the TSGN network. The discussions pre-date the current severe problems on Southern.88 The Minister confirmed that the DfT was considering the proposals from TfL, and was working through the operational and democratic accountability issues entailed in services that would inevitably operate across the Greater London boundary. Mr Maynard could not give us any firm date for when services might transfer to TfL’s responsibility. We pressed the Minister on whether some of Southern’s worst performing suburban routes might be transferred as a priority, before the end of the current franchise agreement, but he did not give any indication that there were plans to do so.89

79.Legally, should the franchise agreement be terminated, the “operator of last resort” is the DfT. The Department has stepped in to temporarily run services on previous occasions—Connex South Eastern and National Express East Coast, for example.90 Until recently, the body set up to deliver services on behalf of the Government was Directly Operated Railways (DOR), a company wholly-owned by the DfT. In December 2015, DOR was absorbed into the DfT on the grounds that “it was not a good use of taxpayers’ money to maintain DOR’s full corporate structure on a ‘just in case’ basis”. The Rail Minister confirmed that the Department had contracted Arup, SNC-Lavalin Transport Advisory (InterFleet), and EY to provide services to support the Secretary of State in connection with his duties under Section 30 of the Railways Act”, including “the full mobilisation of a public sector train operator.”91

80.We note the Secretary of State’s recent announcement of a £20 million package of measures, including the appointment of Chris Gibb to lead a new project board to devise a plan to produce a rapid improvement to Southern Railway’s services. Whether a £20 million fund will be sufficient to make a real difference remains to be seen. While the Secretary of State’s intervention might indicate a renewed sense of urgency on the part of the Department, passengers may view it as “too little, too late”, given that they have been experiencing unacceptably poor service for more than a year. We look forward to seeing the new project board’s plan, and hope that it can swiftly bring about the positive change that passengers deserve. We will continue to closely scrutinise progress.

81.We ask that the Department, in response to this Report, set out in detail: how the recently announced £20 million will be allocated to address the problems on Southern Railway; whether the £20 million is new, additional funding, or from what part of the Department’s budget it has been reallocated; the precise outputs it expects the £20 million to achieve; and a more precise timetable for the publication of the project board’s plan and the implementation of its actions. This money should ultimately be recovered from the operator.

82.Passengers on the TSGN network deserve a much more reliable service. If GTR is in default, it is incumbent on the Department to take the franchise back in house and then to find one or more operators that can improve the situation. It is simply not credible for the DfT to continue to claim that “no other operator” could improve the situation; if it is the case, it is a consequence of the structuring of the franchise, for which the Department is ultimately accountable. If GTR is shown to be in default, the Department must take the opportunity to find a way of delivering more reliable services for passengers. The DfT must have a workable enforcement policy for all rail franchises. There must be a clear and credible threat to restructure or terminate GTR’s franchise agreement should it default on its contractual obligations. We recommend that the DfT respond to this report with a clear statement of its capability to step in as operator of last resort, as it is legally obliged to do in the event of default. We recommend the Department work up plans for this contingency, which would enable it to break up the franchise and transfer some or all operations to one or more other operators. The Department should, for example, be working with Transport for London (TfL) to develop plans, in the event of default, for the transfer of Southern’s suburban rail services to TfL before the scheduled end of GTR’s agreement in 2021.

Compensation for TSGN passengers

83.A standard “delay/repay” scheme applies for passengers on the TSGN franchise. Passengers are entitled to a 50% refund on the cost of their ticket if their train is delayed by 30 minutes or more, rising to 100% compensation if the train is delayed by 60 minutes or more. Season ticket holders must make claims for individual delayed journeys in the same way as other passengers.92

84.Passengers have expressed dissatisfaction with delay/repay schemes, and in December 2015 the consumer rights organisation Which? raised a “super-complaint” to the ORR about lack of awareness and take up of delay/repay compensation.93 The ORR’s response, published in March 2016, set out a number of recommended actions designed to streamline the process, increase take up and promote consistency of approach across the network.94

