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Andy McDonald (Middlesbrough) (Lab)
It is a great privilege to serve under your chairmanship, Dr McCrea, in this vital debate on the future of the east coast main line. I am sure you will keep us on track and on time. Debates between hon. Members on nationalisation and democratic control of industry often stall due to an obstinate adherence to our political prejudices. All of us, on both sides of the House, have political prejudices about the relative merits of private and national ownership of basic industries. At the outset, I invite Members to disregard all preconceived theories and consider the future of the east coast main line objectively, as a technical problem with hard facts.
According to a written answer from the then Minister of State for Transport in 1996, the total gross proceeds to the taxpayer from selling off our rail infrastructure were £5.28 billion. Adjusted for inflation, that would be slightly more than £8 billion today—equivalent to only the past two years of taxpayer subsidy. According to the Office of Rail Regulation, the east coast main line is the only line in the country that comes close to paying for itself. Government subsidy makes up only 1% of East Coast’s income, against an industry average of 32%. The total cost to the Exchequer of the east coast main line was only £9 million in 2011-12; by comparison, Northern Rail, jointly owned by Serco and the Dutch Government, cost the taxpayer £685 million. Since the UK Government put the franchise under the publicly owned Directly Operated Railways, financial stability has been restored. The total premium, plus operating profit, amounted to £647.6 million in the four years to 31 March 2013; that is more in both cash and real terms than any previous franchise on the line, and all that money is available for reinvestment in our railway network.
East Coast has seen revenue growth of 9% over three full years, with 4.3% growth in 2012-13. The Minister of State described that growth to the Select Committee on Transport as a “plateau”. One wonders what word he would use to describe the Chancellor’s performance over the same period.
The Minister of State, Department for Transport (Mr Simon Burns)
Very good.
Andy McDonald
Thank you very much.
Journey numbers have grown from 18.1 million in 2009-10 to 19.1 million in 2012-13. An estimated £800 million will have been generated by the franchise for the taxpayer by April 2014. All that has resulted in a £40 million surplus: money that would otherwise be providing the profit to shareholders, if the line were privatised, and which East Coast has reinvested in its greatest asset, its staff. The fruits of that investment are clear to see: employee engagement is now at an all-time high of 71%—up from 66% in 2011 and 62% in 2010—which is the highest score of the eight train operators that is currently available. The average number of sick days has fallen from 14 to nine. Investors in People accreditation has risen from “standard” in 2009 to “silver” in 2012. Impressively, East Coast was the only train company to have achieved “Britain’s top employer” status in 2012 and 2013. Most importantly, on-board passenger-attributed accidents have reduced by 20% and staff accidents by 23% in the past year.
East Coast has also introduced a new timetable—the biggest change on the east coast main line in 20 years—seamlessly launched in May 2011. It introduced 117 extra services a week; a four-hour Flying Scotsman express from Edinburgh to London, calling only at Newcastle; and new direct services between London and Lincoln and Harrogate, and I hope that it will soon restore the link to Middlesbrough, the largest conurbation in the country without a direct link to the capital.
Karl MᶜCartney (Lincoln) (Con)
Does the hon. Gentleman not see that it is a shame that the seven daily services that Lincoln was promised ended up being only one service?
Andy McDonald
I am not sure that I have picked up on that seven turning into one, but I will mention the performance issues, so an answer may emerge as we proceed.
Mr Stephen Hepburn (Jarrow) (Lab)
My hon. Friend is making a persuasive case. The east coast main line has flourished since it came back into public ownership. This is an example of privatisation for privatisation’s sake. The only people who will benefit from it are that small number of Tory pals—those profiteers who will bung their pockets with taxpayers’ money.
Andy McDonald
I thank my hon. Friend. He makes a valid point, and I hope to return to it.
Andy McDonald
If I can make some progress, I will come back to the hon. and learned Gentleman.
I have laid out reforms that it might be thought would cause disruption. In oral evidence to members of the Transport Committee on 24 April this year, the Minister made the following comment about punctuality on the east coast main line:
“If you look at the latest monthly figures for reliability and punctuality, it is the worst of the 19 franchises.”
Were that the whole story, it would be extremely concerning, but East Coast during the latter half of 2012 achieved the best train punctuality on the east coast franchise since records began in 1999. In recent months, some challenging external circumstances, such as the weather and overhead wire problems on the southern part of the route, affected performance, and East Coast is implementing a joint action plan with Network Rail to ensure that operational performance on the line returns to the record levels achieved in the autumn. The results the Minister cited are completely atypical. One has only to look at Network Rail’s moving annual average for punctuality, which puts the east coast main line in the top three of the seven long-distance franchises, to see that. The encouraging performance improvements in period 1 and to date in period 2 of this year are an early reflection of that collaboration with Network Rail. The latest available figures show that nine out of every 10 East Coast trains were on time, according to the industry’s public performance measure—up considerably on the previous quarter and up year on year.
Alex Cunningham (Stockton North) (Lab)
I am grateful to my hon. Friend and near neighbour on Teesside for giving way and I congratulate him on securing the debate. Does he have any idea why the new managers who were put in by the state to run the east coast main line have done so well? They are using the same people, the same equipment and the same everything else as the private company, National Express, which failed miserably, reneged on its contract and walked away.
Andy McDonald
I wish I could put my finger on it. My hon. Friend highlights a key issue, but it is useful to note that the way East Coast operates is a good comparator for the other services operating in this country.
The improvements are reflected in two key metrics. First, under public ownership East Coast achieved a record-breaking 92% overall customer satisfaction rating in the autumn 2012 national passenger survey conducted by the independent transport watchdog, Passenger Focus. That is the highest score on the franchise since the survey was launched in autumn 1999. It is 5% ahead of the score achieved in 2011 and three percentage points higher than the 89% average for all long-distance train operators. Indeed, in 2012, East Coast received the highest customer satisfaction score of any long-distance franchise operator.
Secondly, complaints stand at a rate of 150 per 100,000 journeys according to the Office of Rail Regulation’s latest available figures—down considerably on the previous quarter and back to the level prior to the disruption from the end of last year. Although that figure is relatively high compared with those of other train operating companies, it is just one third of where it stood when the east coast main line was in private ownership in 2007-08. A higher-than-average complainant rate might be due, in part, to the nature of the line regardless of its ownership, but since it is the publicly owned and publicly operated London Overground that has the lowest rate, at just two complaints per 100,000 journeys, it is difficult to claim a direct relationship between public ownership and complaints.
In addition, perhaps because of the unprecedented investment in staff that I have mentioned, there has been a 78% reduction in threats to staff in the past year. The apparent contradiction between a rise in customer satisfaction and a relatively high complaint rate dissolves entirely when we look at the Office of Rail Regulation’s breakdown of the reasons behind the grievances. Complaints about train service performance are down, year on year, from 38% to 29%, but what are on the increase and make up more than a fifth of all complaints are criticisms of the quality of the trains themselves. That comes directly from the fact that the rolling stock, which East Coast inherited from National Express, is eight years older than the industry average, at 27 years as opposed to 19.
That East Coast has achieved better customer satisfaction than any of its long-distance rivals, while running the oldest rolling stock of any franchise bar Merseyrail Electrics, is a testament to the workers and the management, and that the trains are still running at all after 30 years or more of continuous use is a testament to the brilliance of the engineers of British Rail Engineering Ltd who designed them and the factory workers of the north of England who built them.
