[Hugh Bayley in the Chair] — Rail Industry

– in Westminster Hall at 12:00 am on 3rd June 2009.

Alert me about debates like this

Motion made, and Question proposed, That the sitting be now adjourned.—(Steve McCabe.)

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington 9:30 am, 3rd June 2009

I sought this debate because the economic recession is hitting the rail industry hard. Despite Government efforts to develop long-term infrastructure investment plans and the exhilarating tour of the rail system by Lord Adonis, most commentators are now reporting a rail industry in crisis. The falling demand in the economy is resulting in a falling demand for rail services—both passenger and freight. The drying up of revenue resources or income is leading to cuts in jobs and services and the curtailment of some potential investment. There is a concern among many in the industry that unless the crisis is addressed, we could be going into a spiral of decline for the long term.

Some commentators this week have suggested there is evidence that the recession is bottoming out. I have serious doubts about that, particularly given the analysis of the US economy. However, if we look at the Left Economics Advisory Panel's analysis of the evidence of the 1990s recession, we see that even though the rail industry was hit hard at the bottom of that recession, passenger numbers still fell for three years after the economy reached its lowest point. The evidence suggests that for the rail industry, although there is a potential crisis at the moment, worse is yet to come both for the rail and the underground.

Photo of Bob Spink Bob Spink Independent, Castle Point

I congratulate the hon. Gentleman on bringing this issue to the House. I am sure we all agree that investment in rail infrastructure would help us to climb out of recovery, and that we should take that opportunity. Such a strategy would also help to tackle some of the very serious problems such as the overcrowding on, among others, the c2c Fenchurch Street line into London, which is becoming intolerable and is a major safety issue. There are many reasons why we should make more investment in rail infrastructure and rolling stock.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

I shall come to the impact on passengers, but I agree that overcrowding is a key issue. Some of the figures that we are identifying on particular lines are staggering in terms of the impact of some of the cutbacks, and of the overcrowding problems that passengers experience.

The recession is not just impacting on jobs and services; it is exposing the inherent and disastrous failings of the privatised railway system based upon the franchising mechanism that the Government created, which, in turn, has created a dependency of the railway sector and the railway companies on the Government and the travelling public. That dependency has created extensive public subsidy for what some would consider fairly rapacious profiteering by private companies themselves.

The franchising system that the Government introduced is good for those companies when the economy is booming, and they raked in immense profits during that period at the expense of taxpayers and the fares and charges on passengers. However, in an economic downturn, the franchising system is enabling those companies to pass back virtually all the risk to the public purse and the travelling public.

The rail industry could and should be one sector of the economy that is readily usable to increase demand and stimulate the economy. It should be usable as an investment tool for counter-recessionary measures through which public investment, particularly in the modernisation of the railway system infrastructure, could protect jobs, stimulate demand in the economy and assist in driving the economy out of recession. Rail could be used to set the Government firmly on the path of meeting climate change targets, as well as being part of our overall "greening the economy" policy. However, the Government have handed over to private profiteers effective control of the system. Private operators have made their profits and passed on their high dividends to their shareholders in the good times, and now, having milked the system for all it is worth, they are passing back the liabilities and problems to the Government and the travelling public.

Photo of David Taylor David Taylor Labour, North West Leicestershire

My hon. Friend is referring to the counter-cyclical potential for investment in rail infrastructure and also in the rolling stock. Four months ago, the Secretary of State announced that the £7.5 billion contract for the replacement of high-speed trains should go to the Agility consortium, which has two possible sites in North-West Leicestershire. Does my hon. Friend agree that the Secretary of State was unable to be absolutely clear about the make-up of the 12,500 UK jobs that were said to be preserved or created by the award of that contract? Perhaps the Minister will put more flesh on the bones of that announcement.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

Many of us hope that the planned rail industry investment will protect jobs and stimulate job growth. We need to be very particular about how that investment is developed so that jobs are created, and created in this country as well. However, there is a lack of specific commitment, which has led to fears that a lot of the investment will not stimulate or protect jobs in this country. Workers in the industry, passengers and taxpayers are now paying for the new recession within rail.

I should like to outline how the rail recession is impacting on jobs. In recent months, we have had 7,000 job cuts in the rail sector, London Underground and Transport for London. Let me put on the record some of those job cuts. We have seen 750 jobs go at the National Express group across East Anglia and the east coast franchises. Network Rail, which is deferring 28 per cent. of rail renewals, says 800 jobs are at risk. Workers at other maintenance companies may also be in jeopardy because of the proposed withdrawal of track machine contracts by Network Rail itself.

Photo of Edward Timpson Edward Timpson Conservative, Crewe and Nantwich

I congratulate the hon. Gentleman on securing this extremely important debate. On recent job losses in the railway industry, is he also aware that a fifth of the jobs at the Bombardier plant in Crewe have been lost since December? Bombardier was one of the bidders for the Hitachi contract. Does he agree that if the Government are to help with the continued investment in jobs in the railway industry, the future contracts that are up for tender, including the Thameslink contract, should give credence to the position that Bombardier is in?

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

I certainly concur with the hon. Gentleman's remarks, and I will come on to issues relating to the supply chain.

Let me run through some of the other job losses. Some 530 jobs are to go at the UK's main freight operator DB Schenker, which was formerly English, Welsh and Scottish Railway Ltd, and it looks as though there may be further significant job losses there as a result of Network Rail's announcements. Some 480 jobs are to go at South West Trains, including a large number of ticket office and platform staff, 300 jobs are to go at Southeastern, 162 jobs at East Midlands Trains, 40 jobs at First ScotRail, 30 track welders at Amey, 37 signal and telecoms jobs at Colas Rail, and 86 jobs at Bombardier. Those have already been announced but tragically, more are to follow. There has been a proposed cut in ticket office opening times at First Capital Connect, which has put 20 posts at risk. On top of that, 1,000 jobs are potentially at risk at London Underground and, as a result of some of the Mayor's announcements, some 2,000 jobs are to go at Transport for London. That has had a significant impact on the rail industry itself. Hon. Members can understand why we have received reports from those on the front line of this industry that the sector is in crisis.

Freight has been affected as well as passenger services. We are told that the 530 jobs at DB Schenker that I mentioned could be just the first announcement. In the words of the company, there are further jobs at significant potential risk. There are also rumours of jobs at risk at Freightliner. However, the demand for freight has held fairly steady—Network Rail said that there has been only a 0.5 per cent. drop. It seems that a number of companies are using this opportunity to shed labour and reorganise, and there are sometimes threats to tear up union agreements.

Network Rail's decision to defer 28 per cent. of rail renewals work, which includes the laying of new tracks and new signals, means, in the assessment of the unions involved, that 200 miles of track work has been put on hold. That is 1,000 jobs at risk. The company admits in its business plan that that will have consequences further down the supply chain. It has estimated that 20 to 30 per cent. less heavy materials—for example, from quarrying and steel production—will be demanded over the coming year as a result of the deferral of the work. That runs counter to everything that the Government are seeking to do in investing in the long term and in infrastructure to stimulate demand in the industry and, of course, in the economy overall.

