I congratulate my fellow Lancastrian,
I welcome the debate, and like many hon. Members with constituencies on the west coast main line, I have received e-mails about it and have seen the petition. All credit is due to the Backbench Business Committee for getting this debate under way so quickly. My concern, which is shared by others, is that regional areas such as mine depend hugely on rail connections. I will not repeat what the hon. Member for Ynys Môn said, but I share what he said about the impact on business and improvements on the west coast main line.
My confidence in the Department for Transport has increased following what has happened in the past two years, particularly in my part of the north-west. The Government have made commitment after commitment on rail in a way that we have not seen for a long time under previous Governments. They include electrification on a huge scale all the way to Blackpool and extra carriages, and that represents a total completion of the commitment on the northern hub. Before my time, people petitioned Government after Government on that. My confidence has increased, and I believe that the present Department for Transport is fully committed to those improvements and understands the impact on the regions. That is why I have a bit more confidence in the process.
My hon. Friend
Like many other hon. Members, I speak as a regular user of the west coast main line, and I have my own opinion of the Virgin Stagecoach service. I have seen an improvement in the service over the past couple of years. One of the worst problems in my part of the north-west was overcrowding, so I was pleased with the Government’s support for extra carriages, which has had an impact.
I believe that the Virgin Stagecoach service is relatively good, and many of my constituents have signed the petition, so they agree. However, I accept that it can always be improved and that we need more value for the amount of money that has gone into such commercial operations. The issue is how to weigh that up.
I have talked to FirstGroup, and its offer seems to be attractive, with extra trains, extra carriages, reduced overcrowding, smart ticketing and even reduced fares on some services. Like my hon. Friend
The biggest impact will be the through service to Blackpool, which edges through part of my constituency. Discussions are still taking place, but FirstGroup is prepared to consider the possibility of a stop at Poulton station, which is not in my constituency but is the nearest station to Fleetwood. I shall digress slightly because we have a new Transport Minister and, as his Parliamentary Private Secretary knows, he will hear from me frequently about Fleetwood, which is one of the 10 biggest towns in the country still without a direct rail connection.
The hon. Gentleman touched on Preston station, which is in my constituency. Like him, I am concerned about the developments. We have had an excellent service from Virgin, and I have been pleased with it. We have had many promises from FirstGroup, but does he agree that a major concern is whether jobs will be secure with FirstGroup if there is a change in the franchise? Clearly, the Government are intent on continuing the deal, and FirstGroup won the franchise, subject to the review. Is he, like me, worried about the job situation and ensuring that the hard-working staff continue in employment?
My neighbour in Lancashire raises a valid point about staff that had not previously been raised. There have been improvements in staff approachability and deliverability, and I hope that whoever wins the bid—whether Virgin or FirstGroup—will protect those good employees. I have seen real improvements.
Another matter that we need to be secure about if FirstGroup takes over is travel cards, about which constituents have contacted me. For many years, I have received promises, but I am still not sure about long-term use of the cards. Many senior constituents—I declare an interest because I include myself—find them extremely useful.
I will finish my contribution shortly to enable other hon. Members to speak. For me, the public relations battle has not been particularly useful. On the performance at the Transport Committee, Virgin tried to say that it provided an altruistic service, but it is, rightly and like any other commercial company, in it for money. In 2011, Virgin Rail and Stagecoach declared a dividend of around £10.5 million. That is good, because they ran a good service, but let us not hide the fact that they provide a commercial service at a profit.
I have an issue with Virgin because a year or so ago Grand Central proposed a direct service from London to Blackpool, and I understand that Virgin used its franchise to block that. Let us be under no illusions. The competition is a commercial one between two companies, and one of them is Virgin, but I call it Virgin Stagecoach because Stagecoach has a 49% stake. We must understand the situation.
When we are through the judicial review, I am sure that Ministers will provide us all with a degree of security that lessons have been learnt about private finance initiatives under the previous Government and about the way in which the upgrade on the west coast main line caused chaos for years under that same Government. Because of Ministers’ commitment to the north-west, electrification and the northern hub, I have great confidence that they are as determined as I am, as a regional Member of Parliament, to see an improved service that provides better value for my constituents. I feel that we will see that when the judicial battle is over.
At the end of the day, however, I am not interested in which company runs the service. I want a better deal for my constituents and for the Department to be able to put its hand on its heart and say that it did its best to deliver that deal and to provide security about the risks.
It is a pleasure to serve under your chairmanship, Mr Davies, and to follow another hon. Member from the north-west. I apologise for being absent during the first part of the debate; as I notified the Speaker, I was attending a funeral in my constituency earlier this afternoon.
Like many hon. Members, I travel on the west coast main line every week. Since first entering the House, I have seen the service improve greatly over the past few years, when it has been run by Virgin. Thinking back to 2005, when I was first elected, many colleagues flew to London and back rather than using the train, which is not the case now. The service takes around two hours from Stockport to Euston, and there are three trains an hour. Since the upgrade—which was, indeed, painful—to the infrastructure on the west coast main line and the introduction of Pendolino trains, passenger numbers have grown from 13 million to 31 million.
The debate this afternoon is about letting the franchise for the main line go to FirstGroup, even though there are strong concerns about that company. I shall focus on those issues in my remarks. There are worries about FirstGroup’s bid, as the company will make premium payments of £5.5 billion during the core term, based on 66 million customers being carried. That point is important; the number of passengers has increased from 13 million to 31 million, but can it increase to 66 million?
Compared with FirstGroup, Virgin Rail Group bid premium payments of £4.8 billion. That amount was based on 49 million customers being carried, which I think is much more realistic. I find it hard to see how the number of customers carried on the west coast main line can more than double, and if it does not, FirstGroup will not have the income to pay its premium payments. We have seen unrealistic bids in rail franchising that turned out to be undeliverable. After winning bids for the east coast main line franchise, Great North Eastern Railway and National Express fell short of their forecasts and were forced to hand the franchise back. There would be more chaos down the road if a similar thing happened.
I want to focus on FirstGroup’s track record, which, in Greater Manchester, is not at all positive. As a constituency MP, I have had very negative experiences of the way in which FirstGroup operates as a public transport provider in Salford and across Greater Manchester. During my first few years in the House, the company undertook a major reorganisation of routes and bus service timetables in our constituencies. As time is short, I shall refer quickly to the restrictive and extremely disruptive impact that that had on constituents. Although a different mode of transport is involved, it indicates how FirstGroup regards passengers and its customers.
