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Lord Teverson: My Lords, having sat through the bus debate yesterday and the franchise debate today, I know more about the career of the noble Lord, Lord Snape, than that of any other Member of the House other than my own. That could be quite intimidating because I am merely a user of the rail system, although I was in the freight industry, more on the road side, for 20 years. I remember that we used to try even then to get freight on to the rail system. I was
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I shall be brief and raise only two points. One is the area of competition. As we know, in the economy more broadly, competition between businesses usually raises the quality of products and customer service, and ensures that those that fail eventually disappear from the marketplace because they are not able to provide the quality of service that their customers—in this case passengers—require. One of the big problems of the franchising system is that there is an intense point of competition during the long and expensive process of franchise bidding, but once that happens you move from that snapshot to a period of regulation and trying to make sure that the right standards and quality of service are produced. As we have seen, the results of the franchising system so far have been very patchy.
Being down in the south-west, I do not wish to bore the House, as the noble Lord said before, by talking about First Great Western. However, I was aware of how the First Group effectively improved its services in the run-up to the franchise bid. It met local business and consumer groups and listened to make sure that it understood what was required. It did that very effectively indeed. I know that that was not how the decision was made; it was probably made completely on price. But, maybe through bad management or through changing timetables, once that process has been gone through, it is in the bag. Certainly, to us as the travelling public, it looks as if when they have the franchise they go back to doing the minimum of what they can do. It is as if they think, “We need to make sure that we maintain our margins, and never mind the service because we have—in this case—some 10 years of the franchise”. How can we, in this area, ensure that there is a continuing pressure of competition on franchise operators or, at least, effective control by the rail regulator or the Department for Transport to ensure that the service quality and delivery for passengers continues over that franchise period?
Coming back to my own modest career in transport, I managed a national road freight distribution business for a number of years. One of the more interesting things that I had to do and quite enjoyed was to negotiate a budget with the managers from the 25 depots from around the United Kingdom each year to ensure that they provided the right level of profit and so on. The first time when they came forward with their forecast for the next five years, they would say, “It will be really tough for the first two years and we will make losses—but look at the figures in years 3, 4 and 5”. I knew that if I accepted that, by the time year 2 came around and I went through the same negotiation, the forecasts for the next year would have gone low or into the red and the ones for the future would be high. It is called hockey stick management; you forecast pain and grief in the short-term to buy yourself some time and say that everything will be great in future.
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With a view to speaking in this debate, I looked up rail franchises on the web and came to the Department for Transport site. There I came across a table that related to the payments and subsidies that would be given to the three last franchises that were put out at the end of 2005 and awarded in 2006. I think they were Greater Western, Integrated Kent and Thameslink. Strangely enough, when I added up what those businesses asked for in the first four years of the franchise and looked at what would be the situation in the last four years—surprise, surprise! In the first four years, we the taxpayer would have to give those three franchises £350 million—but the good news was that in the last four years of those franchises they were going to give us £1.4 billion. If I had been given that sort of strategic plan in a business situation, I would have laughed my head off and said “Go away and think about it again and come back to me in two weeks with a proper financial plan”. I know that this is not as simple as that. I know that the Government are proud—and rightly perhaps—for not renegotiating the franchise for Sea Containers and the east coast main line. But what is the temptation for those franchises when it comes to year six, seven, eight or nine, to say, “I’m sorry Minister, we got the sums wrong, thank you for the £350 million but now we would like someone else to take over the job”? How does the Minister see the situation?
3.21 pm
Lord Rosser: My Lords, I congratulate the noble Lord, Lord Chidgey, on securing this debate about an industry in which I spent my working life. I shall not be able to match my noble friend Lord Snape in either his wit or the length of his speech.
The railway industry has had major successes over the past decade. There have been significant increases in the number of passengers and levels of freight traffic, and major investment in new rolling stock and the infrastructure. The railway industry cannot be as customer-unfriendly as some seek to suggest. Ten years ago there were question marks over the future size of the network, future levels of capital investment and financial support. Now, following major investment, steady and sustained economic growth and increasing congestion on our roads in the light of that growth, we find few who argue that the network should be cut back and frequency of services reduced. However, success brings its own problems.
There are capacity issues on some heavily used parts of the network, when measures that can be taken to increase capacity further, without considerable additional increases in the level of capital investment, are limited. I appreciate that when franchises come up for tendering or retendering, part of the specification may include a requirement to increase capacity. However, the decisions on what capacity increases to specify must be conditioned to a considerable degree by the further investment that can be provided rather than based on an assessment of meeting the actual increase in passenger usage that could be anticipated on routes that are already at or near capacity.
It is of course true that, nationally, a low level of journeys is made by rail compared with those made by the private car. However, it is precisely on those rail
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In particular, there are significant capacity issues on a number of commuter routes in London and the south-east, on parts of the east coast main line and probably, in the not too distant future, on parts of the west coast main line. There is widespread acceptance that London's position as the major international financial and business capital will be at risk if quality public transport links are not available. Instead, festering capacity problems in key parts of the rail network in London and the south-east put continued achievement of that goal in jeopardy. The anticipated house-building programme in London and the south-east is also likely to generate increased demand for rail travel, including on those specific routes that are already facing capacity issues.
