My Lords, I am pleased to present the Passenger Railway Services (Public Ownership) Bill for Second Reading today. Public ownership will allow us to end the failed franchising system which has inflicted misery on passengers through delays, overcrowding and poor service—a system in which far too many conversations are about how the railway works or, more often, does not work, and too few are about what the railway is for. At its heart, the railway is there to allow people and goods to move from A to B, which is vital in supporting jobs, housebuilding and quality of life. Railways are central to the Government’s missions to kick-start economic growth and break down barriers to opportunity, as well as helping us move towards net zero.
We need to change the whole culture of the railway to place all passengers back at the heart of the system. This Bill will ensure that trains are run for the benefit of the British public, not for the profits of shareholders around the world. I will be clear: there is a great deal of work ahead to reverse three decades of failure, fragmentation, inefficiency and waste. Bringing the railway infrastructure back into public ownership after the failure of Railtrack in the early 2000s was a helpful step, allowing the infrastructure manager to collaborate better with train operators, but it was just one small step. Two decades later, the system remains far too fragmented, and that is costing the taxpayer dearly.
This Bill will mean that we can finally have trains that are run for the public by the public. It is narrow in scope and serves just two main purposes. First, it will enable us to bring rail passenger services back into public operation as the default option when contracts end, not just as the last resort. Secondly, it will allow us, and our counterparts in the Scottish and Welsh Governments, to keep them in the public sector rather than having to put them back out to tender.
The Bill is just the first step—although a very important one—towards a much wider programme of reform. The need for reform could not be more obvious. In recent times, the franchising system has delivered record high levels of cancellations, frequent overcrowding, a frankly bewildering ticketing system and hugely disruptive periods of industrial action. The list goes on.
Reform of the railways has cross-party support. In fact, it originated in 2018 when the Conservative Government commissioned Keith Williams to carry out a root-and-branch review of the whole railway system. His review confirmed just how fractured and fragmented the railways are. As did the Blake Jones review, which I co-authored at the same time; I am afraid I too have contributed to the plethora of reporting on this matter.
The manifestos of all three political parties acknowledged the need for reforms to address this fragmentation. We all agree that things cannot continue as they are. There is strong public support and a clear democratic mandate for public ownership, so I sincerely hope that noble Lords on all sides of the House can put politics aside to get behind this Bill as a vital first step towards fixing our broken rail network.
My Lords, a recent KPMG survey of more than 1,300 CEOs globally in 11 key markets and industry sectors revealed that nearly 80% of those CEOs believe that hybrid employees will return to full-time office work by 2027. The survey covered companies with annual revenues of over £375 million, with one-third exceeding £7.5 billion. These are companies with large workforces. Amazon’s recent policy decision is a good example of the return to the office. The momentum towards in-office work will only increase; that is just one reason among many why it is essential that we have a rail system that works for everyone, regardless of where they live or what they do. A thriving railway is a crucial tool for driving prosperity across Britain.
It was 31 years ago that the Railways Act enabled the private sector to run franchised passenger railway services. For this Bill now to make provision for those services to be provided by public sector companies represents seismic change and will need line-by-line parliamentary scrutiny—not least in this House, where there are so many experts in the field and we can deliver a platform for passengers from which growth and success can flourish with a gold-standard railway network.
It is not in dispute that there is urgent need for rail reform. The current franchising model is not working. Passenger services are not at the standard they need to be and, post pandemic, the sector is a burden to the taxpayer. The country wants change and we have cross-party support, but that support is for the right change. Nationalising train operating companies is not necessarily the correct answer; it throws up as many questions as it does answers.
I shall first address service reliability and availability. From April 2023 to March 2024, there were 7.6 million delay compensation claims closed by the train operators —a 30% year-on-year increase. What benchmark will the Government set themselves for 2025-26, when the first franchises will come into the public sector, and what year-on-year improvements in compensation claim reduction will the Government commit to for the first five years of operation? Between April 2024 and June 2024, only 70% of recorded station stops in Great Britain were arrived at on time. This compares with circa 92% in Switzerland and 88% in France. So what benchmark will the Government set themselves for 2025-26 and the ensuing years?
My Lords, this Bill was forecast in the Labour Party’s manifesto. We have no quarrel with the need to take drastic action to make the railways work better for passengers, freight business and the taxpayer. State-run organisations can be run efficiently, and we will help to see that they do; we will also help see that, in the case of the railways, passengers and freight users are the main focus of policy.
The Railways Act 1993 left the railway with an expensive and bureaucratic organisation where too much of the effort was focused on blaming others—as instanced by Keith Williams in his original report—for shortcomings in service provision and a regulatory structure which, in common with other privatised industries, was not fit for purpose. We hope it is the Government’s intention to review the role of the road and rail regulator, which has concentrated its efforts on promoting competition and has neglected most of its other statutory duties. The basis for calculating abstracted revenue by open access operators has not been sufficiently challenged, and the regulator’s responsibility for safety has departed without sufficient regard for the widely accepted as low as reasonably practicable principles.
The legal structure devised by the rail regulator gives access rights to operators, protected in law, which prevent the optimisation of the timetable. While it is acceptable that freight has protected status, it should be incorporated in a rational timetabling process optimising scarce infrastructure resources. In my opinion, reform of the regulatory process is essential to the success of GBR. Without control of the regulatory arrangements, it will continue to be the case that major investments—like the £4 billion being spent on the east coast route—will not achieve improvements.
It has become apparent that no one can make timetable decisions that produce faster journey times, as there are so many conflicting paths and no rational ways of resolving these conflicts. As a result, there have been no major revisions to the timetable since 1991. A revised timetable for all routes would give priority to London-bound services, after which would come interregional services and then local services. That would be easily understood and can be built into a co-ordinated whole, giving good connections throughout the railway to other rail and bus services. The control organisation supervising railway operations needs overhauling to eliminate much duplication and end the focus on the blame game, changing it to one that concentrates on failures.
