Delay Repay is compensation gone mad and ignores how the real world works

[najaB]

Your posts are based on ideas and guesswork, but it is a fact that from a purely financial perspective (ignoring any reputational problem that may result), many delays boost TOC profit margins...

And many do not. It's pretty much a wash.

 

[rs101]

You're pushing a rope here, there are some posters in whose minds TOCs can do no right. You're trying to use reason against near-religious fervour.

I think some posters are of the opinion that TOCs are some special case where normal standards of consumer law and customer service shouldn't apply.

 

[Starmill]

I would also point out that the way we are presented with Delay Repay by ministers is almost as a way to be tit for tat to the train companies, rather than actually offering compensation for the inconvenience. The way Northern's shift to Delay Relay 15 was announced was very much an appeal to passengers to claim more cash back to placate them and quieten some of the vicious criticism levelled at Northern recently.

For most people, where no connecting transport is impacted, a delay of 17 minutes is unlikely to cause much inconvenience. It's unlikely that they really need a payment for that, even a small one. But that's not really the political reason it's happening. When there's criticism of the fare rise, criticism over delayed timetable improvements or criticism over poor punctuality, the response from Ministers is 'we've organised you more compensation'.

There seems to be zero interest from Ministers (who, let's not forget, are the crucial source of this policy) in this costs that Delay Repay results in. That should be our clue as to what it costs. I have long suspected it is a cheap way to give the veneer of action.

If we speculate, for example, the cost of restructuring contracts to end the weekly and serious Sunday driver shortages in the North West with the marginal cost of introducing Delay Repay 15, I think I know which would be cheaper. It's also the far less useful of the two.

It's also bizarre that people are worried about the costs of Delay Repay, and the risk that this may be passed on through higher fares, but aren't worried about the other costs in the industry or why they're so inflated.

Fundamentally the argument that we ought not have 'no-fault' compensation schemes because it might lead to higher fares belongs in the bin, along with other bizarre arguments seen on this forum such as 'You want a train that doesn't have a leeking roof? You would have to pay higher fares for that.'.

 

[ForTheLoveOf]

I can understand the concerns of posters who are worried that having Delay Repay may be leading to above-inflation fare increases, and in a sense, that is a legitimate concern.

However, the cost of Delay Repay is such a drop in the ocean compared to all the other costs the TOCs have, that a change from compensation based on the NRCoT minima, to compensation based on Delay Repay, is highly unlikely to even be a consideration when determining fare increases.

In most cases, the one and only reason for RPI fare increases is because the franchise agreement which the TOCs have signed up to, is predicated (financially speaking) on such increases. This is linked with the fact that the Government continually wants to reduce rail subsidy (well, at least the DfT wants that).

The two ways of reducing subsidy are reducing costs and increasing revenue. Reducing costs is one of the driving factors behind the push for DOO, and increasing revenue is one of the reasons why fares increase at RPI rather than CPI.

If better compensation is announced, as @Starmill pointed out, that means that the effect of inflationary increases (or even, as has happened in a number of cases this fares round, above-inflation increases) is dampened somewhat. But what is fixed either way is the fare increases: they would be happening, regardless of the amount claimed in compensation. The TOCs would be at risk of having a reduced, or no, profit margin in many cases; whilst many passengers may think this fair, the shareholders of the TOCs obviously wouldn't.

And as for Delay Repay being 'rolled out' - it has been in existence across most TOCs for many years by now. The latest TOC to gain is was Transport for Wales, and that was several years after the last rollout. Only Chiltern and GWR remain as franchises that don't have it yet (Grand Central being the only open access not to have it). I expect that, within the next 2-3 years, both of the former two will have it. Grand Central may yet remain on the current system for many more years, unless the NRCoT are updated.

 

[Bantamzen]

I'm in favour of delay repay existing, and for it paying out regardless of the cause of the delay.

It should exist, because it puts a cost on what is otherwise an "externality": A TOC can have a horrible punctuality record and it doesn't cost them much (eventually it will cost them ticket sales, but that's fairly inelastic - and if they operate a London commuter route where people don't have a choice, it's almost totally inelastic). With Delay Repay, there's a cost associated with being late, so there's an incentive for the TOC to avoid being late. Yes, this will cost them, and yes, this will be passed on to fares; ultimately it's a policy choice that it's better to be on time than to be as cheap as possible.

