East Coast Main Line Franchise

– in the House of Commons at 2:15 pm on 20th June 2013.

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Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East 2:15 pm, 20th June 2013

I beg to move,

That this House
has considered the matter of the east coast main line franchise.

I thank the Backbench Business Committee for giving us this debate. When I spoke to the Committee in support of the debate, I acknowledged that we had a 90-minute Westminster Hall debate on the subject on 5 June which was led by my hon. Friend Andy McDonald, but on that occasion there was great demand to speak. Many Members were limited to interventions. More importantly, there were many issues which the Minister of State, Department for Transport, Mr Burns did not address in his response. I intend to make that the focus of my speech today.

I declare a family interest in the railways. My grandfather was a railwayman and I am sure he would be delighted to see me here today speaking up for the railways. Of course, he was a railwayman in the pre-British Rail days, let alone the post-British Rail days. In fact—this will probably give away my age—he was working on the railways in the first world war in what was then a reserved occupation. He recalled being approached occasionally by people with white feathers because he was not fighting. He worked in the railways after the war when it became British Rail, and as a long-term railwayman he would have been proud to see British Rail and to see that the railways are still such an important element in our transport system. At various times in the past 50 or 60 years there have been suggestions that railways were the past and we would move beyond railways, but here in the 21st century it is true to say that railways are back as a hugely important part of our future, not just of our nostalgic past. It is therefore particularly important that we get it right for the next 50 years.

The other interest that I have to declare is as a frequent traveller on the east coast main line, spending nearly 10 hours a week travelling on that line when Parliament is sitting. Since I started that regular commute, I have been extremely impressed with the service provided by the current operator. That is not to say that it is perfect. I do not think any provider would have been able to tackle, for instance, the day that the line was completely flooded north of Newcastle, when I ended up having to spend the night in Newcastle. I do not believe that even a private operator could have held back the waves of water that fell on the Newcastle area that night, and I know that several Members present experienced that personally.

I was perplexed when, following the fiasco of the west coast main line refranchising, the Government’s new schedule of competitions prioritised getting East Coast out of the door by February 2015, three months before the next general election. Some cynics have suggested that what motivated that proposal and the timing of it was the fact that my hon. Friend Maria Eagle, our shadow spokesperson on transport, had been raising the issue and challenging the Government on the proposals, given what had happened with the west coast main line. The next thing we heard was that the Government were to refranchise East Coast within a very short time scale. That was to be done at the expense of giving extensions to two other long-distance operators—Virgin on the west coast and First on Great Western—because the investigation into the franchising fiasco suggested that not more than one main line franchise should be dealt with at one time. Even on that basis, though, why the east coast line and not one of the other lines? It makes no sense to reprivatise a successful public sector operator while neglecting the other services.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

I am following the hon. Lady’s speech with great interest, but I always think it better to focus on cock-up in politics, rather than conspiracy. In that respect, would she like to explain why, on 21 January 2010, under a Labour Government, the Department for Transport consultation on franchising made a commitment from her party to reprivatise the east coast main line?

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I am glad the hon. Gentleman made that intervention, because it enables me to say that one of the most important things for all of us in politics is to experience, to look at the evidence, to learn and to come to a view based on that evidence. No doubt he would be interested to read an article published in The Northern Echo today in which Lord Adonis is reported as saying that, on the basis of that experience, his view is that the line should not be refranchised. If we could not learn from our experience and change our politics, it would be a sad thing indeed. I hope that, having heard that people who previously held that view have changed their mind, the present Government will be prepared to follow suit.

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation, NATO Parliamentary Assembly (President)

As I happen to have the article from The Northern Echo in my hand, it might help if I read out what Lord Adonis says:

“In the last four years, East Coast has established itself as one of the best train operating companies in the country, both operationally and commercially.

This has fundamentally changed the situation and it is right and proper that East Coast should be allowed to continue as a public sector comparator to the existing private franchises.”

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I thank my hon. Friend for clarifying the position. Perhaps for the rest of this debate, unlike the one in Westminster Hall, we will concentrate on the main issues before us and the reasons why the Government made the decision they have.

In the Westminster Hall debate, a number of hon. Members questioned the Minister’s claim that East Coast’s performance had plateaued, noting the remarks the right hon. Gentleman made to the Select Committee on Transport on 24 April:

“If you look at the latest monthly figures for reliability and punctuality, it is the worst of the 19 franchises.”

That struck me as odd, because in my experience East Coast trains are, more often than not, on time. That was borne out in the debate, in which many speakers pointed out that the Minister was quoting figures from a narrow four-week period in which bad weather had caused flooding and brought down overhead wires. East Coast is powerless to prevent such incidents, and responsibility for subsequent delays lies with the infrastructure manager, Network Rail. In fact, according to the moving annual average punctuality figures, which offer a more balanced picture, East Coast is in the top three of the seven long-distance franchises.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

I congratulate my hon. Friend and neighbour and those who signed the motion on securing the debate. Is it not worth pointing out that, over the decades, a consistent cause of delays has been problems with the overhead wires? Is she aware that one of the main reasons those problems have arisen is that, back in the ‘80s when the line was electrified under the previous Conservative Government, the overhead wires system was installed on the cheap? Ever since, we have suffered problems precisely because they did not do the good job they ought to have done.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Indeed. I am not saying, and I do not think any Opposition Member would say, that there is nothing that needs to be improved. Track and rolling stock can always be improved, and the current state of the track and overhead cables is a problem, but I would argue that it would be a problem for any operator. That is not what lies behind the Government’s proposal.

There is also the question of the premium payments. Again, I quote the Minister, this time at Transport questions on 25 April, when he said that

“the premium that the east coast main line pays to the Treasury is less than that paid by the west coast main line.”—[Hansard, 25 April 2013; Vol. 561, c. 995.]

In fact, a recent report from the Office of Rail Regulation suggests that, in 2011-12, the Government received £156 million in net franchise payments from the operator of the west coast main line and £177 million from East Coast—the opposite of what the Minister asserted.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

The hon. Lady is making a typically eloquent speech, but does she not agree that it is apposite to mention, in the spirit of fairness and transparency, that the track access charges for National Express were significantly higher—£210 million, I understand, rather than the £92 million now charged to the operator?

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I think the important thing to bear in mind is that the service is not failing in the ways the Minister said it was. If a Government propose a policy, it has to be based on the right evidence and not on an inaccurate interpretation of the situation.

Let me now talk about what East Coast does with its profits. In the previous debate, my hon. Friend the Member for Middlesbrough pointed out that whereas private operators are obliged to pay dividends, public operators can reinvest all their profits back into the service, which in East Coast’s case has amounted to more £40 million since 2009. One of the criticisms that has been made in the past and might still be levelled now at a public operator is that, because the dead hand of bureaucracy lies on it, such an operator cannot be as efficient and as fleet of foot as a private sector operator, but it is true to say that East Coast is organisationally distinct from the Department for Transport. It is staffed by railway professionals and is therefore able to take the best of a private sector company in terms of efficiency, innovation and entrepreneurialism, but because it is in the public sector, any profits it makes are available to the Treasury and all of us as citizens of this country and taxpayers.

I am concerned that talking down East Coast to justify the proposed refranchising will damage morale at the company. That is most unfair, because staff and management have worked extremely hard and achieved good results, with 1 million extra passengers carried in 2012 compared with 2009 and record passenger satisfaction. I hope that, when he responds to the debate, the Minister will correct his remarks on punctuality and premium payments; acknowledge that East Coast reinvests all its profits and can emulate private sector efficiency; and congratulate staff and management on East Coast’s success. I think that that will be an important message to send back to the work force.

Given East Coast’s success, it makes no sense to prioritise its reprivatisation while other long-distance operators are being offered long extensions. Under the Government’s initial franchising timetable, the new west coast main line contract was due to start in October 2012. Under the new timetable, and as a result of prioritising East Coast, the current operator of the west coast main line, Virgin, will be offered a total of four and half years of extensions up to April 2017. Similarly, for the new Great Western contract, which was meant to start in April this year, the operator, First Group, is being offered three years of extensions up to July 2016.

Let us look again at another reason the Minister gave for prioritising the east coast main line over others. He said that the line

“connects industries in the north with commerce in the south, provides cross-border services to Scotland and helps to drive the development of tourism and the success of Edinburgh and Leeds as key financial centres outside London. That is why it is at the forefront of our new rail franchising programme”.—[Hansard, 5 June 2013; Vol. 563, c. 252WH.]

I accept all those things, although many of them can be said about other rail lines.

It is important for business that we have a good, strong railway service on the east coast main line. I am regularly accompanied on my weekly commute by an increasing number of business travellers, many of whom work in my city’s sizeable banking sector. Those people have often been attracted away from short-haul flights by East Coast’s excellent new first class offer, which in the long term could benefit our environment. Business travellers are also attracted by the new services that have been introduced, including a later evening service and an earlier morning service, which enable people who want, or have, to travel to London for business meetings to do so by rail in a way that was not possible before.

However, the west coast main line and the Great Western line are also important for business. The west coast main line connects five of the seven largest conurbations in Britain, and Great Western serves Bristol, Cardiff and the prosperous Thames valley, so the claim that the Government have decided to prioritise the east coast main line because of its importance to business does not really stack up. At least, it is not a reason for prioritising the east coast main line over the other services that were previously due for refranchising.

By deferring proper franchise competition on these other lines in favour of extensions, the damage done to business on those routes could well outweigh any benefit accrued by prioritising the reprivatisation of the east coast main line, because extending those franchises involves little or no competition. It is likely to cost franchises a lot while failing to deliver any improvements in service.

It also leaves the Government in a weak bargaining position with the franchise operators by offering them those franchises without competition. After all, one of the reasons the Government would no doubt give for wanting to franchise is to have competition that would drive innovation and improvement. However, as far as the other lines are concerned, it is more or less a case of giving the operators an extension.

The only bargaining chip that the Government appear to have is to call in East Coast’s parent company, Directly Operated Railways, presumably as some kind of threat to the franchise operator, so that if it does not settle for a reasonable sum the line might be given over to Directly Operated Railways. That seems rather odd, from a Government who are telling us that they do not want rail lines to be operated in that way.

Photo of Alan Reid Alan Reid Liberal Democrat, Argyll and Bute

I have been listening carefully to the hon. Lady’s argument, but I am afraid that I have lost the thread a bit. Will she clarify whether she is opposed to the refranchising of the east coast main line in principle, or does she simply want it to be held back for a certain length of time so that other franchises can be retendered, which is what she seems to be arguing for?

Photo of Lindsay Hoyle Lindsay Hoyle Deputy Speaker and Chairman of Ways and Means, Chair, Panel of Chairs, Chairman of Ways and Means, Chair, Panel of Chairs

Order. We did say that the hon. Lady would speak for 10 to 15 minutes, but she has now been going for 19, and it looks like she still has a ream of paper to get through. I feel sure that she will be coming to the end shortly.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Thank you, Mr Deputy Speaker.

I would certainly argue for keeping East Coast in public ownership. The point I am trying to make is that even in terms of the Government’s justification for what they are doing and their timetable, it does not make financial sense. Therefore, it will not make financial sense for the effectiveness of this country’s railways, or indeed for our financial position. That is an important point. It raises the question of why the east coast main line is being refranchised at this point.

If the Government’s decision had been based purely on a view that East Coast had been performing badly in the public sector, which I know has been said—I hope I have show that it is not the case—it might have been an imperative for turning East Coast around, but that is not the point. I think that we have to ask, yet again, why this is happening. Why should we take a service that is performing well and put it out to franchise, with all the disruption that will cause, and potentially for no gain?

