Extracts from Opposition day debate on Rail Franchising - Jan 10

Thursday, 11 January 2018 08:22

Andy McDonald (Middlesbrough) (Lab):...The Government should have followed Labour’s example. When the operator defaulted in 2009, Labour took the contract back into the public sector. If a company defaults, it does not deserve a contract. Taking a contract back into the public sector would mean that there is no reward for failure, and other companies in the industry would not expect the same treatment. In the light of what happened with the east coast franchise, what plans does the...Request free trial

Andy McDonald (Middlesbrough) (Lab):...The Government should have followed Labour’s example. When the operator defaulted in 2009, Labour took the contract back into the public sector. If a company defaults, it does not deserve a contract. Taking a contract back into the public sector would mean that there is no reward for failure, and other companies in the industry would not expect the same treatment. In the light of what happened with the east coast franchise, what plans does the Secretary of State have to renegotiate the TransPennine Express, Northern and Greater Anglia franchises?

...Some industry commentators have said that the Secretary of State accepted rail franchise bids that were excessive and unrealistic. Can he confirm that winning bids are accepted in the expectation that they will be paid in full? Does he anticipate that the premium payments on the South Western Railway, Greater Anglia, Northern and TransPennine Express franchises will be made in full? Several other franchises look vulnerable in the light of the east coast decision. Passenger growth is slowing across the railway amid weaker consumer confidence, rising fares and changing work patterns. Rail passenger usage has fallen for consecutive reporting periods, and that has included a stark decline in season ticket purchases, which are the core business of rail companies. The fact that passengers are being priced off the railway is threatening the sustainability of the network as a whole...

...All the factors I have described undermine the growth forecasts that are so central to the Government’s model and the undeliverable bid assumptions of operators. FirstGroup won the TPE—TransPennineExpress—franchise in December 2015 based on revenues increasing by 12% a year. In one of his first acts in office, the Secretary of State awarded the Greater Anglia franchise to the Dutch state-owned rail company Abellio in August 2016. The deal commits the company to paying the Government £3.7 billion to run the line for nine years. That is more than the east coast franchise. Reports suggest that Abellio’s bid was £600 million more than the next bidder. Like the TPE and east coast bids, Abellio’s bid was based on double-digit annual revenue growth. The company’s boss described the £3.7 billion price tag as “scary”. Does the Secretary of State guarantee that the Treasury will receive the full premium payment of £3.7 billion from Abellio Greater Anglia by 2025—yes or no?