It should pay out regardless, because that keeps things simple and avoids endless rows over what is and isn't the TOC's fault, with the associated need for ombudsmen, court cases, etc. For an example of what happens when this approach isn't taken, see airlines claims of a few years ago that planes breaking down was a "cause outside their control".
It's analogous to buying faulty goods at a shop: The fault may be down to the manufacturer, or the courier, rather than the retailer, but my contract is with the retailer and it is them that must refund me.

But TOCs don't just deal with faults, for example when some poor soul has had enough of life and steps out in front of a train, or a storm brings flooding and damage to trackside equipment. This isn't the fault of the TOC or Network Rail, its force majeure. But one or the other has to fund compensation regardless, and ultimately that cost will be passed on not simply absorbed.

Your posts are based on ideas and guesswork, but it is a fact that from a purely financial perspective (ignoring any reputational problem that may result), many delays boost TOC profit margins, as the money they get from Network Rail outweighs the company's additional costs (which include delay compensation liabilities)

One of the factors that caused the demise of GNER (not the only one, but the impact was sufficient to warrant mention and demonstrate my point) was stated to be...

Source: https://www.ft.com/content/7a74e824-2962-11db-9dcc-0000779e2340

Well that in itself is a problem with the franchising system, so forgive me for saying this but I don't really think its a great example to use in a debate about delay repay. In these situations it is ultimately the taxpayers not only funding it, but the exploits used by TOCs to keep their profits up and even dependant on.

That I promise you won't last. Government departments are all bracing themselves for more, and deeper funding cuts as Brexit continues to cause uncertainty and anxiety for both the public and private sector. So what will happen when Network Rail's budgets are cut, but they still have to fund compensation to TOCs and thus to passengers? Improvement projects will get delayed, shelved or cancelled, the day to day maintenance will suffer, more delays, more compensation, even less funds, more project delays and so on.

As Delay Repay expands, I forsee more problems and as a passenger who needs the railway network to functuon I'm not sure I think expanding compensation is the right way to tackle performance issues. This of course is ny own personal view, and probably won't be liked on these forums. But I take a much wider view of things and would rather see the scheme left as more of a serious delay compensation scheme than as some platitude for passengers as improvements fall by the wayside.

I'm off now to put on my tin hat for the inevitable flak I will doubtless receive. "Incoming...."

 

[yorkie]

But TOCs don't just deal with faults, for example when some poor soul has had enough of life and steps out in front of a train, or a storm brings flooding and damage to trackside equipment. This isn't the fault of the TOC or Network Rail, its force majeure. But one or the other has to fund compensation regardless, and ultimately that cost will be passed on not simply absorbed.

TOCs are compensated by Network Rail for such events.

If you wish to propose that this practice ceases, feel free to create a new thread in 'Speculative Ideas'. It's beyond the scope of this thread and this forum section.

Well that in itself is a problem with the franchising system, so forgive me for saying this but I don't really think its a great example to use in a debate about delay repay. In these situations it is ultimately the taxpayers not only funding it, but the exploits used by TOCs to keep their profits up and even dependant on.

That I promise you won't last. Government departments are all bracing themselves for more, and deeper funding cuts as Brexit continues to cause uncertainty and anxiety for both the public and private sector. So what will happen when Network Rail's budgets are cut, but they still have to fund compensation to TOCs and thus to passengers? Improvement projects will get delayed, shelved or cancelled, the day to day maintenance will suffer, more delays, more compensation, even less funds, more project delays and so on.

Again if you wish to post proposals for changing the franchising system, feel free to create a thread in the relevant section.

As Delay Repay expands, I forsee more problems and as a passenger who needs the railway network to functuon I'm not sure I think expanding compensation is the right way to tackle performance issues. This of course is ny own personal view, and probably won't be liked on these forums. But I take a much wider view of things and would rather see the scheme left as more of a serious delay compensation scheme than as some platitude for passengers as improvements fall by the wayside.

I'm off now to put on my tin hat for the inevitable flak I will doubtless receive. "Incoming...."

Delay Repay has been in place with some TOCs for many, many years now, so if it was harmful to those TOCs, we would know about it by now.

