Oral evidence: Railway network disruption over Christmas, HC 920Wednesday 14 January 2015

Oral evidence, 14 January 2015.

Witnesses

Richard Price, Chief Executive, Office of Rail Regulation, and Joanna Whittington, Director, Railway Markets and Economics, Office of Rail Regulation, gave evidence.

Chair

Good afternoon and welcome to the Transport Select Committee. Would you give your name and position, please, for our records?

Richard Price

My name is Richard Price. I am the chief executive of the Office of Rail Regulation.

Joanna Whittington

My name is Joanna Whittington. I am a director of the Office of Rail Regulation.

Chair

Mr Price, did you approve Network Rail’s Christmas engineering plans?

Richard Price

No. We do not have a role in approving their plans. We took action following the disruption in 2006-07, and imposed an order on them. Indeed we fined them at that point in relation to that disruption. The order required them to put in place an effective planning system to manage this work effectively. What we do is make sure that they have that planning system in place. The plans themselves are down to Network Rail to formulate and manage.

Chair

You are saying that you make sure they have the plans to manage the work. Is that right?

Richard Price

We make sure that they are using the system that they put in place as a result of our earlier enforcement order.

Chair

What does that involve? For example, one of the big issues that has now been identified is to do with lack of adequate contingency plans. Would you have been looking at their proposals and should you have noticed that?

Richard Price

No, not in detail. What we have done in the past, following the order, was to put in an independent audit to make sure that the system was working effectively and that they were putting in place contingency arrangements around these major projects. We know that they have continued to operate that system, and that is what we require them to do. We do not have a role in checking the individual contingency arrangements.

Chair

You made a number of recommendations in 2008 following previous major disruptions. They covered a number of areas, including looking at skills factors in terms of having the right people, the right contractors and the right skill sets. That seems to be one of the issues in the Christmas disruption. Do you think those lessons have been learned and that the proposals you put forward have actually been implemented?

Richard Price

Certainly when we had this audited in 2010, the evidence was that the lessons were being learned, but of course in this instance we will look very carefully to see whether the skills were in place, and indeed whether the contingency plans were both appropriate and implemented properly.

Chair

That is something you are looking at now.

Richard Price

Yes.

Joanna Whittington

As part of our investigation we are looking at three broad areas, which are set out in Network Rail’s licence and the train operators’ licence. We are looking at Network Rail’s planning and oversight of the works, including contingency planning, which has obviously been quite a focus today. We are looking at the provision of information from Network Rail to the train operators, and then from the train operators on to the passengers. Then we are looking at the impact on the train service—punctuality and reliability. Those are all things which are set out in Network Rail’s licence and the provision of information in the train operators’ licence to enable us to decide whether or not we need to take any regulatory action in that space. In addition, in carrying out that work and reaching a view on whether or not they have satisfied the terms of their licence, we might make wider observations around the way Network Rail and the operators behaved on the day, in terms of implementing the contingency planning. For example, was it a good idea to do it at Christmas? What should a contingency plan around Christmas look like, given the availability of the network more generally, and the different service levels and the different types of passengers? Those things might not directly go to regulatory action, but we intend in our investigation to cover those observations in order that they can feed into the lessons learned that the industry as a whole will take from this.

Chair

You had already made quite serious criticisms of Network Rail’s performance before this happened. Do you think any of that related to what happened over Christmas? Do you think they were trying to catch up on work that you told them they had not done?

Richard Price

We will look at that in the investigation. I do not think that more work was being done over Christmas than had been planned for some time. If you look at the way the system for managing work that Network Rail introduced as a result of our earlier action has worked—Mark Carne referred to this—it has resulted in a significant reduction in disruption from overrunning major projects. What we are looking at here is the fact that clearly things went very wrong in this instance, not least from the perspective that once things had gone wrong there was a dreadful experience for rail users as a consequence. I see a specific set of circumstances that we have to investigate. As I said, a large number of things went right on the network over Christmas and new year, but passengers were really badly let down on this occasion.

Chair

Do you have any powers on passengers’ rights to compensation, or their right to know about compensation?

