(1) Section 23 of the Railways Act 1993 (franchising of passenger services) does not apply to services operated on the whole or part of the high speed rail line so provided for in this Act.
(2) Passengers services on the whole or part of the high speed rail line so provided for in this Act shall be provided by a publicly owned railway company.
(3) In this section, “publicly owned railway company” has the meaning given to it in section 151(1) of the Railways Act 1993. —
This new clause would require passenger services operating on the whole or part of the high speed rail line to be provided by a publicly owned railway company.
I beg to move, That the clause be read a Second time.
In the new clause we address the thorny issue of public sector operation. There has been a great deal of consensus across the Committee thus far, with some notable exceptions; this, we respectfully acknowledge, is perhaps the most contentious issue between us.
If we consider the history of rail privatisation and its impact on the commuting public, it is not difficult to understand the overwhelming public support for bringing railway services back into public ownership. Quite simply, the privatisation of British Rail was a rushed, botched job, which had more to do with ideology than with any clear plan for the nations’ railways, and it left us with a fragmented, inefficient and unsafe network at that time.
To suggest that during 13 years of Labour government nothing was done is to misunderstand the position. A great deal of progress was made with renewals in the railway system, and that must be seen within the context of trying to pick up the pieces after the disaster that was Railtrack. I have already alluded to its appalling record. That left us with an unsafe railway. Much of the 13 years of Labour government was devoted to making it into the safest railway system in Europe. Many people in this room will remember having to reduce speeds down to almost walking pace, because of our concerns about the safety of the points systems and rails. We look back to Potters Bar and Ladbroke Grove, etc., and think of the disasters and loss of life.
To say that our experience of the privatisation of rail infrastructure is not a good one is a gross understatement. It is a huge fear on these Benches that the current proposals to break up Network Rail into eight route businesses may embrace the sorts of dangers that we sadly experienced in those years.
The hon. Gentleman talks about infrastructure, but he has avoided answering the specific question I asked him. If the running of the railways by private companies was so bad, why did not the previous Labour Governments of Blair and Brown renationalise them?
I will come on to our responses to some of the poor performances and, indeed, failures of the franchised private system. If the right hon. Gentleman will bear with me, I will come to that in greater detail later in my brief contribution. He will know as well as anybody that the McNulty report stated that the fragmentation of our rail network left us with an efficiency gap of between 30% and 40%, compared with other European networks. This means that money which should be used to address the cost of travel and to fund much-needed investment is needlessly wasted. We have been left with a ticketing system which is the most expensive and confusing ticketing structure in Europe. Commuters’ fairs are up by a quarter since 2010, having risen five times faster than wage growth.
Our rail network needs significant investment. Private and foreign state-owned companies are subsidised by the UK taxpayer, while profiteering at the expense of commuters. Far from learning the lessons of the past, the Government seem destined to repeat them.
In illustrating the benefits of publicly-owned operators, one could hardly ask for a better example than the recent case of the East Coast. The previous Labour Government took the important step of bringing the East Coast back into public operation, after the private operator reneged on its obligations in 2009. I have heard it said that failure is somehow a judge of success, in that if franchises fall over and fail, it demonstrates the veracity and robust nature of the franchising system. I do not think that really strikes a chord with the travelling public, who see an unreliable service that does not meet their satisfaction.
East Coast proved itself under public ownership to be the most efficient of operators. It returned almost £1 billion to the taxpayer in premium payments as well as investing every penny of profit—some £50 million—back into the service. In addition, directly operated railways kept fares down, had record passenger satisfaction and engaged the workforce with unparalleled success.
Today is an opportunity for the Conservative party to deliver what the public are asking for by supporting new clause 21, which would require passenger services operating on the whole or part of the high-speed line to be provided by a publicly-owned railway. I hope that when High Speed 2 is open for general use it will be celebrated as a national achievement. I do not agree with the Government that a nation capable of completing such a fantastic rail infrastructure project is not competent enough to operate passenger services, but that the Dutch, German and French are more than capable of doing that for us. Such an attitude that we are not competent enough to do what many of our European counterparts take for granted is effectively talking down our abilities as a nation.
I am sure that we will return to that debate numerous times in this Parliament, but I hope that I was persuasive enough to make the Minister see the veracity of our argument and that he and his hon. Friends will vote with us and with the wishes of the public in support of the new clause.
