Transport Committee
Oral evidence: Rail Compensation, HC 1099
Monday 20 March 2017
Ordered by the House of Commons to be published on 20 March 2017.
Members present: Mrs Louise Ellman (Chair); Clive Efford; Karl McCartney; Mark Menzies; Huw Merriman; Martin Vickers.
Questions 1 - 83
Witnesses
I: Pete Moorey, Head of Campaigns, Which?; Anthony Smith, Chief Executive, Transport Focus; Jacqueline Starr, Managing Director of Customer Experience, Rail Delivery Group; and Joanna Whittington, Chief Executive, Office of Rail and Road.
II: Paul Maynard MP, Parliamentary Under-Secretary of State for Transport; and Simon Smith, Director of Passenger Service Design, Department for Transport.
Witnesses: Pete Moorey, Anthony Smith, Jacqueline Starr and Joanna Whittington.
Q1 Chair: Good afternoon and welcome to the Transport Select Committee. Today we are looking at rail compensation. Would you give your name and organisation for our records, please?
Joanna Whittington: Joanna Whittington, chief executive of the Office of Rail and Road.
Pete Moorey: I am Pete Moorey, head of campaigns at Which?.
Jacqueline Starr: Jacqueline Starr, managing director of customer experience at RDG.
Anthony Smith: Anthony Smith, chief executive of Transport Focus.
Q2 Chair: Thank you. We have a compensation system that is very complicated. It gives compensation to passengers in varying circumstances and in varying ways, if at all. Does it have to be as complex as it is?
Anthony Smith: We are moving in the right direction. You are quite right: we have two types of compensation at the moment. Some of the train companies are on the old charter-style compensation, which has a very mixed bag of rules and regulations that passengers find a bit confusing. Most of the train companies are now on Delay Repay, which is quite good. It has the original 30 and 60-minute triggers in many of the franchises, but all delays count and there are no exclusions. It is based on the delay that you suffer, rather than perhaps what somebody else suffered under charter. The principle of Delay Repay is very simple, in theory.
Jacqueline Starr: We are moving towards Delay Repay 15. A number of operators currently offer Delay Repay 30, where compensation is awarded if you are 30 minutes late, but we are moving towards Delay Repay 15. The Government have set out timescales for achieving that by the end of 2020. It is very much dependent on renewal and franchise bids. We are working with the operating companies to implement that within those timescales.
Q3 Chair: What power does the Rail Delivery Group have in this respect? The Rail Delivery Group was set up to try to bring a better focus to the rail sector as a whole. We kept finding, with a whole range of issues, that it was all very complicated in relation to who was responsible for what, let alone who was actually going to do anything about it. Do you think the Rail Delivery Group has done enough in this area?
Jacqueline Starr: The reason I am sitting here is that I represent the customer. I am passionate about customer need, so it is imperative that I continue to work with my colleagues, on either side of me here, to ensure that we understand what customers need and want. We are evolving the compensation scheme in line with customer requirements. It is the role of the Rail Delivery Group to facilitate leadership across all the train operators and implement that.
Q4 Chair: Mr Moorey, you have done a lot of work in this area. Does it seem to you that progress is really being made?
Pete Moorey: It is over one year since we made our super-complaint on this issue. Anthony is right that there has been some progress. Delay Repay 15 is significant, as is the fact that the Consumer Rights Act has now come into force, but we still think there is very inconsistent application of passenger rights on compensation. Delay Repay still does not cover all rail companies. Automatic compensation is still only available from a small minority of train operating companies.
Our own research shows that passengers are still very confused; only 18% of commuters say that they have been informed of their right to compensation as the result of a delay. One in five delayed passengers who claimed compensation say that they found it difficult. Passengers are not very aware of their rights. Our latest research shows that nine in 10 people did not know that they could claim for compensation for delays under 30 minutes. We think there is still an awful lot more that needs to be done. We want to see it happening much quicker, both by the train companies themselves and with regard to the regulator holding their feet to the fire, and by the Government in terms of the reforms that are still needed to the overall rail system.
Q5 Chair: Ms Whittington, it does not seem that you are doing very well at holding the rail operators’ feet to the fire—to use that term. We know about the complexity. We also know that with the original Delay Repay scheme it has taken 10 years for two thirds of journeys to be theoretically applicable to it. The Rail Delivery Group tells us that it is involved in all sorts of consultation, but it does not seem that there is much action. Is it you, the rail regulator, that is the problem on this?
Joanna Whittington: Since we published our report in March last year we have seen progress in a number of areas in relation to compensation. We were keen to make sure that there was an increase in passenger awareness, that the quality of information that passengers received improved and that the claims process itself was made more passenger-friendly.
Our December update identified a number of areas where we had seen improvements; for example, there is now a direct link from the home page to a compensation page on 18 train operating company websites, whereas in March last year there were only two. Similarly, there is now a dedicated online claims process available in 20 train operating companies, whereas previously there were only 14. Since we published the report in December, further companies have come on board. The process of clarifying what we expect, monitoring it and then reporting it publicly drives improvement in behaviour.
There is much more that we need to do. Specifically, we are now carrying out a repeat of the mystery shopping survey that we carried out last year as part of the super-complaint, to look at the quality of information passengers receive at stations and on board trains. Our previous concerns were that the information they received was inaccurate and partial. We have repeated that with a larger sample size, and we will publish the results in the summer. If necessary, we will publish the result at the level of the train operating company so we can see how it is really playing out.
All of that makes a difference only if consumers are actually claiming the compensation to which they are entitled. The compensation gap is the difference between compensation actually paid out and the compensation they are entitled to claim. We have also written to train operating companies to repeat the analysis we carried out last year, which is a difficult calculation to do, to compare whether more passengers are receiving compensation this year than they did last year. We will publish the results of that in the summer as well.
Q6 Chair: It all sounds a very protracted process. There are differing schemes; it is very complicated; more passengers might know now than knew the year before, but they still do not all know how to claim. It is very complex. Do you need more powers to come to a situation where passengers are clear about what their rights are, know how to claim and actually get the compensation they are due, or do you think that is not your role?
Joanna Whittington: The process I have described of clarifying what we expect, monitoring and then transparently reporting it—
Q7 Chair: But when are you going to achieve it? It is all very well expecting things, but do you need more powers to achieve a satisfactory result?
Joanna Whittington: I gave examples where I think improvements have been made. It is still open to the regulator to take enforcement action against the train operating companies using a breach of their licence conditions, if we—
Q8 Chair: Have you ever done that?
Joanna Whittington: We have not in relation to train operating companies, but we obviously have extensively in relation to Network Rail. The important point to realise is that those processes take a lot of time and resource. The model I have described is actually driving improvements today.
Another example would be the work we did on ticket vending machines, a related subject. We identified problems and weaknesses with ticket vending machines. We evidenced that through some research, which showed that indeed some customers were being badly served by them, and we asked the companies to introduce a ticket vending machine price guarantee. We published that research in January or February time.
Initially two operators had arrangements in place. Since then, six further operators have confirmed their intention to introduce that price guarantee on ticket vending machines. It makes a difference, but you are right that we are fighting each little bit through that approach. I hope that the way I have described it and the transparency we now bring will give confidence to passengers over time and improve the service that train operators deliver to them.