My Lords, I welcome my noble friend Lady Blake to the Front Bench and congratulate her in leading the Second Reading of this Bill so well. In my view, she has a lot to contribute to transport. After years of experience as leader of Leeds City Council, she saw at first hand how, over the decades, we have grossly neglected public transport investment in our metropolitan areas outside London. This must change, and I hope it will change under the Labour Government.
I support the Bill. I have no ideological bias in favour of public ownership. My bible as a social democrat many decades ago was Tony Crosland’s The Future of Socialism, which totally persuaded me that there was no virtue in public ownership per se. Therefore, these issues have to be addressed in a pragmatic way. I was always sceptical of rail privatisation. The general argument for separating the natural-monopoly elements of business from the operating elements is a sound one economically; it works in telecoms, for instance, where the infrastructure has vast capacity. But that is not true of the railways. There is not infinite capacity in the natural monopoly, and someone somewhere has to decide which services get priority and which do not.
If I might say so, I thought that the noble Lord, Lord Bradshaw, gave an excellent speech in which he outlined some of the major failures of the 1990s privatisation. The railways need a guiding hand, and on this side of the House I fully supported the conclusions of the Williams review. If I might put it this way, it was a bit rich for the noble Earl, Lord Effingham, to say that we want to see the comprehensive reform of the railways. The truth is that his Government sat on the Williams review for five years and did very little about it, because some Back-Benchers thought that it sounded a bit too socialist. I think he should recognise that Labour here is trying to pick up from the mess that the Conservative Government have left.
Some people will say that, yes, they support the Williams review but it does not necessitate public ownership throughout the system, that we lose the benefits of competition, and all that. As someone who has now been a Member of this House for getting on for 15 years and has gone up and down the west coast main line virtually every week, I must say that we had a reasonable service with Virgin, but we have had a disaster with Avanti. I do not understand how anyone can think that this has been a good example of the private sector contributing to public service.
My Lords, it is always a pleasure to follow the noble Lord, Lord Liddle, who was the opposition spokesman in your Lordships’ House in the last Parliament and therefore may have played a role in the conception of the Bill—although sadly he has been denied any part in its delivery. I am grateful to the Minister and her colleague, the noble Lord, Lord Hendy, for the briefing they gave to noble Lords during the Recess, and for the exposition from the noble Baroness of the reasoning behind the Bill.
You wait a long time for an ex-Transport Secretary and then three of them turn up at the same time. I look forward to the maiden speech of my noble friend Lord Grayling, who has held two of my previous jobs, Transport Secretary and Leader of the House of Commons. I was also briefly one of his juniors when I was a Minister in your Lordships’ House and I enjoyed working with him. He brings with him a wide range of ministerial experience to reinforce the Opposition Benches in your Lordships’ House. I also look forward to the maiden speech of the noble Lord, Lord Cryer, and the noble Baroness, Lady Pidgeon.
Turning to the Bill itself, the Government have inherited a complex set of challenges with the railways after the pandemic bust the franchising model. It simply overturned the industry’s finances, upended travel patterns and has led to increased and unsustainable taxpayer support. However, in moving to the more sustainable system that we have heard about this afternoon, it is important not to throw out the baby with the bathwater.
The structure which I hoped to put in place in the 1990s had three key benefits, all of which we risk losing. It took investment in rolling stock off the public sector balance sheet and created a market of train operators to replace a public monopoly, and its business model forced the industry to look outwards towards its customers, not inwards to the sponsoring department, leading to inbuilt incentives to grow the market. With that new structure, private operators reversed decades of decline in passenger traffic. It helped to double passenger numbers, increased services by a third and turned an operating deficit under British Rail into a surplus for taxpayers, paying a dividend of £3.8 billion to the Treasury from 2010 to 2019.
My Lords, it is always a pleasure to follow the noble Lord, Lord Young of Cookham, whether on this or other subjects where he and I have an interest. I extend my thanks to him for the help that he gave to me and my co-author in putting together material on the privatisation in one of three books on railways and politics. In one of them is a very fetching picture of the noble Lord and his family taking their cycles by train and promoting the railway. I am grateful to him for that. I have two current interests to declare, as chair of the Great Western Railway stakeholder board and as president of the Heritage Railway Association.
I welcome the Bill for one reason above all others. I hope that its appearance so early in the parliamentary Session demonstrates the scale of the Government’s commitment to the railway and their determination, not influenced by political dogma, to ensure that the railway plays a greatly enhanced role in the nation’s transport system and is again, in the words of the noble Earl, the envy of Europe.
When the railway was privatised back in 1993, it was intended by the then Government to break the BR monopoly—as the noble Lord, Lord Young, just confirmed in his speech—and to create a framework for competition to drive efficiency. That never happened. It ignored the fundamental truth that railways are not a competitive sport but a team game, requiring the seamless co-operation of many players to work together properly and efficiently. A competitive structure overseen by lawyers, regulators and civil servants is not the way to run an efficient railway attuned to the needs of its passengers and freight customers.
Reconnecting train operators and infrastructure management under a single organisation should bring efficiency in how things are planned, apart from avoiding the expense of lawyers and delay attributors. I welcome the establishment of Great British Railways, in shadow form at least, and congratulate Laura Shoaf on her appointment as chair of the shadow body. She has a great track record in the West Midlands; I wish her well in her new job.
My Lords, it is a great privilege and honour to make my maiden speech in this House, having moved up the Corridor after 23 years on the green Benches, and to do so following two distinguished figures in the transport world, the noble Lords, Lord Faulkner and Lord Young. As the noble Lord, Lord Young, said, he and I served together briefly during my time in the department; he knows a huge amount about this subject. It is a particular pleasure to do so sitting alongside my noble friend Lord McLoughlin, who was the formidable Deputy Chief Whip when I arrived in the Commons as MP for Epsom and Ewell in 2001, who became a good friend sitting alongside me in Cabinet and was, of course, my predecessor as Secretary of State. In many ways it is also a relief to be here, because I have the privilege and honour of having been the only person to serve as both Lord Chancellor and Lord President. That meant that I was constantly introduced at events as “Lord Grayling” and spent quite a lot of time explaining to people that I was not. It is a relief, having arrived here, that I now am.