I do not want to enter a sour note in what have been harmonious proceedings so far, but I fundamentally disagree with the hon. Gentleman’s new clause. I am in good company, because the last two Labour Prime Minister’s shared my view: neither Tony Blair nor Gordon Brown ever wanted to re-privatise the railways while in power and they did nothing to re-privatise the running of them. He failed to answer my interventions on that.
I always find it slightly odd that those who—sadly, like me—are old enough to remember British Rail see it as the halcyon days when everything was wonderful: the trains ran on time; they were terribly cheap, notwithstanding the taxpayer subsidy of fares; and investment in improving the network overflowed. In fact, every time a Government—whether Labour or Conservative—was hit with an economic crisis, one of the first budgets mangled was that for nationalised industries and investment in the railways. That is why both the previous Labour Government and this Conservative Government have had to invest so much money in improving the rail network’s infrastructure: there was so little investment before privatisation.
The hon. Gentleman seems to think that it was a wonderful experience to ride the trains when they were publicly owned, but that was not the case. They were not more efficient and there was out-of-date rolling stock and collapsing infrastructure and, if we go back to 1963, a significant proportion of the network was closed down as a result of the Beeching report. I therefore really do not think that the answer is to turn the clock back to the bad old days as if they were some halcyon period that we should aspire to replicate today.
I do not mean to detain the Committee for any longer than necessary. I was not going to speak a word on this subject—I could speak on trains for about three long hours—but, given that we are talking about the past and the right hon. Gentleman alluded to his seniority in this place—
You say potato. I trust he will confirm that during the long years of the 1980s and 1990s when our rail system was starved of investment, he lobbied the then Conservative Government at every opportunity to invest in it.
The dates the hon. Lady chose are slightly selective, because it was not just in the ’80s and early ’90s that there was a starving of investment. I at least have the decency to spread the blame to all parties, not just the Conservative party. Rail was starved of investment in the ’70s. My first job was working in this place from 1975 to 1981, and four and a half of those years were under the Wilson and Callaghan Governments, when we ended up running to the International Monetary Fund because the country ran out of money—[Interruption.] The hon. Lady does not like the truth. The country had to go with a begging bowl to the IMF, and one of the major areas to suffer from public spending cuts was the railways.
I am not excusing previous Governments. There was under-investment in our railways—in the infrastructure and in the running of them—by both political parties. That is why I supported the privatisation in the early ’90s, which has been more than justified by the significant investment in the rail network and its infrastructure since then. If no one thinks that that has happened, they should look at the current control period: in the five-year control period 5, £38.5 billion will be spent investing in and improving the infrastructure of the railways. If we are to going to be slightly political, under the control period proposals, it will be nice to see about 850 extra miles of electrification. In the 13 years of the Labour Government, when they were investing more in the railways, there were only 10 miles of extra electrification on our rail network.
This will become a Second Reading debate on public ownership if we are not careful.
There is a great deal of heat in the debate, and not much light. I have no time for those who pretend that British Rail was somehow a high-performing publicly owned service. Clearly, there were huge problems, with political interference in the investment periods and all of that leading to the creation of short-term problems. One thing that I struggle with a great deal, however, when comparing rail with other privatised industries is that, as the right hon. Gentleman just said, investment in the railways still comes from the taxpayer and not the private sector, so the risk is not in the private sector, but in the public sector. We, as the people who use the railways and pay our taxes, are the ones who put in the investment. It is Government money, not private money, that will be invested in the control period, is it not?
The hon. Gentleman is partly right; some of the money is taxpayers’ money, but a significant proportion of what funds the £38 billion over the next five years will be paid by the rail operators to rent the track. There is also the ability for private money to be borrowed for investment, so no, it is not exclusively—
The hon. Gentleman nods his head in a negative way, but he is wrong. The investment of £38 billion in CP5 is not 100% taxpayers’ money. As I said, part of it is rent accrued from the rail operators, which pay to use the track.