I am the convenor of the National Union of Rail, Maritime and Transport Workers parliamentary group. We have received reports from members expressing their fears about the impact on health and safety. The union has asked Network Rail for risk assessments of the deferral of some of the works, but has been denied them. We do not want to return to the days of Hatfield, Potters Bar or Greyrigg.

There are concerns about the impact further down the supply chain. On train manufacturing, as has been said, Bombardier in Crewe is proposing that 86 staff be made redundant, on top of the job losses at Washwood Heath, Eastleigh and Derby. The company is now saying that a number of its existing contracts will come to an end by the end of 2009. It is critical when contracts are being considered and developed to have some understanding of the impact on jobs in this country and the possible loss of expertise and skills if contracts are not awarded to companies such as Bombardier, which has skills that have been built up over generations of developing our train infrastructure and manufacturing for the needs of our industry. Concerns have been expressed across the House that the Bombardier situation has not been helped by the award of the contract for the new super express trains for the east coast main line and First Great Western to Hitachi in Japan.

On London Underground, the objective of saving £2.4 billion announced by Mayor Johnson in November 2008 has been achieved mainly through large-scale job losses and the scrapping of projects. Up to 3,000 jobs could be at risk, and the Mayor has moved to compulsory redundancies and tearing up some existing union agreements. That has provoked strike ballots, which have come in at five to one in favour of strike action to demonstrate the strength of feeling of London Underground and TfL workers. The unions are seeking negotiations with the Mayor to examine the way forward to protect jobs and ensure that services are maintained.

There is no better example than London Underground of the recession combined with the privatisation proposals of past years producing a toxic cocktail of policy failures. The Government's public-private partnership on the underground will go down as a memorial to the Prime Minister's bloody-minded refusal to listen to expert warnings about the privatisation mechanism that has been used. It is a monument to dogmatic incompetence. London MPs went through the experience of Metronet, which milked Londoners for £800,000 a week in profits before it went under. The contract had to be brought back in-house, with a resulting £2 billion debt legacy. We are now told that Tube Lines, which in the past few years has been making £1 million a week in profits, is in jeopardy because its estimate of its work on the contract it was awarded has left a £2.1 billion funding gap. Again, the private sector has failed and the public sector must pick up the tab as administration looms for that company.

It is ironic that the system that was imposed on London Underground is now being imposed on Tyne and Wear Metro. The £300 million of investment that the Government have promised will be delivered only if the company's services are put out to market testing. In effect, it is threatened with privatisation despite the opposition of local Members. In surveys, members of the public have demonstrated their absolute opposition to private sector involvement in the system, in opposition to local authorities in the area.

That is the impact of the recession on jobs in the rail sector, and it is a devastating appraisal of what is happening to those people on whom we have relied to deliver our rail system. The impact is not only on workers, but on passengers, who are paying for the crisis through high fares. They are paying because of a combination of the recession and the privatised franchising system. British commuters pay twice as much as those in all other leading European countries to travel the same distance. Annual season tickets for journeys of between 11 and 25 miles cost an average of £1,860 in Britain, compared with £990 in France, £944 in Germany and £788 in Spain—Italy has the cheapest season tickets at £444—yet our fares are still going up. In January 2009, average regulated and unregulated rail ticket prices increased by 6 and 7 per cent. respectively. Arriva CrossCountry, which will receive public subsidy in excess of £1 billion over its franchise term, raised unregulated fares by an average of 11 per cent.

Photo of Jeremy Corbyn Jeremy Corbyn Labour, Islington North

My hon. Friend makes a very strong point. Does he agree that one of the problems is the excessively complicated fare structures in Britain, which means that travellers who have to travel at short notice because of a special commitment often pay ludicrously high fares? That does not happen in almost any other country in Europe.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

Time and again the Transport Committee has referred to the complicated fare system and the discrimination against passengers who have no access to the internet, where they might be able to make savings by advanced booking. There have even been increases recently in the prices of special arrangements for savings, such as the young persons and family and friends railcards—on 18 May, there was a 50 per cent. increase.

Other concessions have also been hit, which I find extraordinary. Members of the armed services face the same increase in the minimum fare using Her Majesty's forces railcard. Pensioners have had the price of their railcards increased by 8 per cent. recently. The minimum cost of using a network card, which offers discounts on journeys in London and the south-east, has risen by nearly a third. The card now costs £25 a year, which is a 25 per cent. increase on last year's price. Passengers as well as workers are getting it in the neck.

Hidden, stealth charges have also been introduced. For example, we found that one franchise—National Express east coast—has introduced a booking fee of £2.50. That was condemned by local passenger groups. Mr. Ashwin Kumar, a director of Passenger Focus, said:

"Charging passengers to reserve a seat beggars belief, this is another example of back door fare rises. Some of National Express's routes cover extremely long journeys, cost considerable amounts of money and passengers expect that a seat is covered in this ticket price."

Recently, people have been paying more, but have increasingly received a poorer service.

Overcrowding has been mentioned. According to Department for Transport figures, 70 people stand for every 100 who sit on Southern and South Eastern. I feel sorry for people who travel on the most overcrowded train in the country, the 7.15 from Cambridge to King's Cross, which carries an average of 870 passengers, but has only 494 seats. That sounds like the Chamber of the House of Commons.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

My hon. Friend makes a powerful point. My daughter-in-law used to travel regularly on the train from Cambridge. When she was pregnant, she had to sit on the floor. That is what is happening. Does he agree that the railway industry is sweating the assets to maximise profits and ignoring passenger comfort?

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

That has been a consistent process in the privatised system and particularly in these franchises. Companies can maximise their profits by increasing fares and gaining public subsidy, while not rewarding the passengers with sufficient improvements in services.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

I am listening carefully to the hon. Gentleman's speech. Does he agree with the Public Accounts Committee that it is the Government who do not consider the damaging side effects on passengers of the rail franchising process and that that process is causing the problem?

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

I will come on to the rail franchising process because it is at the root of the system. That relates to this Government's dogmatic commitment to privatisation, which the hon. Gentleman's party probably shares.

Another issue passengers face is delays. I am sure that hon. Members will exemplify that with what is happening in their areas. We all remember the delays on First Great Western that produced a passenger strike only 18 months ago. There were demonstrations in which passengers refused to pay their fares because of the company's failure to deliver services on time.

There have been front-line staff reductions. There are regular reports of ticket office closures. There are fewer platform staff, which increases people's fear of a lack of safety. There are reductions in catering facilities. This week, I heard about the scheme companies have come up with for shorter trains, which beggars belief.

The service is no longer based on responding to passenger needs. The public service ethos that existed in British Rail has gone as a result of franchising and privatisation. The service is concerned not with passenger needs, but with cost cutting to maximise profits. That is a failure of franchising. At the heart of the crisis is the privatised franchising system. There is profiteering by converting fare increases and subsidies into profits and dividend payments for shareholders. That occurred even up to the edge and into the current economic crisis.

In December 2008, the RMT published research showing that the big five transport operators were converting above-inflation fare increases into profits and dividend payments of between 10 and 33 per cent. Arriva's operating profit to 30 June 2008 was £14.8 million. The dividend payment was 10 per cent. First Group's operating profits to September last year were £48.3 million. The interim dividends were 10 per cent., with £55 million paid out in 2007. Go-Ahead's operating profits in the 12 months to September were £77.2 million and the dividends paid out £48 million. In the six months to June last year, National Express's operating profits were £28 million and the dividends paid out £40 million. Stagecoach's operating profits to October last year were £31.7 million, with a 33 per cent. increase in dividends paid out to shareholders.