Anthony Smith: Chair, it may feel like very little change, but having worked in this area since 2009 it feels like the white heat of rapid progress at the moment, which is good. It is important to remember as well that the ORR has a role in enforcing the complaints handling procedures of the train companies, but the Department for Transport specifies what is in the franchises. That is what brings in the very welcome Delay Repay schemes. That is a very important issue; bringing in Delay Repay on each franchise has a price tag attached, which the Government have to decide whether or not they want to pay. We would like to see it introduced across all the franchises tomorrow. If we wait for each franchise—
Q9 Chair: How long will it be? You mentioned the Delay Repay scheme that has been introduced on the TSGN contract, because of the uproar about what is going on there. How long is it going to take for that to be rolled out generally?
Anthony Smith: If we were to wait for Delay Repay 15—the 15-minute trigger—for all the franchises it would probably take about a decade, if not longer, if you are waiting for each one to come in.
Chair: And we call this progress.
Pete Moorey: It is incredible. On the one hand Anthony is right and progress is being made, but for passengers it all feels far too slow, particularly after a year of problems on the railways and a real winter of discontent on the railways. People expect the train operating companies to move quickly to introduce Delay Repay 15 straightaway, and not wait for the franchise system at all.
Q10 Chair: Is anybody on the panel responsible for seeing that that happens? Do any of you feel you have a responsibility? I will excuse you from this, Mr Moorey.
Pete Moorey: Well, only as a campaigning organisation that is pressing for that to happen.
Q11 Chair: Do any other members of the panel feel they have a responsibility to ensure that the Delay Repay scheme is applicable to passengers throughout the network?
Jacqueline Starr: I feel I have a responsibility to drive what is best for the customer, but that responsibility has a number of knock-on effects, and there will be a commercial impact that needs to be considered as part of the franchise agreement—
Q12 Chair: Let me stop you there. Let’s focus at the moment on Delay Repay, because that is a recent scheme. You are telling us that you have to look at the commercial implications.
Jacqueline Starr: The train operators need to.
Q13 Chair: Does that mean that while the Department might have announced Delay Repay it is not automatically going to happen, because you, on behalf of the rail sector, have to look at commercial implications?
Jacqueline Starr: No, not at all. What I meant by that is that the train operators and the Department will work in terms of understanding the commercials in relation to Delay Repay 15. That is why they have set the timescales in line with renewing franchise agreements.
Q14 Chair: That sounds like more complexity and uncertainty.
Jacqueline Starr: There is not a pot of cash within the industry that can be thrown at compensation payments. It clearly needs to be understood, so that the impact can be managed and monitored.
Q15 Chair: That does not sound very passenger-friendly to me—that there isn’t a lump of cash to be thrown at this. As far as passengers are concerned, they want something done. They are only claiming compensation because something has gone wrong. How is it going to work?
Jacqueline Starr: Of course. The preferred route would be that we can mitigate things so that they do not go wrong in the first place. We do not want passengers to be delayed. We do not want them to have to claim.
Anthony Smith: The counter-argument is that the introduction of Delay Repay 15 will go a tremendous way to help individual train companies rebuild trust with their customers. It is as simple as that. It is a clear no-fault promise: “We delayed you. Here’s your money back.”
Q16 Chair: It does not sound like that when you hear the comments from the Rail Delivery Group.
Anthony Smith: The cost could be partly offset by the increase in trust that people would have. They would be keener to travel. Secondly, dealing with complaints is expensive anyway. The beauty of Delay Repay is that it is automatic. You get it out of the door, it is done and the passenger probably thinks, “Oh great, done.”
Q17 Huw Merriman: We know that Network Rail pays the train operators when there are delays caused by Network Rail. Is all of that amount paid on as a gross figure by the train operators to passengers, or are train operators effectively profiting from the amounts they receive?
Jacqueline Starr: We know that all of it is not paid on to customers; there is a void in terms of the amount received and the amount paid out. It is a scheme regulated by the ORR. They believe that it is fair, so I would ask Joanna to comment on that.
Joanna Whittington: There are two different schemes in place. There is the scheme whereby passenger compensation is paid, which is negotiated between the train operating company and the Government at the point of franchise; and there is a TOC compensation scheme that compensates train operating companies for the long-term impact on their revenue as a result of poor performance today. If there is poor performance today, in the longer term fewer passengers will travel. The scheme is designed as compensation for their revenue loss.
The question sitting behind that is whether the incentives on Network Rail to deliver good performance are strong enough and whether they could be strengthened on a sort of polluter pays principle. Would directly paying compensation to passengers, possibly via the train operating companies, strengthen the incentives on Network Rail? We consulted on that as part of the ongoing periodic review of Network Rail.
Since that debate took place things have moved on a little bit, which is to do with the way Network Rail currently structures itself and the move to devolve its activities more closely to routes, specifically with the aim of bringing Network Rail’s routes closer to individual train operating companies and hence their customers. You can see that in the route scorecards, which we have discussed at this Committee previously. The expectations of train operating companies for their passengers are now very explicitly hard-wired into that route scorecard. It is part of a bigger conversation about the incentives on Network Rail to deliver good performance. We need to take advantage of some of these new changes on particular routes.
Q18 Huw Merriman: My concern is that the train operators—I am sure not deliberately—could be taking advantage of the fact that they end up, bizarrely, making money out of delays caused by Network Rail, because it would probably be very hard to quantify exactly what the long-term costs are. Would it not make more sense to see the amounts not claimed by passengers returned, not to Network Rail, because that incentivises poor performance, but to the Exchequer? After all, we are spending a huge amount of money on rail so perhaps it would be better coming back to the passengers via taxpayers’ receipts than a private company keeping it.
Joanna Whittington: I absolutely think that the key is making sure that passenger awareness around their rights in relation to compensation is increased. That is why we supported the Which? super-complaint and identified a number of recommendations specifically to increase awareness and to improve the claims process so that it is much more passenger-friendly. That is why I welcome things such as the changes to websites that make it easier to claim. We need to see whether that has had enough impact, which is why we are repeating the analysis we carried out last year.
Q19 Huw Merriman: That takes me to my last question. While technology is not my game, I do not understand why it is not possible for me to use my ticket to press an IT system in the train carriage, so that the train knows which one I am on and by the time I get out at the end it knows I have been on that train. It can calculate whether that train has been running over 15 minutes and automatically reimburse me.
As I have just demonstrated, I am not very good with technology and trying to describe it, but we know it exists so why on earth is it not in place? It strikes me as crackers. Until it is, we will always be arguing about whether people are or are not logging on to the internet, or what have you. Surely it has to exist.
Pete Moorey: Automatic compensation has to be the goal. It is starting to come forward but, again, it is coming forward far too slowly for passengers. Joanna used the example earlier of the work that the ORR has done on ticket machines. That is good to a certain extent, but Which?, Transport Focus and others have had to work directly with the Government in the last year to bring forward an action plan on ticketing, because we have been so frustrated at the slow progress on it. Exactly the same kind of things are now needed for compensation, particularly automatic compensation, where the Government are working directly with the industry, the regulator and others to say, “Why can’t you bring forward faster exactly the kind of things that you are talking about, and have a clear plan of when that is going to happen?”
Anthony Smith: It is interesting. We researched this in 2013, and 12% of passengers claimed what was due to them when delayed. We repeated it in 2016 and it was up to 35%. That was just before Which? did its super-complaint, which I think gave a great boost to this. Repeating that will be very interesting.