For example, a bus service from Leigh to Bolton was re-routed and changed to run hourly, so that it went nowhere near the major supermarkets that many of my older constituents, in particular, wanted to visit. After the alterations, people had to change buses, cross a busy dual carriageway and walk 500 metres uphill to make the same journey that they had previously made on just one bus. At the time, many people told me that those journeys became impossible for them. FirstGroup’s changes, in spite of many representations being made to the company, had a debilitating effect on older people’s lives, chipping away at their independence. They also had a major impact on families, because many families have one member or more who commute into Manchester.
A single parent in my constituency needed to travel 10 miles into the city for her work. She had arranged her working hours completely around one of FirstGroup’s services, which the company threatened to withdraw. It was the only way that she could get to work. I found myself, as a new MP, constantly making representations, presenting petitions and putting concerns forward.
Perhaps worst of all, given the economic situation we are in, changes made by FirstGroup became a barrier to people’s ability to work. Little Hulton ward in my constituency is in the top 10% of the most deprived wards nationally. Only 53% of the people there have access to a car. There are very few local sources of employment, so constituents have to travel to find work. However, FirstGroup withdrew the bus stop for services from that ward to Manchester, even though that bus service allowed people in that deprived part of my constituency to travel to work. The withdrawal also made it much more difficult for people to search for work. I believe that FirstGroup’s attitude and its changes tied the hands of people searching for jobs by restricting their options for work to destinations that had a bus link to where they lived.
Such changes were not only a major issue five years ago; FirstGroup are still making similar alterations to services today. It has recently changed the frequency of a service to the Roe Green area of my constituency from half-hourly to hourly. When I made representations to the company on behalf of angry constituents—something I have had to do an awful lot as an MP—it responded:
“First keeps its network under constant review, which means services can be changed or reduced”.
That change was made with seven days’ notice.
Following years of bad experiences with FirstGroup as a public transport provider, I have little confidence in the company at all. That feeling is shared by many constituents, as well as more widely. I note that the 2012 bus passenger survey found that 13% of FirstGroup’s users were dissatisfied with its services, compared with only 7% dissatisfaction among Stagecoach’s customers. On value for money, 35% of FirstGroup’s users described themselves as dissatisfied, compared with a figure of 19% for Stagecoach. With similar services, therefore, FirstGroup is not doing a good job, and that has been entirely my experience of the company.
Furthermore, constituents, along with many people who have signed this petition, have expressed their concerns about the franchising process, commenting most unfavourably on their experience of rail journeys with FirstGroup. One constituent told me:
“I want to express my total dismay at First Group being granted the franchise for the North West rail route. Our regular experience of First is little short of scrabbling for a place in a cattle truck. We have actually been afraid when forced into a crowded carriage during a busy period... It would be a disaster if a passenger suffered an epileptic episode or a heart attack under such conditions. The lack of capacity makes the idea of a return journey a nightmare. We are both elderly and having to stand in a crowded carriage is not a good experience.”
In such a context, we must remember that FirstGroup has bid to more than double the number of passengers carried on the west coast main line.
My constituent continued:
“By comparison, Virgin trains have given us nothing but satisfaction. We travel to London regularly to see our family and the service is excellent.”
My constituent concluded that the franchising decision
“seems to be badly thought through—and seems to rest on a desire to increase revenue, rather than provide a service for this era”.
I wholeheartedly agree. I have had years of bad experience of FirstGroup. I cannot face the situation that I think we will find ourselves in if it takes over the efficient, effective service currently run by Virgin. I urge the Minister and the Government to think again.
Thank you, Mr Davies. The Shropshire MPs have been campaigning on a cross-party basis, together with our Welsh neighbours, on trying to secure a direct rail service for Shrewsbury. That issue is extremely important for us, bearing in mind tourism and business investment, and that is why I was delighted by the announcement that FirstGroup had been selected and would provide the direct service for Shrewsbury.
My first reaction when I heard about Virgin’s judicial review was frustration and concern, and I felt a little as though it was a case of sour grapes. Subsequently, I met representatives of FirstGroup, who stand by their figures unequivocally. I also met representatives of Virgin and held a meeting in the House of Commons that was attended by 40 colleagues, who came to interact with Virgin’s senior managers and directors. They tried to explain to us why, in their view, and from a commercial procurement perspective they felt that FirstGroup’s figures did not stack up.
Interestingly, Virgin Trains claims that it has been raising concerns about the whole procurement process with various Ministers over an extended period. Indeed, it raised the fact that it had tried to lobby Lord Adonis on this issue. It is therefore rather difficult for me to accept the flavour of some of the comments from Labour MPs that this problem has somehow developed recently. According to Virgin Trains, it had concerns at the time when Lord Adonis was in charge and it raised them with him. As I said, I invited representatives of Virgin to meet me and fellow parliamentarians, and 35 or 40 MPs came to that meeting. I have sent my right hon. Friend the Secretary of State for Transport minutes of the meeting.
I believe that immediately after the announcement, the shadow Secretary of State for Transport, Maria Eagle, whom I was watching on television, was calling for an urgent inquiry because the decision had been made when Parliament was in recess. I think that she expressed a great deal of frustration about that. However, I have been trawling through all the questions that she has submitted to the Secretary of State for Transport and the Department for Transport, and the Library has also been checking them and—she may correct me on this—I cannot find any questions from her during the past six months about the timing of the decision or the procurement process. As I said, she may correct me if I am wrong, but I feel that this is the Labour party jumping on a bandwagon.
The Government have chosen to delay the completion of the process by six months. They negotiated with Virgin an extension to the contract that it was running. Therefore, the timing has been a matter for the Government. Obviously, I was not aware that they would make the announcement in the middle of August, when Parliament was in recess. That would be a matter for the Government.
That is very strange, because I knew that the announcement was to be made in August and I am just a humble PPS. I raised this issue with my right hon. Friend the Prime Minister at Prime Minister’s questions, asking him to try to intervene to ensure that we have a direct rail service for Shrewsbury, and he clearly stated in his response on the Floor of the House in July that the result of the process would be announced in August and that he was sure that the train operators would have listened to my point about Shrewsbury. That is a matter of record during Prime Minister’s questions in July.