Some elements of on-train comfort have also seen a marked increase. Of particular interest to certain hon. Members will be the new first-class complimentary at-seat food and drinks service, which has reversed historical losses of £20 million per annum and which contributed to a 21% rise in the number of first-class journeys in 2011-12, compared with the preceding 12 months. East Coast now serves a million meals per annum, which is a tenfold increase on the previous service, and its first class has certainly looked very nice on the occasions when I have walked through it.
Sheila Gilmore (Edinburgh East) (Lab)
I am very pleased that my hon. Friend succeeded in securing this debate. The first-class service, which, as MPs, we do not of course use, is important because of the environment. For many business travellers, it can make a considerable difference to their choice between flying—certainly from Scotland—and travelling by train. If we want to make the modal shift that we need for our environment, we need a service that will attract that kind of business traveller.
Andy McDonald
I agree entirely with my hon. Friend. The carbon footprint that we all imprint upon this planet is a vital issue, and she makes that point eloquently.
Ministers have admitted in the House of Commons that new investment in both rail infrastructure and new rolling stock on the east coast will come through taxpayer-funded support and not from franchisees. Funding for the 2014-19 upgrade of the east coast main line will be delivered through the Office of Rail Regulation approving a £240 million increase in the value of Network Rail’s regulatory access base. Regardless of whether the refranchising of the east coast main line goes ahead, the public, through Network Rail, will still be paying for the track. We will still be paying for the rolling stock, and we will still be paying for any upgrades, extensions or electrification that might ensue. None of the upgrades is dependent on whether the trains going along the track are painted Virgin red or Stagecoach orange. There is no deadline by which the franchise must take place, except, of course, the next election.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
I congratulate the hon. Gentleman on bringing this matter forward. The Labour Government set a deadline for re-privatising the line, and even when they were unable to meet it, they continued to have it as their policy that the line should be re-privatised. Has the Labour party changed that policy?
Andy McDonald
I thank the right hon. Gentleman for his intervention. We are where we are, and we have to look at the matter on the facts of this specific franchise, examining it carefully to see whether it is working, right at this moment. Comments have been made in the context of reports that had only half the story, so when we have better information we should read it, consider it and judge accordingly, but I hear what the right hon. Gentleman says.
It is absurd for the Government to be pressing ahead with another franchise proposal when the previous franchise offering, of the west coast main line, was such a debacle and will have cost the taxpayer £100 million by the time it is resolved.
Karl MᶜCartney
I thank the hon. Gentleman for giving way to me once again, and I take this opportunity to congratulate him on securing the debate and on the fact that so many of his colleagues—from both sides of the House—who have an interest in the franchise are present. Thank you, Dr McCrea, for chairing—I forgot to say that the first time I intervened.
The Labour Government before 2010—in fact, before 2005—acted perhaps with undue haste, in desperately getting back into the private sector the southern franchise that had been taken off Connex. They made many mistakes at that time. Does the hon. Gentleman not feel that this Government should be credited with ensuring that such mistakes are not made in re-awarding this franchise to the private sector?
Andy McDonald
I am grateful to the hon. Gentleman for highlighting the weaknesses of the entire structure of these private franchises. He does so eloquently.
A serious overhaul of the franchise process is necessary. The Minister may well claim that, following the Brown review, a new process is indeed in place. In that case, one has to wonder why existing private sector franchises, which would be the ideal testing ground for the process, are instead receiving extensions of up to 50 months. The Government’s haste to extricate themselves from running trains is all the more baffling when more than half the rail franchises in Britain are to some extent state-controlled already; it is just not the British state that is in control.
Andy McDonald
I will in a moment.
Putting aside East Coast and London Overground, there are 17 franchises in the UK, of which 10 are operated, to a greater or lesser extent, by the Governments of our European neighbours. Chiltern, CrossCountry and Wales & Borders franchises are operated by Arriva—a wholly owned subsidiary of Deutsche Bahn, the majority shareholder of which is the German Government. Greater Anglia is run by Abellio, the international arm of the Dutch Government’s rail operator Nederlandse Spoorwegen, which also runs Merseyrail Electrics and the aforementioned Northern franchise in partnership with Serco. The South Eastern, Southern and West Midlands franchises appear at first sight to be privately run and are operated by Govia—a joint venture between Go-Ahead Group and Keolis. Keolis, the largest private sector French transport group, is, however, majority owned by SNCF, the French state rail operator. Keolis also runs TransPennine Express, in collaboration with First Group. Are hon. Members, particularly those of a Eurosceptic bent, content that when they pay an extortionate sum for a ticket on Southern, South Eastern, TransPennine or West Midlands trains, their money is on the TGV to Monsieur Hollande? Why does this Government believe that other countries can run our rail services, but that Britain cannot?
The remaining seven franchises are hardly a model of laissez-faire, split as they are between three and a half private companies: Stagecoach, National Express, FirstGroup, and Virgin Trains, which is half-owned by its alleged competitor Stagecoach. New entrants cannot possibly afford to take on these mammoth projects and the risks that may accrue. The original 25 franchises offered in 1995 have shrunk to just 17 today, following mergers, making the barriers even higher.
The previous Conservative Government themselves recognised the barriers to new entrants when they banned British Rail from bidding for franchises in the wake of privatisation. The then Minister for Public Transport, now Baron Freeman, said:
“I am concerned that it would be very difficult to have a fair and equal competition if British Rail was a bidder.”—[Official Report, 26 July 1993; Vol. 229, c. 578W.]
The current debate is about not a free market versus a state monopoly, but whether a public asset, for which the taxpayer will remain liable, should be managed by the British Government, a foreign Government or one of a handful of private companies that are large enough to meet the criteria of the bid.
Such companies will always underestimate costs and overestimate revenue when they bid for contracts, because they know that, if they do not, their competitors will win the bid. They are looking to their next set of quarterly reports and their next shareholder annual general meeting; Governments are looking to the next century. The truth is that no Government can afford to let the rail network go to rack and ruin. The state will always have to intervene to protect that vital national asset and the lives of its citizens. As the saying goes, it is too big to fail.
Train operating companies know that, and they also know that if it all goes wrong, the taxpayer will be left holding the line. Christopher Garnett, the former chief executive of the train operator Great North Eastern Railway—the first franchise operators of the east coast main line—said during the failure of that company:
“The market will self-destruct as bidders bid to win on ever-tighter margins. When it goes wrong, it’s going to come right back to the Department for Transport.”
Since privatisation in 1996, both companies that have run inter-city services on the east coast have failed or walked away from the franchise mid-contract. Passengers will rightly be worried that history might repeat itself under a re-privatised service.
Many of those who are now Government Members once supported keeping the east coast main line in public hands. Before he held his current office, the Deputy Prime Minister said in 2009:
“Our railways should not be a plaything for private companies and we think giving it the stability of public ownership during the next franchise period would be much better”.
He added that
“it’s not an industry, it’s a public service. Our rail services are public services.”
If you will forgive the phrase, Dr McCrea, “I agree with Nick,” but as is ever the case nowadays, we are unsure whether the Deputy Prime Minister agrees with himself.
As many hon. Members whose constituents have lobbied against High Speed 2 know, railways do not affect just those whom the Government call “customers”. Stan Higgins, the chief executive of the North East of England Process Industry Cluster—the hon. Member for Redcar (Ian Swales) knows that confederation of the leading process businesses in our region well—told me the view of his members:
“We’re running railways for profit, as opposed to as a service to our industries and our communities.”
