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ScotRail Franchise

– in the Scottish Parliament on 18th December 2019.

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Photo of Linda Fabiani Linda Fabiani Scottish National Party

The next item of business is a rail update statement by Michael Matheson. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions.

Photo of Michael Matheson Michael Matheson Scottish National Party

I would like to take the opportunity to update Parliament on the ScotRail franchise contract.

The benefits that our railways bring are well rehearsed: they help our economy to grow; they connect our cities and our communities with jobs, education, health services and leisure activities; they enable our visitors to explore all that Scotland has to offer; and they help to reduce the impact on our environment of moving people and goods.

Our commitment to investing in rail is unquestionable. We have spent more than £8 billion since 2007, and we will spend more than £5 billion between 2019 and 2024. That investment is delivering new services, new and refurbished trains and infrastructure improvements that will increase capacity and improve reliability.

Since last weekend, growing communities in the north of Glasgow have had access to a new station at Robroyston. The December 2019 timetable change, which took place this week, has resulted in an additional 10,000 seats on the network every day. That means extra carriages on our Edinburgh to Glasgow routes and on our busy, peak-time Fife and Borders services, as well as additional services in the north-east to maximise the benefits of our infrastructure investment. Since the start of the franchise in 2015, we have increased capacity by around 125,000 seats per day across the network. It is therefore vital that we make those considerable investments in a way that ensures best value for passengers and for taxpayers.

The current ScotRail franchise contract commenced in 2015. As required under the current legislative framework, the Scottish Government let the contract through open commercial competition. Under the terms of the contract, in its fifth year the Scottish Government and Abellio ScotRail must revisit cost and revenue assumptions. Those assumptions provided the basis for the franchise subsidy levels set at the start of the contract, in 2015, and we must consider whether they should be revised.

That is referred to as the rebasing process. In that process, the Scottish Government and Abellio ScotRail could agree to rebase and continue with the contract until March 2025, on the basis of revised revenue and cost inputs that would determine future franchise subsidy levels. Alternatively, either party could issue a no-rebasing notice, which means that the revenue and cost assumptions that determine subsidy levels remain as they are and the contract comes to an end at an earlier point, which would be expected to be March 2022.

The rebasing process commenced on 1 October this year and a decision on whether to serve a no-rebasing notice is required by no later than 31 December. My officials have undertaken extensive and rigorous analysis of the information provided by Abellio ScotRail about the rebasing option and commercial issues concerning a 10-year franchise term. As well as consideration of the effects on passengers, there has been a detailed and thorough analysis of the key financial, legal, economic and operational aspects. Of critical importance was that we measured the information provided against the policy principles that underpin the franchise, which include value for money, passenger satisfaction and full exploitation of the utility and capacity of the network.

I thank the team at Abellio ScotRail for the proposal that they have made and the wide range of information that they have provided in support, which has allowed me to consider the range of issues that are pertinent to the rebasing decision. After careful consideration, the Scottish ministers have decided not to rebase the contract. We are not satisfied that the significant increase in public subsidy that would otherwise be required would generate commensurate benefits for passengers, communities and the economy. As such, we do not consider that rebasing would secure the delivery of the policy objectives that underpin the current franchise.

I can confirm that I have, today, issued a notice to inform Abellio ScotRail of the decision. Therefore, the current franchise agreement is expected to come to an end in March 2022. The existing provisions in the franchise agreement continue as they are set out in the contract, and we will work closely with Abellio ScotRail to ensure the delivery of the requirements of the franchise, including performance and service quality. We will also maximise the benefits of our significant investment in our railways, in order to provide the best possible services for passengers and support growth.

There have been successes and challenges over the first five years of the franchise. We have maintained a good working relationship with Abellio ScotRail throughout that period and I fully expect that that will continue for the remainder of the contract and that it will support us in the delivery of our ambitious programme of transformation on Scotland’s railways.