My hon. Friend rightly makes references to Shrewsbury. I want to associate with his comments my comment about how important a direct line to Shrewsbury is for the whole of mid-Wales. Shrewsbury is our station as well, and a direct line from Shrewsbury to Euston will make a huge difference to the ability of the people of mid-Wales to use the train. I thank him for allowing me to put that point into the debate.
I thank my hon. Friend and constituency neighbour and pay tribute to the intense work that he has done to campaign for his constituents across the border in Montgomeryshire, many of whom will, of course, rely on this service.
I had the pleasure of meeting Sir Richard Branson the other day to talk about this issue. I would like my hon. Friend the Minister to know that Virgin is very keen—I am just making observations—to talk to the Secretary of State. It claims that it has tried to engage in high-level discussions over a long period. It is very keen to meet the Secretary of State to highlight its concerns. Interestingly, the impression that I get is that the Department for Transport is not keen to meet Virgin at this time because of the judicial review. I would be grateful for an update from the Minister. What is the situation?
I think that the judicial review will cost a fortune for both sides, and I very much regret the fact that taxpayers’ money will be used in trying to defend that challenge through the courts. An awful lot of money will be made by lawyers at the expense of the companies and the Government. We need to engage with the operators on the procurement process for the future. I want us to avoid these problems in the future. I want all train operators to agree on some form of bidding or procurement process that has buy-in, so that we can try to avoid these disputes. It is highly regrettable, when constituents are looking forward to better train services, that we have somehow degenerated into this legal quagmire, which could take a great deal of time and cost a great deal of money to resolve.
We are very pleased that there will be a direct service for Shrewsbury from FirstGroup. Apparently, Virgin Trains is now claiming that its bid also included provision of a direct rail service for Shrewsbury. However, I reiterate to the Minister that one of the biggest problems that we have is the lack of parking capacity at Shrewsbury station. I intend to meet Network Rail shortly to discuss that and will be trying to secure a meeting with him on that point as well.
This subject has been so contentious during the past few weeks that we can all agree that some questions need to be answered. It is right, therefore, that we hold a debate to bring greater understanding of the issues that led to the decision to award the west coast main line franchise to FirstGroup. In discussions that I have had, I have always been clear that I remain neutral on who gets the franchise. What is important to me is that the process is transparent and understandable. Does it reassure the public and does it result in improvements and greater connectivity to the service? I am referring not just to the places that the west coast main line MPs represent, but to the areas that filter people to the stations. Most people do not have the time to study the process in great detail. I hope that this debate will help to create a greater understanding of it. The fact that we are having the debate sheds light on the process, and that is bound to make people feel more engaged.
I want to focus on the future of the west coast main line, especially given its importance to my constituency of Morecambe and Lunesdale. We are a transport corridor, both north to south and east to west. The station for the area of Carnforth has been rebuilt and has trains going through it. However, in the words of the train buffs in the area, it is the centre of the railway universe, but nothing seems to stop there. As I said, we are a transport corridor, both north to south and east to west. I appreciate that many hon. Members have one of those elements in their constituency, but we are lucky to have both. However, the lack of flexibility in the franchise over the years has made it hard for us to capitalise on that.
I have had regular meetings with Virgin, which has made the following points to me. It was hard to bring in new destinations. Even Chester was added only because the DFT put it in as a requirement. We need the train operating company—TOC for short—to be able to respond to the market.
One thing that has been positive about FirstGroup is its willingness to consider exceeding the terms of the franchise. We will see what that comes to, but the fact is that it helped it to get the franchise. I hope that in the future the franchise document serves as a starting point, as my hon. Friend Daniel Kawczynski was intimating, and that bids will offer real choice rather than being minor variations on something essentially dictated from Whitehall.
One of the big concerns in my constituency is that the DFT seemed unable to think beyond existing network capacity. What I mean is that getting the most out of Euston was widely discussed, but little thought seemed to go into adding new destinations and connections. That was particularly important because it meant that Carnforth, in my constituency, was just never considered as part of the franchise, despite vigorous local campaigns spearheaded both by me and by the local rail groups. I refer in particular to Peter Yates, who is sat here today.
Obviously, many hon. Members have local interests, and I am no different. I understand that not every station can get a west coast stop, but feeling that no new stops were considered is frustrating. I might also say at this stage that the same problem of lack of vision has led to unending difficulties in trying to stop trans-Pennine trains at Carnforth. The platforms themselves are on the west coast main line and would need refurbishment before they could be reopened.
Historically, this essentially minor detail was something that led to Carnforth being totally ignored. If the public want the station opened and if the TOC would seriously consider stopping there, why would Whitehall stand in the way, especially if that is from a background of never really bothering to consider it anyway? As I said, I had talks with Virgin. It said to me, with regard to the west coast main line train that stops for 20 minutes three times a day at the back of Carnforth station, where there is a sealed-up platform entrance, that it would consider accessing passengers on to the train if the station was upgraded. I am glad to say today that I had the same offer from, and more consideration given to me by, FirstGroup. Whatever people thought the outcome of the franchise process should have been, at least we have started the process of breaking that mindset in my area. To that end, whatever FirstGroup’s history, it seems keen to adapt to passenger need, which must be looked into. If the DFT is also willing to think outside the box, I hope that, in summing up how the franchise was awarded, we can too.
I accept that Rome was not built in a day and things do not change overnight. There are strengths and weaknesses in both Virgin and FirstGroup, but what is most important is that no company has a right to a free ride. That has been agreed. Just because companies have been good in the past, does that give them an open-ended right? If we have learned anything from this, we should insist that the DFT facilitates companies and travellers to come up with new ideas, rather than dictating from on high how services should be run. If we continue with such a process, it will be easier to tender, offer the missing flexibility and give local communities a real opportunity to campaign for better rail services, as my hon. Friend the Member for Shrewsbury and Atcham has done so admirably.
It has been a privilege to speak in this very contentious debate. Whatever the outcome, let us ensure that we make the right decision on the franchise, and that that decision is transparent and that the public know that we, in Parliament, listen and care about how we spend taxpayers’ money on the west coast main line.
I am grateful for the opportunity to speak in this important debate. As a member of the Backbench Business Committee, I welcome the first of the Monday debates, which rely on the public’s response to e-petitions.
