Read Mark Harper’s plan to modernise the rail industry in full

Speaking on Tuesday at One Great George Street in London, Transport Secretary Mark Harper outlined his plans to modernise the rail industry. Read his speech in full below.

“Good evening and thank you to Andy Bagnall and his team at Rail Partners for organising this event and for inviting me to deliver what is my first rail speech since becoming Transport Secretary.

What a fantastic setting this is, surrounded by reminders of Britain’s glorious engineering history and Bradshaw in whose name we meet today (7 February 2023). Whose timetables brought order to the chaos of the Victorian network is as much a part of rail’s story as Stephenson, Brunel and others honoured throughout this building.

I would also like to pay tribute to Adrian Shooter who sadly passed away in December. Over the past 30 years, few have played a bigger role in the growth and modernisation of the railways and I’m sure he’s missed by many a friend and colleague here today.

I realise I’m the second Transport Secretary to give this prestigious address. And I’m pleased to see Patrick in his seat. But me and Lord McLoughlin, Patrick as we all know him, or chief as I used to call him, have a bit more in common. We both hail from working class backgrounds: my dad a labourer, his a coal miner. We both grew up in historic railway towns: Swindon in my case and Stafford in his. And we were both promoted from the whips office to running the Department for Transport. Though admittedly, he was a bit faster than me I spent an interlude on the backbenches.

Now, 6 years may not seem like a long time but, as Andy says, during that period we’ve since left the EU, emerged from a global pandemic, had 2 general elections and my party may have had one or two changes in leadership. Yet the more things have changed outside the railways, the more they seem to have stayed the same inside.

Patrick’s 2016 Bradshaw Address was a passionate call for a more flexible, more accountable and more joined-up railway. That still rings true today, as do the reflections of previous Bradshaw speakers. Lord Hendy’s case for a whole system railway in 2018. Keith Williams, a year later, with his relentless and right focus on passengers and even Rick Haythornthwaite’s warning at the inaugural Bradshaw Address in 2011 of a disillusioned public not trusting the way our railways are run. Those all sound eerily familiar.

So, I’ve spent my first few months in this job listening to the experts, indeed to many people in this room, drawing on my experience in government and many years in business, to understand what’s holding back meaningful change and how we move forward.

Modernisation

There’s clearly a lot of frustration in the industry. There’s a widespread desire to end the sense of drift. By moving on from re-diagnosing the industry’s ills to getting on with fixing them. The government’s policy is clear. The Plan for Rail has already been announced to the House of Commons in May 2021 so delivering that policy, moving from the words to action that is my priority.

Because the railways, quite frankly, aren’t fit for purpose. We’re mired in industrial action, which lets down passengers and freight customers down. And historically unable to deliver major improvements at good value for the taxpayer. Britain is yearning for a modern railway that meets the needs of the moment. One reliable enough to be the 7-day-a-week engine for growth businesses expect. Nimble enough for post pandemic travel, whilst allowing more flexibility for freight and efficient enough when public spending is rightly scrutinised like never before.

The railways need fundamental reform and that is what we will deliver. And what I will try to set out this evening is how we re-energise that process. Freeing reform from the sidings and getting it back onto the mainline.

Context

But first, I must provide some important context. In putting an end to last year’s unwelcome political and economic turbulence this government promised to be straight with the public about the difficult choices ahead. We set out a plan to restore economic stability and that plan is working.

We’ve seen a significant settling of the market, we’ve reassured investors, calmed the markets and strengthened the currency. It’s a strong base from which to deliver the Prime Minister’s 2023 economic priorities: halve inflation, growing the economy, and reducing debt.

It is testament to this industry’s huge economic potential that even amidst a challenging fiscal climate we gave full backing to the £96 billion Integrated Rail Plan.

The largest single investment ever made in our railways will take HS2 from Euston to Manchester. Northern Powerhouse Rail across the Pennines. East West Rail between Oxford and Cambridge. And that has the Chancellor’s full support.

We’re not wasting any time. In December, I saw the huge construction effort underway at the site of Curzon St Station in Birmingham. It will be the first new intercity terminus built since the 19th century. Attracting tens of thousands of jobs and sparking housing and commercial regeneration across the city.

Broken model

Don’t take my word for it go and talk to Andy Street and you’ll get a very passionate case about the transformation that HS2 is bringing to his city.

But we risk wasting that future infrastructure spending if our railway model is stuck in the past and thanks to Keith’s painstaking work, we know what the underlying issues are. A fragmented structure that quickly forgets the customer. Decision making with too little accountability, but with too much centralisation. And a private sector rightly criticised for poor performance but with too few levers to change it. An industry in “no man’s land” as Andrew Haines correctly described it in his Beesley lecture.