I would like to express my thanks to all of those who have assisted me in my first few days in this House—in particular to Black Rod and her staff, to the clerks, doorkeepers and members of the House staff who helped me with my introduction and with getting used to this place. It was a particular pleasure to have two very old friends as my supporters when I was introduced: the noble Lord, Lord Goodman of Wycombe, who was elected to the Commons on the same day as me in 2001, and the noble Lord, Lord Sharpe of Epsom, who has the misfortune—or fortune, depending on your view—to have been introduced to the Conservative Party by me in our mutual home area of Epsom.
It is a particular honour to be appointed to this House, and one I shall always be grateful to the former Prime Minister Rishi Sunak for. In my last few years in the Commons I focused particularly on two issues, and I hope to do the same in this House. The first is international conservation, something I am very passionate about, which in my view is crucial to the future of the planet and of mankind, and also to the future of the aviation sector in this country, which is the other area I have focused on particularly. To some people there may appear to be a contradiction between those two things, but an end to aviation would mean an end to the tourist trade, which eases poverty in so many places and, in particular, is so vital to supporting and sustaining conservation efforts around the world. If there were no tourists, much of the conservation effort in the developing world would not be there. It is my intention to continue to work in these two areas in this House. In particular, I am looking forward to being part of the debate on the sustainable aviation Bill. I am very grateful to the Government for having followed the work that I and others did in the Commons before the election in looking to bring forward that Bill quickly. I urge them to get on with it; it is extremely important.
My Lords, I declare my interests as set out in the register of interests, as chairman of Transport for the North and as a board adviser to Xrail. It is a great privilege to follow my noble friend Lord Grayling; I congratulate him on such a splendid maiden speech.
We were both appointed to the Cabinet in September 2012. Because it was an unexpected reshuffle—or one that had been kept quite quiet—I was told that we could not act in our positions until we had our seals of office. Of course, we were to receive our seals of office from Her Majesty. I was told that she was in Balmoral, while we were in London, and she was not coming to London—so we found ourselves making our way up to Balmoral one Monday morning, and having a Privy Council meeting there.
I was given my seals of office as Secretary of State for Transport first; they were in a very small box. Following me was my noble friend Lord Grayling, who had become Lord Chancellor. After he took his oath, Her Majesty looked at him and said, “Your seals of office are over on the side there. You can pick them up yourself; they’re too heavy for me to lift”. That was a very special occasion for us both. Unfortunately for my noble friend Lord Grayling, he then had to pick up all the mistakes that I had made in my four years as Secretary of State for Transport because he followed me into that position. I hope I did not leave him too many problems, but I certainly left him a few. With that story, I welcome him to the House, congratulate him and commend his speech today.
So that is three ex-Transport Secretaries almost in a row, as the old saying goes. As my noble friend Lord Young pointed out, because of the problems faced by the rail industry we perhaps forget what it was like pre-privatisation; that sometimes needs to be taken into account. There were approximately 700 million passenger journeys a year then. After privatisation took place, in the year before the pandemic, there were 1.8 billion passenger journeys. After what had happened before, you would not want to spend any time at places such as St Pancras, King’s Cross or London Bridge stations. They were horrible, dingy places. Transport had not been ignored by the Government but other priorities, such as health, education and defence, got more of a hearing from the Exchequer. It worries me, and the Government have to guard carefully against going back to that position.
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That is why we have brought in this public ownership Bill as an urgent priority, and we will introduce a railways Bill later in this Session to bring about a much wider programme of reform. This will include setting up Great British Railways to act as a directing mind and put the whole railway back into the service of the travelling public and freight users.
In this debate, I am sure that some noble Lords will question the case for public ownership. In addressing that head-on, let me highlight one noticeable change for the better that did come about under the previous Government. They appointed no fewer than four public sector train operators to take over from failing private sector companies. They must agree that public ownership is a good thing, as they kept LNER in the public sector for six years and Northern for four. The devolved Governments in Scotland and Wales also support public ownership. They are right behind this Bill because it will avoid the need for them to put their publicly run services back into private hands.
Publicly owned operators exist to serve the interests of passengers and taxpayers, not to maximise profits for shareholders. The Government’s holding company, known as DOHL, has a proven track record of picking up the pieces after private sector failure, transferring services to public operation smoothly and without disruption for passengers or staff, and then starting to turn those failing operations around. LNER was one of the first operators to fully restore services after the lockdowns, with patronage last year exceeding pre-pandemic levels. It has led the way on fares reform, simplifying the confusing array of ticket types and improving the management of train capacity on the east coast main line. TransPennine Express has dramatically improved its reliability since joining the public sector. In its worst periods early last year, more than one in five services—over 500 a week—were wholly or partly cancelled, either in advance due to train crew shortages or on the day for a variety of reasons. This is now down to around 500 a month.
The newly stood up shadow Great British Railways has a strong mix of skills, expertise and experience from the top of the rail industry and will be held to account by its newly appointed chair, Laura Shoaf. DOHL, whose chief executive is part of shadow Great British Railways, has previously managed the successful transfer of services, engineering functions, back-office functions and thousands of staff members. It already has work under way to bring in the additional capacity and expertise that it will need as DOHL takes on more services.
As well as delivering better services, public ownership will save a fortune. Once franchise services are all back in public ownership, where they belong, we expect that the taxpayer will save between £110 million and £150 million a year in fees which currently benefit private companies and their shareholders. Finally, public ownership will pave the way for the wider railways Bill and for Great British Railways, which will bring together track and train in a properly integrated way for the first time in three decades. GBR will have a relentless focus on meeting the needs of the passenger and the freight user, while also driving best value for the taxpayer.
