The Secretary of State for Transport (Chris Grayling)
With your consent, Mr Speaker, I will make a statement on rail
franchising. I apologise to the two Opposition Front-Bench
spokespeople for the slightly late delivery of copies of the
statement—the speed with which we took this afternoon’s urgent
questions caught us all a bit by surprise.
I informed the House on 10 January that my Department was
preparing contingency plans for running train services on the
east coast main line in the event of the existing franchise
failing. Despite delivering significant returns to the taxpayer
and having some of the highest passenger satisfaction scores in
the country, the lead operator of the franchise, Stagecoach, has
been incurring significant losses. During that debate, I promised
to return to the House to provide an update on the situation, and
I am doing so today.
Since 2015, the franchise has met all its financial commitments
to the taxpayer, returning nearly £1 billion to the public purse,
but that has come at a substantial cost of nearly £200 million to
Stagecoach. I have already informed the House that the franchise
will, in due course, run out of money and will not last until
2020, but it has now been confirmed that the situation is much
more urgent. It is now clear that the franchise will be able to
continue in its current form for only a very small number of
months and no more.
Last week, following detailed analysis, my Department issued the
franchisee with notification that the franchise has breached a
key financial covenant. It is important to make it clear to the
House, and indeed to the public, that that will not affect the
railway’s day-to-day operations. The business will continue to
operate as usual, with no impact on services or staff on the east
coast, but it does mean that in the very near future, I need to
put in place a successor arrangement for operating the railway
and to end the current contract.
Given the imminent financial pressure that the existing franchise
is under, I am taking action now to protect passengers who depend
on these train services and to ensure continued value for
taxpayers’ money. Given the urgency of the situation, I would
like to take this opportunity to update the House on my plans.
It is worth remembering that our franchising system, as a whole,
has delivered great benefits to passengers. New private
investment has totalled £6.4 billion over the past 11 years,
passenger journeys on the rail network have more than doubled and
the private sector is paying for new trains all around the
country. There are those who want that to stop, because of a
dogma that the state could run the railway better, but we see the
fruits of private investment all around the network.
There has also been much misinformation about the franchise, so
it is worth stressing again at the outset that, because payments
to the Government have been subsidised by Stagecoach, the
taxpayer has continued to profit financially from this franchise.
Passenger satisfaction is high, and preparations are well under
way to deliver state-of-the-art new trains on this railway.
The problem is very straightforward: Stagecoach got its numbers
wrong. It overbid and it is now paying the price. Contrary to
widespread speculation and rumour, no deal has been done on this
railway, and I have not yet made a decision on the successor
operator to run the east coast railway until the longer-term
plans for the integration of track and train can begin in 2020.
There is no question of anyone receiving a bail-out. Stagecoach
will be held to all its contractual obligations in full. But, as
the Brown review said five years ago, this is what we expect in a
competitive franchise system: private businesses risk substantial
amounts of their own capital, and if they fail to live up to
their stretching targets, they lose out, not the taxpayer. For
anyone who thinks that the nearly £200 million that Stagecoach
will lose is insignificant, let me put it into context: the
combined profit of every train operator in the country was only
£271 million last year, and the loss equates to more than 20% of
Stagecoach’s total market value. So this is a significant amount
of money by any measure, and it should also act as a stark
warning to any company tempted to overbid in future. Moreover,
the franchising system has now been adjusted to deter further
optimism when bidding.
The priority now is to ensure the continued smooth running of the
east coast franchise for its passengers. I have therefore asked
my officials to conduct a full appraisal of the options available
to the Government to ensure continuity of service until we
implement the east coast partnership on the route from 2020. My
decision on which option to choose will be made in accordance
with the key principles set out in the statement on how I use my
rail franchising powers. These include: protecting the interests
of passengers; preserving the interests of taxpayers by ensuring
value for money; and supporting investment and improvement in the
railway, including through the deployment of new inter-city
express trains on the east coast line.
In order to inform this decision, the Department will assess the
extent to which each option performs against those principles.
Our value-for-money assessment will be based on a number of
criteria, including which option returns most money to the
taxpayer, the risks attached to each, and the value of any
improvements in passenger services. I will also have regard to
the effect of my decision on other franchises. The decision will
be taken in a transparent way; the Department’s assessment of the
option will be published and it will be properly validated.
At this stage, one of the options is to consider the possibility
of Stagecoach continuing to operate services on the east coast
line under a very strictly designed short-term arrangement. The
current management has a strong record of customer service and to
rule out its involvement now would go against the principles I
have outlined. However, given the circumstances in which the
Government are having to step in to protect passengers on this
line, I am prepared to consider that option only on the basis
that the franchise would be operated on a short-term,
not-for-profit basis. The only acceptable financial reward for
Stagecoach could be received at the end of the contract—and only
in return for the delivery of clearly specified passenger
benefits and improvements. The company cannot be allowed to
continue to run this franchise and simply make a profit, given
what has happened. It got its sums wrong, and it will pay the
price for that, not the taxpayer.