By the franchising process, the public are being disfranchised.
I want to quote the Conservative Secretary of State for Transport who moved the Second Reading of the Railways Bill that carved up and sold off British Rail. He said that that company had
“too little responsiveness to customers’ needs, whether passenger or freight; no real competition; and too little diversity and innovation…; an insufficiently sharp awareness on the part of employees that their success depends on satisfying the customer—indeed, on attracting more customers; and an instinctive tendency to ask for more taxpayers’ subsidy and to feel that public subsidy will always be there as a crutch whenever things look difficult.”—[Official Report, 2 February 1993; Vol. 218, c. 156.]
Those were the reasons for privatisation, and I will look at them one by one. East Coast has increased services in response to customer demand. It has successfully increased revenue in the face of competition from not only road transport, but domestic flights that are far cheaper than anything faced by British Rail. It has innovated with new services for first-class carriages and sold more than 1 million e-tickets. It has the highest rates of customer satisfaction of any long-distance franchise, and staff who are engaged with the company and with passengers. A million more journeys take place on East Coast now than when the franchise became public. Far from crying for subsidy, it makes the lowest demands on the public purse of any rail franchise.
Mr George Strauss, the Parliamentary Secretary to the Ministry of Transport at the time of nationalisation in 1946, said:
“I am sure that Parliament would not tolerate paying a permanent subsidy to a particular section of privately owned industry when, plainly, that industry as a whole, if properly organised, could be self-supporting.”—[Official Report, 18 December 1946; Vol. 431, c. 1975.]
The choice before us is between an unending subsidy to private interests and continued public ownership of a line that, in public hands, is 99% self-supporting. The question that I must ask the Government, and Members who oppose keeping the line in the hands of those who have managed it so well, is whether any evidence would get them to drop their prejudice that private is always better than public.
Dr William McCrea (in the Chair)
Order. I am endeavouring to be helpful, given that well over 20 Back Benchers are in the Chamber. Ten Members have put down their names to speak and we have only a short period, so with the authority that has been given me, I must impose a time limit of four minutes, which I hope will allow them all to speak.
Martin Vickers (Cleethorpes) (Con)
It is a pleasure to serve under your chairmanship, Dr McCrea. I congratulate the hon. Member for Middlesbrough (Andy McDonald) on securing this useful debate. We can sing the praises of East Coast—I am happy to do so as someone who uses its services every week; it does not provide a bad service at all—but the idea that this is some way towards being a golden age compared with GNER, which first took over the line and provided an excellent service, is a myth.
As I have said, I am happy to congratulate East Coast, which gets us here every week, usually on time. Passengers want a clean, reliable, safe and reasonably priced service. When they sit back in their seat, they do not care whether the track is operated by Railtrack, Network Rail or a private operator, or whether their seat is in a private coach or a publicly owned one.
Grahame M. Morris (Easington) (Lab)
To set the record straight, is it not the case that both GNER and National Express had to hand back the franchise, but this nationalised, directly operated rail service has handed £602 million back to the Treasury?
Martin Vickers
The fact that there is one failure—whether in the private sector, the public sector or wherever—does not automatically indicate a flaw in the system. The hon. Member for Jarrow (Mr Hepburn) said that the change would be privatisation for privatisation’s sake, but the opposite is equally true: do we want nationalisation for nationalisation’s sake? That is certainly what Opposition Members seem to want.
In his opening remarks, the hon. Member for Middlesbrough referred to Northern Rail, but to compare it with East Coast is to compare apples with oranges—a regional operator with an inter-city one. Northern Rail provides a perfectly adequate service in my constituency, between Cleethorpes and Barton-on-Humber, but it does not serve such great metropolises as York, Darlington and Doncaster. The station at Thornton Abbey—in a beautiful, idyllic setting—actually serves two farms and an ancient ruin, and I think it had 13 passengers during 2009. East Coast is fine; it provides a perfectly adequate service, but it does not dash up and down between Newcastle and King’s Cross, so there is no comparison whatever.
I am happy to criticise East Coast when it makes mistakes, which it did when it redesigned its timetable last year.
Stephen Phillips
On the timetable, does my hon. Friend agree that although the increased frequency and number of trains is welcome, the lack of joined-up thinking between those trains and local ones has caused constituents real problems that East Coast needs to deal with? If the line is retendered, the Minister must ensure that that factor is included in the tendering process, as I hope my hon. Friend agrees.
Martin Vickers
I welcome that intervention by my hon. and learned Friend, who highlights a particular problem. My point is that the station in my home town of Cleethorpes has been removed from the timetable—because there is no through train to it, it is no longer shown as having a connecting service. I think that Middlesbrough was another destination that was removed from the timetable. Regrettably, despite my protests, East Coast did not correct that in its new summer timetable.
The Government show every sign of moving ahead with the new franchise to a good timetable, which I welcome. I hope that the company will put in place services that British Rail removed in 1991, namely the direct services from King’s Cross to Cleethorpes, which I know the Minister is keen to restore in the new timetable.
Karl MᶜCartney
Does my hon. Friend agree that spending some money on electrifying the line between Newark and Cleethorpes might well give the east coast an option for diverted trains? The west coast has a multitude of such options whereas the east coast does not.
Martin Vickers
My hon. Friend raises a valid point. The important thing for the Cleethorpes constituency in relation to electrifying the line is that 25% of the country’s rail freight, when measured by tonnage, starts or ends at Immingham dock. The line must therefore be a potential candidate for electrification.
The hon. Member for Middlesbrough used, as I suspect all politicians do occasionally, selective statistics, especially ones that were critical of private operations. For example, he omitted the statistic that showed that the west coast main line, in private operation, generates more passenger income than the east coast main line— £820 million in 2011-12 compared with £587 million on the east coast main line.
I hope that the Minister will confirm that we are going ahead with the new franchise, that we are on course to deliver it and that the new franchise will deliver a better service than the existing east coast main line, which is, to be honest, just treading water at the moment. I know that the Minister will also want to ensure that there is a service to Cleethorpes.
Mr Frank Doran (Aberdeen North) (Lab)
I congratulate my hon. Friend the Member for Middlesbrough (Andy McDonald) on securing this important debate. The east coast main line is a vital artery for all of us, running between London and Aberdeen. My principal interest is of course Aberdeen. In the debates that we have had on this issue, it is clear that the east coast main line is generally thought to run simply from London to Edinburgh, but it runs another 130 miles further north. When the line was completed in the 1880s, it was part of the Victorian engineering miracle, producing both the Tay bridge and the Forth bridge. It allowed royalty to get away for their summer holidays, brought to London the fish and the textiles that were produced in Aberdeen and opened up the whole country to tourism in the highlands. It was an important line then, but it is even more important now, which is not always recognised.
Aberdeen is now the hub of the oil and gas industry in Europe. Over the past few decades, it has poured billions of pounds into the Exchequer, but we have a railway line, certainly the last past of it from Edinburgh to Aberdeen, that has been forgotten about. I have raised that issue in the House many times. There has been a failure to construct proper infrastructure to support the oil and gas industry. The same can be said, I think, of Norfolk, which has difficult contacts as well, but perhaps not to the same extent.