Richard Price

We looked at this earlier in the year. The powers that we have are in relation to the licence condition that we took, if you remember, two years ago, which requires both Network Rail and the train operators to co-operate on giving passengers the information they need during disruption. That includes keeping them informed of their rights to compensation. We did some work last year. We got Passenger Focus to do some research for us, which revealed that 75% of customers of the railway do not understand their compensation rights. We absolutely want to see the train companies in particular doing more to keep passengers informed. We see some progress. East Coast, for example, have set a benchmark for the way they let passengers know how they can claim compensation, but there is quite a lot more work that needs to be done across the industry to get this right.

Chair

Is that part of a licence condition?

Richard Price

Yes.

Chair

Will you be looking at the problems at London Bridge?

Richard Price

First of all, we will be looking at the extent to which people were informed of their compensation rights as part of our investigation. We are not looking at London Bridge as part of this investigation because we think the circumstances are different. What we saw at Finsbury Park and at Paddington involved people in very unfamiliar circumstances, travelling around the holiday period with luggage and children—people were unable to use the staircases and so on; whereas at London Bridge, the issues we saw were around the introduction of a new system at a station which was being used by commuters. We are looking at London Bridge as part of our work routinely. We have had inspectors there looking at flows across the platforms where there is less space. We also had inspectors looking at the pedestrian flow issues that you heard Mark talking about earlier. Network Rail has been quite quick to sort out the pedestrian flow issues, but we are continuing to look to see whether those are working. Yes, we are looking at that.

Jim Fitzpatrick

In terms of the investigation that you are undertaking, do you have a time frame for how long that will take? Will the report be publicly published or will it go to the Department for Transport? How do you handle the outcomes?

Joanna Whittington

We are planning to complete the report in a very tight time scale. We would like to report to our board by 30 January. The board will make potentially one of two recommendations. It might make a recommendation that there has been a breach of licence, in which case what we would expect to publish following that would in effect be “a case to answer” letter to the party. We would not publish the report until we had reached a final view as to whether or not there was licence breach and what action would flow from that. If we decide that there has not been a breach of the licence that leads to enforcement action, we would expect to publish the report and the wider observations that we make in it—because that would become the valuable part of it at that point—as soon as is reasonably practicable after our board has considered it.

Jim Fitzpatrick

Are we talking weeks or months?

Joanna Whittington

I would like to publish it by the end of February, because I think its value is in influencing engineering work that has already been planned in terms of the Easter period and so on. It is in that context. I do not think it will necessarily provide all the answers, but there are a number of investigations that people have been referring to today and I see it feeding into that.

Richard Price

We aim to get preliminary findings by the end of January so that our board can take those decisions.

Chair

Mr Price, I appreciate you are in the process of this investigation and clearly you cannot give conclusions because you have not completed it yet. Is it your impression that there is a systemic problem in Network Rail in relation to engineering works?

Richard Price

The issues that we are looking at here are system-wide. This is not just Network Rail. We will certainly be looking at the causes of the overruns in the context of the work around Holloway and Finsbury Park and at Paddington. What we are really interested in is what happened to passengers. Who was looking after the passengers through all this? The causal factors are clearly in the chain that leads to passenger disruption. We will be looking at Network Rail’s responsibility in that. As I say, Network Rail delivered a lot over Christmas. In this case, things went badly wrong and it was in a particularly difficult set of circumstances, which meant that the effect on customers was amplified. We will be looking at the handover, including the passenger information and train platform management, between Network Rail and the train companies. The other thing we will be looking at is what information customers were getting. I was at Finsbury Park, and I saw people queuing around the block outside the station. They were unable to understand how to get to their trains. There was nobody from the rail industry out there giving them either information or a reassuring presence.

Jim Fitzpatrick

Were you on duty, Mr Price?

Richard Price

When I heard that it was happening I went along. I live in the area, so there was no great difficulty for me to get there. The difficulty for me was nothing compared with the hardship that people who were queuing out in the cold were experiencing. Somebody wrote to me: “I have never experienced such a train journey in my life. Utter chaos and bad organisation.” There were other people talking about the difficulty of getting around the station. Elderly people were being left outside in the drizzle and the cold. I saw hundreds of people queuing outside the station. The only significant presence outside the station was the British Transport Police. We want to understand what information was going to passengers and how they were being looked after, because it did not look at all good to me.