The west coast main line is vital to many of my constituents, who, I must say, are a little perplexed, to say the least, about the whole saga of the letting of the west coast main line franchise. In the debate today, it is important for our constituents to understand that we are here, as Members of this House, without the power or jurisdiction to change anything at this point. It is important to state that the only people who can change the decision, unless the will of the Government changes after the judicial review, are the judiciary. The judicial process must be followed and Members must respect that process.
That said, there are general principles that we should discuss, but as MPs it would be a grave error to delve into the minutiae of each bid, because we have not seen the information first hand, and so are second-guessing from the claims and counter-claims of the different companies involved. The issues come under two categories: first, the franchise process itself; and, secondly, how the various bids were applied to the franchise criteria. To take the franchise process first: Virgin Trains and others, particularly Opposition Members, contend that the tendering process was flawed. I have concerns and scepticism about that argument. If flaws had been identified at the outset, before the draft invitation to tender or when the Government released it, we should have seen a robust challenge from the Opposition at that point.
I thank the shadow Minister for that comment, because it illustrates the crux of the issue. There is a lot of second-guessing and a lot of assumptions are being made. The people making those assumptions do not necessarily know the full facts. As I will come on to later in my comments, it is dangerous in any such tendering process for an MP or a Government to move the goal posts once the process has begun.
I will not give way at the moment, because other Members want to get in, but I will give the hon. Lady an opportunity in a few minutes.
There are a few questions about why Virgin or any other party did not raise such a high profile campaign at the outset. Why did we receive letters and ice lollies—I am not sure whether they were connected to this or were part of the Olympics—from Virgin Group on the train platform only once the bid was lost and Virgin had come in second? Why are Labour Members only now coming up with these concerns? They are not even giving their position on the matter. To me, it is a little like someone going to a restaurant and ordering liver, knowing that they do not like liver, and sending it back once it comes to the table and is put down in front of them. In the same way, we need to be careful what we wish for here.
For the Government’s part, it is important that once they have set a franchising process, it should be the benchmark against which the bids are judged. As I said in response to the intervention from Maria Eagle, it sets a dangerous precedent if, after the bids have come in and a tender has been let, we try to shift the goal posts to get the outcome that we were looking for. Not only would that completely undermine the tendering process, but there are obviously potential legal ramifications.
The critical question is whether the process was followed properly. If Department for Transport officials have not properly applied their own criteria to the bids, then yes, we have to acknowledge the concerns of Virgin Trains, and yes, the Government have to address any subsequent issues that might arise. At this point, that decision is a matter for the courts. It is dangerous as an MP to call for the franchise to be re-let on the basis of a petition, rather than an independent judgment to ensure that the correct procedure and process has been followed.
We should wait to see what the judicial review says, and if it is accepted by the court, the Government should deal with it appropriately at that point. If not, I will fully support the Government in signing the contract, on the basis of retaining the integrity of the tendering processes that they follow. For my constituents, the winning bidder at this point, FirstGroup, notwithstanding the legal case, is on the face of it offering the taxpayer a better deal and far better services to Nuneaton, which is what my constituents are looking for.
I congratulate Rosie Cooper on instigating the debate and congratulate everybody who has taken part so far. In the few minutes remaining, I want to stress why the debate is of great importance to my constituents.
More that 1 million people a year use Stafford railway station—Derek Twigg mentioned 650,000 at Runcorn, which is indeed an extremely important station. They are from not only the town of Stafford, but over the Shropshire border and throughout the rest of Staffordshire. The reaction over the past few years to the service offered by Virgin has been generally positive. There were clearly some problems at the end of the ’90s and in the first part of the previous decade, particularly after the Hatfield rail crash, which was obviously nothing to do with Virgin, but due to the state of the rails.
In a situation such as this the Government are really caught between a rock and a hard place. On the one hand, we can applaud the Virgin service and say that we want that or, indeed, a higher standard of service to continue. We can say that, in Virgin, to some extent we have a safe bet: it has proved itself over the past few years and is likely to continue to do so. However, if that had been the criterion, and the Government had accepted £1.4 billion less—or, in net present value, £700 million, which is perhaps a more accurate number—again, questions would have been raised about why the Government, on behalf of taxpayers, have accepted £700 million less, at net present value, simply because they liked the service that Virgin delivers, when a competitor claimed that it would deliver an equal service. The decision was not at all easy, which is why so many Members, including the instigator of this debate, have mentioned that the process is so important. We must see not only that it has been properly followed, but that it is the right process for future franchises.
I also have to say that I was glad that the final two bidders are headquartered in the UK. One bidder was Abellio, which is the Dutch railway; I think it also runs railways in Germany, and it runs Chiltern services very well. I wanted whoever runs the most important railway line in the United Kingdom to be a British-headquartered company. Notice that I say “British”, because both final bidders are based in Scotland—at least, Stagecoach and FirstGroup, if not Virgin, are.
I want to comment on the effect on staff. Clearly, a number of my constituents are affected, and it is extremely important that the transition, however it goes, should first and foremost be done with regard to staff, as well as to passengers. They have clearly been put into a state of some trepidation, although I am glad to hear the reassurances given by FirstGroup about the continuation of services. The issue is not only about the continuation of employment; it is also about how the company treats its staff. It is extremely important that staff are seen as the most valuable asset—not just on paper, but in reality.
When I met the managing director of FirstGroup, I made that quite clear. I have also said that it is extremely important that the service is maintained or improved. I was therefore glad to hear him offer to come to Stafford at least yearly, if not more frequently, to talk to passengers about the service. It is vital that, if and when the transfer goes ahead, it is not just that a service is promised at one point in time, but that, month in, month out, that promise is maintained and that passengers are able to have a direct input into the company running the service.
Clearly, it is extremely important for people in Stafford to see the maintenance of vital hourly services. However, there is also the important question of later and earlier services that I and my predecessor, David Kidney, have frequently raised with both Network Rail and Virgin. Most continental railways have much later services both from the capital to other towns and cities, and vice versa. Stafford is on the Liverpool line and, from what I have heard, I know that people in Liverpool would also like later services and ones earlier in the morning for that great city. I realise that that will be subject to the limits of the track, but with the improvements—particularly those around Norton Bridge just outside my constituency; it is in that of my hon. Friend Mr Cash—that are coming up in the next year or two, I want to see whether it is possible, with additional train paths and improvements to time, to introduce either a later or an earlier service or, indeed, both.
