Transport Secretary: East Coast Franchise

– in the House of Commons at 1:11 pm on 23rd May 2018.

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Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport 1:11 pm, 23rd May 2018

I beg to move,

That this House
censures the Secretary of State for Transport, the Rt hon Member for Epsom and Ewell, for his handling of the East Coast franchise and his proposal to re-privatise the route rather than operate it as a public sector operation;
and calls on the Government to reduce his ministerial salary by £2,400 per year.

Labour has brought forward today’s motion because of the lack of candour and lack of debate around the future of the east coast franchise, both inside this House and outside. Not for the first time, the Secretary of State for Transport has fallen desperately short in matters of clarity and courtesy in his ministerial conduct. I believe that manners maketh the man and manners also maketh the Minister.

I would like to take this opportunity to advise the House that a week ago today I was denied the usual courtesy of being furnished with a copy of the Minister’s statement at least 45 minutes before the statement was made. I was allowed sight of the statement at 12.15 pm in an ante room on the upper ministerial corridor. I was not permitted to retain a copy and simply had to grab the few minutes afforded to me to make brief handwritten notes. With Prime Minister’s questions scheduled to finish at 12.45 pm and there being no other business before the House, that gave me the briefest sight of the document that I was to respond to.

To add insult to injury, I was not even provided with a hard copy of the statement as it was being delivered at the Dispatch Box. I noted that you, Mr Speaker, did have the benefit of a hard copy of the Secretary of State’s statement as he delivered it, but sadly I did not have that luxury.

Photo of John Bercow John Bercow Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Commons Reference Group on Representation and Inclusion Committee

I say in the most gentle spirit—we do not want to go over all of it in detail—that the copy for me was of limited use. It was very interesting to read, but of limited use. It would have been of greater use to the hon. Gentleman.

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

I am grateful, Mr Speaker.

It seems that certain newspapers had sight of the statement approximately an hour before its delivery. That courtesy ought to have been afforded to Her Majesty’s Opposition. To add further injury to further insult, the Secretary of State told this House, in the course of responding to questions on the statement, that the Opposition had been provided with a copy of the statement. Being given brief sight of the statement, by any reasonable interpretation, is a far cry from being provided with a copy. I trust the House will accept that this is not the way to go about business. Even at this stage, I live in hope that the Secretary of State will accept that his behaviour was not what is expected of a Minister of the Crown.

In my remarks today, I intend to examine how rail operations in the United Kingdom got into such an inexplicable and unsustainable place and consider whether the Government’s policy solutions are the right ones. Before I do so, however, I would like to deal with a preliminary issue. Each time we debate the railway, the Secretary of State argues that the private sector funds investment in the railway that we would not have under public ownership. That is simply untrue and misunderstands where investment comes from. It is the taxpayer and the fare payer, not private companies, who fund investment in the railway. Every bit of new track, every new station or new train is paid for by the public. The private sector only finances investment and it does so at a profit, such as rolling stock companies who finance the purchase of new trains and take home eye-watering profits.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

Can the hon. Gentleman explain to me the difference between paying for something and financing it?

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

Absolutely. The private sector can organise financing, but the funding has to come from somewhere. It always comes from the same source: it is provided by taxpayers and by fare-paying passengers. It is paid for, so it is wrong for the Secretary of State to repeatedly credit companies with the investment made by taxpayers and passengers who are paying sky-high fares. Public ownership does not mean less investment. Under Labour, it will mean greater investment.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Foreign Intervention), Shadow PC Spokesperson (Business, Energy and Industrial Strategy)

I am not sure whether this is bad timing, but the hon. Gentleman will be aware that today in Wales the Labour Government have awarded the Welsh franchise to a multinational French-Spanish company, KeolisAmey, in a £5 billion 15-year deal, despite a manifesto promise to award it on a not-for-profit basis. Why are his Labour colleagues in Wales directly contradicting what he is proposing today?

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

That is entirely a matter for the Welsh Government.

The east coast saga is littered with incompetence and delusion, alongside a frankly cavalier regard for the public and passenger interest by a succession of Transport Ministers.

Photo of Helen Goodman Helen Goodman Shadow Minister (Foreign and Commonwealth Affairs)

This is now the sixth change of management for the east coast main line in 11 years. That cannot be good for any organisation. Does my hon. Friend know what is happening to the planned investment programme of new trains being built by Hitachi in the north-east?

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

My hon. Friend is entirely right. There are people now working on the east coast main line who are expecting their sixth change of uniform in 10 years. It is absolutely ludicrous. There has been an appalling record over the past several years.

Photo of Jenny Chapman Jenny Chapman Shadow Minister (Exiting the European Union)

My hon. Friend says something that sums it up. This has been about changing uniforms and livery on trains, while the promised improvements to service, the new routes and the benefits to passengers have never ever materialised.

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

My hon. Friend is entirely right. It is ludicrous that the reported cost of changing the livery yet again on this network is an estimated £13 million.

Photo of Huw Merriman Huw Merriman Conservative, Bexhill and Battle

I am very grateful to the hon. Gentleman. He is being very kind in giving way. Does he recognise that since 2015, when the franchise was put back into private hands, there have been an extra 1.74 million seats and an extra 40 services each week from London to Edinburgh? Is it therefore not the case that we have seen not only a 20% increase in money coming in, but an increase in service?

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

If we speak to people who take that train journey regularly, I think they will have their own observations about the quality of service. However, if the hon. Gentleman bears with me, I will deal with his remarks as I develop my speech.

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

I really want to make some progress—I have taken a lot of interventions thus far.

I am concerned that the Government’s unimaginative and ill-thought-out response to the current crisis threatens the taxpayer interest yet further. Following the west coast franchise debacle in 2012, there were numerous reviews and process changes to rail franchising. We were told that nothing like that could ever happen again. In an act of ideological spite, the east coast franchise was forced back out into the private sector by a coalition Government desperate to tie the hands of a possible Labour Government in 2015. Passengers and taxpayers have lived to regret that decision.

Photo of Liz Twist Liz Twist Labour, Blaydon

Does my hon. Friend agree that there is huge support in the north-east for a directly operated railway in not just the short term, but the long term? The experience in the north-east proved that this was a viable proposition and one that has tremendous support from the public and passengers.

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

I agree entirely with my hon. Friend. There is great support for a publicly owned railway on the east coast—

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

I’ll tell you what: I will answer one intervention and when I have finished with that one, I’ll see if I should answer another one—how does that go as a deal?

My hon. Friend Liz Twist is entirely correct about that, and she is right about the response from the people who work on the railway. The investment in their training and performance reflected that and the benefits of the quality of the railway are because of the hard work and dedication of the people who work within it.

The Secretary of State said more than once that Virgin-Stagecoach got its numbers wrong when its bid for the east coast franchise was accepted in 2014. Why, then, did the Department accept the bid? What due diligence of the bid took place? Two of the Department’s franchise bid advisers told the Transport Committee on Monday that the Virgin-Stagecoach bid got through the DFT’s financial robustness test and financial risk assessment test. If that is the case, the financial robustness test and the financial risk assessment test are wholly ineffective and inadequate. Those same witnesses—the Department’s own advisers—suggested that the east coast franchise was doomed from day one. That is hardly a ringing endorsement from those in the know. In all those circumstances, what faith can we have in the Department’s processes?

This week it emerged that the Secretary of State allowed HS2 to appoint Ernst and Young to investigate Carillion, notwithstanding that EY was advising HS2. Clearly that is a direct, obvious and major conflict of interest. The Business, Energy and Industrial Strategy and the Work and Pensions Committees asked if appropriate diligence took place. It seems that the Secretary of State’s failure to conduct proper due diligence is not isolated. EY, it should be recalled, is one of the Department’s technical advisers on the east coast operator of last resort.

Stagecoach knew that it would not meet its revenue targets weeks after taking over the east coast franchise in March 2015. The company was in constant dialogue with the Department about it. The Secretary of State has been in post since July 2016 and must have known about this for that period of time. Why did he do nothing? Has not this Transport Secretary been asleep at the wheel?

We learned this morning that the Government knew that Carillion was at risk for more than a year before the company went bust. As with the east coast franchise, the Government sat on their hands and did nothing. What about the Department’s managing director for passenger rail services, Peter Wilkinson, who was brought in at such great expense in 2012 to “get rail franchising back on track”? I am not a personnel expert, but I would say that Mr Wilkinson must be in breach of his contract.

Let us get into some of the details. On 14 Feb 2018, DFT OLR Ltd—presumably OLR stood for “operator of last resort”—was renamed London North Eastern Railway Ltd. It is a company limited by shares to a nominal value of just £1. The company has six directors, four of whom are listed with the occupation “civil servant”. They include the DFT’s head of passenger service, Peter Wilkinson; the DFT’s lead on in-franchise change, Richard Cantwell; and the DFT’s head of franchise policy and design, Simon Smith—the other civil servant does not show up on the DFT’s organogram.

Not only was LNER established in February, but the domain name was registered on 29 March. Why has it taken the Secretary of State three months to inform the House of a decision that he took all those months ago? Last year, it emerged that the Government decided to cancel rail electrification projects in March but they did not announce the decisions until after the general election in July. The collapse of the east coast franchise should set alarm bells ringing at the Department for Transport.

Photo of Rachel Reeves Rachel Reeves Chair, Business, Energy and Industrial Strategy Committee

Virgin-Stagecoach has let down passengers, as well as the taxpayer. Does my hon. Friend agree that Virgin-Stagecoach should not be allowed to bid for any other train routes? If it were, that would make a mockery of the whole system of privatisation and outsourcing, with absolutely no responsibility or accountability?

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

My hon. Friend makes a very good point: we seem to be in the business of rewarding failure. The smack on the wrist for Virgin-Stagecoach was to give it an extension on the west coast line. How on earth does that relate to a franchise that has failed?

As I said, the collapse of the east coast franchise should set alarm bells ringing at the DFT. The Secretary of State acknowledges that his Department accepted a bid that was too high, yet at the time of the bid, Virgin Trains East Coast was told by the DFT that it was the highest-quality bid that it had ever received. If the highest-quality bid ever received could go so badly wrong so quickly, what does that mean for other franchises?

Photo of John Bercow John Bercow Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Commons Reference Group on Representation and Inclusion Committee

Order. Before Gareth Thomas intervenes, the shadow Transport Secretary has been most generous in giving way, and that is perfectly proper, but I just emphasise that 15 Back Benchers want to speak. Therefore, it might be an idea to think in terms of finishing the speeches from Front Benchers by 10 past or quarter past 2 at the latest. If it is possible to do so earlier, so much the better. I call Mr Gareth Thomas.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party

I am grateful to you, Mr Speaker, and to my hon. Friend Andy McDonald for accepting this intervention before you got up to make your own. Is my hon. Friend aware of the Centre for Policy Studies—not a natural ally for him, perhaps—and its recent report in which it alluded to fundamental problems with rail competition and the declining market interest in bidding for rail franchises? Would he therefore take this opportunity to commend to the Secretary of State the recent Co-operative party report setting out a new approach to public ownership of the railways?

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

I am grateful to my hon. Friend for his intervention. He makes his point very well. With your guidance in mind, Mr Speaker, I put the House on notice that I do not intend to take any further interventions—I shall crack on.

The franchising model is based on ever-growing passenger numbers. Indeed, other franchise agreements have been agreed with similarly optimistic assumptions about growing passenger numbers and fares revenue. Even in times of growing usage, franchises have proven to be unsustainable, yet we are now seeing a period of falling passenger numbers. In the last two quarters, rail passenger usage fell by 0.4% and 0.9%, driven by respective 8.1% and 9.4% falls in season-ticket journeys. That is a result of above-inflation fare rises; people who have seen fares rise at three times the rate of wages since 2010 are opting for cheaper modes of transport. Passengers are being priced off the railway. This declining usage threatens the integrity and financial sustainability of the railway and the franchising system itself, as other operators find themselves in similar trouble to Virgin-Stagecoach on the east coast.

What, then, is the Secretary of State’s solution? Will he abandon above-inflation fare rises, as Labour has pledged to do, so that passengers can afford to travel by rail and patronage can be boosted? If not, how does he plan to handle problems with franchises down the line? Will he do as he has done with the east coast and allow companies to walk away from their contracts, thereby forfeiting billions of pounds in premium payments owed to the Treasury, before handing services over to other companies that will agree to pay less back to the taxpayer?

The new west coast partnership franchise has a £20 million parent company guarantee. This contrasts with the £200 million guaranteed by Stagecoach on the east coast. Less risk for the private sector means more risk for the public purse. Both options would allow private operators to renege on their contracts, at a cost of billions of pounds, and makes a mockery of rail franchising by telling private operators that the state will intervene if they are in trouble, removing risk and incentivising reckless bids. It would be a case of profits being privatised and losses socialised.

The Public Accounts Committee and the Transport Select Committee have published reports that are scathing of both the Secretary of State’s handling of franchises and the franchising system more generally, which is clearly failing on its own terms. The Secretary of State is attempting to prop up the franchising model for ideological reasons. Since 2010, there have been more direct awards—companies being gifted services without having to bid—than successful franchising competitions, meaning that the system resembles state-sponsored monopolies rather than a market where franchisees make bids they are expected to honour.

I have yet to hear the Secretary of State articulate a solution to these fundamental flaws in rail franchising. So far, he has only proposed to tinker around the edges. The strategic vision for rail announced last November will be a future case study for media students on Government presentational double-speak. Amid reversing the Beeching cuts and announcing the invitation to tender for the next Southeastern franchise, there were two sentences on how the east coast franchise had failed. The strategic vision embodies his approach to his ministerial brief and to announcements in this House: smoke, mirrors, ambiguities, jargon, technicalities, empty aspirations and discourtesy.

Photo of Lilian Greenwood Lilian Greenwood Chair, Transport Committee

Can my hon. Friend offer any insight into the Secretary of State’s long-term vision for rail franchising? Did he hear the evidence to the Transport Select Committee on Monday on the proposed east coast partnership, when Iryna Terlecky, a rail professional with decades of experience, told us that she had

“no idea how it might work”?

She added:

“If I was doing this kind of partnership, I would not do it on the east coast” because it was

“completely counter-intuitive”.

Can he understand why the Secretary of State is going down this path?

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

I am grateful for my hon. Friend’s intervention. I value the work she does so astutely as Chair of the Transport Select Committee. It is remarkable that those experts and advisers are making such comments. I will come on to deal with the choice of the east coast for a potential partnership option in my concluding remarks.