You are right: the key is more announcements and more proactivity by the train companies. Ultimately, it has to be automatic. Why are people filling in forms in this day and age? Virgin now do it on their advance purchase tickets. The refund is automatic if the train is late. It is great. They know who you are because it is an advance purchase ticket. C2C is doing it on its season tickets. There are other places. It can happen. That is obviously what most passengers would like, although interestingly our research shows that some passengers still like vouchers. They like saving them up in a pile and when they get their new season ticket they hand them in; it is almost like a savings account.
Q20 Clive Efford: Could I follow that up with my own recent experience of Virgin? I bought my tickets in advance for 23 February, which was the day of Storm Doris. We did not travel anywhere and did not get any money back from Virgin. We contacted them and they wrote back to me saying, “Dear Joseph.” I had to follow it up, and they paid back part of the money; they took a £60 admin fee for me claiming my money back. We have it all back now—we bought three tickets for three people—but it is not true that Virgin has a Rolls-Royce service, is it? It is rubbish.
Anthony Smith: I am sorry to hear that. I know people Virgin has paid out for. I am very sorry that it did not work in your case. That is very disappointing.
Q21 Clive Efford: When we went on the website, it did not seem to accept that there was the possibility that a train could be cancelled. It is a bit puzzling really. I had to choose a time by which I was delayed. Because I could not do that it sent me right back to the beginning again. In the end I had to take to Twitter to try to get something done.
Pete Moorey: Your experience is very familiar to a lot of passengers. An awful lot of people increasingly use Twitter and Facebook to raise their concerns about rail delays. Our own research has shown very similarly that if you go on to the website you often cannot find the right information you need about compensation. Some of that is now changing as a result of the super-complaint and the work that the ORR has done, but the industry still has a long way to go to help passengers claim the compensation that they are due.
Q22 Clive Efford: I turn up at the station and the train has not gone anywhere, so I’ve got a bit of time on my hands. Why can’t I do it at the station? Why am I told, “Go away and do it online”? Then I get appalling service.
Pete Moorey: That is a very reasonable question. It should be very simple for people to claim compensation in lots of different ways, whether at the station with a member of staff, online or through a paper-based route. Sadly, your experience is all too common.
Q23 Clive Efford: Do we know how much money train operating companies are pocketing that they have not earned?
Chair: Ms Starr, can you help us with that?
Jacqueline Starr: I cannot comment on that. What I can say is that, through the recent awareness campaign, the number of claims has doubled in recent years. Since the launch pad of that campaign last October, despite performance improving for Virgin specifically, the volume of claims has also increased. That tells us that people have more awareness and know what to do and where to claim.
Q24 Clive Efford: To go back to Mr Merriman’s point, why isn’t the money put in a fund somewhere? The train operating companies have an incentive not to provide a decent service in terms of compensating people.
Jacqueline Starr: As I said earlier, the preferred route would be to mitigate problems before they arise, with the money going into the industry preventing delays and cancellations and giving customers the service they demand and deserve.
Q25 Clive Efford: My constituents are in south-east London. They suffer particularly, because we have no alternatives. Surface rail services are it for us, for commuting into and out of London. We are not served directly by the London underground. That might be used by some people for finishing their journey when they get to central London. Surface rail is absolutely essential for us. People deserve some sort of compensation.
Jacqueline Starr: Yes.
Q26 Clive Efford: But it is made so difficult for them. I repeat, if we know how much the company has taken, and that people have not claimed, shouldn’t that money go into a fund that is used for the wider benefit of the industry rather than just boosting the profits of the train operating companies?
Jacqueline Starr: It is not necessarily boosting the profits of the train operating companies because—
Q27 Clive Efford: What else does it do?
Jacqueline Starr: They are investing that money. The ultimate goal is to have automatic compensation, which is achievable through the delivery of smart technology and the capability that the industry are committed to—
Q28 Chair: When will that be achieved?
Jacqueline Starr: By the end of 2018. At the moment, because a number of customers carry a paper ticket, we do not know who they are or where they travel. We cannot communicate with them. When we move to smart technology that will change, and everything in the system becomes automatic.
Q29 Clive Efford: Are you saying that the money that is left in the hands of the train operating companies is taken out before you pay dividends to the shareholders of the train operating companies? Are you saying that no dividend is paid on the profits made from a service that has not been provided?
Jacqueline Starr: No, that is not what I am saying. There are tight profits within the operating companies. Just 3p in every pound is the margin. I am saying that the moneys they make in profit are invested back in the industry, to deliver things like smart ticketing capability, which will evolve the capability of the industry overall, not just around ticketing or retailing, but customer information, accessibility, compensation payments and automation.
Q30 Clive Efford: It is a perverse way of looking at compensation, is it not? If they were forced to pay compensation to the customers they had failed to take anywhere or those they had caused severe delay, wouldn’t there be more incentive for train operating companies to improve their performance, rather than saying, “It is a win-win because we keep the money and put it back in the railway”?
Jacqueline Starr: I accept that could be the case.
Anthony Smith: The key to all this is smarter ticketing, so that the train companies have a much better idea about who is travelling when, and they can compensate them much more automatically. The take-up for that is going to be absolutely crucial in making this a lot easier, alongside some of the initiatives we have looked at.
The point about high frequency services is an important one, because of course that is where Delay Repay is not quite as useful. Even Delay Repay 15 is probably not quite the right product for your constituents. You might look at the London underground type of frequency and the frequency gap to calculate the compensation. It is a point of detail, but it is quite important for quite a lot of passengers. Smarter ticketing will help to shove things in the right direction, and the sooner the better for everyone.
Jacqueline Starr: I want to bring attention to the action plan that Pete mentioned around fares and ticketing. That was a collaboration between Transport Focus, ourselves, Which?, the ORR and DFT. We collectively agreed on the priority items. It was at the very back end of last year. As a group, if we felt that we should be focusing on different things, we had it within our gift to define that then, but we committed to working together. It was a collaborative effort and we all signed up and agreed to those priorities. We have published that.
Q31 Huw Merriman: Smart ticketing is great in principle, but in practice when I asked to get a replacement for my paper ticket—smart ticketing—I was told at the ticket office that they could not sell it and I had to do it either online or in writing. The moment was lost because I wanted a ticket there and then. Not only do we need smart ticketing but we need to be able to buy it in the easiest form for customers, which for a lot of passengers is at the ticket office. Will the RSG commit to ensuring that train operators sell smart ticketing at stations?
Jacqueline Starr: That has to be part of the process. We cannot defend that. I absolutely agree with you that it has to be part of the procurement process.
Q32 Huw Merriman: I want to come back to the point about whether rail companies are getting excess money from Network Rail compared with the amounts that passengers are claiming. I was talking about tapping into the train carriage. That will obviously cost money. Can I make the suggestion that the fund Mr Efford talked about—the excess—is used on enhancing the technology on trains? If that does not occur, ultimately who is left paying for it? If the answer is no one, it will not be coming on stream.
Chair: Mr Smith, is this something you have been looking at in Transport Focus?
Anthony Smith: Trying to get a greater financial incentive on the train companies to sort out problems is a really good line of approach. However, it is best to try to incentivise them downstream and sort out the problems in the first place, rather than trying to identify a pool of people who might or might not have been delayed. Hopefully, when the Minister appears before you, he will have something to say on the matter of boosting the ability of passengers to get compensation more easily and that there will be more of a financial incentive for the train companies to sort it out. There might be some movement in that direction.
Q33 Huw Merriman: But what if the Minister turns round and says, “It is for the train operators to bring that forward”? We will be back to you again.
Chair: We will be going round in a circle, but we will address that if we get to it.
