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Bill could force TOCs to spend NR delay payments on improvements

Legislation requiring train operating companies (TOCs) to spend compensation payments from Network Rail for delays on improvement projects is currently going through the House of Commons.

Joan Ryan, Labour MP for Enfield North, who led the group of 12 MPs presenting the Improvement of Rail Passenger Services (Use of Disruption Payments) Bill, said that it was unfair that TOCs profit from schedule 8 disruption payments from Network Rail for maintenance failures which lead to delays.

Of the ^575m in schedule 8 payments made between 2010 and 2015, only ^73m was spent on compensation for passengers. Although this is more than double the amount before 2010, the Office of Rail and Road (ORR) recently criticised the lack of information on how to claim compensation in response to a Which? campaign. Many of the payments were funded by taxpayers^ contributions to Network Rail.

Ryan said: ^The payments received from Network Rail bear no relation whatever to the passenger compensation schemes between the train operators and their customers. Indeed, only a fraction of what train operators receive in payments from Network Rail is ever passed on to commuters whose journeys have been disrupted. Passengers are certainly not helped to claim what they are owed for delays, given that train operators make it so difficult for them to access compensation.

^It is scandalous that a system can be designed in such a way that the very people using the rail network and who are most affected by the poor standard of service on offer^tax-paying commuters^can end up contributing to train operators^ profits out of their own misery! How can this be right? Where is the accountability to the fare-paying, taxpaying public for how this system operates and where this money goes?^

In Network Rail^s latest figures, the public performance measure (PPM) of British railways was at 90.5%, compared to 91.2% at the same time last year, and Network Rail was responsible for roughly 60% of delays.

Virgin is the only TOC to currently offer compensation in the form of money, not vouchers, as TOCs are now obliged to do under the Consumer Rights Act 2015.

The proposed Bill will empower the ORR to make TOCs disclose any profit from schedule 8 payments and ensure that it is spent on profits to improve passenger experience, including retaining ticket office staff, facilitating easier access to station platforms and trains, free wi-fi, or providing a guarantee that trains will not miss out stops.

Ryan cited a ^4m rail reparation fund, created last year by the ORR and Network Rail to benefit passengers affected by delays on Thameslink, Gatwick Express and Southern routes, which was spent on increasing station and maintenance staff and introducing incident management software.

The Bill, introduced yesterday under the Ten Minute Rule, will next be read in the House of Commons on 22 April.

Virgin is the only TOC to currently offer compensation in the form of money, not vouchers, as TOCs are now obliged to do under the Consumer Rights Act 2015.

Do the TOCS not have some additional costs from disruption as well though?  Will the be expected to bear those themselves?

Why shouldn't they bear those costs themselves?  No-one forced them to take on the franchise.

Although if the franchise becomes more expensive to operate then the net cost to the DfT will go up and DfT will have less to spend on improvements.  It is all a stupid money-go-round anyway.  The only thing I would say is that incentives should be aligned to reduce  cost and push up service standards and I'd favour putting a lot of costs and benefits on the balance sheet of the TOCs and NR rather than anywhere else, because they are the only ones who have control over problems.  So, for example, making NR pay for delays caused by vandalism and extreme weather isn't "fair" because delays caused by those things is not the fault of NR, but because NR is the only party that has control over things like fencing and the strength of sea walls, they should be incentivised to maintain them in a way that minimises delays.  To my mind it can't be about fairness.  They are just players in a capitalist game which they volunteered to play.     

148. While the current compensation paid to TOCs under schedule 8 is intended for the sole purpose of holding them neutral to the non- controllable revenue risk that they face as a result of delay caused by Network Rail or other TOCs , it has been suggested that TOCs could be required to pass on the monies paid under the Schedule 8 regime directly to passengers, or, at least, to reserve those monies solely for the purpose of passenger compensation. This proposal would amount to a significant change in the purpose of the current regime and would be likely to result in more conservative franchise bids, and consequently lower premiums and higher subsidies from government, in light of the higher risk premiums in bids (reflecting the fact that TOCs would be expected to bear significant revenue risk that they are not able to control).

149. The practically difficulty of adding a passenger compensation component to Schedule 8 is low, but it would be hard (under the current system) to ensure that it is accurate (i.e. that what the ^polluter^ pays reflects the actual compensation liability).

Why shouldn't they bear those costs themselves? No-one forced them to take on the franchise. 

4) Management style fixed fee tenders as we have with TfL.

Agree an option but one DfT seems equally opposed to for some reason.

Only as it needed extending owing top the DfTs inability to run franchise competitions!

TSGN

1.7 We announced that the competition would resume with a revised ITT to be issued to existing short-listed bidders. The new franchise is planned to start in 2014, and is expected to be more of a management-style contract ^ all as the Review had recommended.

...

Use of management contracts

2.10  The Review considered the case for widespread use of management contracts or  operating concessions, where the franchising authority takes the revenue risk  rather than the franchisee. The Review rejected this case, but did concede that there may be a better case where a franchisee is facing major and sustained disruption due to infrastructure works.  The TSGN franchise was cited as being likely to be most suitable for such an arrangement.

2.11  We broadly accept this recommendation.  The presumption is that in normal circumstances the risk around protecting and growing revenue is best left with the franchisee. In the case of the TSGN franchise, we accept that the Government is best placed to take much of the revenue risk given the large scale disruption planned over the next few years. In conjunction with pre-qualified bidders we are currently developing the specification, ITT, evaluation process and franchise agreement documents that will give effect to this revised approach.