Photo of Simon Hoare Simon Hoare Conservative, North Dorset

A moment or so ago, the hon. Gentleman mentioned ideology. I am a Welshman and I thought I understood the Welsh Labour party. What is the difference between the ideologies of Welsh Labour and London Labour on these vital transport issues? Clearly there is a difference, as alluded to by Jonathan Edwards.

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

The hon. Gentleman will recognise of course that the Government forced through the franchise option, so they had no choice in Wales.

Like his time at the Ministry of Justice, the Secretary of State must hope to be moved on before his wrecking-ball approach to decisions reveals its true horrors. He seems incapable of being direct with Members and the public alike. Given his track record, is it any wonder that no one takes the east coast partnership idea seriously? Where on earth did he come up with it? In the back of a taxi on the way to Parliament to deliver his statement?

As my hon. Friend the Chair of the Select Committee has remarked, the east coast is the last line on the rail network on which a partnership between a train and track operator has been launched. More than 20 passenger, freight and open access operators use the east coast main line. The east coast franchise runs less than 10% of services. Why would anyone put this operator in charge? There is no basis for the Secretary of State’s assurances that the governance of the partnership would be independent.

The Secretary of State knows that Network Rail’s London and north-eastern route covers the east midlands. Putting that route into an east coast partnership will force Network Rail to prioritise the east coast over the east midlands and further damage a region that is losing rail electrification and services because of timetable changes. Will his east coast partnership not undermine the national rail infrastructure manager, Network Rail? His new market-led proposals for rail enhancements also undermine Network Rail’s role and increase the Department’s micro-management of rail. Is there not simply too much political interference in rail?

Photo of Ronnie Campbell Ronnie Campbell Labour, Blyth Valley

Like many north-east MPs, I travel on the east coast line every week, and I am always being asked this question by passengers and staff: why on earth did the coalition Government get rid of a perfectly good company that put £1 billion over four years into the Treasury and give the franchise to Virgin-Stagecoach? That has never really been explained.

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

I think the explanation is quite simple: it was done out of ideological obsession and to put the franchise outwith the reach of anybody else.

In contrast, the next Labour Government will allow rail professionals to get on with their jobs free from political interference. [Interruption.] They do not seem to understand the difference.

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

No, I am not taking any more interventions. Sit!

Last week, the Secretary of State failed to address my concerns about four other highly vulnerable rail franchises being provided with revenue support by the Department. Is it his intention to take these contracts within the “operator of last resort” function should they fail?

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

How does the hon. Gentleman square his statement that there is too much political interference in the rail network with his party’s stated desire to nationalise the entire network? It does not make any sense.

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

Had the hon. Gentleman been here for the entirety of the debate, he might have heard me refer to that; I know he has just walked in. The object of the exercise is to put rail professionals in charge of the railway system.

Is it not the reality that the franchise system is totally broken? It’s finished; it’s a dead parrot; it is no more. The one thing the Secretary of State is right about is that track and train should be unified, but that should not be done simply to further his ideological obsession with parcelling up public services for profiteers. I am glad, therefore, that this service has been taken out of the franchising system and placed under public control, although the fact that it is a consortium of private companies brought about during the partial privatisation of the “operator of last resort” prevents it from being properly described as full public ownership.

A minimum estimate is that £725 million flows out of the railway every year into the pockets of shareholders. In addition, £200 million each year is wasted through a disjointed system. Breaking the railway up into pieces was necessary to sell it off, but it has created an inefficient railway. A few years ago, the McNulty report found our railways to be 40% less efficient than European comparators.

I do not agree with the Members who favour a “halfway house” option—having a degree of public ownership, but retaining the broader franchising model, along with a public sector operator or two—as that would mean failing to realise the full benefits of public ownership. What is needed is a fully integrated railway that is fully in public ownership. A unified railway in public ownership, serving the interests of British citizens, their communities, their jobs and their businesses is what Labour will deliver, and the sooner we can have a general election to bring it about, the better. I commend the motion to the House.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport 1:40 pm, 23rd May 2018

What a lot of incoherence from the Labour party and Andy McDonald! Who does the hon. Gentleman think runs the railway today except rail professionals? It is a nonsense.

What we also have seen today is a classic example of the definition of the word “hypocrisy”. This morning the Welsh Labour Government announced their plans for what will be a public-private partnership to develop a new metro service on the Welsh valley lines. This afternoon, the Labour party at Westminster is trying to censure me for announcing a public-private partnership to improve services on the east coast main line. That says a great deal about what the Labour party has become.

Several hon. Members:

rose—

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

I will give way in a moment; let me make a bit of progress first.

I am not going to go through, line by line, the process that I have been undertaking in the past few months to reach what I believe is the right position for taxpayers, passengers and employees, but I have been struck by how little Labour Members understand about the way in which such a process must be managed, and how little they appear to understand the financial structure of franchising, rail laws, or the fact that the Government have to operate within the legalities of contracts and other laws.

I believe that, when confronting a failing franchise, the Government have three duties. The first is to ensure that any transition to a new arrangement is smooth and trouble-free for passengers. That was why we engaged an “operator of last resort” team in the autumn, meaning that, if necessary, they would have plenty of time to plan a smooth takeover. The team registered the name and prepared the website so that they would be ready if this situation arose. That is good practice.

The second of the duties is to ensure that the failing company fulfils its contract with the Government. If I had moved to make this decision months ago, the operator of last resort would not have not been ready and, moreover, I would have left taxpayers short-changed—they would have been given back less money than they should have been. When this contract ends, the taxpayer will have recovered all the money that it is possible to recover under the terms of the contract. That is a key duty of the Government in such a situation.

The Government’s third duty is to act according to due process, to be seen to assess all options properly, and to ensure that they have proper legal protection against any challenge to the decisions that I make. In the last few months the Department has ensured that all those duties have been fulfilled, and I am grateful to all the members of the team who helped me to make that happen.

Photo of Stephen Hepburn Stephen Hepburn Labour, Jarrow

The Secretary of State mentioned the Welsh railways, but the motion is not about the Welsh railways; it is about the east coast main line, which has gone bust three times in less than 10 years. The Government are still obsessed with financing the private sector through taxpayers and railway users, whose fares have gone up by more than 32%.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

I will tell the hon. Gentleman what the motion is about: Labour Members saying one thing in one place and doing something else in another. Why should we take them seriously when they do that?

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

Is there not a much bigger problem with the Labour party’s policy of nationalisation? Labour Members are trying to keep us in the single market, but the state aid rules within the single market mean that we cannot nationalise.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

That is absolutely true. The irony is—I shall say more about this later—that it is the rail unions that have been campaigning against the same European laws that the Labour party wants to keep. This is another example of Labour’s nonsensical position.

Photo of Greg Knight Greg Knight Conservative, East Yorkshire

Will my right hon. Friend amplify something that he hinted at earlier? Will he confirm that he sees the Government as an interim operator of last resort and that this is not a permanent renationalisation?

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

I do not intend that the arrangement will be permanent. What I am saying—I have said this all along—is that when we move ahead with the full future shape of the LNER, we will not do everything in exactly the same way. What has been done on this railway in the past has not worked, and I do not intend to do it again. We will do things differently. We will consider giving the staff a stake in the business, and we will look at a different kind of investment from the private sector. However, as I shall make clear, I believe—the Welsh Government clearly believe—that a partnership between the public sector and the private sector is beneficial to the country, and not something to be cast aside as an evil and sinister attempt to do down passengers.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

I will give way once more, and then I will make some progress.

Photo of Ian Mearns Ian Mearns Chair, Backbench Business Committee

I am very interested by the comments that are coming from behind the Secretary of State. It is clear that he is in favour of state ownership of UK railways; the only problem is that it is German, Italian and French state ownership.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

It appears that the Welsh Government—the Welsh Labour Government—take the same view, because they have just awarded the contract for the Wales & Borders franchise to a French state business in partnership with a Spanish-owned private business. Again, the Labour party says one thing in one place and does something else in another.

What we have heard from Labour in the last few months has been a litany of misinformation, misunderstanding and inaccuracy. Let us take the bail-out point. Labour Members claim that there has been a £2 billion bail-out. That is just plain nonsense. It is wholly inaccurate to claim that there has been a bail-out now, when the railway will continue to make a healthy profit for the taxpayer. It would equally be inaccurate to claim that Labour had bailed out National Express when it did not push through nearly £1.5 billion of future premium payments after 2009. The railway carried on making a profit then, and it will carry on making a profit now.

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

Had the franchise run its full term, would the Secretary of State have expected Virgin Trains East Coast to pay the full £3.3 billion in premiums?

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

Any franchise that runs its full term is expected to pay the full premiums, but when National Express went under and there was a further £1.5 billion of premiums to pay, that money continued to be paid by the new operator, in the same way that the premiums that we are expecting will continue to be paid by the operator in this instance. This is my point: the hon. Gentleman does not understand how the finances of the railways work, and that is why the Labour party is so unfit to be in opposition, let alone to govern.

Photo of Grahame Morris Grahame Morris Labour, Easington

I am grateful to the Secretary of State. I hope that he will clear up that point about the last Labour Government and National Express. As a member of the Transport Committee, I heard a former Transport Secretary, Lord Adonis, explain that sanctions had been applied and that that particular operator was not permitted to bid for other franchises, which was a significant sanction.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

If I am not mistaken, Lord Adonis actually accepted before the Select Committee that that did not happen. He thought that standing up in Parliament and saying that there would be a ban meant that there actually was one. I assure the hon. Gentleman that my Department looked very carefully at this and no evidence of any ban has been found. Moreover, a report from the National Audit Office stated that it had found no such evidence.

Photo of Huw Merriman Huw Merriman Conservative, Bexhill and Battle

I was at the same Select Committee sitting. Of course, in the year following those events, the Labour party left office. What did happen at the time was that the then Secretary of State said that National Express would be stripped of other franchises, but of course that did not occur—I dare say that that could not happen legally—and the two franchises remained the same.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

My hon. Friend is right. It is all very well Labour Members posturing, but we do have to operate within the law of the land, which is a fact that they sometimes miss.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

I will take two more brief interventions, but then I must make some progress.

Photo of Lilian Greenwood Lilian Greenwood Chair, Transport Committee

I want to deal with the loss of premium payments. According to the Secretary of State’s own “Short-term Intercity East Coast train operator 2018 options report”,

“the business revenues are estimated to reach around £2bn over the period of interim operation and the forecast income or premium for taxpayers is estimated at around a quarter of a billion pounds.”

That is about £420 million less than had been anticipated under the VTEC contract. Who will fund that black hole in the Government’s finances? Will it be taxpayers or will it be passengers? Will the Secretary of State have to cut other departmental budget lines, or has the Chancellor agreed to bail him out?

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

I am grateful to the hon. Lady for confirming that the talk of a £2 billion bail-out that we keep hearing from Labour is absolute nonsense. The reality is that we will drive this business as hard as we can to keep the revenues as high as we can. But if this railway were going to deliver as much money as was forecast, none of this would have happened in the first place.

Photo of Julian Knight Julian Knight Conservative, Solihull

I thank my right hon. Friend for giving way; he is being most generous. He is forensically taking apart the Opposition’s case. Was he struck, as I was, by the fact that Andy McDonald did not even mention the cost of renationalisation? Across the board, the renationalisation of the utilities and the railways would cost more than £170 billion, and that is money that we simply cannot afford to spend.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

My hon. Friend makes a good point. The Opposition never cost in their renationalisation plans the value of the trains that are currently privately owned, for example. That amount would be billions and billions of pounds, unless they are planning to nationalise the railways but have no trains to run on them, which is also a possibility.

Several hon. Members:

rose—

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

I am going to make some progress. I will want to talk about a couple of other issues, for the benefit of the House, but first I want to be clear about what the debate is all about.

The Labour party, in its guise here today, unreservedly hates the private sector. Other parts of the party do not, however. Even Lord Adonis, who has been attacking me for months, said yesterday that he thought that the franchising system was working well. I do not necessarily agree with him on that. I think that some serious changes are going to be needed, as I have said in the House before, but the solution is not to go back to where the French are today. President Macron is trying to move things away from the model that the Labour party is advocating, which would be disastrous for this country. Labour’s vision for the future of transport in our country is precisely the opposite of President Macron’s. When a country has a system that is struggling, losing money and closing routes, Labour’s vision is not the way for the future.

Several hon. Members:

rose—

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

I am not going to give way at the moment.

I will take no lessons from a party that says that it wants to dismantle capitalism and create a socialist society that looks fondly towards the disaster that has been Venezuela. Madam Deputy Speaker, did you hear the shadow Chancellor talking at the weekend about his vision for a socialist Britain? This is a man who does not even believe in private property. That would be disastrous for this country, and we must stand up very firmly against an ideology that would damage this country—[Interruption] Opposition Members talk about where investment comes from, but they do not understand that if the railway is in the public sector, that means it has to compete for precious capital day in, day out, and year in, year out, with other parts of the public sector—the health service and the education system. The reason why right now we have knackered old trains in the north of England—the Pacer trains that were no more than bus bodies bolted on to train wheels in the days of British Rail—is because British Rail, in the public sector, did not get the capital to invest properly, and that would happen all over again.

I am going to keep my remarks brief, because many Members want to speak. However, I do want to say a quick word about this week’s timetable issues on the railways, since the shadow Secretary of State raised them and they are of great concern to Members.

What we have seen in the last few days has not been good enough. No one should underestimate the logistical challenge of introducing a timetable change. The changes have been made for a very good reason: they mean a big expansion of services across the country. A timetable change of such a scale involves reorganising staff rotas, training staff for new routes, and reorganising how we deploy our trains. It needed months of preparation, and I am afraid that a number of things went wrong, but most particularly the fact that for the second time in six months, Network Rail was far too late in finalising planned timetable changes and left the rest of the industry struggling to catch up. I am not happy with that at all and I have told the leadership of Network Rail that it cannot happen again. But it is perhaps an uncomfortable truth for Labour Members, who keep talking about current problems as an excuse for nationalisation, that the problems that have arisen in the last few days are, to a significant extent, the result of failings in the nationalised part of the rail industry.

I know that many passengers have had disrupted journeys; that is not good enough. I am sorry that that was the case, and everyone in my Department and people elsewhere are working hard to get the problem sorted out. But this has been a major teething problem in what will be a step forward for the railways. Even with the unwanted cancellations, at the start of this week far more services were running than before the timetable change happened.