I hope that the Minister will address some of the key points that I have already raised but that were not fully addressed the last time we debated it—punctuality, premium payment and the success of East Coast—because I am sure that he would not want to be accused of putting ideology ahead of the interests of passengers and taxpayers.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough 2:36 pm, 20th June 2013

I speak not only as the representative of the fine railway town of Peterborough, but as a member of the Public Accounts Committee, which has looked at different aspects of rail travel in recent years, including most recently the west coast main line franchising process, and as a commuter. Like Sheila Gilmore, I travel frequently, although I am not always as familiar with the timetables as I should be. One Wednesday a few weeks ago I was running very fast through the brand spanking new, recently refurbished King’s Cross station in order to catch the 8 o’clock train. I clambered on board only to find after it departed that it was a fast service to York. I passed various Labour MPs in first class, while holding my standard ticket in hand, and then saw my hon. Friend Julian Sturdy. He asked what I was going to do, and I said I would have to get off at York and go back to Peterborough. With typical sympathy and pithy Yorkshire wit, he said, “I hope you’ve written to me to say you’re going to be in my constituency”—although I think it was probably the constituency of Hugh Bayley that I was visiting.

This debate gives us an opportunity to look specifically at the major infrastructure challenges facing the east coast main line. I will focus not on a sterile argument about private being bad and public being good, but on the challenges and opportunities we face in looking at public policy on that line. In the past 10 years we have seen a 43% rise in passenger demand. By 2031 there will be a capacity gap of 1,500 seats in the busiest morning hour on suburban services into King’s Cross. Indeed, journeys from Peterborough and Cambridge are expected to rise by as much as 20% by 2016. I think it is fair to say that, irrespective of our party or our views on the debate about rail privatisation, we all have a common interest, on behalf of our constituents who commute, whether from Scotland, Yorkshire or Cambridgeshire, in safer, cleaner and more punctual trains and in value for money.

It would be unfair and churlish not to concede the progress we have seen in Peterborough. New work has begun and is due to be completed next year. We have three new platforms and platform extensions for the new Thameslink trains and the new inter-city trains. We have a new island platform and a new freight loop. The station has been remodelled over the past few years, and we have 150 new, safe and secure cycle racks to help to develop Peterborough as a local transport infrastructure hub.

It is vital that I make the point that Peterborough is dependent on the railway. Indeed, it is integral to the financial and economic viability of my constituency, given that it is 47 minutes away from central London and King’s Cross. I was delighted to welcome the Minister to Peterborough station last autumn to open, with Network Rail, the reconfigured, remodelled station.

We have to concentrate on value for money, which is a very important issue in the private-public debate. An East Coast train season ticket costs my constituents £6,888 a year—£7,472 with a travel card—which is about 25% of the average annual salary in Peterborough. A First Capital Connect season ticket costs £5,800 a year and £7,000 with a travel card.

Putting partisanship aside, the current provider of the service has done a good job, and I think that the Minister and the Secretary of State have conceded as much. It would be unfair not to concede that it has returned £640 million to the Exchequer by way of premiums since 2009—£187 million in the last financial year. The staff on East Coast trains at Peterborough do a superb job and I know many of them. They are hard-working, decent people with a public sector ethos and a commitment to doing a very good job. I am very proud that we have people who do that, even when the things that go wrong are not their fault, but that of Network Rail. They always smile and try to explain what has happened.

Nevertheless, the situation is not perfect. It is only fair to say that East Coast is the worst performing train company in terms of punctuality. [Hon. Members: “No!] It is true. Only 82.8% of East Coast services arrived on time in the period up to 31 March 2013, compared with 97% of services provided by c2c, which is owned by National Express and is the best performing train operating company. Hon. Members may groan, but those are the facts and we have to agree on them in order to improve the service.

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation, NATO Parliamentary Assembly (President)

The hon. Gentleman will know that the Government’s official timing period does not pick one month or two months as he has done, but considers the situation over one year, and over one year East Coast has performed substantially better than the operator on the west coast, which is the best comparator.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

I think that is semantics. I made it clear that I was talking about the 12 months to 31 March 2013. If the hon. Gentleman wants to write to me to take issue with me, that is fine.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

No, I want to make some progress, but I will give way later to the hon. Gentleman, whom I know has a special interest in the subject.

The Labour Government accepted that public service provision by this train operating company was always going to be a short-term expedient because of a special set of circumstances on the east coast main line. As the Minister has said, in order to leverage key, private sector capital, it is important that we have a new, long-term private partner to innovate and drive up standards on the east coast main line.

It is all very well for Lord Adonis to have a road-to-Damascus conversion. Obviously, being in opposition concentrates one’s mind, but when he was a Minister he spoke out strongly for private sector provision on this particular line. I challenge the Labour party: is its policy now wholesale renationalisation of the railways, or is that just for the east coast main line? I know that Mr Campbell would definitely give me a clear answer, but I am not sure that he and Lilian Greenwood would have a meeting of minds on the issue.

Photo of Grahame Morris Grahame Morris Labour, Easington

The hon. Gentleman is being generous in giving way. Although he is ridiculing us on the Labour Benches for supporting the concept of public ownership, most of the travelling public—70% of them—and even those of them who vote Conservative, support the idea of renationalising the railway industry.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

If it is such a popular idea, why has the hon. Gentleman’s party not put it in its manifesto? Why in 13 years did it not repeal the Railways Act 1993 and go back to the good old days of British Rail, which did not get us to our destination very often or on time?

Photo of Ian Mearns Ian Mearns Labour, Gateshead

Will the hon. Gentleman give way?

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

Let me make some progress and I will give way to the hon. Gentleman shortly.

The Labour party has to bear some responsibility for the series of events that culminated in the current situation. As in so many areas, this Government are having to tackle that legacy. The Labour Government should have been more flexible with Sea Containers and Great North Eastern Railway, which was a very popular provider: it had good staff, good management and was well liked. Obviously, it was undermined—this was out of its control—by the parlous financial situation of Sea Containers, but the previous Labour Government was pretty inflexible and allowed National Express to overbid hugely and deliver a poor level of service. I think that the National Express management team is pretty hopeless. In fairness, the Labour Government did not have much chance or choice to do anything differently at that stage. Nevertheless, unless Labour gives an unambiguous commitment to renationalisation across the network, old Labour hon. Gentlemen will be whistling in the wind.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

Will the hon. Gentleman give way?

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

No, I must make some progress, because Mr Deputy Speaker will reproach me otherwise.

It is worth mentioning that, in terms of premium, National Express paid £338 million to the Treasury between 2007 and 2010. It was not a basket case. It ran into difficulties as a direct result of the economic crisis and the less than benign economic circumstances, but it did pay in. As I have already told the hon. Member for Edinburgh East, the track access charges were significantly higher for National Express than they are for the current company.

I welcome the improvements in control period 4, which covers 2009 to 2014, including the new platform 0 at King’s Cross, the junction remodelling and in particular the removal of the major bottlenecks between Huntingdon and Peterborough and the overall budget of £240 million. I think we all welcome the new inter-city express trains, extra seats and the replacement of the slam-door rolling stock, which will come on stream in due course.

I am a fair-minded person, so I will admit that there have been mistakes in the franchising process. I challenged the Secretary of State about this in Transport questions a few months ago and the Public Accounts Committee looked at the issue, specifically on the west coast main line, in February and identified some key things. There was a failure to follow due procedures and, essentially, a failure of culture. There were Chinese walls between the permanent secretary and the franchise and procurement teams, which seemed strange and is unusual in the civil service. There was also a failure of oversight, with no one person being in charge of oversight and having responsibility for the franchising process from beginning to end.

In July 2011, the Public Accounts Committee published a report on Network Rail. Network Rail is an integral part of any debate about the east coast main line and its future. The Committee found that Network Rail was still less efficient than comparator organisations in Europe, but it did not know why. The Committee also found that the system of penalties and bonuses that were meant to drive improvements in efficiency were not doing so. Because it is an overly complex industry, the risk of poor value for money and inefficiency is endemic. Those were the key lessons of the PAC report.

There is a need to impose clear objectives on train operating companies to avoid overcrowding, or bear the costs of overcrowding. I am not convinced that the Department for Transport has addressed that important issue adequately. We need more clarity on the link between fares and new passenger places and on the balance of costs between the taxpayer and the passenger.

In its contribution to the debate about franchising, through the Brown report and the McNulty report, Passenger Focus has suggested some simple things that would improve the passenger experience, including right time performance information; better ticket information; making restrictions simpler and more apparent on ticket machines; and having performance indicators for the line of route and not just for the franchise as a whole. Those are simple things, but they would make the experience of our constituents who travel to the north of England, Scotland or London much better.

I will finish my remarks by talking a little about competition and open access. I welcome the consultation paper that was published this month, “On-rail competition: Consultation on options for change in open access”. Open access is an important issue that we need to look at. The east coast main line is a good example of open access. It has brought significant benefits to parts of the network. Only a small part of the passenger rail network is open to competitive pressures. On the east coast main line, two non-subsidised open access operators, Grand Central Trains and First Hull Trains, compete with the franchiser. They have shown that competition leads to more journeys, higher revenues for the train companies, lower fares, and more and happier passengers.

The Centre for Policy Studies publication in March showed that passenger journeys increased by 42% at stations that enjoy rail competition, compared with 27% at those without it; that revenue increased by 57% at those with competition, against 48% at those without it; and that average fares increased by only 11% at stations with competition, compared with 17% at stations without it. So the franchise holder faces competition and still pays an increased premium to the Government, as East Coast has done. Open access competition has led to more routes and more high-speed access to new locations, including in London.

As a one nation Conservative—I suppose we are all one nation now, whether one nation Labour or one nation Conservative—I think that it is important that we have good transport infrastructure to places such as

Sunderland, Hartlepool, Halifax, Hull and Bradford. All those places have seen a significant boost to their economic footprint and their direct access to markets. In the course of the public consultation on open access, we need to consider the benefits to local economies and, ultimately, to the taxpayer. Hitherto, the Office of Rail Regulation and the Department for Transport have set their face against open access and have been inflexible in the design of the franchise regime.

In conclusion, 20 years on from the Railways Act 1993, I believe that privatisation has been a success. Labour will not reverse it in government if it wins the next general election. The review of the franchise regime gives the industry an opportunity to facilitate more competition, more investment in our railways, more choice, and greater value for money and efficiency for our constituents. Ministers should seize this chance while they can.

Photo of Ronnie Campbell Ronnie Campbell Labour, Blyth Valley 2:54 pm, 20th June 2013

I understand there was a good debate in Westminster Hall—it is a pity I missed it. I had to be away, but I am here today, and if the Minister cannot understand Geordie I will try to speak in plain English—he does not seem to be listening to anybody on the Geordie side anyway. I will be very slow so that he can understand exactly what I am saying.

My hon. Friend—he is a friend of mine and I have known him for a long time in the House—Mr Jackson made some valid points at the beginning of his contribution, but he got a bit sluggish. I want to get to the bones of the issue. I will not go on, because I know other Members want to speak, but we must get to the bones of this, and we have to know why.

If we look back, Great North Eastern Railway was a good firm; it tried but got unstuck with that container thing and there was a bit of a mess, but in all fairness it walked away, threw the keys on the line and another private company went off the rails with the north east rail link. Then we had National Express, which was hopeless. It should have stuck with what it is good at, although I do not think it is very good at driving buses either. It came in and made a right mess of things.

All we have to do—I do not know whether the Minister knows this, but we do—is talk to the workers on the trains. They will say which the bad company was: National Express. The workers are happy now. Last week they told me that they are happy with the not-for-profit system. I will not say nationalisation—I wouldn’t dare!—it is a not-for-profit company. They are happy. I said, “Don’t say that. If the Minister hears you’re happy, that’ll be the excuse he wants to privatise it. You canna have workers being happy, can we? Even the management is happy, and we canna have them being happy neither.” So I told the workers not to say they were happy too regularly, as that will be an excuse for the Tories to do it in—[Interruption.] The Minister may laugh, but let us put the facts down. National Express lost the taxpayer £55 million. I am not sure of the figure for GNER, but I am sure it was some—I do not know what it was, but it was taxpayers’ money.