While extolling the virtues of public sector operation, I also want to acknowledge the vital role that private businesses will continue to play in our railways. As now, there will be huge opportunities for the many successful and innovative businesses within the rail supply chain. The operation of rail freight services will remain in the private sector, helping to free up our roads and put us on our way to net zero. There will be a continuing role for open-access passenger services alongside publicly run services, where they bring benefits and add value to the network. In view of the dire state of public finances, it would not be responsible to bring privately owned rolling stock—trains and carriages —back into public ownership, but GBR will take a coherent, long-term approach to our future rolling stock needs, helping to secure better value from the private rolling stock market than was possible under franchising.
There was some debate in the other place about the availability of performance data to enable public scrutiny of individual train operators’ performance. However, we are not lacking in information about operator performance: there is plenty of evidence that it has not been good enough. There have been particular concerns about the poor standards of service provided by Avanti and CrossCountry, which I am happy to address head-on.
As a result of decisions made by the previous Government, the core term of Avanti’s contract expires in October 2026, while CrossCountry’s expires a year later. We cannot bring these contracts to an end before those dates unless the relevant contractual conditions for early termination are met. So the Government will continue to monitor operators’ compliance with their contracts closely; the Secretary of State, as passenger-in-chief, has made clear that she will not hesitate to take further action where appropriate. Ministers have already met Avanti and CrossCountry and their Network Rail counterparts to challenge them on poor performance and demand immediate action to deliver improvements. The Secretary of State has also put in place a formal remedial plan for CrossCountry.
Noble Lords may question why we intend to bring services back into public operation as existing contracts expire, rather than starting with the poorest performers. That is a good question, but this is the right thing to do because it is the way to avoid paying compensation to the outgoing operators for ending their contracts early. Our blueprint for rail reform, Getting Britain Moving, published before the election, was clear on this commitment.
I reinforce that reform does not end with the Bill. This is just the beginning. As I alluded to earlier, this Government plan to introduce a wider railways Bill, which will include provisions for establishing Great British Railways. Consistent with the Secretary of State’s commitment to move fast and fix things, in advance of that Bill, she has already established Shadow Great British Railways to improve services for passengers, unlock barriers to delivery and move the rail network towards greater financial sustainability. Made up of leaders from DG Rail Services Group under DfT, Network Rail and DfT’s holding company for public sector train operators, it will signal a new way of working together to deliver a simpler and better service.
Shadow GBR will also be responsible for designing Great British Railways and will play an important role in improving the reputation of the railway with customers. It will build and exemplify the culture and ways of working in rail that we want to take into Great British Railways. The wider railways Bill will be for future debate in this House and elsewhere but I dare say that noble Lords will want to express some of their views on these matters today. I welcome those contributions. We are keen to ensure that we take the time to hear and understand views from interested parties, including noble Lords. As we refine our detailed plans for the wider Bill, I am sure that the Government will have more to say about these plans in the weeks ahead.
To conclude, this Government will put our rail system back on track to deliver for passengers and support our growth and opportunity missions, with clear strategic direction and proper integration and co-ordination. This Bill presents an unprecedented opportunity to begin reforming the railways in such a way that it will benefit generations to come. The passenger and the taxpayer have for too long been at the mercy of the private companies that operate our railways. This Bill is the first step in ending the decades of failure that have become synonymous with rail travel in this country. There is much to be done; once up and running, Great British Railways will be able to put the passenger and freight user front and centre, seizing opportunities for renewed economic growth, innovation, accessibility and a sector that we can be proud of. Public ownership is a vital ingredient in our plan to fix our railways. I beg to move.
Just recently, the European Commission confirmed in a study of its own the benefits of competition in passenger rail. Prior to the pandemic, the railways ran more than 21,000 services on an average day, which represented a 30% increase to that before privatisation. By what year will the Government commit to providing that same level of service to passengers?
Moving on to infrastructure investment and cost benefits to both taxpayers and passengers, which are essential to the success of this project, government investment in the sector has quadrupled since privatisation and in recent years we were successful in winning around £1 billion a year of investment from private funding. To provide a truly great service for passengers, the sector must have continuous investment, so I ask the Minister to confirm what funding agreement she has negotiated with His Majesty’s Treasury to ensure that the money is there. How much has she agreed will actually be available? It would also be interesting to know why rolling stock companies are not being nationalised so that the Government could achieve vertical integration to increase efficiency, reduce costs and boost control, all of which will benefit the taxpayer.
Train operators were net contributors to the Exchequer from 2010 to 2018 but fell into deficit after 2018. The impact of Covid on the sector has been devastating and it now costs the taxpayer £2.6 billion to cover the day-to-day running of train operating companies, which contrasts markedly with the £373 million in day-to-day running costs in 2019 and 2020. If we assume that the move back to the office continues in line with the KPMG survey, we can hope that day-to-day running costs will decrease for the taxpayer in correlation with increased footfall on the train network, but, for clarity, that cost benefit reduction will not be due to this Bill.
The Government have said that the Bill will save the taxpayer millions of pounds so, under the proposal, the management fee and performance-based fee for private sector franchise train operators will disappear. However, unprofitable services are currently subsidised under the existing agreement; this will still be required under a public sector company. Not only that but the subsidy may well increase and there could be costs with franchise extensions and associated dealings. Management still has to run the railways and will be receiving a salary and, instead of a performance-related bonus, perhaps a government-backed final salary pension scheme, which could end up costing the taxpayer more than the performance-related fees. All these elements combined could be why the new Bill required a money resolution.
Rail partners, which obviously have a vested interest, will nevertheless be in possession of a mass of information. How does the Minister answer their point that full nationalisation is a political and not a practical solution which will increase costs over time? Just to reassure the many parties, including noble Lords in this House, who have concerns about the costs for the taxpayer, will the Minister explain, in rough numbers, where the cost savings will come from and what the net benefit to the taxpayer is on a yearly basis versus the current set-up, while discounting the improvement in the balance sheet from the lessening impact of Covid working-from-home policies over time?
