Welcome to our second panel. Can the witnesses please introduce themselves?

Good morning. I am Anthony Smith, and I am the chair of Independent Rail Retailers, which is the trade association for the main retailers of rail tickets in Britain and abroad. Our members collect about £5 billion-worth of the rail industry’s revenue at the moment, or about half of its revenue, and pass it back to the Government. We have 10 members; you will recognise Trainline among those, but we also have others, including Trip.com, Omio and others. They do three things: they sell tickets to consumers; they help businesses choose rail for staff travel; and they white label a lot of services for people, including Uber, allowing them to sell tickets.

Good morning. My name is David Pitt, and I am the vice-president of SilverRail UK. SilverRail is a technology business that essentially provides services to a number of train operating companies in the UK. We also work with National Rail Enquiries, and we have supported it for some 20 years in journey planning. We also provide services around the world. We have a deep-rooted expertise in retailing, but we are not a retailer ourselves.

Good morning. My name is John Davies, and I am the vice-president for industry relations at Trainline. I appreciate the opportunity to speak to you today. Around 18 million customers in the UK rely on Trainline, and we are proud to be a British company and one of the most trusted brands in UK rail.

Why do you feel that an open market for ticket retail is in the wider interests of passengers? Would it not be simpler for passengers to have a single place to go for tickets, which is what advocates of the GBR-proposed approach would say?

Of course, how passengers book their tickets really matters. Retail is the shop window for rail, and it is often a customer’s first contact with the industry. We help shape how people feel about rail, whether they trust the system and, ultimately, whether they make a decision to travel by train at all. It is important to note at this point that the Government themselves, in their consultation document in February, have already noted what they term the “significant value” retailers add to the marketplace, and the role that they play in driving innovation and attracting more customers to the industry. To unpack that a little, competition in the retail segment has clearly driven up standards for passengers, which, in turn, drives up passenger demand, and our very low cost of sale reduces a subsidy burden on the taxpayer. We have to constantly innovate to make rail travel as easy and accessible as possible. Customers always have a choice in where to go to buy their ticket, so they have to have a reason to choose an independent retailer. We have invested £250 million in the last five years in our digital platform and our engineering architecture, to give customers the very best experience they can have when they travel by train. We bear all the costs and risks associated with that. In terms of the employment that we offer and the broader workplace, we are an innovative and exciting brand that attracts the very best talent in the technology industry from other big players, who bring highly-skilled e-commerce expertise into rail. We have about 1,000 employees, half of whom are engineers, data scientists and technology specialists who create all the magic that customers experience when they use our retail experiences. In terms of industry benefits, retailers have been at the forefront of, in particular, the digital ticket revolution in the UK. Now 50% of the tickets sold on behalf of the industry are digital. We have heavily invested in the barcode infrastructure that you see; retailers contributed about 70% of the £30 million cost of upgrading the barcode infrastructure—again, reducing industry costs. I want to pick up on Scott’s point to the previous panel and slightly resist the notion that fare simplification will in due course somehow reduce the purchase of rail travel to a two-dimensional transaction. Retail is not just selling tickets. Travelling by train is a sophisticated and complicated consumer transaction, and it always will be. This week, for example, we have launched a suite of enhancements called “The Way to Train” internally that help customers navigate disruption, use artificial intelligence to anticipate it and present them with options of the things they can do—claim their delay repay and change their plans if that is what they need to do. It is never, ever going to be just a two-dimensional problem about how to buy tickets.

I would echo a lot of what John has said. Competition is paramount in this market. Essentially, ticketing and retail—especially in the digital sense—is the shop window for rail. Without that shop window, we suffer the consequences of not seeing increases in revenue, reductions in subsidy and so on. The competition that we see today in the market works. However, we have to bear in mind that we are essentially losing 14 brands from the franchise space. That is 14 retailers that we have in the market today. The market of train operating companies has shown an awful lot of fragmentation and a lot of confusion for customers and passengers and is at the centre of some of the issues we see in the retail market today. I am hoping and expecting that with GBR.com, as I will call it from a retail perspective, a lot of that fragmentation will be removed and there will be a lot of simplification. Simplification is not just about the product you are selling but how you fulfil to the customer and how the customer is given journey information, pre and post-sales customer service and so on. We have to look at the retail aspect as not just the ticket. It is very much about the wider experience that customers should and do expect from us as an industry, to make their life easier to travel on rail.