Interestingly, the franchises are now floundering. The Government attempted to increase some form of control over the profiteering by introducing premium payments to the franchises. There had to be a repayment to the Government, but that was calculated using extremely bullish passenger usage figures. Many of us—people inside the industry and outside commentators—warned at the time that the bullish passenger growth predictions were not likely, particularly with the threat of recession. It is on the record in the trade and financial press that the Government were warned by the RMT that any downturn would jeopardise the premium payments. That is exactly what happened.

The situation has been made worse by the bizarre cap-and-collar arrangements introduced to the franchises. Many hon. Members have been involved in financial arrangements in the public or private sector. I was chair of the Greater London council finance committee and have worked in the private sector. I have never seen contracts like these entered into before by the public sector or others. The agreements offer protection to the private sector by committing taxpayers' money to part-fund any shortfall if the revenues fail to reach levels predetermined in the franchise negotiations. Basically, that means that even if the private sector does not make the profits it wants, the Government have to intervene to subsidise it. That is an extraordinary agreement to enter into. As hon. Members across the Chamber have said, this is about privatising the profits while the risk is nationalised.

It has been reported that private sector franchise agreements in many areas are falling apart at the seams. The franchise operators are coming to the Government for further support and are trying to renegotiate the franchise. In some instances, there is talk of handing back the keys. The best example is the east coast line. In various meetings, Ministers have categorically denied that they are renegotiating the franchise or offering a management contract to the National Express Group that runs it. However, the National Express Group has made it public that it is in talks with the Government about the repayment terms, which it describes as too onerous. On the day when National Express Group announced that publicly, its shares shot up by 17 per cent. and by 29 per cent. the next day.

Photo of Norman Baker Norman Baker Shadow Secretary of State for Transport

On that point, I received a written answer from the Minister on 8 May about press speculation on the replacement of a franchise by a fixed-fee agreement for National Express on the east coast. When asked what his policy was, he replied:

"Operating agreements with train operating companies may be considered when appropriate to discharge the Department for Transport's duty to ensure continuity of rail services."—[Hansard, 8 May 2009; Vol. 492, c. 488W.]

That appears to be an acknowledgment that a franchise can be replaced by a fixed-fee agreement. Is that the hon. Gentleman's interpretation of that answer?

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

That is my understanding of it. We need more openness and transparency on what is happening in the negotiations that are taking place with a number of franchisees.

Photo of David Drew David Drew Labour, Stroud

As my hon. Friend knows, I dealt with the Minister's predecessor on the First Great Western's yellow card. Speaking of franchises, it would be useful to have it on the record whether that yellow card has been expended by First Great Western. Has it met its side of the bargain? Talk about irony! It is as if a premier league striker has been fined for misdemeanours and the Football Association is paying the fine. It would be useful to know whether the Government are paying First Great Western's fine for its yellow card for all it did wrong two years ago. It seems that the Government have to pay, yet again.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

My hon. Friend and I have discussed First Great Western's yellow card and how it has been monitored with successive Ministers with responsibility for rail.

My point is that the franchises want to have it all ways. They want profits in the good times, but when the franchises become too expensive, they want Government subsidies or to hand it back and negotiate management contracts. I am bitter about National Express laying off 750 workers on the East Anglia and east coast lines. We also know that, in April, Stagecoach went into dispute with the Department for Transport over its support payment system, and the case has now gone to arbitration. Again, it is arguing that there will be an operating loss if the arbitration is not resolved in its favour. On 13 May, First Group announced increases in its rail division of £2.1 billion and an operating profit of £94.2 million, but at the same time its managing director was reassuring shareholders not to worry because the company was accepting taxpayers' subsidies to maintain other franchises in operation. This is the economics of the madhouse, and it is time to stand back.

The Government recognise that they will have to intervene. We are aware of that because the DFT recently advertised on its public tenders website for consultants to ensure "continuity of train services" and, if necessary, run a rail franchise on the Government's behalf. If they are admitting in adverts that they will have to intervene in some instances, we need to ensure that there is a statement to the House about how they plan to do that, especially where, when and how.

I know that other hon. Members want to speak, so I shall end on these points. It is time for the Government, and indeed all of us, to stand back and have a rethink. We need to turn this rail crisis into an opportunity. We need to move away from the dogmatic obsession with privatisation and franchising arrangements. I cannot understand why the Government are refusing to consider other options, particularly a public sector option or role. Like a number of hon. Members present, I have been asking questions about how existing franchises are assessed and whether there could be a public sector benchmark or evaluation, such as a value-for-money assessment of alternatives in the public sector as against the private sector. When Connex was taken into the public sector and lost its south-east franchise, it was run successfully by the public sector for two years. A number of us argued then that we should step back from the dogma and keep at least one franchise in the public sector that could be a benchmark against private sector operators, but what did the Government do? They reprivatised it.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I agree absolutely with my hon. Friend. However, I understand that behind the scenes, very secretly, serious consideration is being given to taking the east coast main line in-house. Other franchises are in similar difficulties, so we could move in that direction. Does he agree that we should urge the Government to move rapidly in that direction?

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

I am not party to those discussions, but the way that resignations have been going in the past couple of days, my hon. Friend may be party to them sooner than he thinks.

There is an inevitability about this. For the first time in perhaps three decades we can start having a rational debate about the future of rail as part of an integrated transport system that is free from the dogma of privatisation, and that goes back to what works best. I urge the Government to launch that rational approach as franchises go into crisis and to consider using the public sector and testing that option. I urge them to accept that there might be an opportunity on at least one franchise to use the public sector option as a benchmark for others.

The travelling public have had enough of the greed and profiteering. We have gone past the days when the market could be said always to offer the optimum solution to every area of policy. We need an end to cuts in jobs and services, and we need an improvement in the long-term investment plan, but it has to be based on a public service ethos that overrides short-term profiteering. I urge the Minister to take back the message that we all want a rational debate about the future of rail. We want to use the current failures as an opportunity for future successes. It is time to move away from dogma and get to grips with the reality of what workers in the railway industry are experiencing with job losses and what passengers are experiencing with fare increases and reductions in service delivery. We must consider the potential for the sector to tackle the recession overall, to be part of the stimulus of demand, and to introduce an integrated transport policy that will help to tackle climate change. That could make a major contribution to rehabilitating political debate across the parties, and to having a reasoned and rational debate on such an important area of policy.

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation

I intend to start the wind-ups at 10.30 am. Three hon. Members are trying to catch my eye, so they will have about eight minutes each.

Photo of John Barrett John Barrett Shadow Work and Pensions Minister 10:05 am, 3rd June 2009

I thank John McDonnell for securing the debate on this serious issue, which affects people from the north to the south, and from the east to the west. He has detailed the job losses and other problems in the rail industry, which has been suffering a severe recession, but there is also an opportunity to move out of the crisis in the industry. One way out of the recession is to make sure that the UK rail industry plays a key part in that recovery, and I shall touch on a few places where such opportunities could be grasped by this Government, or whoever is in government in the years ahead.