Week after week I hear the Tories come to the Dispatch Box and start talking about how they are the custodians of the taxpayer. “We believe in the taxpayer. We are here to save them money.” Well, I have to laugh. We now have a not-for-profit company that has made the taxpayer £600 million in four years and invested £40 million in itself. What is wrong with making a profit and putting it back into the Treasury coffers for the taxpayer? The Government are the custodians of the taxpayer and are saving them money by cutting welfare, hospitals, legal aid and everything else—that is what they tell everybody in the newspapers and on television. The Government are saving the taxpayer. There are also the tax alliance people, the hidden people, who I think are backed by the Tories—the tax alliance party, or whatever it is. [Hon. Members: “The TaxPayers Alliance”] The TaxPayers Alliance. I have not heard a squeak out of it yet. I have never heard it say, “Oh wait a minute. The taxpayer is getting money back, and the Treasury fund this company. This must be good for taxpayers.” No, it is keeping very quiet. I wonder why.

My second point is about why we want to privatise a not-for-profit company that is doing very well. I have an idea—actually, I have a few ideas. My mind works in funny ways. I know the Tory party slush bucket is going around somewhere and I wonder who is contributing to it. I would like to try to find out, get my sniffer dogs on it and look to see who is putting into the Tory slush bucket. We will find out later, when the names come out, who will get the franchise—[Interruption.] Well, I will put my money on now, and I bet it is Goody Two-Shoes. I bet he gets the franchise.

Hon. Members:

Who’s Goody Two-Shoes?

Photo of Ronnie Campbell Ronnie Campbell Labour, Blyth Valley

He’s Branson, that’s who. He’ll be the man who puts the money in the slush bucket, and he’ll be the man who the Tories get to run north-east rail. That is a fact, and I hope that people will remember what I have said.

As I have said before, the company has contributed £600 million to the taxpayer, to the Treasury. Its subsidy from the taxpayer was 1% for various items and things it did on the east coast main line, as against the west coast main line, which gets a subsidy of 37%. Hon. Members can see the difference, and perhaps they can see why Branson might have an eye on the east coast main line, because although he made a mess of the west coast main line, the Tories made a mess of the franchise for him, so they had to give it to him again. He will have his eye on this company and he will want to run it to get that money.

When something is privatised, the money has got to go somewhere. The company makes money. It has shown how to run a rail link, and it has shown companies how to do it, and I am sure Branson knows that, and he will be saying, “Ooh, there’s £600,000. My shareholders are going to be very happy. Instead of that money going to the Treasury, it could go to the shareholders in business.” I can see how he is thinking and I can see how the Tories are thinking. They are saying, “Hey, we’ve got a company here making money for the taxpayer. It should be the shareholders getting the dividends and the managers getting massive bonuses.” I can see them coming in with their massive bonuses and the money just draining away, and they’ll most probably throw the keys on the line again and say, “Sorry, we’ve made a mess of this. We took too much money out. You’ll have to get the taxpayer to bail it out again, with another not-for-profit company.” I expect that to happen in a few years. I’ll most probably not be here, but never mind—I’ll be watching from my granddad seat.

The Minister has got to be listening carefully to what the people are saying. This is important. We hear what they are saying, and they are saying they want the company to remain as it is. They are satisfied with the line. I travel on it every week, like most other Members from the north-east of England and Scotland, and it is a very good line. It is always on time. Very rarely, there will be a couple of minutes here, a couple of minutes there, and of course sometimes something happens on the line, as happens on all rail lines—a tree might fall down or a line might go down. It happens from time to time. Those things cannot be helped. But what is more important is that the workers are very happy, the company is doing well and contributing, and I think it is an absolute disgrace if we give this back to the private entrepreneurs, who, let’s face it, made a mess of it in the first place.

Photo of Andrew Jones Andrew Jones Conservative, Harrogate and Knaresborough 3:02 pm, 20th June 2013

A couple of weeks ago at Transport Question Time I asked about the timetable for the re-letting of the franchise, and I received a clear, extremely positive answer. I was told it would not be long before the franchise was let again.

I want to talk about two areas: public—or not public—ownership, and the franchise itself. Perhaps unusually among my colleagues, I was against the privatisation of our railways, not because I had a fond memory of British Rail. I used to catch the train to school in Bradford every day, and it was not a pleasant experience. Parts of British Rail were good, but parts of it were not, and overall the customer experience was poor. I remember an advertising campaign at the time saying, “We’re getting there.” It was launched to general ridicule from the public, who obviously knew better. It was not because I thought there was an important principle between public and private ownership. Across the world, we can see examples of successful railways in both public and private ownership. I simply thought it would be hard to bring in effective competition.

When it came to managing our railways, there was a sense that we were managing decline, and in many ways of course we were: customers were choosing other modes of travel. I have checked the data on this. I am sure the Minister will be aware, but I might take the opportunity to remind him that when our railways were nationalised—I am talking not about one year’s or one month’s comparison, but about decades of data—more than 1,200 million annual journeys were made each year, and by the time of privatisation, that figure had declined steadily, year on year, to 700 million. There were a series of huge declines and the data were bad, however we look at them.

I changed my mind about rail privatisation for two reasons, the first being passenger growth. Again, it is slightly geeky, but I will remind the Minister of the data. Since privatisation, passenger numbers have gone from 700 million to 1,300 million-plus, which is a fantastic change. Level of usage on the rail network is now comparable with that in the 1920s. Privatisation saw a change of decades of usage, which was a good thing.

I want to encourage more use of public transport, with more freight off the roads. The second reason I changed my mind was personal experience. While travelling around the country, I could see a steady change of attitude in the businesses towards being more focused on their customers—improving customer experience and developing new services and timetables. The customer became more central to the industry.

I agree with many of the comments made by hon. Members on both sides of the House about the quality and friendliness of the East Coast staff, which is absolutely first class. I use it, as I am sure do all the speakers in this debate.

Photo of Grahame Morris Grahame Morris Labour, Easington

You don’t use first class, though, do you?

Photo of Andrew Jones Andrew Jones Conservative, Harrogate and Knaresborough

No, I do not use first class—the hon. Gentleman is absolutely right. Extreme caution is required for any Member using first class, and I do not risk it.

The question is not whether the line should be in private or public ownership; it is about getting the franchise right. I want to see the franchise taken forward promptly, with customers right at the heart of the railway. That means listening to what they want and responding to it. For my own area, in the past three years we have seen the first direct London to Harrogate service for 30 years. I remind the House that this service was removed under nationalisation, alongside the downgrading of services for Hull, Bradford, Cleethorpes and Teesside. The new service is fantastic. Our area has an important visitor economy and is hosting part of the Tour de France next year.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

I might be wrong, but is the service to Harrogate not an East Coast rail service? Does that not show that the operator is able to be flexible and respond to customer demand and passenger needs?

Photo of Andrew Jones Andrew Jones Conservative, Harrogate and Knaresborough

Of course it is an East Coast service. In some ways the operator has responded and I am quite happy to reflect that. I just think that more can be done and the hon. Gentleman’s comment does not really address why our railways saw such a dramatic turnaround after privatisation. Opposition Members have had no comments whatever to make about how we have had decades and decades of decline in passenger numbers. Privatisation occurred and the situation changed utterly. I am sure the Minister has noticed that no Opposition Member has said a word about the change in passenger numbers from the mid-1990s onwards.

I would like to see the new franchise introduce more services for Harrogate. I am sure that representations will be made nearer the time. Flexibility will need to be built in so that we can allow the operator, whoever wins the franchise, to respond to demand. I hope there will be new rolling stock, as some of the trains on the service are from the 1970s, and line investment. It is worth noting that new rolling stock and line investment would change the cost base of the franchise, and start to change some of the numbers that Opposition Members have been keen to quote this afternoon. I urge the Minister to press on, because that will mean more innovation and more success for our industry.

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation, NATO Parliamentary Assembly (President) 3:09 pm, 20th June 2013

Let me start by saying something that I think everybody in the Chamber will agree with. The east coast main line is an absolutely vital economic artery, pumping the lifeblood of our economy—jobs, investment and growth—through all the regions and cities that it serves from London to Edinburgh. That is why this debate is so important. It is not a technical or ideological debate about how the service should be run; it is a debate about how the railways can assist economic recovery in our regions. That is the question we need to debate today.

We had a similar debate in Westminster Hall two weeks ago, in which many hon. Members spoke. I have some sympathy for the Minister: he was left with absolutely no time to respond to the many questions that were asked. However, we have more time today. To recap briefly, I would like to pose two questions that I posed a fortnight ago to which the Minister was unable to respond.

First, if the Government go ahead with refranchising, will the headquarters of the new service be based in York? The headquarters currently provide over 200 jobs, but they act as a sheet anchor for thousands of other jobs with railway engineering companies, suppliers and for Network Rail’s operation of the east coast main line, which employs more people than the train operating company. The Government are legally able to make that a condition of the franchise and there is a precedent. When the train operating company last changed hands, I asked my right hon. Friend Sadiq Khan, the then Minister, whether he would give a commitment to ensure stability by keeping the headquarters in York. He said:

“The headquarters to which my hon. Friend referred are in York. I can reassure him that when the holding company”— that is, East Coast—

“takes over the running of the contract later on this year, the headquarters will stay in York.”—[Hansard, 1 July 2009; Vol. 495, c. 431.]

For the sake of stability for the business now at a time of economic fragility, will the current Minister make a similar commitment?

Secondly, I asked the Minister whether the Government will do what they say they will do and consult users of the service about what they want. It was reported in Modern Railways in May that the Department for Transport would take into account passengers’ views in relation to the train operating companies. Will the Department therefore commission an independent body to conduct a survey to see whether passengers want the service to be taken away from East Coast? A number of Members on both sides of the House have talked about the performance of East Coast, praising the company. We know that it has returned more money to the Government in premium payments—more than £540 million so far—than any other franchise holder on the line. We also know that it is more efficient than its predecessor and is providing value for money for the Government and the taxpayer.

Mr Jackson is a fair-minded man. He and I should sit down together and look at the statistics. However, to quote Alan Whitehouse, a former BBC transport correspondent, on the official measure of punctuality—the percentage of trains that reach their destination less than 10 minutes late over the period of a year—the east coast main line under East Coast’s management did better than the west coast main line under Virgin’s management. If we compare the two in terms of trains that actually arrive on time—that is to say, less than 60 seconds late—East Coast scores 61% for punctuality, whereas Virgin on the west coast main line scores 49%.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

I had no wish to cast aspersions on the current operators, but the hon. Gentleman knows that Passenger Focus, for instance, said in response to the Brown review of franchising last year that the determinants of punctuality were too loose and should be tightened up anyway. However, I concede that there are extraneous circumstances under the auspices of Network Rail that affect performance—such as the gentleman on a bridge at Walton in Peterborough last night who detained me by half an hour.

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation, NATO Parliamentary Assembly (President)

It is useful that the hon. Gentleman says that we should listen to Passenger Focus, because it currently gives the East Coast service the highest level of satisfaction that it has received since Passenger Focus starting doing its surveys in 1999.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

Mr Jackson has just highlighted one of the problems that franchise holders like East Coast face. They are reliant on Network Rail and on the infrastructure if their trains are to run on time. Extraneous issues—including, unfortunately, people trying to commit suicide—are completely beyond their control. Having said that, they do very well in spite of all that.

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation, NATO Parliamentary Assembly (President)

Our speeches are time limited and we get no injury time for interventions, so I must make some progress.

The good performance that East Coast has achieved is all the more surprising because it has not been given the security of tenure of a 10 to 15-year franchise that the comparator company on the west coast has. In fact, East Coast has not really known from one month to the next where it stands or whether it will continue to run the service or not. Last year, the Department for Transport asked the chief executive of East Coast, Karen Boswell, to prepare a five-year plan for the future of her company. She submitted that plan in January this year. In March, an interview with Karen Boswell by Roger Ford was published in Modern Railways, in which she set out her plans, and there was no hint of privatisation at that point. So what has changed?

Franchising is not a low-cost option. The National Audit Office report on the east coast National Express failure estimated that that had cost the Department for Transport between £330 million and £380 million. The Department had expected to receive that money from the franchisee up to 2012 but had not done so. The funds then had to be recovered from other Department for Transport budgets. The aborted west coast main line franchising exercise cost the taxpayer £55 million. Alan Whitehouse, the former BBC transport correspondent, estimates that each one of those bidding for a major franchise such as these spends between £10 million and £13 million in pursuit of its bid. Those costs ultimately come back to the passengers in the form of higher fares.