I know that some people have experienced change that they are not happy with. We cannot deliver everything for everyone, but this is going to mean better journeys for thousands of people up and down the country.

Photo of Kevan Jones Kevan Jones Labour, North Durham

The right hon. Gentleman blames Network Rail for these problems and calls it a nationalised part of the railways, but he must remember that he is the Secretary of State. One of the main problems was the lack of consultation with the wider travelling public, or for that matter with many local Members of Parliament or local authorities.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

There is a certain irony in Labour Members keeping on saying that they do not think I am competent and they do not think that the Department is competent, yet saying that they want to take a greater role in running a nationalised railway. That does not add up—it is a great contradiction—and the idea that they would be any better at it is for the birds.

The issue has arisen because of late delivery of the finalised timetable. That has created huge logistical problems, and two things have made them worse in the north. One is the fact that the electrification project on the Bolton line has gone wrong, which needs to be learned from very carefully indeed—[Interruption.] I do not electrify the railways personally. Secondly, there is the behaviour of the unions, which are currently, in the midst of a difficult period, going forward with work to rule in a way that is deeply regrettable.

Several hon. Members:

rose—

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

I will give way, but then I shall wind up my remarks so that others have a chance to speak.

Photo of Stephen McPartland Stephen McPartland Chair, Regulatory Reform Committee

I have been experiencing some of these teething problems due to the new timetable in Stevenage. There continue to be issues, but we are looking forward to more seats, more services and more destinations. I was on a train today from Stevenage. I had to get off at King’s Cross, but it went through to Gatwick and then on to Brighton, so we are excited about the prospects.

We are very proud to have the east coast main line stopping at Stevenage. We would like more services, but we cannot forget the passengers. They do not care whether ownership is private, mutual or public—they just want things to work. I am grateful that the Secretary of State has stepped in to try to make that happen.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

That is the most important thing. It is why we are pushing forward with the integration of track and train to make the railway more reliable, and it is why we have a strategy to bring in digital technology to improve the performance of the railway. It is also why, for the first time in a long time, we are investing in significant extra capacity across the rail network.

We sat in opposition looking at things that needed to be done but just did not get done, but now we are in government, they are happened. Last week the fantastic new London Bridge station opened. In the summer, I will be in the midlands to open the new Kenilworth station. In July, I will be opening the expanded Liverpool Lime Street station. These are big and positive steps forward for the railway.

In total, over the next five years, we will be investing £20 billion on renewing the current infrastructure, and another £9 billion on further enhancements, including the flagship trans-Pennine rail network. We are building HS2, we will shortly be opening Crossrail, we are just opening the Thameslink tunnels through central London, and we have done the Ordsall chord in Manchester. [Interruption.] The £2.9 billion trans-Pennine rail upgrade will begin in the spring of next year and make a massive difference to passengers.

The thing that passengers will probably notice the most, however—this is being funded by the private rather than the public sector—is all the new trains that are arriving. Every single train in the north of England is being rebuilt, starting from later this year, with all the Pacer trains going to the scrapyard, and every train in East Anglia. The new trains asked for by Opposition Members are arriving on the east coast main line later this year, and new trains are coming to the south-west, the midlands and the south. There will be new trains across the whole country because this Government are investing in our rail network. This Government want to give a better deal to passengers, and this Government are going to do what works. All we hear from Labour Members is ideology from a party that cannot quite work out what it is actually talking about, and I think we have one big job for this country: make sure they never get anywhere near government.

Several hon. Members:

rose—

Photo of Eleanor Laing Eleanor Laing Deputy Speaker (First Deputy Chairman of Ways and Means)

Order. Before I call the spokesman for the Scottish National party, let me say to the House that it will be obvious that a great many Members wish to speak. We have limited time, as there is another debate after this one, and I therefore want to warn colleagues that I will be imposing a six-minute limit on Back-Bench speeches. That, of course, does not apply to Mr Alan Brown.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy) 1:58 pm, 23rd May 2018

It is a pleasure to follow the Transport Secretary. He made a speech that will certainly appeal to his Back Benchers but I would not say it was a forensic demolition of the argument for public ownership of the east coast main line. When the Transport Secretary throws out phrases like “Labour just hate the private sector” and “they would turn our economy into a Venezuelan economy” that seems like smoke and mirrors to me, rather than forensic analysis.

This censure motion relates directly to the handling of the east coast main line franchise. I am happy to support it on that basis, but there has been a further catalogue of errors on the Transport Secretary’s watch. I want to touch on some of that as well, as it builds up to where are today.

It is clear from the opening speeches that there are opposing views across the Chamber on the merits of privatisation and franchising, but one thing that I am confident about is that, as Andy McDonald touched on, the Transport Secretary wrongly connects cause and effect when it comes to privatisation of the railways. He continually plays up the increased investment in the railways since privatisation and the subsequent increase in passenger numbers as if it all just magically happened when British Rail was broken up and sold off. It can be argued that British Rail was struggling—it did have some poor rolling stock and it was outdated—but that is only half the picture because the Government would not allow British Rail to borrow to invest in the railways. The Transport Secretary says British Rail did not have access to capital, but that was because the Government would not allow it to access capital.

There was another restriction on the railways at the time. Substantial investment was needed following the 1988 Clapham rail crash, and further rolling stock upgrades and the channel tunnel were bleeding money elsewhere that British Rail was not allowed to access. Once John Major’s Government sold off British Rail, they allowed private borrowing, so it is correct that additional money was levered in, but that money was levered in on the basis that it could be recovered only through fares or through Government subsidy. If the Transport Secretary cannot acknowledge that money can be borrowed only because it is underpinned by the taxpayer, either it shows a real lack of understanding of where the money comes from, or it shows his ideological blind spot.

That attitude permeates all the way through the failed east coast franchise. The Transport Secretary has previously more or less shrugged his shoulders in the Chamber and said, “Well, you know what? Stuff happens. Some franchises fail, and that is the way the private world operates. Some fail and we move on, but do you know what? Others will come along and they will be successful, so why worry?”

Photo of Christine Jardine Christine Jardine Liberal Democrat Spokesperson (Scotland)

Does the hon. Gentleman agree that one of the flaws in the east coast franchise, and one of the reasons it failed, is that it was so badly set up in the first place, with the backloading of payments? Does he agree that perhaps we should take this opportunity, as we go into a different arrangement, to look at how we set up franchises to make sure we do not doom them to failure?

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy)

I agree with the hon. Lady. I will address a couple of those points because I agree wholeheartedly with what she says about the tender process and the backloading.

The reality is that private investors and companies either make money out of a franchise or they seem to be allowed to walk away. The Transport Secretary stated at the Dispatch Box that what is now happening is not a bail-out of VTEC. But if VTEC owes £2 billion in track premiums and is allowed to walk away without paying anything, that must by definition be a £2 billion bail-out. That is so simple and it cannot be argued against.

Photo of Huw Merriman Huw Merriman Conservative, Bexhill and Battle

Surely the definition of a bail-out is when the Government actually have to pay money to the company, which of course they are not doing. If anything, the criticism of the Government is that they have ripped off the private sector and got more money from it than it could deliver.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy)

Yes, there we see the ideological blind spot yet again. If somebody owes me £2 billion, I would be writing off £2 billion of debt if I said, “Forget about it. It’s okay.” Let us say it is technically not a bail-out, but the Government are writing off £2 billion of debt that that company owes the taxpayer. The company is walking away and getting rid of a £2 billion liability, and I do not understand why Conservative Members are trying to argue different.

The Transport Secretary has previously justified the predicament by saying the franchisee got its sums wrong. That should not be an excuse, but, as I have repeatedly said, and the shadow Minister also touched on this, it means the Department for Transport also got its sums wrong when it thought the tender was suitable for award. It is not just the franchisee that got its sums wrong; the Department for Transport got its sums wrong, too.

The Government failed in their due diligence. What about the supposed parent company guarantees? Those guarantees clearly have not been worth much to the taxpayer. We do not know what the runner-up bids looked like, but do those runners up have a case against the Government, given they clearly failed in their due diligence by awarding this franchise, from which VTEC gets to walk away?

As Christine Jardine said, we know VTEC backloaded the track premiums. If another consortium’s bid did not backload the track premiums, the taxpayer might already have made more money, but we do not know whether there was such a bid because it is all clouded in commercial confidentiality. It also shows, yet again, that no lessons were learned from the failed 2012 west coast franchise. The Transport Secretary had a duty to ensure that lessons were learned and properly applied in awarding the east coast franchise, and it is clear that not enough analysis was undertaken.

When the story broke, although VTEC got the sums wrong, Richard Branson blamed some of the reduced numbers on Network Rail. Given the Transport Secretary also has responsibility for Network Rail, what is the truth in that statement? If it is true that Network Rail was the problem, VTEC should be compensated because that is the way the franchise model works. If it is not true, why has the Transport Secretary not come out fighting to disprove Richard Branson’s comments, instead of casually defending VTEC at the Dispatch Box? It is more smoke and mirrors from VTEC.

At the Transport Committee, the chief executive of Stagecoach used excuses such as that the Scottish referendum and Brexit hit the numbers. Considering that our referendum was in 2014, before the franchise was awarded, that is clearly patent nonsense.

Despite all that, the Transport Secretary’s new wheeze to prevent a blame game between the track owner and the franchise holder is a combined partnership model. That might improve things, but at this stage we do not know what the set-up will look like or how it will interact with other services outwith the franchise. Given the repeated Back-Bench Tory support for open access on the line, there will clearly be further complications for such a partnership to address. It is absolutely guaranteed that there will be further issues down the line.

Photo of Fiona Onasanya Fiona Onasanya Opposition Whip (Commons)

The Public Accounts Committee found last month that the passenger growth forecast by Virgin and Stagecoach was wildly wrong. In the light of what the hon. Gentleman is saying, does that prove the rail franchising model is broken?

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy)

It certainly proves the current model is broken. If a franchisee gets its figures wildly wrong, it goes back to the due diligence by the Department for Transport, which clearly accepted the wildly wrong and inflated figures. Action is needed to remedy that.

Even if we accept the Government’s partnership model, the Transport Secretary has made it clear he believes that the private sector always operates better than the public sector. Surely then, at the very least, he should allow the public sector to bid for franchises: if he is that confident the private sector will win, he does not have to worry about the public sector bidding. Let the public sector bid and let us see which is the most competitive.

Photo of Kevan Jones Kevan Jones Labour, North Durham

Is it not the case that what we are seeing here is not a free market situation at all? In a free market situation, a failing franchisee would lose money, too. The current situation is tantamount to going into a casino, putting on a bet, losing and being given back the stake. Surely risk should be shared with the private sector in future arrangements so it takes a hit, as well as the taxpayer.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy)

I completely agree. Rail franchise holders have been able to walk away. As has been said, the profits are privatised and the losses are underpinned by the taxpayer. That is not a proper free market model because there is absolutely no punitive action against franchise holders when they fail.

Photo of Huw Merriman Huw Merriman Conservative, Bexhill and Battle

If that were the case, why did the share prices of the companies involved collapse?

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy)

Funnily enough, Stagecoach’s share price increased when the Transport Secretary gave a statement from the Dispatch Box in February. Share prices go up and down, which is to do with the overall performance of these companies, and they are very big companies. The whole point of these big companies bidding and providing parent company guarantees is that it is supposed to offset the risk, rather than leaving the risk to the taxpayer.

On the question of state-owned companies or public sector organisations running franchises, the Transport Secretary’s logic completely falls apart when we consider that four foreign state-owned rail companies already operate franchises in the UK. Those companies are making a profit here for reinvestment in their domestic set-up, which is proof that state-run railways can work efficiently.

The previous east coast main line services are further proof that public ownership can work. When the previous franchise failed and was taken into public sector operation, it returned £1 billion in track fees to the Treasury and turned an operating profit of £42 million. So, as has been asked before, why move away from that successful model to one where VTEC can come in with inflated sums and then get to walk away? It is clearly not right.

The southern rail franchise shambles also happened on the Transport Secretary’s watch. The main conclusion of the NAO’s report is that it could not be demonstrated that the franchise has delivered value for money. At the time, the operator blamed Network Rail and the unions, and the Government blamed the unions, completely ignoring the Transport Secretary’s role in refusing to engage with them. The fact is that 60% of the cancellations were due to Govia Thameslink Railway and only 40% were caused by Network Rail. The UK Government set up the model supposedly to deal with the complex infrastructure upgrades, but the Government took all the revenue risks, so the strikes actually cost the taxpayer, because the loss of revenue is underwritten. The Government also awarded the franchise based on an even higher roll-out of driver-only operation, which is what caused some of the disputes.

Photo of Ian Mearns Ian Mearns Chair, Backbench Business Committee

This is not just a problem with southern. Southern is a failing franchise, but northern seems to be on the verge of failing, too, with complaints from passengers across the north of England about services regularly not being provided.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy)

I agree, and I think that the Government are now looking at northern because it is yet another failing franchise—another sign that the current system is just not fit for purpose.

I go back to the problems with the southern franchise. The NAO report makes it clear that the Department for Transport’s responsibility was large, especially for access to the network and timetabling pressures. Such errors led to an additional £60 million being allocated from the Treasury, following a loss in revenue and other costs. Again, all that happened on this Transport Secretary’s watch.

Photo of Chris Grayling Chris Grayling The Secretary of State for Transport

I do not want to deflect attention in any way, but may I remind the hon. Gentleman that that franchise was not set up while I was Secretary of State?

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy)

I am happy to accept that, but all the current problems are happening under the Secretary of State’s watch. He has refused to get involved in trying to resolve the disputes to move things forward. I accept the fact about when it was set up, but he could have been stronger in his leadership and his interventions instead of letting things rumble on.

Another issue that I have with the Secretary of State’s overall competence is his dogmatic refusal to devolve Network Rail to Scotland. The organisation is clearly too big, and it has a bad reputation for delays and overspend, so why would he not want to take the opportunity to devolve it, allowing the Scottish Government to take full responsibility? It has been estimated that a unified management structure could save up to £100 million a year, and that alone should appeal to a Tory Secretary of State, so I just do not understand his dogmatic refusal to engage.