What "problems" are the existing TOCs experiencing, that could be exposed to those TOCs who are yet to make the switch to Delay Repay?

 

[Bantamzen]

TOCs are compensated by Network Rail for such events.

If you wish to propose that this practice ceases, feel free to create a new thread in 'Speculative Ideas'. It's beyond the scope of this thread and this forum section.

Again if you wish to post proposals for changing the franchising system, feel free to create a thread in the relevant section.

Fair enough.

Delay Repay has been in place with some TOCs for many, many years now, so if it was harmful to those TOCs, we would know about it by now.

What "problems" are the existing TOCs experiencing, that could be exposed to those TOCs who are yet to make the switch to Delay Repay?

Well rumours abound that Arriva/Northern are getting nervy abour profits, OK its only rumour but if they are the expansion of the scheme might be on their radar. Just because it hasn't caused issues in the past doesn't mean it won't in the future. But as I say these are my opinions, we'll probably never agree on this so it is a case of wait and see. I'll either be wrong or right.

 

[35B]

Does your company's costs reflect this requirement? And if say there were regular occasions where disruption to the contracted services beyond their incurred additional costs to your company, would they absorb these costs without considering changing their pricing or services?

I'll wager the answers in order are yes, and no. No private business can operate in the long term where it is forced to compensate for events beyond it's control unless it mitigates for it by adding the potential cost of the risk to its prices. Or as in the case with the TOCs they can be compensated by a third party, in this case Network Rail, who as we know are funded by the taxpayers, aka the passengers.

Again I'll state, I am not against TOCs being effectively fined when they get it wrong. But fine them when things are beyond their control, and watch the cost work its way back.

You are right, the costs are factored into prices, and sustained external failures incurring credits would make us look at changing something to modify the risk if it was beyond our assumed parameters.

However, customers do still seek that comfort, for two reasons. One is to lay off their risk if we don’t deliver. The second is as a way of focusing our attention on getting the quality right. It’s worth note that there are big players in our market who won’t offer service credits. They generally have a reputation for arrogance and poor service.

 

[yorkie]

I don't use Grand Central any more. There are several reasons for this, some of which are not relevant to this thread, but one of them is because I know that I won't get much - if any - compensation if I am delayed. LNER operate a Delay Repay scheme, so at least I know that I will get compensation if a delay of 30 or more minutes occurs.

Grand Central have treated me and my friends badly when we were delayed, and shirked their responsibilities and harped on about delays to services that were not the service that we were booked to travel on, and were travelling in the opposite direction, and I am therefore bearing this experience in mind when I make future travel plans.

I am also aware of Hull Trains refusing to issue compensation where they should have done, so again I am very weary of booking them for any legs of any journey I make. Although I was never a regular customer of theirs (I was with GC), I have used them occasionally but am much less likely to now.

I accept that sometimes delays occur, but what I expect is for the level of compensation that most TOCs provide. If a cowboy operator chooses not to match this, then I will bear their poor attitude to customers in mind when making my travel plans.

If people choose to think that losing custom is a good thing for a TOC's profits, that's their prerogative.

 

[Starmill]

One is to lay off their risk if we don’t deliver. The second is as a way of focusing our attention on getting the quality right. It’s worth note that there are big players in our market who won’t offer service credits. They generally have a reputation for arrogance and poor service.

This is absolutely right, and I think goes to the heart of the issue. There's no reason why, if some externality generates a large extra cost, that would usually default to being placed on the customer. In most industries a large firm would simply accept the extra costs of unforeseeable disruption themselves, because it's such awful publicity and legally dubious to say to a customer "sorry, we can't deliver your service because of xyz which is outside of our control, you'll have to just put up with it". Imagine if a modern hotel, built to all of the correct building standards, suffers fire damage. The customers in the damaged rooms would be re-accomodated elsewhere, even if that meant arranging transport to another hotel. They wouldn't simply be left with nothing.

The principle of this argument is all topsy-turvy. The question is not "Why should the customer be paid compensation?" but in fact why wouldn't they. The fact that, as a legacy measure, a few train operators can still get away with this is an outlier.

This does, however, touch on my past point about that change to rules of compensation. I always was and still am happy to receive compensation as a voucher or online credit. While there are obviously drawbacks to this (people visiting from abroad etc), it did keep the compensation money in the system, and I always found some trip to go on to use the vouchers up.