Mr Harris

Do you think there is any point? I do not want to pre-empt your investigation. You may not fine Network Rail for this particular incident, but in this and in other incidents is there really any point? It is money that is publicly provided. Does it just get passed on to the passenger or does it come out of their budgets, which leaves them with less money to do the repairs and the improvements that we all want to see?

Joanna Whittington

If we were to find a breach, one of the options is to fine Network Rail or a train operator. Fines are relatively widely used in the regulation of utilities. They send a very clear message to senior management that the behaviour we have seen is not acceptable in the wider world. Public sector organisations obviously have a number of other issues associated with them, which you have described. That is why, well before we get to that stage, finding a breach would enable us to put in place an order around doing something differently. We have previously required them to prepare a plan, or potentially required them to prepare a recovery plan with industry coming on board. Some of the issues that we are talking about in relation to contingency planning and handing over feel to me to be potentially in that sort of space. It is open to us, if we feel that the behaviour was sufficiently bad and that management itself is not getting that message, to fine them.

Mr Harris

Do you have enough powers in this respect? Are there other sanctions that you might like to have but you do not have and you might consider asking the Government for? For example, going back to our earlier discussion when Network Rail were here, would you consider it worth while pursuing the idea that, instead of suing the company, you could have some direct effect on bonuses for senior managers?

Richard Price

We will look at this in the process of the investigation. If we find that we do not have the powers that we need to act, that will be part of the wider observations that we make. As I say, we took a licence condition across the whole industry on the provision of passenger information. This is a really good instance where we are using that, not for the first time, to see whether it has the effect we want it to. One thing we might look at is whether we have sufficient power to ask more of the industry. The industry is in the process of putting in place plans—a set of commitments—to improve its passenger information. We were expecting them to have delivered that and committed to it by now, and we want that to go faster. We will look at all that. You asked about bonuses. We already report to Network Rail’s board and remuneration committee annually on the overall performance of Network Rail against its regulatory commitments. Those feed straight into the system that Mark just described in terms of the score card against which bonuses are assessed.

Mr Harris

Have you noticed any effect on that?

Richard Price

As Mark said, it is a new system. What he has done is good because, for the first time, people can see very clearly what the relationship is between what Network Rail is delivering almost month on month and their remuneration. It is really for Network Rail’s remuneration committee to determine the amounts overall, but obviously we expect that, if they are not delivering their regulatory commitments or their commitments to customers, it should be reflected in their bonuses.

Graham Stringer

This follows on from Mr Fitzpatrick’s question. You said you went to look at what was happening. Did you have any direct contact with Network Rail during that time?

Richard Price

Indirectly. We passed messages around via ORR’s office on the fact that people were not being briefed outside the station, and also indirectly to GTR.

Graham Stringer

Telephone calls? E-mails?

Richard Price

Phone calls were made from our office. I did not have the numbers with me so I was passing messages via our office.

Graham Stringer

That was just to help them, was it? What was the purpose of that communication?

Richard Price

The purpose was to make sure they were aware that there were people outside the station who were not getting information. There were no station staff outside the station so I passed the message on via the police outside the station.

Graham Stringer

I know you have not done the investigation yet, but we have been here before, haven’t we, after the 2007 Christmas and the report you did then, which had a number of recommendations. Do you believe that all those recommendations were taken into account in the planning of this work over the Christmas period?

Richard Price

That is what our investigation will have to look at. As I said, we do not sign off Network Rail’s plans in advance, but clearly where things have gone wrong in this case we need to understand why.

Martin Vickers

You just said, Mr Price, that there were no station staff outside Finsbury Park station, which I think everyone will find absolutely staggering. We heard from Mr Carne and Mr Gisby about all the problems. We also heard from them about contacts with the rail operators and so on. They may have been in short supply, but do you find it equally staggering that there was no one there?