Then there is his lack of engagement with the Scottish Government about the funding for control period 6 in Scotland. The allocation is way less than his regulator recommended for track maintenance and growth in Scotland’s railways. Why is he being so obstinate in refusing to meet the Scottish Government or to consider what might be a fair funding settlement? We also had the recent railcard fiasco. The autumn Budget included the announcement of a discounted railcard for 26 to 30-year-olds, except the Treasury did not put any money into the scheme. In answer to a written question, I was told that the rail industry would pay for it itself, but that was done without discussions with the industry so, lo and behold, the scheme is in chaos. Who would have thought it? Again, that happened under this Secretary of State’s watch.

The Transport Secretary’s slash-and-burn attitude to rail electrification projects and the short-sighted selection of hybrid engines will lead to continued diesel pollution. He has also so far refused to fund or consider meaningful upgrades to the west coast main line north of Crewe. The way that high-speed rail will be implemented means that journeys between Scotland and Crewe will take longer on high-speed trains than they take currently with Virgin Trains, so we need further investment north of Crewe.

I will deviate from rail slightly before I finish. The Transport Secretary’s incompetence is summed up by his proclamations that there will be no border checks post Brexit. The suggestion is that lorries will not be stopped—just like on the US-Canada border—but that just shows that he does not have a grasp of his brief. That is why I am more than happy to support the motion.

Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon 2:15 pm, 23rd May 2018

It is a great honour to speak in this debate, and I am looking forward to making a short contribution—certainly no longer than six minutes. It is a pleasure to follow Alan Brown. I note that he chastised Government Members for saying that the explanation was simple, but it appears that he does not understand the difference between revenue projections and debt, which is fundamental here. At its heart, the motion seems to be about the east coast main line, how it was franchised, how it is now operating, the solution and also the future of the railways. The divide between the two sides of the House is clear: the Opposition believe that everything should be nationalised, and the Government believe that a public-private partnership will work for the benefit of passengers.

I listened to the opening remarks of the shadow Secretary of State, and I understand his frustration, but surely he appreciates a Secretary of State who comes to the House to announce changes, rather than one who, as happened in the case of National Express, made an announcement on the radio at 7.30 am. When this Government had less talent available to them and I was a Minister, I met a number of people from the rail industry and I can say that to think that the railways are not run by professionals is an insult to the many who work on them. They will have been disappointed to hear the shadow Secretary of State say that today.

This is about rail franchising, the principles on which it is based, and then whether the Secretary of State has followed those principles. After the problems with the franchising of the west coast main line, the Brown review set out the principles for franchising and re-franchising. The principles contain clear guidance on the capital that must be put up by franchisees, on the risks and on the Secretary of State’s duties—duties that this Transport Secretary has surely followed. It is his job to ensure that passenger services are not disrupted and that there is a smooth transition if a franchise is failing. By getting the operator of last resort involved last autumn, services were preserved, and the reality on the east coast main line is that more trains are being run, more money will be generated for the taxpayer and more people are being employed. In addition, the most recent passenger satisfaction survey shows that 92% are satisfied with the privatised railway.

Photo of Lilian Greenwood Lilian Greenwood Chair, Transport Committee

I want to pick up on the hon. Gentleman’s point about the Brown review. One of its recommendations was that franchisees should be responsible only for the risks that they can manage, but that was not implemented. Does he agree that the failure to do so was one reason why this franchise has gone wrong?

Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon

If the hon. Lady reads on, she will see that that recommendation states that franchisees

“should not be expected to take external macroeconomic” risks. Surely this franchise has underestimated the risk to itself by overestimating revenues. Now, whether the Department for Transport took the appropriate advice is for the Transport Committee to dwell on, but the Brown principles are quite clear.

The next duty on the Secretary of State is to ensure that taxpayers are protected, and this private failure has not resulted in public sector liability or taxpayer cost. The Secretary of State is right in what he says about that.

Finally, there are processes that must be followed. Like it or not, whether someone is a Minister or a Member of Parliament, there are many times when frustration with some public or private service can boil over, but due legal process must be followed. Looking at what this Secretary of State has done, I do not think that anyone can argue that he has not followed the process. He came to this House in February, and before that he set in place the operator of last resort. He has ensured continuity of service and that there will be no loss to the taxpayer. He has taken the appropriate legal advice. Against that test, the motion must fail.

Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon

On that point, I will give way to my right hon. Friend, a former Minister of State.

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

I was able to work with the Secretary of State, as the House knows, and I can say with absolute surety that he is a diligent Minister who does indeed know the detail and follows procedure in precisely the way my hon. Friend describes. I do not think it is reasonable to blame the Secretary of State for intervening when we all know that he would have got the blame had he not intervened. He has taken the right steps in the public interest and should not be blamed for doing so.

Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon

The former Minister of State is a friend of mine from when we were both in the Department for Transport. I wholeheartedly concur, as ever.

The second part of the motion is about the future, which is where the biggest divide is. I enjoy a good reminiscence as much as the next person. I remember my fifth birthday treat—my parents took me on the railways, because I always wanted to do it.

Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon

Yes, steam was still around.

For most of the first part of my professional life, I used British Rail to commute. The idea that it was a paragon of virtue and good service is just nonsense. My memory, which I do not think has deserted me, is of old and failing rolling stock, poor maintenance, timetables that were never operated, and a lack of investment. That is not the reality now. Since privatisation, the Government have invested billions in railway infrastructure. Over the next five years, they will ensure that there is another £20 billion—actually, there will be much more than coming that directly from the private sector investing in new rolling stock, which will be the biggest benefit for the public.

Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon

I am mindful of the six-minute limit. I have taken two interventions, so I will not take one from the hon. Gentleman.

That private investment, which Labour so heavily opposes, is the very investment that will greatly benefit the people who travel on the trains, about whom all hon. Members should be most concerned. Under Labour proposals, that investment would disappear.

I applaud my right hon. Friend the Secretary of State, who has come to the House with a future rail strategy. It is a great start, but he knows I would like him to go further in a few key areas. I went to speak to the managing director of South Western, which runs the trains around my area. The reality is that Network Rail is causing the bulk of the delays. I am delighted to see public-private partnerships, but I urge my right hon. Friend to go further with his plans to devolve sections of Network Rail, which would provide local accountability and responsiveness to local passenger need. Let us not worry ourselves about nationalisation; let us make sure we get this right. It is ironic that the part of the railway that is most criticised is the nationalised part.

My right hon. Friend the Secretary of State made the point about timetable delays and one or two other issues. The projects division inside Network Rail is responsible for many good works, but it is also responsible for a number of delays. I urge him to get the private sector more closely involved in the design and concentration of projects.

Finally, I am pleased to say that this motion fails at the most basic level. It is wrong to censure the Secretary of State, who has followed the right processes. The last thing this country needs is to go back to the 1970s. It needs to look forward to the 2020s, and nationalisation can never be the answer.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Department for Business, Energy and Industrial Strategy) (Industrial Strategy) 2:23 pm, 23rd May 2018

I am pleased to be allowed to speak in this very important debate. I start by thanking the staff on east coast rail who, during the eight years I have been in the House, have been unfailingly helpful on my twice-weekly journeys to and from Newcastle. They have been unfailingly cheerful and unfailingly efficient despite the turmoil that successive Conservative-led Governments have put them through.

Speaking of the workers, I would not normally support singling out one worker—in this case, the Secretary of State for Transport—for criticism and in effect a fine for a collective failure of this Government, but if anyone is responsible for that failure, it has to be him. What is more, it is not only a failure of competence; more importantly, it is a failure driven by ideology—the Secretary of State’s extreme free market ideology. If he wants to play ideology at dinner parties around the country, that is his decision, but here he is playing ideology with the east coast main line, a critical piece of national railway infrastructure serving more than 20 million passengers per year and contributing more than £300 billion annually to the UK economy. Also, independent research shows that investment in it could generate more than £5 billion in additional GDP for our country and our region. The Secretary of State’s ideology is destroying jobs in my constituency, for which he must be held accountable.

Hon. Members may have heard me mention that before entering Parliament I spent 23 years as an engineer. My last job was for Ofcom, the communications regulator. As part of that, I spent a lot of time looking at the economics of networks and the benefit of competition, which is where I shall focus my remarks.

Free markets require competition. Without competition, markets become monopolies. I hope we can all agree that private sector monopolies are bad—there are no interventions, so we agree. On the other hand, public sector monopolies can be run in the interests of the many, not the few. Many believe that rail is a natural monopoly. I agree. Railways were born in my region. The Rocket—the first commercial locomotive—was built in Newcastle by the Stephensons, and will return to Newcastle for the Great Exhibition of the North this summer.

From the very start, it has been impossible to run railways competitively in the private sector. The Office of Fair Trading states:

“Competition is a process of rivalry between firms seeking to win customers’ business over time by offering them a better deal.”

What better deal was there under Virgin? Were there more trains? No. Were there better trains? No. Were there better services? No. People could argue that the uniforms and the advertising slightly improved, but does that justify the huge costs involved in bailing out the private sector three times in 10 years? Does that justify the huge costs involved in regulating private sector companies to stop them exploiting their monopoly positions? Private sector companies always abuse monopoly positions. They cannot help it. Did it give us the investment in transport in the north-east that we need for our economic development? Transport for the North estimates that we need £27 billion invested in our transport infrastructure. Did it justify the huge costs involved in designing multiple tenders and the exposure to legal challenges? Did it justify the uncertainty that has been so bad for staff and passengers? Absolutely not. The Conservatives are ideologically constipated on free markets to the extent that they cannot see the reality of our rail network and its needs.

Photo of Ian Mearns Ian Mearns Chair, Backbench Business Committee

I am grateful to my hon. Friend and neighbour for giving way. The Government are ideologically wedded to the privatisation model, but they must accept that, once the regular public subsidy for the railways is netted off, the amount of private sector investment is rather small.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Department for Business, Energy and Industrial Strategy) (Industrial Strategy)

My hon. Friend and neighbour is absolutely right, which shows why this idea that this is a competitive market is a travesty. There is really no investment. More importantly, what little investment does take place is not at these companies’ own risk, because they are bailed out. Yet so infatuated are this Government with private sector monopolies that they do not seem to see that. We see the same thing when they deal with the tech giants: this Government are happy for private sector monopolies to walk all over UK citizens and yet the Government continue to stuff these companies’ mouths with gold.

We need a Government who recognise the role that the private sector can play in many industries and many businesses, but also recognise the importance of delivering natural monopolies through the public sector in such a way that citizens, consumers and passengers benefit. We need a Government who are not in hock to the private sector. As this Government are clearly incapable of understanding the very basics of network economics, I hope they will give way for a Labour Government who will do.

Photo of Anne-Marie Trevelyan Anne-Marie Trevelyan Conservative, Berwick-upon-Tweed 2:31 pm, 23rd May 2018

It is an honour to follow my near neighbour, Chi Onwurah, who always speaks wisely on all things engineering and technical. I long to be as knowledgeable as she is.

I wish to thank the Secretary of State for taking this difficult decision to bring the east coast main line back into public control while we find a long-term, sustainable solution for the train line that takes me and my constituents up and down the length of our great nation, week in, week out. As he knows well, I am the MP for the northernmost English constituency, which lies some 350 miles north of us here, and so I am well aware of the crucial importance of good transport infrastructure to ensure business investment can flow into my constituency. That will help to grow strong, long-term successful businesses, which create great jobs for my constituents. This is one of the most vital investments Government can make.

I have talked endlessly, and partially successfully, about why dualling the A1 from Morpeth to the Scottish border—[Laughter.] I heard that! I have talked about why that is so vital for economic growth and inward investment. Indeed, the Department for Transport based its financing decisions on that economic development model, which was so important to justifying why a rural county needed to address 40 years of lack of road investment. The Secretary of State has listened patiently to me over many years and has supported driving forward that investment. Obviously, we wait with bated breath for the sight of diggers, as they get closer in the months ahead. The Department can be assured that my constituents and I will not rest until the whole road is invested in, because that is a crucial way of linking up north Northumberland to Edinburgh, Newcastle and the rest of the UK.

It is not only road investment that is vital; the east coast main line, linking Edinburgh to London, is an efficient and speedy service, and it has two key stopping points at Berwick-upon-Tweed and at Alnmouth, which is Alnwick’s railway station. With recent and continuing improvements in parking provision at both those stations, we have seen substantial increases in usage by my constituents, who travel north and south for business, study and pleasure. It is a crucial rail transport link for my constituents, of all ages, so it is of the utmost importance to me that this train line is run sustainably, and that the long-term security of the east coast line’s investment in rolling stock and the management of fares to ensure a competitive and effective train line is assured.

With the Ministers here, it would be remiss of me if I did not highlight the continuing campaign by my constituents to reopen the Belford station, which sits between Berwick-upon-Tweed and Alnwick, in order to create more opportunities for investment in that 1,000 square miles of rural constituency. Good rail links bring investment and economic growth, and we must continue to be able to invest in the line.

I remember our nationalised railway systems of old; one of my granny’s Sunday afternoons involved seeing whether we could get a train that went somewhere and could get us home in time for tea—it did not always work. The Labour’s party’s vision for train provision, which does not put the customer at the centre—

Photo of Kevan Jones Kevan Jones Labour, North Durham

I am sure the hon. Lady remembers British Rail, because we are still travelling on some of the 125 rolling stock first introduced by British Rail.

Photo of Anne-Marie Trevelyan Anne-Marie Trevelyan Conservative, Berwick-upon-Tweed

It is not so much the rolling stock that I remember as not necessarily getting back for tea because the train just did not go—that used to cause my grandmother and I some disconcertion. The railway timetables were more an idea than a reality a lot of the time. That is a childhood memory, and the Labour party’s vision for train provision, which does not put the customer at the heart of all policy, will not work. The customer pays the fares and must be at the centre of those decisions. So I believe the Secretary of State has taken the right, difficult decision to use his operator of last resort powers to get the London North Eastern Railway—that lovely brand, which I believe is on a poster in one of our bookshops in Alnwick—up and running to ensure that my constituents and I can rely on it and we invest for Northumberland, knowing that our train service will be sound.

Photo of Paula Sherriff Paula Sherriff Shadow Minister (Mental Health and Social Care), Shadow Minister (Mental Health) 2:35 pm, 23rd May 2018

Thank you for calling me in this important debate, Madam Deputy Speaker. Like my party’s Front Benchers and others, I really am very happy to see this Government, with no hint of irony, realising the virtue of a rail franchise being taken into public hands, operated in the interests of the many, not the few. Let me be absolutely clear: the failure of Virgin East Coast, and this Secretary of State’s handling of it, shows this out-of-touch Government at their self-serving worst, looking after their rich pals in big business while people across the country are left to pick up the pieces. In January, we were offered the ridiculous suggestion from Virgin that the Government’s bail-out of the east coast franchise was somehow the “pragmatic” solution. Why is it that this Government can always somehow find the money to bail out their friends in the big corporations but refuse to help increasingly frustrated railway passengers, such as the ones who contact my office every day? What is “pragmatic” about that?