Q34 Martin Vickers: Can we get some sort of feel for the amounts? Mr Merriman talks about a fund that could be used for smart ticketing or whatever. In 2015-16, total payments to passengers for compensation were £45 million. How much did the rail companies receive? Can you enlighten us on that, Ms Starr?
Jacqueline Starr: I am afraid I do not have those figures to hand. I am more than happy to obtain them and send them on, but I do not have them to hand.
Q35 Martin Vickers: That would be very helpful. It would be interesting to know whether we are talking about £1 million or 50% of that, for example.
Joanna Whittington: When we carried out the work in response to the Which? super-complaint we tried to estimate that number. It is surprisingly difficult. We know how many trains were delayed. We then have to work out how many passengers were on the delayed trains and what their average fare was, to work out the total compensation. Not surprisingly, we identified that, with a few heroic assumptions, the value that people claimed was greater than the numbers that people claimed. You are more likely to claim the higher-value tickets.
The reason why I said all of that in detail is that we are now going to repeat exactly that analysis. Although the methodology is slightly tricky, we will be able to track the difference between last year and this year. That will give a sense of whether the changes that we have been pushing, for better information and better passenger-centric claims processes, are actually getting through in advance of automatic Delay Repay, which is likely to be a number of years off.
Q36 Martin Vickers: Have either the regulator or the train companies done any surveys to estimate what proportion of passengers actually bother to claim compensation?
Joanna Whittington: Yes. The Transport Focus research that we jointly sponsored this year asked exactly that.
Anthony Smith: In 2016, 35% of passengers who were entitled to compensation claimed. Taking your year as an illustrative example and as a very fag packet calculation, it must be about £100 million—roughly.
Joanna Whittington: We also estimated in our Which? super-complaint that about 48% of it was claimed. As I said earlier, you are more likely to claim if it is a high-value ticket. They are two different measures of the compensation gap that we need to focus on.
Q37 Martin Vickers: What about compensation for poor service? A couple of weeks ago I travelled from King’s Cross to Doncaster standing like a sardine on a train that was going to Edinburgh. Because there were delays, there was no catering for passengers travelling from London to Edinburgh. Would they be able to claim any form of compensation?
Pete Moorey: This is where the Consumer Rights Act starts to come into play. Since October last year the Consumer Rights Act applies to the rail sector, which we are delighted about. As part of that, a rail journey has to be provided with what is called “reasonable care and skill.” That takes us into a whole range of areas that go beyond delays and cancellations. The critical point at the moment, given that we are in relatively recent times of looking at it, is how it will be applied. An awful lot will be dependent on case law. We will start to see these kinds of issues coming in from passengers, who will go to their rail company and say, “I don’t think the rail journey was delivered with reasonable care and skill,” and we will have to see how the train operating companies respond to that.
We have raised some concerns, which I imagine we might come on to, around the way train companies apply the new rules with regard to what are called consequential losses. If you are delayed and as a result you face a further loss—for example, if your train is delayed and you get fined by your nursery because you are late picking up your child, or you miss a flight or whatever—at present we think the train companies are not going far enough to meet their obligations under the Consumer Rights Act. There is a whole range of other areas that could now also apply with regard to those kinds of key services, as part of a rail journey.
Jacqueline Starr: The Rail Delivery Group responded to Which? on that matter. We do not accept that we are breaking the law with regard to the Consumer Rights Act. Many train operators already go over and above in terms of compensation payments to customers.
I can give you an example. A customer’s car was damaged in a car park with no CCTV, and £3,000 was paid out. Another example is where a child’s buggy was taken on to the line and it was returned with additional gifts for the child, and compensation for any stress that was caused. Train operators already go over and above, and they deal on a case-by-case basis. I am not saying that happens all the time. Of course, there are examples where it does not happen. That is not acceptable and we want to address it.
Anthony Smith: We have been handling complaints where passengers get stuck with their train companies—so-called appeal complaints—for years, and in many cases we have been able to negotiate good deals for passengers way above what the strict terms and conditions say in the conditions of travel, as they are now called. However, what is very significant about the Consumer Rights Act and its implementation is that the attempt to exclude certain types of claim is now much harder. You have a right to ask for compensation for any aspect of the service; either what was promised or what was advertised. That will make train companies much more careful about the delivery of the service day to day, and give consumers a bit more faith that their complaints will be pushed through.
Q38 Chair: Mr Moorey, I want to go back to the super-complaint and the proposals you made. You said that all compensation and consumer rights responsibilities should be enforced through the licence conditions. Do you think that is the only way to do it? How long will it take to deliver?
Pete Moorey: Today’s session has shown the issue that we believe is at the heart of this, which is that it is a very confusing landscape. As you have asked on a number of occasions, who is responsible for dealing with a lot of the problems that passengers face? Is it the regulator? Is it the rail companies through the conditions of travel? Is it the Government themselves?
Some elements of the compensation system come through the franchises. Some come through the conditions of travel. Some come through the licences. We think that needs to change. We think that it is not clear what the ORR’s role is in terms of protecting the interests of consumers and their ability to take effective enforcement action. That is one of the critical things that we think still needs to change. There is an opportunity for the Government to do that now. It is an area where we would like to see more pressure on the Minister in the next session around how we can get reforms to the rail system so that it is really clear. In any other regulated sector you would be looking to the regulator, be it the financial regulator, Ofgem or Ofcom, to take enforcement action against their relevant companies when they are in breach of their licence conditions. That simply does not seem to be clear enough in the rail sector.
Jacqueline Starr: The Rail Delivery Group is very willing to work with Government to drive reform. We have been very outspoken about that in recent months. We are wholly supportive of driving reform to reduce complexity across the industry.
Q39 Chair: Have the reforms and changes that have taken place actually worked? Have they made things better? Is that something the RDG has looked at?
Jacqueline Starr: It is starting to. An example of where we are driving reform are the fares pilots that have been agreed as part of the fares retailing action plan. Yes, we would like it to happen quicker. It is taking some time to work through some of the intricacies with the Department, but there is progress and it is an evolution from where we have been in recent years.
Anthony Smith: I think there has been progress. The introduction of Delay Repay is in itself evidence of progress, and moving down to Delay Repay 15 is the next step. Smart ticketing and a more direct link between passengers and the train companies will all help, but you need a big stick behind that sometimes to make things happen.
Q40 Chair: Ms Whittington, are you the big stick, or should you be?
Joanna Whittington: It is true that we could expand the conditions in the licences that passenger train operators hold to cover compensation, but I do not think it would make good regulatory sense to repeat what is already in the franchise and to have two different mechanisms with two different enforcement processes covering the same topic. The licence is evolved to sit around what is contained within the franchise. You can put more in the licence but it does not make sense to do that while it is also covered by the franchise.
Where there is more scope for benefiting passengers is around the monitoring of what is in franchises and what is in licences. I do not think passengers give two hoots as to whether or not it is in a franchise or a licence condition. What they want us to be able to do is to report on their experience, and to use transparency to drive improvements in passenger train operator behaviour. We mentioned in the Which? super-complaint response the importance of getting information from the Department for Transport around the franchise commitments, in particular the reasonable endeavours obligations that train operating companies are under, so that we can report on it.
Q41 Chair: Is that information readily available? We have now gone back to an issue that we looked at in a slightly different context—enforcement of the franchise conditions. Is it one that might be there but not enforced?