The second alternative is for the east coast franchise to be
directly operated by the Department for Transport through an
operator of last resort. My Department will subject that option
to the same rigorous assessment to establish whether it would
deliver value for money for taxpayers and protect the interests
of passengers. This option is very much on the table and will be
selected if the assessment that I have set out determines that it
offers a better deal for passengers and taxpayers than the
alternative.
In either scenario, the east coast main line is expected to
deliver substantial revenue to the taxpayer. The line will also
continue to deliver premium payments to the Government once the
east coast partnership is in place in 2020. So let me be clear
that the east coast franchise will continue to offer and deliver
a healthy operating profit for taxpayers. It has done so over the
course of this franchise so far and it will do so in future.
There will be those who claim that because Stagecoach overbid, it
should be excluded from bidding for future franchises. I have to
be clear that the legal advice on this is clear. As the company
is meeting its financial obligations to support the franchise,
including with the full parent company’s support, and because it
has operated services on the east coast line successfully, the
Department has concluded that there are no adequate legal grounds
to restrict it from bidding on current and future franchise
competitions on this basis. Members will understand that it is my
duty to follow legal advice, but let me be clear that we will
keep its eligibility for current and future bids under close
scrutiny and constant review.
It is vital that we continue to focus our attention on delivering
benefits for passengers across the network and on securing the
genuine benefits of privatisation, so in addition to the
transparent, rigorous process for the east coast line that I have
set out, I am making some additional franchising announcements
that will deliver benefits to passengers on the west coast and
east midlands routes. In December 2016, we set out our plans to
award the west coast partnership—the franchise that will deliver
the first High Speed 2 passenger services. In that announcement,
we made clear our intention to agree a short direct award with
the current incumbent to allow the time necessary to design the
west coast partnership. The negotiations have been completed and
we have agreed a direct award with the existing operator, Virgin
Trains west coast.
Let me be absolutely clear that the east coast and west coast
franchises should not be confused. As with the east coast
franchise, the west coast operator is meeting all its financial
obligations, but the west coast franchise has a completely
different corporate structure, in which Virgin Trains is the
majority shareholder. As was set out 14 months ago, the direct
award is a sensible bridge between the existing contract and the
west coast partnership. Once that partnership is ready, the
direct award will cease to exist.
Virgin has transformed the west coast franchise from a poorly
performing service that required a subsidy of more than £75
million a year into a franchise that has one of the highest
passenger satisfaction rates, at 91%, and which returns more than
£200 million per year to the taxpayer. The transformation has
included: the introduction of trains every 20 minutes between
London and Manchester and between London and Birmingham, and
hourly services between London and Scotland; the installation of
wi-fi on every train; the lengthening of the Pendolinos to 11
carriages to accommodate growing passenger numbers; and the
introduction of free at-seat entertainment services.
My decision is in keeping with the three key principles that I
set out earlier: protecting passengers, ensuring value for money
and supporting investment. I look forward to the release of the
invitation to tender for the west coast partnership in due course
and am confident that we will see strong competition for this
exciting new franchise, which will help to transform rail travel
in this country through to and including the delivery of the
first HS2 services.
In the coming years, we will also transform the east midlands
franchise, with the biggest investment in the midland main line
since it was completed in 1870. Passengers will benefit from more
seats, new trains and dramatically reduced journey times from
Nottingham and Sheffield to London. Once the work is complete,
there will be almost twice as many seats into London St Pancras
during the peak compared with today.
The next operator will be required to deliver many of the
improvements, so I shall set out today the next step of the
competition that will award the contract. Abellio, Arriva,
Stagecoach—the incumbent—and a joint venture between First and
Trenitalia have all been shortlisted to run the east midlands
franchise that will deliver improved services. As I have said,
the Government have no adequate legal grounds to restrict
Stagecoach from bidding, but the completion will be run on a fair
and transparent basis, with new safeguards against over-bidding.
Ultimately, the winner will be the firm that offers the best
service to passengers and the best value to the taxpayer.
In a competitive market, franchises will sometimes fail. When
that happens, my duty is to protect passengers and taxpayers, and
to ensure continued investment in the railway. Stagecoach has
paid the price for failure, as stipulated in its contract.
Passengers on the east coast main line can be assured that
services will continue as normal. The Government will undertake a
transparent appraisal of the options available to ensure that
passengers and taxpayers are protected.