I have long been a supporter—since before I came to this House—of putting our country’s railways back into public hands. Real pragmatism would involve just that: giving power and control to passengers—giving the public ownership of our railways, because the utter failure of the franchise system is there for all to see. I worry about the precedent that the Secretary of State has set with the east coast line to companies such as Virgin, sending out a message loud and clear, “Under this Government, no matter how badly your business is doing, don’t you worry, we’ll be there to make sure the taxpayer looks after you.”

The public are paying these big companies more and more of their hard-earned money in exchange for a shoddier and shoddier service. Even just last week, I and other regular users of Virgin East Coast received a rather odd email. It was Virgin congratulating itself on the service being

“in a really good position thanks to the positive transformation we’ve started”.

Perhaps I missed that. I am sure regular East Coast users, both in this House and outside, will have been happy to see that Virgin was signing off with a good crack at a joke—that is all it could have been.

Our railways are in a significantly worse state than they were in 2010, and it is not just Opposition Members saying it; the public also know that things are now so bad that something has to give. Some 76% of the public and 90% of Virgin East Coast staff agree. What this Government just do not get is that their party’s privatisation of the railways 25 years ago has been such a deep, unmitigated disaster that the public are now willing to try something different. They are, frankly, sick of seeing a Secretary of State who comes to this House time and time and time again to tell me and colleagues that our constituent’s experiences of travelling by train—trains overpriced and late, people packed in like sardines—are not accurate and do not reflect the real picture.

Every week that this Secretary of State remains in his position—I note he is no longer in his place; perhaps he has something better to do—is yet another week in which mistrust of his Department grows deeper and deeper. Grand promises to improve the daily commute for people in my constituency are being made in one breath, only for the Secretary of State to turn his back on passengers in another.

“It is a bit of a cheek for a Member…to lecture and question us about rail investment when the Government have made so many promises that they have failed to deliver.”—[Official Report, 5 December 2006;
Vol. 454, c. 221.]

I hope Conservative Members agree, because those are not my words; they are the words of this Secretary of State when he was the Conservative shadow transport spokesman, more than a decade ago. We do not even have to go back 12 years with this flip-flop Transport Secretary. In 2016, he said that nationalisation is “an expensive, reckless idea”, and in 2017 he called it Venezuelan. This January, he said, “We must never forget how badly nationalisation failed key public services.” Now, four months later, he talks of his excitement at bringing back one of Britain’s most “iconic” state-run brands. Well, the chickens really have come home to roost, have they not? If he cares to return to the Chamber, will the Secretary of State tell the House why he suddenly changes his mind on nationalisation and his seemingly long-held principles against it when nationalisation becomes a means of bailing out Richard Branson?

In Yorkshire, what have we had from this Secretary of State? My Labour colleagues and I have come to the House time and again to demand a fairer deal and highlight the concerns of our constituents, only for Transport Ministers to turn their backs callously on northern commuters. We have had the downgrade of Crossrail for the north. Yorkshire has been hit with the biggest fare increases anywhere in the country. We have seen the Secretary of State ducking and diving meetings with me and colleagues when we simply wanted to discuss our constituency concerns. If we continue to say that we will cut the Secretary of State’s pay if he continues with some of these incompetencies, I am worried that he will end up on less than the minimum wage.

Northern passengers have been told that twice as much is spent on them as is spent in the south, although through a rather imaginative calculation, that ignores London. Just this week, we have seen new timetables cause complete meltdown throughout the region, with barely an eyebrow raised in Westminster. And now this: an accidental renationalisation. On behalf of my constituents, who have quite frankly had it with the state of public transport across Yorkshire, I say this: surely the buck has to stop somewhere. The Yorkshire Post recently took the unprecedented step of calling on the Secretary of State to resign; with a record like his, surely the right hon. Gentleman should and must consider his position. The Opposition stand ready to transform our country’s railways for the better, and my constituents are crying out for it. Surely that is not too much to ask for.

Photo of Iain Stewart Iain Stewart Conservative, Milton Keynes South 2:41 pm, 23rd May 2018

It is a pleasure to speak in this debate. As a member of the Transport Committee, I hope to inject a rational perspective into proceedings. As has been mentioned, the Committee is currently scrutinising this issue. I should add the caveat that our proceedings are still under way and we might receive further evidence later.

The first point I wish to make is that this is not a failing railway in the sense that most passengers would understand it. It operates efficiently; there are high levels of passenger satisfaction; there is growing usage of it; and, yes, there is investment in it. Under Virgin, many of the trains have been refurbished and, although I appreciate that this is not a direct part of the franchise, King’s Cross station has been transformed in recent years, so the passenger experience is being enhanced.

The issue at the heart of this debate is that something went wrong with the revenue projections for the line. That is what we need to scrutinise. It is important to understand the nature of the east coast main line franchise. It has a much larger discretionary element than most other rail franchises, by which I mean that the passengers who use it have many more options for making their journeys. Those options are both on the railways, with other train operating companies running services on large parts of the line—at the southern end of the line, Hull Trains and Grand Central offer alternatives to the Virgin Trains, and further north there is TransPennine Express and ScotRail, meaning that there is a discretionary element to which service passengers use—and, because of the long-distance nature of the network, passengers can choose non-rail alternatives, including flying between Edinburgh and Glasgow or driving between some of the key towns and cities. That makes it much more difficult for anyone in the public or private sector accurately to forecast revenues over a lengthy period. I have had conversations with other train operating companies this week, and they said, “We don’t bid for these long-distance franchises because of that element of uncertainty.”

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Department for Business, Energy and Industrial Strategy) (Industrial Strategy)

The hon. Gentleman is saying that the issue with the east coast line is that there is competition, and that Virgin could not handle that competition so should be bailed out. Does he realise that he is undermining the entire argument, because he is saying that when there is competition, franchising fails?

Photo of Iain Stewart Iain Stewart Conservative, Milton Keynes South

No, my point is that Virgin is making a profit on the line and is very able to meet the competition, but what is difficult to forecast accurately—[Interruption.] If the hon. Lady stops chuntering and listens to what I have to say, I will answer her point. The revenues have grown, but they have not reached the very ambitious levels that we set. Many factors behind that are completely unrelated to the rail industry. I shall touch on some that are related to the rail industry, but those that are not include fuel costs, which are considerably lower than was envisaged at the time the franchise was let—

Photo of Iain Stewart Iain Stewart Conservative, Milton Keynes South

No; if it is cheaper for people to use motor vehicles, they are more likely to do that than to use the train. There is a question mark over the extent to which Network Rail’s non-delivery of some of the upgrade projects is a factor; that is part of the picture about which I do not yet know and is something that we will scrutinise. There is also something more fundamental happening in the nature of rail usage, relating to different travel-to-work arrangements and work patterns. There is currently no clear idea of what is behind that, but it will affect other franchises, as well as the east coast line.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

My hon. Friend and I served together on the Transport Committee for three years, and his speech is compelling and highly knowledgeable. Does he feel that nationalisation should be part of the solution to the problems we face?

Photo of Iain Stewart Iain Stewart Conservative, Milton Keynes South

Absolutely not. I will come to that point and refer to the evidence that the Select Committee heard on Monday from Iryna Terlecky, who has many decades of experience in the rail industry.

The shortfall in projected revenue would have happened irrespective of who owned and ran the railway. The difference is that under a nationalised system, the public purse would have taken an immediate hit from the loss of revenue, whereas under the system we have, the parent company and the bond that it put up has taken the brunt of it.

Photo of Iain Stewart Iain Stewart Conservative, Milton Keynes South

No; forgive me, but I have three minutes left and the hon. Lady’s previous intervention was not really up to scratch.

There are of course lessons to be learned about how we base our revenue projections over a long period. There need to be more cautious forecasts of rail revenues over the long term. Indeed, I think that that has already happened in respect of some of the franchises that have subsequently been let. We need to revisit some of the Brown recommendations on the balance of risk that an operator takes against extraneous factors that are not to do with the direct operation of the railway. In the end, though, the franchise system does work; it does deliver enhanced performance. I, too, remember what British Rail was like when I was a child, and it was not a glorious existence.

Let me conclude on what I hope is a more consensual point. I am a sentimental old railway buff and I cheer the reintroduction of the LNER brand. LNER was one of the big four private companies that transformed this country’s rail system in the first half of the previous century. May I make one little plea? LNER had iconic liveries, from the apple green of the Flying Scotsman to what is called the garter blue of the Mallard and the Gresley class, and the teak colour of the carriages. Please can we have that back and rekindle the romance of the railways of those years? I am absolutely certain that that would help to keep passenger numbers high and ensure that this important railway line has a bright future.

Several hon. Members:

rose—

Photo of Eleanor Laing Eleanor Laing Deputy Speaker (First Deputy Chairman of Ways and Means)

Order. I am afraid that I have to reduce the time limit to five minutes.

Photo of Daniel Zeichner Daniel Zeichner Labour, Cambridge 2:49 pm, 23rd May 2018

It is a pleasure to follow Iain Stewart and other expert members of the Transport Committee who have spoken in this debate. I am only sorry that the Secretary of State has left the Chamber—left the dock, effectively—because I was rather hoping that we might discuss what we will do with the £2,400. I was going to suggest that we should perhaps buy him a bus pass, because I am very keen on moving from rail to bus. I was actually going to say something nice about him as well—only one nice thing, I hasten to add—because I was going to thank him for raising the vexed issue of the timetable changes. Many Members will have heard their constituents’ concerns about the way in which the process has been handled. Of course, this is a major set of changes—we understand that—and such change is not easy to implement.

I was on the “Mann in the Morning” programme on wonderful Radio Cambridgeshire this morning, listening to people who have had bad experiences on the rail line from Cambridge. Those experiences were immediately blamed by the Secretary of State on Network Rail. We are now in the process of no longer transferring risk within the system, but transferring blame. It is not all about Network Rail; the train operating companies must bear some responsibility. If we get a chance to look into what happened around this timetable change, we may well find that that is the case, too.

The positive side is that people in the industry want to make it work. The message from passengers that I heard today is that they want the system to be run as a public service, and that is also the ethos that many in the industry want. We should try to focus on that because, despite privatisation over 25 years, most people in the rail industry still have a public sector ethos. If we could celebrate that and make it work, we would do much better.

I do not agree with Members who say that the franchising system works. I am deeply sceptical about it. A number of reasons have been raised for the failure of this particular franchise. Network Rail is, of course, immediately blamed for ideological reasons. In fact, the evidence given to the Transport Committee rather suggested that the relationships were “not very clear”, and that there were some “implicit” understandings rather than “contractual” understandings. If we are writing big contracts, we do not do it like that. Network Rail was not to blame for the failure of this particular contract. It was probably down to a decline in the number of season ticket sales because this route, as has been said, is volatile.

If we are to return to the Brown recommendations and say that train operating companies should not be subjected to these big macro-economic risks, I would ask what kind of risk transfer is really taking place. These are the very risks that we face, and other businesses have to cope with such risks.

Photo of Helen Goodman Helen Goodman Shadow Minister (Foreign and Commonwealth Affairs)

This discussion about the over-bidding on the franchise reminds me precisely of the discussion that we had with the mobile phone companies, which came along, cap in hand, having overbid for their spectrum. It was clear that the system was just not working because people wildly overbid.

Photo of Daniel Zeichner Daniel Zeichner Labour, Cambridge

I am afraid that my hon. Friend is right. That takes us into a much broader philosophical discussion about how we get investment into our key industries, and that applies to a whole range of discussions. Just look at the huge number of consultants, lawyers, contracts and all the rest of it that are involved. We are told that some 300 people are employed just on trying to sort out who is responsible for delays and that hundreds of millions of pounds are lost on this process. Frankly, do we really need all of that? What are the train operating companies actually delivering, apart from the delightful colour changes that have been suggested? If we ask passengers what they want, they say an integrated system. They are talking not about transferring risk or arguing about blame, but about getting the system to work. Let me conclude with a few words about the so-called future partnership model.

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

The hon. Gentleman is, as ever, making a valuable contribution. One of the most interesting things that has come out of this debate, thanks to him and to my hon. Friend Iain Stewart, is the business of how we integrate transport policy. We have heard that a competitive element is associated with road and rail, and that all kinds of other factors affect projections and estimates. Perhaps the Minister will take that away from the debate. There has always been a call for an integrated transport strategy, and every Government have wrestled with it. Perhaps this event will stimulate and catalyse just that sort of approach.

Photo of Daniel Zeichner Daniel Zeichner Labour, Cambridge

Once again, the right hon. Gentleman, an experienced former Minister, speaks very wisely. In the end, this is a slightly false debate. Of course there will always be a role for the private sector in transport; the question is whether we have to build in competitive mechanisms in this kind of way. We could probably repeat the same discussion with regard to buses and other parts of the transport system. We need investment—of course we do. It is a straw-person argument to point to British Rail 30 years ago. Of course we knew that there was underinvestment in British Rail 30 years ago. The question is what the system will look like in the 21st century and how we will unlock the resources that we need.

Let me turn now to the partnership model which, I am afraid to say, the Secretary of State has hidden behind. The Transport Committee heard pretty clear evidence on Monday evening from experts in the field that that approach does not look like the best one to try out. Apparently, some 20 passenger, freight and open access operators use the line. Once again, this is a recipe for argument and dispute about who gets priority and how the whole thing will work. It seems to me that this was more an excuse for the Secretary of State to hide behind to spare his blushes, because he could not bear to admit the fact that the line was coming back into public ownership.

Finally, let me take this opportunity to disagree with Lord Adonis, who spoke very engagingly to the Transport Committee on Monday in defence of the franchising system. At the end of his evidence, he gave a warning to me and people in Cambridge who use the line into King’s Cross, explaining how difficult it could become because of the various competing priorities within this partnership. I had to tell him that that was already happening. A year or so ago, I had the pleasure of having a cab ride to King’s Cross—one of the best parts of being a Member of Parliament is that I get to ride in the front of the train. It was an extraordinary experience and very different from the mixed experiences as a passenger. I well remember the train halting from Cambridge as it joined the east coast main line, and the drivers pointed out that there are regular disagreements and disputes about priority at that point. These are very real issues.