Finally, I think it is absolutely wrong that compensation for 15 minute delays is effectively being used as a sop to cover up delays to service enhancements, or in some cases to try and mitigate against criticism of some planned timetable improvements which seem to have been tacitly abandoned. Offering compensation for delays of 15 - 29 minutes should not be used as a proxy for solving industrial disputes including strike action, resolving endemic, long-term staff shortages, lack of rolling stock or general timetable unreliability. It does seem that, politically, it is being used in this way and I think that's quite wrong. Those issues should be tackled at their source. This is a classic case of dealing with the symptoms and failing to deal with the cause.

I'd be far more satisfied of Delay Repay for 15 minutes were scrapped, and a 30 minute limit were in place, but that this were universal and applied even on GC and HT, LO and XR.

 

[Bantamzen]

You are right, the costs are factored into prices, and sustained external failures incurring credits would make us look at changing something to modify the risk if it was beyond our assumed parameters.

However, customers do still seek that comfort, for two reasons. One is to lay off their risk if we don’t deliver. The second is as a way of focusing our attention on getting the quality right. It’s worth note that there are big players in our market who won’t offer service credits. They generally have a reputation for arrogance and poor service.

I do understand the point on compensation as a method for focusing attention to quality of service, it is a method used in other service industries like the airline industry. However in these industries there is provision for force majeure, described in the airline industry as "extraordinary circumstances" such as extreme weather or bird strikes. Furthermore the airline industry is not effectively underpinned by any taxpayers, as is the case with the rail industry. This appears to have the effect of lessening or even removing the impact on TOCs, sometimes becoming part of their profit modelling.

This is absolutely right, and I think goes to the heart of the issue. There's no reason why, if some externality generates a large extra cost, that would usually default to being placed on the customer. In most industries a large firm would simply accept the extra costs of unforeseeable disruption themselves, because it's such awful publicity and legally dubious to say to a customer "sorry, we can't deliver your service because of xyz which is outside of our control, you'll have to just put up with it". Imagine if a modern hotel, built to all of the correct building standards, suffers fire damage. The customers in the damaged rooms would be re-accomodated elsewhere, even if that meant arranging transport to another hotel. They wouldn't simply be left with nothing.

The principle of this argument is all topsy-turvy. The question is not "Why should the customer be paid compensation?" but in fact why wouldn't they. The fact that, as a legacy measure, a few train operators can still get away with this is an outlier.

Where fault lies with the industry I agree, compensation should be paid. However where I disagree is where circumstances beyond the control of the industry causes delays. In the former, in theory if not necessarily in practice the industry should be absorbing the costs and seeking to reduce the causes. However in the latter costs will simply be passed directly to passengers through pricing structures, or indirectly through subsidies or industry grants.

This does, however, touch on my past point about that change to rules of compensation. I always was and still am happy to receive compensation as a voucher or online credit. While there are obviously drawbacks to this (people visiting from abroad etc), it did keep the compensation money in the system, and I always found some trip to go on to use the vouchers up.

This is an interesting issue that I hadn't considered, and might be worthy of a thread in its own right.

Finally, I think it is absolutely wrong that compensation for 15 minute delays is effectively being used as a sop to cover up delays to service enhancements, or in some cases to try and mitigate against criticism of some planned timetable improvements which seem to have been tacitly abandoned. Offering compensation for delays of 15 - 29 minutes should not be used as a proxy for solving industrial disputes including strike action, resolving endemic, long-term staff shortages, lack of rolling stock or general timetable unreliability. It does seem that, politically, it is being used in this way and I think that's quite wrong. Those issues should be tackled at their source. This is a classic case of dealing with the symptoms and failing to deal with the cause.

I'd be far more satisfied of Delay Repay for 15 minutes were scrapped, and a 30 minute limit were in place, but that this were universal and applied even on GC and HT, LO and XR.

I more or less agree with all of this, save perhaps when compensation should start where I might be more inclined to say 60 minutes rather than 30.

 

[rs101]

If I send something via Special Delivery and it doesn't arrive on time, then I'm compensated. Doesn't matter if the delay was down to Royal Mail or something outside their control (crash on the M25, for example).
They offer a service and cater for that in their pricing.