Richard Price

I was very surprised. There was a situation where people were coming to the end of the queue and weren’t quite sure which queue they were joining, and then having to walk to the front of the queue to find out what was going on. It really was not a good situation from the passengers’ perspective. You asked earlier about what rehearsals or drills are in place in situations like that. I was glad to hear Mr Gisby talking about the fact that the industry is giving thought to what happens at stations like Finsbury Park when the normal terminal stations are closed. You did not get the sense that there was a well-rehearsed drill in place on this occasion. From what I could see, that left station staff in a position they shouldn’t have been in, let alone passengers.

Martin Vickers

Following on from the question that I asked the previous witnesses as regards the structure and who was responsible for informing people, do your preliminary inquiries suggest that perhaps some restructuring as regards responsibilities should take place?

Richard Price

Joanna might want to add to this. The important thing is that the industry delivers what it has already committed to deliver. That comes in two phases. There are already commitments from the industry in terms of keeping people informed during disruption. The investigation will look to see whether they have complied with their own code and therefore are not in breach of their licence under their existing commitments. The second wave of commitments we are looking to the industry to make now reflects the fact that, although improvements have been made already, there are still shortfalls between what the industry has delivered and what customers say they want in terms of consistency of information from different channels, and information about compensation and so forth. The key thing is that the industry works collectively to deliver the commitments it has already made.

Joanna Whittington

To reassure you, as part of our investigation we have already received submissions from all the affected train operators, together with Network Rail. We will be looking at what Network Rail said here, in their report and in our working level contacts, and piecing that together with what the train operators said to us. Then we will start to get a sense of what happened and, more importantly, why it happened, and we will start to think about what we might want to do next, whether it be in the form of regulatory action or potentially in that wider observation space, which could lead to a future modification to the licences.

Graham Stringer

Is that evidence publicly available from the train operating companies?

Joanna Whittington

That is a good question. I do not know whether it will be at this stage. If we reference it as part of the report, we will obviously send it back to them for factual accuracy checking, but our intention is that it will then be incorporated in our report, which will become publicly available.

Graham Stringer

You heard the question I asked Network Rail about the co-operation of the train operating companies. We have obviously had some recent evidence that it was not as good as Mr Carne told us. Is there anything from the reports you have had from the train operating companies that indicates that the relationships were not as harmonious as we have been told they were?

Joanna Whittington

It is a very early stage in the investigation, in the sense that I have received most of the information in the last couple of days, so I would not want to comment.

Chair

Is that one of the areas you are looking at?

Joanna Whittington

Absolutely.

Chair

You are looking at the relationships and the sector generally, not just Network Rail on its own?

Richard Price

Yes.

Joanna Whittington

In order to report to our board by 30 January, we have to be quite clear, in the context of this investigation and the delays that occurred at King’s Cross and Paddington, about whether there were issues around communication. Some of them were alluded to earlier in relation to platforms 4 and 5 and what the understanding was there. It might be that as a result of that we want to make a general observation about the quality of that communication and to discuss it more broadly in the industry. If we are going to deliver something by 30 January, the report itself has to be linked to what we see on the ground at King’s Cross and Paddington.

Richard Price

What we are looking at in both of these cases is system-wide. It is the whole system and the effects of disruption for passengers.

Chair

You may decide to make comments about how the system operates.

Richard Price

Yes, if necessary we will.

Chair

As well as what Network Rail did or did not do.

Richard Price

That’s right.

Jason McCartney

Mr Price, will your first-hand observations and experience be used in your report? Will you be interviewed?

Richard Price

Yes. I am contributing to the investigation and I am under instructions from the chief inspector to offer him a report on this.

Jason McCartney

Your own visual experiences will be used in that.

Richard Price

Yes.

Jason McCartney

Obviously by going out there on Boxing Day yourself you personally believe that it is important for someone who is a well-remunerated leader of an organisation to get out there. Is that something you personally believe?

Richard Price

I think it is important that the chain of command operates in a way—

Jason McCartney

A yes or a no would be sufficient.

Chair

I do not think we should press that. You can answer about yourself.