Let me return to the people who really matter. I am not convinced that the passengers who were fuming on the station platform in Cambridge this morning are that bothered about the intricacies of franchising approaches and who is to blame. They want a railway that works and a railway that is affordable, and that should be the aim of everyone in this House.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell 2:57 pm, 23rd May 2018

The problem this afternoon is that we are just going to fall into the ideological arguments about nationalisation and privatisation, rather than getting down to some of the key causes of why we are in this position today. Quite frankly, the nationalisation argument has been blown out of the water with the single market argument, as I said earlier.

I am pleased to be following Daniel Zeichner because he raised the issue of timetabling, which has affected all of us. I have certainly seen the comments from my constituents who use the trains and heard about the struggles that they have had. What is at the heart of the timetabling issue? Well, train companies normally plan their timetable six to nine months ahead, but the delays of Network Rail meant that they had two to four months. It is therefore not exactly surprising that they ended up in a situation in which the timetabling is not exactly working as smoothly and efficiently as we would hope.

Network Rail had a large part to play in where we are today. We have made comparisons with the west coast main line, and talked about Virgin keeping the contract and Stagecoach making the profits and so on, but Network Rail simply has not delivered on the basis that was laid down in the bids that were put forward. Companies made promises about power upgrades in their bids, but they have not occurred. They also promised to eliminate bottlenecks, and that has not occurred.

Several hon. Members:

rose—

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

Just give me two seconds. When we look at the money that was earned, some £1 billion was returned in three years compared with £1 billion in five years under nationalisation.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy)

The hon. Gentleman is talking about the problems caused by Network Rail. Will he remind the House who was in charge of Network Rail for the Government?

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

I am delighted that the hon. Gentleman has made that point. Indeed, that is the problem with a nationalised company. Many people have said, “Oh, it’s the Secretary of State’s responsibility in a nationalised company, ” but that is not how it works—it is not how it has ever worked. On the one hand, people are saying that the Secretary of State should take complete control of the railways, and on the other that he should get out. People who are running a nationalised operation do not share the sense of urgency of those in the private sector. There are litanies of delayed or missing projects under Network Rail.

Photo of Ian Mearns Ian Mearns Chair, Backbench Business Committee

The hon. Gentleman should just remember that Railtrack was privatised. It failed, and the Government had to take it back in-house to save the railway network.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

Railtrack failed due to the vandalism of John Prescott when he was Transport Secretary. He took advantage of the opportunity when British Rail’s failure to keep its system upgraded and safe culminated just three years into privatisation under Railtrack. The track that broke, which caused Railtrack to fail and to be transformed into Network Rail, did not degrade in the three years of privatisation. It broke as a result of a catalogue of rail mismanagement that led up to that point. It is one of the biggest disgraces—

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

I am sorry, but I have taken two interventions and I will not have any more.

It was a disgrace to use that failure as an opportunity to act according to political ideology. I am very clear on that point. One of the fundamental problems with the railway is that we have got to a point where we are looking back through rose-tinted glasses. I recommend to everyone—perhaps some people have seen it—a programme on Channel Five at the moment called “InterCity 125: The Train That Saved Britain’s Railway”. It is fantastic. I really enjoyed the first episode. What was the first part of that episode? The state of the railways in this country when they were under British Rail, and the lack of investment by Governments of all colours during that time.

We talk about the east coast main line. We are going back to a period when, given the resources that were available at the time, with the overhead powering, the gantries were as far apart as they could possibly be, so of course high winds displaced the wires. These were all failures of trying to deal with a nationalised company that has to compete for its money with the health service, benefits and pensions, education and all the other things the Government have to spend money on. They were also due to the fact that whatever those failures were, staff would still come to work the next day and get paid, because they did not have the responsibilities that they would have had in the private sector.

I am being very critical of Network Rail, and one reason why is that I have had it up to here—up to the top of my head, for the benefit of Hansard—with Network Rail. For several years, this Government—under the then Chancellor of the Exchequer, George Osborne—delivered a grant to Network Rail to put in place a bridge at Dartford station in my constituency under the Access for All scheme. I have constantly been in meetings about that with Network Rail, and I have heard excuse after excuse for why it is not happening. Fundamentally, whatever the reasons, it is getting to a stage where it could not manage its way out of a paper bag. I have had enough—my constituents have had enough—of Network Rail staff’s failure to take responsibility and attempts to pass the buck. There is only one reason why we have problems with electrification: the poor management and poor running of Network Rail. I have kept quiet about my criticisms of Network Rail to this point, but not today, because another failure has led to the contents of a rail franchise bid not being delivered.

Like many Members, I have used the east coast main line regularly, and none of us can deny that the carriages have been upgraded. They were refurbished. The experience in those carriages is more pleasant than it was in the recent past, and that shows that there has been investment.

Every single time we talk about an upgrade, Network Rail puts it back. Now we are looking at December 2018 before the latest set of figures come through. It beggars belief that when we see the failure of such a major company at the heart of our railways, which is charged with delivering the infrastructure for the rail operating companies to work on, nothing ever happens.

The motion states that the Secretary of State’s pay should be cut. In my view, we might instead start thinking about censuring the people who are putting together project plans but not delivering them.

Photo of Tommy Sheppard Tommy Sheppard Shadow SNP Spokesperson (Cabinet Office), Shadow SNP Spokesperson (Scotland), Shadow SNP Spokesperson (House of Lords) 3:04 pm, 23rd May 2018

I always travel by train when I can, and with respect to colleagues from the north-east of England, I am going to lay claim in this debate to be Virgin Trains East Coast’s best customer. I have made 32 return journeys from Edinburgh to London in the past 12 months. That is the equivalent of circumnavigating the globe in a Virgin train and it gives me quite an insight into the service.

I pay tribute to the staff of that service who have served me over these years—the people who drive the trains, who check the tickets, who serve the drinks, who provide the information—and also the many hundreds of staff who work in the depots, cleaning and engineering these magnificent machines. I think it is a shame, the way in which they have been treated, and that they are constantly being told that their boss and their uniform is changing, rather than being valued for the service that they provide.

We have heard a lot about ideology in this debate. The Government seem convinced that their opponents are motivated only by ideological dogma. Anyone reviewing the text of this debate surely can only conclude that the reverse is the truth—that in fact, it is the Government who are so blinkered by ideological dogma in favour of privatisation that they refuse even to consider the possibility of a contemporary public sector alternative. That seems to me very regrettable, because there are many positive reasons why the public sector alternative should be considered. I just want to name two.

The first reason is that it would allow integration of the management of the service and remove the ridiculous separation between the train and the track that is responsible for many of the problems that we are facing in the operation. What better way to ensure that the track serves the demands of the train service than to place it under the management of the same people who manage the train service? The idea of separating a vehicle from what it is travelling on might make sense with a road network, where there are lots of different avenues to travel, but the train only has one track on which to get from A to B, and the management of those things ought to be integrated. That could happen, in a public sector organisation.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy)

Clearly, I agree with the points that my hon. Friend is making. Does this not further reinforce the argument that, in Scotland, Network Rail should be devolved to Scotland, to allow the Scottish Government to have that integration he is talking about?

Photo of Tommy Sheppard Tommy Sheppard Shadow SNP Spokesperson (Cabinet Office), Shadow SNP Spokesperson (Scotland), Shadow SNP Spokesperson (House of Lords)

Indeed, and I will come to that later.

The second big positive of having a public sector operator is that it will allow for much greater investment—we would not have to have investment that was contingent on franchise payments and on levels of use; we could just take a serious decision, as a grown-up country, and say, “We need to rapidly and significantly invest more in our rail network if we are to bring it up to scratch and achieve the type of global service that our competitors can achieve.”

I represent Edinburgh East, including the world-famous Waverley station. I admit there have been some improvements over the past few years—we have seen the market share of the rail journey from Edinburgh to London rise to a peak of 37%—but that still leaves nearly two thirds of the people who make the journey from Edinburgh to London taking the plane. Surely that is a ridiculous situation, and we must take urgent action.

The industry will tell us that, when we get the journey time down to four hours, that is a tipping point and that will take market share to around 40% but, to get the train as the majority means of transport between Scotland and London, we will have to reduce the journey time to three hours, and that can only happen with massive investment in a high-speed network and it can only happen with a new fleet of trains. So I want the Minister to confirm that these changes that are taking place will not in any way affect the delivery in December of the roll-out of the new Azuma fleet on the east coast line, and that he will engage seriously and purposefully with the Scottish Government in discussing the investment required for HST in the future.

The Scottish Government, because of devolution, have some responsibility for the rail network in Scotland, yet as with so many other things it is working in a straitjacket that is set by this place. We have repeatedly said, over a long period, that the franchise for rail services in Scotland should be run by a public sector operator. We tried, in a debate on the last Scotland Bill, to get the whole regime transferred to Holyrood, but could not find support from any other parties in this Chamber. There is now a golden opportunity, however, for the Department for Transport to take seriously the Scottish Government’s request. Now we have the ability to put a public sector operator into the tender process, there is an opportunity in Scotland—if they will not do it here—to use this to experiment to see how a contemporary public sector operation takes place. The Thatcher Government began the attacks on British Rail when, as a service, it was still reeling from the attacks of Beeching and the massive line closures. We do not know what a public sector operator would be like now if privatisation had not happened. Maybe—just maybe—we might have had trains as good as people have in France and Germany.

This is a motion of censure, and I find it surprising that the Secretary of State has absented himself from the debate. This is not a normal motion on a matter of policy; it is a motion that questions the capability and commitment of an individual. At the very least, he ought to have the decency and respect to be in attendance in this Chamber to hear the case against him.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne 3:10 pm, 23rd May 2018

I am grateful to you, Mr Deputy Speaker, for calling me to speak in this very important debate.

We have had a to-ing and fro-ing about the merits of nationalisation, the merits of privatisation and all the rest of it, but what has struck me about the debate is the hypocrisy, I think, that I have heard from many Opposition Members. It is a strong word, used by my right hon. Friend the Secretary of State in his opening remarks—

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

Order. Let me just say that “hypocrisy” is not a word that we would use against fellow Members, as we are all honourable Members. I am sure you would like to withdraw it.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

I will withdraw it, although if you were to look at the record, Mr Deputy Speaker, you would see that the word had been used earlier in the debate, so I was just repeating it, but we will leave it there.

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

If I might help, I was not here earlier, and I can only make a judgment on what happens when I am in the Chair. I am sure you would respect that.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

Thank you very much, Sir, for your very mild and modest rebuke.

I find it extraordinary to hear speaker after speaker look to the network in France, in Germany and in other countries and say that things are operating well there, when clearly, if one understands anything about the EU competition policy or the single market, the whole drift of EU regulation in the rail network has been away from the nationalisation that has been lauded by Opposition Members.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

I am sure that my hon. Friend recognises that President Macron, a centre-left politician, has recognised that the French railway system is completely unsustainable, and that has led all the workers out on strike.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

My hon. Friend makes an excellent point that goes to the slight craziness of a lot of our debate. It is clear to me that the partnership with the private sector has put far more investment—billions and billions of pounds of investment—into the network than would have been the case if it had remained under public ownership. We all know the budgetary pressures. We all know the budgetary situation in 2010, when we had a deficit of £160 billion. It does not take a particularly sophisticated mathematician to work out that, if we had had the rail network in public ownership, as well as public ownership of vast swathes of industry, the budgetary position would have been a lot worse than even in 2010.

Photo of Mike Amesbury Mike Amesbury Labour, Weaver Vale

Surely the way forward in this debate is what works. In the past 14 days alone, Northern Rail has cancelled 1,159 trains—full cancellations. It is complete chaos in my constituency. That demonstrates that the current franchise system is not working. We need public ownership and public control.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

Everyone in this Chamber realises that the franchise system is not perfect, and I freely admit that. However, compared with what was operating before under the nationalised system, we have seen massive improvement in terms of investment and a doubling of passenger journeys since 1995. Under the old system, one of the principal jobs of Government was, in effect, to manage this huge industry. Half the Secretary of State’s time was spent talking to the unions about the wage bill. There were civil servants running the network who were not rail professionals. The shadow Secretary of State said that we need to get more professionals running the system. His proposed solution to that was to nationalise the entire network. That is essentially giving control to the man or woman in Whitehall, who, despite their qualifications and skills, are simply not rail professionals; everyone can see that. It is extraordinary to say that we need more rail professionals to handle the network and operate the system, and then to say that the Government should nationalise the whole thing. There is an inherent contradiction in that.

When I entered this House, I was very lucky to serve on the Transport Committee for three years. We covered a great deal of ground in that time. We went to the EU—to Brussels—a number of times. It is really disappointing, frankly, to see that the debate has regressed since I served on that Committee, under the chairmanship of Mrs Ellman. All parties in this House were broadly in agreement with the franchise system. The debate was about how we were to manage that system and how the franchises should operate. People have mentioned the Brown recommendations, the majority of which, as I remember, were supported by the Committee. We were moving forward. There was political consensus in this House and across the country.

Now, we are faced with a radical Marxist, or whatever you want to call it, party—[Interruption.] I am sure you would not call it that, Mr Deputy Speaker. We can call it lots of things. We are confronted with a party that is openly suggesting that nationalisation is the answer. [Interruption.] The shadow Secretary of State says, “The public are agreeing with us.” The polls on aviation showed that only 18% of the public believed in privatisation at the time, but we privatised it anyway and it was incredibly effective. The reality of British Rail and a nationalised network is not the fantasy described by Opposition Members.

I want to make some specific remarks about the east coast rail franchise. It is absolutely the case that this has been a very difficult franchise. It has had recurring difficulties in terms of revenue projections, as my hon. Friend Iain Stewart said. Those projections would have been difficult under any administrator—any form of ownership. There are serious questions to be asked about the nature of the shareholders’ guarantees and the nature of the public sector liability. However, to suggest that the answer is to nationalise the entire network, which I believe was in Labour’s manifesto, is really, I am afraid, a case of throwing the baby out with the bathwater.

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

Unfortunately I am going to have to drop the limit to four minutes to get all Members in.

