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Theresa Villiers: The Conservative Approach to the Railways

It is an honour to appear alongside such a respected advocate of Conservative values. And it is an honour for me to be invited to speak to a think tank of Politeia's stature about Conservative ideas for reforming the railways.

The railways were the symbol of progress when this country led the world into the industrial era.  And now as we seek ways to revitalise our economy and do so in a way consistent with addressing the climate crisis, the renewed importance of our railway network should not be under-estimated.

Today's railway carries more people than in the years before Dr Beeching cut swathes through the network. Privatisation has helped turn an era of managed decline into one of expansion. Yet it is self evident to anyone who regularly travels on the railways that the experience can be a grim one, particularly for those travelling everyday in cattle class conditions in massively overcrowded trains.

As the months tick by in Brown's Britain, with the snow and rain falling on commuters stranded on  overcrowded platforms in stations which even a Government sponsored report acknowledge can too often be grim and forbidding places, I am more convinced than ever that we cannot go on like this; that we desperately need change.

We need change to ensure the rail industry works more cohesively together with a stronger and more unified focus on addressing those things that matter most to passengers, like overcrowding. We need change to ensure that the industry is accountable to passengers and responsive to their concerns. And we need change to loosen the vice like grip that excessive Whitehall micromanagement exerts on our railways.

We have a clear plan to deliver the change we need on Britain's railway network.

And delivering value for money will be at the heart of that plan ... as way to relieve the pressure off both the farepayer and the taxpayer at a time of acute crisis in the public finances.

Let's just look at some of the bad news over the last couple of months.

The unions are becoming more and more ready to disrupt services with the London Midland Sunday working debacle spreading to affect my constituents on First Capital Connect's Great Northern Line commuter services and then escalating to major disruption on the Thameslink throughout much of this winter.

The extra capacity promised by Labour seems perpetually delayed. 

For example, Tom Harris promised that between 900 and 1300 new Thameslink carriages would be ordered by the Summer of this year. The DfT have yet to get as far as even announcing the preferred bidder.

Not just one, or even two, but three successive Secretaries of State for Transport have promised 1300 extra carriages to relieve chronic overcrowding. The methods used to calculate that figure defied some of the best brains in the nation. My colleague, Stephen Hammond, finally uncovered the truth via a series of parliamentary questions.

The real figure is actually over 300 short of the total those Secretaries of State promised. And at the last count, several hundred haven't yet even been ordered and only a fraction are actually in service on the network.

Over five years after the decision was made to switch Eurostar services to St Pancras, all of the international platforms at Waterloo remain mothballed, despite repeated assurance that at least one of them would be in use by December last year.

At this rate, we seem to have as much chance of boarding a train at Platform 9 3/4 at Kings Cross as we do at the long promised Waterloo Platform 20.

So there are many reasons why we need change to ensure the whole rail industry works more efficiently in serving the interests of customers. That, of course, includes passengers but it also includes freight customers.  Making rail an attractive option for those who need to move goods around the country is pivotal if we are to ease congestion on our roads and keep our promises on tackling climate change. In a modern, low carbon economy, holding a fair balance between the interests of passengers and freight users should not be under-estimated.

One of the first steps towards making the rail industry more accountable to customers and more strongly focused on value for money would be to unify the way the industry is regulated and strengthen the powers of the regulator. 

Supervision of Network Rail and the performance of the train operators would be brought within a single body, with a duty to safeguard the interest of customers.

That will give the regulator the authority it lacked when serious problems occurred on First Great Western route from 2006 to 2008:  the authority to bang heads together and get problems addressed promptly regardless of whether the operators or Network Rail were responsible for the initial fault.

So we would turn the Office of the Rail Regulator into a passenger champion by giving it responsibility for monitoring key aspects of franchise performance and enforcing them on behalf of the DfT.

The regulator also has an important part to play in our plans to reform Network Rail. We need to remedy a key mistake made by Gordon Brown when Network Rail was created.

In his efforts to keep Network Rail's debts off the nation's balance sheet, he created a structure that left Network Rail accountable to no-one. Not to shareholders, or to train operators, or to passengers.

Take the fiasco that occurred two years ago, when Network Rail let its Christmas engineering works over-run on the West Coast Main Line. Huge disruption was caused to both passengers and freight customers. But no heads rolled. And the company still paid out six-figure bonuses.

Yes, Network Rail was fined by the ORR. But when the taxpayer picks up the bill for NR's debts, this is little more than a meaningless gesture.

But Network Rail's remuneration committee still allowed substantial bonuses this year despite a formal letter warning that performance had been mixed. All the regulator could do was to say that he was "surprised and disappointed". Under a Conservative Government, if the regulator is disappointed, the senior management will feel it. We will give the regulator the power to inflict real financial pain on Network Rail via the confiscation of reduction of bonuses in cases of serious under-performance.

At present, Network Rail's senior management is theoretically accountable to "members" who are supposed to function like the shareholders of a public limited company. In reality they do no such thing. The senior management can get away with scooping the bonus pool because an amorphous grouping of 100 members, the appointment of which can be vetoed by the very management team they are supposed to scrutinise, simply aren't strong enough to stop them.