I suppose that, as well as the staff and the service for passengers, the Government are equally concerned about the return to the taxpayer. To me, what it is absolutely key is the confidence that the winning bidder—in this case, FirstGroup—will fulfil its commitment; that is vital. There is a penalty of some £280 million, which is clearly substantial, but that is not a deal maker or a deal breaker. Far more important, as other Members have already said, is reputation. FirstGroup is, according to its website, the largest transport group in the world. It runs Greyhound buses in the States, as well as many yellow school buses and other franchises in Britain. To me, it is absolutely beyond question that any company that walks away from a rail franchise should have no further part in the UK rail industry. That must be absolutely clear: we cannot have confidence in a bidder that fails to fulfil its commitments. I want to hear the Minister’s response on that, and whether that is part of the thinking. This is too big a deal—not only for my constituents, but for the entire country—to allow people yet again to walk away from the firm commitments that they have made.
I have two other questions for the Minister. The first refers to the process. Whatever happens in this case, will he look very closely at the process for future bids to ensure that it is watertight and cannot be subject to the kind of public disquiet and challenge that we are now having. Above all, secondly, do he and his colleagues believe the passenger figures that we have been given? To me, that is the crux of the matter. If those passenger figures are realistic and have been calculated in a way that demands respect and is robust, I see no real problem with the contract going ahead. However, we have to be convinced that the Minister and his Secretary of State, who will stand behind the decision, are themselves convinced of the figures, and I want to hear that from the Minister today.
It is a pleasure to serve under your chairmanship, Mr Davies.
I congratulate my hon. Friend Rosie Cooper on securing the debate. As has been said, more than 172,000 members of the public have signed the e-petition on the west coast main line franchising decision. This debate, which is a result of that petition and of the good offices of the Backbench Business Committee, has enabled Members to put their points. Many of them represent constituencies that are served directly or indirectly by this important strategic route.
A lot of concerns and other points have been placed on the record. From my experience as an Under-Secretary, I know that the Minister—I welcome him to his place for his first debate in the role—probably will not have enough time, even if he has the inclination, to answer all the questions. However, I am sure that he will undertake to write to those Members he does not get around to answering with the fullest answers, so that we can read what he thinks about every point made.
We have had excellent contributions, first from my hon. Friend the Member for West Lancashire, but also from Iain Stewart, my hon. Friend Derek Twigg, Mark Pawsey, my hon. Friend Albert Owen, Eric Ollerenshaw, my hon. Friend Barbara Keeley, the hon. Members for Shrewsbury and Atcham (Daniel Kawczynski), for Morecambe and Lunesdale (David Morris), for Nuneaton (Mr Jones) and, last but not least, for Stafford (Jeremy Lefroy)—I would have guessed that that was his constituency from what he said. Not surprisingly, that includes many railway towns and constituencies that very much depend on stations on the west coast main line.
Many of the points made are at the centre of the debate arising from the awarding of the franchise. If Virgin Trains had not begun the legal proceedings that are now under way, Ministers would have signed the west coast main line contract before Members had had any chance to debate the issue in the Chamber. The truth is that Ministers probably rather hoped that the issue could have been done and dusted towards the end of the summer recess, with the decision slipped out while Parliament was not sitting and attention was focused on recovering from the Olympics. That is not helpful when we are dealing with a 15-year franchise that will cover several Parliaments. It is right that parliamentarians have a chance to debate the issue, and in that respect I very much welcome this debate.
I am disappointed that the Secretary of State—I congratulate him, too, on his appointment, as I have told him in the Chamber—was so quick to rule out a review of the process that led to this contentious decision. As a new Secretary of State, he would have been perfectly entitled to take the time to read through all the documentation and to have all the meetings. Yet, last week, he told the Transport Committee:
“I am content with the way in which the Department exercised its review of that contract.”
Despite his long-standing experience as Aviation and Shipping Minister many years ago, it is difficult to envisage how he could have conducted anything but the most cursory assessment of his Department’s action in this case. He came to his conclusion very quickly after his appointment, which is a shame. When the Minister meets the Secretary of State, I urge them, notwithstanding the legal process currently under way, to reflect on whether a decision to proceed with the signing of this contract should at the very least await the report of the Transport Committee.
One of the main concerns about the decision is that it seems to be almost exclusively a bottom line one, driven as it is by a particularly high pledge of payments to Government—FirstGroup’s successful bid was £5.5 billion compared with £4.8 billion offered by the incumbent. Obviously, such payments are an important part of any decision; I do not suggest that they should not be taken into account. None the less, there have been reports of the Treasury putting pressure on the Department for Transport, which is not unheard of in my experience, to focus precisely on the headline figure offered. The Department has admitted that it has accepted the bid that offers the largest dividend payment but that also carries with it the greatest risk to deliverability.
Two specific concerns raised by hon. Members relate to the credibility of the predictions of passenger growth and the profiling of the promised revenue payments, which are back loaded towards the end of the franchise period. There is huge variance in the rival claims about the growth in passenger numbers that each company believes to be achievable during the lifetime of the franchise. Virgin’s claim of 49 million passengers compares with FirstGroup’s claim of 66 million. The growth that we have seen on the line during the past decade has been largely driven by the £9 billion upgrade of the west coast main line infrastructure and the introduction of the fleet of Pendolino trains. The investment in track and train has delivered faster and consequently more frequent services. What is likely to drive similar growth in the next period, given that we are not about to have another such upgrade?
The invitation to tender documents also set out significant challenges that will face the west coast operator during the latter period of the licence, all of which could impact on the potential to achieve significant growth in passenger numbers. The most significant is the start of work on High Speed 2 at Euston, which will see the number of platforms for services available at any one time cut from 17 to 14 in order to achieve the rebuilding of that station. Yet it is in the later years of the contract that much of the projected growth is expected to come.
If the growth in passenger numbers is not credible, the only other source of additional revenue is higher fares or a reduction in services, or at least in the quality of services. As one would expect, the successful bidder has given some welcome reassurances on all those issues. The reason that concerns remain is that the Government have included in these new franchises new flexibilities to reduce services, close ticket offices, cut passenger-facing staff and even axe CCTV from trains. Such flexibilities would not enhance service provision were they to be taken up by the successful bidder.