I grew up with a railway line at the bottom of my garden and then went off to study transportation engineering at Napier polytechnic—now Napier university—in Edinburgh. As I come from Edinburgh, a key part of the railway industry that strikes me as being important is the Forth rail bridge, which was opened in 1890 and on which 4,000 workers worked. We need to see whether we can revitalise our rail industry, because much of its rolling stock and other supplies are no longer from this country. We have an opportunity to move forward to high-speed rail, as other countries have. We need to make sure not only that that high-speed rail is good for the environment, but that it stimulates the economy throughout the land and provides the shovel-ready jobs that have been mentioned. We could get the construction, civil engineering and railway industries working together to produce jobs immediately and to stimulate the economy.

When this country was growing, 100 years ago, the rail industry played a key part in that growth by improving transport links, but when we jump on to today, what do we see? We see opportunities for high-speed rail, with the Eurostar link taking passengers away from more polluting forms of transport such as air travel. We could extend the high-speed railway network throughout the UK, but I fear that opportunity has been largely missed because there has been a lack of clear vision from the Government. Many other countries have grasped that vision; there are new high-speed rail links in China, Russia, Brazil, India, Poland and Argentina, but what do we have in the UK? Very little.

There is a range of reasons for having high-speed rail, although I shall not spend too much time talking about them. One is the reduced impact on the environment of having high-speed rail links from cities such as my own, Edinburgh, from where 60 per cent. of flights go to other UK cities, causing a high level of pollution. Many of those flights come here to London, where there are protests about the need for a third runway at Heathrow airport. If we had a decent high-speed rail link, many people would decide not to fly, because they could jump on the train and it would take only a few hours to travel the length of the country. In other countries, there is clear evidence that where there are alternative high-speed rail journeys of three or four hours, people will happily move from the air to the railways. A good example of that is the Madrid to Barcelona line in Spain, which was opened in 2008, bringing massive benefits. Previously, trains had made up 15 per cent. of all journeys, but they now make up more than 50 per cent. That was one of the busiest aviation routes in the world, but it has been overtaken by trains.

The opportunities are certainly there, but there is another reason why high-speed rail has a wider opportunity at a time when we are looking at constitutional reform in the UK. There has been a push from the Scottish National party and separatist parties to say that that is the way forward. A high-speed rail system would actually unite the parties, as it is uniting the regions of Spain. High-speed rail will not come from the south of England to Edinburgh if there is a separate Scotland, so it is another reason to tie the country together.

There are opportunities in the UK not only for high-speed rail, but for light rail. In Edinburgh a tram installation programme is in progress and massive investment is being made. I have seen the mock-up of the tram and it looks great, and very efficient, but what has happened on the ground? The tram contract has been awarded to a Spanish firm. Undoubtedly it will produce high quality trams, as it is the same company that produced the trains for the Heathrow Express. The company that has been given the design, construction and maintenance contracts, the Bilfinger Berger and Siemens group, is not a local company, and although it is no doubt efficient, it would have been good if we had had the infrastructure in this country to provide the construction, maintenance and rolling stock and look forward to the future.

In Edinburgh we have had job losses as a result of the recession, as the biggest single employer in the city is the financial sector. The largest employer in Edinburgh, HBOS, is based in my constituency, and there have been many redundancies, but at the same time inward investment in Edinburgh is happening. Companies that are pulling back from investments elsewhere have said that they are going to Edinburgh because it will have an improved transport infrastructure in the years ahead. High quality public transport is absolutely vital. Providing a good quality transport system locally and then a high-speed rail system nationally will not only provide the jobs for the future, but ensure that our economy is in a fit position to take advantage of opportunities when we come out of the recession.

I have kept my remarks brief to allow other Members to speak. Edinburgh plays a key part, and not only because there are many local trainspotters—indeed, the book "Trainspotting" was based in Edinburgh—and because the Forth railway bridge is there. I would like the rail industry to play a key part in getting us out of the recession with the opportunities that are there for the future.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North 10:12 am, 3rd June 2009

I congratulate my hon. Friend John McDonnell on securing the debate and on his expert and detailed analysis, with which I entirely agree. I speak as a dedicated lover and supporter of the railway industry, who has commuted by rail daily for the past 40 years. The railways are important to me and, more importantly, to Britain's future because they are the future mode of transport, especially in an era of energy difficulties and diminishing oil.

We are now seeing the beginning of the end of the mad, Dr. Strangelove experiment called railway privatisation. It has cost vast sums of money, does not work for passengers or taxpayers and was always utterly misguided. It has simply put vast sums of money into private pockets to very little benefit. The first stage in that decline was the collapse of Railtrack, which I understand had a neon sign in the foyer of its building showing its share price: that is how much it cared about railway safety and comfort and the future of passengers. Network Rail took over from Railtrack and effectively brought the network into public ownership, but its behaviour and methods continued many of the bad private sector practices.

Shortly after the creation of Network Rail I attended a waterfront conference addressed by its then deputy chief executive, who showed how the contracts would work and how they would not work. He explained how the specifications were drawn up by Network Rail and given to the contractors, who would then work precisely to those specifications because that is what they were required to do and because they would be fined if they did not do so, even when the specifications were wrong. If the work was done incorrectly over a weekend possession, by the Monday morning it would be inspected and found to be wrong. The work would then have to be done again with another specification and the contractor would say, "Thank you very much", having doubled its money and got twice as much work. That, of course, meant more delays and interruptions to services.

Contracting, subcontracting and sub-subcontracting creates interfaces, all of which mean costs—interfaces always mean costs. British Rail, when in operation, was an integrated system with directly employed staff, so such interfaces did not exist, and if they did they were minor, internal and easily overcome. British Rail employed staff directly, worked under cash limits and corrected engineering work as it went along. It did not have the contracting chaos we have seen under Railtrack and Network Rail. It is not surprising, therefore, that when everything is taken into account, track renewal costs are five times higher then they were before privatisation. No wonder costs are out of hand.

I am sure that the Minister has seen the book, "Britain's Railways, 1997-2005" by the academic Terry Gourvish, which was commissioned by the Strategic Rail Authority. It is a matter-of-fact book showing that total support for the railway industry between 1996-97 and 2006-07 increased fivefold, from just over £1 billion to £5.5 billion. That was simply putting money in private pockets, although I accept that some of it accounted for extra work. Maintenance has been taken in-house, but even that has not improved as much as it should have because of the continuation of practices similar to those that grew up under the privatised contracting system.

I am short of time and so will omit references to the train operating companies, as my hon. Friend the Member for Hayes and Harlington dealt with that effectively. However, I will say that Virgin has recently complained that punctuality on the west coast main line is still as bad as it was when work to the tracks was being undertaken and has not improved, so the TOCs are still unhappy with the quality of what Network Rail is providing.

Network Rail has had a good financial settlement from the Government, but at the same time it is cutting back on renewals and sacking staff. In my view, and that of many others, that is evidence of financial incompetence. Do those in Network Rail deserve their huge salaries and bonuses? I think not: they are thoroughly undeserved. Indeed, the Prime Minister, when talking about MPs' expenses at the weekend, said he wants to apply the same rigour to executives in the BBC and the NHS, "etc." I suggest that the biggest component of that "etc." should be Network Rail. We should not reward it for failure.

