REF0092 Written evidence submitted by Rail Delivery Group

Introduction

The Covid-19 pandemic, and the economic turmoil that followed, have wrought deep changes in our economy and our society. We have all changed our habits, assumptions, and plans for the future.

Many millions of workers will find themselves changing their travel habits post-pandemic, as home and hub working become part of life. People who have experienced lockdown in the cities may hanker after relocation to the suburbs or countryside. Regular commuters if travelling, are doing so at different times and in different patterns than before. Everything – the way we work, shop, travel and go on holiday – has changed.

Indeed, while prior to COVID around 60% of journeys were onDRAFT Season/Anytime tickets (aligned to commuter/business travel) with around 40% of journeys on more leisure-oriented products like Off- Peak and Advance, currently we are seeing between 50% and 60% of journeys being undertaken for leisure. In addition, modelling undertaking by Imperial College shows that while rail demand overall is likely to be depressed for some time and could only fully recover by 2025, leisure travel is likely to recover more quickly, as people shift their travel patterns away from commuting to work each weekday1.

Pre-pandemic drivers of change are still there too – a growing, aging population, the digital revolution, and the pressing need to stem global warming.

Britain’s railway must adapt to survive. Before the pandemic, the railway was already in need of reform. Overly prescriptive contracts had stymied innovation and investment. Lines of accountability have been blurred. The system of fares and ticketing reflected the passenger expectations of the early nineties rather than 2020.

The Government established the Williams Review as the engine to forge a new public-private partnership. With the onset of the pandemic, this process was halted, as the decline in passenger demand necessitated the introduction of Emergency Measures Agreements (EMAs) to keep the trains running for key workers. The industry is very grateful for this and the ongoing support of the Government.

As national lockdown restrictions were eased, operators increased service levels and launched the Safer Travel Pledge to give passengers the confidence that they would once again travel by train. The overriding purpose of this was to support national economic recovery, in particular of town and city centres as well as tourist destinations that rely on the railway. Freight services have also been playing their part, as they did during the national lockdown, by running longer trains in order to carry more goods and supporting the restart in the construction sector.

Whatever the future direction of the pandemic however, there can be no going back to the status quo that did not work for passengers, nor is the current situation sustainable for the taxpayer. We welcome the Government’s agreement with this view and their announcement of an end to the

1 Imperial College London Transport Strategy Centre, Scenario Planning for the Rail Industry after Covid-19, September 2020. REF0092 franchise system and transitional contracts in the form of Emergency Recovery Measure Agreements.

It is vital though that these Agreements are used as a stepping stone to a better, more customer focussed railway, as envisaged by the Williams Review, and we urge the Government to provide clarity as soon as possible about what the railway of the future looks like beyond the timeframe of these contracts.

The private sector wants to play its part in helping to develop this future strategy and the proposals outlined in this submission are designed to inform and assist this work.

As part of this, the industry wants to improve reliability and punctuality on the network, reduce infrastructure costs and implement reform of the fares system to suit the changing way people live and work and to attract more people back to the railway. In addition, it is vital to press ahead with work to accelerate the decarbonisation of rail and support NetworkDRAFT Rail in accelerating investment at an efficient cost at the same time as bringing more private sector investment to the railway, helping to reduce the burden on taxpayers. Finally, the industry wants to press ahead with ensuring we have the skilled and expanded workforce necessary for the railway of the future.

To deliver this, the experience, innovation and investment that private sector operators bring to the network must be harnessed, in particular to help regrow the market for train travel in the months and years ahead. The private sector has shown over the last 25 years that with the right framework and incentives it can do this.

A renewed and reinvigorated partnership between the public and private sectors, with train operators, working with and the wider supply chain, will add greater value, improve services and make a significant difference to the pace of recovery. This will deliver better outcomes for customers, taxpayers and, ultimately, the economy as well as helping the UK achieve its environmental targets and achieve the Government’s stated ambition of ‘building back better’. REF0092 Empowering customers and providing accountability

We want to put the customer back at the heart of the railway, with a framework and objectives set at a national level but within which decisions can be made closer to the customer.

The old franchise system often stymied private sector train operators from doing what, with the right framework and targets, they can do best: delivering a high quality service to passengers; innovating based on changing technology and customer expectations; investing in the future; and doing all this in the most efficient way, reducing the burden on the taxpayer.

As we made clear at the start of the Williams Review two years ago, we believe bottom-up customer demand is the best way to drive improvement and innovation, with a system of decentralised decision-making that is flexible and powerful enough to make change happen. Empowering train operators to deliver better outcomes for customers means change will happen faster, better, and happen organically and continuously. It is, DRAFT after all, train operators who have the direct relationships with customers and therefore are best placed to understand their needs.