Joanna Whittington: We understand that the DFT has written to the train operating companies to require that information to be produced. They wrote a response to our super-complaint response saying that they intended to do that. What we now want is to bring all that information together, perhaps in our annual publication “Measuring up,” so that we can give a really complete sense of what the passenger experience is like in relation to compensation and how it is changing over time.
Q42 Chair: Do you think that train operators are actively trying to limit their liability for consequential losses through section 34 of the National Rail conditions of travel?
Jacqueline Starr: I go back to my earlier point. There are many examples of train operators going over and above what they are legally required to do.
Q43 Chair: But what about this particular aspect? Talking about that might encourage people to think they have fewer rights than they actually have.
Jacqueline Starr: We accept that there is an opportunity to be clearer and provide better clarity for the customers, but we dispute the fact that we are in breach of the CRA.
Q44 Chair: But do you think it could give an impression that you are, and it would discourage people?
Jacqueline Starr: I accept that there is more we can do to be clearer to customers, around the language and the communications that we provide.
Chair: It sounds to me as if you know something is wrong but you are not quite ready to say it.
Anthony Smith: The wording is still way too restrictive. It is in old language: “You can use the railway if we let you, and we’ll catch you out if you’ve done anything wrong, or even if we think you have.” The language is just wrong. It is not in plain English. It does not reflect what happens in practice, which is bizarre. Ms Starr is right; a lot of good-will gestures do go on, so why not reflect that, rather than having very legalistic, tangly language that just puts people off?
Pete Moorey: As you are aware, we have written to all the train companies with regard to this. We see it as a breach of consumer protection law. I recognise that RDG dispute that, and we are continuing to have a conversation with them about it.
The other concern we have is that not all train companies have yet directly responded to the letters from Which?. A majority of them deferred responsibility to the RDG for the terms and conditions on their website. The RDG have themselves written back to us. I do not think that shows a sector or individual companies that are really willing to take responsibility for that. We would like to hear directly from the train companies about whether they agree with our point that it is a breach of consumer protection law. We would like to see them immediately making changes to make it much clearer, on their website in particular, what rights passengers have to claim compensation for consequential losses.
Q45 Chair: Ms Whittington, what are you doing to make sure the train companies have that information on their website?
Joanna Whittington: We welcome the Consumer Rights Act. In fact, we have seen progress in terms of passenger interest straightaway. As a result of the consumer rights coming into effect, passengers can now receive compensation in the form in which they originally paid.
Industry arrangements do not sit very easily with some of the drafting in the Consumer Rights Act. There are areas where it provides better protection, so you do not have to demonstrate fault in order to get compensation, but there are areas where it does not provide as good a protection, so you do not get compensation for delays of less than 15 minutes, or 30 minutes in some cases. We think there is much more work that needs to be done with the industry to talk through exactly how the language can be better reflected to protect the interests of consumers. I agree with what was said earlier about how eventually case law in this area and the new rights given to passengers will start feeding through and influencing the behaviour of train operating companies.
Q46 Chair: But what can you do as the regulator to enforce it?
Joanna Whittington: We have done three things. We report on it. In our December update, we carried out an audit of all the websites to make sure that those payment arrangements were in place. We can take part in conversations and facilitate those conversations. Previously under similar legislation, Which? made us aware of concerns about duplicate season tickets. We spoke to the train operating companies and they changed the national conditions of travel as a result. We can choose to do those sorts of things. Then, at the very end of the process, if we are not seeing the progress we would like, we can take action as an enforcer, as Which? is, under the Consumer Rights Act. It is early days. We have seen some progress but there is clearly a lot more that needs to be done in this area, which is why we continue to engage with the industry.
Jacqueline Starr: In addition to the audit the ORR is conducting as part of the fares and ticketing forum action plan, the Rail Delivery Group will conduct an audit. We wanted to do that because we believe that the train operators should be in a place where they are self-regulating and responding directly to the needs and demands of the customer. I repeat that the Rail Delivery Group and the operators are very keen and willing to continue to work with Transport Focus and Which? to understand what customer needs are, and continually to drive improvements and change.
Chair: I thank all of you for answering our questions. We will conclude this part of the session and move to the next panel of witnesses. Thank you very much.
Examination of witnesses
Witnesses: Paul Maynard MP and Simon Smith.
Q47 Chair: Good afternoon and welcome to the Transport Select Committee. Would you give your name and position for the record, please?
Paul Maynard: Paul Maynard, MP for Blackpool North and Cleveleys.
Simon Smith: Simon Smith, director of passenger service design, Department for Transport.
Q48 Chair: Minister, the original Delay Repay scheme was first introduced in 2007. It has taken 10 years to get it rolled out on approximately two thirds of the network. Do you have any hope that it will be rolled out for all franchises in this Parliament, and why has it taken so long?
Paul Maynard: Our commitment is to have Delay Repay 15 rolled out for all franchises under our control by the end of this Parliament. We will utilise two mechanisms to achieve that: either through the usual refranchising process, as and when a particular franchise comes up for renewal, or through in-franchise change where we will seek to negotiate with the franchise holder to move to Delay Repay 15 in their passenger charter.
Q49 Chair: When you say you want to roll it out to services where franchises are under your control, what do you mean? Do you mean that in some franchises you do not have any control?
Paul Maynard: There are a small number of franchises where we do not get to make that decision, one of which will be the new Wales and Borders franchise, because that has been procured by the Welsh Government. The other, as you will well know, is Merseyrail, which comes under Merseytravel’s purview. They decide their compensation arrangements. Those are two small exceptions, but by and large when it is under our control that is what we will seek to do.
Q50 Chair: We heard in the previous session that, when consideration has been given to implementing rail compensation schemes, the train operating companies look at commercial considerations. It was not entirely clear to me exactly what that meant. What does that mean to you, and have you heard it before?
Paul Maynard: I’m sorry. What does what mean?
Q51 Chair: That the train operating companies were looking at commercial considerations about whether or how they implement compensation schemes.
Paul Maynard: Obviously I did not hear the exchange so I cannot judge it in that context.
Chair: It was from the Rail Delivery Group.
Paul Maynard: I would speculate that what they are referring to is perhaps public perception of the level of delays on the network. The view I would take of how the industry should view compensation is that they should ensure that all passengers have the opportunity to claim, and that it is as straightforward and simple as possible, and as easy to understand as possible. That is why we added to the franchise agreements, starting two or three years ago, the concept of all reasonable endeavours: are the TOCs doing everything that they could and should be doing to make passengers aware of their rights under Delay Repay? It might involve ensuring that passengers can find the relevant forms on the website, that the forms are available in stations and that, if the train is arriving at a terminus, the on-board manager makes an announcement if passengers are eligible for Delay Repay in some way. That is what I and our commercial managers will be looking for in our regular meetings with the TOCs in terms of all reasonable endeavours.
Q52 Karl McCartney: Minister, thank you for coming to see us today. Do you have any examples that companies that do not offer compensation could model their compensation process on, and are there any that you would prefer they did not model their process on?
Paul Maynard: It is a matter of continual improvement. Obviously I pay close attention, both as a Member of Parliament and indeed as rail Minister, to what appears in my postbag from people who are in some way dissatisfied with their experiences on the trains. Delay Repay is possibly the most generous scheme within the European Union, in the sense that it does not seek to apportion blame in any way. It is eligible whether the train operating company is at fault or not. There may be bad weather, for example, or it may be something that Network Rail has done.
Q53 Karl McCartney: But in this distinct area are you aware of any companies that you think are doing a good job in helping their passengers claim when there is a delay? Two of us sitting here perhaps think that Virgin East Coast does. I asked you for some specifics, but you have not been willing to give us any. Are there any companies that are not doing well enough?