Valuable staff are being made redundant—often the experienced staff trained by British Rail, and sometimes because they get in the way when they want to do things right, are fussy and have a sense of commitment to doing the job well. Network Rail wants people who do the job quickly, cheaply and not well. Those staff being sacked are being defended by their unions at great expense, but Network Rail pays large sums of money to stop cases going to tribunal at the last minute when it is obvious that it will lose. That was detailed in a previous Adjournment debate by my hon. Friend Mr. Devine.

The whole edifice of privatisation is crumbling, and I believe that it is time to recreate the integrated, publicly-owned railway industry and save vast sums of public money, and passengers' money into the bargain. Five years ago the then Secretary of State for Transport, now the Chancellor of the Exchequer, said the lack of investment had been compounded by ill-thought-out privatisation, producing fragmentation, excessive complication and dysfunctionality. I think that is a function of privatisation and of the way it has operated.

Two years ago I had the pleasure of meeting Dr. Mehdorn, the former chairman of Deutsche Bundesbahn, the German state railways. An impressive man with a strong and forceful character, he lives in a castle and has weightlifting as a hobby. He was extremely forceful in his absolute opposition to being forced into privatisation on the British model. He said it would be a disaster if DB was fragmented in the way British Rail had been. He is no longer the chairman, but the Germans have decided, very sensibly, not to privatise DB but to keep it in the public sector.

I recently met some colleagues from the former rail freight company English, Welsh and Scottish Railway and mentioned that it had been nationalised. They responded, "Oh no it hasn't." I replied that it was now owned by German state railways. It is all very well being owned by German state railways, but I suggest that we should take the British railway network back into British state ownership and operate our railways the way the sensible continentals operate theirs.

Photo of Jeremy Corbyn Jeremy Corbyn Labour, Islington North 10:19 am, 3rd June 2009

I welcome this debate, and I congratulate my hon. Friend John McDonnell on securing it, and on the good work that he does in chairing the RMT group, consistently taking up railway-related issues and pointing out the failure of the privatisation model.

In reality, British Rail, which was nationalised after the second world war, had a good record in trying to protect a social railway, despite the best efforts of Dr. Beeching. BR was always underfunded and under-resourced for research and development. It was privatised on the basis that it was costing too much money. The then Tory Government said that they wanted a self-sufficient railway, but, shortly into privatisation, the amount of public money going into the railway system was greater than at any time during nationalisation.

We now pay far more money to private companies to run the railway system than we ever paid when it was publicly owned, and we have closed off from ourselves the possible benefits of any profitability coming from the railways. It is, frankly, a ludicrous system.

My hon. Friend pointed out the dogma attached to the privatisation. I believe that he would agree that surely now, of all times, it is time to end that dogmatic nonsense and have a fully publicly owned, publicly accountable and publicly run railway service in this country.

Photo of David Drew David Drew Labour, Stroud

Does my hon. Friend accept that we were almost at a critical stage some years ago because of a lack of railway engineers? That is one way in which privatisation has completely undermined the basic infrastructure of the industry. There is no better example than the lack of railway engineers.

Photo of Jeremy Corbyn Jeremy Corbyn Labour, Islington North

My hon. Friend is absolutely right. John Barrett and my hon. Friend Kelvin Hopkins pointed out that we have a shortage of manufacturing capacity in this country to produce trams, railway carriages, locomotives and many other things. If people go around the world and look at any old railway, they will see that most of the stuff is British-made—most of it by Westinghouse or others, and any of the older trains, including the high-speed trains in this country, by British Rail Engineering. It was an act of political dogma by the previous Government to destroy British Rail Engineering. We lost the manufacturing capacity that went with it, in the same way that bus and other manufacturing capacities were damaged in favour of a money economy rather than a manufacturing economy. We are paying the price for that.

In a recession, investment in public transport infrastructure is of double importance. It protects jobs and the industries themselves, but it also provides a good public transport and freight transport system for the future. Therefore, I appeal to the Government not just to maintain but to increase investment in the rail network.

There is limited time, so, as a London MP, I shall raise a few specific points concerning London and its needs. London relies heavily on public transport. Indeed, public transport usage in London is at a very high level. The former Mayor and, before that, the Greater London council and Transport for London tried hard to invest in improving the bus and underground networks and, more latterly, the overground rail network.

My hon. Friend the Member for Hayes and Harlington was right to point out the utter madness at the time when Mayor Livingstone wanted to refurbish the underground system. The then Chancellor of the Exchequer, currently the Prime Minister, insisted that the whole business be done through a public-private partnership. We thus had two companies set up—Tube Lines and Metronet—to undertake the refurbishment of various parts of the underground. Metronet famously finally went under and had to be taken over by TfL, and the staff were taken over as well. Thankfully, some of their working conditions have improved as a result.

However, Tube Lines is still part of the public-private partnership. London Underground is paying it £5.1 billion for the refurbishment work that it is doing, but it is demanding £7.2 billion. Who will pay the £2.1 billion shortfall? My view is that if Tube Lines cannot do the work for the money that it contracted to do it for—if it is not capable of doing the work on schedule, on time and to the satisfaction of TfL—it should simply be taken over. The work should be taken in-house by TfL, and the conditions and jobs of the workers guaranteed.

There is one particular group of workers that I want to draw attention to in this rail debate, short as it is. Those are the people, mainly women, who clean the underground stations. Under Mayor Livingstone and, to his credit, continued by Mayor Johnson, all Greater London authority employees enjoy the London living wage, which is higher than the national minimum wage to reflect the higher costs of living in London. Former Metronet employees, particularly the cleaners, now receive a London living wage, thanks to the actions taken by their unions and by the administration itself.

Tube Lines cleaners work for the national minimum wage in disgusting, dangerous conditions, for a company with appalling management practices. Workers are harassed, and great pressure is put on them. Many of them have no security of employment—as I understand it, almost from day to day, never mind from week to week—under the company's antediluvian management practices.

I appeal to the Government to look into the employment of those contract cleaners, to insist that they receive the London living wage and that management practices be brought up to date for the 21st century. We must show respect for those people. They do a filthy, horrible job. They clean up all the crap that is left on the trains and in the stations every day, and we should thank them for it and pay and reward them properly for so doing.

I wish briefly to raise two other points concerning London. One is about the electrification proposals for some of the London overground lines. The north London network goes from Stratford to Richmond; the Barking to Gospel Oak line is attached to it. The Stratford to Richmond line is electrified and is a busy line indeed. It is doing extremely well but needs to do even better. It needs more trains, better signalling and better service, and it is heavily used.

The Barking to Gospel Oak line was once due for closure. Apparently, a previous Conservative Transport Secretary looked over a bridge on the Holloway road, found that there was a railway under it and wondered why it was not a road. We then went through the miserable experience of protecting the line from closure and, fortunately, were successful. The line is now much busier and more effective. Indeed, it is now suffering from overcrowding because it is so successful. That is a line that was due to be closed less than 20 years ago.