I believe that the decision that I have advised the Parliament of today in respect of the ScotRail franchise is the right one for passengers, communities, the economy and taxpayers. It is, of course, necessary to plan for the future provision of ScotRail services, and I can confirm that work has already been undertaken to examine the options open to the Scottish ministers after the current contract comes to an end. This will, of course, mean regular engagement with trade unions and other stakeholders.

Looking further ahead, I fully expect that changes in the structure of railways, not just in Scotland but across the whole of the United Kingdom, will take place as a consequence of the UK rail review undertaken by Keith Williams. While we await the outcome of the review, I very much hope that it will see an end to the present complex and costly franchising system for rail services. For now, services will, of course, continue to operate. Abellio ScotRail remains contractually committed to delivering quality rail services. This Government has made significant investment in our railways and we will ensure that we maximise the benefits for passengers and taxpayers.

I conclude by recognising the role of ScotRail staff, their continued hard work and their commitment to delivering essential services to the people of Scotland.

The Deputy Presiding Officer:

The cabinet secretary will now take questions on the issues raised in his statement, and I intend to allow around 20 minutes for that. There are already a lot of indications from members wanting to ask questions, so I ask everyone to be as concise as possible and to make sure that they press their request-to-speak button.

Photo of Jamie Greene Jamie Greene Conservative

I start by paying tribute to the thousands of people who work on Scotland’s railway, many of whom will be watching the statement, given that they had no formal notice and will have learned about the decision as it was announced by the cabinet secretary.

The statement raises a number of questions. What engagement did the Government have with the current operator in coming to the decision? Leading on from that, what analysis was undertaken of the consequences of the decision to terminate the contract early, specifically regarding potential job losses? Will today’s decision have any effect on services currently provided by Abellio? What analysis has been done of the effect of the decision on current and future investment plans for Scotland’s railway between now and 2022? However, the most important question that the public will rightly be asking is, who will run the railway post-2022? Nothing in the statement gave any insight as to the Government’s plans, other than “to examine the options”. Surely, the cabinet secretary should have examined the options before terminating the existing contract.

The statement answers one question but raises plenty more. The public will rightly be concerned and surely deserve answers.

Photo of Michael Matheson Michael Matheson Scottish National Party

Jamie Greene’s initial comment was that the hundreds of thousands of staff who work for ScotRail were given no advance notice of this announcement. My responsibility is to report it first to the Parliament, and that is exactly what I have done. Had I not done so, I suspect that he would have been on his feet demanding answers as to why the information was in the public domain before I had come here and made a statement to Parliament. The reality of the situation is that I am making sure that Parliament is informed of these matters.

The member asked what engagement was undertaken with Abellio ScotRail regarding the decision. As I set out in my statement, Abellio ScotRail submitted its rebasing proposal to the Scottish Government through Transport Scotland. The proposal underwent a very rigorous, detailed analysis in order that we could come to this decision. There is a requirement within the franchise agreement to undertake the rebasing exercise: it has to be undertaken, there are no two ways about it. I assure the member that we undertook a very thorough, detailed analysis of the proposal that Abellio ScotRail put to us.

The member also asked about the potential consequences for jobs in Abellio ScotRail. As it stands, we would expect the contract to continue for its remaining two years. As has been the case for previous contracts, staff transfer to any new operator that takes over a franchise. That was the case in 2015.

One thing that our franchise agreement has, but which the Department of Transport does not pursue in its transport agreements down south, is a no-compulsory-redundancy provision. That remains in place and is a commitment that continues to apply to Abellio ScotRail.

The member made two further points, on current services and future investment. Current services will continue as they are at present, because we expect the contract to be in place for its remaining two years. The record investment that we are making in rail in Scotland in the course of control period 6 will continue as normal. Services will continue to be delivered, projects will continue to be provided, and we will continue to see the transformation of our rail services.

