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The new government has no time to lose on rail reform

The new government has no time to lose on rail reform

Rail Partners - The new government has no time to lose on rail reform
07 September 2022
Andy Bagnall, chief executive

Given the rumbling war in the Ukraine, rising energy prices impacting the cost of living, and economic pressures perhaps pointing to a recession, rail reform is understandably not likely to be the issue that keeps Liz Truss up at night in the early days of her tenure as Prime Minister.

However, her incoming Transport Secretary, Anne Marie Trevelyan, has a number of important rail issues waiting in her red box which it is vital she gets to grips with quickly. It is essential she makes the right decisions about the future of the sector, if rail is to play its fullest part in helping the government achieve wider economic and environmental policy objectives – reducing regional economic disparities and decarbonising by 2050.

Rail still faces enormous challenges coming out the pandemic – the need to adapt to travel patterns that are almost certainly permanently altered, the cost pressures as a result of lower passenger numbers, the industrial action that is slowing rail’s recovery, not to mention the need for structural reform that pre-dated the pandemic.

To help rise to these challenges, the incoming Secretary of State should focus on three broad areas.

First, keeping up momentum for reform by introducing the new Transport Bill

Delivering reform is vital to set the railway up for renewed success. It is critical to get the detail right, but a prolonged hiatus in delivering the ‘Plan for Rail’ will fail customers and taxpayers and lead to poorer outcomes for the country.

Independent train operating companies, want to help co-create the future system and have welcomed the dialogue with government on reform to date. But we must now get on with delivery – November will mark 18 months since the publication of the White Paper and the 12-month anniversary of the market engagement day where the DfT sought input into the design of the new contractual model.

Operators would like to see the introduction of the legislation to create Great British Railways (GBR) as soon as is practical. We must also get that legislation right – harnessing the best of the private sector and ensuring the customer focus and commercial acumen of operators are baked into the system from the get go. We also need to see the government move quickly to set an ambitious growth target for rail freight.

Secondly, stabilising the industry’s finances by utilising the expertise of independent operators

The new Transport Secretary is likely to have some challenging conversations with the new Chancellor early in their tenure, especially given the current levels of inflation driving up costs and revenue still being at around only 80% of pre-pandemic levels.

On the cost side of the ledger, since the start of the pandemic the Treasury has injected an additional £16 billion to plug the gap in the passenger railway finances and keep services running. With other competing demands on public money, such as the need to support households with energy bills, or commitments made by the new Prime Minister on the campaign trail, it is unsustainable for the railway to take more than its fair share. Asking passengers to pay higher fares just as we are trying to attract people back to rail cannot be the answer either. Costs must be controlled by reforming the way we do things to increase productivity and efficiency – this is not only necessary in itself but is also key both to improving passenger outcomes and to unlocking savings that will allow operators to offer their staff a pay rise and end the current strike action.

We must also close the gap on the other side of the ledger by boosting revenue. To do this, independent train operators need the right responsibilities within contracts, and the levers necessary to dispense those responsibilities, to adapt to changing patterns of demand and to focus relentlessly on attracting new and returning customers. An immediate step that could be taken to enable this is to switch on dormant revenue incentives in National Rail Contracts.

We must ensure rail doesn’t become a long-term cost that the Treasury is increasingly unwilling to bear. We want a growing freight and passenger railway, but that means being ambitious in terms of targeting growth, addressing the cost challenges and doggedly chasing revenue. Independent train operators have a track record of doing this previously and can do it again if we create the right framework.

Thirdly, lay the structural foundations for the next decades of growth

Longer term, operators also need to have the right relationships with GBR through the proposed Passenger Service Contracts to ensure that they can focus on customer experience, so rail is an obvious choice for customers over other modes.

To achieve this, the Secretary of State must ensure that the legislation creates a framework that enables success by enshrining the right checks and balances in statute. Simply put, GBR must have a commercial culture with clear functions, set out in statute, that ensures it becomes a guiding but not a controlling mind.

This suggestion is in line with the Plan for Rail, which envisaged a clear role for private sector operators in a reformed railway. Primary legislation should provide certainty around how GBR will engage with the operators in the future framework of the railway.

Getting rail reform right can deliver significant benefits for this country. With the right changes we can create an industry where the private sector is harnessed to innovate and respond to customer needs, driving up passenger use and modal shift to rail freight, supporting net zero targets, levelling up and rejuvenating the sector. This in turn would free up vital public funds to support other key services and level up the country.

If she moves quickly and makes the right choices, the new Secretary of State has a golden opportunity to create a reinvigorated railway, with a robust public-private partnership at its core, which can help the government deliver for Britain.

Rail Partners and its members stand ready to support her in delivering this shared ambition.

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