I know that I will hear a lot about nationalising everything. It
is worth remembering that, as we have heard today,
renationalising our water companies would cost £90 billion. We
have heard nothing about the cost of renationalising the
railways—due to not just losing the private investment that is
bringing in all those new trains, but the billions that would
have to be spent to bring those trains back on to the public
books. We remain committed to the success of a private railway.
Over the past 20 years, passenger numbers have doubled. We have
one of the safest railways in Europe, passenger satisfaction is
high across the network and other countries are now adopting
Britain’s model for running the railways. The plans I have set
out will allow the British public to continue to benefit into the
future from an ever-improving railway. We have challenges to
meet, but we will meet them. I commend this statement to the
House.
5.18 pm
(Middlesbrough) (Lab)
I would like to thank the Secretary of State for advance sight of
his statement, but as I was given it just 15 minutes before he
started to speak, I am not sure that I need to be over-grateful.
Given the content of his statement, I am not surprised at his
reticence. Let us see whether the markets deliver the sort of
share value boost that his last statement secured.
Today’s announcement is yet another monumental misjudgment to add
to a growing list of miscalculations by this Secretary of State.
It is increasingly clear that he does not care about taxpayers,
rail passengers or the rail industry itself, but will do
everything in his power to protect and support Virgin, Stagecoach
and their ilk, and the failed franchise system.
Members on both sides of the House can be in no doubt: the
bail-out culture at the Department for Transport is alive and
well—it has never been better. Virgin-Stagecoach failed to
deliver on its contract on the east coast route. No problem—the
Government will step in and bail it out, kissing goodbye to the
£2 billion that Virgin had previously agreed to pay. But, guess
what? Let us just give both companies a new contract to run the
west coast line as well.
Listening to the Secretary of State’s statement, I did not know
whether to laugh or cry. His argument that a direct award to
Virgin-Stagecoach for the west coast and east coast represents a
good deal is truly laughable. The idea of more profits and less
risk for those companies is an insult to Members and their
constituents. What makes me want to weep is that he is giving yet
more gifts to Richard Branson and Brian Souter. What is more, he
is using our public money to fund his failure. Let us not forget
that Virgin and Stagecoach are companies that extracted hundreds
of millions of pounds in rigged compensation payments from
taxpayers during the upgrade of the west coast main line between
2002 and 2006—£590 million to be precise. [Interruption.] Similar
tactics are now being deployed on the east coast, as the
companies blame Network Rail for their failure to deliver on
their contract.
Virgin Group games the system in rail and Virgin games the system
in health. It has done it before, and it is doing it again:
Virgin Trains is a company that shakes the system down. The
Secretary of State’s failure to stand up to Virgin and Stagecoach
is a disgrace. He is supposed to protect the taxpayer interest,
not to sacrifice it to Branson and Souter, yet he stands by this
model. Companies are not bidding for franchises, which makes a
mockery of competition, and his taxpayer bail-outs make a joke of
train operating companies paying premiums to the Treasury. What
does this Secretary of State do instead? He just gives train
operating contracts without competition. Since 2012, there have
been more contracts directly awarded than franchises let after
competitions. Why? Because he is ideologically opposed to running
the railways in the public sector. He just will not do it. He
cannot do it, even when the clear majority of the public are in
favour of bringing the railways into public ownership. His
solution is more taxpayer support and ever higher fares for
passengers.
The Secretary of State refused to answer my questions about these
contracts in a debate in this House on 10 January. He does not do
long-term thinking, only crisis management. Franchise failure
should mean forfeit. If a private train company cannot deliver on
the contract, it does not deserve the contract. That was what the
Labour Government did in 2009 with the east coast line. This
Government’s failure to grasp reality is costing passengers and
taxpayers dear. That is why a Labour Government will bring in a
railway for the people and businesses that it is intended to
serve, and put a stop to this appalling, profiteering racket.
Several hon. Members rose—
Mr Speaker
Order. Just before the Secretary of State responds to the shadow
Secretary of State, I must say to the hon. Member for Kingston
upon Hull East (Karl Turner), who, in his usual fashion, yelled,
“It’s a disgrace,” from a sedentary position, that this morning I
conducted my weekly Skype session with school students from the
Education Centre. They were students of the Herne Bay primary
school, one of whom asked me, “Mr Speaker, is there a Member who
is particularly cheeky in terms of loud and repeated heckling?” I
said, “Well, seeing as you ask, there is a chap called , who is a very agreeable
fellow, but he does tend to go from nought to 60 in about five
seconds.” I proceeded to educate the pupils of that primary
school class in the favoured expressions of the hon.
Gentleman—“Shocking” and “It’s a disgrace”—and his ritual
exhortation, which fortunately I have not heard today to a
Minister, to wit “be’ave”, which he makes while conspicuously
failing to do so himself.