Two weeks ago, in the debate in Westminster Hall, I argued that East Coast should continue to run the service, not indefinitely but for the period of a full franchise, so that it could be an effective public sector comparator. We have seen today in The Northern Echo that Lord Adonis, who was Secretary of State in 2009 when East Coast was given the job of rescuing the service, shares that view. It is of course consistent with what he said in 2009, which was that the service should be run by a public sector contractor, East Coast, but not indefinitely. I am not arguing for an indefinite arrangement; I am asking for a period equivalent to a private franchise so that we can compare like with like. That is still my view.

I have been thinking about the matter further, however, and I put it to the Minister that we already have a public sector comparator. By the end of this financial year, East Coast will have run the service for four years, returned about £800 million to the Treasury and provided an improved service. If the Government are hellbent on refranchising, will they commission an independent body—perhaps the National Audit Office—to analyse the bids that they receive and compare them with East Coast’s performance? If none of the bidders that responds to the Minister’s tendering exercise can produce a robust case to show that it can deliver a better and safer service with lower fares and a bigger financial return to the Government than East Coast is currently providing, he should keep the service with East Coast.

The Government seem to be hellbent on refranchising, but we know that refranchising against a short timetable is unwise, to say the least. The Laidlaw inquiry, which looked into the fiasco of the collapsed west coast main line franchising process, came up with this recommendation:

“I recommend that the Department for Transport ensures that a credible timeline, with reference to the complexity of the procurement involved, is assessed and agreed at the inception”,

and he argued that this timeline should provide time for contingencies, and for comprehensive quality and commercial reviews. The Brown report, a rather wider one on the franchising system, which was also commissioned following the west coast collapse, proposed a detailed 24-month timeline for running a franchising process.

Let us look at what happened with the west coast franchising process—the rushed, bungled and failed west coast franchising process. The invitation to tender was put out in May 2011. The franchise was awarded to FirstGroup in August 2012—15 months later—with a view to starting the service in December 2012, 19 months later. Both Laidlaw and Brown said it was too short a timetable.

What, then, are the Government proposing for the east coast main line franchise? They intend to put a notice in the Official Journal of the European Union, which I take as a starting point, in October this year, with an invitation to tender in February 2014 and with the contract being awarded in October 2014—not in 15, 19 or 24 months, as proposed in the Brown review, but in just 12 months. The franchise is intended to start in February 2015, conveniently timed just before the next general election, which would be 16 months after the process started, as opposed to the 19 months from invitation to tender through to the intended start on the west coast franchise.

The Government are proposing to do this east coast franchise not only in a more rushed and hurried way than was done with the west coast franchise—the failed west coast franchise—but in a substantially shorter period than was proposed by each of the two reports they set up to investigate why the west coast franchising process had failed. When will the Minister’s party ever learn? This looks like a fire sale, rushed through before the 2015 general election.

I served on the Bill Committee that scrutinised what is now the Railways Act 1993—the legislation that introduced the privatisation of our railways. I have seen it all before. In Committee, the Government of the day said that they would franchise rail services to train operating companies, but that they had no intention of privatising the railway infrastructure of track and signalling. Then, after the Bill went through, the Government changed their mind and decided to rush through—steamroller through—the privatisation of the rail track by creating a body called Railtrack. We know that this body spectacularly and comprehensively failed. When it collapsed, the Labour Government had to put together a public sector rescue at considerable expense to the taxpayer. They created Network Rail—and we still have it as a not-for-profit company owned by guarantee, which does not have directors and does not pay dividends. We have a public sector body.

Alan Whitehouse had this to say in the Yorkshire Post just over a week ago:

“Until just a few weeks ago, East Coast was to remain in the public sector for as far ahead as anyone could see. Suddenly, it is up for grabs. Can it be a mere coincidence that the Transport Secretary…announces a re-franchising plan that would see East Coast trains returned to the private sector by the time of the next election? Or a piece of blatant electioneering? It all smacks of a similar desperation to that of the Major government’s ‘scorched earth’ policy of making rail privatisation a fait accompli before an election that he knew he would lose.”

The Minister does not have to take it from me. He does not even have to take it from a well-respected transport correspondent like Mr Whitehouse. He need only look at the history—his own party’s history—of what a rushed privatisation on the railways led to last time his party was incumbent at the time of an election. I say to him, “Slow down, even if you believe that reprivatisation is the right thing to do. Do not make the same mistakes that you made with the west coast main line. Take your time. I have no doubt that if you win the next general election you will go ahead with it, but if you do it as a fire sale, it will be a disaster not just for the railway, but for the economies of our regions that are served by it.”

Photo of Grahame Morris Grahame Morris Labour, Easington 3:25 pm, 20th June 2013

I congratulate those who managed to secure a debate that is very timely, given some of the announcements that have been made lately. I also thank the Backbench Business Committee for allowing us time to discuss this important issue.

The Government now have yet another opportunity to listen to the overwhelming majority of the British public, including people on both sides of the political spectrum. I think that the logic of the arguments for allowing the east coast main line to remain in public hands is powerful. The Minister likes to call me a dinosaur for believing that public services should be run for the benefit and in the interests of the public.

[Interruption.]

Members will see, if they check the record, that the Minister called me a dinosaur during a debate in Westminster Hall.

I support the renationalisation of the railways, especially when we see Directly Operated Railways delivering a better service and returning more money to the taxpayer than the private sector—which, let us not forget, has failed to deliver twice on the east coast main line. If that makes me a dinosaur, so be it. However, I think that we should look at the recent polling evidence. The average finding is that 70% of the public regularly support calls for the railways to be run publicly, although some polls produce larger percentages. I think that those people would be offended by the contempt and, indeed, total disregard that the Minister and his party have shown for their views and the concern that they have expressed about the failure of the privatised rail system. [Interruption.] It is certainly a failure when compared with the success that the publicly run public service operator has been able to deliver on the east coast main line. If the Minister will bear with me, I shall explain shortly why I think that the system has been a failure, not least on grounds of price.

As other Members have already pointed out today, Directly Operated Railways has returned £640 million to the Treasury in premium payments—I believe that £40 million of that has been invested in improving the service—and it is estimated that it will have paid back £800 million in premiums by April 2014. That is a tremendous success story, which should be noted by Government Members who malign the performance of public industries. Directly Operated Railways also receives the lowest net subsidy: 1%, compared with an industry average of 32%. We should not forget that a shining example of privatisation cost the public purse £4 billion a year in subsidy.

Let us consider the performance of National Express, the failing private operator. It returned only £370 million in premium payments before turning its back on the franchise, leaving the taxpayer to face not only the shortfall referred to by my hon. Friend Mr Campbell, but the disruption that it had caused. Incredibly, despite National Express having failed to deliver on its commitments, the Government will not stop it or other failed operators bidding for the rail franchise, should they decide to go ahead. In a written answer to my good and hon. Friend Jeremy Corbyn, the Minister confirmed:

“National Express and its subsidiaries are permitted to submit for the pre-qualification process (PQQ) to run passenger rail services in all franchise competitions including the East Coast Main Line.”—[Hansard, 3 June 2013; Vol. 563, c. 970W.]

That is incredible.

Photo of Bob Stewart Bob Stewart Conservative, Beckenham

If the company permitted to bid, surely its past record will be taken into account? Is that not the way it will work?

Photo of Grahame Morris Grahame Morris Labour, Easington

I suspect the Minister may be able to clarify the criteria, but judging by the answer he gave my hon. Friend the Member for Islington North,

I suspect that will not be the case. Past performance does not seem to be an impediment, although perhaps it should be—and perhaps the Minister will take more notice of such a suggestion from his own side.

Whether in the public or private sector, companies that fail to deliver on their commitments or promises to the taxpayer should not be allowed to take over franchises that they have shown they are not competent to run. It is not that National Express failed on one franchise and is bidding for another; it has already failed to deliver on the east coast line.

The public understandably have concerns about the Government position in relation to this matter, and they must not reward failure. If the Minister goes ahead with the privatisation, how will he guarantee that any future operator awarded the east coast main line franchise will be able to fulfil its contract, and what assurances can he provide that the taxpayer will see a similar rate of return in respect of premium payments as they received from Directly Operated Railways? It has been said that DOR is a not-for-profit service, but that is not quite true, as it is hugely profitable, but all the profits go to the taxpayer. That is the position, and I am sure various private train operating companies would relish getting their hands on that level of turnover.

Photo of Grahame Morris Grahame Morris Labour, Easington

Yes, we can speculate about who might take on the franchise, but it is incredibly profitable and I am sure there will be no shortage of takers. That money should be going into the Treasury at this time of austerity, however.

Photo of Alan Reid Alan Reid Liberal Democrat, Argyll and Bute

I have been listening carefully to the hon. Gentleman’s speech, but I am still not sure whether he is arguing for the east coast main line to be operated by a publicly owned company permanently or just for a temporary period that happens to be longer than the Government propose?

Photo of Grahame Morris Grahame Morris Labour, Easington

I can give a direct answer to that: yes, I am arguing for permanent public ownership. I am in favour of directly delivered public services, and although I do not want to take up too much time, I have some pretty powerful arguments on why that should be the case.

Andrew Jones talked about competition. Even if someone could not support the entire network being in public ownership, I think a reasonable person might be able to say that, for reasons of having a comparator, we should keep the very successful public provision through DOR, to act as a test and yardstick for us to assess how the private sector is doing. Instead we have the preposterous position of a failed private operator of the franchise not being barred from bidding, but instead being allowed to rebid to operate it. The Government seem quite happy to allow that.

Another perversity is that the Government seem to have this ideological, dogmatic hatred of nationalisation and publicly provided services. They are against the idea of a directly operated public service on the east coast. They are quite happy for public sector companies based in Germany, France and Holland to operate such franchises, but not UK public sector companies. That seems completely inconsistent.

Mr Jackson gave some interesting statistics about the cost of season tickets. It is interesting to look at the costs in some European countries. Research shows that a 24-mile commute into Paris costs about £924 a year, a similar commute into Berlin costs some £700, and a similar commute into Madrid costs £654. A similar commute into London costs £3,268 a year. How can anybody suggest that the privately operated service is a huge success and stands international comparison? This follows a decade of inflation-busting fare increases which, although never welcome, are putting an unbearable strain on family budgets at a time of austerity, with wages frozen and in many cases falling.

I understand that the rail Minister is a regular user of the network—after being persuaded to swap his chauffeur-driven ministerial limousine for the train. Has he had a chance to explain to other commuters exactly what privatised rail has delivered for the taxpayer—other than the highest fares in Europe? It certainly has not delivered investment. Sir David Higgins, the head of Network Rail, has warned that it would take

“30 years of continuous investment to ensure our railways get to the level of some of the European railways that we admire”.

Dividends to shareholders of the big five transport companies that are contracted to run the UK rail service have reached nearly £2.5 billion since 2000, and there are plenty of examples of excessive boardroom pay; some of the highest paid directors have received in excess of £1 million.

However, East Coast and Directly Operated Railways offer a genuine alternative, with all profits being reinvested in services or in the Treasury—money which otherwise would have been used as dividends for shareholders or bonuses for fat cats. According to the “Rebuilding Rail” report, the cost of running the railway has more than doubled in real terms since privatisation. It is estimated that privatisation costs the equivalent of £1.2 billion a year—more than the cost of public ownership.

In the face of multiple market failures, higher costs to the public in fares and subsidies, and lower premium payments, there is nothing more ideological than the Minister and the Tory party remaining wedded to this disastrous railway privatisation policy. I hope he will listen to the concerns expressed today by Members, and by the British public, and end this failed franchise policy.

Several hon. Members:

rose—

Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I point out that we need to conclude Back-Bench speeches in about the next 50 minutes, so if everybody is to get in, speeches need to be a bit shorter and with not too many interventions. Then, nobody will be disappointed.

Photo of Alan Reid Alan Reid Liberal Democrat, Argyll and Bute 3:39 pm, 20th June 2013

The east coast main line is vital in providing connections between Scotland, north-east England, Yorkshire, eastern England and London. Liberal Democrats in government are delivering a massive investment in rail infrastructure and are determined to put passengers at the heart of the railway system. That is why, as part of this coalition Government, we are investing £240 million in the east coast main line between 2014 and 2019.