Next, I shall focus on risk management. The Government want to remove the privately owned train operating companies that have been working the network for 31 years. I apologise, as this might seem like a basic question, but who exactly is going to replace them? Will the Government be able to find more skilled and knowledgeable staff than those already working in the sector? Will they appoint new chief executives, chief financial officers and boards of directors who will be responsible for the running of the companies? If yes, will the Minister provide a timetable for when the recruitment search will begin for the relevant key staff? How will those key staff be incentivised to control costs and grow the rail network for the benefit of passengers?
The Financial Times has also reported concerns from rail industry bosses that the scale and complexity of nationalising the remaining franchises could put pressure on the Department for Transport operator of last resort. How will the Government ensure that DOHL is sufficiently resourced to deal with this? What hiring plans have been made and what budget has been secured for the new headcount?
Finally, I come to accountability and governance. For these new public sector companies to be successful, they will need to be accountable to shareholders—the shareholders being the taxpayer. What performance, financial management and innovation metrics have been agreed by the Minister to ensure that both passengers and taxpayers are receiving value for money and will not be negatively impacted by spiralling costs in the sector due to a lack of experience, a lack of expertise or both?
In the same way that powers will be given to the OBR to make judgments on any major taxation or spending announcements, will the Minister commit to giving the same powers to the Office of Rail and Road to conduct an impact assessment for the Bill to confirm that it makes economic and operational sense and will not be to the detriment of either passengers or the taxpayer? Will the ORR also be given the authority to assess all aspects of the performance of public sector companies awarded public service contracts?
We know the Government intend to establish a powerful new watchdog: the passenger standards authority. Can the Minister explain why it is not being delivered as a part of the Bill? In the past, previous Governments have introduced temporary legislation with the intention of bringing forward additional reforms, but the wider reforms have not materialised. Will the Government take this precious chance to deliver a comprehensive package of railway reform rather than focusing solely on this interim Bill?
We have an opportunity to make our rail system the envy of Europe so please let us do it the right way, which will bear fruit for generations to come.
Complaints are made about the rolling stock companies. We do not expect these to be taken into public ownership, although, in common with other state-owned assets, they were sold far too cheaply and largely debt free to an immature market. However, allegations about fixing the market have not been upheld and, with fresh entrants into the business, there is every reason to believe that the market will become more competitive. The rolling stock companies should have a place at the table when designs are developed, as well as the supply side of the industry and some representation from goods designers, as was the case with British Rail.
We await with interest what the Government will propose for fares and charges. We want our railway to be busier. For this to happen, we need to charge cheaper fares and provide more capacity. In many cases our trains are too full, to the extent that people avoid using them, which cannot be right environmentally or economically. We want our railways to offer a “turn up and go” capability, not one that charges high fares to travellers who have to make urgent journeys at the last minute and who face having to stand because insufficient accommodation is available.
There are a few more issues on which we want clarity from the Government, in the Minister’s reply or in subsequent legislation. I know that the Government have in their possession proposals for a modest programme of infill electrification, which would mainly benefit freight but would also bring benefits on the passenger side. This should include modest extensions to the existing third rail systems which the previous Government allowed to be halted.
Other proposals would show that the Government are looking to the future, such as electrifying the Midland main line; the work on the Felixstowe to Nuneaton route that is so sorely needed in the freight industry; and the provision of a flat crossing at Newark. This, together with the re-signalling now taking place and the elimination of wasteful paths for five-coach trains that should be formed of 10 cars at least as far as Doncaster, would create at least two and possibly three more paths each hour on the east coast main line, as it needs to build on its place as the premier route between London, the north-east and Scotland. This would not need an immediate cash handout, but the design work and preparations in the supply industries would be immediate and would let the railways know that the Government are listening to them.
Lastly, I turn to the decision made by the last Prime Minister in respect of HS2. There is simply insufficient capacity in the system to plug the gap left by this announcement, and early clarification of the Government’s position on this is necessary.
We will hear a number of maiden speeches, to which I look forward, including one from the noble Baroness, Lady Pidgeon, who is an expert on transport. I hope we shall listen to them all.
In fact, since Covid, we have not had a competitive railway in any sense. What we have had is the most centralised system of management of the trains in recent times. The Department for Transport lays down the costs for every service and the Treasury collects the revenues. The franchise operators have very little incentive to make any improvements of any kind; all they want to do is collect their fees. We need a fresh start and I think that this Bill gets us part of the way to it.
The only part of my noble friend’s great introduction to this Bill that I paused at was her announcement that we might have to put up with two more years of Avanti. I would like to know why. Can we please see what the contract is that the Government feel they cannot withdraw from? Can we see what performance standards the last Government set for Avanti and whether they are being met? As a Government, let us not hesitate too much about taking drastic action. I know that my noble friend Lord Adonis, when he was Transport Minister in 2009, was advised by the department and its lawyers that it was quite impossible to take LNER into public ownership at the time. He said, “Well, what’s the risk that they’re going to sue?”, and went ahead with it. I cannot see the public rushing to support Avanti if it is deprived of its franchise.
I have some detailed points on the Bill that I think are important and on which I hope we can have a decent discussion in Committee. They are concerned mainly with new Section 30C, on the definition of what kinds of public service contract and public service company are allowed to operate on our public railway. One of my concerns—it relates to what I said earlier about my noble friend Lady Blake and her experience in Leeds—is whether combined authorities and mayors would be able, under the remit in new Section 30C, to run services in their metropolitan areas. It would be a shame if we had in our minds the wonders of the British rail model of the past, because I do not think that it was very wonderful. We need a much more decentralised structure for our public railway, and we need to find the mechanisms to make that decentralised structure work.
My second point is that I do not see any ideological objection to public/private partnerships in running the railway. Let me give an example. You might have a situation where a private company was prepared to commit to electrification plans for a particular line that would not be in the public sector investment plan. My view is that we should allow public/private partnerships on a net additionality rule. If they are going to bring more investment into the rail system, what on earth is the case for not allowing them to do so?
With those points, I say that it is clear that this is a good start—but it is only a start. The whole scheme of reform has to be worked on very hard by the department and its Ministers in the coming months, but, in the meantime, I welcome the Bill.