The member’s final point was about looking to the future. If there is a delay in deciding what the future of rail services in Scotland and in the rest of the UK will be, it is because the UK Government has been sitting on the Williams review since autumn this year. It could have published the review in October, but it chose not to do so. We are still waiting to see what the outcome of that review is. Once we know that, we will have a better idea about the scope that we will have to shape rail services in Scotland in a way that reflects the needs of the Scottish people and of the Scottish railway network.

Photo of Colin Smyth Colin Smyth Labour

I thank the cabinet secretary for advance sight of his statement. Since the start of this franchise, Abellio has failed to deliver for Scotland’s hard-pressed passengers. They have suffered delays, overcrowding, cancellations and fare hikes. Abellio has failed to meet the basic contractual requirements. It has breached the franchise agreement in relation to punctuality, cancellations and passenger satisfaction, and it has let down the hard-working ScotRail staff. I am glad that the Scottish Government is finally backing my calls, and Scottish Labour’s calls, made time and again, to end this failing franchise.

I know that part of that failure is because of the fragmented, privatised railway system, which should also end. We await the outcome of the Williams review to consider the exact nature of any contract that replaces the Abellio franchise.

Will the cabinet secretary guarantee today that the Scottish Government will ensure that a public sector operator will be properly prepared and in a position to take on the contract, so that Scotland’s railways can at last start to put passengers, and not profits, first?

Photo of Michael Matheson Michael Matheson Scottish National Party

I thank the member for his comments. I said to Jamie Greene that, in considering the rebasing proposal that ScotRail put to us, we carried out a very detailed and thorough analysis of its submission. However, I can confirm to Mr Smyth that his personal views on the issue did not factor into that assessment, which was founded purely on the rebasing process.

Colin Smyth’s second point was on the public sector bid. He does not seem to acknowledge or recognise that our hands are tied at the moment, because our only option is to have a franchise bid for rail services in Scotland. We have the scope for a public sector body to bid for a franchise agreement against other parties who are bidding for any franchise that is let by the Scottish Government.

Colin Smyth might be happy to continue with franchising; I am not. As I have previously stated in this chamber, I want to get rid of franchising, so that we can have a public sector service in Scotland that reflects the needs of the people of Scotland. I assure the member that we will do everything that we can to get the powers here in Scotland to determine the future shape of Scotland’s railway. I hope that we will get the support of the Labour Party in demanding from the new Conservative Government that all powers over rail should be devolved to this Parliament, so that we can use them in a way that reflects the needs of the Scottish rail network.

The Deputy Presiding Officer:

We move to open questions, and I have a lot of requests.

Photo of John Finnie John Finnie Green

I thank the cabinet secretary for early sight of his statement. I warmly welcome the end of the franchise and mourn the fact that we cannot go straight to nationalisation. I hope that the Labour Party and others will call for full devolution.

It is important that trade unions are involved as we go ahead, and I hear what the cabinet secretary says about franchising. That is our view too—we want to go straight to nationalisation.

However, if franchising exists, can the cabinet secretary assure us that he will put a robust public sector bid together with no expansion of driver-only operations? Will he rule out following the hard-right UK Government’s punitive employment proposals and guarantee that Scotland’s rail workers will have the full range of workplace rights, including the right to withdraw their labour?

Photo of Michael Matheson Michael Matheson Scottish National Party

On the member’s latter point, the answer is yes. I am aware of the concerns that have been raised, particularly in relation to the proposed changes that the UK Government is suggesting should be introduced—the legislative changes to curb the right of transport workers on the railway to take industrial action. I completely oppose that approach. The best way to deal with industrial relations is to nurture and cultivate positive industrial relations, rather than resorting to legislative changes and the punitive approach that the UK Government is intending to take. I assure the member that that is not in our thinking or in the approach that we will take.