As we were caught short by the speed of the urgent questions, I
know that the hon. Gentleman did not have as much time as he
might have wished to prepare, but I am not sure that he listened
to a word I was saying. He talked about a bail-out culture, gifts
and standing up to people, but I have just announced that we will
terminate a contract and that we may bring the operation of this
railway back into the system of operator of last resort, which
is, if I recall correctly, what Labour did in 2009.
I intend to ensure that I do what offers the best value for the
taxpayer and the best option for the passenger at a time when
exciting things are happening on this railway. New trains
arriving in the coming months will transform the journey for
passengers on the route, and that is long overdue. In the next
control period, there will be investment in different parts of
the route in order to improve performance in places where it is
desperately overdue. The future is promising for the passengers
on this railway, as they will have a better travel experience in
the months to come.
The hon. Gentleman talked about long-term thinking, which is
precisely what the east coast partnership is about. It is about
unifying track and train in a way that I believe the public of
this country want, and people on the railway believe that this
will lead to a more efficient railway. The more that we can
reunite the day-to-day operation of the track and trains right
across the network, the more reliable a railway we will have.
Nationalise it.
The hon. Gentleman says from a sedentary position, “Nationalise
it.” But this country has done that before. It was called British
Rail and it became a national laughing stock. Whatever else we
may do, I have no intention of leading our railway system back
into the days of British Rail, when lines were closed, routes
were axed and the system received a lack of investment year on
year because it was competing with schools and hospitals for the
capital available. I have no intention of recreating British
Rail, although Labour may do. I have a strategy that involves
bringing together track and train, a long-term vision of
investment, expanding our network and new trains. That is what
passengers want.
(Milton Keynes South)
(Con)
The west coast main line is a vital railway service for my
constituency. Virgin has indeed transformed that service over the
duration of its franchise. Will my right hon. Friend say a little
bit more about the duration of this direct award? What additional
features can my constituents expect during that time?
My expectation is that it will last no more than two
years—possibly only one year. It is important to get the west
coast partnership structure in place to go through the bidding
process, and we will shortly be issuing the invitation to tender.
I can only reiterate that there is a clear corporate difference
between the east coast main line, which is 90% owned by
Stagecoach, and the west coast main line, which performs well and
is majority owned by a different company, Virgin Trains. Whether
the brand is used on both is neither here nor there; it is a
different corporate entity. There is no possible legal benefit or
passenger benefit from somehow ripping this up for an interim
period, rather than moving seamlessly into the future and the
path towards HS2.
(Kilmarnock and Loudoun)
(SNP)
Despite what the Transport Secretary says, the franchising system
is quite clearly not working, especially given today’s further
announcement. When all these announcements are made, we keep
hearing about the private investment that privatisation of the
railways has brought in with the increasing passenger numbers.
The reality is that all that new investment is paid for by the
rail users. Sure, it might make the railways more attractive, but
it is being paid for by those who use the railway. It is not
magic money; it comes out of our pockets. It is quite clear that
the parent company guarantee system is not working. If it were
working properly, the east coast franchise would continue until
the end, so there is clearly a failure in the system.
The Secretary of State did the usual bluster, but he mentioned
water companies when he was talking about nationalisation. Well,
I have news for him: in Scotland, the water company is a national
company. It is owned by the public and operates successfully. The
Scottish Government are also looking into a public sector rail
bid, so these things can work. If the Transport Secretary’s
defence is that Stagecoach got its sums wrong, what does that say
about the Government’s due diligence on the tenders that were
submitted? The fact is that the Government followed through and
awarded the tender to a company that got its sums wrong. That is
another reflection on his Department.
All this follows the west coast main line tender farce—the
franchise deal collapsed in 2012, resulting in the direct award
to Virgin, which is now going to get another direct award. There
are way too many direct awards in the franchise system, and that
kind of goes against the ethos of competition that a franchise is
supposed to bring, which again highlights that the system is not
working. What will be the duration of the next award and what
impact will that have on the timescales for HS2? Will the
Secretary of State give us accurate timescales for the HS2 tender
process?
On the east coast and west coast awards, will the Secretary of
State follow the Scottish Government’s lead? All employees on the
ScotRail franchise are paid the real living wage, there are no
compulsory redundancies and ScotRail is operating at a higher
satisfaction level than the companies in the rest of the UK. For
once, will he seriously consider the devolution of Network Rail
to Scotland? That would save his Department money, take away some
responsibility—given that it is a failing Department—and perhaps
make up for a £600 million shortfall in maintenance monies
allocated for the next control period in Scotland.
I have one final question. [Hon. Members: “Oh!”] How is the
Secretary of State’s new railcard system working? What funding
has been put in place for it? Does the inflation-level rise he
has agreed cover the new railcard?
Mr Speaker
I simply advise the hon. Gentleman, in all friendliness and
candour, that he was only 43 seconds over his time.