I have done a little bit of arithmetic for the debate. The journey time from London to Edinburgh, which is about 400 miles, is four hours and 20 minutes at an average speed of 92 miles an hour. Edinburgh to Aberdeen is only 130 miles, and it takes two hours and 39 minutes at 45 miles an hour. When I have raised those issues in the past, they were usually coupled with problems on the road network and with air transport. I used to be able to say that someone could travel from Aberdeen to Rome by car and find only 70 miles of single track, which was on the road between Aberdeen and Dundee. That has now been sorted. Air transport has improved dramatically as well, but we still have the same problem on the rails. One part of the east coast main line, just north of Montrose, is single track. The Minister will rightly point out that the responsibility for that lies with the Scottish Government, but for a couple of centuries it was the responsibility of Westminster, and nothing was done about it.
I also want to raise a specific issue with the Minister because it relates not just to this particular line, but to High Speed 2. In the economic evaluation for HS2, there is a suggestion on page 9 that the Government are retaining an option for removing through-trains from stations north of Edinburgh to London once phase 2 of the new high-speed rail is built post-2033. That has caused some consternation. The Minister is looking slightly bemused; he has probably not read the evaluation thoroughly.
Ian Swales (Redcar) (LD)
I congratulate the hon. Member for Middlesbrough (Andy McDonald) on securing this debate and on his excellent speech, which fully covered many of the issues. I have been a regular traveller on the east coast main line for more than 25 years for business purposes. It seems hard to believe that it is the most successful and profitable line in the country, because the bungled franchises under both Governments and under-investment have left us with old trains, poor punctuality and high fares.
Arriving at Darlington station to come to Parliament, I have a choice: buy a standard return ticket, or get back in my car, drive to London and do the return trip that way. At 45p a mile, I save the taxpayer £60 if I drive. Is there anywhere else in the world where a mass transit system is so much more expensive than each passenger recovering in full the cost of driving a car?
In the year to March 2012, East Coast made a profit before tax and payments to the Department for Transport of £196 million on a £666 million turnover; that is more than 29%. It is high time that some of that money was used both to reduce the fares and to upgrade the rolling stock. Until then, users of the line are bound to feel that they are being ripped off and, in effect, used to subsidise the rest of the network.
Iain Stewart (Milton Keynes South) (Con)
My hon. Friend makes an important point about the quality of the rolling stock, but is he not aware that the inter-city express programme, which will be built in the north-east, will introduce new trains on the east coast main line?
Ian Swales
Indeed, and I hope they will be built in the north-east at the new Hitachi factory. Let us hope the public procurement produces the right answer.
I note the Opposition’s position. They had the chance to make the franchise public in 2007; they did not, and they went into the last election promising a refranchising in 2011. The Public Accounts Committee, of which I am a member, reviewed the east coast fiasco in mid-2011. It mainly considered the National Express failure, which was a familiar story of unrealistic bidding, poor due diligence, poor contracting and wasted taxpayers’ money. Since then, the Department’s franchising team has caused the west coast train disaster with another huge loss of taxpayers’ money. Will the Minister give us confidence that a proper job will be done this time?
Although I understand the commercial sensitivity, I feel that the whole bidding review process should be as transparent as possible. Independent experts should be involved from the start to provide scrutiny to avoid unrealistic assumptions producing the wrong answer. Taxpayers should not have to wait for the National Audit Office to pick over the entrails again. Furthermore, if the offers are not good value for travellers and the taxpayer, continuing public ownership must be a realistic alternative. As the hon. Member for Middlesbrough said, we should not start with the answer and allow political dogma to decide.
I hope that the bid review process will also be stress-tested. For example, there should be no assumptions about tax recovery from companies, which then avoid tax, as we constantly see in the world of the private finance initiative.
With its inherent profitability, and given that the 250-mile journey from Darlington to London takes as little as two and a quarter hours, the east coast line should be the jewel in the crown of the UK rail network. However, with two bungled franchise deals behind us, the Minister has a lot to do to convince us and the public that this will be third time lucky.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
I congratulate my hon. Friend the Member for Middlesbrough (Andy McDonald) on securing this important debate.
I also congratulate my hon. Friends the Members for Edinburgh East (Sheila Gilmore) and for City of Durham (Roberta Blackman-Woods) on leading a campaign that has widespread backing inside and outside Parliament. It is not surprising that it is so well supported; as we have heard, the facts speak clearly for themselves. By the end of this financial year, East Coast estimates that it will have returned about £800 million to the Exchequer since the line was nationalised. The net public subsidy in the past financial year was just 1% of turnover, compared with an industry average of 32%.
A recent report commissioned by the TUC reveals that the firms receiving the largest state subsidies spend more than 90% of their profits on average on shareholder dividends. Of those firms, the top five recipients received almost £3 billion in taxpayer support between 2007 and 2011, which allowed them to make operating profits of £504 million. However, more than 90% of that money—£466 million—was paid straight to shareholders.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
It is also worth while pointing out that the taxpayer has been getting this money back from Directly Operated Railways in a context where the company has been able to operate only on a fairly short-term basis, because there is no certainty for the long term about the franchise. Is it not highly possible that, if the current operators had the security of knowing they were going to operate the railway system for a considerable number of years to come, they might make even better returns for the taxpayer and run the system even more efficiently?
Mrs Hodgson
I agree. That was a good point, and it was well made.
I am a regular user of the service, as are many Members, constituents and people across the north-east, and the improvements in service and punctuality have been plain to see. That is not to say that there are not occasional causes for complaint; of course there are, and we all know what they are—often, it is the toilets. However, the service has improved, without the need for the private sector ethos that we often hear about from advocates of privatisation.
In a written answer to my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah), the Minister said:
“The Government remains committed to benefitting from private sector innovation and operational experience in its railways.”—[Official Report, 22 April 2013; Vol. 561, c. 590W.]
Given the improvements since the line was nationalised and the low reliance on subsidy, which is 1% of turnover, as well as East Coast’s returns of £800 million to the national coffers, the private sector organisations running other franchises could learn a thing or two from Directly Operated Railways.
The east coast line is getting increasingly busy, and it needs constant investment in maintenance and capacity improvement. Incidentally, one way that we could improve capacity—I and other north-east Members recently met the Minister to make this case—would be to bring the Leamside line back into use in the north-east to take some of the freight off the main east coast line. The Minister and I have discussed that at length. The proposal would have the added bonus of providing the means to extend the Tyne and Wear Metro to Washington, in my constituency, which would bring great benefits to the town and its residents.
However those improvements are made, they do need to be made, and that will require money. The benefit of keeping the franchise in public ownership is that that investment can be made by ploughing the generous profits generated—£800 million so far—back into the service, instead of giving them to overseas shareholders. Our network sees hundreds of millions of pounds disbursed to shareholders of private companies every year, despite the fact that those companies receive state subsidies to keep going. East Coast’s performance over the past three years has shown us the folly of that model. Why send profits generated from British passengers to foreign owners abroad, when some of those owners are subsidising rail fares in their own countries? We could and should use those profits here to improve our services and to help keep our fares down.
The East Coast arrangement is not hurting my constituents; it is working. It is not broken, so it does not need fixing—apart from the toilets, of course. If anything, based on the performance of East Coast, it would be desirable to see more of our key lines under public control. What the service needed was the stability to carry on planning for the future and improving performance and service standards further, while maintaining the return to the taxpayer. What it has, however, is the uncertainty caused by being put out to the market once again, where it may even be the subject of a tender by the company that failed to run it properly last time. That would cost taxpayers millions.