There will, of course, be a robust public sector bid if we are confined to nothing other than a public sector bid for a franchise, but I am conscious that that is a costly exercise for a public sector organisation. It could cost some £10 million and the organisation would potentially be bidding against other parties. That is why we need to get rid of franchising for rail services: it is costly, complex and does not serve the public well. We need to have all the powers over rail in this Parliament in order to determine the way in which we run and shape our rail services. I give the member an assurance on both his points.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

This is good news indeed. I very much welcome the decision to end Abellio ScotRail’s contract, which the Liberal Democrats have been calling for, and the cabinet secretary has made it at the earliest practical opportunity. I congratulate him on making that very wise decision.

What action will the Government now take to make sure that there is stronger protection for customers in the future contract? Will it provide more break points in the new contract to ensure that there is a better chance to correct poor performance—which is what we are concerned about—earlier?

Photo of Michael Matheson Michael Matheson Scottish National Party

I am grateful for Mike Rumbles’s comments on the matter. He touched on an important issue. I do not want to start speculating about any future contracts, on the basis of my hope that I have heard correctly that the contents of the Williams review could lead to an end to franchising of that nature. There may therefore be an opportunity for us to look at arranging rail services in a fundamentally different way that will help to address the issues that Mike Rumbles highlighted.

Mike Rumbles also touched on something much more fundamental in our rail services. The way that the regulatory function operates through the Office of Rail and Road is at times too slow, not only in picking up poor performance in rail infrastructure and by train operating companies, but in taking proactive action to address those matters. The regulatory function needs to change to become more passenger focused and to improve services for passengers. Alongside that, we need to see greater alignment between infrastructure and passenger services. Too often, infrastructure is dealt with through a heavy rail industry focus and is not passenger focused enough. It needs to be aligned in a way that makes it much more passenger focused.

Given my discussions with Keith Williams and what I have heard are the key issues that have been set out in the Williams review for the UK Government to consider taking forward, I hope that the UK Government will take those issues forward. In the end, that is a political decision, but if the UK Government does that, it could allow us to change things fundamentally in a way that addresses the issues to which Mike Rumbles referred and which is much more passenger focused and aligns the issues more effectively. I am certainly prepared to work with members from across the chamber, should the powers be devolved to this Parliament to allow us to do that.

The Deputy Presiding Officer:

I know that the cabinet secretary’s answers are fulsome and probably appreciated, but they are rather long, which means that some questions will need to be cut out. I ask him to bear that in mind.

Photo of Willie Coffey Willie Coffey Scottish National Party

I welcome the cabinet secretary’s statement. He will be aware of my continuing interest in supporting the improvement of rail services from Kilmarnock, and from Ayrshire as a whole, to Glasgow and Edinburgh. His recent visit to Kilmarnock to meet industry representatives highlighted the potential that electrification could bring for the local economy. How does he see that work moving forward, given his announcement today?

Photo of Michael Matheson Michael Matheson Scottish National Party

I am aware of Willie Coffey’s interest, given that both Wabtec Rail and Brodie Engineering have bases in his constituency, which I had the pleasure of visiting fairly recently.

In our programme for government, we set out our ambition to decarbonise our rail network, a key part of which will involve greater electrification. In the next couple of months, we will set out our plans for how we intend to go about that, which will include looking at the electrification of a range of different parts of the existing network. I cannot give a specific commitment to Kilmarnock in the way in which Willie Coffey seeks, but I can assure him that our plans for infrastructure investment will continue, with the record investment that we have set out for control period 6.

Photo of Liam Kerr Liam Kerr Conservative

Performance concerns have many causes: 40 per cent of cancellations are caused by problems with tracks or signalling, 10 per cent are caused by non-ScotRail operators and 20 per cent are caused by the weather, circumstances outside of its control or passenger incidents. The cabinet secretary’s decision does not begin to address any of those issues; if anything, it makes them worse. Is it not the case that what is really happening is that the franchisee is being made a convenient scapegoat for the Scottish National Party’s failure to understand the challenges of running a railway, and that the decision sets up any future franchisee or operator for failure?