Photo of Alex Sobel Alex Sobel Labour/Co-operative, Leeds North West 3:18 pm, 23rd May 2018

One of the firmest ideological principles held by Conservative Members, as we have just heard from Kwasi Kwarteng, is their insistence on the superiority of the private over the public with regard to the ownership of capital. The continued failure of the rail franchising framework to harness the power of the private sector ought to give them pause for thought on this matter. Much has been said about the £1 billion surplus that was poured back into the Treasury when the east coast main line was run in the public interest prior to Virgin Stagecoach, but less has been said about how East Coast achieved what private companies could not.

Photo of Mike Hill Mike Hill Labour, Hartlepool

Does my hon. Friend agree that improved transport links are vital to the success of the so-called northern powerhouse? As such, does he agree that this east coast fiasco means that we can now show that only a publicly owned company model can deliver that agenda?

Photo of Alex Sobel Alex Sobel Labour/Co-operative, Leeds North West

I thank my hon. Friend for his comments. I often stand at King’s Cross waiting for my train home and see the words “Train cancelled” above me. I look wistfully at platform nine and three quarters, hoping that I may be able to go through the wall and travel home on the Hogwarts Express. Although the Minister for Magic, Cornelius Fudge, was a very inept Minister, he at least managed to run the Hogwarts Express successfully—unlike the Secretary of State. I completely agree with my hon. Friend’s point.

I would like to turn to the remarkable East Coast Rewards loyalty scheme that was made available to customers from 2011 until it was scrapped by Virgin Trains East Coast. I extend my thanks to the individuals behind the “Save East Coast Rewards” campaign, who kindly provided my office with a collection of documents obtained through freedom of information requests, including financial reports and business plans produced while East Coast was under public control. The documents disclose the business thinking behind the creation of East Coast’s generous loyalty scheme. There is a sharp focus on understanding and exploiting the unique market characteristics of the east coast main line, to compete with fierce competition from road and air.

The scheme had the following benefits. Frequent business travellers who spent £1,800 over three months would receive six first-class return tickets, lounge access for them and a guest, 20% off advance fares from the East Coast website and a quarter of a bottle of wine, which I am sure Conservative Members would enjoy. That was a bold and competitive offer, and it brought business back from air travel and road on to the railways. For less frequent business and leisure travellers, a spend of just £255 through the East Coast website entitled them to a free standard-class ticket anywhere on the network, so they could enjoy Yorkshire, the north-east or Scotland completely free.

After Virgin took over the franchise, it decided to roll out the Nectar point scheme. Subsequently, an £1,800 spend over three months would award business travellers £18-worth of Nectar points, instead of six first-class tickets. A £255 spend would get someone £2.50-worth of Nectar points, instead of one standard ticket under the public East Coast. It appears that Virgin Trains simply pushed the Nectar reward scheme on to East Coast, without paying any attention to what was already on offer, demonstrating a lack of understanding of the loyalty market, what East Coast had to offer and competition from air travel.

Financial reports from East Coast show that, in 2013-14, East Coast Rewards had more than 380,000 members, who accounted for 50% of expenditure. In subsequent reports, the reward scheme is shown to be ever growing, with more than 600,000 members, before being folded when Virgin Stagecoach came in. The reward scheme was increasingly central to the surplus that East Coast provided back to the Treasury.

The remarkable thing is that a not-for-dividend subsidiary rail operator appears to have understood far better than Virgin Stagecoach how to run a viable rewards scheme that succeeded in exploiting the market characteristics of the east coast main line—its status as an artery route and its discretionary travel base of leisure travellers, with competition from road and business air travel—to successfully run a rail franchise. Virgin’s inability or unwillingness to recognise the viability and popularity of the reward scheme it inherited from East Coast seems at odds with the belief that private interests are best placed to organise business profitably.

East Coast was an example of a rail operator that was not responsible to shareholders or profits and was not contorted into complementing the brand identity of Virgin. We had a well-run and well-liked organisation that understood its market position and its strengths and weaknesses and improved the service while pouring money back into the public purse. We need to return to that situation, not as a last resort but as a default position, using the best ownership model for rail travellers, whether as directly operated rail or a co-operative, which would have strong employee and consumer interest. We on the east coast deserve the best railway, which we have not had under Virgin Stagecoach but did have under the public East Coast.

Photo of Simon Hoare Simon Hoare Conservative, North Dorset 3:23 pm, 23rd May 2018

If Members on both sides of the House can agree on only one thing in this debate, it has to be the importance of the railways to our national transport infrastructure, important though they are for business and social purposes and of course for their distinct and clear environmental benefits, as we try to get people on the trains and off the roads. I pray in aid HS2 and Crossrail, which underscore the importance that the Government place on investment in our rail network.

This has in some respects been a slightly confusing debate, but not, I suggest, on the Government Benches. To paraphrase the arguments that have been made on the Government Benches, of course franchising is not prayed in aid as a perfect, foolproof exercise, but it delivers better results than we had under nationalisation, and the Government have behaved in a pragmatic way in facing the problems of the east coast franchise. The Labour party seems to be trying to have its cake and eat it in saying that the Government are solely ideologically driven, have blinkers on and see the private sector as the sole answer, and yet chastising them for finding a temporary, pragmatic, workable solution not designed on the testbed of any form of political ideology but merely trying to provide a seamless service for people who rely on that rail route for either social or commercial purposes. I see no evidence there of any Conservative ideology, but more likely pragmatism.

There was certainly confusion from the shadow Secretary of State for Transport, Andy McDonald who regionalised the philosophical basis of the Labour family, be it Welsh or English. As we have heard, Carwyn Jones, the First Minister in the Labour Government in Cardiff, has taken an entirely different approach to the railways from that which the hon. Member for Middlesbrough seemed to suggest.

Clearly this is a bit of a death knell for that debate. We all remember the phase in British politics when people said, “You’re all the same; there’s no difference between you.” If any ideology underpins this debate, it is the vindictiveness of some pettifogging deduction of a ministerial salary and an ideology that British Rail was marvellous, nationalised is best and the private sector does not know what it is doing. That is going backwards, and we all know that trains going backwards is not the ideal way of making progress in transport terms, unless of course you are shunting into the sidings—a direction of travel in which I hope the Labour party continues.

Photo of Grahame Morris Grahame Morris Labour, Easington 3:27 pm, 23rd May 2018

It is a privilege to speak in this important debate. I would like to recognise the expertise of many members of the Transport Committee, on which I have the honour of serving.

Listening to the debate, I cannot help feeling a sense of déjà vu. The shortcomings of privatisation and the franchising process are demonstrated by the private operators running the east coast main line. I was slightly amused when the former Rail Minister, Stephen Hammond, who is very affable, talked about the golden age of privatisation and how wonderful the new rolling stock was. I just checked the age of some of the rolling stock on the east coast main line. The InterCity 125 diesel-powered high-speed trains were introduced in 1976; the 225s, which were the mainstay, were introduced in 1989; and the Pacer trains on the Northern Rail franchise were introduced in 1984, so let us have a sense of realism.

This is the third occasion in a decade that the Government have had to accept back the keys to a failed east coast franchise. A failure once we can excuse and twice is unfortunate, but the third time is a cause for censure and for reflection. It demonstrates that the Government’s desire to privatise the east coast main line is nothing more than adherence to blind political ideology.

It is ironic that the Transport Secretary, as a leading Brexiteer and staunch privateer, now allows our railways to be run by any state-owned company except one owned by the British state. The right hon. Gentleman might like to dust off an old phrase to use in this context: “Take back control”. He would be in good company, as numerous surveys show that 70% of the public support calls for the railways to be publicly owned—run in the public interest, not as a cash cow for private operators.

I remind the House that, when in public ownership, the east coast main line returned over £1 billion to the Treasury to be used either to upgrade the rail service or for vital public services. In 2015, we were told that re-privatising the east coast main line represented “best value” for commuters and taxpayers, and I do not believe the Secretary of State has adequately explained how that can be reconciled with the decision to bail out Virgin Stagecoach to the tune of £2 billion.

Why do the Government not hold such companies to their contractual commitments? The noble Lord Adonis, with whom I do not always see eye to eye, gave some interesting evidence to the Transport Committee. He questioned why it is acceptable for corporate entities to walk away from their commitment to us—the taxpayers—to my constituents and to the Government. We really should take a harder line with the private train operating companies. We should block companies that have corporate structures and base themselves in tax havens from bidding for public contracts. A decision to overbid on such a contract is simply corporate irresponsibility, and the taxpayer is being fleeced time and again.

Photo of Huw Merriman Huw Merriman Conservative, Bexhill and Battle 3:31 pm, 23rd May 2018

It is a great pleasure to follow my Transport Committee colleague, Grahame Morris, who always speaks well on this subject.

I am very interested in why this franchise has been brought in-house yet again, and the Transport Committee is keen to get under the skin of whether there is a particular issue with this franchise that causes it to be more problematic than others. We were very fortunate to have two respected industry professionals come and speak to the Committee, Iryna Terlecky and Nicola Wood, who both act independently to verify whether a franchise should be passed. Quite simply, their point about why this franchise failed is that the bidders overbid. Why did they overbid? Because they took the view that this network is the jewel in the crown of the UK rail network, and if a private company has the jewel in the crown, that sets it up well for the remainder of its franchises.

The House may welcome my taking a step back. The Government can of course be looked at—they should, rightly, be looked at—for allowing this to happen on their watch, but it would be slightly negligent of a Government not to try to take the maximum amount of money they could for the taxpayer. That money ultimately allows the Government to continue with the financing of the entire rail network, and in that regard I think that such strong criticism is based a lot on ideology in relation to who should run the railways. In my view, although I will always regard the private sector as the better operator, where the private sector cannot operate, the state will of course step back in, as has indeed been the case.

Network Rail has taken a bit a battering in this debate. It was quite clear to us from the evidence—indeed, VTEC has acknowledged this—that, in terms of the works Network Rail has delivered, it is not responsible for the issues on this line. It may be that Network Rail became a problem, but it delivered during control period 5. We should acknowledge that, rather than use it as a scapegoat, as it often is. [Interruption.] Quite frankly, I am not particularly bothered what Richard Branson has to say. That actually tends to be the case, but I think he looks more to Brexit and other reasons to explain why this has failed, when we have in fact seen more of an inflow of people staying in this country, rather than leaving.

This point has already been raised, but I want to mention the noble Lord Adonis. I was particularly impressed by the evidence he gave to the Select Committee, and he was very balanced. He made the point that, in his view, all the franchise systems work well, but this line is an exception and has been one previously, and there is no reason to change a model that he still believes works well. He is worth listening to, but I take issue with his claim that, on his watch, a bidder such as Virgin Stagecoach would not have been allowed to bid again and would have lost its other franchises. Of course, when National Express suffered the same fate, the legal advice was that the cross-default mechanism did not allow it to be stripped of the other two franchises, and it was not stripped of them. It is all well and good for Lord Adonis to say that a future Labour Government would have stopped such bids coming through, but he knows full well that between 2009 and 2010 there was no option to do so, so we will never know whether that would have been the case.

In the 30 seconds I have left, I want to talk up our rail network. In my view it works well. Within the EU, we have the largest investment in the railways; the utilisation of our railways is 60% greater than the EU average; and the European Commission has found that there are £11 billion of efficiency savings for the other 27 members to deliver, but zero for the UK. We have the second safest railway and the second highest passenger satisfaction ratings. That is hardly surprising, given that we have doubled the number of passengers since privatisation. I want to talk up rail because it still has more to offer us in private hands.

Photo of Mary Robinson Mary Robinson Conservative, Cheadle 3:35 pm, 23rd May 2018

It is a pleasure to follow my hon. Friend Huw Merriman. I am pleased to have the opportunity to speak in this important debate about franchising and the operation of our railways.

The Government have undertaken the biggest programme of railway modernisation since the birth of the industrial revolution. Northern Powerhouse Rail, HS2 and the northern hub are among the most ambitious initiatives to fuel the engine of the north and fulfil our aim to create a fully integrated transport network right across the north of England. Greater Manchester is a major beneficiary of the historic transport devolution, and I hope that the powers that are being given to Transport for Greater Manchester will allow those of us in the north to emulate the successful independence of Transport for London.

As this is a censure debate, I want to put on the record my view that a large part of the success of our rail in the north has been down to my right hon. Friend the Secretary of State. I know from working with him over the past few years that he is as committed as I am to ensuring that we improve our rail services and revitalise the whole northern economy.

I emphasise from the outset the importance of the train lines that serve my constituents. Stockport is an important regional hub, with 3.8 million journeys a year made from Stockport station. Rail travel plays a critical role in connecting district centres such as Heald Green, Gatley, Cheadle Hulme, Hazel Grove and Bramhall in my constituency with Manchester and towns across the borough.

However, the new revised timetable from the rail operator, Northern, offers a diminished service for my constituents in Heald Green, Gatley, Davenport and Woodsmoor—stations that account for 2.3 million journeys a year. Of most concern for passengers using Woodsmoor and Davenport stations will be the uneven service pattern, particularly the gap in the morning peak between 7.38 and 8.23. Having no service for almost an hour at peak time is clearly unacceptable. The situation is made worse by cancellations and only this morning, a Gatley commuter told me that both the 7.05 and the 7.47 were cancelled, describing it as simply a disaster for the residents of Gatley. My constituents will be appalled by the actions of unions, which promise strikes and working to rule to exacerbate the problems further.

It is not just passengers travelling to work who are affected by the timetable changes, but students going to school, who have been left high and dry. Parents and headteachers have expressed their concern to me that children as young as 11 may have to make a choice between travelling on a later train and therefore arriving at school late, and catching a train earlier in the morning and facing the prospect of waiting on a busy main road at the school gates until they open.

Northern was awarded the franchise under its parent company, Arriva Rail North, which inherited the rolling stock units from the old Northern Rail in 2016. The franchise agreement stipulated that the outdated pacer trains, which my right hon. Friend the Secretary of State mentioned, would be phased out by 2019 and that improvements would be made, with more than 2,000 extra services a week along the network. However, we have not reached that situation yet. It is clear that Network Rail failed to complete the Bolton works on time and was late in setting timetable information for Northern.

We need a more integrated rail system across our northern cities and for local connectivity to run side by side with it. There has been a lack of accountability. The Mayor of Greater Manchester mentioned accountability as being important a year ago. I urge him not to make political capital out of this issue, but to work with the Government, the Secretary of State and Transport for the North, to attend meetings and to ensure that we in the north are properly represented by him.

