ORR backs introduction of Rail Ombudsman

How can rail passengers be given greater protection?

Despite train operating companies improving their information provision and delay compensation, the Office of Rail and Road (ORR) says complaints handling must improve. To this end, it now supports the introduction of a Rail Ombudsman to provide a better service to passengers and resolve disputes.

In its Measuring Up report published on July 26, the ORR’s research shows that although passengers were broadly happy with the ease of making a complaint and with the politeness of staff, 59% were unhappy with the outcome of their complaint and 52% with the way their complaint was handled.

The number of complaints rose by 8% compared with a year ago (to more than 500,000), and the ORR says 12 out of the 24 train operators studied did not provide a full response to 95% of complaints they received within the required 20 working days.

However, the ORR also says that successful compensation claims have risen by around ten percentage points in the past year. Companies are also providing better information on how to choose, buy and use tickets (although the ORR notes that improvement is needed, such as for group fares). And 12 operators guarantee to refund extra costs to passengers who buy tickets from a machine without realising there are cheaper fares available. ORR Director of Railway Markets and Economics John Larkinson said: “We are seeing that the industry is improving customer service in some areas, such as compensation for delays, but the quality of service when dealing with passenger complaints needs to be better. This is why we are supporting setting up an Ombudsman, and will also continue working with industry to keep offering a better service to passengers.”

The top reasons for complaints are punctuality and reliability (26.5%), online ticket sales (7.3%), onboard facilities (7.1%), ticket buying facilities (7%) and ticketing and refunds policy (6.8%).

For many years, the Government, train operators and the Regulator have been looking to ‘put passengers at the heart’ of the rail industry. How can passengers be given greater protection and the railway be held more accountable to its users? This is a key issue which continues to vex the industry.

One idea has been a Rail Ombudsman. This was an idea promoted as a Private Members’ Bill by Tim Loughton, MP for East Worthing and Shoreham, prior to the recent General Election campaign. It did not make it through the Parliamentary process in time, but it is an idea which appears to have gained cross-party support, and it found its way into Theresa May’s manifesto.

It remains to be seen whether this idea will be pursued - and an Act of Parliament will be required if we are to see a Rail Ombudsman. However, with the Government now seeking policy suggestions from other parties, it is potentially an easy win.

What would the Rail Ombudsman do?

Put simply, the Rail Ombudsman would stand up for the interests of rail users. It would incentivise good performance, ensure that complaints and disputes are properly handled, and have the power to impose binding rulings on train operators and passengers.

While the precise role and powers still need to be defined, the clear intention is that the Rail Ombudsman would be an independent arbiter spanning the industry, with the hope that this will improve confidence in the industry as a whole.

What is the problem?

The proposals are intended to address a number of prevailing perceptions. Train operators benefiting from

passenger misery: When trains are delayed or cancelled and Network Rail is at fault, train operators receive performance payments under the terms of their track access contract.

Known as Schedule 8 payments, these are intended to compensate for the revenue impact of the delay. These payments are used to fund any compensation payable by the train operator to the passenger (as well as other costs which may arise), but the amount paid to passengers tends to be less than the amount received from Network Rail, leaving the train operator with a profit.

Resolution of complaints: Passengers

are expected to accept the decision of train operators. While Transport Focus has certain important responsibilities, it is not able to resolve complaints, impose decisions or offer alternative dispute resolution.

Adequate compensation: While passenger compensation has become more generous in recent years with the introduction of Delay Repay, sometimes this does not fully compensate the passenger for the actual losses suffered (taxi costs or hotel costs, in extreme circumstances).

How would the perceived problems be solved?

The proposals offer a number of possible solutions:

Schedule 8 payments: Instead of payments being made to the train operator, they would be paid into a central pot, which would be used to fund the activities of the Rail Ombudsman and from which delay compensation would be paid. Any surplus would be used to fund other passenger benefit schemes.

While this would address the issue of train operators making profits, and by centralising the process make it more streamlined, it does not solve everything. Train operators incur additional cost and suffer revenue losses as a result of performance issues - it seems fair that these are compensated, otherwise the impact will simply work its way back into the premium/subsidy bid for a franchise. It could mean that funds available to drive passenger benefits for the many are instead used to compensate the few.

The track access agreement is between the train operator and Network Rail (and so it is not clear how the funds would end up in the central pot), and will need either legislation or the franchise agreement to compel the train operator to pay up.

It is also worth remembering that this is something which the Office of Rail and Road has considered relatively recently, in the context of the supercomplaint made by

Which?. One of the outcomes of this was the recommendation to make passengers more aware of their compensation rights and to make it easier to obtain compensation. It is probably too soon to say whether this has been successful. Complaint resolution: The Rail Ombudsman would be empowered to resolve passenger complaints where the train operator has not been able to (to the passenger’s satisfaction).

Drawing parallels with the Energy Ombudsman model, the train operator would first need to be given the opportunity to respond within six to eight weeks. In the absence of a satisfactory response, the matter could be escalated to the Rail Ombudsman for resolution.

The Ombudsman would have powers to deal with a broad range of complaints - it could require the train operator to offer an apology, an explanation of what went wrong, action to correct the issue, and/or a financial award. Awards of the Ombudsman would be enforceable in court and train operators should take comfort from the impartiality of the Ombudsman. Here, the role of the Rail Ombudsman seems particularly relevant and it could be a powerful voice for the passenger.

Compensation: Offering a centralised compensation regime in theory saves costs and means that the service can be more widely promoted, so that those affected can access it more easily.

However, it could be said that train operators are the better placed (with access to the relevant information) and are better incentivised to undertake this role. As the parties driving customer service and satisfaction to generate revenue, the train operators are best placed to act on criticisms to the services offered.

A step in the right direction?

As ever, the devil will be in the detail. This could lead to heated discussions in Parliament during the process of the legislation needed to create a Rail Ombudsman.

The creation of a Rail Ombudsman may fill a vital gap in consumer protection for the rail passenger. However, the roles which the Rail Ombudsman would play need to be carefully thought through so that they can be properly implemented and not drive perverse behaviours that could have an impact across the industry.

This move is definitely in the right direction, but needs to be carefully considered before being implemented.

Darren Fodey is a Senior Associate and Richard Shepherd is an Associate in the Rail team at Stephenson Harwood LLP.