Sir (New Forest West) (Con)
It seemed longer.
Mr Speaker
I do not know how long it seemed to the right hon. Gentleman, who
is usually quite a patient fellow. Not everybody, I am afraid, is
as succinct as the right hon. Gentleman, who has developed it
into an art form, but the hon. Member for Kilmarnock and Loudoun
(Alan Brown) must do better.
We are going to hear a lot today about the public versus private
argument. What SNP Members, and indeed Labour Members, have not
remembered is that if the investment has to come from the public
sector, it competes with money for schools, hospitals and the
armed forces. That means that, as happened in the days of British
Rail, our rail network is starved of investment, and we saw the
consequences. By contrast, the new trains that are shortly going
to be arriving in Edinburgh Waverley and going up the east coast
to Aberdeen are paid for by the private sector.
They are paid for by the customers!
Of course they are paid for by the customers. The private
companies make the investment and they make the return on that
investment because the passengers pay for fares. That is the way
that business works. Perhaps Labour Members do not understand the
way that business works. Customers buy something they want to
buy. I am absolutely certain that customers want to travel in
brand-new trains. That is long overdue on the east coast main
line, where they have regularly failed to do so. However, there
are clearly lessons to learn on this. That is why we have moved
much more towards a quality basis for new franchises. I want an
increased quality of service delivered to be the basis for the
allocation of new franchises.
The hon. Member for Kilmarnock and Loudoun (Alan Brown) asked
about the west coast main line direct award. As I said, it will
run for between one and two years. It will finish as soon as
possible. I want this up and running. We are going to issue the
ITT for the west coast partnership very shortly.
The hon. Gentleman raised the issue of staffing. The private
sector-run east coast main line is today employing more people
than it did in the public sector. As somebody who believes
passionately that we need more customer service staff on the
railway rather than fewer, I think that is a good thing.
The hon. Gentleman asked again about the devolution of Network
Rail. I simply reiterate that I think that the SNP Government
have quite enough to do without going beyond the devolution
recommendations that we have put in place.
As regards the travelcard, it is being issued by the industry,
which is moving ahead quickly with preparations for it.
(Weston-super-Mare) (Con)
The last time the Secretary of State stood at the Dispatch Box, I
asked him about open-access rail and competing rail firms. He
rightly waxed lyrical about the benefits to customers in terms of
choice and value that open-access rail can produce. As he looks
at the options for the east coast main line, will he consider, in
addition to the two options he has laid out for the House, an
open-access alternative so that we can get away from the
state-led and potentially even nationalised set of alternatives
that we are otherwise being pushed towards?
I know that my hon. Friend feels very strongly about this. He is
right about the benefits of open access. My view is that open
access holds the existing operator’s feet to the customer service
fire to make sure that it delivers. It would not be realistic to
do this in timeframes available to me for making the change that
we are going to need. However, I am very clear that the rules
around the creation of the east coast partnership must and will
leave room for open access.
(Great Grimsby) (Lab)
The reason given for not providing residents of Grimsby and
Cleethorpes on the east coast a direct service to London was the
impact on Virgin’s profits. Will today’s announcement see any
progress on a direct rail link line for my constituents, or
perhaps a cut in the amount they are shelling out for their
fares?
I very much hope and believe that we will be able to create
opportunities for more direct services to east coast towns in the
years ahead. There is no reason why this route cannot be used for
further open access, if the Office of Rail Regulation judges that
the capacity is there. It is very much down to the regulator to
decide what is realistic and what is not. It is as much about
whether it can be done logistically as anything to do with
profitability. [Interruption.] The hon. Member for Middlesbrough
(Andy McDonald) says, “Easy get-out.” There is only so much
capacity available. I hope, however, that the investment going
into the east coast main line during the next control period will
free up additional train paths and additional capacity. Of
course, when HS2 arrives it will create a complete step change
for the east coast main line and allow for services to a whole
range of new destinations.
(Erewash) (Con)
With Stagecoach remaining on the shortlist for the East Midlands
franchise, which serves my constituents, will my right hon.
Friend keep the bid under review and revisit the legal advice he
has received over the coming months?
I will be immensely careful about both the legal position and
what is right for the midland main line. We will take the bid
that will deliver the best outcome for passengers, and we will do
so in a way that fulfils the legal advice. I am not interested in
a second-rate solution for passengers. We will be providing much
upgraded services and new trains, and the people who operate
those new trains have to be the right ones.
Mr (Huddersfield)
(Lab/Co-op)
Is the Secretary of State aware that I am very disappointed he
did not inform me he was attending a well-publicised meeting in
the centre of Huddersfield in my constituency on Friday? He had
the opportunity to talk to me and some of my constituents about
the deterioration of the east coast line over recent years and
the fact that not only the east coast line but the network across
the north of England is a very great concern for my constituents
who use it to get to work.