On 25 March, the coalition Government announced that the franchise for the east coast main line is due to be returned to the private sector in February 2015. Officials from the Department are meeting interested parties, including Transport Scotland, to ensure that future changes to the east coast main line are co-ordinated successfully. Part of the programme will be the establishment of new vehicles for the inter-city east coast franchise, which will replace the existing set of diesel-powered high-speed trains from 2018 onwards.

It is true that under the nationalised operating company, there has been an extended period of successful operation, but—

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Will the hon. Gentleman confirm that the new rolling stock is not linked to the refranchise?

Photo of Alan Reid Alan Reid Liberal Democrat, Argyll and Bute

The Government are providing the money for the new rolling stock. Yes, it is perfectly possible that if the railway was to continue under the directly operated company that new rolling stock could still be provided.

Before Sheila Gilmore interrupted me, I said the word “but”, and I want to draw the House’s attention to one of the conclusions of the Brown review. It highlighted that any significant delay in the resumption of the franchising process could have a negative effect on investments involving rolling stock, upgrades and expansion and could result in some international suppliers deciding to make alternative investments outside the UK.

In a supporting letter from Mr Brown to the Transport Secretary, dated 31 December 2012, he wrote:

“I have come to the conclusion that the franchising system is not broken, but, on the contrary, it has made a major contribution to Britain’s increasingly successful rail network. There is no credible case for major structural change.”

That demonstrates that the operation of train services indefinitely by the directly operated company is not an alternative to our system. Direct operation is a key part of the private franchising model, but it was only ever meant to be a short-term mechanism as a measure of last resort.

We heard Labour Members arguing for the continuation of the directly operated model, but the Labour party is divided. By my count, we have two votes for nationalisation for ever, one for nationalisation for an indefinite period and, from the hon. Member for Edinburgh East, one for “Don’t know”. I do not think I received an answer to my intervention, but if she wishes to clarify that I am perfectly happy to give way to her a second time. The resumption of the franchise process should take place at a speed and pace that works for the Department and allows it to make necessary improvements. That was one of the key proposals of the Brown review and is why the Department will now ensure that no more than three to four franchise competitions are delivered per year in total.

Let me conclude by reiterating the commitment from the Liberal Democrats, as part of the coalition Government, to the improvement of our railways. We and our coalition partners are determined to place the passenger at the heart of the rail system and deliver better value for money in the system following years of extreme inefficiency under Labour. That is why we are delivering the biggest investment in our railways since the Victorian era. The east coast franchise and the new vehicles that are coming with it are an important part of that investment package.

Photo of Graeme Morrice Graeme Morrice Labour, Livingston 3:43 pm, 20th June 2013

It is always a pleasure to follow Mr Reid, but it is more of a pleasure to follow my hon. Friend—and namesake—Grahame M. Morris. I know that that can sometimes be confusing, particularly when we speak consecutively.

I congratulate those hon. Members who are sponsoring the motion on their success in getting the Backbench Business Committee to agree to its being debated today, and particularly congratulate my hon. Friend Sheila Gilmore, the lead sponsor. The whole House will be aware of her tenacity on this issue, and I commend her on her opening remarks. As she mentioned, she is a regular user of the east coast main line service from Edinburgh Waverley to London King’s Cross, as I am. So we have both been made aware at first hand, as I am sure other hon. Members have, of the benefits of the service to Scotland, the north-east of England, Yorkshire and beyond. I am sure that, like me, she appreciates the general reliability, frequency, excellent customer service and value for money the service provides to its passengers.

As a state-owned service, the ethos of putting the customer first and ensuring the most effective and efficient use of public resources is the prime objective of the company. Of course, private companies can be just as good, but their first loyalty is to their shareholders, and any profits not reinvested go on share dividends, often to the fat cats of the City of London. The difference with East Coast being a subsidiary of Directly Operated Railways, a holding company owned by the Department for Transport, is that its surpluses are paid back to the Exchequer. As Labour Members have said throughout this debate, £800 million has been returned to the taxpayer since 2009. Moreover, East Coast has invested some £40 million in the service, including in infrastructure and asset improvements. It also has the best punctuality there has been on the line since the service was privatised, and all passenger surveys and polling indicates that the overwhelming majority of people are satisfied with the service and wish it to remain in public ownership. So why are the Conservative-led Government, supported, as we have heard, by their compliant fellow travellers in the Liberal Democrats, intent on reprivatising what is evidently a most successful, lucrative and popular public service?

Photo of Graeme Morrice Graeme Morrice Labour, Livingston

We will hear shortly from the Labour Front-Bench spokesperson on what our policy is on this matter, but I know what it is and I concur with it: retaining this service in public ownership.

Photo of Alan Reid Alan Reid Liberal Democrat, Argyll and Bute

But the crux of the matter is this: is it Labour party policy that this service should remain in public ownership for ever or simply for a temporary period that happens to be longer than the one the Government have set out?

Photo of Graeme Morrice Graeme Morrice Labour, Livingston

As I have just mentioned, we will hear from our Front Bencher on this shortly. My own view is that this should be for an indefinite period, but the clear blue water between us and the Government on this issue is that we support a successful public service, whereas the Liberal Democrats are as one with the Conservatives in supporting the privatisation of this service. We have to question the reason why. Has this been proposed for the right financial and service reasons, or is there another, perhaps more partisan, explanation?

I wish to raise a relatively straightforward issue of fact. In an answer to a recent parliamentary question, the Minister of State said that investment in the east coast main line’s infrastructure is not dependent on reprivatising passenger operations. He said:

“Funding for the 2014-19 upgrade of the east coast main line will be delivered through the Office of Rail Regulation approving a £240 million increase in the value of Network Rail’s regulatory access base. Network Rail may then borrow up to this amount to fund the upgrade works.”—[Hansard, 15 April 2013; Vol. 561, c. 2W.]

However, he has since asserted otherwise on a number of occasions. For example, at the Transport Committee meeting on 24 April he said:

“What I think is important, looking to the future, is how you make the needed and important investment in the East Coast Main Line to bring it up to scratch. You will be as aware as I am that part of the electrification is very antiquated and needs to be replaced and upgraded because it is causing significant problems to the quality of service. I do not believe that keeping the East Coast Main Line in public ownership is the most effective and swiftest way of getting that investment. I believe that returning the East Coast Main Line to a franchise operation offers the best opportunity to move forward. In addition, the Government and the rail industry, through Network Rail, are continuing to invest in the East Coast Main Line, but we need to accelerate that and increase it.”

Then, at Transport questions on 25 April, the Minister stated that

“yes, there will be taxpayers’ money involved in investing in the east coast main line, but, more importantly, the involvement of the private sector means that we can increase, over and above the taxpayers’ money, the money that can be invested in enhancing and improving the service for passengers.”—[Hansard, 25 April 2013; Vol. 561, c. 995.]

Despite a number of hon. Members raising this with the Minister in the debate a fortnight ago, he failed to address this point in his reply. Therefore I would be grateful if he could now state once and for all whether any elements of replacing and upgrading the electrification on the east coast main line are dependent on the transfer of the operation of passenger services to the private sector. Similarly, it would be helpful if he could explain how this investment will be delivered more swiftly if reprivatisation takes place. Finally, can he provide more detail of the increased investment, over and above the taxpayers’ money being put into the line, that would be delivered as a result of privatisation?

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government)

My hon. Friend is making an excellent case to keep the line in the public sector and at the very least to allow a public company to bid for it. Does he agree that as the Minister has made it clear that the planned infrastructure upgrade work on the east coast main line between 2014 and 2019 will be borne by Network Rail, that answers the question?

Photo of Graeme Morrice Graeme Morrice Labour, Livingston

Indeed. I am trying to expose the inconsistency in what the Minister has been saying. Unless he can explain his position when he speaks later, it remains unclear why all this private investment has been deemed necessary at all.

The past, current and planned public investment into the east coast main line has been and continues to be highly effective. However, if further investment is required, it could easily be provided by public means, given that the service returns far more to the Exchequer than it receives in subsidy. Furthermore, given the thoroughly negative history of private involvement in the east coast main line, it is highly probable that taxpayers will once again be left to pick up the tab, as we have seen in so many other botched franchise deals, not least on the west coast main line, if the east coast service is privatised.

In summary, the British taxpayer has funded the east coast main line service successfully since November 2009, after 12 years of declining profits and eventual failure under both GNER and National Express. The east coast service became hugely profitable almost immediately after renationalisation and has returned its soaring profits to the Exchequer every year, with an estimated total returned in excess of £800 million by the end of this financial year.

It is unfathomable that the response of the Government to this success, so quickly established after years of failed management by the private sector, is to decide that this is a good time to give National Express a second chance. It is appalling that the Minister and his Department are so eager to overlook this clear demonstration of the high quality of our public rail service management. Rather than continue with this charade, I suggest that the Minister should focus his efforts on sorting out the debacle of the west coast main line and other similar fiascos.

It is ill-advised for the Government to create an issue out of nothing and waste resources in trying to solve a problem that is not there, when they already struggle to deal with real problems and real issues, often of their own making. I can only conclude that it is merely political dogma that is driving the agenda, which I hope will ultimately be derailed.

Several hon. Members:

rose—

Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I need Members to speak for less than 10 minutes if everyone is to get in, so please watch the clock and remember that your colleagues are waiting to speak. I call Andy McDonald.

Photo of Andy McDonald Andy McDonald Labour, Middlesbrough 3:54 pm, 20th June 2013

I will be brief, Madam Deputy Speaker. I congratulate the hon. Members who secured this important debate.

The passions that questions of democratic control arouse in all parts of the House are understandable, and falling into dogmatic defence of the present or romanticised views of the past is a constant danger, but the main problem of franchising is not the money skimmed off the top by the train operating companies—the money paid out in dividends was 2% of sales in 2012—or even the massive fiscal drag caused by fragmentation, payments to rolling stock leasing companies and the excess interest on Network Rail debt, paid for no other reason than to keep it off the public balance sheet. The biggest problem of franchising, which echoes through the McNulty report, the Brown report and every major policy discussion of the past 20 years, is that the debate about the future of rail in this country has become a debate about what colour the trains are. The real debate must be about whether rail is a private enterprise or a public service.

The Minister himself has been caught in such narrow thinking, insisting time and again in Westminster Hall that Directly Operated Railways could not run a railway indefinitely, because it was not intended to do so when it was set up in the dim and distant days of 2009. With respect, though, what previous Transport Ministers imagined DOR’s role to be is of no consequence. The question surely must be not whether it was intended to run indefinitely, but whether it is capable of doing so. The tremendous success of East Coast demonstrates that it is. Total premium plus operating profit amounted to £647.6 million in the four years to 31 March 2013, and as hon. Friends have pointed out, the total by the end of the term will be £800 million. That is more in both cash and real terms than any previous franchisee on the line has achieved. All that money is available for reinvestment in our railway network.

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government)

My hon. Friend is making a powerful speech. Could not the Government, if they wanted to, amend the Railways Act 1993 to enable East Coast to bid for the franchise as a public company? That might not be exactly what we want, but it would at least help.

Photo of Andy McDonald Andy McDonald Labour, Middlesbrough

My hon. Friend makes a good point. Such a leap of imagination—if people opened their mind to other possibilities that are available—would be welcome.

East Coast has achieved revenue growth of 9% over three full years, with 4.3% growth in 2012-13. Journey numbers have increased from 18.1 million in 2009-10 to 19.1 million in 2012-13. All that has resulted in a £40 million surplus. I was disappointed to hear Government Members criticising the service East Coast provides, when the record shows the contrary is true. Nine out of 10 trains are on time, according to the latest public performance measure, and the national rail passenger survey gives the service a 92% overall customer satisfaction rating—the highest score of any franchise on the line since records began in autumn 1999. Government Members’ critical comments are therefore highly regrettable.

If East Coast remains in public hands indefinitely, it will be to the benefit of passengers, communities and taxpayers. Several times in this course of this debate, the idea has been floated that such an arrangement would be more attractive than Ministers realise and that the public would find it engaging. More than that, it would mark a fundamental change in the thinking of the past 30 years—the economic voodoo that says that involving the private sector always, magically, creates benefits.

