The Secretary of State for Transport’s Policy Exchange speech

Good evening ladies and gentlemen

It would be no exaggeration to say that the railways of this country are crucial to its economic future. Just look at the millions of people who travel into our cities each day by rail. Without trains our economy would grind to a halt. And without our railways, they could not get to work in today’s congested world.

And this is a brave new era for rail in Britain, and a comeback which surpasses most.

I have been travelling on our railways since I was 12, as a daily commuter for almost all that time.

Think back to what it was like then.

Stations closed.

Routes closed.

Tracks turned from double to single to save money. They even moved the rails so only one train could pass.

Do you remember that extraordinary plan to close Marylebone Station and turn it into an express coach route into central London.

When the railways were privatised in the mid-1990s they were on a firm downward spiral.

What a contrast to today.

In the 20 years since privatisation.

Passenger numbers have more than doubled.

Stations and lines are being opened.

We’re having to put back the second track that British Rail ripped out on routes like the one to Corby.

And Marylebone Station is the terminus for one of the most innovative and successful rail lines in the country.

But success brings big problems and big challenges, and it is about those I want to talk tonight.

On much of the network our railway is operating on the edge of what it can cope with. It carries more passengers today than it did in the heyday of the 1920s, on a network a fraction of the size. If and when things go wrong, the impact can be widespread and quick.

And I get to hear about it.

And yet demand still goes up and up. For passengers and freight.

I travel on the line to Waterloo most days. Back in the 1990s around 110,000 passengers a day used Waterloo. Today the figure is nearly 240,000. The route is absolutely jammed with trains. Each day they line up to get into the stations on the route.

Next year we will introduce longer trains on the line, with a 30% addition to capacity. As we are doing elsewhere – on the Northern Rail network for example.

Changes like that help. But they are not enough.

The industry cannot simply take comfort in its success in attracting the growth of the past 20 years. It already struggles to cope with demand – and the margin for error is so slight that a small problem can lead to long delays, cancellations and overcrowding. The level of demand and the number of trains mean that things wear out quicker, and that there is less and less free time to do the repair works that the network needs.

Performance has been declining – and on a day like today when commuters have been struggling to and from work this is not good enough. We have got to turn this around.

So our railways need to adapt and change in order to be able to cope with the growth that they have already experienced and that which lies ahead. We need a railway which is sustainable in all senses of the word.

And that means a series of changes to deliver the best possible passenger experience for the future.

It means continuing to deliver a steady programme of improvements and enhancements, large and small.

It means looking at new ways of expanding our system further and doing so in an innovative way.

It means harnessing new digital technology to transform the way our railways work.

And it means a change to the way the industry works in order to make sure it can meet the needs of passengers.

And that last point is crucially important. It was often said about British Rail that it seemed to operate as if it thought it was running a giant train set, and not a customer service business. There’s still a danger of that happening today. So let’s be clear. Our railways are a customer service business, and they should always act as such.

So we have to expand and develop the network so we can meet demand and improve the passenger experience.

We are already delivering a massive range of improvements to our network.

£350 million of enhancements to the suburban rail networks around Liverpool and Manchester

Electrification in the Midlands, on the Trans-Pennine route and the Great Western mainline.

Longer trains and platforms around London.

Faster services in East Anglia – including new trains built by the great team at Bombardier in Derby.

A huge increase in commuter seats and capacity in London with Thameslink and particularly Crossrail

And there’s more to come.

In the early part of next year, the first phase of construction of HS2 to Birmingham will begin, and I recently announced the government’s preferred route for the further stages of that path to Manchester, Leeds and beyond.

It’s been controversial, often because people don’t understand why it is needed. Some people see it as speed alone whilst they are cramped for space on their commuter service. But the way we deal with an over-congested railway is to build more capacity.