Just to reiterate, I did make sure that my office contacted the
hon. Gentleman’s office on Friday morning to tell them I was
going later in the day to meet Conservative councillors ahead of
the council elections—an event that I would not normally invite
him to. I was particularly struck by how thoughtful the
Conservative team in Huddersfield is about the potential
transport improvements for that area. It was a very valuable set
of discussions.
Mr Sheerman
On a point of order, Mr Speaker.
Mr Speaker
Not in the middle of the statement.
Mr Sheerman
Is it not right that Members should be told of another Member
visiting their constituency?
Mr Speaker
I am extremely grateful to the hon. Gentleman for his point. The
Secretary of State says that the hon. Gentleman was notified and
his office was informed. I must say, I think the spirit of the
requirement is not always honoured. It is quite important that a
genuinely conscientious effort is made to contact the Member
concerned, but, to be fair, the Secretary of State did start by
saying, “I informed his office.” That may or may not be entirely
satisfactory, but we will have to leave it there for now, because
notwithstanding the hon. Gentleman’s considerable perturbation
about what he regards as late notification, other hon. Members
are now waiting to ask their questions and will become very
perturbed if they do not have the chance to do so.
Several hon. Members rose—
Mr Speaker
We will start with one that I feel sure, from experience and
precedent, will be very brief. I call Sir .
Sir (New Forest West) (Con)
How good is ’s memory?
I am not a doctor, but I know that there is no record whatever of
any ban on National Express continuing to bid for franchises
after 2009. I am sure that the legal advice then was the legal
advice I have now. Whatever one may say in public, the reality is
that no legal constraint was placed on National Express from
further bidding for franchises.
(City of Durham) (Lab)
I think it is the Secretary of State who has the short memory, so
I will remind him that this is the third time in 11 years that a
private sector franchise on the east coast line has failed. Can
he explain to the House why his Department prevented East Coast,
a public company that ran the railway superbly for both
passengers and the taxpayer, from bidding for this contract? Will
he today commit to changing the rules so that public sector
companies can bid for these franchises?
The key point to remember is that this is a franchise that has
increased the number of services, increased the number of staff
it employs, improved its passenger satisfaction rating and is
providing a larger payment to the taxpayer, notwithstanding the
troubles I have set out today. That, to me, suggests that it is
getting something right. I want to be absolutely
clear—[Interruption] Notwithstanding the sedentary comments, it
is really important for me to pay tribute to the hard work of the
staff who work on the east coast main line, who have done a good
job in improving the quality of service for passengers. It is not
their fault that their company got the financing of this wrong.
(Ochil and South Perthshire)
(Con)
Can my right hon. Friend confirm that every penny of the £165
million guarantee that was insisted on in the franchise agreement
will be reclaimed by the taxpayer?
Absolutely, and indeed, that has already happened. I am
absolutely clear that Virgin-Stagecoach will fulfil this contract
to the letter.
What about the £2 billion?
The shadow Secretary of State has failed to understand what I
keep saying, which is that this railway every year continues to
generate a substantial contribution to the taxpayer, and that
will continue right the way through until 2023 and beyond.
(Lewisham East) (Lab)
May I ask the Transport Secretary for an update on station
accessibility improvements? Hither Green in my constituency was
due for a major upgrade in this control period, but that was
kicked into the long grass by his predecessor. How much has been
allocated for these improvement projects in the next control
period, and will projects that were priorities last time around
but lost out continue to be priorities?
There will be a continuation of the accessibility fund in the
next control period. We have not decided exactly how much it will
be, but I can give the hon. Lady an assurance that I will want to
make sure that where commitments have been given in the past, we
will seek to fulfil them in the next control period.
(Witney) (Con)
Will the Secretary of State confirm that privatisation has
brought investment of £6.4 billion to our railways over the past
10 years, and that when awarding franchises both on the east
coast main line and on the Cotswolds line—the GWR franchise,
which is being consulted on at the moment—his guiding light will
always be the quality of service provided to passengers?
This is now very much my approach. My view is that if the service
is really good, revenues will follow. While it is absolutely
essential that one seeks to achieve best value for the taxpayer
in a bidding process, there is already a different balance
between the amount of money bid and quality, and the balance will
continue to evolve towards quality. That is what matters to
passengers, and what drives revenues.
(Delyn) (Lab)
If the Secretary of State rushed, he would just about get the
6.10 from Euston to Flint in north Wales, and it would cost him
£283 for a return ticket. In the next two years of the direct
award franchise for the west coast main line, does he expect
prices to stabilise, or indeed fall?