I think this is a great opportunity to get rail retail right in Great Britain. After 25 years of things evolving in an interesting way, we can get it really right now, both for passengers and for taxpayers. At the heart of this, there is a lot to do with the accountability of Great British Railways. It will essentially have a monopoly on quite a lot of services and things it provides, therefore any area where it can be challenged and you can have competition will, in a sense, send an electric shock through the system and will make it think about customers in a way that most businesses have to. For most businesses, competition and private money drives innovation and growth. If our members do not make money—if people do not come back to them and buy from them again and again—they go bust. That is a very positive force. You would not expect to have just one mobile phone provider, like British Telecom—imagine! You have choice; that is what drives growth. If the rail industry is to prosper in the future, it has to get more passengers on board. Costs are notoriously difficult to reduce. The Government cannot sustain the subsidy of £2 billion a year forever, so the only way forward is through growth. Growth is driven by competition. That is what our members do; that is why it is important.

I want to ask a question based on what you have said already. It was interesting to hear you mention the business aspect as well. I think I had forgotten that we all use a business interface to buy, and it obviously offers rail tickets and flights. Yesterday, in his winding-up speech, the Minister said that anybody who was not supporting the Bill was denying the one-stop shop that should exist for ticketing, timetabling and accessibility. Do you think that the Government is oversimplifying what it is trying to achieve and that what you do already could be worked with, rather than being scrapped consistently? Do you think that the aim that the Government is trying to achieve, which to me is essentially just the accessibility piece, could be achieved by the existing market, rather than having to throw everything out and create something new? That could take years and cost an absolute fortune—I would be interested to know about the cost aspect too.

Rebecca, you are exactly right. As Ben on the previous panel said, it is not irrational that GBR would want to have its own shop window, its own marketplace, and all the rest of it, but, for the reasons that the Government has set out, the role of independent retailers competing alongside it brings so much. We want to continue the innovation in the competitive market that we see today. The Passenger Assist piece is really interesting, because we have been seeking to embed the passenger assistance function within the Trainline app for some years now, but the ability to have that has been resisted by industry and Government stakeholders for some time. Perhaps it is now clearer why.

I think your question is a good one, because there is a double opportunity here. There is the opportunity for Great British Railways to have a competitor in selling tickets, but of course Great British Railways will also be providing some of the infrastructure that ticket retailing will hang off, and I think there is a great opportunity to work with the private sector to really boost those systems. The current industry systems are a bit clunky and a bit out of date. There is a chance here to build something really good for the future, around open data and AI, to really help rail sell itself, rather than just retailing. Rail is good at retailing. “Ms Smith, you want to go to Edinburgh at 12 o’clock on Sunday. Here’s your ticket.” “But have you thought of going to the highlands on holiday for 20 quid this year?” Rail could move into that sphere, which airlines, restaurants and all sorts of other people move into. If you get the underlying systems right, there is a great opportunity here, but it has to be done in partnership with Government. You are absolutely right.

Can I just add to that? There is certainly an opportunity for renewal. I would slightly challenge the concept of throwing away what we have today. Essentially, the way the industry works today is based on a number of systems that sit within the Rail Delivery Group. That essentially provides the backbone, and I do not see that changing; I think, in relation to that concept, that that does not get thrown away. From a cost perspective, it is very easy to look at this as a cost-negative way forward, but what we have today, as I mentioned a moment ago, is 14 different retail platforms provided by the train operating companies. I think that, from a customer perspective, consolidating those into one, unfragmented solution for the customer is a very positive way forward. I would say the revenue generated on the back of that is positive and that is where the Government should be aiming to make its benefit.