The truth is that railways cannot be run for profit. British Rail was subsidised. Network Rail is subsidised. No railway in the world is not subsidised in some shape or form. In that environment, train operating companies are simply one more player lobbying for a share of taxpayers’ money. They are required to return a profit for their shareholders, but their profits are not won in the marketplace; they are created by legislation.

The efforts of train operating companies are not turned outward, focused on striving towards greater efficiency or customer satisfaction; they are turned inward, focused on ringing out as much subsidy as possible from the taxpayer. Fares cover, on average, only 65% of the cost of the network, so all dividends are the result of Government largesse—and Governments have been more than generous. In the two years from September 2010 to September 2012, Network Rail’s debt, for which the taxpayer is ultimately responsible, has increased by £4.1 billion.

I would like to take this opportunity to praise the Department for Transport for resisting the self-defeating austerity advocated by the rest of the coalition Government and borrowing at very low interest rates to invest in upgrading our national infrastructure. I also offer my consolation for the fact that, in order to keep that off the Chancellor’s radar, the Department has had to pretend that it is not Government debt and pay an additional £150 million a year in interest as a result.

Surely now is the time for honesty. Private companies in the rail sector do not spur innovation. They extract value and are unnecessary, as East Coast shows. The investment in the railways is all Government money, underwritten with Government debt. The current system is unsustainable, because Network Rail now spends more on servicing its debt than on maintaining and upgrading the network, and that debt is increasing. The taxpayer paid for the service, pays for the service and will always pay for the service. It is only fair that they get what they pay for.

Several hon. Members:

rose—

Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I am putting a nine-minute time limit on Back-Bench speeches to ensure that the remaining three Members who wish to speak can do so. If there are interventions and compensation, it will take us longer to get there.

Photo of Ian Mearns Ian Mearns Labour, Gateshead 4:01 pm, 20th June 2013

I congratulate my hon. Friend Sheila Gilmore on securing this important and timely debate from the Backbench Business Committee—I have to declare an interest, because I sit on it. Like many colleagues, given the recent history of the east coast main line and privatisation, not to mention the present Government’s failure on the west coast main line franchise, I am deeply concerned about the Government’s plans and the impending privatisation of the east coast main line.

The Secretary of State for Transport’s announcement to start the tendering process for the east coast main line and nine further franchises paid no regard to public interest. It will result in the return of a profitable rail service to private hands within the next two years. The plans are no doubt a recipe for disaster. We already know that South West Trains, another private franchise, is in operating difficulties.

We have clearly established that Government Members are in favour of state ownership of the railways. I am sure that Bob Stewart and the Minister of State, Department for Transport, Mr Burns, are in favour of state ownership, but not UK state ownership; they are in favour of German, French or Dutch state company ownership of UK railways. Do we honestly think for one moment that Angela Merkel would allow such a situation to prevail in the Federal Republic of German? I do not think so.

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government)

My hon. Friend makes an excellent point. Is it not ludicrous that a publicly owned company in the UK cannot bid but publicly owned companies in other European countries can?

Photo of Ian Mearns Ian Mearns Labour, Gateshead

Given how Eurosceptic so many Government Members are, I think that it is utterly bizarre that they would rather see profits from UK railways going to France, Germany or Holland.

If Members have any doubts about the way this is all coming about, they need only look back a few years to the Government’s rescue of the line from the failing £1.4 billion National Express franchise. However, despite the private sector’s record of failure, the Government are determined to press ahead regardless of the interest of the travelling public. They would pursue the foolish policy of privatisation, despite history repeatedly telling us that the privatisation of railway lines and rail infrastructure is detrimental to cost and service for the customer and to the Government because of huge financial bail-outs.

The state-owned Directly Operated Railways, which runs the east coast main line, has generated and paid the Government £640 million in premiums and profits since 2009, and it is anticipated that by the end of this financial year that figure will be £800 million in total. Surely even the Chancellor or the Finance Ministers whom I faced on the Finance Bill Committee earlier this afternoon would want to see those moneys returned to the Chancellor’s coffers. Even this Government, given the current financial state of the country, should want to keep the franchise in public hands and see those profits repatriated to the Treasury.

The Government should pocket the profits for the public and use them to help cut the deficit and perhaps even invest in infrastructure. One thing that we have to accept about the east coast main line—railway engineers have told me this—is that, unfortunately, when it was first electrified I am afraid to say that it was done on the cheap; it was not a good model of electrification in the first instance. This Government, however, do not want to see that money reinvested. It is clear that, for them, private shareholder interest comes before the public interest. This is yet another example of this Government’s failed and ideologically driven economic policies.

No one denies that the east coast main line suffers its own problems of chronic under-investment, particularly with regard to what is now very tired rolling stock. We have discussed rolling stock reinvestment, but the problem is that we are being promised jam not tomorrow, but the day after tomorrow. The first new rolling stock on the east coast main line will be the diesel replacement, but that will not actually occur until 2018, with the rest of the fleet following further down the line. Let us not forget that the east coast main line inherited this burden from the privately owned rail firms, Great North Eastern Railway and National Express.

There has been very little rolling stock investment on the line for many decades. There has been some refurbishment, but that was mainly on carriages that were damaged following the tragic Hatfield and Selby rail crashes. The only way to run an effective rail service is to ensure that the infrastructure is up to scratch through continued investment, yet the overriding objective from a private sector perspective is not to invest in maintenance and customer satisfaction, but to return money to shareholders.

Privatisation in the rail sector is consistently lacking and detrimental to customers and the industry. Why privatise a service that has been successful? In short, it is not broke, so why fix it?

Let us recall the demise of Railtrack in 2002. The problems were numerous, but the straw that broke the camel’s back was the requirement for essential safety repairs following the Paddington and Hatfield disasters. Railtrack—a privately owned company under the failed model—was answerable to shareholders rather than the public. It was, to put it bluntly, badly managed, effectively bankrupt and unwilling to try to fund urgent safety improvements as well as normal running costs. Subsequently, as we know, the company was put into administration and Network Rail, a not-for-profit body, was invented to take over the rail network.

Given the inherent debt of Network Rail, is any Government Member suggesting for one moment that we re-privatise it? Of course not, because it would be completely and utterly stupid. Even if it were privatised—let us be honest—who really trusts this Government to introduce a fair and transparent, or even competent, tendering process in the current rail industry? Let us not forget the west coast franchise, for instance, which has cost the Government at least £50 million. What a complete shambles—a shambles that has resulted in Virgin, which lost to First Group in the tendering process, having to have its contract extended until 2017. The whole model does not produce competition; it produces a series of service monopolies on individual lines. That is not competition as anyone would understand it.

In among all this, the staff on the east coast main line have worked diligently and conscientiously through all the management changes over the years, but they have seen the equipment and rolling stock that they work on slowly deteriorate around them. Those staff are a credit to the service and deserve our congratulations. They and the travelling public they serve on the east coast main line deserve so much better.

The east coast main line should remain where the vast majority of the travelling public want it—in the public sector, in public ownership—and some of the surpluses that it generates should be reinvested into the service itself.

Photo of Mary Glindon Mary Glindon Labour, North Tyneside 4:09 pm, 20th June 2013

I not only congratulate my hon. Friend Sheila Gilmore on securing the debate, but thank her for all the hard work that she has done in spearheading the campaign to keep the east coast main line in public ownership.

Like my hon. Friend Mr Campbell, I note that the Chancellor of the Exchequer has said that he wants to balance the books and keep costs down for taxpayers. He therefore needs to have words with the Secretary of State for Transport and his Ministers, because they seem to be oblivious to that fact. While in public ownership, the east coast main line has provided vast sums of money to the coffers. The Office of Rail Regulation has reported that it offers the best value to taxpayers.

I can only reiterate the facts and figures that colleagues have given this afternoon. Directly Operated Railways Ltd has paid back £602 million to the Government in premium payments, which is £232 million more than National Express paid back for the same service and £320 million more than Virgin-Stagecoach has paid back since 2009. The facts speak for themselves. Only 1.2% of East Coast’s income is derived from public subsidy, compared with an average of 32.1% for the private train operating companies. Since 2009, East Coast has reinvested all of its £40 million profit into the service, whereas Virgin, in operating the west coast main line since 1996, has paid nearly half a billion pounds in dividends to its shareholders.

Like many of the MPs here, I use the east coast main line every week. I have used it for leisure purposes since the late ’60s. There are some fantastic places to visit along the line, my favourites being York and Edinburgh, where I have many happy memories. I have seen a number of improvements in the three short years during which I have travelled between Newcastle and King’s Cross as an MP. The trains are punctual for the most part and the staff are always friendly and helpful. Some 80% of the delays that do occur are beyond the control of East Coast. It should be praised for being at fault for so few delays. When trains are delayed, East Coast has a fantastic compensation scheme that refunds the fare. For MPs, that goes back to the taxpayer in lower expenses.

It is possible to get to London from Newcastle in two hours and 40 minutes. That is fantastic for people who are travelling to work and must be lauded. The excellent rewards scheme, which the company initiated, means that there is plenty of opportunity to get free journeys. Again, when that is used by MPs, it means a direct saving to the taxpayer through lower expenses. Could we expect the same from a private operator that had to keep its shareholders happy?

Andrew Jones is right that there has been a rise in the number of passengers using the service. There has been a 59% increase since 1944. However, analysis shows that that is the direct result of a 300% increase in public subsidy to the rail industry. It is also the case that although there has been passenger growth, there has been no corresponding increase in rail’s modal share compared to other forms of transport.

The number of people using the trains has not, in effect, changed.

In a recent Westminster Hall initiated by my hon. Friend Andy McDonald, the Minister did not give East Coast any acknowledgement for reinvesting its profits, and he failed to recognise that if it went into private ownership, the cost of upgrading the line and getting new stock would be met through public spending. He could not give a good reason why privatisation was being pushed through ahead of other franchises, as highlighted by my hon. Friend Hugh Bayley. An article in

The Northern Echo reported how Lord Adonis accused the Department for Transport of attempting to “rig the franchising timetable”, delaying costs for other lines, at a huge cost to taxpayers, in order to put East Coast first. He said:

“East Coast is doing a great job and it should be allowed to get on with it.”

I will conclude by agreeing with Frances O’Grady, the general secretary of the TUC and chair of Action For Rail, who said:

“This decision defies all logic…The government…is not interested in evidence-based policy and is once again putting the interests of private companies and shareholders before those of commuters and taxpayers…This is privatisation for privatisation’s sake, as Ministers steadfastly ignore what is best for the rail industry and the people who work on it and use it.”

I can only agree.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith 4:16 pm, 20th June 2013

Mr Reid made a robust defence of privatisation—it must be unusual for the Conservatives to hear a Liberal Democrat robustly defending Government policies for a change—but it is not unfair to point out that he represents a constituency in the west of Scotland. Although I am sure some of his constituents use the east coast service from time to time, he will not have had my experience of regularly meeting constituents on the train or at the station. If he had, he would know that his defence for putting the east coast service back into private hands would not find great favour among users of that line, because the service provided since East Coast was brought in has been good. It has not always been perfect, but customers and passengers are generally satisfied and, as has been said, when there are problems—particularly delays—they are mostly not down to factors over which East Coast has, or is expected to have, any control.

It is pretty outrageous of the Minister, who is generally a fair person, to use poor punctuality over some selected periods to justify putting the east coast service back into private hands. Some of his colleagues suggested that the private sector might be able to offer infrastructure improvements or offers for long-term planning, but for the last few years, East Coast has been operating the service, not on a day-to-day basis but certainly not on a long-term basis with any security. Surely we should now give East Coast the chance to see what it could come up with if it were given long-term security similar to a franchise period.

The Government should approach the issue in a non-ideological way. As has been said in this debate, East Coast provides a good return to the taxpayer, in contrast to previous operators, and surely success should be rewarded, not punished as the Government seem intent on doing. I would like the service to be retained and continue to be operated by Directly Operated Railways. That would be the simplest way forward. If the Government are not prepared to do that, could they not allow Directly Operated Railways to come forward with an alternative bid and a proposal that could be put against whatever comes in from private tenderers, to see who offers best value for the Government and for passengers? Then we can judge who has the best offer on the table. The Government should at least do that, if they are not driven purely by an ideological bent, as they appear to be.