The right hon. Gentleman is an astute Member of the House, and I
have no doubt that he would have bought an advance ticket for a
fraction of the sum he mentioned. Really good value is available
on the west coast main line, although for those who turn up at
the last minute—as, indeed, is the case with airlines and many
other forms of transport—there is a higher price to pay. I
believe that since the passenger numbers on the west coast main
line continue to rise and services continue to be rated good, the
current operators must be doing something right.
(Cheltenham) (Con)
It seems clear that Stagecoach miscalculated, overbid and is now
paying a £200 million price. Can anything more be done to avoid
private sector companies overbidding and setting themselves up to
fail, and can those lessons be learned in time for the GWR
extension, which will affect my constituents in Cheltenham?
It is really important that we do so. We have in fact already
changed the way the franchising structure works for the most
recent franchise. The south-eastern franchise, which is out to
tender at the moment, has a different approach to the issue of
risk sharing. We have to be careful: on the one hand, we must
seek to get best value from the franchises, but on the other
hand, we need to make sure that they are resilient. It is a
balance, and we have to try to get this right, but we are seeking
to improve the balance between the risk to quality and the
revenue we receive.
(Dewsbury) (Lab)
While the east coast main line was under public ownership between
2009 and 2015, passenger satisfaction, punctuality and
reliability reached record high levels. Has the case not
therefore been made for renationalisation based on these
principles?
Except that since the line returned to being operated by
Stagecoach, passenger satisfaction levels have risen, the number
of employees has risen, the return to the taxpayer has risen and
the number of services has risen. In my judgment, the day-to-day
operation of this railway has proved very successful over the
past two or three years, even though its finances have been
disastrous.
(Stirling) (Con)
In my right hon. Friend’s statement, he said that the financial
reward for Stagecoach at the end of its contract would be set on
the basis of the achievement of “specified passenger benefits”.
What does he have in mind?
I want continued improvements of the kinds committed to in the
original franchise documents—better services, more services. If
there is to be any payment at all at the end of this direct
award, it has to be on the basis of an improved situation for
passengers and better services. As far as I am concerned, this
will be a not-for-profit award on a year-by-year basis if—if—we
go down this route. Such a decision has not been taken, and I
will not take it until I have seen the evidence on either side;
and I will be completely transparent about it. Any payment at the
end of a direct award has to be linked to a much better deal for
passengers.
(Carshalton and Wallington)
(LD)
Can the Secretary of State confirm that if any Virgin or
Stagecoach directors receive any bonuses in relation to the east
coast project, they will have them clawed back?
Given that the company has lost nearly £200 million over time and
has, I believe, effectively wiped out all its profits from rail
operations for the past four years, I would be extremely
surprised if its management wanted to pay any bonuses at all. If
they do, they will not be paid for by the taxpayer, but out of
the company’s reserves, but I will be gobsmacked if they are
paying bonuses on this at the moment.
(Torbay) (Con)
I welcome the general tone of the Secretary of State’s statement,
in particular the emphasis on Stagecoach taking the hit rather
than the taxpayer. Can he tell me what lessons will be learned
for the great western railway franchise from what has happened
with the east coast franchise?
I am very clear that when the great western franchise is let, it
has got to be based to a much greater degree on quality. As my
hon. Friend will be aware, we are consulting on the possibility
of having a separate south-western franchise. I am looking
forward to hearing responses on that—I am open-minded about
it—but I am clear that the next great western franchise has got
to deliver better and more innovative services for people in the
south-west. It is why, for example, we are now working with Great
Western with a view to reintroducing a passenger service to
Okehampton, which is something there is a clear opportunity for.
(Rochdale) (Lab)
The Secretary of State was very casual in dismissing the comment
of my right hon. Friend the Member for Delyn (David Hanson).
People who use the west coast main line feel that it is very
expensive, because there is so little competition. During this
period, when he has imposed a new contract, what will he do to
guarantee that there is value for money and that we will not
simply see ticket prices go up, when they should be going down?
All I can say, again, is that this railway line is well used and
has seen an increase in passenger growth and customer
satisfaction—it is the highest-rated railway in the country. I
never want to see fares go up, but pay rises happen each year and
there are costs to meet. Therefore, I am not offering a cut in
fares, but we will operate a tight regime around the franchise to
make sure it is not abused.
Mr (Kettering) (Con)
May I thank the Rail Minister for agreeing to meet the formidable
Kettering rail users group this coming Wednesday in his office?
They are going to bring with them constructive proposals for how
the rail service to and from Kettering might be improved. May I
urge the Secretary of State to recognise that Kettering is the
most northerly junction from London between the Corby-to-St
Pancras service and the midland main line itself? Thus,
Kettering’s status during the next franchise should be enhanced.