This is interesting, because if I were Great British Railways, I would be thinking, “Why would I let somebody else sell my tickets?”, unless they were going to bring more custom into the railway. I met what I think must be one of your members, Trip.com, and they spoke about how tourists coming into the UK buy the flight and train trips within the UK, and even from the UK into France. So I get the benefit there, but otherwise why would GBR let someone else sell their tickets? Something that came up yesterday—one of the many demands on the Bill—was that the Minister should confirm that there will not be any booking fees for customers who are buying tickets from GBR, but I guess that people are using Trainline and paying the booking fee because they think it is worth spending that extra money for the service you are providing.

Indeed.

But are you providing extra customers to the railway, and will you with GBR, do you think?

The purpose of our existence is to grow the pie.

But the danger is that you are just trying to get a share of the market that GBR could serve quite happily, rather than bringing new customers in. All you are doing is taking a commission from them for tickets they would otherwise have sold.

Of course, and that is in two parts. We have already established—because the Government have recognised it—that independent retailers play a fundamental role in driving the innovation that brings new customers to the railway. We are in a place where the context sets the frame for that. I think it applies in two other ways. One is the conversation we probably need to have in the industry about the cost of sales—the economics within which independent retailers work. The 4.5% commission that we pay is the lowest cost of sale in the industry, within a broader cost of sale that amounts to, we think, around 10% of the industry’s revenue. That is incredibly competitive. We bear all the costs and the risks of investing in the technology that we do. The other part of it—and why we should think of ourselves as valuable distribution partners to GBR, complementing them in the way that Rebecca says—is the reach into places that GBR itself would find harder. Speaking for Trainline, we operate in Europe. There is a European connection into St Pancras, offering customers the ability to do cross-border travel: come through the tunnel out of St Pancras, up the midland main line, across the concourse to King’s Cross, and up to Scotland. Those are opportunities that it may be better for us to assist with more cost-effectively, and which the Government, in their way, would find harder to reach. I think there is room for all that in this landscape.

Can I add to that, Chair?

We are quite tight on time but go on.

Very briefly: GBR, of course, will not be the only tickets being sold. There are still open-access operators in Scotland, Wales, London and others. Picking up from the earlier question, our members—some are quite small—can focus on quite small businesses and institutions, like Portsmouth football club supporters. They can get there using rail. Bath University—they get their staff using rail. GBR will never have that sort of micro focus.

LNER does, which is fantastic, and I hope GBR uses that as their app. I can buy my tickets on that as well, which I think is a good thing.

The reason why it is good is that there is competition. There is a risk, if you do not have competition, that it will atrophy. Ask LNER: does it cost them 4.5%—which is the commission that Trainline and others get—to sell a ticket? Because I bet it does not. I bet it is more than that. That is going to be one of the key features of the future of the comparability. GBR is not a free cost of sale—somebody has got to pay for it.

In terms of the segment share of industry sales overall, I think through all our portals we sell about 30% of the industry’s tickets—some of that through train operating company-branded systems. However, I think the thing to recognise in this market is that it is a free and open market. There are currently around 30 different places you can go to buy your ticket. There is no compulsion on any customer to come to Trainline. We do not hook them in and retain them through some Machiavellian means to prevent them from going somewhere else. If they come to us, it is because they prefer to come to us, and it is because we make the process of buying a train ticket intelligible and a worthwhile transaction. So yes, we have been successful at attracting customers to rail, and that is where we find ourselves.

In what way is it not true?

Yes, but we have tools that make those options available to people. We have to serve a consumer population that wants the things that most people want to buy. If they need to go and find other things, we can help them do that as well.

I think it is a fine definition. Of course, when we put our go-to-market campaigns out, we take external advice and we test the validity of the claims that we make, and that is the basis on which we publish them—we do all that in good faith. You cite some places where authorities have questioned whether that is strictly correct, but we are content to comply with that direction. That is no issue.

So long as it is about the Bill.

It is not something that I can comment on, but we can come back to you with a bit more detail on that. There is a market for technology expertise in the way that we serve the industry that we do, and you have to reward and remunerate the right people in a way that is comparable for the markets that they are employed in.