Since privatisation, there has been a will and determination to invest, as well as the actual delivery of investment, to bring our railways up to scratch. The process is time-consuming, sadly, because of the problems arising from the earlier lack of investment. The other sad thing for rail users is that a lot of the investment that is badly needed to improve journey times and the reliability of the service is not seen immediately by them. New rolling stock is immediately seen by commuters and travellers, obviously, and they benefit from it, but when we improve and upgrade the track or the overhead cables on that part of the railway that is being electrified, users do not see the outcome of the investment in the same way. However, such investment is still critical to improving the performance of our railways. I am confident that that will continue.
The hon. Member for Middlesbrough mentioned the east coast main line. I would be the first to accept that it was a well-run part of the network, but it was run under Directly Operated Railways because the last Labour Government rightly withdrew the franchise from the franchisee because there was dissatisfaction with the way it was operating the line. DOR is an emergency mechanism that was introduced in the legislation on privatising the railways because there is a legal requirement for the railways to provide a service all the time. To avoid a hiatus if there is a problem with the franchise, DOR will, for a fixed period of time only, step in to ensure continuity of service.
The hon. Gentleman kept talking about a state-run service. I suppose that DOR could, by definition, be called state-run, but it was not meant to run the line for ever. Even the Labour Transport Secretary who took the action made it plain at the time that there was not going to be a never-ending provision of service by DOR.
I accept what the right hon. Gentleman says about the background, but DOR ran the line successfully. The Labour party recognises that and has learned from that experience. We now say that it is something that should be used in the future, which is why we opposed the refranchising last year.
I am sadly well aware of the Labour party’s proposals for that provider to continue to provide the service. Frankly, I have every confidence that the conglomerate, which includes Virgin, that has taken it over will provide a first-class service. Based on passenger satisfaction, Virgin does so on the west coast main line. I am sure that the hon. Gentleman remembers the fiasco of the refranchising of the west coast main line in the summer and early autumn of 2012. The passengers—for want of a better expression, it was people power—were amazed that Virgin’s franchise was not renewed. Ultimately, because of the problems that emerged, Virgin continued to run it, and I have every confidence that it will run a first-class service on the east coast main line.
Let me give the Committee an example of the way that franchisers can innovate to respond to the needs of local people. I am sure Committee members are aware—if they are not, the Minister will be more than aware—that there has never been a direct service between Scarborough and London in the lifetime of the railways. Why should Scarborough, where there is a demand for such a service, be so deprived? Virgin is responding to the marketplace and the wishes of customers, and from 2018 it will run a direct service from Scarborough to London. That is how franchisers can respond to changing circumstances and demands.
Similarly, Opposition Members will be aware that High Speed 1 is currently run by a private company. The hon. Member for Middlesbrough looks perplexed and is consulting his colleagues, but I chose my words very carefully: High Speed 1 is currently operated by a private operator. I see no reason why it should be returned to the public sector. I fundamentally do not believe that politicians and Governments are best equipped to run services and industries such as the railways. Our experience of their doing so was poor. Notwithstanding the problems and the need to improve our infrastructure, on balance, investment has been provided and work is being carried out to improve our rail services to make them into a first-class service in the private sector. I believe that that is where they should remain.
It would be a mistake if High Speed 2 were to be shackled before the first train had run on the tracks by being run, in effect, by the Government as a nationalised industry. If there is a Division on this contentious issue, I urge my colleagues to reject this opportunistic new clause. It is very much in keeping with the new politics of the Corbynista regime which, as in many other areas, is totally divorced from the best interests of the British people.
It is a great pleasure to be here, Mr Chope. I hope to see you at the weekend in the Orkney islands, with any luck. I would like to clarify a few points raised by the right hon. Member for Chelmsford. For the record, he praised Virgin’s role on west coast. Virgin is the brand name of the east coast main line at the moment, but Virgin has only 10% of the franchise. The other 90% is owned by Stagecoach, which they are trying to keep a very closely held secret because of Stagecoach’s horrendous record when it comes to transport in this country.
The right hon. Gentleman said that British Rail in various guises had failed. Nobody doubts that. No one on the Opposition Benches is saying that it was a success, but what has to be understood is that of the 46 years that it was in public ownership, 32 of those years were under a Tory Government. One of the main reasons why the trains were never improved was that we as a nation inherited very poor quality stock and a poor system of stations, and the truth is that Governments chose to dip in and dip out of supporting the railways, as the right hon. Gentleman rightly said. He is right that they were not run very well. However, I would argue that whatever the successes or failures of the past 20 years of privatisation have been, people have learned lessons. The east coast main line is an example of how people took some of the good of what they had learned from privatisation and put it into service on the east coast, which became the best service in the whole of Britain.
