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Transport Committee

Oral evidence: Rail services and infrastructure, HC 1041

Wednesday 18 January 2023

Ordered by the House of Commons to be published on 18 January 2023.

Watch the meeting

Members present: Iain Stewart (Chair); Mike Amesbury; Mr Ben Bradshaw; Jack Brereton; Ruth Cadbury; Paul Howell; Chris Loder; Grahame Morris; Gavin Newlands; Greg Smith.

Questions 1 - 99


I: Huw Merriman MP, Minister of State for Rail, Department for Transport; and Dame Bernadette Kelly DCB, Permanent Secretary, Department for Transport.

Written evidence from witnesses:

– [Add names of witnesses and hyperlink to submissions]

Examination of witnesses

Witnesses: Huw Merriman and Dame Bernadette Kelly.

Q1                Chair: Welcome to this session of the Transport Select Committee. There is a familiar face in front of us, but for the purposes of our records, can you introduce yourselves, please?

Huw Merriman: Good morning, Chair. I am Huw Merriman, and I am the Rail Minister.

Dame Bernadette Kelly: I am Bernadette Kelly, permanent secretary at the Department for Transport.

Q2                Chair: Thank you both, and welcome. Forgive me for asking this, but I have to. Minister, if you were still sitting in the chair that I am in now, what questions would you ask yourself?

Huw Merriman: That is a great opening question. Over seven years, I think I have sat in every single one of those seats, apart from this one here, so it is a novelty for me.

There is so much going on across the rail portfolio that it might be best if I answered your question by telling myself—or you, as it is now—what my objectives are to try to fix some of the pressing matters for passenger and freight. I will go through those briefly, if I may, because I hope that your brief will be in this sphere as well.

First, it is to see the industrial action settled or concluded, and then to ensure that the reforms that will pay for those settlements are actually delivered, so that we end up with a better railway and, indeed, a better workplace for the workers who do such a great job.

Secondly, it is to introduce rail reform, which has been talked about over the years, including by this Committee, but has not been delivered. We are determined to see rail reform delivered.

Thirdly, it is to publish our rail enhancement pipeline, which is long overdue, and then to focus on the projects that are going ahead and manage stakeholders for the projects that we cannot proceed with at the present time.

Fourthly, it is to oversee progress and cost control over HS2, because I cover the HS2 portfolio as well; it is about gripping it and seeing the delivery of phase 1, phase 2a and then phase 2b, which goes to Committee this week.

The final thing I have written down, but there could be many more, is to drive improvements to train operator performance, which is currently not acceptable, and turn some of the operators around so that they can do a better job and get our trains in on time, but also work to budgets, which are going to be tight as well.

Those are my five priorities. It is going to be busy, but I am keen that we crack on and make some progress.

Q3                Chair: Thank you. That is really helpful and covers a large part of the agenda we have today. I will start off by asking some questions about the industrial dispute. We had in front of us last week some of the trade unions, as well as Network Rail and the RDG. From the unions, we have heard a number of accusations that the Government have been interfering in the negotiations, tying the hands of negotiators, introducing conditions at the last minute and not giving sufficient notice to the unions. How would you respond to those accusations?

Huw Merriman: First, I would like to hope that, through the role that you are now doing and that I did for years, I have built up a good relationship with the union leaders—a robust relationship, as it always was when I was chairing the Committee, but one based on mutual respect.

I recognise the job they have to do for their members. If you look at the average pay of those who work in rail, you see that they have done a really good job for their members, but of course the challenge we now have is that the taxpayer has funded train operations to the tune of £31 billion over the last two years, and next year £11 billion will be going in. We have to find savings and efficiencies, and of course it has been challenging to do that while inflation is running at such high levels. I understand the need for them to negotiate hard for their members, and I hope that they understand the cost envelope that we have to deal with.

On the point about interfering, the fortunate thing that we have been able to do—the Secretary of State has led in this regard—is to sit down with each of the union leaders and try to get a starting point as to where we can assist. The word that we ended up using was “facilitate”, which came from one of the trade union leaders. After those meetings, I sat down separately with the union leaders and the employers to try to work out where they are in terms of where matters are currently stuck, and then we have tried to go away and find some form of resolution that we can put back to the employers; to be able to give a little more in certain instances, or hold the line if we feel we need to, with regard to the taxpayer.

I do not believe that we have interfered in a negative manner; we have intervened positively. We have been able to refresh mandates, which has led to settlements with the TSSA and Unite. I very much hope that that will lead to settlement with the RMT, which has been responsible for 70% of industrial action over the last year. Talks are going on this morning between the Rail Delivery Group and the RMT, and talks were going on last week and into this week with the RMT and Network Rail. I am really hopeful that those talks will lead to a settlement.

On the ASLEF side, I understand the point that was made about a document being put to them by the Rail Delivery Group. The challenge, as I understand it, was actually laid by me: we had a meeting with ASLEF and the Rail Delivery Group on 9 January, and I wanted to ensure that by the time that meeting took place there had been discussions around the offer. Those discussions were not able to take place, so the Rail Delivery Group ended up delivering the offer document to ASLEF on the Friday before that meeting so that discussions could take place. That is why it came in the form of a formal document as opposed to talks that lead to a document, which has been more the RMT approach.

As I said, I would like to hope that my relations with the unions are positive. I very much hope that they can come to a settlement with the employers. The Secretary of State, the Prime Minister and l have done everything we can to try to facilitate that outcome.

Q4                Chair: Thank you. From the evidence we took last week and from what has been commented on in the press, it looks as though the RMT negotiations are—if not reaching a conclusion—in a healthy place, but that is not the case for ASLEF, which this week has announced another round of strikes in early February. How do you propose to go about resetting the ASLEF negotiations?

Huw Merriman: Chair, like you, I very much hope that the RMT talks, which are now in the detailed stages, will lead to a decision from the RMT executive that allows a settlement to be made. I very much hope that that is the case, and I wish them all well in that regard.

You are correct with regards to ASLEF. Again, it highlights that the talks have been much later in occurring between ASLEF and the Rail Delivery Group, and that is why I was very keen, as was the Secretary of State, to try to drive more momentum so that there was something to talk about. That is why the Rail Delivery Group formally delivered a document—an offer.

I regret that it has been rejected. The average pay for a train driver is just short of £60,000, and the offer that was on the table would take that average pay to £65,000. There is a commitment with regards to no compulsory redundancies, and of course changes to working practices are needed to give a better passenger experience and for management to be able to run the railway. Those things will fund the pay rises, so in my mind, it is a great deal for the rail industry as a whole, but I recognise that more talks are needed.

I am very encouraged that ASLEF said in their statement that they will take part in talks. Yesterday, I sent out another invitation to Mick Whelan of ASLEF, and his team, and the Rail Delivery Group to come and meet before the end of January—before the strikes of 1 and 3 February—to see whether we can take matters to a more positive stage with a view to those strikes being called off, but, as things stand, the strikes are on.

I should make it clear that there has been talk that the RMT has put industrial action out. That just relates to the very small number of RMT members who drive trains. I think it is about 2% of all train drivers. It is understandable, if the train drivers in ASLEF are going on strike, that the RMT train drivers are not looking to cross a picket line. But that is not general RMT action; there is no industrial action on a national stage from the RMT as things stand.

Chair: Okay, thank you.

Q5                Jack Brereton: Do you think the attitude that Mick Whelan has taken has been helpful? We heard in our last evidence session that he does not even recognise the RDG and is happy to allow the strikes to go on for years, potentially. Do you think that attitude is productive and helpful?

Huw Merriman: Obviously, these things play out in public in a certain way, and that is why I have been really keen to ensure that we use moderate language—language of reason and positivity—to try to bring about an outcome that settles these strikes. They are no good for the workforce, because they lose their wages, and they are no good for the passenger, because they cannot use the railways. If that continues, it will end in a negative spiral. It is in all our interests to talk ourselves into a better place, so I hope that they will consider and do likewise.

I recognise that they have a job to do. If you look back over years, the unions have been very successful in getting more power and more pay for their members, but that has led us to a position where it is increasingly difficult for management to be able to run the railways, so I hope that there will be some agreement that we have to reform if we want the railways to thrive.

Q6                Ruth Cadbury: Hello, Minister. Back in the mists of time, earlier in this dispute, it was reported that a settlement was almost ready to be agreed, and then it was pulled by No. 10, so we are trying to establish where the employer side directions and decisions are coming from.

On 7 December your Secretary of State said:It is not my role to negotiate in place of the employers and the trade unions, but I said that I and the Rail Minister would work to try to facilitate an offer.” No. 10 said that it is for unions and employers to work through the details of negotiations, and Steve Montgomery of the Rail Delivery Group said that firms have to “seek permission” from the Government before making new offers to railway staff. Where is the direction coming from? Is it the employers, Department for Transport civil servants, you and the Secretary of State, the Treasury, or No. 10?

Huw Merriman: To a certain extent it is a bit of everyone, but perhaps I can give a bit more detail so that you can see how it works. With the end of franchising, the train operators are responsible for collecting the fares and passing them through to the Government, and then the Government pay the cost of running the railways. Therefore, the risk and the funding are on the Government and, indeed, taxpayers. As a result of that, a mandate is given by the Government to employers: “This is the financial envelope the Government can afford,” and then it is down to the employers to negotiate terms with the unions.

Of course the Government are involved in setting the overall framework for how much can be afforded, but it is for the employers to then negotiate the terms, not least the savings and efficiencies that can be returned from workplace reform. This is not just a question of pay rises; it is also a question of the workplace reforms that will pay for them. That is where the employers are heavily involved.

Of course I hope that the taxpayer would expect the Government to be involved in those numbers, because it is the taxpayer who is currently footing the bill, but the individual negotiations are not for Government Ministers. When I sit in a room with union leaders and employers, I am not involved in negotiations but trying to find out where the sticking points are and what we can go back and try to do. We were able to do that with a revised mandate from early January, and at the beginning of December, which saw the action settled with regard to the TSSA and Unite.

That is why I like to think that our interventions have led to positive outcomes. I share the Chair’s optimism with regard to the RMT; I hope that will happen again. That has happened because we were able to go back after listening in the talks and see what more we could do.

Q7                Ruth Cadbury: The Government keep saying, “We have to look at the costs of this,” but do they factor in and have they done a proper impact assessment of the economic costs of a continued dispute, and therefore the economic benefit of settling sooner rather than later?

Huw Merriman: Absolutely. We know that industrial action costs the railway £25 million on a working day and £15 million on a weekend day. We have also seen the figures of the £700 million impact on the economy at large.

Q8                Ruth Cadbury: And the long-term impact?

Huw Merriman: Of course there is a longer-term impact, because passengers will avoid using the railways and change their travel patterns, which is no good for the railway or for decarbonisation either.

We absolutely factor that in, but we have to take into account other Government pay deals across the public sector, because while on the train operating side they are private entities, as I said, it is the taxpayer who is largely funding these settlements, and, of course, Network Rail is a public sector agency. We have to look in the round, and at what teachers and nurses are being given. We have to look across, and that is why No. 10 rightly is involved in these discussions.

As far as I am concerned, No. 10, No. 11 and the Secretary of State have all been really focused on how we can get these settlements to a place where the industrial action comes off. Do you want to add anything, Bernadette?

Dame Bernadette Kelly: No, I think you have said everything that needed to be said, Minister. I don’t have anything to add.

Q9                Mike Amesbury: Minister, the RMT strongly argued that the talks were torpedoed at the last minute; driver-only operated trains were introduced as a condition at the eleventh hour. Is that the case?

Huw Merriman: No, it is not the case that anything was put in place to torpedo. DOO, as we tend to call it—

Q10            Mike Amesbury: But was it introduced at the eleventh hour?

Huw Merriman: No, it has always been involved as a concept that DOO is one of the many reforms that we would like to see furthered over the years. As new technology and new trains come on stream, and we can use DOO, we would want to do so in the way that we have seen over previous years.

In my region, in Southern Rail, there was industrial action in a dispute that took a long time. DOO was eventually introduced, and the performance of trains has been better as a result, and the incidents that were talked about have not occurred.

Q11            Mike Amesbury: So it did not put a spanner in the works. At the eleventh hour, that did not happen.