There are proposals to electrify the line. Seventy- five per cent. of the benefit of electrification would go to freight usage, because a much easier freight corridor from the east coast to the west coast of England would be opened up. Currently, electrified trains can bring freight in from the east coast ports of Felixstowe and Harwich, but they have to use diesel locomotives along the Barking to Gospel Oak line. The cost of electrification of the line is £40 million, of which £25 million has apparently already been earmarked by the Government. I would be grateful if the Minister confirmed that.

There is a £15 million gap, which is not very much, given the huge benefits that could be achieved by that piece of electrification. My hon. Friend Harry Cohen and I have put down an early-day motion on the matter. I would be grateful if the Minister confirmed that the Government actively support that electrification programme.

My final point concerns the relationship between the Government and TfL on station improvements and management schemes. My constituency includes Finsbury Park station, which is one of the busiest suburban, or semi-surburban, interchange stations for the east coast main line, the Moorgate to Hertford line, the Victoria line and the Piccadilly line. It is a very busy but very out-of-date station. It is impossible for anyone with any kind of walking difficulties or anyone using a pram, a pushchair or anything like that to access the station. It is a dreadful station in terms of step-free access.

Mayor Livingstone had a plan to introduce a completely step-free access arrangement for the whole station. It has since been postponed or cancelled by Mayor Johnson, but Network Rail, to its credit, has said that it will introduce step-free access from the street to the mainline platforms that are above ground level. However, TfL will not introduce a lift service from the street level to the underground platforms. We have the ludicrous situation of a lift going halfway through the station. We can get from the mainline platforms to the street, but we cannot get to the underground, yet most of the journeys that require an interchange involve going between a mainline platform and the underground.

As I said, the situation is ludicrous. It will probably end up costing double the amount to deal with the matter at some future point. Will the Minister be kind enough to intervene and knock heads together on the step-free access programme—I understand that there is a window of opportunity of a very few months to get this sorted out—so that when the work starts, it can be for the whole station, not just half? That might sound slightly localised and arcane, but it is very important as a message that the Government are serious about disability access at all stations around the country and are prepared to intervene where necessary to ensure that that is provided.

Photo of Norman Baker Norman Baker Shadow Secretary of State for Transport 10:30 am, 3rd June 2009

I congratulate John McDonnell and his Labour colleagues on presenting a common philosophical approach to the future of the railways. I somehow doubt that it will be shared by the Minister but we will doubtless find out. I congratulate the Minister on not being derailed and still being in office at this point. I hope that he is still there next week—a lot can happen in a couple of days.

On the effect of the recession on the railways, I shall concentrate predominantly on the issue of franchises, which has been picked up by Labour Members. The Treasury's policy has been to try to reduce the call on the public purse of running the railways—rather belatedly, given the huge increase with Railtrack and other post-privatisation calamities. However, the consequence of the method that the Treasury has adopted to try to reduce the call on the public purse has not been in the best interests of the railways or their passengers, be they people or freight users.

Essentially, the policy of driving up income means that the Government are very vulnerable when a recession comes upon the industry. Suddenly, train companies are unable or unwilling to meet the costs of the reduction in income that they experience as a consequence of diminishing passenger or freight usage of the railways. That is a serious matter. It is leading to losses in individual companies, to job losses, as the hon. Member for Hayes and Harlington rightly said, and to passengers suffering. Companies are considering where they can make cuts to services that are not governed by specific franchise agreements, so we are seeing cuts in booking-office hours, cuts in the number of staff on trains and cuts in catering services, most famously on the east coast main line. National Express appears to be adopting a policy of presenting bleeding stumps to the Government in the hope that they will bail it out. I hope that the Government will not be seduced by that rather ludicrous tactic. National Express's customer base is being damaged by how it is approaching the matter.

What happens if a franchise fails? We have yet to receive a clear answer from the Government on that. I am asking the Minister, although I am not particularly hopeful, to give us a clear answer today on the issue. Lord Adonis, for whom I have a great deal of time and respect, has said repeatedly that the Government will not allow renegotiations of franchises. That appears to be the Government's stated position, but the parliamentary answer that I referred to appeared to hold out the prospect of a train franchise being replaced by a fixed-fee operating agreement. In other words, National Express or some such company could hand in the franchise but could carry on running the franchise under a new financial arrangement. That is in effect a new train franchise—a replacement for the existing one. I therefore need to ask the Minister this point-blank: are the Government considering fixed-fee agreements for train operating companies as part of existing franchise arrangements, or are they not? What is the role of a fixed-fee agreement? If the Minister made that clear, that would be very helpful.

My view on the franchise agreements is clear. The Government should play hardball with the companies. They entered into a financial agreement and should be made to stick to it. If a company hands in a franchise, any other franchise held by it should be handed in or taken away from it at the same time. Indeed, I would go further, and this is where the hon. Member for Hayes and Harlington may be surprised, but pleasantly, I hope. In my view, if a franchise is handed in to the Government—handed back—it should be held in the public sector as a public interest franchise, not least as a comparator for other franchise agreements currently operating. That was the case partly with South Eastern, when the Connex franchise was handed in.

However, I am not talking about a comparator simply in traditional Treasury terms. We need to consider what we are trying to get from franchises. A public interest franchise would allow us to recast what we expect from the railway. It is not simply a matter of pounds, shillings and pence, which is how the Treasury looks at these matters. We need to consider passenger targets for franchise holders. What do the passengers want? That is not necessarily the same as the financial outcome that the Treasury demands of train operating companies that are successful in franchise bids. If we had a passenger-based franchise, that would enable people to make not only a financial comparison but a passenger delivery comparison, which would be useful in driving up performance throughout the railway industry.

Having said that—this is where the hon. Gentleman will disagree with me—I believe that there is a case for significantly longer franchises but, crucially, with new passenger-based targets included in them so that there is not simply a financial measurement. In our view, a 30-year franchise with a five-year renewal checkpoint would be a sensible arrangement whereby if the passenger-derived, passenger-oriented targets were met, the franchise would be retained; if they were not met, the franchise would be taken away. That would give a train operating company a direct incentive to meet passenger objectives.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

Would it not mean that the franchisees would just refuse to accept arrangements that made the franchises too onerous, and if in time they became too onerous, would not the franchisees just come to Government for more handouts? Would it not be just like the commitment that we have made to private finance initiative schemes, which will cost the taxpayer billions of pounds over the next 30 years?

Photo of Norman Baker Norman Baker Shadow Secretary of State for Transport

I am seeing a Treasury Minister in 45 minutes' time about a PFI arrangement that has gone ludicrously wrong in my constituency; it relates to a waste contract. On the hon. Gentleman's question, no, it depends on the line that the Government take. The Government could say to the train companies, "These are the rules. These are the criteria you have to meet. These are the passenger targets you have to meet." If they want to walk away from that, let them walk away and there can be a return to the public sector. That means that the Government would be involved in a bit of hardnosed negotiation with those companies. It would not simply be five companies giving people the runaround; there would be an alternative, which is a public sector interest test. That is the line that I would advise the Government to take.