Passengers would welcome clarity from Government on the extent to which those new “freedoms” can be used. Only today, Ministers have announced that they have agreed to requests from London Midland to close ticket offices and reduce opening hours at others, despite months of denying our claims that such measures were being planned. Passengers are nervous about the future.
The invitation to tender also gives the successful bidder significant freedoms in respect of fares throughout the term of the contract. It promises that fares can rise by
“RPI+3%+5% in 2013 and 2014 and then by RPI+1%+5%”.
Consequently, it is possible that some routes could see ticket prices increase by up to 11% for each of the next two years and then up to 8% each year until 2026. If that is to be the only way of meeting the promised revenue payments in the event of the predicted growth not being reached, it is no wonder that many passengers are concerned.
FirstGroup rightly points out that its profile of predicted growth and revenue is very similar to Virgin’s in the first two-thirds of the franchise. However, it is the fact that the much higher growth and payments to Government occur towards the end of the franchise that is the cause of the concern. The figures are stark. The profile of proposed payments to Government increases from just £26 million in 2014 to £739 million by 2026.
I am listening carefully to the hon. Lady’s argument. What I do not understand is whether, given what we now know, she would have made a different decision from that made by the Government.
The hon. Gentleman is tempting me, but it is impossible for me to make such a decision on the very low level of information that is in the public domain. As a Minister—I was never a Minister in the DfT, though I was in many other Departments—I had to make decisions like this, but I had to hand significant information––all the documentation and all the lawyers and officials. I do not have sufficient information in this Chamber today to answer that question. I hope he will regard my answer not as evasive but as plain common sense.
It is only in the final three to four years of the 13-year contract that the premium payments promised by FirstGroup exceed those promised by Virgin. The profile of payments goes steeply upwards from £26 million in 2014 to £739 million in 2026. The fear is that that builds in a clear incentive for the bidder to walk away from the contract before the payments are due, not least if the predicted revenue that is to fund the process does not start to appear as expected over the course of the contract and if the predictions turn out to be optimistic. FirstGroup states:
“Any suggestion we may walk away from our West Coast bid is misplaced. We would face considerable damage to our reputation and credibility if we did—and doing so would significantly impact our ability to win further franchises.”
I welcome that reassurance and I am sure that it is made in good faith, but I do not believe that, under the current Government’s approach to franchising, the consequences are as obvious.
In the past year, FirstGroup has exercised a right not to complete the maximum possible length of the contract it holds to deliver services on the Great Western main line, thus avoiding more than £800 million in dividend payments to the Government. I appreciate that FirstGroup would robustly state that that is not the same as walking away from a contract, but what is the same is that it was possible because the promised premium payments were highest during the final three years of the contract. Yet FirstGroup has secured the west coast franchise and it has been shortlisted again for the Great Western contract, so there are no consequences there for what is in effect gaming the system.
I do not accept that it is obvious that FirstGroup has cause to feel that it will suffer any damage, let alone find it harder to win future contracts, from terminating a contract early. Indeed, under Governments of both persuasions—I perhaps need to say under Governments of all persuasions, given that we have a coalition Government at present—we have not seen consequences follow from gaming the system or from failing to meet obligations. Companies have routinely been shortlisted again for franchises and have won franchises even though they have handed back keys or gamed the system to avoid making payments back to the taxpayer.
It is also said that the penalty for handing back the keys early is significant; at £190 million in the case of FirstGroup, it certainly sounds significant. However, put in the context of just one year’s payment to Government being £739 million, walking away does not seem quite such a bad deal if one is focused purely on financial considerations.
If these concerns were just being raised by the losing bidder, we might put it down to sour grapes; indeed, I think that was a phrase that one Government Member used. Clearly there is an element of that driving the judicial review and the challenge that we are now seeing. However, the fact is that many respected people across the industry are dubious about whether the bid that FirstGroup has succeeded with is viable.
Perhaps the Minister would be willing to listen to George Muir, who was the director general of the Association of Train Operating Companies between 1999 and 2008. Writing in Passenger Transport magazine, which is on my reading list, he starkly sets out the reason why there is widespread incredulity in the industry about this contract. He says:
“A 10.4% growth rate produces, in the year 2025/26, revenue of £2,982m out of which is to be paid premium payments to the government £1,696m…and profit to FirstGroup of £149m. Put it this way, in 13 years’ time this fine franchise is to have a profit margin of 62%. Wow! Surreal.
Put it another way, the premium in year 2025/26 is £1,140m in today’s money…and this to be paid by a business with passenger revenue last year of just £824m.
Well, if you believe this, you will believe anything.”
He warns that the Department for Transport
“cannot possibly believe they will get over £1bn, in today’s money, for four years on the trot from FirstGroup. They don’t. It’s a farce.”
Those are not my words, but those of George Muir, who was the director general of ATOC for many years and understands the industry. He is clear where the blame lies—it is in the changes that the Government have explicitly made to franchising since the election. He says:
“The problem goes back to Theresa Villiers’ franchise reform white paper of a couple of years’ ago, which she had been scribbling away in opposition. It reminds me of Andrew Lansley’s NHS reform, crackpot ideas in opposition.”
I stress that those are not my words; I am quoting George Muir.
The Government are right to prepare contingency plans if the legal challenge is not settled by the
Of course, the Government are also only days away from beginning the tendering process for the east coast main line. The taxpayer received a dividend of £187.7 million from the east coast line in the past year and £170.7 million in the year before that. From next year, that money will go either to private shareholders or to the state railway of Germany if it was to win the contract; it has made a bid for the Great Western contract. I do not believe that the east coast line has been given the stability and certainty to enable us to judge whether a not-for-dividend model could work in the longer term more widely across the rail system. Therefore, I hope that the Minister will be willing to consider our proposal that the east coast line continues to be run as a not-for-dividend publicly run comparator to some of the other companies that are running franchises.