And in the end it’s rail’s customers that suffer. Like on the East Coast Mainline, where passengers still await the full benefits of billions of pounds in taxpayer investment and years of infrastructure upgrades. I know this first hand. As a backbench MP, when I was trying to get a Sunday train from my constituency to London, I remember constantly refreshing the First Great Western timetable to find half the trains weren’t running. Like many passengers, I had no choice but to give up and take the car instead.

Andrew, who was then running First Group, probably remembers my rather irate emails from the station platform, interrogating him about why the service was so unreliable. Four months into this job, I now know why. I possibly owe him an overdue apology. It wasn’t entirely his fault. Because Sunday services are essentially dependent on drivers volunteering for overtime. Which means, despite best efforts, we can’t run a reliable 7-day-a-week railway on which customers can depend. It’s why I and the Rail Minister, Huw Merriman, have been clear throughout this period of industrial action that modernising working practices must be part of reform.

Pandemic impact

Finally, the pandemic has made a bad problem worse, a lot worse. Thanks to hybrid working, an economic model dependent on 5-day commuting is out of date. Take season ticket sales, which are at just 28% of pre-COVID levels.

Unsurprisingly, and you don’t need a chartered accountant like me to tell you this, the impact on the industry’s bottom line has been stark. Revenue is around £125-175 million lower each month and costs keep rising year on year.

Any other industry would have collapsed years ago but the railways have only survived because of the taxpayer and the public purse. The source of over 70% of income over the past 2 years at a cost of £1,000 per household. I won’t mince my words: operating the railways is currently financially unsustainable and it isn’t fair to continue asking taxpayers to foot the bill. Most of them don’t regularly use the railways. Including plenty of my constituents in the Forest of Dean.

But they find themselves subsidising an industry that delivers only 1.5% and 2% of all journeys that are taken by the public. That disproportionately serves commuters in the south-east and whose funding comes at the expense of other vital transport upgrades. At a time when sacrifices are being made across the economy we must be aware of the trade-offs when it comes to public spending and remind ourselves, as Patrick rightly said in his address, that the Department for Transport isn’t the “Department for the Railways”.

So, we have a broken model. Unable to adapt to customer needs and financially unsustainable. Left untreated, we will drive passengers away with poor performance, that will lead to fewer services, that will drive more passengers away and so on and so on. Only major reform can break that cycle of decline and Keith’s blueprint is the right place to start. So yes, we will create a more customer focussed and joined up railway. But we want to go further, I want to go further, and actually enhance the role of the private sector. Not just in running services but in maximising competition, innovation, and revenue growth right across the industry. Which the benefits of the private sector has delivered time and again.

Customers

Let me start, however, with customers. To raise revenue, we must instil a customer first culture. That means reliable services, comfortable journeys and accessible stations. But it also means tackling the issue which tops passenger lists of biggest concerns, which is fares and ticketing. With 55 million fares available how can anyone feel confident they’re getting the best value for money? Ticketing should be hassle free, something you barely have to think about. Which is why, today, I can confirm the extension of Pay-As-You-Go ticketing, with 52 stations across the south-east set to be completed this year including on Chiltern, London Northwestern, and C2C services.

Ticket prices should also be fairer but often there is little difference between the cost of a single or a return. Operators are often unable to significantly reduce prices on quieter services. So, after LNER’s successful single leg pricing trial we’ll extend it to other parts of the LNER network from the spring and then carefully consider the results of those before extending more widely. It means a flexible single fare will always be half the cost of the equivalent return – giving passengers more flexibility and better value. This is not about increasing fares, I want passengers to benefit from simpler ticketing that meets their needs.

We’re also going to learn from the aviation sector and better manage capacity as well as raise revenue by trialling demand-based pricing on some LNER services too.

Yet, passengers aren’t the industry’s only customers. Carrying tens of billions of pounds worth of goods we cannot overstate rail freight’s untapped potential for green growth. So I intend to create a duty to ensure the new industry structure realises that potential with a dedicated Strategic Freight Unit tasked with creating better safeguards, more national coordination and, later this year, listening to what was said earlier, setting a long-term freight growth target.

Structure

However, turning towards customers requires us to turn away from the current industry structure. So, we will establish Great British Railways, or GBR. As we prepare for that, we’ll pick up the pace of reform. I am pleased to announce that the winner of the GBR HQ competition will be revealed before Easter. And by the summer, we will respond to the consultation on GBR’s legislative powers.