Huw Merriman: Again, let me be clear about DOO. It has always been a concept. The issue is that DOO is a matter between the train operators and the train drivers, because it does not require the other crew members, who tend to be represented by the RMT, to be introduced. We will see train operator by train operator making the determination as to whether they want to move towards DOO, which may not be possible, because the new trains may not be ordered and coming on stream, but it has always been—

Q12            Mike Amesbury: Sorry, Minister. I know there will be further questioning on this later, but my question is: was this introduced at the eleventh hour in the negotiation, creating a spanner in the works?

Huw Merriman: There have always been talks with regard to the RMT as to DOO-type language, but there has also always been an understanding that DOO is not a concept that we need to discuss with the RMT in great detail, because it involves the train drivers, being ASLEF, and the train operators.

The other aspect that has come up is the concept of parity. That was a point that the RMT made: they were looking for parity of pay with regard to the Network Rail offer and then the Rail Delivery Group offer—therefore, RMT members on trains. They felt that that matter was not addressed. Again, that is where we have been able to go away and do some more work, so I hope that, rather than anything torpedoing the talks, we have been able to listen to what the RMT have had to say and, where they objected or wanted to see more done, we have been able to go away and try to get more done, which I hope leads towards an RMT settlement.

I can tell you, Mr Amesbury, that we have not rowed back on the concept of DOO. As far as we are concerned, if that technology can be rolled out, we should roll it out. It has been in existence since the early 1980s; 55% of all rail journeys involve DOO operations, so why wouldn’t we want to roll it out further? It is safe and it increases performance.

Mike Amesbury: That is disputable. Thank you anyway.

Q13            Mr Bradshaw: How nice to have a Rail Minister who knows something about the railways, and transport in general.

Huw Merriman: I’m worried about where that will now end. You ask me the most technical questions, Mr Bradshaw.

Q14            Mr Bradshaw:  Was the £700 million cost to the economy figure that you just gave us, Huw, the cost per day of strike, or a total?

Huw Merriman:  No, that was overall. It was an independent figure from the Centre for Economics and Business Research. We have also seen the £1.5 billion figure given by UKHospitality. The £700 million was over the period from June all the way to Christmas.

Q15            Mr Bradshaw: Okay. We had the head of the rail companies before us last week, who acknowledged the RMT’s figure as to what the strikes have cost the Government so far. In fact, he went even further and said it was anywhere between £300 million and £500 million, so we are talking of a cost to the Government of over £1 billion so far. That would easily be enough money to have solved this dispute months ago, wouldn’t it?

Huw Merriman: If you look at it through that lens, it has absolutely ended up costing more than would have been the case if it had just been settled in that part. But we have to look at the overall impact on the public sector pay deals that are going across, and at the reforms that do not often get talked about but are absolutely vital as part of the package.

The reforms will pay for the pay deals and make the railway more efficient in the long run. This is not just about pay for the workforce; it is trying to make the workforce more efficient in terms of working practices, and safer, which is something I feel passionately about. These reforms will take workforce off the tracks so that we can have technology checking for cracks and other defects, rather than people on the line. I feel passionately that these reforms are good for workforce and would also give them the pay rise.

Q16            Mr Bradshaw: I do not expect you to comment on the Government’s overall approach to public sector pay, and we can all argue that reform is necessary in various sectors, but at a time of real falls in living standards for people across the public sector compared with people in the private sector, this strikes me as the very worst time to try to push for radical reforms. It is far better to push for radical reforms when times are good and pay is increasing and keeping up with living standards. It seems to be an approach which, as you have acknowledged, is costing the Government—the public, the taxpayer—much more than it would have cost to have settled the dispute and got back to a normal running railway.

Huw Merriman: I have heard it said that this should have been done, for example, during the covid times. But the reality is that everyone in the railways really pulled together and worked incredibly hard to keep the railways functioning so that key workers could get to their destinations, so, in my view, that was not the right time to introduce the reforms. They were therefore introduced afterwards, when it was also clear that rail patronage was not anywhere near where it had been.

It is quite interesting that on Southeastern, for example, only 32% of annual season tickets have returned post covid. After covid we have been impacted by a couple of things. One is reduced patronage, which means that we have to find more efficiencies within the rail system to keep it funded. The other part is that we have been impacted, as you said, by inflation, so what would have perhaps been a more generous pay deal if inflation was running at what it was a few years ago is now below inflation, and that makes it harder to deliver, because the union leaders rightly say that it does not keep up with the cost of living. Those are our challenges. Bernadette, you have been in post for longer—

Q17            Mr Bradshaw: Who is covering the cost of the indemnity? Is it having to come from your existing budget, or is the Treasury covering it?

Huw Merriman: Do you mean with regard to train operators?

Mr Bradshaw: Yes.

Huw Merriman: Again, I have heard this said before, but you have to put it in the context of how the train finances work. There are no indemnities in that sense. The train operators pass on all the fare revenue that they receive and then the Government—the Department for Transport—pay them the cost of running the railway and a small fee, which is about 2%. About 1.5% relates to their performance, and 0.5% is more of a fixed management cost. There is no indemnity in that regard, because of the way the railways are now funded. They just collect the revenue and pass it on to us, but they still get paid their management fee when they are operating trains.

Q18            Mr Bradshaw: So it is your Department that is covering the costs.

Huw Merriman: The Department for Transport is responsible for costs and the revenues are all received ultimately by the Treasury.

Dame Bernadette Kelly: Minister, you asked me to comment from a broader perspective, having been in the Department longer. The desire to reform some of these working practices has been there for a long time and was central to the whole rail reform plan.

Clearly, we did not anticipate that at the time this dispute was happening we would also be experiencing a very sharp spike in inflation, which obviously makes it a more difficult scenario and dispute to resolve. As the Minister said, what we now see on the railway post pandemic—what look like permanent changes to travel patterns on parts of the railway—throws into sharper relief the need to have an efficient and productive railway. That is part of the determination to ensure that this dispute is settled, and in a way that generates some of those improvements.

You are right about the very high economic costs of disruption on the railway, and we are acutely conscious of them, but, equally, the logic of that argument would have you settling at any cost, and in the long term that would be very bad for the railway and the economy as well.

Q19            Grahame Morris: Good morning, Bernadette. Good morning, Minister. I would also like to ask some questions about the potential savings of what you, Huw, referred to as the modernisation programme.

As an aside, on a number of occasions we have put the issue of how important driver-only operation is to train companies, particularly Northern, the train operating company that provides services in my area. They said that for them it was not an issue at all—not a priority or an issue—because of the number of unmanned stations that did not lend themselves to driver-only operation. In terms of reliability, I have only ever used one driver-only operated service—it was last time I came to London—and it was two and a half hours late because the cameras failed, so I am not quite sure how they are more reliable.

May I ask you about ticket offices? I asked Steve Montgomery, the chair of the Rail Delivery Group and an MD at FirstGroup, about the process that has to be followed to close ticket offices as part of the modernisation programme. He told the Committee that it was a key issue in the dispute with the RMT in particular. He said there would be a public consultation and that the results would have to be submitted to the Department for Transport where someone would have to decide on whether a booking office could close or whether they could reduce the hours that it operates.

Huw, I suspect the decision may end up on your desk. Can you give any guarantees that we will at least have the same staffing levels? Mr Montgomery suggested that staff from the ticket offices would be redeployed in the stations, on the platforms, in cases where there are closures or hours reductions. Can you give any reassurance or comfort to the people who may be displaced?

Huw Merriman: Thank you, Mr Morris. With regard to ticket office reforms, there are just under 1,000 ticket offices at present. About 12% of all transactions take place through a ticket office. That is obviously much reduced, but the number of ticket offices is largely the same as it was 30 years back. Our intention is, effectively, to align the ticket office staff with where they see the passengers. Most passengers either book online or use the machines. We want to try to have the ticket office staff come from behind the ticket office and interact with passengers—customers—on the platform, where they can be of more assistance.

Any decisions on closures have to be done via the ticketing and settlement agreement. There will have to be an impact analysis of what that would mean for passengers, and then those decisions would be made. We are moving away from ticket offices because, as I said, most passengers have moved away from them. We want to ensure that the staff in the existing offices interact more with passengers than they do at the moment. I hope that interacting more with staff will help those who have mobility issues and may struggle to get on the train and those who want more information on where the train is. Hopefully, it will be a more rewarding job for staff as well.

Q20            Grahame Morris: I want to ask a little more about the ticket office closure proposals as part of the Government’s modernisation agenda. We tried to press Steve Montgomery for some information on what the financial modelling was and what cost savings were anticipated from the redeployment and closure, or restriction in hours. He did not seem awfully forthcoming. I think he suggested that he might write to the Committee. Could you enlighten us as to what the driver is in terms of the financial savings that this would bring?

Huw Merriman: There are likely to be some financial savings. While there are no compulsory redundancy elements to the reforms, there is likely to be voluntary redundancy. In fact, early signs—certainly on the Network Rail side—have shown that a lot of staff would want to take advantage of the redundancy. There will be fewer staff in that regard.

Of course, we cannot model the exact financial efficiencies. To do that, one would end up predetermining the ticket office consultation process, which, of course, we cannot and will not do because we need to look at each office and what the impacts are. That is probably the reason why Mr Montgomery was struggling to give you an accurate figure. He would be predetermining the consultation, which of course cannot be done.

Q21            Grahame Morris: I am not sure whether that clarifies it. Surely management—either the Rail Delivery Group or the employers—must have an idea of the net savings that this would produce, in the same way as they must have an idea of the net savings that would be produced from changing the maintenance schedules and integrating the teams. I will leave that for now.

I want to ask you about another issue that I know you are familiar with because I can remember that you had a private Member’s Bill about simplifying the ticketing system, which is notoriously complex. I am sure members of the Committee have had this experience sometimes. If you buy your ticket from one of the automated ticket machines, you do not get the cheapest ticket. I have discovered that you do not get your senior citizen’s discount sometimes, whereas when you go into the ticket office the staff have the expertise to give you the best fare. Is there any indication, if ticket offices are closed, that there will be a guarantee of the same range of tickets provided by ticket offices available to passengers?

Huw Merriman: As part of the rail reform, and indeed as part of the reforms to the ticket office mechanism, we very much want to see a change in the way that fares are set. There are far too many fares. It is interesting to look at the model that Scotland has just tested, and something I will be looking at very closely. The reality is that the machines need to give you the same deal that you could get from someone in a ticket office.

To take my station—Etchingham on the Hastings line—it is only open for a very short number of hours during the day. Therefore, you could only actually get the service you have just described, Mr Morris, if you went in the morning rather than in the afternoon. We need to ensure that our machines are updated so that you can buy any ticket from the machine that you can buy from a person. We also need to ensure that we roll out more pay-as-you-go. We have a commitment to roll that out to 200 more stations in the south-east. Again, that makes the whole process more straightforward, simpler and will entice more people on to the railways because they will understand how to use it. I am really passionate about doing what you have just mentioned as part of this overall package.

Q22            Grahame Morris: Perhaps I could pick up on the answer you gave earlier about vulnerable passengers: disabled, blind or partially sighted passengers, or indeed those travelling with small children and pushchairs. I was one of a number of MPs who wrote to the Equality and Human Rights Commission about the issue of ticket office closures and how it would adversely impact vulnerable passengers.

The Equality and Human Rights Commission wrote back and said they had sought a meeting with the DFT on this issue. Can you enlighten us on whether either you or the Secretary of State met the EHRC on this issue? If we have widespread ticket closures, could you elaborate on how that would impact on your ability to meet your duties under the Equality Act? This is for people with disabilities.

Huw Merriman: Absolutely. To answer your question, I have not met them. We will write back with regard to the Secretary of State. I can absolutely assure you, and perhaps I can ask Bernadette to take us through the process. This, again, is why I do not actually want to put a figure on anything because nothing is predetermined. We will go through the consultation. We will look at the impact in terms of equalities. We will make sure that those are adhered to.

Overall, if you look at the design, I have already described the fact that only 12% of passengers actually use the ticket office. That demonstrates that those other passengers are not interacting with staff. Our proposal is to actually get staff outside the glass screens so that they can help. In my view, that can only be a positive for those who have particular mobility challenges so that they get more assistance. I would say the general design concept, Mr Morris, is very much with the customer or passenger in mind, in particular those who are vulnerable.

