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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.
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.
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
The noble Lord is not here to set out his position, but I am sure that we will hear from him in due course.
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.