Paul Maynard: All train operating companies should be seeking to learn from each other what represents good practice. As part of our fares and ticketing action plan, the Office of Rail and Road is reviewing all the train operating companies’ websites to check that access to Delay Repay forms is available clearly, so that people can make online claims if need be or in hard copy if they want. I am not aware of any train operating company that is in breach of its franchise agreement in terms of meeting its passenger charter commitment on compensation. If I was aware of any such train operating company, it would be a very serious matter indeed.
Simon Smith: We monitor that each month. We get data each month from Transport Focus from passengers who have made complaints to them when they have not had a satisfactory experience with a train company. We get both statistics and a report from Transport Focus each month. We see if there are particular issues with the complaints handling processes with any particular operator. If that ever occurs, we raise it with the operator or ORR as appropriate, depending on what the issue is.
Q54 Karl McCartney: Let me try a different tack, as my final question. Have either of you personally or in a professional capacity recently tried to claim compensation from any rail company?
Paul Maynard: No, I have not.
Simon Smith: Not within the last six months, no.
Q55 Clive Efford: Why do we have a plethora of compensation schemes? Why don’t we have one clear set of criteria for how train operating companies should compensate passengers?
Paul Maynard: We do in so far as Delay Repay 15 is the ultimate goal we are now working towards across all train operating companies. As is always the case, each franchise has its own distinct features that need to be reflected in what passengers have access to. We have made a commitment to have no-fault compensation for delays of 15 minutes or more. The challenge now is to make sure that that is rolled out across the national network and that we make the process of application as straightforward and simple as possible without excluding anyone from the process.
Q56 Clive Efford: What weight is given to the compensation scheme when you are assessing a bid?
Paul Maynard: As we stated in our response to the ORR’s response to the super-complaint, we give quality points when bidders make reasonable and innovative recommendations for how they can improve the compensation process. That will be part of the customer service sub-plan in any franchise bid. It is not necessarily the case that you get specific points for just that element, but the bid assessor will give points overall in that part of the sub-plan and that will be part of what they take a view on.
Q57 Clive Efford: Do we assess it as being a successful set of criteria for measuring that part of the bid when we only have a third of passengers claiming compensation?
Paul Maynard: I presume you are referring to the Transport Focus figure of 35%.
Clive Efford: Yes.
Paul Maynard: I looked at that in two ways when it came out. First, 35% is far too low. I would hope and expect to see that figure increase over time. Whether it will, it is hard to say, because by introducing DR 15 we are changing the threshold slightly. The monetary value of the compensation may not be enough to justify in some people’s mind the effort they might have to go through to claim; I do not know. At the same time, I recognise that compared with 12% in the previous Transport Focus survey it is a step forward. To me, that justified the decision to introduce “all reasonable endeavours” in the franchise agreements. Since Transport Focus’s research has come out, there has been a lot more focus in the minds of passengers on issues of compensation, not least because of what has been occurring on GTR, and the announcement and decisions around that. I hope we will see it going up the next time Transport Focus does its research.
The ORR is working closely with all the train operating companies. We have asked every TOC to do a report for us on what they are doing to improve access to compensation. Thirty-five per cent is progress but by no means satisfactory progress. I know there is more that can be done. Do I think we will ever get to 100%? No. I do not think you do in any regulated industry for that matter, but I am sure we can do better. There are still simple things that can be done, such as ensuring that people know that they have to retain their paper ticket, which may have been lost in a barrier for whatever reason. There are always things that can be done practically by the train operating companies to make it as smooth a process as possible.
Q58 Clive Efford: But if I am a train operating company and I make it difficult for passengers to claim for a delayed or cancelled train, so I get to pocket the money I am not paying them in compensation, where is the incentive for me to improve the compensation system?
Paul Maynard: Given the scenario you have just painted, the incentive would be that, in my view, they would be in breach of their franchise agreement to utilise all reasonable endeavours to make sure that their passengers were able to access the compensation system. If they were in breach of their franchise agreement, it would be quite a serious state of affairs.
Q59 Clive Efford: But it is a difficult and complex process. I was on this Select Committee in a previous life, when I had dark hair, and we are still talking about the same issues today in relation to compensating passengers. There does not seem to be urgency among the train operating companies to do it.
Paul Maynard: I do not deny that it is a complex matter. The fact that we have seen an increase of £10 million in compensation issued in each of the past two years, up to £45 million, shows that we are making progress but that there is still much more that can be done. The role of the rail Minister is to make sure that train operating companies understand the importance that both I and the Department attach to this issue. We expect to see continuous improvement. The monitoring that is going on by both ourselves and the ORR, and indeed the scrutiny that Which? is putting the industry under, should make sure that the train operating companies continue to make progress.
Q60 Clive Efford: I have one last question. If train operating companies were required to put an estimated sum of money into an account that could be held by the Department for Transport for the betterment of the infrastructure, or to pay out compensation should some historical claims come in, do you think there would be more incentive for train operating companies? The money would have to be paid into and held in a separate account rather than just washing around their bottom line.
Paul Maynard: It is possible. I understand that something similar is occurring on the Northern and TPE franchise at the moment. I am not sure exactly what you have just portrayed. My concern might be that I want an incentive on the train operating company to act to minimise the number of delays in the first place, and if the money is forfeit either to the passenger or to the fund you have described, there will be less incentive on the train operating company, because the money has been forfeit in one form or another anyway. I want to try to use what incentives we have available—this is just one in a suite of a number of performance measurements—to encourage train operating companies to reduce delays in the first place.
Simon Smith: Could I expand on that a little? You asked earlier about what we were achieving through bid evaluation and whether we genuinely were incentivising quality through that. We can look at it in terms of what we have managed to procure from franchises over and above the base requirements in the specification for recent competitions.
For several franchises, we have commitments we achieved through that process to pay automatic compensation to passengers in some circumstances. That will be rolled out this year on Northern, TPE and East Anglia to passengers with a season ticket who have registered their details, and also advance ticket holders. On Northern and TPE, the operators have committed that, where the amount actually paid out in compensation is less than the amounts that they assumed in their bids, the extra amount will be paid into the customer and communities improvement fund that we set up in those franchises, so it will be used for the benefit of passengers on those franchises. That is an example of some of the benefits we have been able to achieve through the competitive bid process.
Paul Maynard: I have thought of a better reason why there is a flaw in your proposal. I want to see the train operating company focus on ensuring that passengers know their rights and are able to claim compensation. If that money is forfeit anyway, there is less incentive on the train operating company to ensure that passengers are aware of what they can claim for through Delay Repay. I want the focus to be on ensuring that the passenger is placed at the heart of the decision whether to claim compensation or not. The TOCs have to make sure that passengers know they have a right to submit a claim.
Q61 Huw Merriman: Minister, as you know, I have Southern Rail in my constituency, and the 15-minute Delay Repay compensation scheme is certainly welcome there. The Southeastern franchise is up for renewal, and the tender document is out there. Will there be the same 15-minute Delay Repay compensation scheme for the new Southeastern franchise?
Paul Maynard: We are certainly looking for bidders to outline how they will introduce Delay Repay 15 in the passenger charter that will cover Southeastern.