Both my hon. Friend and the Kettering rail users group are
powerful advocates for Kettering. I am sure they will be pleased
by the investment going in. I was on the line the other day, and
I could see all the engineering work taking place north and south
of Kettering. There will be much better train links into London
and, importantly, far more seats at peak times from Kettering,
and we will be looking carefully at how we can ensure that
passengers from Kettering have the best possible experience.
(Manchester Central)
(Lab/Co-op)
With the collapse of this contract and the collapse of Carillion
recently, is this not a moment for us to be clear with the public
that we are learning the lessons of these contracting exercises?
People are coming in, overbidding or undercutting—or however one
likes to put it—to kill off the competition and yet cannot afford
to provide these public services. We need to be really clear with
people that we have learnt the lessons and understand and that
this will not happen going forward.
Actually, I absolutely agree with the hon. Lady. We do need to
learn the lessons—that is absolutely clear. That is one reason
why we have shifted much more clearly towards a different
risk-based approach on current franchises and why we are moving
towards a greater element of quality on current franchises. It is
worth saying that the winning bid for the new south-western
railway franchise was not the highest bid; it was the
highest-quality bid. That is important. We can never militate
against corporate failure. What has happened with Carillion has
been tragic, but we took a lot of precautions on the rail network
and HS2 to make sure there was not a significant impact if the
worst happened, which it did; but, yes, of course lessons have to
be learned.
(Cleethorpes) (Con)
While privatisation has certainly resulted in more investment in
the network, it is also clear that the existing franchise system
needs reform. At the moment, we have competition for gaining the
franchise, but very little competition in the actual provision of
rail services. If we are to have improvements to services such as
the direct service to Grimsby and Cleethorpes, which has already
been referred to, we need to look again at the franchise system.
Does my right hon. Friend have any plans for longer term reform?
We are looking at the way the franchise system works to try to
make sure it is as effective as possible for the future. However,
as I discovered, things I would like to do at a number of places
on the network are constrained just by the limitations of what is
there. My hon. Friend would be surprised by how often it is
impossible to deliver a service improvement I would like to
deliver, because, in the days of British Rail, a length of track
was taken out, a station was closed or whatever. I would not want
to go back to the days when services were being axed; I want to
be part of a railway and a transport system that is actually
expanding and growing, and that is our ambition.
(Darlington) (Lab)
On passenger satisfaction, is the Secretary of State aware that,
this morning, every service on the east coast main line from my
constituency to London was either delayed or cancelled? There is
no competition on the line, and this is the third time the
franchise has failed. Does he not understand that passengers and
staff on the line just want certainty, and that is why they are
keen on having a public sector body managing the franchise?
I do not know for certain the cause of this morning’s incident—
Signalling.
Of course, signalling is the responsibility of the public sector
Network Rail, so there is a gentle suggestion that the hon.
Lady’s proposal may not be the all-encompassing panacea. What our
signalling needs is what we are giving it, which is £20 billion
of investment over the next four years to renew infrastructure
that is old and, in many places, worn out. We are still dealing
with the years of under-investment before this Government took
office.
(Glasgow East) (SNP)
rose—
Sir (Kingston and Surbiton) (LD)
rose—
Mr Speaker
I call Mr .
Thank you very much, Mr Speaker. You are far too kind.
The Secretary of State spoke in his statement about protecting
the interests of passengers and taxpayers. When will he look at
the example being taken forward in Scotland, where Scottish
Government Minister has said he is minded to
accept a public sector bid to run the railways? What is the
Secretary of State’s objection to that? Is it ideology or just an
obsession with corporate recklessness?
As I said earlier, my ideology is very straightforward: I want
more investment in the railways, I want more trains and I want
newer trains and new opportunities. Of course, the model the hon.
Gentleman is articulating would mean less investment in the
railways, because we would lose all the private investment in new
trains, for example. I do not believe that that is what the
public want.
Sir rose—
Mr Speaker
We shall now hear from a Kingston and Surbiton knight—Sir
.
Sir
Thank you, Mr Speaker—that was a difficult choice for you.
The Secretary of State has today acted when a franchiser
overpaid, hitting its shareholders. Will he commit to the House
that when a franchiser under-delivers, hitting the passengers, he
will also act?
If a company is systematically failing to deliver, yes. However,
in many cases—indeed, I suspect I know precisely what the right
hon. Gentleman is talking about—the infrastructure is the
problem, rather than the train company. I cannot blame one person
for another person’s failings; what I can do is try to sort out
the failings that lead to these problems in the first place. If
we look at the Waterloo line, for example, where the problems
last autumn were caused by a technical problem around the
Waterloo works, which took about two months to get rid of, that
is a good example of where Network Rail problems caused the
issues. That is why we need that £20 billion investment in
renewing those parts of the infrastructure that are too prone to
fail.
