From: Gibson, Mike
Sent: 19 January 2011 10:59
To: ELPHICKE, Charlie
Subject:
Sent: 19 January 2011 10:59
To: ELPHICKE, Charlie
Subject:
Charlie Elphicke MP
House of Commons
London
SW1A 0AA
18 January 2011
Dear Mr. Elphicke
Rail services in East Kent
Thank you for your letter of 15 December addressed to Charles Horton. Charles has asked me to reply on his behalf. I’m sorry for the delay in getting back to you, but the letter has just been passed to me by our customer services centre and if you could ask you team to address any future correspondence to me at the address below, I’ll make ensure you receive a prompt reply.
Before dealing with your questions, please pass on my personal apologies to all local residents regarding the poor rail service over December. This was due to adverse weather conditions, namely snow and ice on the conductor rail (clearing this is a Network Rail responsibility) which meant our trains could not draw power. This, and the related communication problems were explained by Charles in detail to Kent MPs at a meeting chaired by Helen Grant MP in Portcullis House on 8 December and a summary can be found in the attached letter to Helen dated 15 December and feel free to share this with your constituents.
I apologise in advance for the length of this letter, but in view of your constituents’ concern and the number of enquiries you have received want to give as full a reply bas possible.
Fare increase
I’m afraid that the high speed service does have to be paid for our franchise agreement provides for a premium fare.
I appreciate you will be under some pressure on ail fares and I would like to go into some detail to the background to this and recent increases.
Historically, the former British Rail (BR) charged on a “per mile” basis moving to demand-led pricing in the 1970’s. BR was able to set fares as it wished, regional managers had a considerable degree of latitude when setting local fares and on privatisation we and other operators inherited a patchwork of fares that did not necessarily reflect passenger volumes from individual stations, or local market conditions.
Unlike BR, today’s train operating companies (TOCs) are not free to set fares as they wish. This is because what are known as regulated fares, season tickets and “Anytime” tickets on routes where there is no competition to rail and where passengers have no alternative than to go by train, (mainly commuter travel into London) are controlled by Government and the level of increase in regulated fares is dictated by the policies set by this and the previous administration. For a commuter TOC like Southeastern, these comprise the majority of our fares and the bulk of our income. The only fares that can be set by TOCs are unregulated fares, for example, cheap day returns.
By way of background, when the rail network was privatised in 1995/1996, to guard against excessive profiteering, the Government of the day pegged increases on regulated fares at RPI – 1% which meant in real terms, the cost of rail travel went down year on year. In addition, in order to incentivise train operating companies to improve performance and reliability, under the Customer’s Charter initiatives in vogue at that time, Government set a policy whereby season ticket holders would receive a discount of 5% on renewal if the operator did not meet agreed train performance targets. This was hard-wired into franchise agreements as the Passengers Charter. As you may know, previous holders of the Southeastern franchise did not meet these targets and passengers received the discount on a regular basis. Taken together, the combination of below inflation fare increases and a 5% season ticket discount meant that some of our fares were lower in 2006 than in 1996.
The shortfall in revenue was matched by an increase in subsidy and the concomitant impact on public finances resulted in the last Government’s policy of moving the balance of funding the rail network from the taxpayer to the passenger as detailed in its White Paper Delivering a Sustainable Railway which can be found on the Department for Transport’s website www.dft.gov.uk
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This shaped the cost model of subsequent rail franchises and the shift to RPI+ fare increases. For Southeastern, the increase was RPI + 3% as opposed to the RPI + 1% set by the Department for Transport (DfT) for other rail franchises granted during this period. The explanation given by the last Government for imposing RPI + 3% for the Southeastern franchise was because from 2000 onwards, the railways in Southeast England had benefited from disproportionately more investment in infrastructure and new rolling stock than other parts of the UK, which needed to be paid for.
As part of this RPI + 3% formula the DfT allowed us to vary regulated fare increases from individual stations by either plus or minus 5% in accordance with local market conditions. Under the terms of our franchise agreement, 2010/2011 was to have been the last year that Government determined the RPI + 3% increase. For the remainder of our franchise, fare increases in 2012, 2013, and 2014, would be RPI + 1%. However, as a result of the Chancellor’s announcement in the Comprehensive Spending Review last autumn, the RPI + 3% formula will now apply for the remainder of our franchise. And you may recall that the Secretary of State in his statement to Parliament on 25th November last year said ‘more investment is clearly needed. That is why I argued for additional rail investment in the Spending Review, and it is also why I have taken the difficult decision to allow regulated fares to rise by 3 per cent above inflation for the 3 years from 2012 – to help pay for these investments’.
Southeastern’s franchise agreement assumed that RPI+3 would be in place for the first five years of the franchise. The Secretary of State’s recent announcement means that it will stay in place until the end of the franchise in 2014. The additional revenue from this decision will therefore be recovered by DfT from us through existing mechanisms in our franchise agreement. Therefore RPI+3 in Kent will go directly to pay for rail investments.
The RPI figure used when setting rail fares is that for July in the previous year and as the RPI figure for July this year was 4.8%, the average Southeastern regulated fare will increase by 7.8%.in January 2011. This is an average increase, so some fares will rise by more and others by less.