So a further measure a Conservative Government would adopt to give Network Rail much stronger incentives to respond to their customers is reform of the company's governance.

We will streamline and shrink the membership to turn it into a supervisory board. We will ensure that members will be appointed independently of Network Rail's management.

And we will make sure we have people on it who will provide a strong voice for passengers and for train and freight operators, in setting the overall direction of the company and holding its management to account.

And, in addition, we will inject more contestability into areas of Network Rail's remit. At present, the company has an almost complete monopoly over publicly funded rail improvements.

A recurrent concern about their performance is the slow pace and often high cost of delivering much needed improvements.

Yes, we all know issues have arisen in relation to the big tickey projects such as the West Coast Main Line upgrade. But huge frustration has also arisen in relation to Network Rail's approach to smaller scale projects such as station improvements, longer platforms and car park expansion, improvements that can be real lifeline to hard-pressed commuters.

So we would open up funding for these smaller scale rail improvements so they are contestable by a range of industry players including the train operators.

We believe that getting the train operators involved, as the companies closest to passengers and with the most direct interest in delivering what they want, should help drive forward more cost effective delivery of important measures needed to relieve overcrowding such as longer platforms and station improvements.

We also believe this aspect of our reforms will provide a valuable benchmark against which to measure the performance and value for money achieved by Network Rail.

And to help us draw in much needed private sector investment in this kind of upgrade a Conservative Government would adopt a simple idea, a measure that's had widespread support for years, that's proven its effectiveness and in the limited instances where it has already been deployed, in short, it's a no-brainer.

I am, of course, referring to longer franchises.

The Government recently tendered the South Central franchise for just 5 years and 10 months.

This period is a blink of an eye compared to the longevity of rail assets.

We need franchises that are long enough to allow operators, their banks and shareholders to commit investment in the knowledge that they are allowed a reasonable payback period.

We believe 15 to 20 year franchises should become the norm.

Clearly safeguards will need to be put in place to protect the passenger interest during the duration of such a long franchise including break clauses.

This model has already shown it can work, with Chiltern Rail's 20 year franchise enabling them to invest in signalling improvements, a new station and increased parking for cars and bicycles, with more due to be announced this week.

I and my colleagues have been making the case for longer franchises for many years and we very much welcomed the indication shortly before Christmas that we might finally be starting to convince the Government on this. 

Another reform of the franchising system that we could introduce would be a move to more qualitative assessment of franchises so that bids are not judged only on price but also on their commitments to invest in the sort of improvements I've been referring to aimed at tackling overcrowding and improving the passenger experience.

The Government's Dutch auction approach led to some heroically optimistic bids.

Natex was the second franchise to go down on the East Coast Main Line in less than three years, a franchise award which the rail minister at the time warmly welcomed with the words:

"The whole deal is good news, not only for the passenger but for the taxpayer."

After one franchise collapsed because it couldn't make the numbers add up on a bid that would yield £1.3b in premia, was it really wise to it to accept one for £100m more to be delivered in a shorter time period?

Of course getting value for money for the taxpayer will always be hugely important, never more so than at this time of crisis for the public finances.

But I believe that it is possible to engage in a more intelligent assessment of value for money which recognises the importance of long term investment in the rail improvements that can do so much to improve life for commuters.

So in summary, three important elements of our plans for putting passengers at the heart of the way our railways are run are strengthening the rail regulator, reforming Network Rail and awarding longer better franchises.

But there is another key reform for which our railways are crying out.

We need to radically scale back the DfT's detailed day-to-day involvement in matters like timetabling and the procurement of rolling stock.

Well intentioned though it is, having civil servants drafting detailed timetables and deciding with the 0909 from Reading can stop at Slough or not is not the best way to run a railway.

High as my regard is for the civil service, the man in Whitehall does not always know best.

I am in no doubt that the extent of Whitehall involvement in the detail of train procurement, specifying design down to the last bolt, is one of the reasons why the new carriages promised by Labour have been so very slow in coming.

Instead the Government's role should focus more on setting overall direction, while we apply a modern model of regulation to make Network Rail more efficient and more customer focused and give train operators the best incentives to deploy private sector investment as part of a cost-effective solution to passenger concerns.

And there is more.

Important though it is, reforming the way the existing railway runs isn't enough. We also need to prepare for the future. 

The future needs of our transport infrastructure, our economy and our environment. I cannot be plainer: this country needs high speed rail.

Over a year ago I set out my party's commitment to high speed rail and benefits it has to offer. Quite simply, it can transform the international competitiveness of regional economies by redrawing the time-distance map of these islands.

A classic example is provided by Lille, a town with high unemployment and below average income. It fought hard to be on the TGV network and its economy was wholly transformed by it.

In this country, not only does high speed rail have major advantages in addressing the prosperity gap between the South East and the rest of the country, it can yield significant benefits in terms of knitting together regional economies as between one another.