In conclusion, let me be very clear that this issue is not about siding with any particular company, and I do not think that today’s debate has been about that. Having said that, I understand Virgin Trains’ frustration, which it frequently expresses, that it has been runner-up twice to successful bids on the east coast franchise and that the successful companies—Great North Eastern Railway and National Express—later failed to meet their contractual obligations. It is this unfortunate history of franchise contracts being brought to an early end, at least in part because of over-ambitious payment promises that later proved impossible to meet, that has sparked fears that history may be repeating itself. I hope that the Minister wants to ensure that lessons have been learned and I also hope that he will now agree that, even if it becomes legally permissible to do so, he will not proceed further with this contract until there is a chance for the House to receive and consider the forthcoming report of the Transport Committee on this issue.
Further to that point of order, Mr Davies. If that is the case, surely somebody has to devise a method by which there can be a vote? Given that this is a new procedure that is going into unknown territory, I would think that the House authorities should be looking at that position, as to whether or not a vote is allowed on a very important subject, as this subject is.
I congratulate Rosie Cooper on securing this debate. It is obviously an important debate and it is, of course, historic; as she will recognise, this is the first debate held on a Monday afternoon in Westminster Hall under these auspices. I have joy in responding to it on behalf of the Government—I am delighted to do so—but I would probably not have quite the same joy if my hon. Friend Gavin Williamson suggested that I might be here every Monday afternoon from 4.30 pm to 7.30 pm. Mr Davies, it is also a pleasure to serve under your chairmanship.
We have had a fascinating debate. I thank a number of hon. Members, including Maria Eagle, for their kind comments and for the questions that they have put. I will attempt to answer those questions. Of course, some of them tempt me to go down a line that, if I were to take it, would probably mean I had the shortest ministerial career in history, and I do not propose to do that this afternoon. However, where possible, I will be as helpful as I can. Where I can, and at the right time, I will answer some questions now, and where I can, and at the right time, we will look at perhaps responding more fully in writing.
It has been a very interesting debate. Derek Twigg said that all politics is local, and that has certainly been proved by a number of the contributions today, including his own: I listened very carefully to the comments about Runcorn, the number of passengers and the more frequent service. I remember well the cold morning in Rugby; well done to my hon. Friend Mark Pawsey for continuing to press the case of Rugby rail users. I will respond to the questions put by Albert Owen later in my speech. May I also just say to my hon. Friend Eric Ollerenshaw that, as I understand it, he will be able to use his rail cards on off-peak journeys in future? He also made a number of representations and I am delighted to tell him that I am sure the Minister of State, my right hon. Friend Mr Burns, will be listening to his concerns avidly. As usual, my hon. Friends the Members for Shrewsbury and Atcham (Daniel Kawczynski) and for Montgomeryshire (Glyn Davies) made the case on behalf of their constituents powerfully. And my hon. Friend David Morris wanted more than a “Brief Encounter” with the west coast main line at Carnforth; I understand that point entirely. There were a number of other contributions that I wish to pick up as we go through.
As the hon. Member for West Lancashire said, the petition had more than 172,000 signatures. Beyond any question, the franchise process is of genuine public interest, and quite rightly so. After all, whether someone is a fare payer or a taxpayer, they have a stake in our railway networks and an interest in ensuring that they provide real value for money, as well as services that are accessible, reliable and safe. The Government clearly want the railways to succeed in that regard, which is why we are investing more than £18 billion in the railways over the spending review period.
It is important to mention at the start the Government’s objectives for the railways, which were set out in the rail Command Paper this May by my right hon. Friend Justine Greening, who was then the Secretary of State. As I am sure a number of hon. Members will remember, it was subject to extensive debate on the Floor of the House. Our aim as a Government is to work closely with the industry to ensure that our railways are financially sustainable and consumer-focused. That approach is essential if we are to ease the burden on the taxpayer and improve value for money for fare payers. We are also building on the work done by my right hon. Friend Mrs Villiers, which looked specifically at reforming rail franchising.
I note the remarks made by the hon. Member for Garston and Halewood about George Muir. I remember discussing with George his comments on rail franchising. He was in a minority of one at the time, and I think he probably remains in a minority of one, certainly within the Association of Train Operating Companies community.
On rail franchising, the Government set out three key principles in January 2011. First, we believe that franchises should be longer, expanding the opportunity for operators to invest in improvements, as well as enabling them to strengthen their working relationships with Network Rail and other key stakeholders. Secondly, we set out that we should see demanding outcomes for operators to deliver, but give them more flexibility to decide how best to achieve those outcomes. Finally, we said that the specifics of each franchise would be decided on a case-by-case basis.
The procurement of the new inter-city west coast franchise was, as everyone would expect, a thorough and extensive process, which a number of hon. Members have stated. The process was transparent to both Parliament and the public. The first public consultation was held 18 months ago. In May 2011, the then Secretary of State, my right hon. Friend Mr Hammond, came to the House and gave an updated timetable, including the extension that was partly announced to ensure the success of the Olympics. He provided an updated timetable for the procurement, alongside a draft invitation to tender.
There was then a second public consultation on the train service specification. All bidders were explicitly encouraged to submit bids that contained proposals that reflected consultation with stakeholder groups, including local groups along the route of the franchise, many of which were spoken about today, and Passenger Focus. Following that consultation, the formal ITT was launched and placed on the Department’s website this January. As is now known, following that, four bids for the franchise were received: from Abellio; FirstGroup; a joint venture between SNCF and Keolis; and Virgin Trains, a joint venture between Virgin and Stagecoach.
The Minister is talking about timetables. Does he agree that the date that the bids would be announced had been well known for a considerable time?
My hon. Friend is right to make that point. As I said, my right hon. Friend the Member for Runnymede and Weybridge had made the announcement in May 2011 and set out the timetable. It was apparent from that time when the announcement of the bids would be.
A thorough examination of the bids was carried out over nearly three months. As soon as the winning bidder was identified, in accordance with existing practice and the published timetable, the Department ensured that announcements were made to the London stock exchange that it intended to award the inter-city west coast franchise to First West Coast Ltd, a subsidiary of First.
