1.The Department did not ensure, as it should have done, that those responsible for the railway are clear about their roles and that they work together effectively. This has contributed to major disruption and misery for passengers. In 2018 rail passengers have faced delayed and cancelled train services because of strike action, timetable chaos and infrastructure problems. The Department’s and industry’s failed introduction of new timetables in May 2018 led to one in ten trains being cancelled by Govia Thameslink Railway (GTR) and Northern. Where services did run, these were significantly delayed with significant financial and emotional costs for passengers. Given the fragmented nature of responsibilities for operating the railway, it is alarming that the Department has not ensured a clear line of ownership and oversight of the timetabling process, and that it did not sufficiently probe the assurances it was getting from industry on progress. We have previously recommended that the Department set contractual incentives to ensure better joint working between Network Rail and train operating companies in future franchises to improve the response to disruption and services for passengers. However, the Department has not set out in sufficient detail what it is doing differently when letting new franchise contracts, nor how it is incentivising closer working to take place in those contracts already let. In September 2018, the Department launched a ‘root and branch’ review of the management and operation of the railway, which is expected to report later in 2019.
Recommendation: As part of its response to the ongoing rail review, the Department must set out once and for all a clear governance and accountability structure for the railway, including what the Department retains responsibility for and how it will gain assurance that the wider system is functioning as it intends.
2.We are concerned that the Department is still not adequately protecting taxpayers’ money in its management of Govia Thameslink Railway and that there is a lack of transparency about the profit rate that the company will be able to earn from its franchise. In 2018, the Department had not yet achieved value for money from the Thameslink, Southern and Great Northern rail franchise, operated by GTR, because it had failed to deliver improvements for passengers. Between September 2014 and September 2017, passengers experienced the worst overall service performance on the national rail network in terms of punctuality of trains. Passengers experienced further disruption in 2018 because of the timetable changes in May, meaning that long-suffering passengers on the route have faced disruption in the first four of the seven years of the franchise. The Department asserts that the new management of GTR has made some improvements to performance, but there is further to go. GTR has so far not made a profit, and the Department asserts that it will cap GTR’s profits for the remainder of the franchise, but it will not provide details of this cap. We do not accept its rationale that this is commercially sensitive, given the novel nature of the franchise. The Department also now requires GTR to invest £15 million on improvements for passengers, in addition to the £12.4 million settlement following GTR’s poor performance between 2015 and 2018. The Department is still to decide how the £15 million will be spent and it is not clear whether the investment will result in tangible improvements for passengers. We are concerned that the franchise failed to include sufficient investment to secure improvements for passengers, outside of the Thameslink programme, as part of the original franchise contract.
Recommendation: Within three months of this report, the Department must set out: details of the profit cap that it applied to Govia Thameslink Railway; and how the £15 million passenger improvement fund will be spent, including the tangible improvements from it that passengers can expect.
3.The Department’s failure to learn the lessons from previous programmes means that its strategic management of the railways is not evolving quickly enough to be able to procure and execute complicated projects such as Crossrail so that they do not face cost increases and delays. A range of issues have emerged on the Crossrail programme, including delays to some infrastructure and more time being required for systems integration and testing the new line. These issues have significantly increased the expected cost of the programme and delayed the start of services for passengers. These additional costs will be funded primarily through a £1.3 billion loan from the Department to the Greater London Authority, and an additional £750 million loan to Transport to London, should it be required. Londoners will therefore bear the brunt of these costs, which could further increase as it is not yet clear when full services will begin. The Department did not sufficiently probe the assurances given by Crossrail Limited over the progress of the programme and its expected cost. It is disappointing that we keep seeing these similar issues in how the Department manages programmes, including the Thameslink upgrade and the programme to modernise the Great Western Railway. It is worrying that as the Department embarks on another major programme - the £2.9 billion Trans-Pennine route upgrade - it is not learning lessons from previous programmes.
Recommendation: The Department should, within three months of this report, set out how it plans to systematically capture and learn lessons from programme delivery so that it avoids repeating the same mistakes experienced on some programmes again.
4.It is unacceptable that passengers still do not know when the improvements to services that the Department promised them from the failed East Coast franchise will be delivered. The Department promised passengers an improved service when it let the East Coast franchise to Virgin Trains East Coast (VTEC) in 2014, including reduced journey times, new services, and a large increase in seat numbers. Also, new direct services with some northern towns and cities were promised from May 2020. After the franchise entered financial difficulties in 2017, the Department terminated the franchise in June 2018, bringing it back into the public sector. The Department now operates the franchise under the brand of London North Eastern Railway (LNER). The Department asserts that the commitments given by the VTEC franchise are the same as those in the Department’s Services Agreement with LNER, including the introduction of new direct services. However, infrastructure enhancements on the East Coast are necessary to enable these direct services to be introduced and the Department could only tell us that this work will be completed throughout the early 2020s. Infrastructure enhancements will therefore not be in time to support the introduction of the new direct services by May 2020 as promised, and we remain unclear when the new services will run. The Department also expects a new public-private east coast partnership will operate on the route from 2020 and it is not clear whether LNER will be operating the new direct services or the new east coast partnership.
Recommendation: By summer recess, the Department should write to the Committee setting out in detail when the new direct services to towns and cities such as Huddersfield, Sunderland and Middlesbrough, promised on the east coast railway when the VTEC franchise was awarded will begin, reflecting the latest plans for necessary infrastructure enhancements.
5.The Department and rail industry have been too slow to act to make the railway more accessible for passengers with disabilities. The Department states that the rail industry is making progress in improving accessibility, including increasing the percentage of trains built or refurbished each year which have accessibility features factored and improving station step-free access. The rail industry had also begun trialling a new online app that aims to improve how passengers with disabilities book assistance. However, there is more to do to ensure equal access. There is still variability in the support people are getting during their journeys and pre-booked assistance does not always materialise. The ORR has recently launched a consultation on its proposals to significantly revise guidance for train and station operators to make the railway more accessible for all. The Department told us that it monitors complaints made regarding accessibility and help provided. However, it does not track whether people are getting the support they need.
Recommendation: The Department should write to the Committee by the summer recess setting out how it will ensure that train operating companies and station operators make sure that passengers with disabilities can use the railway, and to set out an enhanced monitoring regime to make sure that the companies are complying with the plan.
6.We continue to be concerned that the Treasury’s and the Department’s lack of a clear plan for what will replace PF2 funding for some major road improvement projects risks squeezing funding already allocated elsewhere. The Department has delayed some road investment projects that should have started before 2020, reducing the budget available for new road projects between 2020 and 2025. Funding available for new projects over this period will be further squeezed if the A303 Stonehenge tunnel and Lower Thames Crossing projects are funded from this budget. These projects were originally to be part-funded through PF2. But the government announced in Budget 2018 that it would no longer use PF2 for new projects, having found the model to be inflexible and overly complex. We are not convinced by assurances that the Department and Treasury are fully committed to these projects without more detail on the alternative funding models that are being developed. We have previously raised concerns in our report on the Whole of Government Accounts that these models may not be value for money.
Recommendation: Within three months of this report, the Department and Treasury should write to the Committee clearly outlining the range of financing structures available to fund the A303 Stonehenge tunnel and Lower Thames Crossing projects, how this will affect the budget of £25.3 billion for Road Investment Strategy 2 (RIS2) funding, what the effect will be on other road projects in RIS2 and how it will appraise the cost and risk implications of these options to protect the public finances over the long-term. In particular, now that these projects will not receive any PF2 funding.
Published: 27 February 2019