The question of fares is very important. The Government have a policy of RPI plus 1 per cent. That was reinforced by Lord Adonis on 25 February when he said that the Government stood by the RPI plus 1 per cent. formula. However, rail fares in recent years have increased enormously above inflation. Since the Government came to power, the cost of travelling by train has gone up by 7 per cent. above inflation, while the cost of travelling by car has fallen by 13 per cent. As a motorist, I say to motorists that they should not moan about fuel prices. They are doing better under the current Government than train and bus passengers. Train and bus passengers should be out protesting. They are the ones who have seen the price increase.

RPI plus 1 per cent. makes no sense in a Government policy designed to tackle climate change. If we want to tackle climate change, we have to persuade people to use lower-carbon means of transport. It means getting people on to buses and trains, although they are being priced above inflation, and it means getting people off roads and certainly out of the air, although that means of travel is being reduced in price. That cannot make any sense. What will the Government do to co-ordinate their climate change strategy with their transport strategy, which is producing the opposite result to the one that they ostensibly say they want? This year, we could have frozen rail fares instead of forcing them up. We could have done that by cancelling 4 miles of motorway widening. That would have paid for all rail fares to have been frozen this year, but the Government want 4 miles of motorway widening instead. I know which one the public at large would choose if they were given the option.

It is very important for climate change purposes, for jobs and to tackle the recession that we end up with continual and increased investment in railway infrastructure projects. We could start with infill electrification. I am pleased that the Government have committed, or almost committed, themselves to electrification of the midland main line and the line down to Exeter. [Interruption.] Well, the Minister can confirm that he is committed to that. I agree that infill electrification in particular has a role to play. Lines such as Barking to Gospel Oak are crying out for investment in that regard.

We must also ensure that we invest in high-speed rail. My hon. Friend John Barrett made that point, and quite rightly, as Scotland must reap the benefits of the high-speed rail network as much as anywhere else in the country. I want to ask the Conservative spokesman, Stephen Hammond, to confirm that the Conservative Treasury team, not him and Mrs. Villiers, is committed to high-speed rail investment and to Crossrail investment if the Conservatives take power.

Photo of Norman Baker Norman Baker Shadow Secretary of State for Transport

The hon. Gentleman is on in a minute; he can tell me in his response to the debate. Saying that his party has no plans to do anything else is no answer, by the way—I want a firm commitment from him that that investment will go ahead if there is a Conservative Government.

Lastly, on Network Rail, there is the issue of efficiency. It takes five to eight hours to change a set of points in Switzerland, but 40 to 42 hours in the UK. Network Rail has to do far more far more efficiently, and until it does, it is not right that its top management should receive massive bonuses.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport) 10:40 am, 3rd June 2009

There can be no doubt that we are in a recession, and there is no doubt that the causes of that recession, like all recessions, are both international and domestic. I therefore congratulate John McDonnell on calling this debate, which allows us to look at some of the domestic implications of the recession.

I was pleased that I agreed with some of the points in the hon. Gentleman's speech. His view that the recession is unlikely to have bottomed out is certainly borne out by history. Recessions are not common, nor are quick recoveries from them. A return to trend growth after the last quarter of negative growth usually takes at least two years. It is therefore highly unlikely that we will see a quick recovery or that the recession will have a small impact on the rail industry and other industries. That is presumably why the Government acknowledged in the Red Book that the downturn is forecast to be much deeper than that of the 1990s.

I also agree—I think that the hon. Gentleman knows, although he did not mention this in his speech—that the PPP was the 14th of the 15 financing options that London Regional Transport presented to the Government, and Ministers chose to take that 14th option. Where I start to disagree with the hon. Gentleman, however, is that Metronet's failure was due not only to the economic incompetence of Metronet, but at least partly to the economic incompetence of Mayor Livingstone.

Photo of Jeremy Corbyn Jeremy Corbyn Labour, Islington North

The hon. Gentleman has made an extraordinary allegation against Mayor Livingstone. He really should explain it to hon. Members or withdraw it.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

I am happy to explain it. It is widely acknowledged that Metronet believed that it was in a cost-plus contract and that Livingstone believed he was in a cost-inclusive contract, but neither side wished to test that point. There was economic incompetence on both sides.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

No, I have given the hon. Gentleman his chance.

It is important to recognise that there has also been a complete failure to acknowledge that the Government's franchising process has given rise to a number of the issues that the hon. Member for Hayes and Harlington described and that they are not the fault of the TOCs. The Government are trying to rebalance the position between the fare payer and the taxpayer, and that is their decision, but it is also one reason why fares are going up. The Government's over-specification of the franchises is another reason why we are seeing increased job losses, because the specification of the contracts and the increasing premium payments have left franchisees with no other options.

I was intrigued by the speech by Kelvin Hopkins, who said with relief, if I heard him correctly, that Network Rail had followed Railtrack and was effectively in public ownership. I am sure that the irony was not lost on everybody when he then went on more or less to rubbish the record of Network Rail, which, as he said, was effectively in public ownership.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I said that it carried on with many of Railtrack's modes of operation. Instead of just being in public ownership, it should have operated as the equivalent body did under BR—as an integrated, properly publicly owned industry.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

Indeed, but the hon. Gentleman did say with relief that Network Rail was effectively in public hands—that we can agree on.

Last month's Budget from the then and, I guess, still current Chancellor announced a squeeze on public spending between April 2011 and 2014, so the line that it is only the Labour party that ever invests is clearly complete nonsense. Today's debate gives the Minister the possibility, in the context of the recession, to put on the record a number of the implications of the Chancellor's spending plans.

According to analysis by the independent Institute for Fiscal Studies, total investment spending will be cut by half across all Whitehall Departments to 2014. The Treasury's often optimistic forecasts predict that investment spending will fall by half by 2013. Even before the proposed budget tightening, the IFS predicted that the Department for Transport's spending allocation would fall by 4 per cent. over the three years from 2011 to 2013. Given that a quick recovery is unlikely, will the Minister confirm the IFS numbers? In addition, the DFT will be forced to find its share of the Chancellor's announced £6 billion efficiency savings, which are independently estimated to represent 6 per cent. of current expenditure.

Given that we are in a recession, which will clearly impact on the railways, the Minister needs to answer a number of questions this morning. What size will the overall reduction in the DFT's budget be as a result of the 2011-14 spending plans? What size will the resulting reduction in investment spending and current spending be? What is the Department's judgment in terms of the balance between current and capital spending? Does it have any plans—this relates directly to the point made by Norman Baker—to review control period 4, which is being talked about in the industrial press? Electrification has also been mentioned, and I want to ask about its future because it has been widely suggested in the rail industrial press that the rolling electrification programme is one of the programmes that might, as the euphemism goes, be pushed to the right. The Government need to clarify those points, which are the direct implications for transport spending of the Chancellor's Budget.

Another key question that the Government need to answer today relates to the implications and problems beyond 2014. The Budget's predictions suggest a major decline in possible spending. Does the Minister realise that the Government's spending proposals in the Budget have left considerable uncertainty across the rail industry?

Time is relatively short, but I want to put it on the record that the Government's focus is all wrong. The Department has been working far too much on the minutiae, such as details of timetables and train specifications—on his trip, Lord Adonis even had a chance to look at the restaurant car menus. Such things should be left to the industry. The Department needs to concentrate its resources on the strategic direction. That was picked up in a Public Accounts Committee report, which said explicitly that the franchising process

"does not consider damaging side effects" for customers.