Before I hand over to Bernadette, you mentioned the DOO. Can I come back on that, without wishing to prolong that discussion? The train I used to get down to Crowborough in East Sussex was an hourly train. If that train was cancelled, we were waiting two hours. It was already rammed as it was. Often, what would happen is that the train would get cancelled, not because the driver was unavailable but because the conductor was somewhere in Three Bridges because of all the lines dominoing over.

The idea of DOO is that it makes it more resilient because you are not dependent on two members of staff, just one member of staff. I am absolutely committed to having second crew members on board. The other beautiful part of DOO is that when I was on that train, unless you were in the carriage where the conductor was operating the doors you would not see that member of staff. Once you have DOO, that member of staff can walk all the way through the carriages, checking tickets or whether anyone needs assistance and whether security is okay. That is why I am so passionate about it.

Grahame Morris: I understand your point of view. Can I put to you an alternative view that was put to the Committee last week by the two Micks—Whelan and Lynchin respect of passenger safety? I have had the experience—perhaps you have—of travelling home from a sporting event or a football match, where there are people who are particularly vulnerable, like women travelling home alone. If the only person on that train is the driver, travelling home alone on the railways late in the evening is a dangerous thing. We need to give due regard to responsibilities for people’s welfare. There are some terrible reports about assaults on the railways and so on.

There is a different perspective about reliability. Routinely, the train service from my area is once an hour. It is two carriages. I hope that you are going to address that as well at some point in the IRP.

Chair, do I have time to move on to minimum service levels?

Chair: Ruth has a quick supplementary.

Q23            Ruth Cadbury: On ticket office closures, Minister, the 12% of passengers that you quoted who are currently using ticket offices are more likely to be occasional travellers and tourists. They are more likely to have disabilities, to be cash buyers and to have children in tow. That is why they need human contact, notwithstanding the confusion over ticket prices, connections and so on.

If you insist on ticket office closures across the board, will you expect a guarantee that there are at least the same levels of staffing provision and hours of operation of human contact at those stations? Will those people be able to take cash payments? What about stations with barriers? You talk about those people multi-tasking, selling tickets and giving people information about trains running and so on. That is before they go through the barrier. You also mentioned helping people on and off trains. Which side of the barrier will these people be? Will there be the same level of service on both sides of the barrier?

Huw Merriman: To take Tunbridge Wells, which is a station I use quite a bit, at the moment those selling tickets are actually behind the glass. They do not come out and assist if you are stuck at the barrier. There are other staff doing that. It is trying to multi-skill, so that one member of staff can do the full range that you have just described. That is what we are very much focused on doing.

Our starting point is that, if there is currently a manned ticket office in a station, we will look to ensure that there are still personnel at that station doing the tasks that I have just described.

Q24            Ruth Cadbury: The same hours?

Huw Merriman: Again, the starting point is that we will look to replicate what is in place already and then look at what staffing is needed. I am not saying that all the staff would still be there. The whole idea of multi-tasking is that one person might be able to do the roles that two could do in terms of selling the ticket and helping people through the barrier, because they are working more remotely with a device like you have in front of you. Again, none of this has actually been set out because we are still in the early days of design. Nothing is predetermined because we have a consultation to go through as well, but those are the sorts of general design concepts.

Q25            Ruth Cadbury: Can I push on the guaranteed hours of access? Will you be expecting guaranteed hours of access if you are going to insist on closing the physical ticket offices?

Huw Merriman: The starting point for this is that the provision will be the same, but it will be done in a different way. That is the general starting point, yes.

Dame Bernadette Kelly: On process, as the consultation goes on, I will find out whether officials have met with the Equality and Human Rights Commission. I am not sure whether that has happened or not. There are other organisations such as the Disabled Persons Transport Advisory Committee that are much involved in this process, as you can imagine. Transport Focus is looking at it through the user’s lens as well, including people with families, young children, and so on. Obviously, cost is an element of the process, but so is ensuring that we have a railway that everybody can access and use.

Huw Merriman: We know that you have an inquiry on the impact per transport sector for those who have disabilities. We very much welcome the work that this Committee will do with regard to the changes at ticket office level.

Chair: I would now like to turn to minimum service levels, with the Bill having had its Second Reading earlier this week. Grahame has some questions.

Q26            Grahame Morris: I am conscious of time, but it is opportune to put these questions given that the minimum service Bill passed on Monday. I remind the Minister that when the Secretary of State appeared before this Committee, he said that the minimum service levels legislation would not help resolve the current dispute. We were asking about the degree to which it was fit for purpose in minimising future disruption.

What discussions have you had with stakeholders, particularly the train operating companies? What is their view of how the Government’s legislation will operate to reduce disruption?

Huw Merriman: We have written to a very long list of stakeholders to alert them. The real detail from them will come in the consultation exercise that will shortly be laid out. That is where we would expect to hear from all of the industry, and indeed all of the passenger groups and the unions with regard to how they see this working in practice. It is a challenge for the railway.

When the RMT strike on Network Rail, we tend to see about 20% of the network operating, but a lot of it is actually prioritised for freight. When ASLEF strike, it is more like 10%. At the moment, there is already some service. The challenge we will have, Mr Morris, is that in order for any part of the railway to work there may be a large number of areas that have to work in totality to allow a minimum service to occur. It is not just, “Oh, we have to do a consultation. We are reliant on that consultation to really make this work in practice.

Q27            Grahame Morris: Minister, how long will the consultation last? Would it not have made sense to have had the consultation in advance of bringing forward legislation rather than after the event?

Huw Merriman: As the legislation was first mentioned or introduced at concept stage, it was only going to apply to rail. It was not going to be broadened out. The legislation is now no longer owned by the Department for Transport. It is owned by BEIS, but, of course, we are one of the key Departments because rail is still one of the limbs impacted.

As things were first introduced, there was no consultation element in there at all. I believe this is in much better shape because there will be the element of consultation. It will take time to pass through Parliament, as you will be aware, Mr Morris. That time gives us the ability to go out and seek the views of the industry. Those views will then shape how we draft the regulations. The way the legislation works is that it is largely a framework. It is relatively straightforward. It just specifies that there will be a minimum service and the impact that has on the right to strike. It then leaves each particular policy area to come up with what its minimum service level would be. That is what the Department will have to deliver. We will put down that regulation. The content will be based on the consultation responses. I feel that we have this the right way round. We are not writing the regulations in advance of the consultation, let me put it that way.

Q28            Grahame Morris: I am sure you are familiar with Mark Phillips, the chief executive of the Rail Safety and Standards Board.

Huw Merriman: Yes.

Q29            Grahame Morris: He was deeply cynical about the ability of minimum service levels to work in practice, given the complex nature of rostering patterns. He did not believe that it would be effective in helping to maintain a service during a dispute. He flagged up the issue of its being easy to get round because the relevant staff could simply go sick.

Huw Merriman: I am sure they would not necessarily look to go down that avenue.

Q30            Grahame Morris: Why would anybody comply with what to many people, particularly trade unionists, is a draconian measure? Why would they not seek to work to rule, remove good will and find some way to subvert it? Is this not just a piece of grandstanding?

Huw Merriman: No. There will be a lot of work that goes into it. As I say, the consultation will be incredibly extensive for rail. That consultation will form the basis of the minimum service regulation that we will have to put in place.

Perhaps I could outline this, and then pre-empt what may be your follow-up question. At the moment, while there is no fixed minimum service, there is a service that runs. In my area, one would have to drive up to Sevenoaks in Kent. It is a long drive—an hour’s drive for me—but you can still use the train on a strike day. There is already a skeleton service in place, but it is very patchy. What we want is a more formalised basis so that we can agree what that minimum service should be.

I will give you an example of the reason for that. I have a constituent who writes to me whenever there is a train strike. She says that she is on a zero-hours contract, so when the trains are on strike she does not get paid. We have a duty to those people to ensure that they can get from A to B. If the taxpayer is paying all this money, surely the passenger has the right to use the service. If it was a key service and it was right to keep the railways running during covid for key workers, it must still be right to carry on having the railways working after covid. That is why we believe there is a good case for minimum services.

Grahame Morris: We believe that it is possible to resolve the dispute with good will on both sides. We wish you well in doing that. Chair, I will hand back as I am conscious of the time.

Q31            Chair: There is one supplementary from me on this. I think I heard correctly the Secretary of State for BEIS in the debate on Monday say that the rail regulations would be agreed before the Bill completed its parliamentary passage. Is that correct?

Huw Merriman: I don’t know how long he expects the parliamentary passage to work for. All I can tell you, Chair, and reassure you all, is that there will be a proper consultation exercise. The consultation responses will form the basis of the regulations. That will drive the timing for our regulations.

Chair: Thank you. We now turn to the integrated rail plan.

Q32            Paul Howell: As I am sure you are aware, Minister, the Committee conducted an inquiry into the IRP’s implications for the economy. The report concluded that there were a number of issues. It was about publishing updated benefit-cost ratios for HS2 and for all NPR options. It was about committing to the development of Leeds station and a new station in Bradford. There were things about Manchester Piccadilly. Technical appraisals were published, and timetables sent out for study.

I want to pick up a few questions around that report and the response you gave us back in October. What were the outcomes of the meetings you had with local leaders mentioned in your letter? Have those meetings changed or refined the Government’s thinking? Could you please outline which local leaders you actually spoke with?

Huw Merriman: I think that letter in October was actually a letter that my predecessor wrote to me when I was Chair. I think that must be right.

Dame Bernadette Kelly: I think this is the letter being referred to.

Huw Merriman: That is the one from December. We were talking about the one in October. To reassure you, Mr Howell, I look back at the integrated rail plan as one of the really great reports that was put together by this Committee. We ended up having a good set of visits to Bradford, Leeds and Manchester, and were left in no doubt as to what rail could do for those communities. It is fair to say that those we met in Bradford—Mr Morris will remember this well—felt that they had been missed out.

One of the priorities I mentioned was about the enhancement pipeline, and if I had read them out in full they would have talked about the integrated rail plan. The challenge that I set myself is how we can provide a better solution for Bradford. The Prime Minister set the challenge over the summer to assess options for a new station in Bradford. We saw the proposal at St James’s Market that members of the Committee will remember, and also how to better connect Bradford. The IRP sees a line that goes from Manchester to Leeds and delivers that train service in 33 minutes, but if you were in Bradford you would end up taking a train on a new improved line, which would take 12 minutes, to go back on yourself. That is why those in Bradford felt so sore.

The Secretary of State has met the northern leaders—

Q33            Paul Howell: On Bradford specifically, when do you think we will see those proposals?

Huw Merriman: I need to write back to the Committee by the end of March in order to comply with the deadline that I asked my predecessor to meet, if that makes sense. Of course, what happened with my predecessor was that the IRP suddenly turned into an even more ambitious proposal than the Transport Select Committee had dared to design, whereas what we are looking at now is what tends to get called core IRP, which means the £96 billion integrated rail plan that this Committee critiqued.

I anticipate writing back to the Committee to fully describe what the integrated rail plan actually means; there has been a lot of confusion about the changes. It will also be specific to what I would like to see happen for Bradford. I intend to meet again with Susan Hinchcliffe in Bradford, and also the team in Leeds. I have a real personal passion and commitment to see better for Leeds and Bradford.

Q34            Paul Howell: You can continue now about your meetings.

Huw Merriman: I have met more of them individually. I have met Andy Burnham, Mayor of Greater Manchester. The Secretary of State has met all of the northern leaders. I think it was my predecessor who wrote back in October saying that he was going to have those meetings, and of course I ended up taking over from him. I do that on a regular basis. My intention, before I write back to you, is to have gone up to Leeds and Bradford and to have sat down with the leaders there to work out what more we can do.

Q35            Paul Howell: The reason for pushing a bit on the question is very parochial, in that those of us in the north-east feel that the Leamside line in particular has been ignored. The Committee did not get to look at that specifically when it visited. If you are talking to the northern leaders, you could well be talking to the North of Tyne Mayor or the Tees Valley Mayor. If it fits between the two and you do not see them there, you could talk to Andy Burnham and he would not know where the Leamside line was.

I do not know whether you know this, Minister—I am sure you do—but the Leamside line has been described as the most important piece of infrastructure for the economic future of the north-east. We feel very passionately about it. I know that you have a meeting next week with some leaders on that.