Up to now our solution has been longer trains and longer platforms. It’s about doing something bigger and bolder. Our railways are more diverse than almost anywhere in the world. Few countries try to run express trains, commuter trains, local trains and freight on the same tracks to such high intensity as the West Coast Main Line does.

If we want the growth to continue in the future, we have to ease some of that pressure. That means building a new line to complement the old. And if we are to build something new, why wouldn’t we build the best, the newest, the world’s most advanced passenger railway. That is what HS2 will do, and it will deliver much more capacity, as well as better connections between the Midlands and the North. It will free up capacity on the West Coast mainline for more freight and commuter services. It will make a real difference.

HS2 is just one part of what we are planning for the future. Work is under way on the development of the best ways of delivering better, faster journeys across the Pennines, to support the Northern Powerhouse. We are starting development work on the Midlands Rail Hub. We need a programme of improvements on the Brighton main line. And we will make sure that we deliver proper resilience at Dawlish and on the main line to the south-west.

It’s an extraordinary contrast to that situation 30 years ago.

We also need to use our railway as a driver for new economic growth.

With improved freight facilities and links to our ports – and as facilitators of new economic and housing developments.

And in doing so, I plan some new departures to the way we run and finance the development of our railways.

Network Rail is a committed organisation with a fantastic safety record, the safest major railway network in Europe. But it has been too cumbersome, has not always been an unqualified success in delivering the upgrades our railways need; and does need to focus much more on passengers.

Network Rail needs to change, and its management want change to happen. Nicola Shaw, the Executive Director of the National Grid, looked at what needs to change earlier this year and made a series of recommendations. She said that we need to devolve route responsibility in Network Rail to the local management – effectively creating a network of local businesses supported from the centre. Mark Carne has started this transformation, but there is more to do. It is one part of the change that is needed to create a more efficient and responsive railway.

But every monopoly needs competition. So I want to go 1 step further, and bring new skills into the challenge of upgrading our railways – to test the ways we are doing things right now, and find ways of doing them better. I want to bring forward a new strategy for rail in due course, but I want to outline today some of my thinking.

I’m going to start with what I believe to be one the most strategically important rail projects that can unlock housing and development.

The line from Oxford to Cambridge was closed in the 1960s, even though it escaped the Beeching axe. It was a decision we have lived to regret. It links 2 of the world’s most important university towns, the growth areas around Milton Keynes and Bedford, and the areas which house some of our most significant automotive technology businesses – often built around Formula 1 racing. To put it bluntly it is one of our most important corridors. And it is not just me, the National Infrastructure Commission has said so too, identifying the need for tens of thousands of new homes in the area, and to design major new transport links with delivery of these homes and supporting those businesses in mind.

Most of the old route remains, partially derelict, in use in places, and the link is eminently reopenable. Despite millions of pounds of pre-funding, it is stuck in a long pipeline of Network Rail projects that are funded for some time in the next decade.

So I am going to do things differently, I want to go faster, I want to get going. I am going to establish East West Rail, which will become a new and separate organisation to Network Rail. In the short term it will get on with the task of accelerating the permissions needed to reopen the route. But its main task will be to secure private sector involvement to design, build and operate the route as an integrated organisation. It will lead to the creation of Britain’s first new integrated railway for decades.

East West Rail will provide a commuter route for the crucial centres on its corridor and will provide the transport spine for additional housing and business development in a corridor which is one of the government’s priority areas for the future of our country. The £110 million funding provided by the Chancellor in the Autumn Statement will allow us to do the initial work on the project, and also to carry out enabling works that will mean that it can co-exist with HS2 at the point the 2 routes cross in Buckinghamshire which would otherwise miss the opportunity to develop the route until HS2 was completed.

The new organisation will work hand in glove with the National Infrastructure Commission as it plans the development of this nationally important transport corridor to identify the best way to deliver the project, looking particularly at the potential benefits of linking transport infrastructure development and the economic and housing development around it.