Given the shambles over the west coast line, I would have thought that the Government would at least leave a successfully operating line well alone—
Stephen McPartland (Stevenage) (Con)
I, too, congratulate the hon. Member for Middlesbrough (Andy McDonald) on securing such an important debate.
Every franchise is operationally different. East Coast runs 155 services per day, with six trains per hour from London in the peak. It essentially serves two main destinations from London: Leeds and Edinburgh. The west coast operator runs 321 services per day, with 11 trains per hour from London in the peak. It serves five main destinations: Birmingham, Manchester, Chester, Glasgow and Liverpool. I have used both services; I use East Coast and First Capital Connect daily, and both work quite well.
It is impossible to argue that the private is sector is bad and the public sector is good. Many speakers so far have focused on an ideological debate, but I want to focus on what will lead to improvements in passenger satisfaction. The east coast operator could remain public, it could become a mutual-type organisation run by its own staff and members or it could be moved into the private sector, but passenger satisfaction should be the main reason for any change and the main driver of any innovation.
Stevenage is on the east coast main line. It is a category C station, with more than 4 million passenger movements a year. It is an important hub for Hertfordshire, with Stansted on one side and Luton airport on the other. That will be the subject for a separate debate between me and the Minister, because there is a proposal to expand Luton airport, with the result that a plane would fly over Stevenage every minute or so.
East Coast is used by many commuters—20,000 to 30,000—to go from Stevenage into London every day. It is a different type of service for us than it is for many Members in this room, who want it to be a long-distance operator. One of our concerns is that as it opens up more services in the north and more direct lines, it will shave minutes off the journey to London by cutting services to places such as Stevenage.
Jason McCartney (Colne Valley) (Con)
It is always a pleasure to pass through my hon. Friend’s constituency on my way up and down to Yorkshire every week. Will he join me in congratulating the Government on their record of investment in our railways? In my patch, there is the northern hub rail investment and the electrification of the trans-Pennine route. Does he agree that franchising is about where our railways—our east coast main line—will be in five, 10 or 15 years, not the adequacy of the service at the moment?
Stephen McPartland
I was disappointed to hear my hon. Friend say that he passes through Stevenage without stopping—I would prefer him to stop an awful lot more. However, I, too, congratulate the Government. This Government and the previous Government have done a lot of good work on the rail industry, and we could look at the way in which King’s Cross is being changed.
Grahame M. Morris
Will the hon. Gentleman acknowledge that the privatised rail operators are costing the public purse—the taxpayer—£4 billion a year in subsidy? Since the east coast service has been nationalised, it has cost only £1 billion a year.
Stephen McPartland
I would not be able to acknowledge that, because I do not know the figures, but I can take the hon. Gentleman’s word for it.
Many people have said that the private sector ethos is not something we want to introduce to East Coast. In May 2011, I was fortunate enough to persuade East Coast to increase the number of services stopping in Stevenage by 18 per day. The number of services rose from 40 to 58 a day, which means an extra 9,000 seats a year. That all sounds great. It was the biggest rise in services to any location on the east coast main line. I did an awful lot of work on that. The individual I spoke to, who was the chairman of East Coast at the time, was previously the chief executive of First Capital Connect, and she took the private sector ethos that she received and learned at First Capital Connect and introduced it to the east coast main line. The reason First Capital Connect is important is that it shares the Stevenage station, effectively, with East Coast, and one of the main problems on a franchise that is 960-odd miles long is that it deals with so many other local operators. The point has been made that an interaction with local services would be hugely important and beneficial to many of our constituents. Fortunately for us, it works well in Stevenage.
Stevenage is only 30 miles from London, and the debate seems focused very much on services between London and the constituencies of some Opposition Members, and London and my constituency. A couple of years ago there were almost 40,000 journeys a year from Stevenage to Newcastle; a year ago there were nearly 50,000 journeys from Stevenage to Leeds; there are 11 services a day from Leeds to Stevenage and back. Stevenage is the capital of the UK space industry. We employ more than 10,000 scientists and engineers and build 25% of the world’s telecommunications satellites. A couple of days ago a satellite built in Stevenage went up, which will be responsible for broadcasting everything back to the UK. Interacting with a high-technology area such as Stevenage is important. People who engage in debate about this issue always seem to focus on the idea of a long-distance operator running the service, with Peterborough as the closest place people could get to—where they would have to change. As my hon. Friends have explained, that gives rise to the question whether it is cheaper to do that, or just to go on a plane or drive. Many of my constituents will drive to Heathrow airport and fly to Scotland, because that is cheaper than going by East Coast train. That is ridiculous. Sadly, it is faster. That is another problem. The debate and our efforts should focus on passenger satisfaction. Whether the service remains private or becomes public, or a mutual, that should be the whole idea.
In my final 30 seconds I have something to put to the Minister. Wherever the future of east coast ownership lies, it should include a mechanism for the removal—or, in today’s language, the recall—of the rail franchises, if any rail passengers are dissatisfied.
Hugh Bayley (York Central) (Lab)
I, too, congratulate my hon. Friend the Member for Middlesbrough (Andy McDonald) on securing an important debate.
The headquarters of the east coast main line has been in York ever since the line was built in the 19th century, and hundreds of skilled jobs in my constituency depend on its staying there—jobs at the headquarters and in the Network Rail management of the east coast main line, and hundreds of jobs in private civil, structural, signalling and electrical engineering firms that work for the railways. There have been two private sector-created hiatuses, caused by franchise collapses, on the east coast main line. Now there is a Government-created hiatus—a refranchising. I urge the Minister to make sure that there is stability and that those jobs stay in York.
In February, I asked my right hon. Friend the Minister—I call him my friend because we sat next to each other at the Democratic convention, cheering Obama to the hilt; he is one of us—at Transport questions:
“Before the Government announce their franchising schedule will they look at the feasibility of running a public sector franchise on the east coast for a period to compare like for like with a private franchise on the west coast to resolve the issue”
of whether privatisation works?
He said:
“I am afraid that he is not going to tease out of me in advance what my right hon. Friend the Secretary of State will announce”.—[Official Report, 28 February 2013; Vol. 559, c. 463-4.]
I wish that the Government had given the idea consideration before they announced that they intended to go ahead with franchising, but since they deliberately did not, and told the House they were not going to do so, I ask them to consider the proposition now.
There are three fundamental questions for the Minister. Do the Government want lower fares on the railway, so that the railways become more affordable and passengers get out of their cars and on to trains? Does he want a high return on the public investment that there has been in railways for decades? Does he want ever-improving quality and safety? I am sure that his answer to all three questions would be yes. Has privatisation delivered on those dimensions? On fares: no, it clearly has not. On the return on investment, track charges now being obtained by Network Rail are lower than they were 20 years ago. The East Coast train company is giving the Government a higher return than its predecessor private companies. In round terms, it turns over £650 million a year and gives the Government a profit of £200 million. In the middle of a downturn, for East Coast to provide the Government with a 30% return is doing pretty well, and I do not think the Government should put that in jeopardy.
Ian Murray
I congratulate my hon. Friend the Member for Middlesbrough (Andy McDonald) on a wonderful speech. My hon. Friend the Member for York Central (Hugh Bayley) is getting to the crux of the matter. I travel on the east coast line—400 miles, for four hours 20 minutes—about twice a week. Does he agree that if a private operator returned that amount of money to the Government, they would champion it as a great way for the private industry to run the railways?