The Committee also said that the Government could have a major impact on procurement. I totally disagree with how they are going about procurement. The Committee's report states that:

"promises of bringing 1,300 new rail carriages into service by 2014 look over-optimistic."

Analysis in answers to parliamentary questions to the Minister shows that only 973 of those carriages are likely to be extra carriages, and that the rest are part of the Thameslink growth programme, which the Minister's predecessor rolled out.

I agree that shorter franchises and the whole franchising process bear a major part of the blame for what has happened. Longer franchises are at least part of the remedy. Clearly, a number of passenger criteria, as well as punctuality and service levels, will need to be set out in the franchises. However, it is also clear that longer franchises must be part of the answer.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

I am sorry but I will not give way to the hon. Gentleman as I only have a minute left.

In the very short time remaining I want to concentrate on franchises, because it is an issue that has been raised a number of times today. Is the DFT going to stick to its mantra that it will not renegotiate franchises? If so, is the DFT, as the hon. Member for Lewes was going to say, prepared to offer fixed-fee contracts? If it does take contracts back in-house, does it intend to keep them in the public sector or to re-franchise them within six months? Finally, does the DFT recognise that the much talked about cross-default option is, in reality, not open to it, because if it takes the contract back in-house, that will not affect the holding company level, so the cross-default option will not be available to the Government?

I note, unfortunately, that my time has run out, but I hope that the Minister might answer at least some of those detailed questions about the franchising process.

Photo of Paul Clark Paul Clark Parliamentary Under-Secretary, Department for Transport 10:50 am, 3rd June 2009

I congratulate my hon. Friend John McDonnell on securing this debate. This issue is very important to the Government in terms of ensuring that the railway system is sufficiently robust to meet the requirements of the travelling public and of the movement of goods through freight operations.

I will endeavour to cover as many of the points that have been raised as possible, but let me say first that some of the comments made and the views expressed about the railway system seem at odds with the reality. Out there, the reality is that more people are using rail services than at any time since the end of the second world war—since 1946, in fact. We have greater investment, punctuality, reliability, service, safety and operating rolling stock. Indeed, one of the pleasant challenges that we face is dealing with the fact that we have great demand for railway services. Nevertheless, of course the economic downturn is going to affect the railways, as it is affecting every other type of transport and other industries.

It is interesting that Stephen Hammond wants to discuss records of investment. If I am quoting him correctly, he said that it is now "false" that only a Labour Government will invest. One only need go back to recessions of the 1980s and 1990s to see that the railways are in a far better position today than they were in those days. In 1982, the railways were at their lowest point, with the lowest number of passenger journeys, the lowest number of passenger miles travelled and the lowest passenger revenue. The conclusion of the Administration at that time was to see what report could be introduced to try to delay the terminal decline of the railways. That Administration came up with proposals that would have seen wholesale line closures and the slashing of route mileage by more than 80 per cent.

Fortunately for us today, that view did not prevail. However, railways were still not invested in, which remained the position when we came to the 1990s and a further recession, which meant further problems. It is against that backdrop that we must view the situation. We then had a botched privatisation process, which continued the legacy of under-investment. We have had to deal with that legacy since 1997 in trying to address the problems on the railways. Now, we have had a growing railway system for more than a decade, with increasing performance, reliability and customer satisfaction.

However, there are still challenges to be met and they must be met within this recession period. Of course, that is why we have continued to invest—to ensure that we have a robust railway system within the existing framework. That is also why we have announced £10 billion of investment to increase capacity for the next control period, for an extra 183 million passenger journeys between 2009 and 2014. Let us recognise the substantial investment that has been brought into the system by both private and public resources.

Photo of David Drew David Drew Labour, Stroud

I will not talk about Swindon and Camborne because I know that that is outside this debate. However, can the Minister confirm that that £10 billion is on track? I apologise for the pun there. Obviously, that £10 billion is a key counter-cyclical factor in extending the network, including opening up new lines and improving existing ones.

Photo of Paul Clark Paul Clark Parliamentary Under-Secretary, Department for Transport

The Government's actions, such as bringing forward fiscal stimulus packages at the pre-Budget report to invest in public transport, including the railway programme, show our commitment to ensuring that that investment continues at this time. My hon. Friend Jeremy Corbyn said that it is at exactly this time that we should keep such investment going, and we would not disagree one iota with that view. Actions speak louder than words, but we have put on the record our commitment to bringing forward and continuing with investment to address the immediate issues relating to capacity on our railways. That is in contrast with the proposal of Mr. Osborne, the shadow Chancellor, who would have lopped some £840 million off the transport budget from April 2009. So we take no lessons about investment—

Photo of Paul Clark Paul Clark Parliamentary Under-Secretary, Department for Transport

I will not give way because I only have four minutes left and I want to cover some of the points that have been made.

I want to talk about the issue of franchises, which was raised by my hon. Friend Norman Baker. The hon. Gentleman asked whether we were going to play "hardball" with the operators to ensure that they deliver on their franchise requirements. That is our position exactly: we will ensure that the operators meet the franchise requirements. That is also why I say, as Lord Adonis has already said, that we are not in the game of renegotiating franchises.

Having said that, however, there is the question of a management contract, if required. What happened with Great North Eastern Railway is on public record, and there is nothing different in what I say now. There was a management contract, and as I am sure hon. Members are well aware, under section 30 of the Railways Act 1993, which was amended by the Railways Act 2005, there is a requirement on the Secretary of State to operate as "operator of last resort" if need be. However, the issue is ensuring continuity of the services that are required. We see that as being the important point—making sure that customers are put first when there are problems.

It has been said that only in the bad times do we have to bail out the companies, while they reap all the benefits in the good times. That is not how it works. In fact, in the good times the taxpayer shares in any revenue increases, and in the downturn there is a requirement for us to make up a percentage of the revenue gap. However, that provision applies only in the last year of a four-year franchise.

Opposition Members have talked about longer franchises. Having longer franchises would also mean having to predict revenues over 15 to 20 years, which makes matters extremely difficult.

Photo of Paul Clark Paul Clark Parliamentary Under-Secretary, Department for Transport

I will not give way.

In addition, longer franchises would also raise further questions about our ability to ensure that we hold operators to account over any difficulties.

We recognise that the issue of fares, including getting the balance right between the fare payer and the taxpayer, is absolutely critical. The hon. Member for Lewes quoted from what Lord Adonis said to the Transport Committee about sticking by the RPI plus 1 per cent. formula. Of course, Lord Adonis went on to confirm that we are going to take away the flexibility that allows regulated fares to increase by up to a further 5 per cent. Furthermore, he said that, with negative RPI, we will expect rail operators to reduce their prices and not just freeze them from January 2010.

There was a lot of speculation about what the scale of job losses might be, and I recognise the issues that will be faced. On investment and renewals, everyone is well aware of Network Rail's investment commitment. The package for 2009-10 is similar to that for 2008-09, but it is designed to achieve improvement in productivity by, for example, using modulus point sets so that we can get better turnaround. That is why there has been a re-profiling.

Other issues were raised that I would have liked to deal with, but I was not given the time to respond. We continue to invest in the industry and we will continue to invest for passengers.