DEREK TWIGG, MR MARK LAMBIRTH AND MR ROGER JONES

19 JULY 2006

  Q406 Chairman: Good afternoon to you, Minister. May I begin by saying that I am very delighted to see you and your colleagues here this afternoon, but you will be aware that the Treasury were asked to send a Minister to accompany you because one development that has been very clear in the railway industry in the last few years is that the Treasury has a very real role to play and is taking a very active role both in policy making and in policy control. I would like to put on record that it has been extremely unhelpful that that letter was sent to the Treasury a considerable time ago, and it was only yesterday that I received a final letter explaining that a Treasury Minister was not available. I am, frankly, unimpressed with that and I think the Committee will want to return to it, possibly in this report. However, I am sure that you will have all the answers because I am assured by the Treasury that you are speaking for the whole of Her Majesty's Government. I hope you are aware of this responsibility and will respond to it in your normal manner. So you can tell me what are the Government's overarching strategic objectives in the franchising process?

  Derek Twigg: I wonder if I could introduce my colleagues first.

  Q407  Chairman: I am so sorry. Yes, please do tell us the names of your colleagues.

  Mr Lambirth: Mark Lambirth, Director, Rail Strategy and Finance in the Department.

  Mr Jones: Roger Jones, Head of Franchise Specification in the Department.

  Q408  Chairman: You are most warmly welcome, gentlemen. Now, you have had at least two minutes to think. What are the Government's overarching strategic objectives, Mr Twigg?

  Derek Twigg: Thank you, Mrs Dunwoody. Basically, obviously, it is to achieve the best value for money for the taxpayer and for the passenger; also, obviously, to improve and extend passenger services. I think you have to look at the context of this as a whole in terms of the success of the railway, in terms of the record number of passengers, and of course, the improved reliability—many TOCs now are actually hitting around 90%—and of course, the investment in terms of rolling stock, big projects like the Channel Tunnel Rail Link and West Coast main line and of course the improvements in passenger services in terms of information for passengers, et cetera, and also some very good ideas in terms of pricing and ticketing aimed at cheaper tickets and attracting more passengers on to the railway.

  Q409  Chairman: You may think that it is quite clear and that you have brilliant ideas, but your passengers and the industry do not seem to be of that opinion. How do you think you can make it clearer?

  Derek Twigg: Let me make it clear that I do not accept that everything is rosy in the garden and there cannot be further improvements both in franchising and we have to learn lessons and are learning lessons in the new franchise we have just done in the South West, which Mr Lambirth will go into in some detail later when you ask the point, in terms of making sure that they do bring about better value for money and deliver better services for the passenger. I accept that, of course, there are improvements that need to be made, but if you look at passenger satisfaction, overall satisfaction with the rail journey is about 80%, either satisfied or better. Now, again, of course, we want to improve that but I think that is a figure that is worth quoting.

  Q410  Chairman: How do you balance your desire to drive down the public funding requirement and driving up the quality of service?

  Derek Twigg: What is important to look at here in terms of what we want really to look at first is deliverability in terms of the service we want to specify for a particular franchise or part of the network, and of course, then we examine that in detail in terms of how we can look at it in terms of value for money, in terms of what it does for the passengers, looking at passenger research, in terms of passenger numbers and growth and so forth, and look at whether that would need a certain amount of subsidy or whether we could possibly call in a premium for it. It is a multiplicity of things we need to look at.

  Q411  Chairman: Yes, and when you have looked at them all, how do you reconcile trying to drive down what it costs with trying to provide better quality?

  Derek Twigg: I do not think there is actually a conflict.

  Q412  Chairman: So it is quite possible to drive down costs and give people a much better standard?

  Derek Twigg: If you just look at what is happening in the railway currently . . .

  Q413  Chairman: I think that is what we are doing, Minister.

  Derek Twigg: If you just look at it now, you will see that passenger satisfaction is around 80%, which is the highest it has been in terms of the overall journey. We have increased punctuality and reliability of trains, and of course, a much younger rolling stock than we have had for many years. Of course, within that there is an increase in the number of passenger kilometre/miles being travelled. So I think there are lots of good things that are improving. I think also passenger services, information on trains and stations has improved. I also think in terms of the ticketing I mentioned before there are lots of good deals around.

  Q414  Chairman: We are delighted with all the good things. How do you reconcile these very clear problems of the whole service costing less and standards being improved?

  Derek Twigg: I think standards are being improved and I think we look to get . . .

  Q415  Chairman: But you have not so far driven down the costs.

  Derek Twigg: I think there are some interesting figures which maybe I could quote to you. There has been an increase, obviously, in the number of passenger journeys which you are aware of in terms of the over the billion mark. That is a 42% increase in 10 years. We have also seen the number of passenger train kilometres operated, again in 10 years, increase by 23%, and costs have risen by 27%. So I think that is a reasonable figure to give you in terms of seeing the improvements in both passenger kilometres that have been travelled, the increase in passenger journeys and of course increase in fare box revenue is 47% as well.

  Chairman: We are delighted you are carrying many more people.

  Q416  Mrs Ellman: The number of people using rail has grown largely over the past few years. Do you attribute that to the Government's success in improving the economy?

  Derek Twigg: I certainly do attribute a large part of that to the Government's success in the improvement and success of the economy. I think also that you would have to say it would not be that alone. I know there was a study done by Professor Nash[1] in about 1998-99 which looked at London South East Railways, which suggested nearly 20% of the improvement was down to privatisation and franchising. That is a few years ago, so it is difficult to be definitive about what actual percentage it has put on as part of the franchising process, but it is clear that the railway has become more attractive, it has become more reliable, and while there are lots of factors in that in terms of, obviously, the maintenance and renewals but also the passenger service, the investment in trains, the investment in staff on trains, information, make it a more attractive journey. So I think there are lots of reasons, but I do accept your main proposition that much of it is down to the improvement in the economy.

  Q417 Mrs Ellman: Would you be concerned if increased rail fares then stopped people using the trains as much, if there were not sufficient regulation of fares?

  Derek Twigg: As you know, our current regulation is RPI plus one, and they have fallen in real terms in the last 10 years by about 3% but obviously the other fares are a matter for the train operating companies within a basket of fares. All I can repeat, as I did at a previous hearing, is that it is not in the interests of train operating companies to price people off the railway.

  Q418  Chairman: Are you quite sure that that is their attitude, Mr Twigg? Are you not convinced that some of them, really as almost a conscious policy, are pushing to price large numbers off because they do not feel they have the capacity?

  Derek Twigg: I think there are issues around demand management, Mrs Dunwoody, but there is also certainly—and I accept the point, one of the criticisms you made at previous hearings, in terms of transparency and information regarding the current ticketing system, but there are many excellent fare deals out there which range from, obviously, South West Trains megatrain fare . . .

  Q419  Chairman: I am sure there are excellent fare deals. That was not actually what we were asking you. You are saying it is not in the interests of train companies, I quote, "to price people off the railways". We are saying to you are you sure they are not using that as a way of dealing with the lack of capacity?

  Derek Twigg: It is clear from the variety of deals that they are offering to attract people on to the railway, particularly at off-peak times, that that is not their aim and should not be their aim. They want to grow their revenue, they want to get more people—and so do we—using the railway, and that has been borne out by the massive rise in passengers on the railway over the last 10 years or so.