Photo of Michael Matheson Michael Matheson Scottish National Party

That is a bit rich from the Conservative Party. Week in and week out, Conservative members come into the chamber to slag off ScotRail and to demand better services. Every time that I raise the fact that the vast majority of delays and cancellations on the network in Scotland are caused by infrastructure issues that are the responsibility of Network Rail, which is the responsibility of the UK Government, Conservatives boo me and say that that is just an excuse to cover for ScotRail, but now they are trying to defend ScotRail. I ask them at least to be consistent if they are going to stand up and make comments about rail services in Scotland.

The real answer to Liam Kerr’s question is whether his Government will commit to implementing the recommendations that Keith Williams makes in his review. Ultimately, following his review, there will need to be a political decision on whether there should be a fundamental change to the way in which our rail services operate. That will involve getting rid of franchising, allowing different models for the provision of rail services and ensuring that infrastructure and passenger services are much more closely aligned—in the way that Liam Kerr mentioned—so that they are much more passenger focused. If that happens, we will be able to make such decisions here in this Parliament.

In recognising the infrastructure challenges that we have in the Scottish routes, I hope that Liam Kerr will recognise that this Parliament should have responsibility for those challenges and that we should be able to align infrastructure with our passenger services in order to improve overall passenger satisfaction levels. I hope that he will be big enough to recognise that, but time will tell.

Photo of Jenny Gilruth Jenny Gilruth Scottish National Party

Can the cabinet secretary provide any further detail on whether his decision will have implications for the current Abellio contract between now and 2022?

Photo of Michael Matheson Michael Matheson Scottish National Party

The existing franchise agreement and the contract’s content continue to be in place. Through the various levers in the contract, we can continue to hold Abellio to account in any areas in which we have concerns and in which it might be failing.

Photo of Jackie Baillie Jackie Baillie Labour

I thank the cabinet secretary for the early Christmas present to the hard-pressed commuters in my area, and I welcome his recognition of Scottish Labour’s campaign, which highlighted the myriad problems with the rail service. Commuters in Helensburgh, Balloch and Dumbarton have experienced delays, cancellations, skip-stopping and short-form trains, with passengers crammed in like sardines. Those problems continue today, so what assurances will he give my constituents about the level of service that they will receive from now until March 2022, when the Abellio contract finally comes to an end?

Photo of Michael Matheson Michael Matheson Scottish National Party

I am pleased to give Jackie Baillie’s constituents an early Christmas present, if that is how she views the matter. It is a decision that was made purely on the basis of the rebasing requirement in the franchise agreement.

I recognise Jackie Baillie’s concerns and the service issues in her area, parts of which are addressed through the Donovan review. Work is being progressed, and it is being monitored independently in order to ensure that progress continues to be made.

Despite the problems that there continue to be in the network, I am sure that Jackie Baillie will recognise that improvements have been made in addressing a range of issues; it has certainly been the case that improvements have been provided as a result of the Donovan review. Alongside that, the remedial plan will be put in place for improvements that ScotRail has to take forward. Equally, Network Rail needs to undertake measures on improving reliability.

I know that there have been particular issues on the line to Dumbarton, which has failed on a number of occasions. We need to make sure that Network Rail is doing everything that it can to minimise that type of recurring problem on the route to Dumbarton, and in any other part of the Scottish network.

All the provisions that are in the franchise agreement at the moment continue to be there; they will continue to be enforced, and we will continue to work with Abellio ScotRail to make sure that it is held to account on those matters. I assure Jackie Baillie that we will continue to focus on making sure that, where concerns about passenger services are raised, Abellio ScotRail addresses them.

Photo of Stuart McMillan Stuart McMillan Scottish National Party

The cabinet secretary mentioned the UK rail review. When it is eventually published, how will he take it into consideration for the future of rail services?