At some stage, if the economy continues to grow as we hope, decisions will have to be made on whether considerable further capital investment will be made available to meet the continuing increase in demand for travel on heavily used parts of our rail network. If we find that we cannot give those key, heavily used and economically significant routes that further increased priority in the competing demands for finite capital investment, we will have to accept that some of that projected demand will be choked off by fares policies and the adverse effects of capacity problems on the quality of service provided. There will be an economic and an environmental price to pay for this, which the Eddington transport study appears to state is likely to be greater than the cost of the investment required.
One can see the role that the rail franchising process can play in encouraging and requiring some further investment and improvements in the quality of rail services, but there are limits to what it can achieve in this area. A recent issue relating to the east coast main line franchise is a case in point. The successful tenderer for the renewal of the franchise was not able to increase the frequency of services from London to Leeds as provided for in its successful bid because of subsequent decisions by the Office of Rail Regulation in favour of open access operators, which used up the limited spare track capacity available at the southern end of the east coast main line. What happened in this instance also suggests that some unfortunate conflicts between different bodies involved exist in the franchising process, particularly where there are shortages of capacity.
Costs are of course important in the franchising process, although it is not always clear when one assesses bids how the balance is drawn between costs and service quality, quality of management, and track record in successfully running rail services, and how the final judgment is made on which tender should be accepted. Perhaps there should at least be a review of whether we have got right the current balance between commercial confidentiality and transparency in the franchising process.
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One of the key areas of costs is Network Rail and its charges. Now that we have moved on from Railtrack and its approach, and instead have Network Rail, which took maintenance of the track that it owns and for which it is responsible back in-house, we have seen reductions in, and greater control over, costs. However, apart from knowing that Network Rail can undertake track maintenance rather more efficiently when it does it itself than when working through contractors, we do not really have any proper benchmark against which to assess Network Rail's performance.
Merseytravel has been pressing unsuccessfully to take on overall responsibility for the maintenance of the infrastructure of Merseyrail in addition to the operation of the services. While there are arguments both for and against such a move in respect of this small and largely self-contained piece of the railway network, going down that road would have given some sort of comparative benchmark against which to assess Network Rail.
Since this is not the approach that was adopted in this instance, will the Minister say anything in his response about whether it is considered that the current franchising system provides an effective benchmark for Network Rail’s costs and performance in addition to the benchmark that it can provide for the costs and performance of train operating companies? I appreciate that the Office of Rail Regulation is involved, but it, too, sees the effective benchmarking of Network Rail's costs and performance as an issue. Bearing in mind that the amount of money available for future capital investment to meet increasing demand in certain heavily used and economically crucial parts of the system is finite, the need to be able to test that we are getting value for money from Network Rail is crucial.
One of the points made in the recent Eddington transport study was the fundamental importance of technological progress if the link between economic success, energy use and greenhouse gas emissions was to be broken. That comment of course applied across transport as a whole, and the study made the point that since travel plays,
- “a fundamental role in supporting economic success and people's quality of life, and as extensive personal mobility extends to most of the population, simply stopping growth in transport demand is not a realistic scenario”.
I am not clear on the extent to which the present franchising process is being or can be used to further technological progress in the rail industry to meet the greenhouse gas challenge and to maximise the performance of the current network, both operationally and on cost. Is the franchising process, for example, being used to encourage the development and use of cleaner fuels and to reduce consumption per mile? The railway industry cannot afford to rest on its laurels as far as its environmental advantages are concerned, because other modes are making progress in this area.
British Rail had a widely acclaimed railway technical centre, but one senses that over the past decade, with the fragmentation of the industry, that clear focus may have diminished. I hope that my noble friend will provide some reassurance on the priority given to technological innovation and
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I am aware that government and industry are working together to create a technical strategy and that a White Paper setting out the long-term needs that the railways will have to meet is pending. I hope that if detailed answers cannot be given today, the points that have been raised will be addressed in the work that is being undertaken. Success can create problems and the railway industry has flourished under this Government. However, that success can be maintained and continued only if the problems that have now arisen, particularly over capacity in certain parts of the network, are addressed in a way that seeks to meet further anticipated demand, rather than stifle it at a potentially major economic cost to the nation.
3.31 pm
The Earl of Glasgow: My Lords, I hope that the House will forgive me if I use this opportunity to talk less about the franchises themselves, of which I am fairly ignorant, but rather about the railways, for which I have a passion. I agree with many of the points made by the noble Lord, Lord Rosser, which reflect many of the things that I shall say.
I have long believed that transport should be given a much higher priority in government thinking. It should be right up there with inflation, education and the health service. Yet, I am unaware of any coherent national transport policy—nothing that looks very far into the future, anyway. Of course, a number of short-term measures are being implemented and considered—congestion charges, motorway charges, all sorts of motoring charges, green taxes on aircraft and so on. On the railways, the policy seems to be to modernise and improve the existing network—cleaner trains, more punctual trains, more modern rolling stock and, of course, safer railways. That is all necessary and admirable, but it is nothing like enough.
