Rail Delivery Group Industry Forum

Speech by the Rt Hon Justine Greening MP, Secretary of State for Transport.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Justine Greening MP

Opening remarks

Thank you for that introduction

And thank you also for inviting me along today.

All of you are key players in a key industry and so I’m delighted to have a chance to make my own small contribution to this important event.

I do need to make an apology though. And that’s because other government commitments mean I can’t stay as long as I’d like to.

But I’m pleased to say that my colleague, the Minister of State for Rail Theresa Villiers, is also here today to answer your questions.

Investing in rail is good economics

It was clear to me in my job at the Treasury, and it’s even clearer to me as Transport Secretary - investing in rail is good economics.

Cutting commuting times and speeding up journey times.

Moving people and products faster.

Connecting our communities and supporting our businesses.

That’s how we can create jobs, generate growth and help Britain out-compete and out-produce the rest of the world.

And “investing in rail” is exactly what this government is doing with £18 billion of rail funding in last year’s ‘Spending review’ and the biggest programme of railway modernisation since the Victorian era.

As a government, we recognise that each investment, each modernisation can have a tremendous ripple effect, whether it’s less congestion and more capacity, or fewer delays and greater reliability.

So, focusing resources on our railways, renewing and re-building our infrastructure - these things make a positive difference to services and to passengers, to our economy and our country.

That’s the rail reality.

Change and reform for a purpose

But there is another inescapable rail reality. And it’s one that I know you all recognise: investment must be accompanied by change and modernisation must go hand-in-hand with reform.

I’m not talking about change and reform for their own sake, but change and reform for a purpose - ensuring our railways are efficient and affordable.

Now, in a Europe where our neighbours are competitors as well as partners, there are many areas where I want Britain to be number one, ahead of the pack and top of the table.

Having the most expensive railway is definitely not one of them.

But, as Sir Roy McNulty concluded, that’s exactly the position our railways are in.

As you will know, even after allowing for unavoidable differences, Sir Roy estimates that UK rail costs are 20 to 30% higher than they should be.

Little wonder that he found significant scope in our railway system to eliminate waste and cut costs. Potential savings of up to £1 billion a year could be found by the end of this decade-. and all without any reductions in services.

And here are some other facts that should make us all sit up and take notice.

Since 1996-97 passenger numbers have risen by around 57%.

Against this background you’d expect unit costs to fall.

Yet, today, they remain almost exactly the same in real terms as they were in 1996-97.

To me, as a former chartered accountant, let alone as Transport Secretary, that just doesn’t add up.

Efficient and affordable equals successful and sustainable

For too long the railway has relied on ever-increasing public subsidies on one hand and ever rising rail fares on the other.

And that means we face a choice on this… two very different options which would lead to two very different futures for the rail industry.

Option one is that we deliver value for money for taxpayers and fare-payers… that we drive down costs and drive up efficiencies.

Option two is that we do nothing and stick with a status quo of expensive to build, expensive to run and expensive to maintain railways.

That’s a stark choice. But it’s an easy choice because the “do-nothing option” is actually no option at all.

The truth is straightforward and undeniable: the rail industry will only be able to compete for future investment if its long-term cost issues are addressed.

And let’s be frank, if you don’t cut costs then, eventually, your only alternatives are to cut services, hike fares even higher or do both.

If there was ever a business model designed to condemn the industry to short-term stagnation at best, and long-term decline at worst, then it is definitely this.

So our only option, our only course of action, is to deliver better value for money on our railways.

Without question such an approach will boost the business prospects of this vital national industry.

And it will improve the travelling experience of rail users too, by releasing resources that can be re-invested in services and infrastructure.

It could even mean an end to inflation-busting rises in regulated fares.

That’s why, for me, it’s a very straightforward rail equation -.efficient and affordable equals successful and sustainable.

Government must play its part

So that’s the challenge we face - costs down, efficiency up.

And government must play our full part in meeting that challenge.

So we are constructing a supportive policy framework, hence our reforms of rail franchising.

By introducing longer, less prescriptive franchises, we want to give the industry more freedom to innovate, as well as a stronger incentive to invest in better services and address passenger needs.

We’re also bringing the days of Whitehall micro-management to an end, devolving more responsibility for managing the railways to local levels.

Change and reform must always work for and make sense to the people and businesses that use and depend on rail, whether it’s commuters or freight customers.

That’s why the government wants to help fare-payers by moving towards a simpler, fairer and much more user friendly system.

And it’s why we recognise the importance of increasing transparency.

Rail customers must be able to benchmark performance and taxpayers must be able to see how their money is spent and what their subsidy is buying.

Potentially greater transparency could result in greater feedback for the industry, helping the industry to really know their customers, to understand what they want from rail services.

We are also determined to build on the value for money work carried out by Sir Roy McNulty… which means setting out our wider vision for a sustainable and successful railway, including reform of Network Rail.

So, last week, I announced my intention to publish a command paper early next year.

I’ve done so because, as a new Transport Secretary, I am determined to give this the focus and attention it deserves.

Publishing our command paper early next year will therefore give me time to consider all the key issues around rail reform.

It will also enable me to look at what emerges from the government’s growth review, a landmark review that I am certain will shape the future of our economy and vital transport infrastructure like rail.

And, equally as important, it will mean the command paper can properly reflect the consequences of my decision following our consultation on a national high speed rail network.

Alongside the command paper I also plan to consult on the scope to devolve responsibility for some rail passenger services in parts of England to sub-national bodies, and on issues relating to the review of fares and ticketing announced in May.

In addition, the ORR expects to consult later this year on possible changes to its role, particularly in respect of future franchise.

I accept there are some who were keen for every last dot and comma of our reform proposals to be written, ready and published this side of the New Year.

Well I want you to know that the decision to publish the command paper early next year is not one that I have taken lightly.

But rail reform matters.

So my priority is to get our proposals right, not rush them through.

Industry leadership

If government must play its part in meeting the big challenges facing our railways, then so too must the industry.

And I’m pleased to say that this group, and this event, demonstrate the industry’s willingness to step up to the plate.

Your leadership counts.

The decisions you make and the actions you take - they can all have a positive impact.

And government wants to help and support you as you meet the challenges and make the changes because we understand that all of us have a stake in this.

None of us can pursue reform alone or in isolation. There needs to be a new culture of partnership and collaboration, as exemplified by the RDG.

Trade unions and train operators, Network Rail and the ORR, government and industry. We must all work together. We must all do our bit because we all stand to lose if rail becomes ever less competitive and ever less affordable.

Concluding remarks - the only game in town

This audience knows better than anyone that our railways cost more than they used to and more than they ought to.

You also know that such a state of affairs is as unsustainable as it is unacceptable.

Left unaddressed it will hurt passengers, freight operators and taxpayers.

Ultimately it will hit the industry and, in the long term, perhaps even damage our economy.

So we can’t afford to side-step this issue or kick it down the tracks.

As we invest and modernise we must also change and reform - that really is the only game in town.

Building a railway that is efficient, that helps to drive our economy.

A railway that is affordable for hard pressed taxpayers.

A railway that, first, last and always, delivers for the people who are its commercial life blood - its passengers, its customers.

Yes, that’s a huge challenge.

It requires us to be brave enough to think differently and bold enough to act decisively.

And it demands that we work together and work smarter.

But, when I come to events like this - and when I think about the expertise and experience that the RDG, and key industry players like all of you, bring to this task - I am convinced it’s a challenge we can and will meet.

Thank you

Published 21 November 2011