85.We intend to monitor progress towards implementing the ORR’s recommendations later in this Parliament. We therefore intentionally excluded delay/repay compensation from the terms of reference for this inquiry. Nonetheless, many witnesses addressed the issue of compensation in the context of TSGN passengers, many of whom have been routinely and consistently delayed over the course of more than a year. Witnesses felt it was unfair for the onus to remain on the passenger to make individual claims in these extraordinary circumstances.95 At least one TOC operates an automatic delay/repay scheme for passengers who pay by bank card—last year Virgin Trains became the first to automatically refund the relevant percentage of the cost of the ticket to the card on which the ticket was purchased.96

86.On 29 June, the then Prime Minister announced that a “more generous” compensation package for Southern Railway passengers would be announced “soon”.97 No such package had been announced by the time we heard oral evidence from the DfT on 20 July. The Minister told us that he was:

[ … ] taking advice on the options that are available to me to offer an enhanced remuneration package, but my focus really has to be on resolving the problems on the network first, rather than diverting that focus to issues of compensation.98

87.On 6 September, the Rail Minister wrote to inform us that the Government had decided that the Consumer Rights Act 2015 “should apply in full to all transport services, including mainline passenger rail services, from 1 October 2016.” The Government had previously proposed to legislate to extend an exemption for the mainline rail sector to October 2017, “to allow time for operators to move to a consistent compensation scheme”. Mr Maynard informed us that:

[ … ] the Government is now of the view that rail customers should not be denied any consumer rights or protections even for a temporary period while the rail industry works to put in place more consistent compensation arrangements between train operators. The Government has today withdrawn the draft statutory instrument which would have put this exemption in place.

The practical effect of the removal of the exemption is that mainline rail passengers will be able to pursue TOCs, through the Courts, for compensation equal to the full cost of their ticket where they believe that the TOC has “failed to run a service with reasonable care and skill”. This could include delays of less than 30 minutes and other failures of service provision; it will be for the Courts to decide on a case-by-case basis. The Minister’s letter confirmed the Government’s commitment to “strengthening the standard compensation schemes that operators offer”, and noted that these “will remain the main means of redress for customers when things go wrong.”99

88.Given the scale and prolonged nature of disruption on parts of the TSGN franchise, it is unacceptable that a standard delay/repay scheme, in which the onus is on the passenger to make individual claims each time they are delayed, continues to apply. Alternative arrangements should have been made as soon as it became clear that passengers were going to experience a prolonged period of severe disruption. The then Prime Minister’s commitment, given in June 2016, to an enhanced compensation package was therefore welcome, if somewhat belated, but we are concerned that no such package has yet been announced. We recommend that the Government immediately put in place an automatic compensation scheme, in which TSGN’s passengers are refunded directly, without the necessity to make a claim.

89.The Government’s recent decision not to extend the exemption for mainline rail services from the Consumer Rights Act 2015 is welcome. We intend to explore the implications of this decision in more detail, alongside steps being taken to strengthen TOCs’ delay-repay compensation schemes, later in this Parliament.


66 GNER’s agreement was terminated after it went into default; for, for example, “GNER east coast franchise terminated”, FT.com, 15 December 2006

67 Written answer 39858, 13 June 2016

68 Oral evidence taken on 11 July 2016, HC (2016–17) 67, Q188

70 Southern Railway, ‘Revised timetable’, accessed 2 September 2016

72 Southern Railway, ‘Revised Timetable’, accessed 8 September 2016

74 Q92 [Mick Cash]

77 DfT (RPE0250)

78 TSGN franchise agreement, Schedule 10.4, section 1 (f) (iii)

79 DfT (RPE0250)

87Package of measures announced to help improve resilience of Southern network”, Department for Transport press release, 1 September 2016

88 London Assembly Transport Committee, Devolving rail services to London: Towards a South London Metro, October 2015

90Connex loses second UK franchise”, Railway Gazette, 1 August 2003; “National Express loses East Anglia franchise”, Financial Times, 26 November 2009

91 Written Answer, 23836, 28 January 2016

92 Transport: passenger rights, compensation & complaints, House of Commons Library Briefing Paper SN3163, June 2015

93Which? use super-complaint powers on rail industry”, Which? press release, 21 December 2015

95 Campaign for Better Transport (RPE0206); Duncan Neat (RPE0207)

96 Virgin Trains (RPE0204)

97 HC Deb, 29 June 2016, col 294




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13 October 2016