Fare increases are predicated on the level of Government subsidy, and the amount given to Southeastern started at £139.9M, in year one of our franchise in 2006 and will decline to £24.7M in year seven. In year eight, (2014) we will be expected to pay a premium of £9.3M to the DfT to operate the franchise. This is in accordance with Government policy outlined above of moving the balance of paying for rail services and infrastructure investment, such as Crossrail, the Thameslink programme and new rolling stock, from the taxpayer to the passenger.
While this may be little consolation to passengers facing fare increases, they are also taxpayers and a useful summary of the issues surrounding rail fares and government subsidy can be found in recent article in the Economist at http://www.economist.com/node/16847108?story_id=16847108&fsrc=rss
Some passengers have asked why the fare increase from their station is higher than that from others.
As explained above, the combination of local, arbitrarily set fares in the BR era and RPI – 1% increases and performance-related season ticket discounts between post-privatisation between 1995 – 2006 meant that many of our fares were historically low and did not reflect market conditions.
To correct this and bring fares in line with those elsewhere in the Southeast our franchise agreement does allow us to levy an increase of RPI + 3% +5%.
In addition, Southeastern is in receipt of revenue support from the Government. This, requires us to minimise the fiscal burden on the Treasury by ensuring, so far as is possible, that the balance of the costs of paying for rail services moves away from Government and towards the passenger.
Although we are a private sector company I hope this demonstrates that the fare increases on the Southeastern network over the past four or five years have been in accordance with Government’ policy rather than excessive profit making on our part.
Obviously, no one likes paying more, particularly in the current economic climate, and it’s up to us to demonstrate that passengers are at least receiving value for money and I hope that since we took over the franchise in 2006, you have noticed some improvements. Despite negative media coverage, the high speed service is proving popular and is acting as a motor for regeneration in east Kent. We are running more services than ever before and stations, notably Dover Priory are looking better and brighter and have seen significant investment.
Service specification
A number of your other questions current main line services to London Bridge and Cannon Street, the case for high speed services from Deal and the increase in journey times to Charing Cross (related to the increase in station stops) are directly linked to our service specification.
To explain, the timetable we introduced in December 2009, including stopping patterns on HS1 and main line routes was based on the service specification we inherited as a contractual commitment from the DfT when we were awarded the franchise in 2006. While we are able to amend the timings of individual trains, the level of service from stations is governed by the service specification which can only be amended by the Secretary of State.
While, the service specification benefiited the majority of people who use our services and has resulted in additional passenegr numbers, inevityably, there were those to wjhom hange was unwelcome and want these changes reversed, or additional services introduced. This has been discussed with stakeholders at some length and realistically, based on advice from the last Government, there will be no major change in our service specification until our franchise re-let.
To this effect thse changes as you will be aware, Kent County Council is currently consulting with stakeholders on its Rail Action Plan for Kent which will form the basis of Kent’s response to the DfT consultation on the next Southeastern franchise and is aimed at ensuring that all local aspirations are factored into the service specification. Southeastern supports this initiative in order that the next service specification against which our owning group expects to bid, reflects the needs of all local rail users.
The process is being led by County Councillor Nick Chard, Kent's cabinet member for Transport and the Environment. More details can be found on Kent County Council's website and Nick Chard has invited stakeholders with an interest in local rail services to contact him direct at nick.chard@kent.gov.uk Dover District Council and the Trains4Deal group in your constituency are already involved in this process and you may wish to advise other constituents with an interest in local services to make their views known.
Capacity
You refer to severe overcrowding on the standard (main line) service during peak periods. We regularly monitor passenger numbers through a combination of manual counts and loading data software fitted to trains. The latter by assuming an average weight of 75kg per passenger effectively weighs the train and tells us when and where the trains are busiest. If your constituents could let me know the times of trains which are particularly busy, we can arrange for additional counts to be carried out, and if possible, more units can be added.
Connections at Ashford
In so far as is possible we will amend the times of individual trains to ensure convenient connections at interchanges such as Ashford. If your constituents could let us know which services to or from Deal and Dover Priory do not have a convenient connection, please let me know and I’ll see what can be done in the next timetable change. However, I have to emphasise that what might seem a relatively simple task of amending a train time by a few minutes may have knock-on implications on other services so you will appreciate that all such requests have to be considered on a network, rather than on a purely local basis.
Communications problems
You referred to our website not updating cancelled or delayed services during the bad weather in December. This is explained in more detail in the attached letter to Helen Grant MP, but in brief, information provision during this period was impeded by failings in the download from the national train services database which is managed by Network Rail. This database holds all the information about the services which are planned to operate on any individual day. Due to an IT problem in Network Rail's mainframe computer system we received our download to our station based information systems extremely late which meant that all the work done overnight to amend service information was overwritten by data which by then was out of date. There was a process failing within these systems that meant that the data sent from Network Rail’s timetable database contained duplicated information with both the normal and contingency timetables showing on certain parts of our network. This problem was not unique to Southeastern and other operators had similar difficulties. We have sought assurances from Network Rail that lessons have been learned from these problems and have received confirmation that the causes are understood and that remedial actions have been taken to avoid any recurrence.
I hope this goes someway towards answering your constituents’ enquiries but if you need further information, or would like a meeting with Charles please let me know.
Best wishes
Mike Gibson
Public Affairs Manager
Southeastern
Friars Bridge Court
41-45 Blackfriars Road
London
SE1 8PG