Huw Merriman: And with you, Mr Howell. It is actually you who is organising it.

Q36            Paul Howell: I am arranging it; correct.

Huw Merriman: I thank you for orchestrating it. I look forward to meeting you. Yesterday, we received the strategic outline business case on the line. It falls within the restoring your railway project, which has been successful in terms of the applicants. I think we have had 140 applications to restore railways, but unfortunately we cannot fit them all in.

Further north from you, you will be aware that the Northumberland line is one of the leading projects that is being delivered for the north-east. On the Leamside line, while we can take matters forward because we have the business case, the funding envelope is incredibly challenging. The entire pot was only £500 million. It may seem a lot, but the Northumberland line is likely to cost £200 million-plus of that. As a result, it is a challenge to fit them all in.

I am looking forward to meeting you. The business case is in. We also envisage, as part of a devolution settlement for the north-east, that it may well be able to be funded by that particular means, but that will be for a different Department.

Q37            Paul Howell: The LA7 deal has just been proposed in the north-east. Are you aware whether there was anything associated with that specifically mentioned in the deal?

Huw Merriman: I am not, but we can look and will no doubt be writing back to you. We can actually include the details in the letter.

Paul Howell: That would be very useful.

Huw Merriman: I should also mention—you have rightly said this before, and this Committee has focused on it as well—that sometimes, when people talk about the north, they tend to focus just on Manchester. As far as we are concerned, the north covers the north when you look at it geographically as well. You are right to pick us up on that.

The reason I highlighted Bradford, Leeds and Manchester is because that is where the core railway in the integrated rail plan is being built. That is why I mentioned just those three cities.

Q38            Paul Howell: Not to push the point too far, you mentioned your visits to Bradford as the Transport Select Committee, but nobody came to the north-east and looked at the Leamside options and the criticality of that line, whether it was about freight, local or even the resilience of the east coast main line. From a Committee point of view and from you, Minister, I welcome the fact that we now have engagement going forward.

Huw Merriman: Not just that. Before I meet anyone from Leeds and Bradford, I will be up in Northumberland looking at the Northumberland line and the work that is being done there. I will be up in the north-east before I will be in Yorkshire or Lancashire.

Q39            Paul Howell: Feel free to call into the Leamside on your way to Northumberland, Minister.

Huw Merriman: You are very kind.

Q40            Paul Howell: In the NPR as a whole and your assessments, will the comparisons that were rejected be looked at properly in terms of economic impact and the benefit to communities? That is obviously one of the key things that we pick up. I am sure it has an impact across Bradford, and so on.

Huw Merriman: One of the things that this Committee looked at with regard to the integrated rail plan was whether the business case that had been advanced by those local communities had been compared with the business case that the Government’s preferred option had been based on. That is something I am very keen to ensure has been tested.

When Mr Morris and I went up to Manchester and talked to the Manchester team about their underground station concept, they did not feel as if their ideas had been taken into account. I can tell you that a lot of work has actually been done in that regard. The teams now know exactly what their competing arguments are and what the cost and time differential is between the projects. I am very much working on the basis that when I reply to the Committee at the end of March, I can set that out in more depth. It was a key ask, and obviously I completely supported it.

Q41            Paul Howell: I have one final throwaway. In the meetings that have taken place between you, your predecessor, and the Secretary of State with local northern leaders, have there been any other specific changes to thinking that have come out as a result of those discussions?

Huw Merriman: There are always more requests with regards to devolution. Manchester has its own ideas as to how it could set up its Bee transport system, for example. The point I always ask of the leaders is that they work with us to try to turn train operations round, to work in collaboration and to encourage better performance. Also, if they are on the Labour side, I ask that they assist me with regards to trade union relations to try to get a settlement as well. I am trying to work collaboratively and not just collect all of the asks, but put some back so that we can try to work on a leadership basis to get some of these matters resolved.

Dame Bernadette Kelly: Can I add to that? The other dimension, of course, is that in any given city or town there may be things that people want to do to improve the rail services, but that is part of wider transport planning. One of the things we are also very keen to do—I certainly do this when I am meeting chief executives at my level—is to talk not just about rail but about the totality of the plans that places have to improve their bus, tram and other services, and think about how we can work with places to unlock all of the things that can make a big difference locally.

Of course, some of those things can be achieved more quickly than Northern Powerhouse Rail and very long-term investments of that sort. It is a multi-dimensional conversation in the context, as well now, of commitments given on devolution, where we are keen to make sure that those conversations are happening. I talk a lot to Leeds, Manchester and other places, and we are practically working with those places to unblock things and move things along wherever we can.

Q42            Paul Howell: To build on that at a more micro level, we can go back to examples in our own patches. We have a restoring your railway bid in for the Ferryhill station, which will link to Teesside for people there. The benefits that come from that need to be associated to the buses being able to link to the station. The consideration needs to be around the economic benefit to a place like that and the surrounding areas, to make sure that we can get it.

There were examples yesterday in meetings where we were talking about the new diagnostic hubs that are there. For people in Ferryhill and the villages around, to get to the diagnostic hub is almost impossible at the moment on public transport. These are critical things. I really encourage progress on the restoring your railway bids and anything you can do to accelerate them.

Huw Merriman: I will briefly come back on that. Mr Howell is absolutely right. One of the meetings I had last week was with Ministers from the Levelling Up Department and BEIS—we were due to have somebody from the Education Department too—to try to work out whether we are delivering new railway lines or improvements to timetables in the area where the new housing is going to be built or the new schools. It is trying to join our Department up with the other Departments to make sure that it fits in with all the strategic points that you just made.

Q43            Paul Howell: One final comeback, Chair. That can be chicken and egg. The railway station can generate the need for housing in an area, as opposed to putting the railway where the housing would be. It is where you can see growth in deprived communities that would really welcome those investments.

Huw Merriman: I completely agree.

Chair: I would like to turn now to the performance of particular train operators, notably Avanti West Coast and TransPennine Express. We had a session on this just before Christmas. You said earlier that the quality of service is not acceptable. Mike wants to come in at this point.

Q44            Mike Amesbury: Yes. After 13 years of successive Tory Governments, why are rail services in the north so utterly useless?

Huw Merriman: That is one of the questions Mr Bradshaw would ask. Let me answer by saying that we do not find the levels of service across all train operators to be acceptable. Cancellations are at 3.6%, but in certain parts of the network they are a lot worse than that.

In TransPennine, that figure is 11%, which is clearly unacceptable. The waits that passengers are having to experience for trains are also unacceptable, but there are specific reasons for that. They are not perhaps just as you have alluded to. We have real challenges—

Q45            Mike Amesbury: Thirteen years is a long time though, isn’t it? We have seen these services deteriorate. It is nothing short of appalling.

Huw Merriman: Let me take the biggest example of where services have fallen down. That has been because, over previous years, the railway industry, both on the management and indeed on the workforce side, have relied on rest-day working agreementseffectively, working overtime. A train driver will tend to work 35 hours a week, but they top up their pay because they work on their rest days. That has been the system that the railways have utilised for years. It is not a satisfactory position.

When I speak to MPs and colleagues and ask them about Avanti’s performance prior to July 2022, they say that it was sort of okay. Of course, that was the time when the rest-day working agreement was ended, in the sense that drivers did not work their rest days. Effectively, the service toppled over. That is the key indicator for Avanti as to why things deteriorated so poorly over the summer.

The same applied with regards to TransPennine Express. As I just referenced, it has 11% cancellation. There was a rest-day working agreement in place up until the end of 2021. That was at effectively time and 0.75. It was a 1.75 agreement, the highest of all train operators. It came to an end, which meant that the drivers were not available, particularly at weekends, to be able to drive the trains. That is where cancellations occur.

I agree with ASLEF that rest-day working is not the way forward. We need more drivers so that those drivers are just working to their contracted hours. If they do not want to work overtime, they do not need to and we have more drivers and more resilience.

The other factor to throw in was covid. It can take 18 months to train a driver. During covid, certain train operators had driver bubbles for training, which were fantastic. I met the driver assessor at East Coast. He took a lateral flow test every day so that he could train drivers. In TPE and Avanti, that did not take place. As a result, for a long period of time no driver training occurred. Covid also saw more drivers leave the industry. TPE, for example, lost 56 drivers last year through resignations. While 113 drivers have been replaced over the last year, it takes 18 months to train them. Covid has had a massive impact on driver training and on drivers leaving.

The other thing I should highlight about TransPennine Express is that they have a sickness rate of 14%, which is obviously incredibly high and much higher than it should be. When you add up all those factors, you should need about 1.6 drivers per operation, if you follow my gist, to be able to run a full service. TPE only have 1.1, so they are short of drivers, which has led to cancellations.

I want to give you specific reasons rather than party politics on this. There are technical reasons why these train operators are not working. A lot of it comes back to the need to reform working practices. Management do not have control over their operations.

Q46            Mike Amesbury: You mentioned TransPennine Express. What are the checks and balances? We can do compare and contrast. They are markedly worse than other operators. At what stage do you, as a Minister and the Department, intervene and say, “Enough is enough now. We’re going to take over, and put it into public ownership or the preferred user in terms of operator of last resort.

Huw Merriman: Northern is an example of a train operator that you would probably also tell me is not properly performing.

Q47            Mike Amesbury: Yes, but it is better, isn’t it?

Huw Merriman: I gave you the average cancellations of 3.6%. It is 5% on Northern. We also do not have a rest-day working agreement on Northern. There are big challenges for Northern passengers and that currently sits with the operator of last resort.

This is not a question of what is in the operator of last resort or what is operated by a private train operator. These are working practices that do not currently work across the entire network that I badly want to see reformed. I want to work with the unions, with the workforce and with all the train operators to turn this around.

To your point, if a train operator is not performing, and it appears clear that they cannot perform and cannot turn things around, that contract would come to an end, and we would not hesitate to put it into the operator of last resort. The TransPennine Express contract comes to an end in May. I am already looking with Bernadette and the team at what needs to be done with regards to that contract.

On a weekly basis, I have all of the data relating to Avanti and TPE, and what they are doing to turn matters around. Avanti has been an interesting exercise because we now have more services on Avanti since the 11 December timetable change than we had before it fell over in July. It is now up to 264 services, an increase of 40%. That has been done without any reliance on rest-day working. Over 100 drivers have been recruited so that we can actually stretch the timetable.

The challenge we have is that, with industrial action over Christmas, we cannot properly ascertain whether it is working, because we never seem to have a clear week where we can just say, “Its down to you, the Avanti train operator, as to whether performance is going well or not.” All I can say—I dont wish to tempt fate—is that over the last couple of weeks the performance has been much improved. My hope with Avanti is that it is turning a corner, but I can tell you that on a weekly basis I look at that challenge. Where we have to put remedial notices in place, we do. Then they have to put a plan in place to deliver on that.

Q48            Mike Amesbury: Minister and Dame Bernadette, with me you have a new focus group as a customer of that particular service, with many other people as well, travelling from the north of England.

Transport for the North published a report yesterday which referred to over 3 million people in the north of England, and I include the whole of the north of England, being socially excluded. That is because of a generation of lack of investment in services and infrastructure, so it is not new, and it is not about the chaos now.

I am heartened by some of the things you said. I know you cited Bradford, Leeds and certainly the north-east, and I will do a shout for Cheshire there. There has been an economic impact with regards to services in the north. What is your assessment of that? What is the current chaos costing the northern economy on a weekly or yearly basis at the moment?

Huw Merriman: Transport for the North gave evidence, I think back in November, that it was costing the Manchester economy £8 million per week. That was their figure, but it is one example, and of course that is not all the north, as Mr Howell will be very keen to point out.

We are aware that there is economic impact. There is an impact in communities that already have great disadvantage. The reason why I am so passionate about delivering new rail projects is that they can regenerate. That is why the visit that this Committee did, and that I was part of, up to Bradford and Leeds left its mark on me. It can transform communities.

That is very important when we are building the new railway, but it is also where to see such a poor performance really breaks my heart because we are letting people down. As I say, I hope that by being a Select Committee Chair I am not a party political person. I like to hope I get on very well with you, Mr Amesbury, with you, Mr Morris, and all of those on the opposite side as well. I am focused on the technical here. It is the workforce reforms that will really change matters. We should not be relying on voluntary driving over the weekends, because at the weekends we see 115% performance in terms of pre-covid days. People have flocked back to the railways at weekends, yet the train operators cannot have their staff working at weekends in many instances unless they volunteer for it. That is no way to run a railway.