By contrast, the Sunday Times told us yesterday that the subsidy for Southeastern, which is now in the public sector, is four times what it was prior to the pandemic, when it was in private hands. Passenger safety improved after privatisation and closed branch lines were reopened. We need to put those facts into the public domain while we debate the future of the railways. It seems to me that the challenge before us is to try to retain those advantages within the new structure.
I will take them briefly in turn. First, on the public sector balance sheet, I had the benefit of negotiating with the Treasury for investment in the railways both before and after privatisation. Before, I would go along to a Star Chamber composed of colleagues who I thought were my friends but turned out not to be, and I made the case for investment in rolling stock as best I could. They would say, “George, we’re really interested to hear from you, but we’ve just had the Secretary of State for Defence, who wants more soldiers, we’ve had the Home Secretary, who wants more policemen, we’ve had the Health Secretary, who wants more doctors and nurses, and we’ve had the Education Secretary, who wants more teachers. Politics is about priorities and we’re very sorry, George, you can’t have your new train set for Christmas”.
After privatisation, there was no dialogue with the Treasury at all about investment in rolling stock. The capital markets responded to the business case that I made, and we got the investment which we needed. That is one benefit that we are about to lose, given the path on which the Treasury and the Government are now embarked.
The franchising costs of the operators now run by the DfT score as public expenditure. At the moment, those franchises do not have much time to run, so the sum is relatively small, but when GBR is up and running all rail investment will score as public expenditure; that is potentially £13 billion which the Government do not have to find at the moment. Amazingly, if you look under the heading “Financial implications of the Bill” in the Explanatory Notes for the Bill, you will see that there is simply no mention of that whatever. Nor in the other document, Final Stage Impact Assessment, is any mention made of that under the heading “Impacts on government priorities”. But any spending Minister knows that, when he looks at his or her capital budget, it is crucial whether that investment is public expenditure or private. If the Transport Secretary is unsuccessful against the bids for doctors, nurses, policemen and teachers, there are implications for the reliability of services, which we have heard about, and for the supply line, which the Minister mentioned—that is, those who supply the rolling stock in this country.
The second advantage was to bring in other successful transport operators—people who run bus companies, airlines, shipping or successful operators from overseas. Their skills were applied to running the railway and so break the British Rail monopoly. If British Rail was not as good as Ministers felt it ought to be, there was nothing we could do about it; there was no one else who could run a service. Privatisation created this new market of train operators bidding for franchises; many good people within British Rail moved over to the new train operators, and welcomed the freedom that privatisation had given them, particularly the freedom of manoeuvre that came with it. Just as other European countries are moving over towards the model that we now have, this country is taking a backward step to a public operator with an outright prohibition in the Bill on the use of private contractors.
The structure which we chose also avoided national strikes of train drivers. Each individual franchise operator negotiated individually with the trade unions and, by and large, they reached agreement. National bargaining with a single employer, as proposed, could mean that any future pay disputes have a greater impact on passengers. Others may talk in this debate, or certainly in Committee, about the implications of employment changes for the thousands of railway workers who now work for the train operating companies who will move over, presumably to a single contract at some point within GBR, with all the implications that has for negotiation for the workforce.
The third innovation was an incentive to grow the market, to look outwards towards the customer. Once a company had won the franchise, the only way that they could increase its turnover and profit was by winning more customers. But when I was Transport Secretary, it made little difference to British Rail whether it had more customers or fewer; it just meant it got more or less subsidy from the Secretary of State. Franchising created that incentive to look outwards at the market, not inwards towards the department. By contrast, the new contracts introduced by the Government leave operators with little commercial freedom or ability to help growth—a point touched on by the noble Lord, Lord Liddle. Given the financial challenges facing the Government, it is counterintuitive to ban the only part of the rail system with a track record of driving growth and reducing subsidy for taxpayers. Nor is public ownership a panacea for all the problems —passengers mind about performance and price. Over half the delays in the system are caused by Network Rail, which has been in the public sector for two decades. On price, is the Treasury going to find the money to keep rail fares down? It is just worth remembering that, on privatisation, rail fares were capped at RPI minus one, a policy that was reversed by the incoming Government.
A final word about fragmentation—a word that was used a lot by the Minister. The final impact assessment says that the Bill aims to reduce industry fragmentation. A common criticism of privatisation is that we have ended up with an industry that is fragmented and should be brought together. I understand that argument, but it should be treated with some caution. The most popular and safest form of public transport is by air, yet you could not find an industry that is more fragmented. The airlines do not own the aircraft, they do not own the airports, they do not run the national air traffic system, they do not do the baggage handling or the catering. Some airlines do not even employ the pilots but get in self-employed pilots. I prefer to use “specialised” to “fragmented” in describing a transport industry. I challenge the assertion that an industry which is fragmented or specialised is less efficient than an integrated one.
The Bill will probably go through but, as a political midwife, I hope that the Government will see whether some of the progeny of privatisation might be saved.
The creation of GBR also gives us the chance to restore some financial and economic disciplines that have not been a feature of the present set-up, and that cost so much more than British Rail did. It is a difficult balance to strike, not least because the playing field in transport has been so uneven. Successive Governments approved the annual increase of rail fares above inflation almost every year in recent times, while in contrast the annual fuel duty escalator has not been used since 2011, so motorists have received tax breaks over almost 13 years. Subsidies for electric cars have encouraged a further shift from public transport to driving. This is not a war on motorists. If anything, it is the disadvantaging of the most fundamental and important element in the transport structure.
It is not just with road users that the railways find themselves competing on unfair terms. By far the most polluting and environmentally unfriendly form of passenger transport is domestic aviation. In a report published by the think tank Transport & Environment UK last month, it was shown that, if a fair equivalent to the fuel duty paid in other sectors were applied to domestic aviation, up to £6 billion a year could be raised. Had High Speed 2 not been progressively scaled back and that railway built to provide a new fast intercity service, particularly to Glasgow and Edinburgh, there would have been a genuine modal shift from domestic flights to the high-speed railway, as has occurred in all the European countries that have had the foresight to build a high-speed rail network.