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Transport) 3:39 pm, 23rd May 2018

Let us get things straight. Who runs the Department for Transport? Who makes the decision about who runs our railways? Is it the private operators? Is the Secretary of State completely under their control? Is it the officials? Has the Secretary of State completely abdicated his responsibilities and placed them in the hands of civil servants? Perhaps it is the Secretary of State. Of course the buck stops with the Secretary of State. He has the final say. It is his stroke of the pen that decides what happens. The fact is that the Secretary of State has more centralised control than we have witnessed for many, many years. He interferes with work programmes according to his political preferences and he certainly has the final say on all that happens in his Department.

It was, therefore, the Secretary of State who set out the franchising process for the east coast main line. It was the Secretary of State who had responsibility for the content of the franchise. It was the Secretary of State who had the ultimate responsibility to review the east coast main line bids. It was the Secretary of State who would have carried out the due diligence over the bids. It was the Secretary of State who would have determined whether a bid could be delivered. It was the Secretary of State who would have awarded the franchise. It was, of course, the Secretary of State who had the responsibility for managing the franchise ever since.

There is no point passing the buck to some rail operator. There is no point blaming officials. The Secretary of State is 100% responsible for every failed franchise. The Secretary of State therefore bears responsibility for the £2 billion black hole in his accounts created through the termination of the contract with Stagecoach-Virgin. It is now this Secretary of State who is responsible for nationalising the east coast main line. Alec Shelbrooke mentioned Access for All funding; it is the Secretary of State who has cut £50 million out of the Access for All funding.

Labour is delighted that our desire to nationalise the railway is making so much sense to the Secretary of State. Before we come back into power he has taken our policy to put rail back under public control, such was its success when Labour did that in 2009 on the east coast, putting £1 billion back into the hands of the Treasury. Unfortunately, the east coast main line will still not be under public ownership: private companies Ernst and Young, Arup and SNC-Lavalin will be taking over its operation.

I have to say to the Secretary of State, passengers up and down the east coast are saying no more franchising, and no more privatisation or privatisation dressed up as some obscure partnership. No. They are saying: keep it in public hands. As my hon. Friend Grahame Morris said, 70% of the public are demanding that rail be put under public ownership. Labour will honour that demand. My hon. Friend Daniel Zeichner highlighted how it was not just his but his constituents’ desire to see rail taken back in the interests of the public.

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Transport)

I will make some progress now and see how the time goes.

I thank my hon. Friends for their contributions in holding the Secretary of State to account: my hon. Friends the Members for Bishop Auckland (Helen Goodman), for Darlington (Jenny Chapman), for Blaydon (Liz Twist), for Leeds West (Rachel Reeves), for Nottingham South (Lilian Greenwood), for North Durham (Mr Jones), for Gateshead (Ian Mearns), for Jarrow (Mr Hepburn), for Blyth Valley (Mr Campbell) and for Weaver Vale (Mike Amesbury). My hon. Friend Chi Onwurah used her business experience and expertise to analyse the reality of the Secretary of State’s failed franchising model and found him wanting. My hon. Friend Paula Sherriff was right about the Secretary of State’s readiness to, as she put it, bail out their rich pals no matter how badly their business is doing. My hon. Friend Alex Sobel provided a reality check to the Government’s approach, saying that it was more likely to be found on platform nine and three quarters. He was absolutely spot on when he highlighted the loss of the east coast reward scheme.

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Transport)

As I say, I am going to see how time progresses.

I question why the Secretary of State has waited so long. Having registered the LNER name back in March this year, it is clear that nearly two months have passed with him withholding information from the public about the level of failure and his intention to nationalise the line. Perhaps he could not say, “Nationalisation.”

I do not want Stagecoach or Virgin to feel that they are off the hook either. While fully exploiting the Tory privatisation of the Railways Act 1993, let us be clear that the track record of companies such as Virgin is to drive profit out of the public purse—out of the pockets of taxpayers. Virgin has been particularly astute in the way that it has used litigation to sue the state over contract failure. It is the financial model of Virgin to do so, no matter the line of business, and look at how it has used that to win the lucrative contract on the west coast.

Can the Secretary of State guarantee that there are no mechanisms that Virgin or Stagecoach can use to take out litigation against him or his Department in the light of this abject failure, and can he further guarantee that he will disqualify them from applying for any future transport contracts? Further, can the Secretary of State report to the House how much this abject failure on the east coast main line has cost the taxpayer? Just three years after the east coast line was ripped out of public hands, time and resources have been spent—public money—on this failed, ideologically driven project.

From my discussions with Network Rail and Virgin—

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Transport)

I said I would give way if there is time at the end. From my discussions with Network Rail and Virgin Trains East Coast, it is evident that the Secretary of State’s Department, and therefore, the Secretary of State, failed in the process of drawing up the franchise—failed to discuss the infrastructure upgrade, scheduling and deliverability with Network Rail when its budgets were evidently under strain. So we had one part of his Department cutting back while the other part of the Department was signing agreements to the contrary, agreeing things that would never be delivered. How did the Government let this happen? I have heard that from both Network Rail and the rail operator, so I know it to be true.

We know that there are around another four franchises that are on the brink of collapse. Will the Secretary of State therefore come to this House and make a statement on each of these contracts and bring these immediately back under public control? He has a responsibility to militate against the future failure of our vital public services, so will he take action now to avoid failure and to ensure that our rail is safely and smoothly transferred into his operator of last resort?

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

I am most grateful to the hon. Lady for giving way. Will she now clarify from the Dispatch Box that in order to nationalise the railways, it is Labour’s specific policy not to be a member of the single market?

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Transport)

I can make it absolutely clear to the hon. Gentleman that the French railway system and the German railway system have trains in national ownership, not only in their country, but in our country, too.

Right across the country, it is crystal clear that this Government’s transport policies daily fail the public. They charge more and more for the public to use the trains while signing dodgy deals to enable private companies and even foreign Governments to suck money out of our railways; and they waste money on livery and uniforms, as we have heard in today’s debate. I must put on record that it is the staff who are at the heart of the constant change, and we thank them for their endurance through this process.

Labour would put that money back into our trains, back into upgrades, back into building our public services and therefore back into our economy. Today’s debate has clearly demonstrated that the Secretary of State has completely failed this nation and has completely failed our railways. It is time for a new Secretary of State, and my hon. Friend Andy McDonald is ready to take our rail back and get our nation back on track. Labour will rescue and generate our rail service once again.

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London) 3:49 pm, 23rd May 2018

As we have heard from right hon. and hon. Members, the railways always stimulate passionate debate, even if some of the arguments made by Labour Members do not seem to have moved on much since the 1970s.

Leaving aside Labour’s unwarranted, ad hominem, vindictive attacks on the Secretary of State, which only serve to underline how thin its substantive arguments are, it would have us believe that our future lies in returning to the bad old days of British Rail. However, scores of Conservative Members have used this debate to restate the merits of what has been achieved since privatisation, and they are entirely right to recall its considerable successes.

As my hon. Friends the Members for Spelthorne (Kwasi Kwarteng) and for Milton Keynes South (Iain Stewart) made clear, privatisation has transformed the railway. Passenger numbers have doubled, with 1.72 billion journeys in 2016-17. Passenger satisfaction has increased—ours has the second-highest satisfaction levels of any railway in Europe—and we have unprecedented levels of safety, meaning that the British railway is one of the safest in Europe. The public and private sector, working together, have responded to demand by delivering more services to more stations across a busier network. Some 71 more stations are open today than in 1994-95, and more than 7.3 million passengers services were planned on the Great Britain rail network in 2016-17, which represents an increase of 29% from 1997-98.

Photo of Paula Sherriff Paula Sherriff Shadow Minister (Mental Health and Social Care), Shadow Minister (Mental Health)

The Minister seems to be referring to some utopian paradise with his talk of all the great things about the current rail system. Has he looked at Twitter this week and seen the complaints of many thousands of people, including many of my constituents, who are experiencing a living hell just commuting to work and college?

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London)

We are of course dealing with the challenges of managing a busy, successful and growing network. The hon. Lady will acknowledge that we have just introduced one of the biggest—if not the biggest—timetable changes in the history of the railways to reflect the surge in demand for rail services. We recognise that there are problems, of course, and we are focusing on them so that we minimise disruption, but we should acknowledge that we are dealing with the challenges of success, rather than failure.

Let us not forget about freight either—it is one of the great success stories of privatisation. The private rail freight operators that took over from British Rail in the 1990s brought a new spirit of commercial enterprise and customer focus, and an innovative approach, to operations. That transformed a sector that had been in steady decline into one that, over 20 years, has doubled its share of the land-based freight market.

Privatisation has driven innovation, new private investment and customer service excellence, drawing in more than £4 billion of private investment in our railways since 2010 to deliver faster, more convenient and more comfortable journeys. Thanks to private investment, 7,000 new carriages are to be introduced on the rail network between now and 2021.

Photo of Lilian Greenwood Lilian Greenwood Chair, Transport Committee

By talking about freight, the Minister is avoiding the main subject of the debate. He will know, however, that the rail freight sector is in some difficulty following the loss of important business.

Virgin Trains has identified one reason for its underperformance as people switching from rail to road due to rising rail fares and falling petrol prices. Given the Government’s supposed commitment to tackling air quality and climate change, and to a modal shift from road to rail, why did he not anticipate that and do something about it?

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London)

The hon. Lady mentions climate change, which is of course relevant to freight, as one reason for the freight sector’s difficulties in recent years has been the withdrawal of coal from use in power stations and the declining coal tonnage in freight. And, of course, the Government are committed to our climate change targets, and we are on track with our various carbon budgets.

I will turn now to the main subject of the debate: last week’s decision on the east coast. Our decision ensures that the taxpayer will recover all the money possible under the terms of the contract, and Virgin and Stagecoach have lost nearly £200 million in the process.

Throughout all this we need to remember that, fundamentally, the Intercity East Coast rail operation, as a train service business, continues to be a successful enterprise that returns good value to taxpayers now and will do so in the future. VTEC could not meet the agreed costs of its contract with the Department but, as an operating business, Intercity East Coast services are in good shape, and commercial revenues more than cover the direct costs of the train business. In fact, VTEC paid back more money to the taxpayer than when the line was in public sector ownership.

Photo of Alex Sobel Alex Sobel Labour/Co-operative, Leeds North West

Does the Minister see in any merit at all in the public sector running of the east coast line between 2009 and 2015?

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London)

We are putting together the new east coast partnership, which will constitute a new approach to how we run the railways. It will bring together the best of the public sector and the best of the private sector, ending the blame game that has seen train companies blame the track operator and vice versa.

Let us not forget that, as a passenger service, this was a well-run railway. The dedication of the staff responsible for the delivery of railway services has maintained high levels of passenger satisfaction—more than nine out of 10 passengers are happy with their journeys.

Opposition Members have suggested that we have nationalised the railway. That is, of course, not the case; rather, this is a temporary return to public control. Indeed, that was envisaged in the original design of privatisation in the early 1990s. The use of the operator of last resort—our public sector operator—is an integral part of the franchising system, not an alternative to it. It is used on a routine basis when we negotiate with private companies to provide a genuine alternative in negotiations, ensuring that we secure real benefits for passengers and taxpayers, and keep people moving. They are given a better deal because they know that the Government have this option in their back pocket.

As was emphasised in the 2013 Brown review, passengers remain protected through the Department’s ability to handle default with an operator of last resort on hand to take over. In this situation, the OLR will do what it is supposed to do: work with the Department on the next competition for a commercial train operator. It will help us to shape the new partnership railway on the east coast, preparing the ground for the line to be transformed into a public-private partnership that will deliver the best of both worlds.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

Rachael Maskell commented on the French nationalised railways. Does my hon. Friend agree that they are in terrible straits, and that the President has recognised that the present system cannot continue because it is haemorrhaging billions of euros every year?

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London)

Indeed. Advocates of the full renationalisation of our railways should heed what President Macron is saying about the sustainability of the French model. It is a warning indeed.

The east coast provides an opportunity for the first of a new generation of long-term regional partnerships, bringing together the operation of track and train under a single leader and a unified brand, and delivering more effectively for rail users.

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London)

Not at the moment.

That brand is the London and North Eastern Railway, LNER. This will evolve into a partnership between the public sector and a private partner, procured through a competitive process.

Of course, we are always seeking to improve the way in which we deliver. We continually refine the franchise model and monitor the performance of all franchises closely. We know that passengers have had enough of the blame game between train operators and Network Rail. We have also improved bid assessments since 2014 by introducing a new process to ensure that bids are more financially robust, such as when there is a lower level of growth in passenger numbers than was anticipated. We have developed new approaches to sharing risk with train operators, which means that they do not take on risks that they are not able to control, including impacts due to wider economic changes. Let me be clear: this means that the Government will continue to run a system that requires train operators to face financial penalties if they do not meet their commitments and ensures that we get the best deal for passengers and taxpayers.

Some Members have raised concerns about other franchises. I can reassure the House that the Department closely monitors the performance of our franchises, assessing a range of measures such as levels of bonding and parent company support, as well as assessing liquidity ratios to establish their health.

Colleagues have commented that this week has seen the launch of the biggest change to rail timetables in a generation. This timetable change will deliver improved passenger services across the country, including the delivery of substantial passenger benefits from the Thameslink programme and the great north rail project. By 2020 there will be over 2,000 extra services a week, with room for 40,000 extra passengers. There will be faster and more comfortable journeys, and new and direct services across the north and beyond.

This vindictive motion diminishes those Opposition Members who support it. I reinforce the Secretary of State’s message that we put passengers at the heart of the railway by making the best use of expertise from the public and private sectors, just as the Labour Government in Wales have done this morning.

Question put.

The House divided:

Ayes 271, Noes 304.

Division number 163

See full list of votes (From The Public Whip)

Aye

No

Question accordingly negatived.

Photo of Rachel Reeves Rachel Reeves Chair, Business, Energy and Industrial Strategy Committee

On a point of order, Mr Deputy Speaker. At 10 minutes past 3 this afternoon, just after the Secretary of State for Transport left the Chamber, he issued a press release on plans to tackle poor performance at Northern Rail. I wonder whether the Secretary of State, who is almost back in his place, has indicated any intention to make a statement to the House allowing right hon. and hon. Members to question the Government on those plans, which are of huge significance to many of our constituents.

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

I have certainly not been given any notification that the Secretary of State wants to come back at this moment, but there is a good chance tomorrow morning at business questions, when I have no doubt you will be able to raise this again.