I believe that we have to transform those practices, and that means management have to change the way they operate. They also need to show more empathy and support, and throw their arms around the workforce to encourage and support them. Everyone feels worn down by what is going on. It is my job, particularly as I am new and coming in, to be optimistic, to try to drive change, and to encourage all sides to adopt new practices because the existing ones are not working.

Q49            Mike Amesbury: We should not have stations collapsing in parts of my constituency like Northwich either, but I am heartened by some of your responses.

Huw Merriman: We are conducting a station audit, which should be ready for spring. I think almost 2,000 stations have been audited on how they operate for passengers. There have been issues with stations. Sunderland, near Mr Morris, is another example of a station where work was being done and it actually ended up causing flood damage while it was being done. I fully appreciate the passenger experience at stations as well as on the trains.

Chair: Before I turn to Ben, Chris wants to ask a quick supplementary.

Q50            Chris Loder: Good morning, Minister, and hello, Bernadette. It is nice to see you, as always. Minister, in the legacy you are grappling with at the moment, in the contracts operators have—emergency measures agreements or emergency recovery agreements, whichever it is—is it correct that the DFT actually has to approve the manpower plans and the recruitment of staff within the train operators?

Huw Merriman: Obviously, the DFT is responsible for the cost, so we look through the contracts. I am going to have to hand over to Bernadette. We wouldn’t be involved in those specifics, would we?

Dame Bernadette Kelly: I will need to check the exact details. Clearly, the contracts are underpinned by a lot of very detailed information about how operators are going to deliver those contracts. We obviously bear the cost of operating those contracts. There will be a lot of detailed information. Whether it precisely covers what you have described, I will have to check.

Q51            Chris Loder: In a lot of the conversations that a number of us have with train operators at the moment, they say, “We cant fix this, we cant sort that, or we cant recruit so-and-so,” because, they say, the Department for Transport will not approve the recruitment. By default, I am linking that to train driver recruitment and some of the issues we talked about earlier with other operators, including Avanti, where part of the issue has been that the Department itself has refused to approve the recruitment of drivers, in effect to avoid this situation. I just want to understand whether or not that is actually the case. If you are unable to share that with us today, could you write to us and confirm?

Huw Merriman: We will. Perhaps I can take Avanti as an example. Between April and December last year they were able to recruit 100 new drivers. That was how we were able to work with the train operator and put the services back again without a reliance on rest-day working. TPE had 113. Those are examples where those train operators have been able to recruit. That is why I do not believe we would be as involved, but we will write.

Dame Bernadette Kelly: Indeed, it is quite the opposite. Where we know that the problems with performance are driven by a shortage of drivers, we have actively been working with the operators to ensure that they are taking steps to increase driver numbers and driver training. We will check. As I say, there is a lot of detailed information and there is business planning. We need to be confident that what the train operators are saying to us about their cost base is accurate, but I do not think we try to run every detail.

Q52            Chris Loder: I understand that. We would just like confirmation, if it is possible, of whether or not that is the case.

We have talked a lot about the railways in the north so far this morning, but we should not forget that, as we speak at the moment, the whole of the south-west is directly cut off from London because the infrastructure is unavailable due to a landslip between Woking and Basingstoke.

This is one of countless issues that we have seen with South Western Railway over time. It started in the pandemic, when the conscious decision was made to cut off anywhere pretty much in Somerset, Dorset, Devon or Wiltshire into Waterloo. We continue to see this long-term situation where, if you want to travel from the county towns, particularly of Dorset and others, you cannot get a direct service to London.

Are you able to tell us what you are doing, not just about the north but for those areas, particularly in the south-west, where we are equally seeing as bad a train service, if not worse in some cases? We actually cannot get to London, and we have not been able to in many cases for a long time. What is the Department doing to prioritise sorting out that issue?

Huw Merriman: You are right. You touch on the landslip on South Western. We have also had the same issue with regard to Great Western Railway. The west country has been impacted severely by weather conditions, which, as you know Mr Loder, is nothing new.

We had a meeting yesterday with the Network Rail team, where we talked about ensuring that Network Rail have the resilience. They touched a lot on the issues around climate change and the impact it is having with landslips and floods, so I am absolutely well aware of that. The message from us is that we need not just the train operators to grip this but also Network Rail, because some of the causes have been in infrastructure.

You will be aware that we have signed off on the next control period, which I believe is a generous settlement. I will want to make sure that, in renewals, the south-west is given the proper investment it needs. Quite clearly, weather-related issues seem to impact the south-west almost more greatly than other parts of the country.

Q53            Chris Loder: Finally, the Heart of Wessex line—the line that runs from Bristol to Weymouth through Yeovil—is the worst frequency rail line in the country. I have heard from a lot of colleagues about the issues that they experience in the north-east. I wonder whether or not you have it on your radar to improve the service on that line.

Huw Merriman: We will write back to you on that basis. I recall that the Committee was due to be visiting your constituency to see the issues for themselves—

Q54            Chris Loder: The Chair then decided to go and do something else.

Huw Merriman: I am sure, Mr Loder, that we will write back to you in that regard. I hear you loud and clear, as I always have done. In your membership of this Committee, you have always been a champion for your local railway. We will write back to you specifically on that matter.

Chris Loder: Thank you very much.

Q55            Mr Bradshaw: Turning to our agenda, Minister, Avanti and TransPennine have been failing for a very long time. We know that the operator of last resort is doing a very competent job running the services that it is responsible for, and indeed improving the ones it has taken over. Why do you not just put everybody out of their misery and hand Avanti and TransPennine to the operator of last resort, not least because they have made it quite clear to us, contrary to what we have been told previously, that they would be very happy to take over those services, and have the capacity to do so?

Huw Merriman: I saw the response from Robin, the operator of last resort. The point he rightly made was that he has the bandwidth to deliver what is asked of him. I do not think he made any comment specifically as a pitch to any specific train operator. He was saying that he will do what is asked of him, and they are a good team.

There are also challenges for the operator of last resort. They are grappling with the issues in Southeastern, which is the trainline I have and is with the operator of last resort, and also in Northern. We need to make sure that the operator has the bandwidth to focus on the existing train operators that are being looked after, so that we do not add too much to that portfolio and then cause things to be worse off. There is an opportunity, if one looks at TransPennine Express and Northern, for a different model that combines both. I am not saying this is exactly what is being designed, but many commentators have said that the model could be better put together were those two operators to be amalgamated as one.

The issue with Avanti is quite interesting. My predecessors decided to give a six-month extension to Avanti, to give them time to put a new timetable in place and then to assess it. That would run out on 1 April, but, obviously, you cannot make a decision in March because a decision needs to be made earlier. The reality is that the timetable change only came in on 11 December. You need a period of time to monitor how well it is being delivered and then make a decision. I am not entirely sure that the six months was the best period of time. We find ourselves evaluating how things are working—we are talking last week and this week—in the same month that we may need to make a decision. That will actually weigh quite heavily on my mind. The last thing I want to do is to change operators when the operator is actually turning things around. That would be the wrong thing to do.

I think you know me well enough, Mr Bradshaw, to realise that that will not be a decision on what is good political optics. It will be a decision based on who is best placed to run that service. If the operator is turning matters around, it would suggest it is them. If they are not, I would not hesitate to change it.

Q56            Mr Bradshaw: But do you understand that there is an essential difference in the way that the public, particularly the travelling public affected, feel about their money—it is essentially their money—being poured into the coffers of directors and shareholders of private companies that are failing, often foreign owned, and their money being put into publicly run, publicly owned railways? That is the crucial political difference and choice that you are making.

Huw Merriman: Of course it is. That is also why I do not have any issues in saying that, yes, we look at the mandate which is offered for pay. Ultimately, it is taxpayers’ money that supports funding these matters.

Q57            Mr Bradshaw: I am talking about who is responsible for—

Huw Merriman: It is across the board. It is why Government should absolutely have a stake in how matters are working out, or not working. Passengers should absolutely be concerned, but they should also be reassured by the figures.

As I say, under the contracts, the amount overall that a train operator gets is about 2% of the sum totals; 1.5% of that 2% relates to their performance. If they are not performing, they do not get paid. They just get the 0.5%. First, those margins are low. If you compare them to other investments, a lot of entities would not be in that market at all; 2% is very low. Because so much of it is at risk on performance, it just does not get paid. All the figures are published for the previous year. I think we are up to March 2022. They are paid in arrears. They are all published. It is possible for anyone to look on the website, gov.uk, and see the figures. What you will find is that they are actually much reduced in terms of payments because operations were not as they should have been.

We are transparent to the taxpayer. I believe the amounts are relatively low. They are often exaggerated, but they are there for everyone to see.

Q58            Jack Brereton: I want to ask another question about the operator of last resort. This would probably only change one or two people at the top of that operator. Do you think that would really make any difference, given that it is only likely to change a couple of people at the top of the organisation?

Huw Merriman: You are absolutely right, and that is one of the matters we look at. To take Southeastern as an example, which is probably the most recent transfer to the operator of last resort, the person at the most senior level left because there was an issue. I am pretty sure that every single other employee of Southeastern moved into the operator of last resort and did their same job under that guise, so, yes, you are absolutely right.

Then you have the added management and leadership time that Robin would have to give. There can be costs with regard to consultants as well. That is why I come back to the point I was making to Mr Bradshaw. If it can be demonstrated that a train operator—the team as is—is turning matters around, we want to support that because then we can encourage all train operators to turn matters around. There will be a benefit for them as well as the passenger. We would not want to move operations over if that were occurring. That would set things backwards rather than forwards. If the train operator cannot turn matters around, the operator of last resort is there and would be used. You are absolutely spot on. The actual people involved tend to be the same people under a different guise.

Q59            Jack Brereton: You talked earlier about all the financial risks now being with the Government. We see a huge amount of fare evasion on the railways. What incentives are there now for operators to increase their income streams?

Huw Merriman: Brilliant point. There are two facets to that. First, on fare evasion, you will all be aware that the penalty fares have now gone up to £100. As has been highlighted in the press, I have taken to taking photos of barriers where they are open, and I can see footfall going straight through. At a time when we are struggling to fund the railway, it is absolutely negligent not to ensure that we are checking tickets. Again, that comes back to the train operators having the staff in place to ensure that the barriers are closed and can only be opened either by a member of staff or by someone demonstrating that they have a ticket. I am keen to see us crack down on fare evasion. It should not just be a question of the penalty fare, albeit that it acts as an incentive. It should also be ensuring that gates are properly manned and are closed when they should be.

The other part is, where is the incentive for private operators to put more on? That is where we have to change the model. It comes back to rail reform. We have a situation where all the costs are for the Department for Transport, but the revenue return is for the Treasury. Looking at it on a siloed basis, if train operators want to put on more services because they will get more revenue, which makes sense for Government plc as a whole, we at the Department for Transport are left with a cost, which we do not actually have, to allow them to do that, but we do not necessarily see the revenue return. Because we have a much more collaborative approach across Government, I want to see us change that P&L so that, ultimately, we can work with the Treasury to get a better return to the Treasury because more train services are put on. Sporting events are a good example where we could put on more train services, but at the moment we cannot because of cost. I am determined that we will change that this year.

Q60            Jack Brereton: On Avanti particularly, we have seen very short notice, in many cases, of cancellations. In some cases it is literally 48 hours’ notice of changes to the timetable, so you are not able to buy tickets in advance having to plan your journey but not being able to book a ticket in many cases. Do you think there should be an appropriate amount of time for people to be able to book in advance? Forty-eight hours is insufficient, isn’t it?

Huw Merriman: It is. This is probably a bit sad, but last night in preparation for the Committee I looked at the ability to book for Avanti this Saturday, and I could not book. I looked again this morning and on Trainline it is showing sold out. I understand the issue is that there are engineering works taking place this weekend, but, as a result, you cannot book tickets. The thing is that the trains are still running but they are subject to engineering. That just does not work.