The right hon. Gentleman misquoted when he said that neither Blair nor Brown supported reprivatisation. What he meant was that they did not support renationalisation, and that is actually correct. They were opposed to going backwards, quite apart from the fact that they thought it would be a diversion of money that could be spent elsewhere on putting right a lot of things that failed under 18 years of Tory government. They chose not to do it, and they did not want to do it. The truth about Railtrack is that the Government were forced to do it, and I will tell the Committee why. On
I work with people who worked with me in the coal mines in the ’70 and ’80s. They went on to be contractors and subcontractors repairing rails. They told me some nightmare stories of the work they were involved in. We used to have railways underground. I was a mechanic looking after trains underground, so I have some experience of how to look after railways properly. Some of the things they were telling me were nightmares. There used to be a standard in this country that every length of rail had to be changed once every 40 years, regardless of its condition. That was the maximum length of time a rail could be left in place. One thing which happened almost immediately after privatisation was that that was changed to rails being replaced once every 80 years. That was the mental attitude of the people to whom we gave away our railway system, and who we allowed to run our trains. Is it any wonder that things went wrong? Railtrack had to be brought back into public ownership to protect the travelling public from the shortcomings that were clearly occurring.
The east coast franchise went first to GNER, which ran it for some time. It was a reasonable service, but its parent company, Sea Containers, was going belly-up. Overnight, GNER pulled out of the franchise. Who had to come in? The Government had to step in. As the right hon. Gentleman said, it was right and proper to pick up the pieces and keep it running. They kept it running and it was franchised out again to National Express, but the National Express experience was appalling. They ran the trains the same way as they ran the buses. The hygiene, punctuality—every part went backwards, and again the public sector had to walk in. When National Express walked away—they were not thrown out; they walked away because they were failing—Directly Operated Railways became the most successful train line in the country.
As I said at the opening, it is clear that some of the lessons learned through privatisation were put in place as they applied to the day-to-day running of the trains. We have now gone back, despite the success that was delivering money to the taxpayers of this country. Despite the opposition from the public, who use the east coast line every day, it has gone back under a franchise, and time will tell whether it is successful. I will not say whether that will happen, but I will say that I use that train every week. I use trains to come to work every day. The performance on the east coast line is appalling compared with railways in this part of the world. It might be only 15 minutes late, but it is 15 minutes late every day of the week. It is not unusual to see people rammed in like cattle on a service that is clearly failing them.
I am clear that we have a chance here to take control. That is what the public want. Whenever they are asked, they say they want it to go to a publicly owned railway. People do not want to go back to the days of mouldy cheese sandwiches and trains that rattle; they want a quality railway service, and we can have that if we apply the lessons we have learned and commit ourselves as a nation, whoever is Secretary of State for Transport, to maintain the level of support that the railways need and deserve.
I did not intend to speak, but as the debate is so interesting I cannot resist the chance to say a few things. In my experience, this debate always reflects pre-existing ideological positions and, frankly, does not often tend to delve into the intricacies of what is best for running a railway. That can be seen in all parts of the House of Commons whenever this debate comes up.
For Government Members there are some difficult facts about our present system that need to be addressed. The existing railway in the UK could not strictly be described as a privatised system. It is a hybrid system; the way that it was initially privatised secured that. A true privatised system would perhaps have been to bring back the Big Four railway companies and have them compete against each other, but that is not what we have at the moment.
There has to be acknowledgment that the system depends on public subsidy. A railway system for a country such as ours would always need a large amount of subsidy. The way that we do that now is to give the subsidy to Network Rail for the infrastructure. When we talk about the francishees paying premiums to the taxpayer, it is because we set the access charges according to the subsidy that we give. It is still a system that requires a net contribution from the taxpayer.
We also have to reflect on the fact that the existing hybrid system is as it is because the initial privatisation simply could not cope with the liabilities. Railtrack simply could not deliver on what was promised, even in the initial honeymoon period. There has to be a reflection that East Coast did work extremely well, even if it was initially intended for a limited period. In effect, many of our railway operations are publicly owned; they are just publicly owned by foreign Governments. Their subsidiary companies operate our system. In addition, our ticketing system is bizarre and complex, and much more expensive than in comparable European countries.