John, you have suggested that GBR’s retail arm should be structurally separate from the organisation. Why should that be the case? Anthony and David, do you agree? Are there examples of how other countries with large, state-controlled operators approach this issue?

We think that the decision not to separate out GBR’s online retail function is a structural design flaw, meaning a high likelihood that the Government’s objectives for the reform of the rail industry will not be met. GBR Online Retail will be a new vertically integrated state-owned retailer that will compete with independents. Under those plans, of course, GBR will define and operate the market, including setting its economic terms, and participate in it. This duality of role creates a conflict of interest, the type of which was acknowledged in the Bill’s own impact assessment, and also by the CMA. The Government’s objectives for fair and open competition will suffer unless this conflict of interest is properly addressed. While the Government have set out a number of measures, we do not think that they go far enough. You asked about comparators, such as European comparators—of course, Trainline operates in other jurisdictions. Our experience in the EU is that, where you do not have the right kind of market structures in place, the only recourse becomes via external competition challenge. Under existing frameworks in both Germany and Spain—Germany in 2022, and Spain in 2024—the competition authorities have found that the state operators, with similar vertically integrated structures, have abused their dominant positions.

I would totally back that up. In an ideal world, you would have GBR Online Retail separated out into a separate company whose accounts were audited so that you could see the cost of sale. I think that is very important for keeping GBR accountable. If the Office of Rail and Road is going to be able to compare the retail activities of the different participants, it has to be able to compare apples and apples. If it is not clear what it costs GBR Online Retail to sell a ticket, the ORR is going to be comparing apples with pineapples, and that is going to be difficult. It will not be able to exercise its Competition Act duties. I think that level of transparency is very important.

We are not a retailer, and we have a slightly different view from that perspective. We tend to look at GBR as a retailer and as part of a large operation that will go through an awful lot of change, including fares and ticketing reform. While absolutely living on a level playing field and not having any suitable benefit over and above third-party retailers, we also have to be conscious that we do not starve the retail arm of GBR from its inception, essentially. Ensuring that it is a success for the greater good of GBR and for the passenger is very important.

The Government has acknowledged the need to ensure that GBR is not treated favourably over any other retailer. Are there sufficient measures to ensure that independent retailers have got access to the same data and systems that GBR’s retail arm will have? Could you explain what data it is in particular that you feel you need, in this open data that presumably you want?

That is a very good question. One of the good things about the new set-up will be the creation of a code of practice, which will bind Great British Railways in its dealings with third-party retailers. One of the things that you would expect to see in that is provisions about data. The odd thing is that, as currently structured, the code of practice will not apply to GBR retail. It seems very odd that it only applies to the third-party retailers. To get a reciprocal, sensible arrangement on data, you have got to have everybody playing by the same rules, agreeing to share the same things, and agreeing not to share certain things, because there are commercial interests at play here as well.

What data is it that you are after?

It is more about the customer and the passenger. To answer your question directly first, Alex, the data is driven by the systems from RDG—our delivery group, which we have spoken about already. In terms of creating access to fares, timetable information and all that kind of data, that is there today. It is implicit within the accreditation process for any retailer that they have to be able to sell any ticket across any service in the land. That is implicit within the system we have today, so it has to be bound into what we have in the future, most definitely.

But is it? It is my understanding that the different train operators at the moment provide slightly different data. Maybe John could answer that.

It is true to say that industry data is served up to retailers to consume at quite a granular level, and train operators play a role in that. In 14 different places they upload reservations into a reservation system, and perhaps some train operators do it in slightly different ways from others. There is a consistency to be had here. More broadly, David is right: underpinning it, we as a community of retailers, need access to the fares, the features, the products, the services, the systems and the data that GBR itself is going to have on an equivalent basis. Under the code of practice, parity of market access in that regard is really important. It is not just the data about selling train tickets, as Scott and Rebecca have talked about; it is the access to products and features such as the ability to book passenger assistance, the ability to help customers directly with their delay-repay claims, and the ability to allow independent retailers to also participate in the loyalty schemes that the train operators find it within their budgets to fund. It is also those sorts of things that need to constitute parity of access for independent retailers.