To facilitate this new way of working a major area of reform that should emerge from the post- pandemic railway system, and the current emergency support being provided, is new types of train operator contracts. We want to see a new, flexible and responsive system of contracts on the railway, with the needs of the customer, taxpayer, economy and the environment at their heart.

In commuter markets where customers want a fast, efficient and cost-effective journey to and from work, with clear accountability for the standards of service, contracts could be a ‘concession’ style agreement, where companies are paid a straightforward price for the job of running an effective rail service. This might be a contract issued with a city-region or mayoralty, or other national or local authority, depending on what works best.

We see a strong role for devolved authorities in : they could specify and award these concession service contracts once they had the capability to do so, including closer integration of rail with other modes of transport, and perhaps even take on some or all of the revenue risk associated with the delivery of passenger services.

Other contracts should be structured around customer-focused ‘outcomes’ for example to increase customer satisfaction – but leave it for the operator to implement and where necessary change initiatives to deliver this. This could suit markets where customers have greater choice of when and where to travel or where there is competition from other forms of transport. With these kinds of contract, the balance of risk and reward would be shared fairly between private and public sectors.

We also know by asking our customers that they like a choice of operators on long-distance routes, so new arrangements might include structured competition between operators on the same routes, benefitting customers. Competition is key to driving improvements, as operators compete to offer potential customers the service that is right for them.

Each of these approaches considers the balance between risk and increased revenue depending on the passenger needs and type of contract. They incentivise the private sector to drive down operating costs and encourage revenue growth, thereby lessening the burden on the taxpayer. REF0092 The competing demands of different bodies and customers, must, we believe, be managed by an independent body, providing a single ‘guiding mind’ to help the industry act in a coordinated fashion and provide clear lines of accountability for when problems arise.

Clearer accountabilities will be achieved if there is a clear line of sight from the customer to train operators directly responsible for delivering the services customers require, to Network Rail as the key supplier of infrastructure services to train operators, to the new independent national rail body we believe continues to be essential, and finally to governments which must decide public policy and funding levels. The new body should set the outcomes that need to achieve and develop the incentives that enable and support effective partnership between infrastructure and train operations.

We know from all past experience that long-term, centralised decision-making on a system as complex as the railway can be slow, cumbersome, and lead to perverse outcomes. Indeed, this is why Network Rail has moved to a devolved regional and routeDRAFT structure.

Such centralised decision-making over the long-term, whether by government departments or by the independent national rail body we are calling for, would set the railway back, not set it on a path to drive better customer outcomes, economic growth and taxpayer value.

However, the railway as a whole is a vital public service and public asset. In the future, we see the important role of Government as setting the overarching objectives (for example economic growth, levelling-up nations and regions, faster decarbonisation, shifting people and freight off the roads and into rail), while the operational delivery is left to the people best placed to achieve it.

The independent national rail body should sit above both the operational and infrastructure sides of the industry and ensure they work as equal partners to develop better timetables; improve punctuality and customer satisfaction; manage the increase in customer demand by spreading that demand better across the day; as well as creating more capacity to support growth in the rail freight industry; decarbonise rail; and deliver the major infrastructure projects needed to boost our economy. This must be a genuine partnership of equals for the system to work effectively for the customer, delivering a more punctual and reliable railway as passengers return post-pandemic.

A fares system fit for the future

One of the areas where there is the most pressing need for radical change is in how people can choose and buy their tickets. At privatisation, the legacy fare structure was left in place and regulated, with demand being driven by adding new products and fares. This has resulted in over 55 million different fares in a complex and hard-to-navigate structure built on layers of out of date regulation and misguided stipulation.

We have long argued that this system of fares needs to change. Before the pandemic we conducted the largest ever consultation into what passengers wanted from a fares system, and 84% said it should be reformed.2 Even then, it was not reflecting their needs, and just as importantly it was not efficient in generating revenue or spreading demand more evenly throughout the day, distorting times of travel and preventing the creation of more flexible commuting and leisure fares.

2 https://www.raildeliverygroup.com/files/Publications/2019-02_easier_fares_for_all.pdf. REF0092 With the onset of the pandemic, the need for fares reform is now even greater, with many lifestyle changes now embedded in peoples’ behaviour. We urgently want a system which is agile, fair, and which enables more passengers back onto the railway as more people return to work; at the same time delivering higher revenue growth through more efficient use of the network, something that has greater importance given that fare revenue is currently being underwritten by the taxpayer.

Many people are unlikely to return to the same patterns of travel as before the crisis. People will want to travel at different times to avoid crowds. Companies and organisations will rethink their policies on home working, hub working, and their need for large central offices. ‘Work’ will increasingly be seen as an activity not a place.