We want to link delivery of the railway together with other initiatives to support the range of opportunities in the Oxford-Cambridge corridor, including housing, science, technology and innovation.

The East West Rail organisation will be established early in the new year, and will be ready to support or transition into a broader delivery model at a later date. I am very pleased to announce that the former Chief Executive of Chiltern Rail, Rob Brighouse, the man already responsible for reopening the route between London Marylebone and Oxford has agreed to chair the new East West Rail organisation.

In other places too I want to look at innovative ways of funding infrastructure development. Often the opening of a new road or a new railway line or station can transform the value of development land. It is right and proper that the government gets back some of the value it has created to invest in infrastructure. We have seen this happen for Crossrail through the mayoral community infrastructure levy.

Network Rail also has significant assets that could be used to help meet the costs of improvements to the network. Stations are at the heart of many of our communities but all too often are not reaching their potential. We’ve seen some examples of where stations have been turned into thriving new commercial and residential developments that deliver benefits for both passengers and taxpayers. I want to see more of this happening. I want to see Network Rail play a part in releasing land to meet our housing challenge.

Ladies and gentlemen – of all the change needed, though, one stands out to me. I think we need to change the relationship between the tracks and the trains on the railway. I understand why the railways were privatised in the way they were, with the 2 parts of the network split into separate companies. But the railway of the mid-1990s is very different from that of today. What worked on a declining post-nationalised industry is not necessarily right for now.

Delivering improvements on a working railway is a tough task at the best of times. Doing so across different teams with complicated contracting arrangements is even tougher. And when things go wrong, a lack of a joined up approach can make things much worse for the passenger.

Not only are solutions slow – but people are left with poor communication.

Train companies take the blame for the failings of Network Rail – and Network Rail as an infrastructure company has not always been incentivised to focus on the best possible customer service.

In my experience passengers don’t understand the division between the 2. They just want someone to be in charge. They want their train to work. I agree with them.

And report after report commissioned by the department has pointed in the direction of a simpler railway, with less contracting complexity, and more localised decision making.

I think it’s time now to get on with the solutions. What does this mean? I intend to start bringing back together the operation of track and train on our railways. It will be a process of evolution and not revolution but I believe it will mean a better railway on a day to day basis, and it will mean that it is much easier to meet the challenges today’s network faces. Whether it’s planning essential repairs, putting in place improvements that can squeeze an extra service in on a crowded route, or responding quickly to a problem on the network, our railway is much better run by 1 team of people working together. They don’t have to work for the same company. They do have to work in the same team.

I intend to press ahead with a recommendation put to the department 5 years ago by Sir Roy McNulty, when he reported to Philip Hammond how to make the railways run better and more cost-effectively. I will do this initially at an operational level. In order for all those involved to be incentivised to deliver the best possible service for the passenger. I expect the new franchises on South Eastern and East Midlands, the next ones in the franchise pipeline, to have integrated operating teams between train services and infrastructure.

We will continue to develop this model as further franchises are renewed – including the option of developing joint ventures as proposed by Sir Roy. Going forward, this new approach will also need to take into account the needs of open access and freight operators, both essential to our railway. The solutions in various areas may differ from each other in their models but the outcome will be the same – a railway that is predominantly run by an integrated local team of people with an absolute commitment to the smooth operation of their route.

Ladies and gentlemen

There are 2 other things that I want to do to enhance the passenger experience on our railways.

In a world where I can even buy my lunch in the House of Commons tea room with my mobile phone, I should not have to queue for a paper ticket on my morning journey to work.

I have mandated my department and the industry to make rapid progress introducing smart ticketing across the network. The ingredients are there to deliver something much better – and we want to see these key reforms happen quickly.

I don’t really understand why it has taken so long. We need to get on with the job.

I think everyone commuting into our major towns and cities should be able to use mobile phones, contactless cards or smart cards for their ticket.

I want to see more pay as you go options for rail travel, as passengers are able to do with Oyster cards in London, meaning no need to purchase a ticket ahead of travel.

