Oral statement to Parliament

Rail reform command paper: oral statement

Oral statement about modernising and investing in the infrastructure of the railway network.

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

The Rt Hon Justine Greening MP

Opening remarks

With permission, Mr Speaker, I would like to make a statement on 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’s 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 don’t come up to scratch.

I believe that government and the rail industry can and must do more for passengers and for taxpayers.

Of course, investment has a huge part to play.

That is why we’ve been investing in our transport infrastructure because that’s one of the best ways to support business, generate growth and create jobs.

And, for rail, that has meant the biggest modernisation programme since the Victorian age with £18 billion invested in this spending period.

But Mr Speaker, it’s not enough only to invest in them it’s also vital to make sure they are set up for success.

So today (8 March 2012), I am setting out our plans to do precisely that, with the publication of our rail command paper, entitled ‘Reforming our Railways: Putting the Customer First’.

Efficiency Gap

Mr Speaker, I have taken the ‘Ronseal’ approach to the name. This 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 a railway that offers the best services and the best value.

That means a rail network which 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 and that’s in spite of the strong and steady growth in the number of passengers using them.

Sir Roy identified inefficiencies worth £2.5 to £3.5 billion-a-year and the people picking up the tab for this costly efficiency gap are passengers and taxpayers.

So reform is long overdue.

Passengers rightly want to know that we have a plan to end the era of inflation-busting fares seen over recent years.

And taxpayers rightly want to see railway subsidy reduced to help us tackle the fiscal deficit.

My message to everyone today is very clear. The days of spiraling and unjustified rail costs are coming to an end.

Under this government, the rail industry will only be able to compete for future investment if its long-term cost issues are addressed, and if it can earn the right to grow.

I’m 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. That’s why we want the industry to fully close the efficiency gap of £3.5 billion per year identified by Sir Roy, by 2019.

Managing and reducing costs. Balancing budgets. Targeting investment where it can drive long-term growth and jobs, delivering more capacity and better service for the investment that goes in.

Government’s response - the Command Paper

The time is right for reform. I believe we are in a good position to build on recent efficiency gains to further improve the performance of the industry - 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 this 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 really 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 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 it will ease the burden of the railway on the broader public purse.

Taken together with my decision to limit the most recent increase in regulated fares I believe this will have a positive long-term impact on household budgets.

Closer working between industry parties

For reform to really be effective there needs to be closer collaboration between the infrastructure managers, in other words Network Rail, and those who provide passenger services, 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 to them to bring forward partnerships equipped and incentivised to deliver not just better services, but also 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.

Franchises, fares and ticketing

Rail franchises will be reformed with greater transparency around costs and efficiency again to ensure 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 these key aims can be achieved.

It’s 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 smartcards across England and Wales and across different operators, increasing convenience for passengers.

Smartcards are also pivotal to introducing a more flexible system tailored to customers, with a wider choice of tickets and season cards, recognising the reality that not all journeys take place five days a week during rush hour.

The rail workforce

Mr Speaker, If we duck the reform challenge then it won’t 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, to help 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.

Network Rail

It’s 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 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 - to voluntarily appoint a Public Interest Director, who will ensure the concerns of taxpayers are fully reflected at board level and help strengthen the role of members.

Decentralisation - local authorities and the ORR

Mr Speaker, it’s 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.

And 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.

We will publish our conclusions in due course.

Concluding remarks

Mr Speaker,

Facing up to reality… saving farepayers and taxpayers £3.5 billion a year reforming our railways putting the customer first. That’s what this Command Paper is all about.

And, by working together on this package of reform, I believe industry, regulator and government can generate the savings and the change we need.

Lower costs, better services and ticketing offering greater choice and flexibility.

A rail industry built to last because it’s efficient, effective and affordable.

That’s what this Command paper will deliver and I commend it to the House.

Published 8 March 2012