Our transport system is facing potential gridlock. Every year, as the noble Lord, Lord Rosser, said, there are more reports of greater and greater congestion at some time or in some parts of the country—congestion on the roads, congestion at the airports and overcrowding on trains. Already, there are stories of passengers having to stand on trains for over an hour, because all seats have been taken. My noble friend Lord Chidgey pointed that out.
If we are going to take the threats of global warming seriously, and we need to make drastic cuts in our carbon emissions, we should not be planning to expand the road network or build more airports or runways. We must surely be planning the expansion of the railway network. It is the only means of transport that is relatively and proportionately eco-friendly. Besides, in normal circumstances, it is the most pleasant and least stressful form of travel. Already more people are choosing to travel by train. This is good news, but I suspect that it is the result of greater frustration caused by other forms of transport. Surely, for environmental reasons, we should be
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It seems that we are already planning for more trains, longer trains and more frequent trains to cater for some of the extra people we hope to price off the roads, but do we have the necessary capacity to accommodate these extra numbers, particularly the increasing numbers we expect to attract in the future? The answer is almost certainly no. It is transparent that the only possible solution to future transport problems is a vast investment in the railways. When I say that, I do not just mean more carriages on trains, longer platforms, or quieter stations made safer for single women at night, although these are all important short-term measures. I mean more railways—and that means new lines.
If Crossrail gets government approval it will be a start. In particular, we need to plan a new line that will provide a high-speed rail service from the north to the south of the country. I am talking about a new line; something that would make internal travel by flight unnecessary—maybe a line that links up with all the major British airports. The journey from London to Glasgow would have to become quicker by rail and be made at a cost at least comparable to that of the airlines. At present, Glasgow to Stansted by air is much cheaper and faster than Glasgow to London by rail. So many of us—me included—decide to take the plane instead of the train, which we would much prefer in other circumstances. I sometimes wonder whether the Government take the dangers of carbon emissions and global warming seriously or whether they just pay lip service to this problem.
A hugely more efficient train service, capable of taking twice as many passengers as today, must be in place in 10 or 15 years’ time. The Government must start planning for that now. Their present position appears to remain a cautious one. Officially they say that, because they do not know what the future will bring, they are not yet prepared to commit themselves to any major irreversible investment in the railways of the future. Surely this Government must show more courage and vision.
On a slightly different issue, related to the franchises, I find the Government’s present attitude towards our semi-privatised railway service rather curious, almost schizophrenic. Not so long ago the Labour Party, with the full support of the Liberal Democrats, was fighting to keep the railways within the public sector. At one time it even promised to renationalise the railways if it came to power. This no longer seems to be the Labour Party’s view. The Department for Transport now seems to rejoice in the current semi-privatised, semi-government-controlled system, constantly praising the train operators for investing in new rolling stock, while still having them there to blame for imposing the damaging fare increases that threaten to price people off the railways.
All sorts of wheeling and dealing seem to go on between the Department for Transport and the train operators, in which the major concern now—apart, of course, from safety—seems to be the Government’s
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I have one hope, which is that, through wheeling and dealing with the franchise-holders, the Department for Transport might be able to source the sort of money needed for the major investments necessary for the future of the railways. When I say the future of the railways, I mean also the future of Britain’s whole transport system.
3.39 pm
Lord Faulkner of Worcester: My Lords, this is the second occasion on which I have had the good fortune to follow the noble Earl in a debate on railway policy. I remember saying in the previous debate that I agreed with every word the noble Earl had said; I can almost say the same of his speech today. The sentiments he expressed on behalf of the railway industry are certainly shared by a number of Members of this House. I should like to join others in congratulating the noble Lord, Lord Chidgey, on his success in securing this debate today and giving us the opportunity to discuss railway franchising.
It is precisely one year and two days since I asked an Unstarred Question in your Lordships’ House on what the Government were doing to provide capacity to meet the increased demand for rail travel. Noble Lords will be relieved to know that I do not intend to repeat the speech that I made then, although many of the arguments that I and others who spoke in that debate put forward apply with equal or even greater force today. Increasing capacity to cope with the demand for rail travel has become an even greater priority, as a number of speakers have already said.
What has moved on is the debate on climate change, particularly since the publication of the Stern report. The case we made a year ago for promoting the use of the railways to combat CO2 emissions has been greatly strengthened and enjoys wider support than it did. Most people accept that the best thing that the railways can do for climate change is to carry more people. On the basis of passenger kilometres, the rail system already generates about 50 per cent less CO2 than cars and 75 per cent less than domestic air transport. In the case of Eurostar—a very special case—a full train uses one-tenth of the carbon emissions of a flight from London to Paris or Brussels.
Over the past 10 years, there has been a greater reduction in carbon intensity from the railways than from cars, and that trend is likely to continue. It results from trains carrying more passengers, combined with the benefits of things such as regenerative braking on electric trains and low
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At the same time, the rail industry continues to improve its environmental performance through the extension of regenerative braking and initiatives such as the use of biofuels. Virgin, for example, claims that its Pendolino trains on the west coast main line return 17 per cent of the electricity that it needs back to the National Grid, which, in a press release that came out this week, Virgin says is,
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