Q62 Huw Merriman: To take it one stage forward, because you talked about concern over disincentivisation for rail operators to bring forward compensation, if on Southeastern, for example, we had automatic compensation by way of everybody having an Oyster-type card that they tap on as soon as they get into the carriage, it would mean that everybody was automatically compensated. I understand the issue is a question of cost, but, as we heard from the previous panel, it seems to be the case that Network Rail is paying more than the train operators are actually paying out in terms of compensation.
To come back to the ring-fencing argument, could we expect the rail operators to use that excess cash to put automatic ticketing in place, which means that you do not have to worry about disincentivisation of claiming because it will all be automatic? If that sounds like a viable runner, could I put it forward as a suggestion for Southeastern?
Paul Maynard: There is virtually a Westminster Hall debate response that I can give you, because there are quite a few questions in there.
Huw Merriman: Yes, I’m sorry. I beg your pardon.
Paul Maynard: The point I would make is that, first of all, I would stress the difference between automatic compensation and automated compensation. Automated compensation is important, in that train operating companies can lower their unit costs for processing claims by doing more online, and so on and so forth. That is fine.
Automatic compensation is essentially where you compensate someone without them needing to make a claim. To do that, you need to be absolutely certain that either the person has registered via some system that that is the usual train they travel on in the morning on a commuter route or they can find some other way of demonstrating that they were present on the train in question for which they are claiming compensation. It is important that there is no scope for fraudulent claims.
Q63 Huw Merriman: But, Minister, in a way that is what I am appealing for. The technology is there. The reality is that you can use your phone to pay and to tap in. If you have paid with your phone, which therefore knows which account you have, you would tap in as soon as you enter the carriage of the train—not at the train station—and then tap out at the end. If that technology tells you that it has been more than 15 minutes, it is an automatic delay, back to the account that you purchased from. This is not new technology; it exists. My point is, can’t we get the rail companies to pay for it right now?
Paul Maynard: That is why we will look at what bidders recommend in their proposals as part of the Southeastern franchise competition for how they move down that path.
Q64 Huw Merriman: That takes me back to my concern. We left this with the last panel. I certainly do not feel confident that they will bring forward those ideas. I question whether it is in their interest to do so, whereas from an overall Department perspective surely you can make it happen, because those are the terms of the franchise: “You want the franchise, that’s what you deliver.”
Paul Maynard: Which is why we are going to be inviting them to make recommendations to us as to how they seek to go about it. I am not trying to be elliptical. We are at a very early stage in the bid process, and I want to see what they bring forward.
May I deal with your points about schedule 8? I think you were referring to schedule 8. There is a lot of talk in both the trade press and the media more widely that in some way schedule 8 is money that should be going to the passenger but is not going to them. I entirely understand why that perception has developed. We are asking the ORR to look at how they can improve schedule 8 to make it more transparent, in particular to make sure that where there are TOC on TOC delays, they are clear in the figures, and that it promotes the sort of collaborative working we want to see of bringing track and train together to reduce delays overall.
There are a number of reasons why schedule 8 cannot be compared with Delay Repay, and why it is slightly misleading to think that there is a pot of schedule 8 money that somehow is not going where it should. First and foremost, schedule 8 is partly about attributing blame for delay between TOCs, Network Rail or unattributed delay, which Delay Repay most specifically is not. In addition, schedule 8 is calculated by the minute as opposed to Delay Repay, which is only triggered at 15 minutes. More than that, the amounts under schedule 8 are calculated according to benchmarks drawn up in CP5 for how Network Rail should be performing. They are calculated on a service group basis, not by individual train. Therefore, the number of passengers who are delayed on any particular train is not reflected in schedule 8 payments.
It is quite hard to have that correlation when you look into the granular detail. What I have taken from the discussions more widely is that schedule 8 itself is not a well understood process in the first place. I am hoping to use the periodic review to make schedule 8 a much clearer process and much more related to what passengers experience during their travels.
Q65 Huw Merriman: But we know that Network Rail pay out X amount of money to, say, Southern or Southeastern, and we also know that they pay an amount in compensation over a year. We therefore know that there is some differential. I understand that you have to factor in long-term costs of people not using the railway, but, leaving that aside, we know there is an amount of money, which none of the previous panel disagreed with in terms of keeping it in their own account, that could be used as a ring fence to invest in the technology we are talking about, which brings automated compensation or other benefits.
Paul Maynard: Equally, there may be examples where it is the TOCs who are paying Network Rail, because Network Rail’s performance has been over and above what was expected; or the TOCs have been causing delays themselves. I would find it hard to justify that either fares should go up to compensate Network Rail in some way or some other transfer of funds should go from the passenger side of the industry to the infrastructure side of the industry. The fact that that theoretical possibility exists within schedule 8, and I think occurs on two of the franchises, is why I am very nervous about moving further down the path that you outline. I understand where you want to get to, and I would share that objective. I am not sure that that structure would deliver that outcome.
Q66 Chair: What would introducing Delay Repay 15 cost the Government?
Paul Maynard: We have an amount set aside in the budgets. It was roughly £61 million, but at the moment the amount of claims is not such that we are in danger of reaching that amount of money.
Q67 Chair: Would you want to go slow on applying it across the network because of financial implications for the Department?
Paul Maynard: No, I do not think so. What I am keen to do is make sure that we continue to decrease the compensation gap. ORR is looking carefully now at coming up with a robust calculation of what the compensation gap amounts to. You mentioned the 35% figure earlier. Even in itself that is misleading, because it is 35% of all passengers rather than the 42% who are eligible for Delay Repay. Even in that one simple figure there is a degree of confusion over what we are measuring. We need greater clarity over what we are measuring, but it is a clear Government commitment to roll it out. I want to see as many passengers benefiting from it as possible but at the same time maintain a laser-like focus on reducing the overall level of delays.
Q68 Martin Vickers: Following on from those questions, Minister, you mentioned that it is going to cost taxpayers £61 million to roll out the scheme. Why should taxpayers be paying rather than the rail companies?
Paul Maynard: That is the amount we have set aside to cover the elements of it for which we are liable. If you take a franchise such as GTR, which is an investment and management contract, we are funding the compensation we are making available out of the revenue that is coming from the franchise anyway. That is the only one that currently has Delay Repay 15 in operation on it.
Q69 Martin Vickers: I understand that the GTR franchise is unusual, shall we say, but I presume that £61 million is for the network as a whole. In actual fact, we the taxpayers, rather than the rail companies, are compensating passengers.
Paul Maynard: That is not necessarily assuming that we utilise all of that £61 million. That is just what we set aside.
Q70 Martin Vickers: Even if it was £6 million, the principle is still the same.
Paul Maynard: Because it was taken as a policy decision by successive Governments that this would be an appropriate use of the money.
Martin Vickers: It is a rather bizarre policy decision.
Q71 Chair: Mr Smith, could you clarify some of the points you made about actions taken to enforce franchise agreements in relation to compensation claims. How often have you taken action against operators for not promoting compensation schemes to passengers?
Simon Smith: We have not needed to take action against operators for not promoting promotion schemes, because when we have looked into it we found that operators were complying with their obligations under the franchise agreement. It is important to stress that the obligation to exercise all reasonable endeavours to notify passengers and make them aware of their rights to compensation is an obligation that has been only in more recent franchise agreements. We have been rolling it out over the last two or three years. We are now at the point where it is in all but three franchises, but that has taken place over time.
Where there is the obligation to exercise all reasonable endeavours, we have been doing a number of things to ensure that franchises are doing it. We have a contracting commercial management team that is responsible for managing the franchise agreement and monitoring the obligations under the franchise agreement. Clearly they cannot be on every delayed train, so we cannot check in every single instance, but we have raised the issue of the passenger charter through the regular meetings we have with the operators. Our contracting commercial managers inspect the TOCs when they visit to see that they are complying with their obligations.