I happen to know that through going into the Department and asking a number of questions. If you are a member of the public looking to book, and you go on to Avanti’s website, you cannot work out what is occurring. It will tell you that there are engineering works and that the line is not closed and is just being re-routed, but it does not tell you why you cannot book. That is where there is still work to be done.

The timetable changes appear to be working well, but there are still problems in communicating to passengers what they can or cannot do, or why it operates in this manner. I believe that the staff are not properly given enough information to be able to then give the passengers. The passengers get frustrated, and the staff have to take that frustration, which is not good for their morale. We need stronger communication and better management to look after the staff.

Q61            Jack Brereton: In some of the short-notice cancellations, we have seen some excessive uses of p-codes, particularly with TransPennine. Do you think it is acceptable to see that level of p-code cancellation?

Huw Merriman: P-coding is the concept where you can cancel up to 10 o’clock the night before. On the one hand it can be said that it does not show up as a cancellation, but it still does. In the performance fee that we actually pay to an operator, we take into account the p-code cancellation as well as the on-the-day cancellation. The regulator also looks at that.

I am not happy with the amount of p-coding that is going on with regards to TransPennine. P-coding should be used in advance, where you can see engineering or certain acts whereby it is understandable as to why you need to take the service down and it is better to give the customer notice a day before rather than on the next day. We are currently seeing more p-coding cancellations on TPE than on-the-day cancellations, and that cannot be right. I am due to meet the Office of Rail and Road to discuss the use of p-coding.

Q62            Jack Brereton: Are you looking to change some of the regulations around p-codes?

Huw Merriman: I am freewheeling now, but I would like to see a bit more conditionality on what you can p-code and what you cannot p-code.

Q63            Jack Brereton: In Network Rail, we have seen very poor performance in many cases. National Audit Office figures show that the number of delays attributed to Network Rail are worse in every single region in the last period than they were in the period before. Are you concerned about the declining performance levels in Network Rail?

Huw Merriman: I am concerned about the resilience of the railway as a whole. That is the train operators and Network Rail. As I say, one of the reasons why I am so keen to see the end of industrial action is that it is quite difficult for us to ascertain whether it is the industrial action that is the absolute cause of this, not just on the days themselves but the impacts they actually have on morale and performance on non-strike days, or where it falls solely to management. That will allow us to get a much better view. Yes, I am concerned about Network Rail’s performance, in the same way that I am concerned about the performance of the train operators.

Q64            Jack Brereton: I want to ask you one final question, which is around some of the franchise commitments. There are a huge number of franchise commitments which have not been delivered. To name but a few in my area, there were plans that Avanti were going to significantly improve Stoke station. East Midlands Railway were going to install ticket offices on stations, which has not happened. They were going to enhance what is currently a very limited Sunday service. Those are just a few in my area.

Huge numbers of these franchise commitments right across the country are not going to be delivered. What is the Department doing to monitor the number of franchise commitments that have not been delivered?

Huw Merriman: Again, this is where we have to be absolutely transparent about what can be done and what cannot be done. This Committee has always called for transparency. It is something I have taken to my heart in this role. It is really important that we demonstrate what we can do, but also what we cannot.

A lot has changed. We are running 90% of the timetable compared to pre-covid days, but we only have 80% of the patronage. The high-yield passenger tickets have not come back. They tend to be around commuter season tickets. We have to look at things within that new model. That means we will have to be open with colleagues, stakeholders and with passengers as to where we cannot fund any longer. We may have had a commitment a few years ago to do it, but everything has changed. We cannot expect the taxpayer to keep paying in billions as a subsidy, when the taxpayer also wants money to go into the NHS, schools and other challenges.

Within that, we will look at the matters you have just referenced, but I will be straight with you. It might turn out that we can no longer fund it because we have to put our money into just keeping the timetable running rather than into some of the investment parts.

Q65            Gavin Newlands: On that specific issue, nearly half—six out of 14—of TransPennine services on Friday in and out of Glasgow were pre-emptively cancelled, and on Tuesday only three out of the 14 services actually arrived as advertised, whether that was down to being cancelled or being excessively late. We talk about rail services in the north, but obviously the DFT is responsible for the vast majority of cross-border rail services as well.

Given the poor performance—I mentioned TPE but obviously Avanti has come up—what discussions have you had with the Scottish Transport Minister and/or Transport Scotland?

Huw Merriman: I have a meeting with the Scottish Transport Minister this week, I believe. I very much expect to be discussing the matters that you have just touched on. “To be held” would be the answer. I am keen to work with colleagues in Scotland because I recognise that when we look at these train operations, they are operations that go into Scotland, and part of the Union connectivity review is all about enhancing the connections within the Union, so I recognise the impact that it has.

Q66            Gavin Newlands: You know how much I love connecting our Union, Minister.

Huw Merriman: I certainly do, Mr Newlands.

Q67            Gavin Newlands: As you are well aware, the Scottish Government have settled disputes. I am told that the Minister, when you meet this week, will be able to give you some tips on how to settle disputes with the trade unions.

On the minimum services Bill, the Scottish Government have been clear in their opposition to it. I am curious on this point. How do you envisage enforcing the minimum services Bill, and making the Scottish Government make ScotRail put on minimum service levels?

Huw Merriman: It is one of the challenges for the consultation. We absolutely look at devolution because, obviously, the Bill will apply in Scotland. As you specify, ScotRail, as the train operator, is controlled ultimately by the Scottish Executive. There is more control from the Scottish Administration of Network Rail than there would be in England. It will of course require some discussions on how that will work. I am keen to engage positively with my counterparts up in Scotland to be able to do just that.

I recognise your point about the settlement in Scotland. The only point I would make there is that I firmly believe that we have to have reform; that is not just to pay for the improved pay offers but to reform workplace practices. I did not necessarily see that in the Scottish settlement model in the same way that we are trying to push for in England. I think that is why settlements of industrial action may have taken longer to deliver in England than they have in Scotland.

Q68            Gavin Newlands: I think there was some reform in the Scottish settlements, but obviously not to the same degree as the DFT is seeking.

Another issue is the capacity for further investment in rail by the Scottish Government. A subject I have brought up many times, and I have spoken to you about it previously, is the absurdly high track access charges that are levied on ScotRail. In the last full year, ScotRail paid £354 million. Northern Rail, which operates a similar service in terms of kilometres and passengers, so similar metrics, paid £153 million. That is over £200 million more levied on ScotRail. That is £200 million that we cannot invest in further modernisation or services. How can that possibly be justified?

Huw Merriman: I am grateful to you for raising that when you and I met last week to discuss it. I have agreed to take it away and do some more homework. I cannot give you an answer as to why that is the case, but if it is disproportionately high, we either need to explain why, which would then be justifiable, or, if we cannot, that leads to another conversation. Bernadette, do you know? I am sorry, I am throwing it at you.

Dame Bernadette Kelly: I am afraid that my knowledge of the technicalities of how track access charges are calculated is not good enough to be able to give an answer. I think the Minister is absolutely right. There ought to be some sort of consistency in the way that this is priced and the methodology used, so we need to look at it.

Q69            Gavin Newlands: It is astonishing; it doesn’t matter who I ask, nobody seems to be able to answer the question.

Dame Bernadette Kelly: I think we will be able to answer the question.

Huw Merriman: We will.

Q70            Gavin Newlands: There will be a methodology somewhere. It is not on the back of a fag packet, I assume.

I am conscious of the time, Chair, so this is my last question. It is a continuation of access charges to some degree, looking at open access operators. For instance, Lumo, which operates an excellent service by and large, and I make no criticism of that, is in competition with LNER, a publicly run operator. At the moment, Lumo pays nothing to access the track and use the network. LNER paid £129 million last year. Over the two years Lumo paid nothing, that is a quarter of a billion. If you look over five years—I appreciate this will change every year—Lumo will pay roughly between £400 million and half a billion pounds less in track access charges than LNER. How can that possibly be justified?

Huw Merriman: It cannot be. It is holding back our ability to do more open access. I would tend to get a recommendation saying, “There is an open access opportunity here,” but the recommendation is not to allow it because, effectively, you end up giving away the railway for indeterminate amounts of time for nothing. Yet at the same time, as I have already said, the taxpayer is the one footing the bill for another train operator.

I want to see more open access, but the open access providers need to pay for the use. Then we have proper competition but a level playing field in terms of the cost part. What you have just described is the case, but it is also the reason why we are not seeing more open access; it distorts the market. I would like to see more open access, but working on the basis that there is equality when it comes to the actual track charge side of things and then let the competition commence. That will form part of the rail reform that I mentioned as the second objective. It is not just to deliver rail reform but to bring in more open access, so that we get more competition there as well.

Q71            Chair: That leads neatly to our next section. We have touched on lots of different aspects of rail reform. Can you give us an update on where we are with Great British Railways? When the Secretary of State was in front of us before Christmas, he was taking some time to think it through. Have you any updates for us?

Huw Merriman: The Secretary of State has been excellent in having a very open mind and willing to hear all ideas, all views, from former Rail Ministers, from the industry, from within the Department and from me. We had those meetings. We had one a couple of days before Christmas where we went through a whole series of options. The Secretary of State is giving the Bradshaw talk on 7 February, and I hope all members of the Select Committee will receive an invite. He will set out exactly what that rail reform is going to look like.

One of his key concerns was to make sure that, as well as actually having rail reform, there is still accountability for him as the Secretary of State, looking at the NHS England lessons from before. I am pleased that he was willing to look at it very much on an open-minded basis. He is brilliant to work for in that regard. You will get more details. You can understand that if I start talking as to what those will be that will be the end of me, and it will not make his talk of much interest either. I will also be looking forward to hearing more.

Q72            Chris Loder: I want to come back to your earlier point about Avanti West Coast and ticketing. I refer you to Bernadette’s previous letter, which she sent us after I asked about that the last time round. It is quite revealing in explaining why those issues have taken place, if that is helpful for you. Do we yet have a date as to when we might see GBR implemented?

Huw Merriman: The date I can give you is 7 February, which is when you will hear more from the Secretary of State as to what rail reform will look like. All I can tell you is that, working on the basis that rail reform will be delivered, I have already set up weekly meetings with the Department for Transport team so that we can work on it as a project. There is a huge amount for us to deliver. In those weekly meetings I also intend to see the transition team brought in that was set up previously, as well as train operators. We want rail reform to look like a great, renewed offer for the private sector as well, so that they are more involved, and also freight. I will be meeting them weekly.

What is really important—you made this point, Mr Loder, or maybe I have previously—is that we do not just design a rail reform system and then hand it over to the people who are responsible but who have had no input on its design. They will be very much involved, and they know that, so that what we are designing is what they feel comfortable running.

Q73            Chris Loder: It is important to know that they have had a lot of involvement for quite a long time so far, haven’t they?

Huw Merriman: Yes, but to be fair what has held this back has been the political process. Politicians change and have different views on what rail reform should be. You will remember the Williams-Shapps review. It was not delivered, and during the time it was not delivered it changed its model as well. What has been refreshing—I think it was picked up in the press—is that you have the Network Rail team and the train operator team working together to give their joined-up view of what they would like to see rail reform look like. That means that they are joined at the hip, rather than one fearing that the other will be in control.

Q74            Chris Loder: How is that process reflecting what the taxpayer and the paying passenger want to see?

Huw Merriman: Ultimately, the passenger does not really care about rail reform or what it is called. They care about getting a better offer. When it comes to ticketing reform and more pay-as-you-go, that needs to be at the heart of rail reform because ultimately that changes the passenger experience.

What I hope rail reform will also do is regalvanise the entire industry. We have had so many challenges. We have had challenges from covid, industrial action and the performance of operators. We need a moment where we can all feel much more optimistic about the future of rail and sell the benefits of rail. The benefits are vast. If you look at it from a decarbonisation perspective and the ability to connect our cities to level up, rail is at the heart of that. We need to start talking it up more. I think that the workforce need to be thanked for what they do, and for us to put an arm around them to make them feel good about working for the railways. I see rail reform encompassing all of that.

Q75            Chris Loder: By the sound of it, 7 February will be the next decision point.

Huw Merriman: Yes.

Q76            Chris Loder: I guess the options being considered are full fat GBR, GBR lite or GBR something else. What are the options at that decision point?

Huw Merriman: You are tempting me to get sacked.

Q77            Chris Loder: Not at all. I don’t want your job.