Hugh Bayley
They would, and rightly so but they should also do so for a public sector operator.
I was on the Public Bill Committee—they were called Standing Committees in those days—that considered the Railways Act 1993. We were told that the railways had to be privatised because there would then be masses of new private sector investment in the railways. Sadly, that has not happened. I totted up the investment for the first two years in which the Government were in power: 2010 and 2011. Network Rail invested more than 10 times as much as all the private rail companies put together. It invested £9,739 million and the private sector invested £780 million. In truth, the jury is still out on whether rail privatisation works.
Hugh Bayley
No; I think I will make progress, because I have only a few minutes.
I ask the Minister to consider whether it makes sense to run a private franchise on the west coast main line, which he is obliged to do—Richard Branson will sue him if he does not—and continue, for a full franchise period of 15 years, a public sector operation on the east coast main line, and to compare like for like. Which delivers better value for money to the Government, gives a better service to the public, and does better at reducing fares? I put a final challenge to him: let the Government follow what the passengers want—put out a leaflet on East Coast trains and ask the public whether they want refranchising or to stick with East Coast. If they go for East Coast, give East Coast a whirl.
Several hon. Members rose—
Dr William McCrea (in the Chair)
Order. I intend to start the winding-up speeches no later than 3.40 and there are still four hon. Members who have said they want to speak. To allow that to happen I impose a three-minute limit, and hope to get everyone in.
Ian Mearns (Gateshead) (Lab)
It is a pleasure to serve under your chairmanship, Dr McCrea. I congratulate my hon. Friend the Member for Middlesbrough (Andy McDonald) on the fantastic speech he made in opening the debate.
Like many of my colleagues, given the recent history of the east coast main line—not to mention the Government’s failure on the west coast franchise—I am deeply concerned about their plans for the impending privatisation of the east coast main line. The announcement by the Secretary of State for Transport about the start of a tendering process for the east coast main line and nine further franchises pays no regard to the public interest, and a profitable rail service will return to private hands within the next two years. The plans will no doubt be a recipe for disaster.
My hon. Friend the Member for Middlesbrough established in his speech that Government Members support state ownership of the UK rail network, but importantly, that does not mean UK state ownership. Instead, they support German, French and Dutch Government ownership of the UK rail network. It has been interesting to hear about the lack of understanding of the complex interrelationships in the way our rail franchising system works, such as the relationship between Network Rail, the train operating companies and the rolling stock leasing companies, and about the failed diffuse franchising model established by the Tory Government from 1979 to 1997.
We are promised new rolling stock on the east coast main line, but initially only the diesel trains will be replaced, and that will not happen until 2018. No one denies that the line suffers from chronic underinvestment, particularly as there is now very tired rolling stock. However, let us not forget the burden that East Coast inherited from the privately owned rail firms, GNER and then National Express. Those problems were exacerbated, given the limited amount of rolling stock available on the line, by the Hatfield and Selby rail crashes. When full train sets are taken out of a service of that nature, it means that the operator is operating on very tight margins indeed.
The only way to run an effective rail service is to ensure that infrastructure is up to scratch through continued investment, yet from a private sector perspective the overriding objective seems to be not investing in maintenance and providing customer satisfaction, but retaining funds for shareholders.
Like the travelling public, I am deeply concerned about what is being proposed for us. If we acted on the proposal that my hon. Friend the Member for York Central (Hugh Bayley) has suggested and asked the travelling public on the east cost main line what they want for the future, we would get proof of the undoubted fact that the vast majority of them want the franchise to stay exactly where it is—in public ownership.
Sheila Gilmore (Edinburgh East) (Lab)
The ideology in this debate is clearly not on the Labour side, as is shown by the speeches we have heard. What is puzzling many of my constituents is why it is somehow so urgent to put the east coast line out to franchise now, when East Coast is working well and when the franchise process for the west coast main line was such a disaster so recently. It sounds like the answer is ideology.
A couple of misconceptions have arisen in the debate so far. One of the previous speakers suggested that refranchising would fund improvements such as electrification, but during the past few years Network Rail has made infrastructure investment from public money. It is clear that refranchising will not bring about that kind of investment. I also say to the hon. Member for Redcar (Ian Swales) that, instead of perpetuating the notion that somehow East Coast is uniquely expensive, if he took his Government’s advice to benefit claimants and became “digital by default” he could considerably reduce fares by booking in advance. That is no different from the situation with any of the other rail operators.
There is now a good argument for looking at the situation. I am sure the Minister will say, as some Government Members have already said, “Oh, but the Labour Government were going to refranchise.” We learn from experience, and we have learned that there is no inherent reason why a publicly operated railway company cannot make a success of things. One reason for that is that such a company will be operated not by some anonymous Department, but by rail professionals; it will not be run from the Department for Transport. Those rail professionals are clearly motivated to make things work, which is why we are seeing the improvements that we feel are happening on the east coast line.
The time has now come for us to look again at some of the assumptions that were made at the time of privatisation.
Sheila Gilmore
I am sorry; I do not think I have time to give way.
There was a view that the track should be separated from the trains and that the network should all be split up. However, we know from the McNulty report that the unit cost of railways in this country is 40% higher than in countries in Europe where there are publicly owned, integrated rail services. The time has come not to be ideological about this issue, nor even defensive about what anybody’s Government did in the past, but to look at what is actually happening out there.
In the first instance, we should say of the east coast line, “No, we will not put this out to franchise again at this stage. There is no need to do so.” Secondly, we should look at the whole process and analyse what is happening. Thirdly, we should perhaps look again at having an integrated rail system—
Ian Lavery (Wansbeck) (Lab)
As ever, Dr McCrea, it is a pleasure to serve under your chairmanship, and I congratulate my hon. Friend the Member for Middlesbrough (Andy McDonald) on making an excellent contribution to the debate.
I have only three minutes to speak, which does not give me much time to consider the privatisation or nationalisation of the east coast main line; I would need a lot of time to do that. Quite simply, I will focus on saying that the privatisation of the railways—some might even say the theft of the railway infrastructure—is totally unacceptable. It has been an unmitigated disaster, and franchise after franchise on the east coast main line has been a shining example of that.
I have looked at the results of the east coast main line. Since it has been in public ownership, it has been absolutely outstanding and there have been some things that private companies would be absolutely delighted with: increased passenger numbers, profits, premium payments and passenger satisfaction, and better turnover and punctuality. Also, passenger fare revenue has increased by 34% to £820 million. In 2012, turnover was £665.8 million, which was an increase of £20 million, leaving a profit before tax and service payments to the Department for Transport of £195.7 million, which was an increase of £13 million. Passenger journeys with East Coast, which runs trains from London to Yorkshire and from the north-east of England to Scotland, increased by 2.1% in 2012.
In addition, there is another important point, which I think has been agreed on by Members of all parties today. Customer satisfaction with East Coast has risen by 2%. Also, the company’s latest punctuality figures are the best since records began in 1999. What a credit to East Coast that is, and why on earth the Government are hoping to privatise the east coast main line quite frankly beggars belief. Again, it is about absolute ideology and absolute dogma, and who will benefit from this privatisation? It will not be the passengers and it will not be the work force; the financial bonanza will be distributed between shareholders.
