Bill could force TOCs to spend NR delay payments on improvements

[whole diary]

[Chris from Nailsea]

From Rail Technology Magazine:

Bill could force TOCs^▸ (Train Operating Company) to spend NR^» (Network Rail - home page) 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^▸ (Member of Parliament) 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^» (Office of Rail and Road formerly Office of Rail Regulation - about)) 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^‡(resolve)) 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.

[JayMac]

All round a very good idea.

I take issue with one part of the article though:

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

Wrong, just wrong. All TOCs will (in fact have to) pay compensation in money if requested. Besides which there are two Virgin TOCs. And the older one (West Coast) I know for a fact will send an RTV when you've asked for a cheque. The did it to me last week!

I personally think money should be the default and RTVs the option.

[ellendune]

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

[JayMac]

Probably not. But only passing on to passengers around 13% of Schedule 8 payments is I think at the heart of the issue.

[Tim]

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^» (Department for Transport - about) 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^▸ (Train Operating Company) and NR^» (Network Rail - home page) 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.     

[ChrisB]

NR^» (Network Rail - home page) didn't.....

[stuving]

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^» (Department for Transport - about) 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^▸ (Train Operating Company) and NR^» (Network Rail - home page) 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.     

I think you've quite missed the point - even missed your own point. It is not about "fair" and never was. I guess DfT (who are ultimately responsible for the whole framework) ought to be aware the public and press are going to look at as if it is, though.

As I've said before, the intention is to shift costs away from the bits of the industry that can't influence them at all, towards those that at least might. They can then decide if it's worth spending money (operating or investment) on reducing the problem. Even those that appear to be entirely "outside the control of" may not be: for trespass, for example. Someone (NR, obviously) should consider better fencing, detection, or whatever else they can think of.

It would probably happen inside a huge national railway in any case, so it's not a purely "capitalist" thing - maybe more of an an accountant's thing. As to the terms of franchises - obviously these were bid for on the basis of the rules (including passenger compensation) at the time, so changing them will be a slow process.

But are these payments even relevant? More follows ...

[stuving]

What obviously underlies this back-bencher's bill, and most of the comment in th press or his forum, is an assumed answer to the question "how much of the money TOCs^▸ (Train Operating Company) get from NR^» (Network Rail - home page) for delays is meant to go as compensation to passengers". And that assumed answer is "all of it".

Now ORR^» (Office of Rail and Road formerly Office of Rail Regulation - about) put out a big report last month in response top Which?'s "super-complaint" about rail compensation. That says it considers the whole subject, but it does not really address that question head on. I expected it to say how the delay-minutes money ("Schedule 8 payments", in the industry jargon) are determined, but it barely mentions them.

It does reinforce the point that franchises are bid for on the basis of what DfT^» (Department for Transport - about) put in about compensation, and adds that DfT don't reveal exactly how they get their figures. It also contains this:

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).

That appears to say that the right answer to my question is "none of it". However, it probably isn't. It might be "some of it, but no-one knows how much as it was never made explicit when the rates were set". It really isn't very clear at all - does "revenue neutral" mean just compensating loss of income, or for increases costs, and which of those is a refunded fare counted as?

But I suspect an initial answer could, in any case, be "less than you think". It would certainly help if we knew - has anyone found out more?

[ChrisB]

148 above does confirm though that the taxpayer (all of us) gets a better deal from franchises under the current terms than it would if (whatever was deemed to be) 'full' compensation was paid just to the customers delayed.

[Electric train]

Cannot see the Treasury or HMG being keen on this idea ................... a lot of the schedule 8 payment goes direct to DfT^» (Department for Transport - about)

[ellendune]

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. 

No but DfT^» (Department for Transport - about) did actually want someone to operate the services. Bidders will not be prepared to loose money in order to have the franchise. Why should they? This is not some vanity game where bidders will pay anything for the chance to run trains.  DfT already have one franchise competition with only 2 bidders.  If they make it too tight what will happen?

1) They end up giving to some optimist who thinks they can do a massive cost cutting exercise and the quality of service plummets again.
2) They have so few tender they end up paying over the odds in the end and we all loose out.
3) DfT will have to operate it themselves which is I suspect what you want - but will be the last thing the present government will do so more likely we get 1 or 2.   

[JayMac]

4) Management style fixed fee tenders as we have with TfL^» (Transport for London - about).

[pedant]
Oh, and to no longer have something is to lose, not loose.  [/pedant]

[ellendune]

4) Management style fixed fee tenders as we have with TfL^» (Transport for London - about).

Agree an option but one DfT^» (Department for Transport - about) seems equally opposed to for some reason.  But that's fine as it would allow the company to make some money.  Some people seem to be determined that private companies must make a loss on rail services. 

[Rhydgaled]

4) Management style fixed fee tenders as we have with TfL^» (Transport for London - about).

Agree an option but one DfT^» (Department for Transport - about) seems equally opposed to for some reason.

Not sure about 'equally opposed', state-operation they avoid like the plauge but isn't at least one franchise (Thameslink and/or Great Western) currently a management-contract rather than the normal franchise model?

[ChrisB]

Only as it needed extending owing top the DfTs^» (Department for Transport - about) inability to run franchise competitions!