The Opposition and those who traditionally push a nationalised position have to reflect that British Rail was a poor service. We cannot look back to any golden era; I have never pretended that that existed. Equally, when we talk about East Coast we have to reflect that that operated within an overall system of incentives and penalties; that is the privatised operations system that we have.
Fundamentally, we have to recognise that franchises are contracts. Contracts can be good; they can be bad. Some of our initial franchise agreements on the railway were frankly abysmal in the system they operated. Others that have been let more recently have been more effective.
I will vote for the new clause for two reasons: integration and flexibility. Railway systems around the world tend to be more successful with a higher degree of integration between infrastructure and operations. Our existing system causes real problems, and many of the problems for passengers come from that lack of integration.
As the right hon. Member for Chelmsford said, flexibility is the key issue. He mentioned the additional operations from Scarborough being run by Virgin. Although that is welcome, flexibility is the crucial problem with the franchise system. Northern has had huge demand in terms of passenger numbers—it has happened in my constituency. The economy has fundamentally changed and there is huge demand for rail services—in many ways it is a golden era for the railway. However, the franchise agreement could not respond to that demand. It was let on the assumption of zero growth, and I would not have complaints about the people and the process for doing that. Yet we have all the problems of a bureaucratic, nationalised system and none of the attractions of a market system, which would respond to a price signal from the market. That is why we have problems of overcrowding, poor services and inability to meet demand.
There are many examples of successful, publicly-owned railways around the world. I recently got back from Hong Kong, which is not renowned as a socialist utopia—it is a dynamic, capitalist part of the world economy, with a publicly-owned railway. We can always look to examples from that country; indeed, we need to look around the world for best practice in running a railway. I am comfortable with the new clause, because we need to look at how best we can integrate our railway, to deliver the best deal for passengers. It should be permissive: we always need to leave the door open for a more integrated system, even if we have our existing hybrid system at the moment, which—based on the length of those franchise agreements—will be with us for a considerable time. This conversation needs to be focused more on the best way to run a railway and less on pre-existing ideological positions.
The intention of the proposed new clause is to require passenger services operating on whole or part of the high speed line to be provided by a publicly-owned railway company, essentially nationalising HS2 train services. I regularly travel on the east coast main line—indeed, the hon. Member for Middlesbrough and I travelled on the same train on Monday morning, on the Grand Central service, which was set up by buccaneering free market innovator Tom Clift, who is sadly no longer with us, and his team. That successful open-access operator has been taken over by Deutsche Bahn. It regularly tops the league in passenger satisfaction and punctuality. Most of the staff come from Sunderland and they are a model of the customer service that we expect on our railways.
The proposed clause would restrict the operating structure of HS2 at this early stage—essentially seeking to nationalise the HS2 rail service, which is against the broader principles of how successful rail services in the UK are currently operating. My right hon. Friend the Member for Chelmsford has done my job for me in making the case to reject this new clause.
With regard to the commercial operation of phase 1 of HS2, it is imperative that we keep our options open. With the line not due to open until 2026, decisions on the commercial model to operate HS2 are some time away. Whatever those decisions might be, they will be made to seek the best value. This is about delivering the best service at the best price for the passenger and the taxpayer, not pandering to outdated 1970s socialist dogma. The rail franchising system is designed to deliver benefits for passengers and taxpayers, which are realised through competition. Since privatisation the rail industry has been transformed, with passenger journeys more than doubling over the past 20 years, from 750 million to around 1.6 billion. We believe that this remains the right approach overall in delivering the best value for the country and tax and fare payers.
The model that is being delivered in the UK is being emulated around Europe: for example, National Express is operating two franchises in Germany. As we have heard, the east coast main line is extending new services to Middlesbrough and Sunderland, and we have heard this week that a direct service to Scarborough is being considered. If one needed an image that encapsulates what is wrong with British Rail, it would be the pacer train, which was built by British Rail under a nationalised British Leyland. It was an infinitely unpopular train, and when this Government came to power we gave a pledge to phase it out.