I ask the Minister why on earth National Express—a company that threw the keys back at the Government because it could not cope with privatisation last time—will be allowed to bid for the east coast main line for a second time. If it could not cope the first time, why is it even being allowed to put itself forward a second time?
Grahame M. Morris (Easington) (Lab)
It is a pleasure to serve under your chairmanship, Dr McCrea, and I congratulate my hon. Friend the Member for Middlesbrough (Andy McDonald) on the timely and comprehensive speech that he gave on this very important subject.
Government Members have accused Labour Members of making this an issue of ideology. Well, in Westminster Hall today we have a Minister who oversaw the architecture to privatise the NHS and who is now overseeing the privatisation of a successful publicly owned rail franchise in the north-east. Indeed, this process is an experiment. Under the previous Conservative Government, the rail network was broken up and a new model devised in a way that any objective commentator must acknowledge was a failure.
We have seen a decline in the quality of service, a lack of investment, higher public subsidies and inflation-busting fare increases since privatisation. In fact, a report by Just Economics showed that UK rail services were less affordable, less comfortable, slower and more inefficient than publicly owned rail services in Germany, France, Italy and Spain. British train tickets are now the most expensive in Europe. A typical season ticket in the UK now costs 14p per kilometre, compared with just 8p per kilometre in Germany, Holland and France, which are the next most expensive countries in Europe. So, if we are making comparisons on price or value for money, the privatised franchise model that we have here just does not stack up.
I do not wish to go off the rails in terms of time, Dr McCrea, but I am under a bit of pressure and we have had some first-class contributions from Members. I do not want to repeat what has been said. However, I am perplexed about why, after four years of stability, rising passenger satisfaction and significant returns to the Treasury, the Government are rushing through the privatisation of the east coast main line, if not for reasons of ideology and dogma, ignoring the evidence. Conservative Members ask, “Would you nationalise the industry?” Well, in public polling, not just of Labour voters, but generally, those in favour of nationalisation poll in excess of 70%, by MSN and NOP and 93% in The Guardian. There is nothing more ideological than privatisation for privatisation’s sake. This is a privatisation too far, and it is not fit for purpose.
Lilian Greenwood (Nottingham South) (Lab)
It is a pleasure to serve under your chairmanship, Dr McCrea. I congratulate my hon. Friend the Member for Middlesbrough (Andy McDonald) on securing this important debate. We have heard about the many improvements that have been made on the east coast since 2009. My hon. Friend set out the hard facts. East Coast has made real progress since Directly Operated Railways stepped in. Yes, there is more progress to be made, but I struggle to recognise the picture of East Coast treading water. A number of puns have made, but I am not sure that the metaphor of a railway treading water, used by the hon. Member for Cleethorpes (Martin Vickers), is one that I would use. However, hon. Members have provided examples of hard facts that support the call for the east coast main line to remain as a not-for-private-profit operator.
My hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) noted the improvements to punctuality that she and her constituents have benefited from. My hon. Friend the Member for Edinburgh East (Sheila Gilmore) noted the improvements in targeting business travellers, who might otherwise travel by plane, with worrying environmental consequences. There has been a 19% increase in those using the first-class service.
The hon. Member for Stevenage (Stephen McPartland) described a huge improvement in services to his constituency. He also said that passenger satisfaction should be a key measure. Of course, East Coast is getting better and better. Passenger Focus, the independent watchdog, recently recorded 92% satisfaction with East Coast—the best score found in its survey on that line since it was launched in 1999, better than under GNER or National Express.
As my hon. Friend the Member for Easington (Grahame M. Morris) suggested, the hard facts point to this being a dogmatic, ideological privatisation, rather than one based on the service.
Stuart Andrew (Pudsey) (Con)
I take it that the hon. Lady would want completely to dissociate herself from the comments made by the former Labour Transport Secretary, Lord Adonis, who said:
“I do not believe that it would be in the public interest for us to have a nationalised train operating company indefinitely.”—[Official Report, House of Lords, 1 July 2009; Vol. 712, c. 232.]
Lilian Greenwood
I do not know when the hon. Gentleman last spoke to Lord Adonis, but sensibly, like the rest of us, he responds to a change in circumstances. Over the past four years, we have seen East Coast perform well under Directly Operated Railways. Therefore, now is the time to keep it as a publicly operated service.
Mr Simon Burns
The hon. Lady has said something important. I do not know when she last spoke to her noble Friend Lord Adonis, but when she did, did he tell her that he had changed his mind?
Lilian Greenwood
I last spoke to my colleague probably two weeks ago. Certainly, he has changed his mind.
Andy McDonald
Does my hon. Friend recognise that Lord Adonis made his remarks some years ago on the basis of a National Audit Office report that looked at only eight franchises? That report underestimated the 2011-12 subsidy necessary from the taxpayer to those eight franchises by £224 million. We cannot rely on those comments, which were made in good faith at that time on false information.
Lilian Greenwood
The noble Lord is not here to set out his position, but I am sure that we will hear from him in due course.
Lilian Greenwood
I agree that we should be paying tribute to the work of East Coast staff. They stepped into the breach at a difficult time. The two previous franchise holders failed, with one operator walking away from its obligations entirely. Yet East Coast, run as a not-for-dividend operator, has achieved what its predecessors could not: stability and constantly improving services. This Government’s actions are putting that progress at risk.
It is worth briefly highlighting how strong East Coast’s performance has been. Passenger satisfaction is up by 12% over the last year; 3 million more seats per year have been provided; punctuality has improved and a new timetable has been established; and the service has more than held its own financially. As a not-for-dividend operator, East Coast has already returned £640 million in premium payments to the taxpayer, while recording a £40 million profit.
Fiona O'Donnell (East Lothian) (Lab)
I am sure that my hon. Friend is aware that the east coast main line passes through my constituency. It not only gives passengers a beautiful view of East Lothian, but is an essential part of the community of Dunbar. The instability is worrying people who use that service both to commute to London and into Edinburgh.
Lilian Greenwood
My hon. Friend is right. That instability is causing concern. Another thing causing concern is the fact that that £40 million profit, which has been reinvested in the service, would, under this Government’s plans, be split with shareholders instead.
I know from my own region how better services have made a real difference to passengers. In the east midlands, more services now stop at Newark; direct trains have been established daily between Lincoln and London; and two weeks ago a new commuter service was launched from Grantham. Bearing all this in mind, it is difficult to recognise the Government’s description of East Coast’s performance. Indeed, the Minister has said that punctuality on the east coast has plateaued. He even said that East Coast was the worst operator for punctuality when he appeared before the Transport Committee in April. He was then quoting from a very narrow, four-week window. Will he acknowledge today that this picture is not representative? According to Network Rail’s most recent punctuality figures, East Coast outperformed Virgin in both the last quarter and over the whole year, without the benefits of a £9 billion upgrade of its infrastructure. So this privatisation cannot be about punctuality, given that the Government have announced an extension to the operator’s contract on the west coast main line, where delays are more common.
It has been said that the Government are seeking a commercial partner to deliver investment, but will the Minister confirm today that the cost of upgrading the east coast main line and procuring new rolling stock will be met through public spending? In April, the Minister said that franchises should be measured
“by the premiums that are paid to the Government”,
as well as by reliability and overcrowding. But East Coast has made improvements in all those areas and grown the business, on a route that was last upgraded in the 1980s. The operator has developed a five-year plan and could deliver further success, if only the Government took the sensible step of backing it. Instead, we have seen an ideological decision to re-privatise the service. This is a damning indictment of this Government’s priorities at a time when the franchising system has collapsed and the National Audit Office has questioned the Department’s ability to deliver major projects.