Surely this might be a two-way street. What data would you be willing to share back again?

That comes up quite often, and you are absolutely right—this is a conversation that we frequently have with the industry and the Government. We advocate an innovative and positive position for the sharing of data, because understanding how customers interact with the industry—what they do, what they buy, where they travel, what they have paid, and what might encourage them to do so again—is an incredibly powerful tool, and one that the industry has not really worked out how to get its arm around yet. We need to work out the frameworks within which all that can be exchanged equitably, but it is absolutely the right question.

I absolutely concur with that. Coming back to my point a moment ago, this is all about the passenger and how we give the passenger or customer the best service, the best information and the cheapest price—all that. We need to do this by essentially concentrating on the data. I think part of the question may allude to current practices where some train operating companies have essentially their own tickets or their own pricing for services that they do not necessarily share. That has to be eradicated. GBR will essentially be GBR-broad, and it will give that same price and that same ticket to all retailers.

The prize you outline is aggregated data about what is happening to consumers and who is buying what and why, but keeping it a very macro level. At the moment, I think the industry sees the third-party retailers as a bit separate—a bit add on—and something to be dealt with. The future has got to be a partnership to come together for growth.

It feels as if there is an elephant in the room, which is the National Rail platform. I assume that National Rail is already the national platform, and data is already being shared. Are we perhaps in danger of getting a bit red herringed with the GBR thing? Surely the data sharing that will have to happen for a GBR platform is already going on anyway. Is this creating a problem that does not need to exist?

I think we are halfway towards solving that problem. The Rail Delivery Group absolutely have a marketplace of data—it is there—but as for how accessible it is to organisations like ours, you certainly have to go and find it. There is a lot of consolidation that has to take place between GBR, the Rail Delivery Group and all the organisations we spoke about—that is the crux of the problem.

My actual question comes off that. Do you think that effective provision is being made to ensure that there is a competitive tender process for GBR retail’s back office systems?

Hot off the press in the last week or so, GBR has come out with a market engagement process, which alludes to there being that tender process that is going to be undertaken.

You are not sure yet what that looks like.

I think you are absolutely right that there is a lot of industry data that is shared and is common at the moment. Consumers and passengers can search for train times on Trip.com and on National Rail. But there is a difference between having a single source of the truth—you do not want to double-book seats—and, on the other hand, giving, as you would want, our members the creative space to customise the information coming from the source so that you can add features, update it and constantly make it relevant.

The ORR will have oversight of the retail market, but do you feel that its powers go far enough? What needs to change on the face of the Bill to ensure the fair and open retail competition that you would all like to see?

In an ideal world, I think on the face of the Bill you would have a separate retail arm of Great British Railways which was therefore identifiable and accountable. That would be in an ideal world. What we would like to see in the Bill is more detail about the ORR’s duties and what resources and tools might be made available to them so that they can oversee the market successfully and resolve disputes. I think they have got some of the skills there already. As you are aware, they have the Competition Act 1998 powers in respect of the railway as well, and those will be applied in this area. I think the Bill could be strengthened in that respect.

Anthony has answered most of the question, but certainly what I would like to see added to the remit of the ORR is something that does not exist at the moment, and actually we have had much of the opposite of it coming out of the Department for Transport in the last several years. Essentially, we need a driver for innovation. The one thing that franchising has done in the last 20 or so years is that every time a franchise changes, that is typically the point where innovation gets kicked in. Certainly from our perspective, John and I have had many years of competing essentially to be the technology provider at the point of franchise change, and that is when the innovation starts to kick in. My concern about GBR is that there is no change, so where does the innovation come from? I would like to see that built into what ORR pushes for.

To build on what has been said, three things are crucial to equipping ORR with meaningful enforcement oversight. First, it needs ex ante powers so that it can do things before harm has occurred, not just after harm has occurred. We think that the ability to issue financial penalty is probably important. Beyond the ORR enforcement regime, there should be an appropriate appeals regime.

Thank you very much. We have to finish the panel because we are slightly overrunning. If there is anything else that you would have liked to say more on—we slightly jumped over the code of practice—please write in.