The Minister and I have had this exchange about the pacer train before. Has the longevity of the pacer train not been due in part to the fact that they are very cheap to run? Under the franchised model, it has been very hard to get rid of them, unless there has been an explicit overruling of the market system by Ministers. The private operations—the market—cannot get rid of the pacer trains; it has to be a political decision.
The pacer train was the offspring of the position that a state-run railway can often find itself in, faced with other demands on public sector finances, not least the health service. Built on the cheap, with single-axle units without bogies and the correct suspension, the pacer trains were never going to be fit for purpose and were very unpopular. I am delighted that the Government are going to phase them out.
Another factor in our ability to phase out the pacer is the fact that with new rolling stock coming in in so many areas, we have other rolling stock cascading down to replace the pacers. This is a direct result of the investment in the rolling stock. On the east coast main line we look forward very much to the IEP trains built by Hitachi in the north-east, which, I think, will be a phenomenal improvement to that service and free up rolling stock for some of the new services that will be provided on the non-electrified part of the network.
Section 24 of the Railways Act 1993 states that the appropriate designating authority—in the case of HS2, the Secretary of State—may by order grant exemption from designation of a service to require a franchise under section 23(1) of that Act. Therefore, if so decided, the HS2 service will not require a franchise. However, as I have already stressed, the commercial model to operate the HS2 infrastructure and train service are yet to be determined. To speculate, it may well involve some sort of transitional phase in the early years.
With the ability to exempt a service from the franchise requirement set out in the Railways Act 1993, I do not believe it is necessary to include the proposed new clause in the Bill. With that explanation, I hope the hon. Member will withdraw his proposed new clause, although I am not too optimistic that he will.
The Minister’s judgment is, as ever, accurate. We have had a thorough debate and the issue shows clear dividing lines between both sides of the Committee. I am grateful to my hon. Friend the Member for Blaydon for reminding us of some of the horrors that were experienced under the management of our infrastructure under the guise of Railtrack.
May I pick up on a couple of points? On British Rail, I hear what the Minister said, but I respectfully suggest that we are talking about an era when there was little faith or investment going into our railway system. We do a huge disservice to the British Rail engineers who kept that service going, effectively on a shoestring. We do them an injustice by not recognising the work that they did.
Virgin and the new services have been mentioned as an illustration of innovation and new services that can be brought into play. I note what the Minister says, but on that detail, because of the way that matters are currently structured and the potential for development of open access services, there is significant pressure and a countervailing argument. This suggests that Virgin/Stagecoach—my hon. Friend the Member for Blaydon is quite right that it is principally a Stagecoach company—will not fulfil the promises that it made in the franchise specification to introduce new services to places such as Scarborough and Middlesbrough. While it is not strictly within the ambit of our discussion, perhaps Mr Chope might take the opportunity to speak with the regulator to ensure that nothing will happen that will undermine or betray those promises.
The Minister talked about the innovation of the IEPs being introduced under the current structure, including those that can be produced by Hitachi in Newton Aycliffe. I think we are all waiting with bated breath, because Hitachi is there for one very good reason: it has access to the single market. However, that is perhaps an argument for another day.
This is a straightforward political choice; we respectfully acknowledge that. I caution against describing as outdated the desire of the British public to see their own railway services and railway infrastructure run by the state. They look to other countries. The Minister alluded to the breaking out of the franchise system across the European Union, but I think he would have to concede that the structures in Germany, France or Spain look starkly different from the one that obtains in the UK at the present time. He may be right that there is some development, but as we speak, we are very much an outlier in terms of the proportion of private franchise operations running our rail services.
That is an ingenious way of interpreting stark distinctions between the United Kingdom and, for example, Germany. Deutsche Bahn provides the majority of infrastructure services in Germany, and it is coming into the UK for the rich pickings and to take our taxpayers’ investment back to Germany’s railway system.
I politely caution the Minister against describing our amendment as representative of an outdated “1970s socialist dogma”. If that was right, there would be some cause for concern, because this idea is extremely popular with the general public. Surveys done in recent times have suggested there is concern about the fact that taxpayers’ money is being used to fund state-owned companies such as Deutsche Bahn, Nederlandse Spoorwegen and Keolis. If the Minister wishes to ignore that, that is a matter for him. We have had a good debate, but this is such an important new clause for HS2 that we wish to press it to a vote.