Richard Price

It was not difficult for me to get there. The important thing is that there are eyes and ears on the ground so that the system understands what is going on and can respond effectively.

Jason McCartney

Did you see Mr Gisby when you were out and about?

Richard Price

I saw Mr Gisby outside King’s Cross on the television.

Jason McCartney

Did you do any media interviews yourself?

Richard Price

No.

Jason McCartney

Looking at the potential fines and previous penalty notices, the range is from £2.4 million on 6 September 2007 to £14 million on 13 May 2008. There was £3 million on 22 November 2010. Is that the sort of range we are looking at for any potential fine? Is there a level you can go up to? Is there a cap? The range is £2.4 million to £14 million.

Joanna Whittington

In legislation there is a cap, which is that the penalty cannot exceed 10% of the turnover of the licensed entity. I would not want to leave you with the impression that that is the sort of fine we will likely be considering. Potentially more important in this space is what an order might say around planning and doing something differently the next time round. There are particular issues with fining in the public sector. There is plenty to indicate that Network Rail are taking this very seriously.

Jason McCartney

That is £20 million of fines. Where specifically has that money gone, or what was the intention? Where has that £20 million gone?

Richard Price

The money goes ultimately to the consolidated fund. It goes to taxpayers or to public expenditure. That is the way the legislation works, and that is what is required.

Jason McCartney

The big issue about this was the inconvenience and the chaos for the passengers themselves. In terms of your report, how do you see recompensing and compensating passengers, or is it just the actual operation of Network Rail itself? Will you be making recommendations about the level of recompense or compensation for passengers?

Chair

What powers do you have in that area?

Joanna Whittington

Compensation is a requirement of the National Conditions of Carriage. There are two schemes. There is a delay repay scheme and a charter-based scheme. As I understand it, they are a requirement of the franchising agreement process. The key focus for the regulator in this space is to emphasise to train operators the importance of getting that information out and making it clear to passengers how they can claim compensation or a refund, if that is what they are entitled to. One of the things we would like better information on is using websites and information leaflets at the station so that people can easily claim that.

Chair

Those are the areas that you are concerned with.

Joanna Whittington

Yes, those are our areas.

Jim Fitzpatrick

If I may, I want to go back to your visit to Finsbury Park, Mr Price. I am quite tickled that you went down there. It is to your great credit that you did and I think most, if not all, of my colleagues in the Committee would share that view. Did you identify yourself? I am assuming that you did not wear a high-vis jacket with “Office of Rail Regulation” on it, because the disgruntled passengers might have been pleased to see somebody that they might want to talk to. Did you identify yourself to station staff, or did you just walk around and make observations? How did that work?

Richard Price

I did not identify myself to the station staff because I am not in the chain of command. As I said, once I had spotted there was a problem with information outside the station I got the message through in the most effective way I could by talking to the police outside the station, who, as I understand it, passed the message on. I talked to passengers. People were asking anyone who was around and looked authoritative which queue they should be in. It was striking that there were two queues but it was not clear which queue you should be in to get to which train. There was quite a lot of confusion. People could ultimately see trains scheduled on the boards outside the station but weren’t sure whether, if they joined the end of the queue, they would get into the station in time. The lack of that kind of basic information outside the station was the thing that struck me.

Joanna Whittington

Clearly the passenger experience is absolutely fundamental to this report. In addition to Richard’s experience, we have also been in touch with Passenger Focus and London TravelWatch. As an organisation, we have already received 40 letters directly from passengers who were affected. We will be carrying out an analysis of the social media on the day so that we can provide a better and more comprehensive view of what the passenger experience was across the piece.

Richard Price

Specifically in terms of Passenger Focus, we asked them to invite comments from people who were affected on the day so that we get a richer base of information. It should not be based on what I saw; it should be broadly based on what customers experienced.

Chair

Will that be a report for you?

Richard Price

It will be reflected in the report of our investigation. It will ultimately be public, but it will go to our board and will inform them in taking their decision on the licence breach question.

Chair

Thank you both very much. Oral evidence: Railway network disruption over Christmas, HC 920 21