The industry has long called for a guiding mind to coordinate the network so GBR will be responsible for track and train, as well as revenue and cost. Which means finally treating the railway as the whole system it should be rather than a web of disparate interests that it’s become. Passengers won’t longer face the excuse-making and blame-shifting of years past. Instead, GBR will be wholeheartedly customer-focussed. Serving as the single point of accountability for the performance of the railway and crucially, following ministerial direction, the GBR Transition Team will develop the guiding long-term strategy for rail which we will publish later this year and I hope will provide strategic direction to the sector.

Yet there remains a lot of misinformation about GBR. So let me tackle some of these myths head on.

This is not going to be Network Rail 2.0, nor a return to British Rail. Taking politics out of the railways is the only way to build a truly commercially led industry and, for me, that is non-negotiable. That’s why GBR will be an arm’s length body ensuring a balanced approach to both infrastructure and operations. With both sides getting a seat at the table and both sides delivering an efficient, high performing railway for customers.

The role of ministers is to provide strategic direction and be accountable to Parliament. It is not the role of ministers to pore over operational decisions. For example, I shouldn’t need to approve whether a passenger train ought to be removed from the timetable to allow a freight train to run instead, as I was doing earlier today. That will be left to industry experts in 5 regional GBR divisions working in partnership with regional bodies such as the Greater Manchester and the West Midlands Combined Authorities.

Similarly, we can’t take the other extreme view. Public oversight of our critical infrastructure is needed. Especially to support those passenger services that don’t turn a profit, yet still play an important economic and social role. That’s why we need a pragmatic partnership between state and industry, harnessing the necessary oversight of the state. With the dynamism, innovation and efficiency of the private sector.

This integrated model works, and not just with the railways. That was how we achieved one of the quickest and most successful COVID vaccine rollouts in the world, and its what we need to do in the railways.

Private sector offer

Which brings me to the final area of reform. To enhance the role of the private sector, which I see as central to the future of the railways. Under privatisation and thanks to a resilient and world class supply chain, passenger numbers doubled to 1.75 billion by the eve of the pandemic. With private sector investment in rolling stock reached nearly £7 billion over the past 10 years.

I don’t want to turn my back on that commercial expertise. The National Rail Contracts and current overcentralised approach are temporary, a short-term fix that has helped steer the industry through the pandemic and this will be phased out.

I want the private sector to play its most important role in our railways yet. To reinvigorate the sector, drive innovation and most importantly, attract more customers to the railway. It will do so in partnership with GBR. GBR will help set the right commercial conditions across several key areas.

There will be new Passenger Service Contracts that will balance the right performance incentives with simple, commercially driven targets. But they won’t be a one-size fits all approach. In the past, we know some operators took on more financial risk than they could handle. So, now that risk will sit where it is best managed and that includes with operators, but only where it drives the best outcomes for passengers and taxpayers. We shouldn’t be afraid to let managing directors of train operating companies actually manage and direct their operations. Which is not what they’re able to do at the moment.

We’ll also open up railway data and systems, whilst lowering barriers to entry for the industry. For ticketing, that means a more competitive retail market and I will welcome new players to spur more innovation and give passengers the services they need.

We will expand commercial opportunities around land and property near stations. In Japan, rail companies take full advantage of these investments, generating even more income for the railways and we should look to do the same.

And finally, we will support more open access services where it benefits passengers and taxpayers. We’ve seen this work well with Hull Trains and Grand Central as well as with Lumo on the East Coast Mainline. All offering passengers greater choice and more direct links. Open access operators will play an important role in the industry’s future, especially as we grow new markets and make best use of spare capacity on the network.

Conclusion

Let me finish by saying that despite being the second Transport Secretary to deliver this address I’m probably the first to be given a biblical nickname. Modern Railways Magazine described the rail industry as waiting for “Moses Harper to come back from the mountain with tablets of stone.” Whilst I’m, of course, flattered by that comparison, unlike Moses, I do plan to live long enough to reach the promised land of rail reform. And whilst my words this evening have not been divinely inspired they do have the full support of the Prime Minister and the Chancellor, which, in politics, is the next best thing.

As a whole government, we are pressing ‘go’ on rail reform. Day-to-day work will be ably led by the Rail Minister, Huw Merriman, who’s here tonight and has long championed the need for a reformed railway, including when he was chairman of the Transport Select Committee. He will provide the stability and leadership needed, while also giving the industry freedom to deliver meaningful change and I hope you will all rise to the challenge:

• to put customers first
• to realise the benefits of GBR
• to help enhance the role of the private sector

Because only then can the railway earn the public trust it needs to grow.

As we look ahead to the industry’s 200-year anniversary in 2025, this is our chance to resurrect some national pride in our railways. A chance to harness the political will that is there, the economic imperative and I believe the industry buy-in to build the modern railway Britain deserves.

It’s a chance we cannot waste.”