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Rail Reform

With permission, Madam Deputy Speaker, I would like to make a statement on the railways. Our rail network matters—to our quality of our life, our national well-being and our country's future prosperity. For this Government, it is a simple equation: good transport equals good economics. But, too often, we find ourselves frustrated and disappointed when the cost, punctuality or comfort of rail travel does not come up to scratch. I believe that the Government and the rail industry can and must do more for passengers and taxpayers. Of course, investment has a huge part to play, too. That is why we have been investing in our transport infrastructure, which is one of the best ways to support business, generate growth and create jobs. For rail, that has meant the biggest modernisation programme since the Victorian age, with £18 billion invested in this spending review alone. However, it is not enough only to invest in the railways; it is also vital to make sure that they are set up for success. So, today, I am setting out our plans to do precisely that, with the publication of our rail Command Paper, ““Reforming our Railways: Putting the Customer First””. I have taken the ““Ronseal”” approach to the name, as the strategy will do what it says on the tin: put the customer first. The hallmarks of our railway must be high standards and low costs. It must be a railway that offers the best services and the best value. That means a rail network that is efficient, effective and affordable. Nevertheless, in his rail value-for-money study, Sir Roy McNulty concluded that our railways are among the most expensive in Europe, despite the strong and steady growth in the number of passengers using them. Sir Roy identified inefficiencies worth £2.5 billion to £3.5 billion a year—of course, the people picking up the tab for that costly inefficiency are passengers and taxpayers, so reform is long overdue. Passengers rightly want to know that we have a plan to end the era of the inflation-busting fares seen over recent years, and taxpayers rightly want to see railway subsidies reduced to help us to tackle the fiscal deficit. My message to everyone today is clear: the days of spiralling and unjustified rail costs are coming to an end. Under this Government, the rail industry will be able to compete for future investment only if its long-term cost issues are addressed and if it can earn the right to grow. I am pleased to say that Network Rail is already due to deliver £1.2 billion of efficiency savings by 2014, with at least a further £600 million expected by 2019. But, as Sir Roy so clearly set out, we need to go further. The railway as a whole needs to become less dependent on Government subsidies, which is why we want the industry fully to close the efficiency gap of £3.5 billion per year identified by Sir Roy by 2019. We are about managing and reducing costs, balancing budgets, targeting investment where it can drive long-term growth and jobs, and delivering more capacity and better service for the investment that goes in. The time is right for reform. I believe that we are in a good position to build on recent efficiency gains to improve the performance of the industry further and to improve the passenger experience. The programme of work that will decide rail outcomes and funding for the five-year period from 2014 is now well under way, and that sits alongside a period when we will see the biggest round of re-franchising since the privatisation of the industry. Both represent a further opportunity to change our railways for the long-term better. Today's Command Paper sets out our ambitions for Britain's railways, and the agenda for change that both the Government and industry will follow in the months and years ahead. By reforming the industry, we will achieve substantial savings. Those savings will allow us to cut and then abolish above-inflation rises in average regulated fares, and they will ease the burden of the railway on the broader public purse. I believe that, taken together with my decision to limit the most recent increase in regulated fares, that will have a positive long-term impact on household budgets. For reform to be really effective, there needs to be closer collaboration between the infrastructure managers—in other words, Network Rail—and those who provide passenger services, which are generally the train operating companies. Only through better joint working will we reduce costs and improve the customer experience. The industry is already pushing for better alignment between track and train. We look forward to the industry bringing forward partnerships that are equipped and incentivised to deliver not just better services, but better value. The rail industry, led by the Rail Delivery Group, has also declared itself willing and able to respond to the strategic and operational challenges that the railway faces. Such leadership across the industry will be essential if we are to get the most out of our reforms. Rail franchises will be reformed, with greater transparency on costs and efficiency—again, that is to ensure the best value for fare payers and taxpayers. Franchises will be longer, giving train operators the flexibility they have been asking for—more time to make the biggest investments—to deliver what passengers want, within a sustainable budget. We will also move to a more transparent, modern and flexible approach to fares and ticketing. We are launching a consultation today to take views on how those key aims can be achieved; it is time to bring fares out of the 1970s and into the 21st century. We will expand smart ticketing to give more passengers the kinds of benefits that travellers in the capital already enjoy with Oyster cards. Working with industry, we will roll out smart ticketing across England and Wales, and across different operators, thus increasing convenience for passengers. Smart ticketing is also pivotal to introducing a more flexible system tailored to customers, with a wider choice of tickets and season cards, as we recognise the reality that not all journeys take place five days a week during rush hour. If we duck the reform challenge, it will not just be rail users and the public purse that pay the price; ultimately, the rail industry and the wider economy will suffer, too. So we want everyone working in rail, be it management or front-line staff, to help to make these reforms work. By reducing costs and increasing demand—set alongside this Government's huge investment in railways—there is genuine potential to boost jobs across the industry. Of course, it is important to reform governance, too. Network Rail is giving greater decision-making powers to its regional route directors, making it more responsive to local conditions and increasingly focused on day-to-day train operations at the local level. We welcome Network Rail's efforts to find new and more efficient ways of managing its assets, including long-term concessions to third parties for the management of parts of the network. Network Rail is also rightly taking steps to reform corporate governance, including its management incentives package, so that it is more accountable to passengers and freight customers. I would also like to welcome its sensible decision, to be announced shortly, voluntarily to appoint a public interest director, who will ensure that the concerns of taxpayers are fully reflected at board level and help to strengthen the role of members. It is time to give communities more control over local services, so today we are also consulting on devolving decisions about the railway to sub-national bodies. Our joint consultation with the Office of Rail Regulation on a greater role for the ORR in regulating passenger franchises closed recently. With a smarter regulatory approach, our aim is to remove Government from day-to-day industry involvement by adopting a more unified regulatory structure for the railways and we will publish our conclusions in due course. Facing up to reality, saving fare payers and taxpayers £3.5 billion a year, reforming our railways and putting the customer first: that is what the Command Paper is all about. By working together on this package of reform, I believe that industry, the regulator and Government can generate the savings and the change we need. Lower costs, better services and ticketing that offers greater choice and flexibility, as well as a rail industry built to last because it is efficient, effective and affordable: that is what the Command Paper will deliver and I commend it to the House.