Photo of Michael Matheson Michael Matheson Scottish National Party

We had hoped to have the outcome of the UK rail review in the autumn of this year, when it was anticipated—possibly in October. However, it was delayed by the UK Government, and we still await the outcome.

I have had positive engagement with Keith Williams on a number of occasions. He recognises the specific demands that we have in Scotland, and I was always very welcoming of his sympathetic approach to the issues that exist for the Scottish rail network. I hope that the UK Government will make the right political decision and allow us to have the range of powers in Scotland so that, in running our rail services, we can consider a variety of different models for how those services are provided. I hope that the UK Government will publish that review, and its outcome, in the next few weeks.

The Deputy Presiding Officer:

If Rachael Hamilton is quick, I will manage to get John Mason in.

Photo of Rachael Hamilton Rachael Hamilton Conservative

In October of this year, Dominic Booth, Abellio UK’s managing director, said:

“Scotland’s railway needs stability, not the upheaval a change in the franchise would bring about.”

Will the cabinet secretary explain why bringing in what is, in effect, a break clause will not lead to further uncertainty for passengers on the Borders rail line and across Scotland, and for the hard-working staff in terms of job security?

Photo of Michael Matheson Michael Matheson Scottish National Party

I hope that Rachael Hamilton will welcome the significant improvement that there has been on Borders rail services, including the provision of increased capacity as part of the December timetable change.

As I said in my statement, I point out to Rachael Hamilton that this is part of the rebasing process that is set out in the franchise agreement. The debate earlier this year was very much about just ending the franchise, and that being it. However, this is about the rebasing process, which is a very technical and detailed process, in which very detailed analysis is being carried out. As such, it comes as no surprise to Abellio ScotRail. It submitted a rebasing notice to us, and we made an assessment of it.

Our decision was based on the significant cost increase associated with rebasing, which we do not believe would have been commensurate with improving services for passengers, given the additional costs that there would have been for taxpayers.

I will certainly look to work with Dominic Booth and his colleagues at Abellio ScotRail over the next two years to make sure that we maximise the benefits of the existing franchise, while we remain part of it.

Photo of John Mason John Mason Scottish National Party

In recent years, there have been huge improvements in the rail service; there certainly have been between Glasgow and Edinburgh. We now have five electrified lines, we have the 385s, which are tremendous trains, we have more seats and we have less overcrowding than there used to be. Will all those improvements carry on, whatever happens?

Photo of Michael Matheson Michael Matheson Scottish National Party

Yes. All the commitments that were set out as part of our plan for investment in the franchise and our infrastructure investments will continue as part of the franchise and in control period 6; I give John Mason that assurance. We want to build on the significant improvements that we have seen in rail over the past decade or so and to ensure that that continues in the years to come.

The Deputy Presiding Officer:

I can squeeze in a quick question from Claire Baker.

Photo of Claire Baker Claire Baker Labour

I very much welcome today’s announcement, but ScotRail’s contract with Abellio will still last until 2022, and as we enter the severe winter period my constituents are about to face a price hike in their fares. What guarantees can I give them that they will no longer have to put up with a substandard service?

The Deputy Presiding Officer:

Can the cabinet secretary please give a quick answer to that question?

Photo of Michael Matheson Michael Matheson Scottish National Party

The member will be aware that we have put a remedial plan in place to specifically address concerns and issues about performance in the Fife circle area. As a result, we have seen marked improvements: reductions in cancellations, improvement in punctuality and increasing seat capacity, which has just come in as a result of the December timetable change. There is certainly more to do, because some of the real benefits that we want to see delivered on the Fife circle area are dependent on the delivery by Wabtec Rail and Angel Train Contracts of high-speed trains, which will further increase capacity. I hope that, as we go forward into the May timetable, we will see further improvements as a result of increasing capacity on the Fife circle.

The Deputy Presiding Officer:

That concludes questions on the rail update statement. I am sorry that I was not able to reach Rona Mackay or Neil Findlay.