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Rosie Cooper
I think that is a real option. I understand from the grapevine that First does not intend to brand the west coast main line “FirstGroup”, but that there is a great possibility that it will be called Horizon. We might be in that kind of territory; I am not sure.
If there is a failure to reach an agreement before 9 December, it would mean instituting a directly operated railway service on the west coast, matching the current system on the east coast. The Government’s own guidance says that 120 days are required to get that kind of operation in place, and here we are 90 days away from the end of the current west coast franchise. Will the Minister enlighten us on how that will be achieved to ensure the smooth transfer of services to the DOR, if necessary? There is much to consider and address: safety matters; employment and contracting issues; even the simple thing of setting up a website to sell tickets. What would be the associated costs of the DOR in the initial set-up and the monthly costs thereafter? Those costs would be incurred by the taxpayer because of the Government’s failure to handle the situation adequately.
We must consider the staff. Come 9 December, they will have no idea for whom they will be working—FirstGroup, the DOR, or perhaps even Virgin. As part of any transfer of a franchise, there is a responsibility for the incumbent to work with the new operator.
The Parliamentary Under-Secretary of State for Transport (Stephen Hammond)
The hon. Lady has been speculating quite a lot about the steps that the Secretary of State may or may not take as a result of a comment that he made yesterday. Let us be clear: he has a statutory duty under section 30 of the Railways Act 1993 to provide or secure the provision of services. As he made clear, that would be a temporary measure should the franchising arrangements not come into place.
Rosie Cooper
Is the Minister saying that any offer from Virgin to run the service at no cost and the best-value operation will affect his decision? I will ask him some questions about the associated costs should we set up a DOR.
I understand that two mobilisation processes are running side by side. Will the Minister tell us how that is working in practice? What are the associated risks and costs that arise from the lack of clarity? What assurances can he offer staff that their positions will be secure and the situation resolved?
The Minister has partially intimated the answer to the question that I am going to ask. If a DOR is to run the service, will it have the contract for a defined period, or will another mobilisation process be undertaken where an operator is awarded the contract? What will be the cost of that process?
One of the reasons for securing this debate is the manner in which the Department has handled the entire process, from the timing of the announcement to the consistent reluctance to answer hon. Members’ questions. We keep being told that this Government are open and transparent, and I want to believe that. We are told by the Department that it is confident in its decision on the west coast franchise. If I accept that both those statements are true, why have Transport Ministers not had the courage of their convictions and been willing to come to the House to make a statement to allow scrutiny of the process and the decision? There is a claim that one of the bidders had submitted questions to the Department seeking clarification on certain matters, but it has yet to receive a response. We are basically being told by the Department, “Trust us. Trust what we are telling you.”
The Parliamentary Under-Secretary of State for Transport (Stephen Hammond)
I congratulate the hon. Member for West Lancashire (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 the Member for South Staffordshire (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 the hon. Member for Garston and Halewood (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. The hon. Member for Halton (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 the Member for Rugby (Mark Pawsey) for continuing to press the case of Rugby rail users. I will respond to the questions put by the hon. Member for Ynys Môn (Albert Owen) later in my speech. May I also just say to my hon. Friend the Member for Lancaster and Fleetwood (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 the Member for Chelmsford (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 the Member for Morecambe and Lunesdale (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 the Member for Putney (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 the Member for Chipping Barnet (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 the Member for Runnymede and Weybridge (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.
Daniel Kawczynski
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?
Mr Hammond
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—
Mr Hammond
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 15 August, on the first possible date thereafter—3 September—my right hon. Friend the Member for Chipping Barnet took the opportunity to make a written ministerial statement to the House.
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 the hon. Member for Halton, his colleague the hon. Member for St Helens North (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.
Derek Twigg
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?
Stephen Hammond
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.
Rosie Cooper
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 the Member for Halton (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.
Stephen Hammond
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.
Mark Pawsey
Given all that we have heard in this effective debate, does the Minister agree with the majority of Government Members that the interests of rail users, taxpayers and railway staff will be served by the contract going ahead?
Stephen Hammond
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.
Philip Davies (in the Chair)
I call the hon. Member for West Lancashire (Rosie Cooper) to wind up the debate. I am sure she is aware that we are due to finish at 7.30 pm.