 

[Bletchleyite]

I more or less agree with all of this, save perhaps when compensation should start where I might be more inclined to say 60 minutes rather than 30.

I'd go with 30. I do agree 15 is a bit much and could be done away with without really upsetting people, though it does have the advantage of concentrating TOCs' minds on sloppy timetabling.

 

[35B]

Where fault lies with the industry I agree, compensation should be paid. However where I disagree is where circumstances beyond the control of the industry causes delays. In the former, in theory if not necessarily in practice the industry should be absorbing the costs and seeking to reduce the causes. However in the latter costs will simply be passed directly to passengers through pricing structures, or indirectly through subsidies or industry grants.

In principle, I could be willing to go with you there. In practice - see many GWR threads - it creates ambiguity about the definition of "beyond the control of the industry", and the suspicion that it is being defined in the company's interest and against the customer. It also increases the cost of managing claims, whereas part of a Delay Repay scheme's virtue is that it is binary.

You make a comparison with commercial aviation; to me, the interpretation of EU216 by some airlines (notably Ryanair) shows that the existence of force majeure provisions acts an incentive to treat customers unfairly.

Ultimately, to me it is about a fair balance between customer and supplier. Delay Repay does this in a balanced and proportionate way; it may be imperfect, but (to paraphrase Churchill) the alternatives are all worse.

 

[Gareth Marston]

I too question the thinking behind 15 min delay repay especially as many parts of the country suffer from the effects of Government encouraging and accepting franchise bids for more services that have caused congestion and delay because the infrastructure has not been upgraded to cope with more frequent services.

Here on the Cambrian the Welsh Government opted to fund the cheapest with least built in performance resilience option for increasing track capacity back in 2008 so that extra services could run. We've yet to try it at hourly frequency in action yet, however they (WG) have decided to reopen Bow St station by 2020. Bow St station will wipe out the current 12 minute turnaround times at Aberystwyth. The station sites sits at the bottom of a V shaped dip with 1 in 75 gradients on both sides for about a mile. Stopping there and restarting up a steep gradient will chew up minutes, what little resilience there is will be lost. Delay Repay will do nothing to resolve it - people prefer the trains to run on time.

 

[Bantamzen]

I'd go with 30. I do agree 15 is a bit much and could be done away with without really upsetting people, though it does have the advantage of concentrating TOCs' minds on sloppy timetabling.

I'd be more comfortable with a 30 minute cutoff where force majeure was considered.

In principle, I could be willing to go with you there. In practice - see many GWR threads - it creates ambiguity about the definition of "beyond the control of the industry", and the suspicion that it is being defined in the company's interest and against the customer. It also increases the cost of managing claims, whereas part of a Delay Repay scheme's virtue is that it is binary.

You make a comparison with commercial aviation; to me, the interpretation of EU216 by some airlines (notably Ryanair) shows that the existence of force majeure provisions acts an incentive to treat customers unfairly.

Ultimately, to me it is about a fair balance between customer and supplier. Delay Repay does this in a balanced and proportionate way; it may be imperfect, but (to paraphrase Churchill) the alternatives are all worse.

I'm not sure the alternatives are as bad. Clearly the compensation system in place for TOCs is flawed, as they can and have used it to make profits and build business models around. And Delay Repay is rapidly becoming a political appeasement for ever growing network problems, delays and disputes, all underwritten by the taxpayer. So there is more to do to strike that best balance.

 

[Gareth Marston]

And Delay Repay is rapidly becoming a political appeasement for ever growing network problems, delays and disputes, all underwritten by the taxpayer.

but does nothing to solve the underlying causes.

 

[Bantamzen]

but does nothing to solve the underlying causes.

Indeed, in fact as I've previously said I can see it becoming part of the problem.

 

[bnm]

Only Chiltern and GWR remain as franchises that don't have it yet (Grand Central being the only open access not to have it). I expect that, within the next 2-3 years, both of the former two will have it.

GWR are introducing Delay Repay in early 2019. No official public announcement yet, but it has been briefed to staff.

 

[Starmill]

GWR are introducing Delay Repay in early 2019. No official public announcement yet, but it has been briefed to staff.

This has been a non-starter in the past, where rumours and leaks suggest Delay Repay is to begin, but then in fact it doesn't for whatever reason. As far back as 2014 and 2015 there have been question marks over this.