A number of Members talked about parliamentary scrutiny today. It is not unusual that the announcement was made during a recess. On two occasions, the previous Government made announcements to the market, quite properly, on days when the House of Commons was not sitting. To suggest that that is a new way of doing something—
The hon. Lady comments from a sedentary position. She is quite right; she did not suggest that, but a number of her colleagues did. It is not a new way of doing things, provided that as soon as Ministers return to the House, they make a written ministerial statement. Following the announcement on
After the announcement, the Department received a legal challenge to the procurement from Virgin Trains Ltd, which had bid unsuccessfully. I intend to try to answer as many questions as possible, but I do not need to be reminded—I am sure that hon. Members do not either—that in cases where there is a legal challenge, it is difficult to answer all the questions that may be asked. As I said earlier, if I appear reticent, it is not any wish not to be transparent, but simply that when matters are subject to the judicial process, it is impossible to make broader comment.
It is right and proper, and the Department believes so, that our choices regarding new franchises and value for money for the taxpayer are subject to scrutiny by Parliament. However, there is a right and proper time for that to take place.
Many hon. Members paid tributes, quite rightly, to Virgin Group. Sir Richard Branson and Virgin have made an undeniable and tremendous contribution to UK rail. Let me try to assure hon. Members that the winning bid offers significant benefits to passengers. First West Coast Ltd has contracted to introduce 11 new electric trains of six carriages from December 2016. That will mean an extra 12,000 seats a day for passengers. First has also committed to retaining and fully refurbishing the trains already in the fleet.
In the speech by Mr Watts, who is not currently in his place, made a point about the leasing of trains. The short answer to his question is that commitment to lease trains is in the franchise agreement. To remove any part of the train fleet, the Secretary of State’s consent is required. I hope that that clears up that issue.
Subject to the approval of the Office of Rail Regulation, First will take advantage of the increased flexibility in the contract to introduce a number of new services from London Euston to Blackpool, Bolton, Telford Central and Shrewsbury. It will also introduce ITSO-based smart ticketing, which will benefit users across the country, bringing the sort of freedom that we have already seen in London with the Oyster system. It will not have escaped the attention of hon. Members that in its bid, alongside that investment, First West Coast Ltd has committed to reduce standard anytime fares by on average about 15% over the first two years.
There have been a number of questions on staff and morale. I reassure hon. Members that, as with previous franchise transfers, existing employees, including drivers, guards and back-office staff assigned to the part of the organisation transferred to First West Coast Ltd, will be protected by TUPE regulations. FirstGroup has also given a commitment to continued investment in front-line staff.
I reassure the hon. Member for Ynys Môn that all bids were assessed independently for deliverability, and all bids were assessed as deliverable. The Department believes that the winning bid is deliverable, provides value for money for taxpayers and passengers, and capitalises on the £9 billion already invested in the west coast main line and the £18 billion the Government are continuing to invest.
None the less, as the hon. Member for Garston and Halewood said, the Government can learn lessons from the mistakes of previous Governments on handing back keys and the failure of certain people on the east coast main line to deliver. There have been several comments on the procurement process, and we are acutely aware that we need to ensure we learn lessons from past franchise failures. In designing the franchise, some of those comments and recommendations, particularly the Public Accounts Committee’s recommendations, following the failure of the east coast main line have been taken into account. We therefore required First West Coast Ltd to provide a third party-backed guarantee, the largest guarantee ever required.
We have also removed the cap and collar system that was in place for the east coast franchise and introduced a GDP support mechanism—a question was asked about that. Indeed, the mechanism supports the Government because there is protection whether GDP goes up or down. I will happily write to the hon. Member for Halton with the full details of that mechanism when I am able to do so.
I do not want to pursue the matter for too long, because time is short. If the Government’s projections for GDP, which the bids were based on, is low—the Minister has not said whether one bidder put in a lower projection, despite the Government’s figures—will the Government have to give money back to the successful bidder?
My understanding of the GDP process currently in place is that there would be either payments back to the Government or payments from the Government. I will write to the hon. Gentleman about that.
I make it clear that GDP was only one of the external factors; it was not the only external factor. To ensure that the Government are further protected, a profit share mechanism has also been introduced. The mechanism will enable the taxpayer to benefit from a share in any super profits that the franchise generates while continuing to provide an incentive for the franchisee to outperform.
The hon. Member for West Lancashire asked a number of questions about the Government’s preparations, should the franchise end without a new franchisee being in place. I make it clear that the existing contractor has a contractual obligation to support handover activities. On the 120 days to which she referred, a departmental mobilisation manual is being used by both parties in every franchise to ensure that a franchise handover process is in place, and the activities and time scales required to effect a transfer are set out. The Government are confident that the Department is putting in place the right contingencies in the time scale, should the process not be completed. We expect the legal issues to be resolved so that contingency plans will not be necessary.
We have very little time, and I implore the Minister to answer my questions on the detail of the guarantee and on the contract negotiations. I also implore him to answer the question asked by my hon. Friend Derek Twigg. They are important and pertinent questions that go to the heart of protecting taxpayers’ money, and, sadly, the Minister has not answered any of them. I know we have gone round the houses, but the Minister has not answered the questions at the heart of the debate.
I am sure the hon. Lady has listened to my contribution, and I am sure she has taken notes, but I have made it clear that, where I am able to answer questions because of the ongoing judicial process, I have answered them. Equally, I have given a guarantee that after the judicial process, where the Department is able to answer those questions, we will provide a written answer. As I am sure she knows, I cannot make a statement that would prejudice the judicial process.
The Department is confident that we have taken the right decision in the interests of taxpayers and passengers. We expect to sign the contract soon, but we intend to defend the judicial process robustly. Of course, as I said at the outset, it is right that Parliament should scrutinise the franchising process, but there is a right time.
I make it clear that this is not a political decision; it is a commercial decision taken in line with the franchise and procurement processes set out in the reforms of the then Secretary of State, my right hon. Friend the Member for Runnymede and Weybridge. There may be a desire for more extensive parliamentary scrutiny of the process and the bids, but commenting too deeply and changing our decision now could fundamentally undermine any future Government competition, and it would be wholly inappropriate for me to do so.
I guarantee that my ministerial colleagues and I will continue to keep the House and the Transport Committee updated on developments, subject to any constraints of legal or commercial privilege.
Very quickly, I thank you for your stewardship of the second part of the debate, Mr Davies.
I hoped to be able to respond more extensively, but in the half a minute that is left to me, I sum up by telling the Minister that I believe a bird in the hand is worth two in the bush. For the record, I do not believe in the tooth fairy, either.
Question put and agreed to.
That this House has considered the e-petition from Ross McKillop and others relating to the West Coast Mainline franchise decision.