My Lords, I congratulate all those who made their maiden speeches in this debate. They made excellent speeches and will make a great contribution to the House in the future. The noble Lord, Lord Cryer, referred to 1920s capitalism. I look forward very much to having a drink with him one evening, I hope, and discussing the very different attitudes that capitalism had to free markets in the 1920s. I remember that Lord Ashfield, who chaired and brought together the London Transport system in the private sector over a period of 30 years, could hardly bring himself to use the word “competition” in his shareholder letters. If he did, it was always coupled with the adjective “wasteful”, normally following the verb “eliminate”: “We must eliminate wasteful competition”, he said quite nakedly to his shareholders. His attitude to free markets and that of Mrs Thatcher must be regarded as two very different aspects of capitalism, not easily confused.
I also welcome the Minister to her place, and I thank all who contributed to the debate. It is invidious to mention any names, but I want to select the speech of my noble friend Lord Young of Cookham, who set out with great lucidity the problems that privatisation was meant to address. If privatisation has to a degree failed, by whatever measure we choose to apply to it, his essential point was that the problems have not gone away. They are essentially the same problems, and the Government will have to come up with different solutions to them. So far, we have seen nothing of that.
We can all agree that reform of the railways is necessary to some degree. The last Government initiated that process with the Williams review, which contained many detailed recommendations—on fares, ticketing and other matters, for example—that I imagine will appear in the promised rail reform Bill next year, or whenever it appears. Given that it is several years since Williams reported, I am surprised that the Government need a further year to bring that Bill forward. My fear is that, as with the last Government, the complexities involved may be so great that we never actually see it and that, importantly, today’s Bill, far from being an interim measure, could end up being a sort of permanent state.
The Williams review was widely welcomed cross party, and the part of it that is most relevant to this debate and the Bill is concerned with the structure and franchising of the railways. As referred to by the noble Baroness, Lady Pidgeon, the model envisaged by Williams was based on a successful model used by Transport for London for all its services, other than London Underground, which is directly provided. That model differs from the current arrangements for national rail. The key difference is that the fares risk is carried by Transport for London, in contrast to the rail privatisation model, which sought to transfer that risk to the train operating companies. That aspect of rail privatisation has never worked well, because it turns out that fares risk is closely linked to the economic cycle: as the economy booms, more people take trains and, if there is a recession, fewer people do so and the fares fall. That is a well-demonstrated economic phenomenon, but the train operating companies are totally incapable of managing it; they cannot manage the economic cycle.
As each franchise has been renewed over time, we have seen the Department for Transport agreeing contracts and franchises whereby more and more of the fares risk remains with the Department for Transport and, therefore, with HM Treasury. This process was brought to its ultimate logical conclusion by the pandemic, when there were no fares at all and all the fares risk was transferred to the Department for Transport, where it has largely remained under the contracts that have been renewed since then, even as passenger numbers have picked up, with the fares going straight to the Government.
By contrast, the TfL model leaves the private sector responsible for managing the risks that it is actually equipped to manage. For trains, buses and trams, this means having them in the right place at the beginning of every day, pointing in the right direction and with the appropriate staff on them, to an agreed standard of cleanliness—all the things that train operating companies are good at managing. If they fail to manage them properly, they receive a financial penalty. This system demonstrably works, which is no doubt why its adoption on national rail was recommended by Keith Williams as a former TfL board member, as indeed am I.
However, that was not what the unions wanted. I do not like to bring the unions into this after the minatory comments of my noble friend Lord Balfe—I am actually quite friendly towards trades unions—but I want him to reflect for a moment that one of the objectives of the unions and one of the consequences of the Bill is that, if there is a national strike on the railways in the future, his ability to get to Cambridge by one of the three alternative lines that currently serve him, and which allow him to escape the effects of a strike on one line, will be taken from him. He would be marooned in Cambridge and unable to put his services at the disposal of your Lordships’ House if there were a national strike, which is of course the power that the trades unions would like to be able exercise.
That part of the Williams prescription has been junked, and instead the phrase “single employer” has crept into the debate, appearing in Labour documents. There is to be a single employer with single terms and conditions; that is a very different thing from Williams and does not have cross-party support. We are moving from a tried and tested system, recommended by Williams and tried and tested by TfL, to one that is not tried and tested at all—or, if it was, it was in the period of the Attlee Government and the 1950s. The Government run the risk that the logo of Great British Railways will be the curly British Rail sandwich, which some of us are old enough to remember.