Huw Merriman: I really would ask you just to bear with us. On 7 February you will get the full vision from the Secretary of State for Transport as to what rail reform looks like. Bernadette, would you care to do any better than that?

Dame Bernadette Kelly: No, I don’t want to be sacked either. I think we should wait.

Q78            Chris Loder: Can we talk about the alignment of GBR, the alignment of Network Rail control period funding and the alignment of the contracts that are still being let to operating groups, or owning groups to operate parts of the railway, some of which are being done without consultation, I should add, and some of them up to five years? I think the fact that they have been done without at least consulting MPs is very poor.

Can you tell us about the alignment of that, and how awarding these contracts by your passenger services department is, in effect, working with whatever new announcement is going to happen? Does it, as it appears to me, make that situation more difficult?

Huw Merriman: All I can say is that you make the case for more integration so that the decision making is more consistent, holistic and joined up. I could not say more than that.

You have also touched on the point, with evidence from Department officials, when you were asking questions, that while legislation is required in order to change a contracting provision from the Secretary of State to an arm’s length body, an awful lot can be done without the legislation. While legislation is needed, a lot of the change is actually a project management change, which, of course, could go on in advance of legislation.

Q79            Chris Loder: Are you suggesting that the changes we might see on 7 February will not require any legislation?

Huw Merriman: No, I am not suggesting that at all. I think we have all worked on the basis that legislation will be required to complete matters. What I think is really important is that we do not just wait for legislation. You can either legislate and say, “Right, now we have all this work to do to deliver the project,” or you can do the project management side and then the legislation comes in so that you have a parallel process. I am much more to that latter model.

Q80            Chris Loder: Mr Newlands made the point a little earlier about the perceived imbalance in track access payments between Lumo and LNER. We should also bear in mind that Lumo operates eight trains a day compared to the 100 and something that LNER runs. We should not forget that.

In terms of open access, going forward, will you or the Government commit to having a proportion of access rights or access paths, particularly on the long-distance network, for open access?

Huw Merriman: That is an interesting concept. We have looked at open access previously. It is obviously the case that it does not necessarily work in all areas. It is quite interesting that on east coast, where the performance has been better than on the west, you have competition. It is a good starting point for the need for there to be more competition.

Q81            Chris Loder: If we were to do an objective comparison between open access operators and non-open access operators, including directly operated railways, we would see the recovery of passenger numbers to be consistently higher on open access operators. They have consistently rebounded and come back, growing back to higher than previous covid levels. Is the Department concerned that actually there is something not quite right with the current model compared to open access, which means open access can thrive and we are still somewhat stifled in the other parts of the industry.

Huw Merriman: I think that is a very fair challenge for us. If we were to say to open access providers, “Right, you have to pay immediately,” it might well be that we stifled new entrants to the market. We may have to take more risk with the open access providers as well. At the moment, there is no incentive from a Treasury perspective to grant more open access operator agreements, because of distortion, as I mentioned in my answer to Mr Newlands.

Q82            Chris Loder: Finally from me, do you have any further operating contracts lined up that you are about to issue or award to owning groups to operate parts of the railway?

Huw Merriman: Not with regard to changes. I mentioned that TransPennine Express and Avanti contracts are due to expire, in May for TransPennine Express and on 1 April for Avanti, but there are no others that I am aware of.

Q83            Chris Loder: Are you currently minded to award the west coast operation again to FirstGroup?

Huw Merriman: I want the ability to monitor the turnaround. I do not want to make a decision when I have not had that data before me. As I mentioned, ideally the six months should probably have been 12 months or six plus six, because it would have given a better opportunity to look at and assess performance, and then make a decision.

Q84            Chris Loder: Are the criteria that you will use to make that decision publicly available for us to see?

Huw Merriman: I will be fully transparent in terms of how it is delivered.

Dame Bernadette Kelly: There is quite an exhaustive process that we go through internally when decisions are being taken by Ministers on the award of new contracts.

Q85            Chris Loder: But they have not always been successful, have they, lets face it? We have Avanti, TPE, and we have had terrible problems with South Western Railway for years.

Dame Bernadette Kelly: The Minister has talked at length about the drivers of those problems. I do not think it is necessarily a function of the process that we go through and the criteria we use when we are assessing contract award decisions. As I say, it is pretty exhaustive. There is an enormous amount of legal, financial, commercial and other assurance that goes into that process, and multiple levels of governance. My own investment committee, which I chair, always looks very closely at these things before Ministers take decisions.

Q86            Chris Loder: Just listen to the question, Bernadette, because we have to crack on. The simple question was about the criteria.

Dame Bernadette Kelly: I will check what we formally publish. I can tell you what the criteria are. They are typically around outcomes for the passenger and value for the taxpayer, within a whole more detailed set of things beneath that. They will differ from contract to contract because it will depend on the service being provided. I can certainly write and tell you more about the criteria and the things we look at, if that would be helpful.

Chris Loder:  I suspect the Committee would like to look at that in more detail.

Chair: Greg has been patiently waiting. Minister, will you put your HS2 hat on?

Huw Merriman: I thought this might come up.

Q87            Greg Smith: Minister, no surprises from this part of the table. It was revealed that the final delivery cost of phase 1 of HS2 is likely, if it is not mitigated in some way, to blow through the ceiling of its original budget. There has been acknowledgment that there will be some pressures to mitigate the cost of this thing. Can you detail what those mitigations will be, and, within that, can you give a cast-iron, absolutely binding guarantee that in those mitigations there will not be a penny cut from any of the measures to try to compensate communities who are in a living hell through the construction of this thing?

Huw Merriman: Mr Smith, thank you. You are right that there are cost challenges in the HS2 project. Inflation is obviously an issue for the country at large, but construction materials inflation is even more challenging. HS2’s budget is based on 2019 figures, when inflation was nowhere near where it is now. I am going to ask Bernadette to talk us through some of the financial parts, and then perhaps I can pick up on the community mitigation points.

Dame Bernadette Kelly: Yes, it is facing financial pressures. These are driven by two things. The first is the cost pressures to which you refer, which we and HS2 Ltd reported to Parliament in the last report that Ministers made on 27 October. It showed that HS2 Ltd has drawn down £1.5 billion of its delegated contingency. It is reporting £1.9 billion of further pressures, which it expects to crystallise.

HS2 Ltd has indicated to the Department that if cost pressures are not mitigated, given what they know to be the risks that still exist on this programme, they expect to exceed the target cost of £40.3 billion for phase 1, but remain within the funding envelope of £44.6 billion. It is important to distinguish those two numbers. The funding envelope, which includes Government contingencies, is £44.6 billion.

We have asked HS2 to produce a mediation plan in response, to deal with those pressures. We have not yet received a full response. We are waiting to hear in detail what mitigations are anticipated. The Minister will, I am sure, pick up on compensation. I would not expect that to be among the sorts of mitigations that the company is looking for at this point in time. In parallel, though, I have to say that the programme is experiencing very significant inflationary pressures, as the Minister says. The budget and the funding envelope were set in 2019 prices, which obviously precede the inflation we are now seeing.

A consequence of the autumn statement, and the Chancellor’s plans set out then, means that on HS2, and right across the Department’s capital programmes, we now need to find ways to absorb inflationary pressures. This is particularly challenging for a programme like HS2, which is in full flight, spending some £600 million a month and obviously operating in the construction sector where there are some even higher levels of inflation present. We are working through with HS2 Ltd both how it will mitigate in the normal way the cost pressures that we see, and work with its supply chain to manage the much greater than expected inflationary pressures.

Ministers, the Secretary of State, the Rail Minister and the rest of the ministerial team will be taking decisions over the next few weeks on how the wider pressures across the capital portfolio are to be managed. It is likely that there will be some quite tough decisions that need to be taken then, including around the phasing and delivery of all our capital programmes, including HS2.

I do not want to give an overly reassuring picture and then rightly be called out at a later date by the Committee for having glossed over what is a difficult time for both HS2 and all of our capital programmes, but I want to distinguish between the budget set and the performance of the company in managing the pressures within that, and the unanticipated tsunami of inflation with which we are also dealing.

Huw Merriman: It is important that this Committee has always audited and evaluated the progress of HS2, and we welcome that continuation. Every six months there is a report to Parliament. It was last reported in October, so the next one is not due until March. Bernadette and I were both keen to be fully transparent with you about the current cost challenges.

With regard to the community element, we had a high watermark of complaints back in February 2020. Great work has been undertaken, despite the fact that we are in a more construction phase now than we were even back then. Matters have got better in terms of the manner in which HS2 addressed those complaints, but there is still progress to be made. I am sure, Mr Smith, that you will agree with at least that point.

We do not want to go back there. We want to make sure that HS2 is a good community neighbour, where it can be, understanding that of course there will be impacts which cannot be completely mitigated because it is such a vast construction project. I am keen to ensure that community relations do not deteriorate.

Q88            Greg Smith: Minister, you lead me to my next question. To be fair, this comes from across two rail infrastructure projects: the construction of HS2 and the construction of East West Rail. I have personally driven one of your predecessors, the former Rail Minister Chris Heaton-Harris, around the roads of my constituency. I have taken a former HS2 Minister, Andrew Stephenson, around, the HS2 residents commissioner and the HS2 construction commissioner, as well as multiple executives of HS2 Ltd, not the chief executive. Equally, I have taken the chief executive of the East West Rail company, Beth West.

Everybody has agreed on the ground that the state of the roads is shocking, and that that has come about in large part from the thousands of HGV movements that small rural roads were not built to take. Complaints in my inbox and complaints locally in Buckinghamshire are going through the roof at the moment because of the state of the roads. People are refusing to drive on some of them because they are so shocking. When is something actually going to change for communities that, for in excess of a decade, will be living with this absolute nightmare, and to put right some of the things that these infrastructure projects break?

Huw Merriman: Mr Smith, I am aware both in conversations with you and from my family, who are your constituents, of the impact. Steeple Claydon is a good example. As you say, it has the HS2 impact and East West Rail impact. I know from my conversations with my family that the issue is not just local roads and the conditions of them, but also closures of them.

Greg Smith: Yes.

Huw Merriman: It is those two elements that comprise the largest volume of complaints to HS2. I know that, with regard to Buckinghamshire, matters got to a level where there was an agreement that HS2 and East West Rail would have a construction road conditions baseline—I think it was called—where they would look to ensure that there were standards for the quality of roads being repaired and maintained. It got to a level where HS2 had independent inspectors look at the condition of roads. In the last year they spent a lot of time with Buckinghamshire County Council ensuring that the roads’ rebuild or repair, which is of course with the county council, matched what needed to be delivered. There was good partnership work between Buckinghamshire County Council and HS2 in that regard.

I believe that they are currently working together to get those improvements delivered, but I will write to you and let you know. This Saturday—I should ask for your permission—I shall be in Buckingham seeing my family, but I will make it my business to have a little drive round through the Steeple Claydon area, to see for myself.

Q89            Greg Smith: I appreciate that. I do not want to press the point further, other than to say that one of the things missing in the way we do infrastructure in this country, whether it is transport or otherwise, is the effect that building it has on the people who have to live around it. It is a missing piece. There are always lots of words about being a good neighbour; the lived experience on the ground is anything but. I think that needs to be accepted.

Huw Merriman: I appreciate that. I am interested in what more we can do for your constituents in that regard. Earlier this week, I went to Hertfordshire to see the construction of the 2.1 mile viaduct that is being built. What is interesting there is the legacy for the community. There is tunnelling going on at that site, with a viaduct going north and tunnelling going south. There is 16 miles of tunnelling with chalk coming out. That chalk is being put on the land underneath the viaduct. It will comprise a 300-acre nature project, but because the chalk is being put on it, it will be much richer for ecology than the current arable has been. It is a really interesting example. That will then be opened up to the public. Currently it is not. By the time HS2 has moved on, it will have left not just the railway line there but something for the community as well. At Old Oak Common, rather than lorry movements taking all the spoil out, there is a conveyor which does it instead. The railway is then used to take the spoil away, ultimately towards other sites.

I think we need to do that more. Like you, I have had constituents where we had embankment works in railways, in remote parts, which meant that only village lanes could access them. Rather than using the railway to bring in the materials, they came in by road. That is no good for the quality of the road and it is no good for our decarbonisation targets either.