And just as our nineteenth century rail revolution did, ushering this kind of step change in connectivity that comes with HSR will drive social change too.

When Barak Obama sought to sell his vision of a new high speed train network to the American public he used Spain as an example.
And when you look at the Spanish experience with HSR you start to understand why he chose that country rather than longer established players like France or Japan.

Spain is rolling out high speed track and a phenomenal pace. Its AVE high network hasn't just breathed new life in the cities it serves, it has even started to break down intense regional rivalries, some of which date back centuries. So much so that the terrorist group, ETA, said it would target anyone involved in construction of a high speed link between the Basque region and Madrid. It even went so far as to detonate a bomb at the headquarters of one of the contractors working on the project.

Well thankfully our regional rivalries aren't as acute in this country. But the impact of HSR in Britain could still be profound and far reaching.

And I believe that the Conservative pledge on high speed rail that we made at our party conference in 2008 has transformed the debate on the future of our transport networks in this country

At that conference, I announced that a Conservative Government would give the go ahead for a new high speed line connecting London and Heathrow with Birmingham, Manchester and Leeds. 

I should emphasise that we see this very much a first step. Our aspiration is to go further in years to come, to a line that stretches north to Newcastle and Scotland; and to a network which ultimately expands to connect many of the UK's major cities in a national high speed network. 

Since that announcement, the momentum for high speed rail has been gathering pace in this country.  Now it can boast support from politicians across the spectrum. 

Despite the Government's longstanding reluctance, don't forget Ruth Kelly's 30 year strategy for the railways had no place for high speed rail, we saw a change of heart from Labour with the establishment of HS2 Ltd. I should make it clear that I am grateful both to Sir David Rowlands for keeping me informed on its work and to the Secretary of State for permitting and encouraging him to do so. As and when we see the report we will be able to make a decision on the merits of the proposals it contains.

There has, rightly, been a great deal of discussion about the benefits of cross-party work on projects as important and long-term as building Britain's high speed rail network. The birth of our first 68 miles of track to the Channel Tunnel owed much to an unlikely combination of John Prescott and Michael Heseltine.

But there remain a number of important differences between Lord Adonis' approach and mine.

Firstly, we are the only party to have put forward a fully costed, timetabled commitment to bring high speed rail.

Secondly, our extensive modelling is predicated on the most cautious assumptions including those we have made on future fare revenues. We see no point in building a line where fares put its use beyond the reach of ordinary families.

Thirdly, it remains a matter of regret that HS2's primary remit covers only London to Birmingham, when the arguments for taking HSR further north are so clear. So far the Government has declined to match our commitment to bring high speed rail to the north of England. 

And fourthly, when it comes to air to rail switch, the Government just don't get it.

HSR has huge potential to assist us in cutting carbon emissions by providing a viable alternative to thousands of short haul flights. However, you will only maximise its potential to do that if you connect up new domestic lines to HS1 to the Channel Tunnel; and if you make sure that HSR is smoothly and efficiently integrated into Heathrow. That is why we want a new rail hub for Heathrow so that passengers can go straight from the airport to a top class new high speed rail line that can take them on to destinations like Paris and Brussels by connecting up with HS1 and the Channel Tunnel.

Over recent months, of course was been asked about the impact of the recession on our plans.  I can answer that question today. If we are elected, our plans for a new line to Manchester and Leeds will go ahead.

We have carefully costed our proposal. We are confident that it's workable and that it's affordable. We stick by our commitment.
We will deliver on it.

And on this project, as in all our endeavours if we are elected to serve this country as its Government, value for money will be a guiding principle.

To those who say it makes no sense to embark on this great task, given the state of the public finances, I have four points to make.

Firstly, even with the most optimistic forecasts, the planning and preparation needed is likely to take at least 4 to 5 years, so the major spend is unlikely to begin before 2015 when construction would start.

Secondly, however great the efforts we make, the period of construction will inevitably be a long one. So the taxpayer's contribution will be stretched over the 12 years it would take to deliver the complete line up to Manchester and Leeds, relieving the pressure on budgets in individual years.

Thirdly, every credible study indicates that the West Coast Main Line will be full, some time between 2015 and 2020. Expecting aviation or our congested motorways to meet the resulting capacity pressure is neither practical nor environmentally acceptable.
Given the lead times involved in building new railways, we can no longer put off the decision on a new line. Within ten years, extra capacity on the West Coast corridor will not be a "nice to have luxury", it will be a pressing necessity.

It would be hugely short sighted to embark on a new conventional line when the cost uplift for high speed rail is probably 30% at most.

And fourthly and finally, study after study shows that over time high speed rail will pay for itself, not least the report published last year by Network Rail.

Ladies and gentlemen, this is a project that requires us to look beyond recovery from recession and set our sights on preparing for prosperity.

It was a British engineer who gave the world the railways.  Now Britain lags behind a lengthening list of countries across Europe and Asia who are harnessing the benefits of high speed rail. It is high time we started catching up with the rest of the world. I am convinced that if we are going to build a greener and more competitive Britain, we need to rise to the high speed rail challenge.

Thank you.

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