The logic behind the Bill is not without merit—there is a case for it—and it is that the network effects of the railways require a single controlling brain, but that single controlling brain largely exists at the moment. Following the scrapping of the Strategic Rail Authority, it sits explicitly in the Department for Transport, which awards the franchises, runs the system and is the controlling brain. The creation of Great British Railways is an admission that the Department for Transport has failed in that role. But having a single controlling brain does not necessarily mean that you need a single operating arm, as TfL illustrates.
There are logical inconsistencies in the Bill’s approach, the first of which relates to devolution. If there is an argument for a single brain to control a single national network, how does that fit with devolution? As several noble Lords have asked, how does it fit with a system whereby, in London, the most congested and busiest part of the network, you will have two competing networks? You will have a network run by TfL, using the private sector, and a network run by Great British Railways, often with services on the same tracks, from which the private sector is going to be banned. How can the private sector be unacceptable on some services on those tracks but perfectly fine on others?
The Government have no coherent answer to the question about London or what they are going to do. They could say that they will just leave it alone and not do anything with it, but of course the mayor has been accreting responsibility to himself for additional lines in London over time and he wants more—and there is an argument that he should have more. Are we to see a moratorium on the movement of responsibility for lines from Network Rail to the mayor? Is it all going to be frozen just as it is? Are we going to allow that process to continue, or are we going to reverse it in the interests of having a single controlling brain and the logic that exists behind Great British Railways? We have absolutely no idea. Even if all the services provided by TfL were not provided by the private sector, the logical question of having two different brains would still arise.
The other problem is to do with open access. The Government say that they are in favour of open access, but logically they should not be if they believe in a single brain and a single operating arm. Many of us are sceptical about whether they are truly committed to open access. On the other hand, as my noble friend Lord Young of Cookham pointed out, in the European Union open access has been pursued with great vigour in recent years under European Union law that has mandated it. Incidentally, the direction that we are going in is a Brexit bonus—I do not think that the Government have fully appreciated the difficulties that they would have had with this enactment if we were still a member of the European Union.
We have a report here, published only in August by the European Commission, on the benefits that have accrued from open access. It finds that
“where competition is more mature, the following effects could be noticed … Lower fares … Potential cost reductions … Increased frequencies”
and improved services. Specifically on fares, the report says:
“On average ticket prices have decreased by 28% on the selected case studies due to a non-incumbent operator entering the market”.
The Government have decided to turn their back on all that. Perhaps the cool reception that the Prime Minister had when he met Mrs von der Leyen not so long ago followed his explaining to her that he was about to exclude from access to British railways the many European companies that operate on them already and might want to bid for services in future. That might explain a great deal—I do not know.
As the debate has made clear—the Government have not really denied it—this is a rushed Bill. The result of that, as we are told in the impact assessment that accompanies it, is that there has been no time to look at alternative models. It says:
“The Bill has been prepared to enable swift delivery of a Government manifesto commitment”—
not to improve matters for passengers—
“As such, it has not been practicable for the Department to undertake the usual long-listing process”
of options that might be legislated for instead. That is what we are getting: a rushed Bill with no alternative solutions. Yet the debate today in your Lordships’ House has indicated an appetite for that.
I have tried to address the broad principles underlying the organisation of the railways. It has been suggested that this is a trivial and tiny Bill and that all the serious discussion will happen in a year’s time, or whenever the rail Bill comes. But actually, as the debate has made clear, this Bill is pregnant with huge consequences for the future, which is especially true if it gets pushed off further and further into the future. Even if the Government meet their timetable and have a Bill in front of your Lordships’ House 12 months from now, it will still take several years to implement it in practice. What we are setting up today could be the shadow arrangements that we live with for many years—but we have heard no serious discussion from the Government about issues such as performance monitoring and accountability.
I have mentioned devolution and open access. We do not understand where the investment is going to come from in future, a question repeatedly asked by noble Lords. At the end, the noble Baroness on the Lib Dem Benches brought in the important question of industrial relations and terms and conditions, but we do not know how that will work when people are TUPE-ed across to government employment. What is the cost of that going to be and how is it going to be affordable? Furthermore, what is the consequence of bringing the pension liabilities of the train operating companies over on to the government balance sheet, and what effect will that have on public finances?
There is an opportunity for us to discuss all those things in Committee, and I look forward to doing that when the time comes in a couple of weeks.