Against this background, the regulated provision of ‘season tickets’ which are based on making the same journey five days a week, to the same place, at the same time, year after year does not reflect passenger requirements and drives poor value-for-money outcomes.

DRAFT Instead, we argue for a system that reflects the actual journeys people take, no matter how complicated and irregular. It must be able to reflect these rapid changes to patterns of employment. It will also help operators spread demand over the whole day, to avoid overcrowded trains at busy times and almost empty carriages at other times.

Rail has a vital role in supporting other sectors of the economy including leisure, hospitality and tourism. A reformed fares system can help people rediscover the joys of the British seaside holiday, the great towns and cities, the countryside and other attractions. Operators want to be able to offer even more incentives to support towns and cities up and down the country which is good for the economy, good for wellbeing and good for the environment by providing an alternative to domestic air travel.

The rail industry wants to use technology that is already available to allow tickets to be bought easily and straightforwardly up to a few minutes before departure, for the best possible price based on availability – no more shock last minute fares if you cannot book in advance, and which regulation currently distorts. Industry has been calling for a system that can competitively price the kinds of complex or non-core journeys that the current system does not allow for – these are the key to providing an alternative to the car and getting new people to try rail.

This will shape the new customer experience: fares and ticketing that works for the customer, incentivises travel at quieter times, is flexible and adaptable as people’s plans and the external landscape changes, and one that we can guarantee is the best fare for their needs, every time.

A net zero carbon railway, helping to tackle climate change

While the focus has been on the current pandemic, the climate emergency has not lessened. The pressures on our infrastructure and way of life from the pandemic are nothing compared to the devastation that will come from continuing global warming.

However, the desire to ‘build back better’ and support a green recovery have been undermined by recent figures showing that over the summer and into September, the number of cars and lorries on UK roads was almost back to normal, with an average of 96% of pre-Covid traffic levels on weekdays and exceeding pre-COVID levels at weekends. REF0092 This data is alarming and raises the concern that the country is on the precipice of a car-led recovery from Covid that threatens the UK’s ability to meet its net zero carbon emissions by 2050. Therefore, action must be taken to encourage modal shift to public transport, in particular rail.

The railway is crucial to achieving this net zero target. As the International Energy Agency (IEA) points out, rail is among the most efficient and lowest emitting modes of transport, helps reduce greenhouse gas emissions, congestion and air pollution, and the growing number of electrified services are well positioned to take advantage of the rise of renewables in the electricity mix.3 It has been estimated that taking the train from London to Edinburgh, for example, reduces carbon emissions by 87% compared to flying.4

Similarly, goods transported by rail have a significantly reduced carbon footprint compared to goods transported on lorries, with each tonne of rail freight producing 76% less carbon emissions than HGVs (not to mention a reduction in traffic congestion and road traffic accidents, air pollution, and lorries rattling through our cities, towns and villages). DRAFT

Incentivising the use of rail and increasing capacity for both passengers and freight on the network is therefore crucial to help leverage these benefits and encourage further modal shift.

To make this happen, continued investment in rail infrastructure is essential, including expanding the network by reopening closed rail lines and delivering HS2, that will not only support the creation of 30,000 jobs during construction and help rebalance the economy but will also create up to 20 extra daily freight paths on the West Coast mainline.

We are also calling for a review of existing taxation and charging regimes applicable to the transport sector to ensure it internalises more of the environmental impacts of transport usage to support the transition to a net-zero economy and encourage further modal shift.

Moreover, the industry is committed to going further to decarbonise the rail sector. Whether it be research and development into big ticket items such as alternative energy sources for rolling stock, or exploring how to generate the electricity the railway needs from renewable sources, the industry is actively identifying innovative solutions to reduce its carbon footprint.

However, to achieve full decarbonisation, clear and consistent long-term environmental policy is essential so that industry can develop and implement a strategy to reduce carbon emissions in line with Governmental targets. There must be aligned incentives that establish clear accountability and induce behavioural change in the transport sector so that the risks and rewards of working towards carbon net-zero are shared collectively.

There is also no doubt that there will need to be significant investment across both the public and private sector. To enable these necessary investments to be completed by 2050, it is imperative that this process starts now.

As such we are calling on the Government to commit to a long-term rolling programme of rail electrification, to provide visibility and consistency to the supply chain, allowing firms to make the necessary long-term investments and build-up expertise which in turn could help deliver future projects at up to half the cost of previous schemes.

3 The Future of Rail International Energy Agency (IEA) https://www.iea.org/reports/the-future-of-rail 4 https://www.seat61.com/CO2flights.htm REF0092

September 2020

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