I wonder whether the way the Government have timetabled the franchise process—presumably partly to comply with the Brown review and obviously in order to have the east coast main line back in private hands before the 2015 election—will result in a fair bidding process. I say that because with Virgin operating the west coast route until April 2017 and providing a service that is popular with many passengers, and with another branch of the Virgin empire operating flights to Edinburgh and Aberdeen, competition issues would surely arise if it was to bid for the east coast main line as well. It would not leave many alternative bidders, certainly from within the UK. The 2015 date has clearly been driven by the date of the general election, but I wonder whether the franchise process, instead of giving the Government a successful policy to sell to the public, might not in fact give them a huge headache just before May 2015. If that is the case, it will serve them right. I say give DOR on the east coast main line a chance at least to put forward an alternative bid to show what it can do, to show what its management team can do and to show what alternative offer can be put into the process to see which would bring the best value for money.

I want to raise a point that has not been raised so far, but which is important to the future of the east coast main line and the franchise. We will be having a separate debate next week on High Speed 2, which I support—although I think it should be going all the way to Scotland—but whichever option is adopted for the future of high-speed rail in the UK, under the present plans the services operating the high-speed system will reach points near Manchester, York or Leeds, and will then be run on the existing rail network up to north-east England and Scotland—along what are endearingly called in the HS2 prospectus the “classic routes” to Edinburgh and Glasgow. It is reasonable to ask, therefore, how many more trains we can fit into the existing east coast main line network north of York.

For those reasons, we need to plan for the future services, network and infrastructure on the east coast main line on a long-term, secure basis. Let us not forget what has happened before with the franchising process on that line. Twice the operator has been forced to give back the service to the Department, and most recently DOR was forced to operate the service at the last minute to ensure that the public continued getting a good service, as indeed they have.

If DOR cannot continue operating the east coast service, the Government—whoever is in power in 2015—might find themselves in a difficult situation. At the moment, if a privately operated franchise collapses, DOR has the infrastructure, staffing and structure to move in quickly and take over the service. If we take away the DOR service on the east coast main line, we will take away a valuable alternative operator and comparator for the rail network. That is another reason why the Government should be rethinking this proposal and approaching it on a non-ideological basis. They need to consider what is best for the customer and passenger, and that must surely be to allow the current East Coast service to continue, rather than yet again to force it into private hands in the way suggested.

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government) 4:23 pm, 20th June 2013

I am delighted to have the opportunity to participate in this debate. I begin by congratulating my hon. Friend Sheila Gilmore on securing this important debate and on all her campaigning work on this issue.

The east coast main line is vital for the connectivity of my constituency. As regular passengers, many of my constituents have an interest in the future management of the line. I too am a frequent user of the route, travelling between my constituency and Westminster, and I have generally been pleased by the speed, punctuality and comfort of the line and by the high standard of service and professionalism of its staff since it took over from National Express in 2009. I am not alone in thinking this. The most recent survey by the independent consumer group Passenger Focus found that 92% of passengers were satisfied with their experience with East Coast. To put that in perspective, that is the highest level of customer satisfaction recorded on the line since the surveys began in 1999, and 3% higher than the national average for long-distance operators. Improved satisfaction tells only some of the story. East Coast has increased its employee engagement, meaning that most employees are in favour of continued public ownership of the line. That should not be dismissed.

My hon. Friends have gone through much of the detail on the benefits of East Coast, including the £800 million being paid back to the Exchequer, and I do not feel that I have time to reiterate all those points. What is clear from the information we have, and which is readily available to the Minister and his team, is that this is a well-run, profitable line that is popular with passengers. Why, then, are the Government insisting on selling off the franchise, while at the same time extending the contracts for less successful operators? I hope the Minister will answer that specific question.

In the previous debate on this issue, Martin Vickers said that East Coast is simply treading water—an amazing claim to make considering that the franchise has consistently made improvements year on year. The Minister stated that East Coast had provided the foundations for a private company to come in with

“certainty of ownership, longer planning horizons”—[Hansard, 5 June 2013; Vol. 563, c. 254WH.]

to improve the service. The success of East Coast without that long planning horizon prompts the question: how much more would it be able to do if it was given a longer franchise? Perhaps he could confirm that the majority of investment in new rolling stock will come from the public sector, and not the private sector. We should not link the private sector franchise for running the line with future investment in rolling stock—they need to be kept separate. They keep getting muddled in our debates.

The Liberal Democrat-Tory Government have been quick to say that when Labour set up Directly Operated Railways in 2009, after the privately owned National

Express walked away from the franchise, it was there purely as a stop-gap. That was certainly true at the time. Since then, however, Labour has seen that the franchise is working for both passengers and the Government. Has the Minister not considered that the franchise is working well and should be extended? A large part of the Minister’s argument in the previous debate seemed to rest on the fact that previous Labour Transport Secretaries said that they would do the same as him. Today, we have a statement from Lord Adonis and my right hon. Friend Sadiq Khan saying that they are clearly in favour of the contract staying in public ownership. Lord Adonis said:

“In the last four years East Coast has established itself as one of the best train operating companies in the country, both operationally and commercially. This has fundamentally changed the situation, and it is right and proper that East Coast should be allowed to continue as a public sector comparator to the existing private franchises.”

It seems illogical to change something that is performing so well, particularly when it provides a useful comparator to measure the performance of private operators against. At the very least, the Government should delete section 25 of the Railways Act 1993 and allow East Coast to submit a bid for the new franchise. It seems almost perverse that, as we have heard from other colleagues today, state-owned companies from France, Germany and the Netherlands currently operate 10 of the 17 privately run UK rail franchises—thereby subsidising rail fares elsewhere in Europe—yet public companies from Britain are not even allowed to bid. Surely it is clear to everyone in the country—apart from the Minister and his team, perhaps—that the Government’s plans for rail are totally on the wrong track.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport) 4:30 pm, 20th June 2013

I congratulate my hon. Friend Sheila Gilmore on securing this important and timely debate, which builds on her strong campaigning work on behalf of passengers, and the many hon. Members who have supported the compelling case that she set out.

Since the Government announced the reprivatisation of East Coast services in March, the decision has been fiercely criticised in Parliament and the country at large. Ministers have been pressed on numerous occasions in this House and through dozens of written questions, yet they have not produced a single credible reason for rushing through this costly and unnecessary privatisation—a point that my hon. Friend Hugh Bayley made very eloquently, as did many others. Instead, one by one, the props supporting the Government’s argument have been kicked away.

We were told that the east coast main line had to be privatised because punctuality had plateaud; and perhaps it really had disappointed in four weeks out of 52. That was the narrow window that the Minister quoted when he appeared before the Select Committee on Transport. Indeed, he even described East Coast as the worst operator for punctuality. However, contrary to what Mr Jackson claimed, the annual figures show that over the last year the east coast main line has outperformed the west coast on punctuality, according to both the public performance measure and the narrower “right time” assessment. Punctuality is now better than under the previous, failed private operators and is at its best since records began.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

I thank the shadow transport spokesman for giving way, but I did not actually say that. I compared the performance with the performance of the best-performing train operating companies, rather than making a strict comparison with the west coast main line. That is an important distinction.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

I shall have to refer back to the record, but it is my recollection that the hon. Gentleman described East Coast as the worst operator for punctuality, which is certainly not the case, so this privatisation cannot be about punctuality.

We were also told that the east coast main line must be privatised in order to attract private sector investment. The Minister told the Select Committee:

“I do not believe that keeping the East Coast Main Line in public ownership is the most effective and swiftest way of getting that investment.”

However, as he has confirmed in written answers to hon. Members, the cost of rolling stock procurement and track upgrades on the east coast main line will be met through public spending, just as the cost of the £9 billion west coast upgrade was borne by the taxpayer. If anything, the Government’s plans threaten investment. At the moment, all the east coast profits are invested in the service, instead of being split with shareholders. That would end in 2015 if the Government have their way, so this privatisation cannot be about investment either.

We were also told that privatisation would deliver better value for money. On that point the Government’s argument takes its final departure from reality. Since 2009, East Coast has returned £640 million to the taxpayer and invested £40 million of its profits back in the service. As the Office of Rail Regulation recently confirmed, East Coast receives virtually no subsidy and yet made the second highest premium payments of any operator in 2011-12. To put that into context, subsidy accounted for just 1% of East Coast’s income, compared with an industry average of 32%.

East Coast is also performing a vital role as a public sector comparator, especially as the Government seek to negotiate extensions with operators. This is an important point, and I shall return to it shortly. East Coast delivers good value for money, benefiting taxpayers and fare payers. Let us compare today’s situation with the instability and cost that resulted from the collapse of Sea Containers and the decision of National Express to walk away from the franchise. Against that backdrop, and taking into account ageing rolling stock and a route that was last upgraded in the 1980s, Directly Operated Railways has done very well to record such a strong financial performance.

East Coast’s improvements to financial and operational performance have also been reflected in better services for passengers. Since 2009, the operator has introduced a new timetable providing 19 more services per day and, far from lacking innovation, it has taken initiatives on customer services. For example, many train operating companies are encouraging passengers to print advance-purchase single tickets at home, but East Coast is the only operator that allows them to amend a print-at-home ticket up to the evening before departure.

The proposed privatisation is not about passengers. It is not about operational performance and it is not about value for money. It is about politics, and the determination of the Government to end a successful, not-for-dividend alternative to franchising. The taxpayer will end up footing the bill for this politically motivated decision. There will be the immediate cost of running the franchise competition. Will the Minister tell the House what the overall cost will be to the taxpayer of refranchising the east coast route?

That covers only the direct cost, however. As we seek to reduce inefficiencies on the railways, East Coast provides a useful public sector comparator—a benchmark against which we can measure the costs of franchised operators. That was certainly the position of the present local transport Minister, the Under-Secretary of State for Transport, Norman Baker. Perhaps he did not enjoy the support of Mr Reid when, in 2009, he told the House:

“My view on the franchise agreements is clear…if a franchise is handed in to the Government—handed back—it should be held in the public sector as a public interest franchise, not least as a comparator for other franchise agreements currently operating.”—[Hansard, 3 June 2009; Vol. 495, c. 83WH.]

That was his view in opposition. I wonder whether it is still his view in power.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

I will not give way at the moment. I do not want to run out of time.

Directly Operated Railways has another function. It allows the Government a fall-back operator, should they fail in their current negotiations for franchise extensions. Indeed, earlier this month, the Minister of State, Department for Transport, Mr Burns told the House:

“The operation of train services by DOR is an essential part of the privatised franchising model.”—[Hansard, 5 June 2013; Vol. 563, c. 225WH.]

However, the Government are proposing to remove all operational responsibilities from DOR, leaving the body hamstrung. He cannot expect to retain the experienced and capable management team at DOR once the East Coast route is privatised. As the Department goes into negotiations for franchise extensions and direct awards, the train operating companies will know that Ministers are loth, for political reasons, to transfer operations to Directly Operated Railways. That must be dispiriting for those civil servants who are sent to negotiate the best possible deal for the taxpayer. As my hon. Friend the Member for Edinburgh East has noted, Ministers have taken their strongest bargaining chip and thrown it away. This mindset and this lack of imagination are compounding the costs incurred by the shambolic collapse of rail franchising on this Government’s watch. That collapse has cost the taxpayer at least £55 million, and the price is rising.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

I have to ask the hon. Lady a straightforward question: in 13 years, why did not the Labour Government repeal section 25 of the Railways Act 1993 in order to facilitate the franchising regime that she and her hon. Friends think is the right way forward?

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

I cannot speak about that as I was not here, but the fact is that we now conducting a thorough review of the how the railways are structured. East Coast should be kept as a not-for-dividend operator, and we are committed to doing that.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

No, as I want to make some progress.