Even without HS2 going to Newcastle and Edinburgh, there has been a large modal shift to the railway. Pre-Covid, the proportion travelling by rail from London to Edinburgh was 35%; the latest figure today is 57%. Much of that growth has taken place on LNER, and I congratulate it, but the introduction of open-access Lumo services has also played a considerable part.
During the privatisation process, no thought was given to how the social benefits provided by the railway would be paid for. Back in the day, BR understood these benefits and how to offer them as part of the service for which it received the passenger service obligation grant. Busy trains provide low-carbon travel, with emissions even lower when the train is powered by electricity. They reduce traffic congestion and pollution by reducing the number of cars on the road. They can be part of a different lifestyle, encouraging people to walk to the station or use the bus, rather than avoiding exercise by taking the car from the house without walking at all.
Trains connect people and reduce the problems that are experienced in remoter parts of the country. We have already seen how communities such as Okehampton have benefited from being reconnected to the network: passenger numbers are more than twice those forecast and there have been huge benefits to local society. Trains are safer than hazarding your life on the road network, where 1,700 people die annually still. The standards applied to road design and accident investigation are weak and way behind the focus on safety that is a central part of railway culture. Trains are a lifeline for young people who cannot afford private transport or do not want to pollute by using cars or aircraft. They are also essential for the elderly and particularly those who should no longer drive, even if they cling on to their cars.
Despite some problems at older and smaller stations, the railways have opened up a much better lifestyle for those with impaired mobility. One of the biggest changes in the last 20 years has been the large increase in the number of people travelling in or with wheelchairs or who are receiving assistance at stations. Privatisation made no financial provision for these benefits and, unsurprisingly, the private companies were not able to provide all of them without some financial support.
Train services are not like a standard commodity, such as buying soap powder or a tin of beans. They are a careful compromise between providing the best service possible with perhaps 200 different preferences by the passengers who use them. They are also a compromise between fastest journey time or high frequencies and best connections with other trains and other forms of transport.
Contrary to what was believed back in 1993, competition has always been between modes, rather than between train operating companies. For almost the whole period since privatisation, the railways have been working in a difficult environment with constant changes in demands by previous Governments and micromanagement by civil servants. To their credit, the better train operators have managed to make this complex system work and, particularly pre-Covid, tried to improve journey times, provide enough rolling stock for a growing number of passengers and build positive relationships with rail user groups, local authorities and local bus companies. They have been able to draw on funds to help achieve local improvements through initiatives such as the customer and community improvement fund.
Open access operators have, as my noble friend the Minister made clear, been left out of the scope of the Bill. This is sensible—the numbers are small, but they fill a gap in the network that was never filled though franchising. Similarly, heritage special train operators, including those using steam locomotives on the main line, are not covered, which will be a great relief to them given the substantial regulatory burden that they already have to take into account and the significant operating challenges they face, particularly at the moment in sourcing coal for their locos.
I agree that the rail freight operators are best left as they are, but some direct support by government might be required to provide rail freight terminals where they are needed, and there needs to be protection from predatory pricing by juggernaut operators, particularly where overseas companies pay no vehicle excise duty and avoid fuel duty by filling their tanks abroad.
Decarbonising road freight is a huge problem, but on rail it can be achieved relatively easily through extension of electrification and other sustainable forms of traction such as battery power. Getting traffic off our roads and on to the railways is absolutely the right thing to do from an environmental standpoint and is massively popular with the public as well.
Opinion poll surveys show substantial support for the Government’s nationalisation proposals, provided that they are not accompanied by huge fare increases. One of the most important and welcome changes will be an end to the present wholly unsatisfactory arrangements where the Treasury is in control of tactical policy and minimising costs is the primary objective. There needs to be an understanding across government that railways are an opportunity, not a problem, and are an essential part of any national growth strategy.
We look forward to the second railways Bill next year to complete the transformation and to put railways at the heart of the nation’s transport infrastructure. Meanwhile, I welcome this Bill and I congratulate my noble friend Lady Blake of Leeds on taking charge so well today, and I look forward to working with her and with my noble friend Lord Hendy of Richmond Hill during its later stages in this House.
If the House will indulge me, I will conclude with the final words of my third book on railways, Signals Passed at Danger, which I referred to earlier and which is available in all good bookshops. My co-author and I wrote:
“The railways’ capabilities are manifest when the management of the railways is restored to those competent to operate them, with a clear strategy and funding agreed to deliver the outputs of that strategy”.
Let us hope that the Bill is a first step towards achieving that.
As a former Lord Chancellor, I very much recognise the need to uphold the rule of law in this country. It is one of the things that makes us strongest as a nation. It is one of the things that has created one of the world’s most highly regarded legal systems. In this House I see one or two familiar faces from my time as Lord Chancellor. I should also say that it is the role of this House and of Parliament to challenge and sometimes disagree with the view of the courts. That constructive tension lies at the heart of our democracy. It is part of the strength of our democracy, and it should never be lost.
As a former Lord President and Leader of the Commons who co-chaired, with the noble Baroness, Lady Stowell, the first Joint Committee on the restoration and renewal programme, I also intend to play an active part in pushing for us to get on with that. It is far too many years since we started that process. I find it very frustrating that eight years later we still have not made progress. It is vital to the future of this historic building. We are all guardians of an essential piece of our history here, and it is our duty to make sure that it is sustained, maintained, improved and protected for future generations. We must do that.
