Rail Franchising

Part of NHS Winter Crisis – in the House of Commons at 5:13 pm on 10th January 2018.

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Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy) 5:13 pm, 10th January 2018

I am not against competition per se. There is certainly lots of information about models that are deemed to work better than others. One aspect of competition is that the public sector should be allowed to make its own bids for operating franchises. A bit of competition might help to drive innovation, but in no way should the public sector be barred from the process.

We then have the Virgin Trains East Coast shambles on the east coast line. The Transport Secretary stood at the Dispatch Box again to say that there was no bail out. When he responded to me during proceedings on the statement, he claimed that the parent company guarantees would protect the taxpayer, but we now have confirmation that franchise fees were backloaded, meaning that Virgin was able to walk away without paying the £2 billion premium track fees it was supposed to pay. That was confirmed at the Dispatch Box. He said, “It’s okay, we’re going to get the £165 million parent company guarantee,” but that is considerably less than the £2 billion premium fees the taxpayer would otherwise have received, so the argument is nonsense. To say that the franchise might have failed is no excuse. It is testament, again, to the failed model currently being operated by this UK Government. The very fact that Stagecoach’s shares went up after we heard news of the new model proposed by the Transport Secretary tells us who is walking away with the best deal from the new arrangements.

The east coast main line gives us proof that public ownership can work. When the previous franchise failed, it was successfully run as a public operation that paid over £1 billion in track rental fees to the taxpayer and returned a nominal profit of £42 million from the overall operation. The large private companies would not suffer a £42 million profit, because they would think it too little, but it would be welcome for the public sector and could drive further investment. Another failing of the franchise model is that it only allows big companies to operate, and they chase massive profits, at the behest of their shareholders.

The public-private alliance model proposed by the Transport Secretary might in theory be an improvement but, again, it is bonkers not to revert to the working model under the public franchise. The new model will still contain risk in terms of multi-layer operations and interactions, and even the timetabling to get it in place, as was outlined by the hon. Member for Middlesbrough.