Decisions on rolling stock have been postponed and a lack of orders is hitting the supply chain, threatening jobs and skills. The National Audit Office has raised serious concerns over the Department for Transport’s ability to deliver major projects, including HS2, and the Thameslink rolling stock contract is only now being signed after an unacceptable three-year delay.

With that background, it is no surprise that the rail industry has been shaken with a loss of confidence in the franchising process, hurting not just those on the front line, but the wider industry as well. Instead of concentrating on the problems caused by the collapse of the west coast and Great Western tenders, the Government are selling off the one part of the network that is benefiting from an extended period of stability. The east coast line could benefit further if the Government only had the courage to support it. Management have prepared a five-year plan for improving services, but Ministers have damned East Coast with faint praise, conceding that it is doing a good job, yet pushing through their politically motivated timetable for privatisation.

As Lord Adonis and my right hon. Friend Sadiq Khan said this week, it makes no sense to reprivatise an East Coast service that is working. Let me quote the noble Lord:

“East Coast is doing a great job and it should be allowed to get on with it…It has an impressive performance record, it has a loyal customer following and it is making big payments back to the government from its profit—to keep fares down for the travelling public—without needing to pay dividends to private shareholders …The government’s decision to rig the franchising timetable to get this unnecessary privatisation under way is requiring them to agree costly extensions to other contracts, wasting tax-payers’ money.”

He is right, and I hope that the Government listen to that argument.

We now have an opportunity to learn lessons and improve the rail industry for the better. Ministers should proceed on the basis of the best evidence available and promote what works instead of relying on political dogma. So it is disappointing to see them repeating the mistakes of the 1990s, when the ill-thought-through privatisation of the rail industry left us with problems with which the network is still grappling today. Now we have this unneeded, unwanted, and unjustified privatisation of the east coast main line—a service that has quietly and successfully improved the quality of journeys; a not-for-dividend operator that has delivered good value for money and reinvested profits in the service, unlike the private operator that walked away. There is no financial or operational case for privatisation. It is a transparently political act from a Government who are prepared to risk undoing the progress of the recent past. Passengers deserve better. I hope that Ministers will listen to the arguments made in the House today and halt this costly and unnecessary privatisation.

Photo of Simon Burns Simon Burns The Minister of State, Department for Transport 4:43 pm, 20th June 2013

I, too, begin by congratulating the hon. Members for Edinburgh East (Sheila Gilmore) and for City of Durham (Roberta Blackman-Woods) on securing the debate. It is clearly a topic that arouses considerable interest, as has been seen in hon. Members’ speeches. I suspect that the policies advocated by the Greek chorus on one part of the Opposition Benches vary somewhat from the policies of Lilian Greenwood on another part of the those Benches.

I particularly enjoyed the thoughtful speeches of my hon. Friends the Members for Peterborough (Mr Jackson) and for Harrogate and Knaresborough (Andrew Jones), and there was an interesting speech from Mr Reid, but I gently remind him that it is this Conservative and Liberal Democrat coalition Government—and not simply the Liberal Democrats—who are making such record investments in our rail infrastructure.

As usual, I listened with considerable care and interest to the extremely thoughtful speech of Hugh Bayley, who raised a number of issues. First, he asked whether the headquarters would be in York. I understand why he did so: the issue is important to him, because York is his constituency. Obviously we would not expect to specify the location of the headquarters in any future franchise proposals, but there is nothing to prevent the new franchise company from choosing to locate its headquarters in York, especially given the current precedent.

The hon. Gentleman sought to tempt me down another route, asking for an independent commission to be set up to establish whether passengers wanted services to be taken away from Directly Operated Railways. I am afraid that I must disappoint him. I will not be tempted on to the wayside. We have no plans to set up any such commission, although perhaps I can give him some consolation. We are working with the independent body Passenger Focus to ensure that we understand what passengers, on the basis of their own experiences, want from their rail service, and that will influence any proposals that emerge from the franchise process.

The hon. Members for Middlesbrough (Andy McDonald), for Easington (Grahame M. Morris), for Livingston (Graeme Morrice), for Gateshead (Ian Mearns) and for Blyth Valley (Mr Campbell) all made their customary contributions. I am afraid that, while their delivery may have gained in rapidity, theirs is a message that I have heard many times before. I am sorry that they are not on message in relation to their hon. Friend Lilian Greenwood. I think it would be fair to say—they will be proud of this—that they would like an outright renationalisation of the whole railway system.

Photo of Simon Burns Simon Burns The Minister of State, Department for Transport

No, but I think that that conclusion could be drawn from what the hon. Gentleman has said. [Interruption.] He is being a little too coy now. We do know his history; he does have form. I do not think that even the hon. Member for Nottingham South is advocating an outright renationalisation.

The debate is so important, and of so much interest to so many people, because the east coast franchise serves so many communities and businesses, and helps to drive the economy along the length of the country, from London in the south to Aberdeen and Inverness in Scotland. I am grateful for my second opportunity in less than three weeks to discuss the franchise. We needed to revisit the issue today because Members felt that, given the high level of interest, the last debate—which was restricted to one and a half hours—was not long enough.

It is clear that the inter-city coast franchise is a valuable one. That, in my view, is a major part of why it should be returned to the private sector as soon as possible, as was originally envisaged by Lord Adonis when he brought it into temporary public ownership as Secretary of State in 2009. He said—I am repeating this for a reason—

“I do not believe that it would be in the public interest for us to have a nationalised train operating company indefinitely.”—[Hansard, House of Lords, 1 July 2009; Vol. 712, c. 232.]

The work that has been done on the east coast franchise in the last three and a half years of public ownership, to which many Members have rightly referred, will allow an operator from the private sector to apply its own skills and innovative thinking to building long-term value for both the taxpayer and passengers on the route. I was informed during the Westminster Hall debate two weeks ago that Lord Adonis had changed his views on the ownership of the franchise, but I have not, and the Government have not. We remain committed to obtaining, for east coast passengers and for the taxpayer, the great benefits of franchising that we have seen since privatisation.

I think it is very interesting that the noble Lord and Sadiq Khan, along with the shadow Secretary of State, put out a press release this morning in advance of the debate. I would love to know the date of the telephone conversation the hon. Member for Nottingham South had with Lord Adonis when he told her he had changed his mind. I would be very grateful if she would intervene and tell me. [Interruption.] She says that she had a telephone conversation—[Interruption.] She said she never had one?

Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. We must have a debate across the Dispatch Box so it can be recorded. We do not want prompting and responses from any Member who does not have the Floor.Minister, you have the Floor.

Photo of Simon Burns Simon Burns The Minister of State, Department for Transport

I was wondering whether the hon. Lady was going to intervene.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

I intervene merely to confirm that I have not had any telephone conversation with the noble Lord since we last spoke over the Dispatch Box.

Photo of Simon Burns Simon Burns The Minister of State, Department for Transport

I accept the apology.

I have to say to the hon. Member for Nottingham South that that was an interesting and carefully worded response. I was not asking when she had a conversation since the last debate; I asked when she had the conversation in which Lord Adonis told her he had changed his mind. I am not going to get an answer, however, so we will make some progress.

Photo of Simon Burns Simon Burns The Minister of State, Department for Transport

No, I want to make some progress.

By returning the east coast franchise to a private sector operator, we will provide certainty of ownership and much longer-term planning horizons that are not available to public sector operators. That is vital at a time when this Government are making significant investment in the franchise, both in the infrastructure through our rail investment strategy and in new rolling stock as part of the inter-city express programme. A strong private sector partner will be able to build on that investment and work with local stakeholders, the Department and the railway industry to ensure that the best possible deal is delivered for passengers and taxpayers.

I heard the concerns raised by a number of hon. Members about services along the line and what they would like to see for their constituents and the service in general in any future provision.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

The Minister recently said the east coast needs a long-term private sector partner that is able to cope with the totality of this change programme. Will he explain to the House in plain English what precisely he meant by that?

Photo of Simon Burns Simon Burns The Minister of State, Department for Transport

Absolutely, and doing so will also help answer the points made by the hon. Member for Livingston. The Government are investing significantly in the east coast main line because its infrastructure needs to be improved and enhanced, but Governments are not awash with unlimited amounts of money. We are more ambitious for the east coast main line, and we believe from the experience of other franchisees that they are prepared to invest their money as well, to build on the investment that the Government provide, through Network Rail and other sources, to ensure that there is more investment in improving services for passengers, which is the key aim. That is why this Government are making record amounts of investment in infrastructure, amounting to billions and billions of pounds; such is our commitment to improving passenger services.

Photo of Simon Burns Simon Burns The Minister of State, Department for Transport

No, because I am running out of time.

Part of the success of franchising comes from having both a private sector that is willing and able to invest and manage risks and a Government who have the ability to step in, in the short term, to ensure the continued service of the railways in the event of a franchise failure. While we do everything we can to avoid such failure, we must be in a position to step in so that there is a continuation of service if a franchisee were to get into trouble, as happened with National Express on the east coast main line in 2009. That is the whole purpose of DOR. It is not a company like other companies providing franchise services within the rail network. It is there as a company of last resort in an emergency to ensure continuity of service under the Railways Acts. This should never be considered a long-term solution, and it is not an alternative model to franchising. Many Members totally misunderstood or did not get that point. This is fundamental: DOR is not an alternative model to franchising. We firmly believe that the private sector is best placed to deliver the best value for the passenger and taxpayer, and DOR allows us to make that choice.

Photo of Simon Burns Simon Burns The Minister of State, Department for Transport

No; I am running out of time. The nature of Directly Operated Railways, as an interim measure and operator of last resort, means it would not be right or practicable for it to plan beyond the short term. In order to provide the stability and innovation that is needed for any business, in particular a rail franchise that serves the public, it is necessary to be able to plan well into the future and make investment decisions that have a horizon beyond the short term. To meet this need, the inter-city east coast franchise must be transferred back to the private sector.

A number of Members have suggested that East Coast should be maintained in public ownership for an extended period to provide a comparator or baseline for future private sector operators on the franchise, or against operators on other parts of the network. This approach does not work. All franchises are different, and with changes to charges and funding occurring every five years, they even differ from themselves over time. Any attempt directly to compare one franchise with another, or even one incumbent with another on the same franchise, ends up simply comparing apples with pears. East Coast, a large inter-city franchise, is obviously different from Essex Thameside, a franchise providing commuter services on a much smaller route. Clearly, it would be folly to try to make valid comparisons between them. However, even with the apparently similar inter-city west coast franchise, differences in fleet size, cost base, network grant, investment plans, disruption and other factors make drawing a valid comparison with East Coast almost impossible.

There is a comparator already in existence. In the past 17 years since privatisation, the number of passengers using the railways has doubled from 750 million to 1.5 billion. The number of journeys has doubled, and the amount of freight moving off our congested roads and on to the railways has increased by 60%. The comparator is the British Rail model that satisfied no one, failed to respond to its customers and was totally unsuccessful.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East 4:57 pm, 20th June 2013

I thank all Members who have contributed to this debate, especially the Government Back Benchers, who made it a proper debate. We may not agree, but this is an important issue and we all need to be challenged and to have that discussion. However, I am disappointed that they seem determined to paint this debate as a strictly binary dispute—everything should be private, or everything should be public—hence the insistence on trying to push Labour Members to “come out”, as it were, as renationalisers. I am sure that some of my colleagues are unabashed re-nationalisers. Our dinosaur Member, my hon. Friend the Member for Easington

(Grahame M. Morris), demonstrated that he might be in good company, in that 70% of the British public might also be dinosaurs on this issue.

We do not need to approach this subject in a highly ideological way. There is a powerful pragmatic argument, whatever we think of the wider issues, in favour of retaining East Coast in public hands. That case was made powerfully by many Members. I do not want to ignore the contributions of others, but I would single out the powerful contribution from my hon. Friend Hugh Bayley, who asked some important practical questions and pointed out that to rush this process—even in the face of what the investigation into the west coast fiasco told the Government—is to put ideology above common sense. Unfortunately, the Minister was so determined to talk about our policies then and now that he still has not answered a number of the crucial questions. He has not said why the east coast route should be prioritised over other long-distance routes. He did not say why the evidence presented in previous debates was not—

Motion lapsed (Standing Order No. 9(3)).