We have now asked for reports from each of the train operating companies to set out their understanding of the level of awareness among their passengers of their rights to compensation and what they are going to do in order to increase that awareness. Finally, we co-funded research by Transport Focus, which provided us with information on a company-by-company basis on what customer awareness was. We have taken a number of actions to monitor and incentivise compliance with the franchise agreement.
Q72 Chair: Minister, who should be responsible for the monitoring and enforcement of compensation? Should it be done solely by the ORR through licence conditions, or should it be a franchise issue? One of the challenges we find, and I am sure you do, is that no one person or organisation seems to be really responsible for what happens.
Paul Maynard: It is a finely balanced argument as to who should take responsibility. One thing I have given a lot of thought to in my time in the role is what should be the consumer-facing role of the ORR. Back in 2012, they gained some degree of licensing influence over passenger information during disruption, and the disabled passenger rules that each TOC has in operation. I am acutely conscious that the ORR, particularly in terms of passenger information during disruption, has a significant element of compensation in it, so they should make sure that passengers are aware of what compensation they are entitled to.
At the same time, we also have to bear in mind that, as a Minister, I have to take responsibility and be politically accountable for the operation of the rail network. What I would not want to do is sit here and be asked about the compensation system on a particular train operating company and find myself saying, “Well, that is a matter for the Office of Rail and Road and not for me.” It is ultimately a matter of responsibility for me, and for that matter the Secretary of State, to say whether the arrangements of any particular train operating company are consistent with our franchise agreement—a franchise agreement that the Secretary of State himself has signed.
Q73 Chair: Does that mean that you would like the responsibility to lie with the Minister?
Paul Maynard: Yes.
Q74 Chair: Thank you. You have taken the welcome decision to extend all the provisions of the Consumer Rights Act to rail. How do you think that will benefit rail passengers?
Paul Maynard: I am interested to see what happens. When I considered the matter carefully, I recognised that there was some degree of debate over whether any exclusions should be applied to the rail sector, and concluded that I could not justify that. I welcome the fact that passengers will now have an extra level of recourse. I would caution against any assumption that this is in some way potentially a form of compensation that is superior to Delay Repay. It may not be, but it ensures that passengers have some other legal recourse if they feel that some aspect of their trip that was important to them when they made the decision to purchase the ticket did not live up to expectations. We will wait to see how that plays out.
I hope train operating companies use their discretion and common sense in judging any claim that comes in under the Consumer Rights Act. There may be certain elements that end up being tested in court. It will obviously be a matter for the courts to determine, through the gradual accumulation of case law, how they will apply in the rail sector. To me, the key thing is that it will be a matter of demonstrating whether the train operating company used reasonable skill and care in delivering the service and, if it did not, the extent to which failure of a particular element of the service impacted the overall passenger journey. It will be for the courts, if necessary, to decide exactly how much compensation is due as a consequence.
Q75 Chair: Section 34 of the National Rail conditions of travel purports to limit the liability of operators from consequential losses from delays. Do you think that is a contravention of the Act and misleads passengers?
Paul Maynard: I understand that Which? and the Rail Delivery Group are not necessarily in complete and harmonious agreement on that point.
Chair: That is correct.
Paul Maynard: I will try desperately to get this right. My understanding is that the law on consequential losses has not changed as a result of the application of the Consumer Rights Act. Clearly, whenever any train operating company on its website or in any other printed material sets out what consumers are entitled to, I would reasonably expect them to include the rights that are due under the Consumer Rights Act in addition to the other elements of consumer compensation to which they may also be entitled. As I understand it, we are discussing with the RDG and others in the industry how we can ensure that, in particular, the National Rail conditions of travel are sufficiently clear that any passenger reading them understands what their rights are.
Q76 Chair: I would like to go back to Southern Rail.
Paul Maynard: Oh good.
Chair: I don’t think we can have a meeting on the rail network without Southern Rail being in it.
Paul Maynard: Indeed not.
Chair: To clarify where things might be, could you tell us how many Southern passengers have received one month’s compensation on their annual season ticket since your announcement last December?
Paul Maynard: The latest figures I have available are 36,979 claims totalling £8.85 million, for those who have a season ticket. That scheme continues to operate until 30 April, which will be the last day for new applications.
Q77 Chair: How much has that cost the Government?
Paul Maynard: The £8.85 million has been taken from the revenue that has been accrued from the franchise.
Q78 Huw Merriman: Do you think there is a chance that you will run that scheme for at least part of this year? It is obviously impossible to tell how the year is going to pan out. Do you think there is a likelihood that you could do it again if performance continues in the manner it was operating at last year?
Paul Maynard: At the moment, given the industrial action that is making it impossible to run an adequate service, I am not aware of any proposals to continue it beyond 30 April. Obviously we cannot see into the future.
Q79 Huw Merriman: The service is nowhere near as bad as it was last year, in my opinion; others may differ. How much do you think this is likely to cost the Government overall, bearing in mind the type of franchise arrangement that is in place? It is more of a management contract, so the risk and reward remain with the Government. Is there an estimated figure?
Paul Maynard: There is no estimated figure. It is rather a counterfactual of what might have occurred if several other things had not occurred in the first place. That would be a level of uncertainty that I do not think would pass the civil service test of giving advice to Ministers.
Q80 Huw Merriman: In terms of what has happened so far, is there a figure as to exactly how much the dispute has cost in loss of revenue and the amounts so far, or indeed for 2016’s figure?
Paul Maynard: I have a figure in my head that I am 95% certain of, but can I write to the Committee after I confirm the amount?
Huw Merriman: I thought you were just about to give it to us as it was a high probability.
Paul Maynard: I think I know what it is, but it is best not to make up a figure that you then have to withdraw. I am 95% certain.
Q81 Chair: Earlier this year, a passenger claimed back half the cost of his season ticket under section 75 of the Consumer Credit Act. Does this new avenue for compensation expose the Government to more payments and more losses?
Paul Maynard: I need to be a little careful about what I say with regard to that particular example. My understanding is that American Express paid the money out without confirming with GTR whether GTR accepted liability or not. I understand that they have now had a discussion with the Rail Delivery Group at industry level to ensure that, in any subsequent claims under that part of the Act, they check whether the train operating company accepts liability in the first place. I think you needed to ask the RDG in the previous evidence session where they had got to in those discussions, but that is where I think it has been left at the moment.
Q82 Chair: On the topic of accepting liability or otherwise, can you tell us when the force majeure claims will be resolved?
Paul Maynard: As you may recall, I commented briefly last Thursday. We have now completed six periods-worth of force majeure claims. The last time I appeared before you I had not fully appreciated that it was a legal process by GTR. It has the ability to test the Department’s findings. We continue to work with GTR to resolve the interpretation of the figures, but I very much hope it can be completed very soon. I assure the Committee that it is a regular, if not daily, topic in my private office as I ask for progress and updates. I am as keen as the Committee to resolve the matter, as I find it difficult to see how we can properly move forward with the franchise without its being resolved.
Q83 Huw Merriman: Would it be right to say that it is in the hands of your lawyers, and indeed GTR’s lawyers, or is it still at a commercial level?
Paul Maynard: As I said, we are in discussion with GTR over how we process the figures.
Chair: Thank you very much, Minister, and Mr Smith. This session is concluded.