I will have that challenge on HS2. They need to make more of their own sites. At the Colne Valley site in Hertfordshire, all the concrete is actually being constructed on site rather than being brought in, and they have built a link road off the M25 to do that. That is a good example, but you have given me poor examples in Buckinghamshire. It is something I am keen to look at.

Greg Smith: I am coming back for another bite at East West Rail later.

Chair: Thank you. I am conscious of time. I want to wrap up and give time for people to get to Prime Minister’s questions. Jack also has an HS2 question.

Q90            Jack Brereton: Thank you, Chair. We have already mentioned quite a bit about Leeds. When are the terms of reference of that study on connecting Leeds going to be published?

Huw Merriman: Shortly. Whenever Ministers used to say that, I got quite frustrated sitting round the table because I wanted to know what “shortly” meant. It is well overdue. It is over a year old now. I am very aware of that, and I am doing everything I can to make sure that it is published. It is having an impact on Leeds, and I am passionate about seeing how we can get HS2 trains to Leeds. That study is a core part of the exercise.

It comes back to Bernadette’s point. The reason why I am saying “shortly” is that part of understanding our entire financial envelope is understanding all our current commitments and what is going to be delivered, and to work that through with Treasury so that we can go ahead. Part of that go ahead is that Leeds route study as well.

Q91            Jack Brereton: What is being developed to put forward an alternative to the Golborne Link?

Huw Merriman: I have committed to come back to the Committee by the end of March. Again, I think it was to my predecessor, at my request, that we must have an update by then. My concern with that date is whether I will be impacted by these other events, which may mean I am somewhat delayed. I will do everything I can because there is a big impact on the HS2 project going all the way towards Scotland in terms of alternatives to the Golborne Link. I am a little concerned about saying that I am definitely going to hit that deadline. I am a bit uncertain as to whether I will be able to deliver by that date.

Dame Bernadette Kelly: It is also fair to say that on alternatives to the Golborne Link the work is at a much earlier stage. There are some quite big, complex questions. I assume that, if the Minister is able to write, it is more likely to be an update on it than a conclusive indication of what decision the Government have taken. I do not think we are in a position to do that.

Huw Merriman: That was a commitment made by one of my predecessors, which, in the circumstances, was fair. I am not sure that I will be able to hit it myself.

Q92            Jack Brereton: With the rail network enhancements pipeline, there was a commitment that it should be published on an annual basis. That was made in 2019, and we have not had any update since. When will that be published?

Huw Merriman: That was the third priority I listed. You are right; it is three years overdue from last October. There was not a statutory requirement to publish it every year, but there was always a commitment that it would be published.

Again, I will be completely open and transparent about what I have picked up. We have a pipeline that has far too many projects in it for the funding envelope that has been awarded to it. That has always been the case. One of the first graphs I saw when I came in was a straight line that showed the funding from Treasury. Above it was a series of lines that went up and down, which were political commitments given to projects that then got added to the list.

One of the things I have found with the Department for Transport is that there is a fantastic team of officials, but some decisions have been made outside the Department on commitments that just cannot be delivered with the funding that we have been awarded. I have to be transparent and open with colleagues that there will be projects that colleagues may have been told would be going ahead but which actually have not been proceeded with and will not go ahead. My job is going to have to be to give the bad news.

Q93            Jack Brereton: You are saying that you are going to have to cut a huge number of projects.

Huw Merriman: We only have a funding envelope for a certain proportion of those projects. Bernadette outlined that we are trying to work out our entire financial envelope. Once we have that for enhancements, the Secretary of State and I, working with the officials, will go through which projects score the best—we will be looking at it from a BCR perspective—and therefore which projects we should proceed with. There will also be some projects in that list that we cannot continue with and, in reality, have not been continued with. No one has been frank and up front with stakeholders as to that situation, but I will be.

Q94            Jack Brereton: Are you confident that that BCR process is an effective scoring mechanism? Often, the bias is very much weighted towards areas where values can be generated much more highlyfor example, in London. In areas like my own in the midlands, and in the north, it is almost impossible to achieve some of those BCR figures. How do you make sure that the projects that get through are the ones that will deliver not just on value for money but on wider levelling up and other aspects that the Government are prioritising?

Huw Merriman: I will very much be looking to use the recommendations from the Transport Select Committee’s transport infrastructure report, and nodding to Government that the new Green Book rules look not just at the biggest bang for the buck but at what that does to regenerate and to decarbonise. Rail scores on both those fronts. We will very much look at that to take us through, otherwise everything does just end up in Mr Smith’s constituency if you look at it from the previous lens. I am keen to ensure that we look at railways for where they can regenerate and where we can get housebuilding and jobs off the back of that as well. That comes back to conversations I have had with colleagues in the Levelling Up Department.

Dame Bernadette Kelly: I always feel obliged to say a word in defence of BCRs and the appraisal methodology we use. It is a bit more sophisticated, and we are constantly seeking to make sure that it properly reflects the wider regional issues that we see. It is not just what you can measure, count and quantify but the wider benefits to society as well. The levelling-up toolkit has been part of our appraisal methodology for some years. We are constantly trying to be more thoughtful, and I think it is more sophisticated than is often suggested.

As the Minister rightly says, when you take decisions, the strategic case and the balance of investments across the country will be at the forefront of Ministers’ minds as well. It is not just a pure numbers game; it never is.

Q95            Jack Brereton: In terms of those enhancements, obviously HS2 will require a lot more work on the existing network now, particularly for the eastern leg and through my own area, in Stoke-on-Trent. There are enhancements that are needed to the classic network to facilitate many of those services. We talked only recently about the fact that the service at the moment is proposed to terminate at Macclesfield. What are you doing to make sure that those enhancements are focused on making the classic network HS2-ready?

Huw Merriman: That is crucial, coming back to what Bernadette was talking about. Obviously, implications of HS2 have a knock-on effect on timing for other parts of the network for enhancements and, indeed, renewals. That is why I believe it makes sense to have the portfolio within one ministerial team. We can then make those decisions and properly integrate. It absolutely factors in, because if there was a decision on HS2 there would have to be a corresponding decision on the enhancement of one of the existing, or indeed new, non-HS2 routes. That is absolutely the case.

Q96            Jack Brereton: I have one final question about restoring your railway. The update I have had about the project in my constituency, Meir station, is that it is progressing extremely well. How do you feel about the whole RYR project? Is progress going well? Are there plans that will be progressed and developed, as was the hope of the Government?

Huw Merriman: It has been great to have an open tender competition and to say, “Right, if you would like your former Beeching line reopened, then put a bid in.” That is correct because it should be as open as possible. The difficulty, and I have seen countless examples of this from the past, is not managing expectations. When you only have £500 million, you cannot deliver anything like the number of bids. Then we end up with very disappointed colleagues and disappointed communities who have put in an awful lot of work, because we require a business case to be put together, which costs money. Are we properly managing expectations?

The other matter I see, and that I can assure the Committee I am really focused on, is cost management. The point I make to contractors and Network Rail is that if you run over cost on a restore your railway line—the Northumberland line, for example—you have just knocked out somebody else’s restore your railway line, and that is not acceptable.

The other thing, post pandemic, is that it will be a struggle for us to maintain our existing timetable. We have to be very careful not to open new railways that cannot fund themselves, because then we are making the situation worse. Okehampton was the first project to open. It has four times the number of passengers that were anticipated. It has been a great success and was built to time and budget. Not all have been as successful in that regard.

Chair: We are moving to our last question, which will be a strong bid for a slice of the infrastructure budget from East West Rail.

Q97            Greg Smith: I want to focus on East West Rail. I put a similar question to the Secretary of State when he was before us before Christmas. The Chancellor made a big commitment to East West Rail in the autumn statement, but no one really knows what that means. Bicester to Bletchley track is being laid, compounds are being taken out and trains will be running on that before we know it. But no one is certain what happens beyond Bletchley. Certainly, no one is certain what that means for the Aylesbury spur, which HS2 is basically building anyway. Can you update us on that?

Huw Merriman: Yes. As you say, the Chancellor committed to East West Rail. It is, if you like, in three phases. The first phase is Oxford to Bletchley, which is in your constituency, Chair. That is due to open in 2025.

The second phase would be to go from Bletchley to Bedford. The third phase would be from Bedford to Cambridge. In terms of the work, we are currently looking at options as to how the line would go into Cambridge. Would it go north of Cambridge or south, which would encompass the big university business site? Those are being looked at right now. The commitment is there to East West Rail. What we have to determine—again it comes back to our financial envelope point—is what can be delivered within cost. That will obviously have a knock-on as to whether it goes all the way to Cambridge. Bernadette?

Dame Bernadette Kelly: That is exactly right. It is a question of timing as well. The autumn statement has obviously restated our departmental spending review totals for the next two years. The Chancellor also set out a clear expectation that spend will be held at cash levels across Government and flat cash beyond that. That creates challenges for a Department like ours, where we have, as the Minister indicated, a very big pipeline of large projects that we want to deliver. What we are working through now, post the autumn statement, with the Secretary of State and colleagues in the Treasury is how we make the financial envelope match the pipeline that we are able to deliver. There will have to be some choices. It is quite challenging.

Q98            Greg Smith: I am going to make a brief point and I do not expect a long answer to this, given the time. Doesn’t that play to the problem about the way we do infrastructure in this country? Over many, many years—in the case of some projects a decade—we essentially have a huge row about the concept of something. Those rows are particularly happening beyond Bletchley, through Bedfordshire and into Cambridgeshire on East West Rail, where it is a new railway cutting rather than bringing an old one back to life, through my constituency and the Chair’s. We only start to design it and think about how we can do it, once the row has been resolved one way or the other. Isn’t that leading to a lot of these problems? We are committing to concepts of things, rather than committing to actual projects that are worked through and detailed?

Dame Bernadette Kelly: I agree with you that there are real challenges for how we bring the politics and delivery of big infrastructure projects together. It is not straightforward. You said you did not want us to give a long answer. I could probably talk for some length about this, but I will not today. I think the general point you make, which is that it is quite challenging in terms of how we deliver these things, is absolutely spot on.

Huw Merriman: I remember the shadow Secretary of State saying that my problem was that, “We all know what he really thinks because it is all written down.In the report on transport infrastructure this Committee was very critical of politicians for pre-announcing projects without properly costing them, and then turning round and blaming the project delivery team for overrunning. HS2 is a good example, where it was completely undercooked in terms of how much it was really going to cost. In my view, that is to be laid firmly at the door of politicians. I can say that, Bernadette.

Dame Bernadette Kelly: You can.

Huw Merriman: And you would probably agree with me.

Dame Bernadette Kelly: I completely agree with you.

Q99            Ruth Cadbury: The rail industry would talk about the difference in the delivery model between HS1 and HS2, but I specifically want to ask about your commitment to the accessibility of trains—getting on and off of them and in and out of stations—and the electrification project. Are those projects sufficiently ambitious to be deliverable in a reasonable time?

Huw Merriman: On the latter, in the Trains fit for the future?” Select Committee report, there was a call for a rolling electrification programme. While we have electrification projects in the system, it does not feel like a rolling programme. I see the benefits of having a rolling programme, because you can learn lessons from previous projects and get the price of delivery right down. We need to get to a system like they have in Germany, where it is about half a million pounds per passenger mile, whereas in this country it has been £2 million for some of the western projects. I would like to see more of those, and I will push for more of them. Again, I come back to the funding envelope and the challenges that I have. It is not easy to do both of those things.

With regard to accessibility, we want to see a railway that everyone can use. We see the struggles. While there have been some good examples of the accessibility funding improvements being put in place, I think the challengeand we have a consultation about to go out on thisis, whether we deliver some projects that are so superb in their delivery that we end up pricing out the ability to do three stations because we have spent so much on one. That is something I feel we need to look at. I feel that there are too many people who miss out on accessibility.

I am hugely supportive of that fund. We have more stations to award this coming year. We also have the accessibility audit of each station, which will tell us a lot more. I know that your Committee is doing work on this. It may be that I come back and speak specifically to that matter when you look at rail.

Chair: Thank you very much. You have been very generous with your time. We have covered a lot of different aspects of your portfolio. We eagerly anticipate 7 February. I am sure that there will be further opportunities for us to question you and the Secretary of State on rail reform. For now, I again thank both of you for your time.