By introducing KeyGo to their smartcard, Southern are due be the first operator to do this properly next year, maximising the benefit to passengers from investments in smart ticketing infrastructure made by the Department for Transport. Yesterday, we saw South Eastern role out their smart card. We now need to see other train companies offering similar choices to their passengers where the equipment is already available to support this and we need to ensure that the infrastructure needed spreads across all of our major cities.

I am delighted that the Chancellor has made £80 million funding available through the Autumn Statement to support further infrastructure roll out for smart ticketing by the end of 2018. I have established a special transport project team in the department to take this forward, and I will personally be chairing the first Smart Ticketing Delivery Board with industry, Transport Focus and sub national transport bodies like Transport for the North early in the new year to further drive forward progress.

For longer distance travellers, they should be able to buy tickets online or on mobile phones, and use the barcode system to travel round the country without the need for a paper ticket. That technology is now being rolled out. We need to step up the pace.

The other thing that I can do which I hope and believe will help the passenger experience is to change the way in which we let franchises to train companies. On a network which needs substantial public subsidy and which needs billions of pounds of investment, it is right that we seek to maximise the revenue which flows back to the public purse. But this cannot be done at the expense of the passenger experience. Franchising is delivering some real improvements – like the complete replacement of all the trains operating in East Anglia. But we also need to make sure that quality and train performance – and the passenger experience – are set at the heart of the franchise objectives and incentives that we set to a much greater degree than they are at the moment. I believe we can push for quality and still achieve the financial performance that the taxpayer needs.

I will be reviewing how we do this for future franchise competitions, including the forthcoming East Midlands franchise competition. We need to recognise that some franchises are now very big. The West Coast Partnership proposals shows an imaginative response to running a railway and building HS2. They recognise that the skills required may involve more than one company. I am very open to better ideas for having our railways work for passengers.

Ladies and gentlemen. I also want to say something about the people who work on our railways. I want a world class railway that offers world class job opportunities. I have already set out my ambition for 30,000 apprenticeships across rail and road by 2020, and we are building dedicated high speed rail colleges in Birmingham and Doncaster.

Our network today is run by decent hard working people who feel passionate about the services they operate.

I see us needing more people, not fewer, as we cope with raid growth. I want a stronger partnership between the leaders of our railway and their employees. I want those who work on the railway to have a stake in its success. So in the coming weeks I will be also setting out plans for employees to have a financial stake in the future success of our railway, based on how well it looks after its passengers. I am pleased that Network Rail is already moving in this direction.

But I also need to say something about the rail unions. They have some real decisions to take. The strike action on Southern has been completely gratuitous and has little to do with the operation of that railway. Driver controlled operation has existed on our railway for decades.

A substantial proportion of the trains on Southern are already operated in this way. Rail safety experts say that union claims about safety are simply not true.

The multi-billion pound investment in new trains for the route inevitably comes with new technology and new ways of working. No other industry today fights modernisation. Organisations that succeed and deliver excellent service embrace modernisation.

We are a government that believes in our railways and are investing in their future. The money that the Chancellor set aside to start digitalising our signalling in the Autumn Statement is a clear sign of that.

So I say to the unions. I respect our hard-working staff; I want us to continue to have the safest railways; passengers deserve the spacious new trains; so stop your needless strikes; come to the table and let’s work together.

There is no way that our railways can meet the challenges of today, let alone those that lie ahead, if the unions do not adapt to meet this new reality.

Ladies and gentlemen. If our railways are to cope with the challenges of today and tomorrow it will take more investment, new ways of working, new ways of funding improvements, more joined up management, simpler structures, collaboration across the industry. We can and will make this a real golden era for rail. We can transform the passenger experience. We can create opportunities across our society.

We can and we will make sure our rail network plays its part in making this a country that works for everyone.

Click here to read this speech on the Department for Transport website