GWR also announced a new Penalty Fares scheme but then nothing happened with it. It seems there's previous in this area.

 

[bnm]

Why would the MD put his name to a staff briefing of the change were not going ahead.

I can be as cynical as the next man when it comes to GWR, but I've no reason to doubt the staff who've told me it's going ahead.

 

[bb21]

as the money they get from Network Rail outweighs the company's additional costs (which include delay compensation liabilities)

In fact, as odd as it may sound, as I recently discovered, it does not include compensation liability, not directly or in full at least. That money is usually accounted for from a different pot.

TOCs are compensated by Network Rail for such events.

External causes will fall under either TOC responsibility or NR responsibility (and sometimes joint responsibility). NR compensate TOCs only for events classed as NR responsibility, and a proportion of those classed as joint responsibility. Fatality is a prime example where the TOC will pick up a bill of some sort in most cases.

I won't get too involved in the discussion in this thread but I think Starmill's posts summed up my opinion on this matter reasonably well, if not completely. Fundamentally the customer paid for a service, so is entitled to compensation when the standard of service provided falls short of expectation, the question that needs to be answered is where the threshold should sit, not who is responsible. Delay Repay is a much simpler and cheaper system to administer, and really, it is the operator's responsibility to recoup costs from those responsible. The customer's contract is with the service provider and the service provider alone.

Just a quick word about the significance of Delay Repay money seeing that a few people have commented on that. While it is true that it pales into insignificance when compared to other costs involved in running a railway, it is still a substantial cost. In an operational context they tend to matter less, but in a financial context they are still an important part, so I do agree that this money has to come from somewhere. What I cannot really tell you is where, as different companies will have different views on this, and how much impact it has on the financial forecasts for each TOC.

 

[Starmill]

I can be as cynical as the next man when it comes to GWR, but I've no reason to doubt the staff who've told me it's going ahead.

Given I don't know them, it wouldn't be my place to comment. I'm only quoting your own previous regarding the implementation of the new compensation scheme. To use your words, when it comes to Direct Award, GWR are good at negotiating what is best for themselves rather than what is good for the passengers. If 'this time, it's different' is true, then fantastic.

Rumours reach us all the time that staff are briefed things that turn out to be bull all the time.

Still, assuming a public announcement is made this will be a splendid development. GWR passengers have had to put up with excuses and poorer rights than almost all other railway passengers for far too long.

 

[jon0844]

Where do we claim for the forum downtime this week? One hour or so delay on posting.

Was it planned engineering work?

 

[ForTheLoveOf]

Given I don't know them, it wouldn't be my place to comment. I'm only quoting your own previous regarding the implementation of the new compensation scheme. To use your words, when it comes to Direct Award, GWR are good at negotiating what is best for themselves rather than what is good for the passengers. If 'this time, it's different' is true, then fantastic.

Rumours reach us all the time that staff are briefed things that turn out to be bull all the time.

Still, assuming a public announcement is made this will be a splendid development. GWR passengers have had to put up with excuses and poorer rights than almost all other railway passengers for far too long.

Chiltern will soon find passengers knocking on their doors asking why they aren't introducing Delay Repay yet! Although, despite the inevitable Direct Award or two, we should see a new franchise within a few years, undoubtedly with Delay Repay of some kind (hopefully Delay Repay 15, which would be a massive step change!).

 

[JB_B]

Where do we claim for the forum downtime this week? One hour or so delay on posting.

How much did you pay for your ticket ?

 

[davart]

Delay repay is a good thing - refunds due as a result of poor performance.

I do agree that the compensation culture has gone too far. With regards to trains however, they are a service that operates to a timetable.

I used to get the train to work years ago but frankly got sick of having to explain why I was regularly 5 minutes late. It reflected badly on me so in the end bought a car for a 9 mile commute. There was only a couple of trains an hour at the time, so not a lot of room for getting an earlier train.

The situation remains today. On some routes, you simply cannot rely on a train at all if you value your job.

I enjoy travelling by train. I can read, eat, relax.

It is however too expensive and too unreliable as a method of travelling to work.

Delay repay must be structured so that it really does penalise both train companies and track owners as appropriate. So called 'Acts of God' should not be paid by a train company individually but the costs shared amongst all of the operating companies.