The collapse of franchising has cast a long shadow over the rail industry. The fiasco has cost the taxpayer at least £55 million. Orders for rolling stock are on hold and the supply chain has been hit, threatening jobs and skills. The Government should be putting their house in order, so it is worrying to see Ministers instead, devoting their time to this unnecessary and unwanted privatisation, which suggests that they have not learnt the lessons from the recent past.
East Coast is working. The Office of Rail Regulation recently confirmed that East Coast receives virtually no subsidy and makes the second highest contribution back to the Treasury. We should not be undermining a successful service that has delivered real benefits for passengers. There has been enough instability on the line and the network as a whole benefits from having a public sector comparator, as my hon. Friend the Member for York Central (Hugh Bayley) suggested. I hope that the Government will now do the right thing and cancel this costly and unnecessary privatisation.
The Minister of State, Department for Transport (Mr Simon Burns)
It is a pleasure to serve under your chairmanship yet again, Dr McCrea.
I congratulate the hon. Member for Middlesbrough (Andy McDonald) on securing the debate. The east coast franchise competition has become a subject of keen interest to many, not only in this room but beyond. The presence of so many hon. Members in the Chamber today to take part in and listen to this debate is a reflection of that keen interest.
The east coast main line serves a huge number of communities and businesses, as a number of hon. Members have made clear, and it connects industries in the north with commerce in the south, provides cross-border services to Scotland and helps to drive the development of tourism and the success of Edinburgh and Leeds as key financial centres outside London. That is why it is at the forefront of our new rail franchising programme, which was announced by my right hon. Friend the Secretary of State in March.
The programme that we announced is the right one. We want to secure the best possible rail services for both passengers and taxpayers, and the programme confirms our belief that franchising is the right way to do so. By publishing the programme, we have provided the whole rail industry with a long-term plan covering every rail franchise for the next eight years. That gives certainty to the market and supports the Government’s major investments in the country’s vital rail network. It is also exactly the same policy that the last Labour Government operated for 13 years when running our railways.
I think it was the hon. Member for Middlesbrough who seemed to be a little confused as to when the noble Lord Adonis made his comments on franchising being the right way, which have been quoted during this debate, so I will help him by saying that they were made in another place and repeated by the right hon. Member for Tooting (Sadiq Khan), who was the senior Transport Minister in the House of Commons at the time, during the debates on having to take the east coast main line into DOR.
Hugh Bayley
I am grateful to the Minister. Lord Adonis was saying that we would not want to run the east coast as a public operation indefinitely. No Opposition Member is asking for the east coast to be run as a public sector operation indefinitely; we are asking that it remain with the public sector for a franchise period so that we can compare like with like—public performance against private performance. We will then not have to rely on ideology because we will have some facts.
Mr Burns
I will return the compliment the hon. Gentleman gave me earlier by saying that he is on the reasonable wing of the parliamentary Labour party. I have to tell him, though, that Members from the more exotic wing of the Labour party were not saying that in their speeches; they want the east coast main line to be permanently in the public sector, not the private sector.
Lilian Greenwood
In 2009, the Under-Secretary of State for Transport, the hon. Member for Lewes (Norman Baker) said that if a franchise holder walks away, a public sector comparator should be maintained. Is the Minister in agreement with his departmental colleague?
Mr Burns
The hon. Lady anticipates the very point I am about to make, which is that, under the Railways Act 1993, the Secretary of State has a statutory duty to ensure the continuous, seamless provision of rail services. That is why the Department for Transport has Directly Operated Railways. It is a body of last resort when there is a problem; it is not a permanent company, for want of a better term, to run a rail franchise indefinitely. My hon. Friend the Under-Secretary was correct in 2009, and the noble Lord Adonis was also correct.
Mr Burns
I am going to make progress, because I have only six minutes.
We have ensured that the delivery of the key inter-city franchises, both on the east coast and the west coast, is staggered so that they are not let at the same time in the economic cycle. The east coast is the first of those franchises to be let, and it is being returned to the private sector, as hon. Members know, after an extended and successful period of public ownership through force of necessity because of the fiasco with National Express. No one doubts that.
Mr Burns
No, I do not have time. I am not giving way.
When my right hon. Friend the Secretary of State announced the new franchise programme, he set out three key principles that we want rail franchising to follow: first, that passengers gain; secondly, that the rail industry thrives, with growing companies and new competitors coming into the market; and thirdly, that the taxpayer gains through more efficient use of public money and less waste in the industry. We believe that letting the east coast main line back to the private sector in line with those three principles will deliver the best possible long-term outcome for passengers and taxpayers.
I am aware of a number of concerns raised by hon. Members, including the hon. Member for Aberdeen North (Mr Doran), on services to Scotland. Mindful of that, officials from the DFT who are developing the proposition for the future inter-city east coast franchise are meeting a number of interested parties along the route, including Transport Scotland, as I am sure he would expect, and other transport bodies in Scotland, as well as local authorities, to understand their concerns. The specification for the new franchise will address both current and potential markets along the franchise route, including those between London and Scotland and up to Aberdeen.
East Coast has delivered a great deal in the past three-and-a-half years of public ownership, which provides the foundations for more to be done by a private sector company that has certainty of ownership, longer planning horizons and an innovative and entrepreneurial approach to doing more for passengers and taxpayers. The operation of the east coast by the public sector was never intended to be a permanent arrangement.
Lord Adonis himself, when he was Secretary of State, said that he did not believe it was in the public interest for us to have a nationalised train operating company indefinitely, and I believe he still believes that. I would be fascinated if the hon. Member for Nottingham South (Lilian Greenwood) intervened to tell me exactly what he said when he told her that he had changed his mind, because I have great difficulty believing that someone as intellectually astute and consistent as the noble Lord Adonis has changed his mind now.
The announcement that we will return the franchise to the private sector in February 2015 provides the certainty that is needed so that longer-term plans for the business can be made. We now need a strong private sector partner.
Mr Burns
If the hon. Gentleman listens, I will tell him.
A strong private sector partner is needed to build on what has been done and take forward our exciting plans for the route as part of the next franchise. The Government are making a significant investment in the route over the coming years, as a number of hon. Members mentioned, with new trains provided by the substantial inter-city express programme and new capacity provided by infrastructure projects. To ensure that that is managed and delivered so that those investments are put to best use, with minimal disruption for passengers, the inter-city east coast franchise needs a long-term partner that is able to deal effectively with the risks and challenges that come with such huge investment and change. That is best provided by the private sector.
Much of the debate has centred on the idea of privatised railways versus nationalised railways. The implication is that the running of the east coast by the public sector through DOR represents an alternative model to normal franchised services. That is not the case. The operation of train services by DOR is an essential part of the privatised franchising model. The Secretary of State has a statutory duty to maintain and ensure continuous provision of service, which is why DOR exists, but it is a short-term mechanism to meet immediate problems. Once those problems have been sorted, the intention is always to return to franchising.
Time is running out. Hon. Members have mentioned a number of issues, and I will write to them with answers to their questions, but I have to conclude by saying that it is almost Alice in Wonderland to believe in the so-called halcyon days of British Rail. I do not remember them; I believe things have improved under the franchise system.