As a former Secretary of State for Transport, I could not pass up the opportunity to make my maiden speech in today’s debate. I am very pleased to see the Minister in her position. We know each other well from my time in government when we debated the future of transport in Bradford. I very much hope that her time in government will lead to real work. Bradford is a great city that needs better transport links, which I wanted to see and was moving towards trying to achieve. She was part of the review process after the 2018 timetable issue, and I was always grateful to her for the work she did then. Of course, she and the noble Lord, Lord Hendy, are now going to have to deal with the challenges of overseeing an industry in which somehow it is always the Minister’s fault if something goes wrong. I particularly remember being blamed by one of the unions, which called for my resignation after a freight train derailed in the morning peak, causing massive delays in south-west London. I am afraid that kind of joy lies ahead for her, and I do not think these reforms are going to take away the reality that the buck still lands on the Minister’s desk, however much they might wish to change that.
Clearly there are disagreements across this House and the other House about the best way forward, though I think there is no division between us about the fact that franchising has run its course in its current form, or rather the form that it existed in before the pandemic. Change was needed, which is why I commissioned Keith Williams to do his review. Whether the approach the Government are taking is the right one is a different question, because—I have to say to the Minister—I do not believe that the issues on our railway today are about ownership. The reality is that the people who have been running the railways are going to be the people running the railways in future. The issue is all about capacity and constraints. Frankly, we have had too many trains on too little space, and it just does not add up. Trying to get many trains through our busiest junctions at peak times has been an impossibility. It is what has caused so many of the delays, and that is what is going to carry on happening. Ultimately, if the Government are to deliver what they say they are going to deliver, they will have to invest in extra capacity as well.
The second issue is that, as the noble Lord, Lord Young, said, renationalisation brings the railway back into competition with other areas of government at Budget time. Ministers must not close the door to private investment in the railways. If they do, they will find that services do not improve, costs do not come down and capacity challenges remain. If they shut out the private sector from the railway, in my view they will come to regret it. But that is all for another day. The debate will continue, not just on this Bill but on the Bill that the Minister has said will come before this House, and the House of Commons, in due course.
I finish by reiterating that I regard it as a huge privilege to be here, and it is good to be alongside many friends on different sides of the House. I very much look forward to taking part in debates here in future. It is an honour and a privilege that I am very grateful to have been given.
I accept fully that this proposal was in the Labour Party’s manifesto and that it is therefore going to happen. However, we have not yet seen the main railway Bill, and will not do so for a little time yet. There are a number of questions to be asked about that because the balance between freight and passenger and the accessibility of both the freight industry and passenger transport—this was referred to in a way by the noble Lord, Lord Faulkner—is going to be an important one.
I have always thought there should be a guiding mind for transport who is accountable. I thought that it should be mine because then I would agree with what I have been saying, but I assure the Minister that any guiding mind is still going to have to use the same capacity on the railways that we have today. That is one of the biggest issues. It was of great regret to me that the previous Government, in cancelling the second part of HS2, made a big mistake. HS2 was never about speed; it was always about capacity on the network. If we want to see more people travelling on our railways and more freight on our railways, we have to increase capacity. That is a key issue but this Bill does nothing at all in terms of capacity on our network. It talks more about the mechanics, but they will still have to use the same facilities that are required now. That will be one of the biggest challenges for the Government.
There is also the question of the transfer of liabilities. When we see the final Bill, it will be fascinating to see what happens in relation to transferring liabilities of pensions and different salary costs across the whole industry. It is interesting that, while we in this country are eventually going to go back to a single operator, in Europe, countries such as Spain, Italy and France are embracing on-rail competition between operators and competitive tendering to increase services, deliver newer trains, grow passenger numbers and reduce subsidies. Perhaps they looked at what we saw happen in this country on the railways over a period of time: a massive increase.
One of the reasons why the railways have become a lot more politically controversial, in a way, is that many more people are using them. Since the pandemic, we have seen quite a big change in the way in which the load of passengers is changing over the week. There is now a lot more use of the train service by passengers at weekends. Part of the problem is that, with the oldness of our railway infrastructure, any Network Rail engineering works taking place tend to be done on weekends because that used to be the time when fewer passengers were using them. That is not the case any more; it is one of the issues that will have to be addressed. There are still a lot of unanswered questions as far as both this Bill and the later one that we are told will come sometime next year are concerned. We need to see how the latter will address some of these issues, in particular investment.
The other area where the UK is changing is greater devolution to our regional cities. There will always be issues in terms of the big intercity lines: the line that goes from London up to Scotland; the line that goes from London to Manchester and on to Scotland; the line that goes down to Wales; and the line that goes down to the south-west. Those will always be of national significance and where the Secretary of State will perhaps want to have the most input, but what about local services in the West Midlands, in the city regions and in Manchester, Liverpool and Newcastle, where much more devolution has taken place? How do we involve those devolved authorities as well? That is going to be one of the most important parts that we have to address.
Overall, we have seen huge investment take place in our railways. My noble friend talked about his involvement in the restoration of the Houses of Parliament and wanting to see that work. I came across an interesting fact at the weekend: when Sir Charles Barry first got the contract to build the Palace of Westminster in 1835, he said that it would cost £725,000 and take six years to build. It cost three times that and took 30 years to build; he was dead by the time it was finished. The way we are dealing with restoration in this place, I sometimes think that all the people on the restoration committee will, I am afraid, suffer the similar fate of never seeing it completed.
However, investment in our railways is not short-term; it takes a lot of planning and a lot of pre-work enabling that planning to take place. A lot of the expense is increased if that pre-work is not done; we have seen many examples of that. This is the start of a debate; we have not yet heard all the answers from the Government. This is a manifesto commitment Bill. We will, I think, want to press much further on some of the more detailed issues when we see the next railways Bill. I know that there are two more maiden speeches coming, from the noble Baroness, Lady Pidgeon, and the noble Lord, Lord Cryer; we look forward to hearing them later.
I know how important the whole subject of good connectivity is to the Minister, particularly as far as Leeds and its neighbouring cities are concerned, and to the people for whom she spoke when she was the leader of Leeds City Council. These issues are wider. If we can move forward in a way that involves the private sector, we are much more likely to see greater investment take place. I worry about some of the implications of what is coming from the Government at the moment and worry that we will not see that private investment taking place in our transport, which, overall, has served the country incredibly well over the past 25 years in which we have seen major changes in our railway system.