The Minister of State, Department for Transport (Baroness Kramer) (LD)
My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer to an Urgent Question given earlier today by my right honourable friend the Secretary of State for Transport on the franchise competition for the east coast main line. The Statement is as follows:
“Mr Speaker, first, I welcome the honourable gentleman to his post.
This morning I announced the intention to award the intercity east coast franchise to Stagecoach Virgin, exactly on the schedule we promised two years ago. It is great for passengers. It will bring more trains, faster trains, new trains, better services and better-value fares. It is good for towns and cities up and down the east coast. It is good for our economy and jobs. It is proof that the right route forward for our railways is the private sector and the public sector working together. This deal will make the route of the Flying Scotsman a world-beater once again.
Now, I have heard different advice from the Opposition, led of course by the unions. They told us to leave this route in the hands of its emergency public sector operator. They do not understand that this would deny the east coast line new ideas and investment. They do not understand that it was set up as a short-term measure by the last Labour Transport Secretary, which is why at the time the noble Lord, Lord Adonis, 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, 1/7/09; col. 232.]
and the Minister of State, the Member for Tooting, said,
“one reason we are able to invest record sums in our railway service is the revenues that the franchises bring in and the premiums that they pay”.—[Official Report, Commons, 1/7/09; col. 430.]
Right then—wrong now.
It is this Government who are powering ahead with a better plan for our railways. First, this new franchise will be good for people who use the line. This deal will strengthen the vital links from London to Scotland all the way along the route as far as Aberdeen and Inverness. Passengers will benefit from regular, faster, more frequent services to places like Falkirk, Stirling and Edinburgh. Journeys between London and Edinburgh will be regularly down to just four hours by May 2020. Leeds will see regular journey times down to just two hours. Places like Leeds, Bradford, Shipley and Harrogate will see more direct services each day. Sunderland, Middlesbrough, Huddersfield and Dewsbury will all get new direct east coast services, the first from Huddersfield to London since the 1960s. Lincoln, which gets one train a day to London under the current operator, will get one every two hours with the new one. And we have protected service levels to every current main line station.
All these destinations will be served by the new intercity express trains by May 2020. They will be built in the heart of the north-east at the new plant in Newton Aycliffe. So I ask the honourable Member sitting opposite, why does he want to deny the north all these benefits? The new operator will provide 50% more capacity across the east coast network and a 40% increase in morning peak seats to and from Kings Cross, and refurbish the existing fleet. It will cut some of the most expensive fares by 10% from May next year.
But this franchise is not just good for passengers. It is also good for staff. It offers investment in skills, a graduate programme, new apprenticeships and a national academy for rail professional education based in London, York and Derby. This will also be good for taxpayers. The franchise will run for eight years with an option to extend for a further year. In that time, it will return £3.3 billion in premium payments to the taxpayer. These figures are robust; they have been subject to rigorous scrutiny, including by independent auditors. So this deal will bring more services, more passengers and a growing return.
That is why, Mr Speaker, the Government’s franchising programme is creating the railway that this country needs. Passengers in Essex, London and the south-east are already benefiting from the improved services that the partnership of public and private sectors on our railway can provide. This award is further proof that private competition is good for passengers, staff, communities and taxpayers. The quality of the new operator’s plan will benefit the whole country”.
Baroness Kramer
My Lords, the Secretary of State set out his schedule for franchising for the east coast in March 2013. It is exactly on schedule. There is nothing artificial about the timing; it is entirely appropriate. On the demand for a public operator, we have always said that we do not have an ideological barrier, but why would you use one when we have excellent private trained operators? This is an absolutely excellent franchise. The argument is often made that the DOR returned £1 billion in revenue. Noble Lords will note that that was over five years, although there are differences in the timetable. We will be getting £3.3 billion from this eight-year franchise.
Lord Shutt of Greetland (LD)
My Lords, I thank the noble Baroness for repeating the Statement. I have to say that it is no surprise—I would have thought to anyone—that the winner of the franchise is one of the three applicants. That seems quite a sensible way for things to go. If there are three applicants, the winner will be one of them.
I have a concern about monopoly. The winner of the franchise is the firm that operates on the west coast. There can be opportunity with monopoly. If we are to have a monopoly, can we have some benefits from it? I am delighted that the tentacles of the east coast will go to Dewsbury and Huddersfield, and that there will be more trains to Bradford and more in the West Riding. Those of us in the Pennines are in a position from which we can look east and west. Will there be opportunity under this franchise, particularly on fares and opportunities to choose routes? Bearing in mind that the operator is to be the same, will there also be fair play on fares for people in the middle of the country?
Baroness Kramer
My Lords, this is certainly not a monopoly situation. Quite a number of companies bid on these franchises across the UK. They all start from a level playing field and we consider them completely impartially. With regard to fares, I note that the new franchise operator proposes a 10% reduction of standard anytime fares on longer distances in May 2015.
Lord Adonis (Lab)
My Lords, as the Minister who created the East Coast company, I ask the Minister to join me in congratulating Karen Boswell and her fantastic staff at East Coast on providing a first-class public service since National Express left the public without any service on the east coast line five years ago. Can the Minister also confirm that, at 91%, East Coast has a record customer satisfaction rating for that franchise since its creation, and that the East Coast is also the most popular franchise long-distance operator in the country at present? Would she regard it as a failure if the new private operator did not equal or exceed those performance ratings in a year’s time?
Baroness Kramer
My Lords, I am absolutely delighted to join in the accolades for the staff at the door—they have done an outstanding job and we have always applauded them for it. As they transfer to the new company, I am sure that they will continue to do an outstanding job. They will be offered new training opportunities and new opportunities to develop professionally, which will be extremely exciting. Therefore I am delighted to congratulate them. I am also delighted that the new franchise offers the kind of investment that we want to see, improving service in so many ways, improving the existing rolling stock and bringing on new rolling stock, additional seats and new services—all those kinds of things. We absolutely need improvements in ticketing as well, which is important because of the many people who use the east coast line.
Lord Cormack (Con)
My Lords, I echo my noble friend’s thanks to the current operators. However, the people of Lincoln will be delighted to have a reasonable service. I will take this opportunity to invite all Members of this House to visit Lincoln during 2015 when we celebrate the 800th anniversary of Magna Carta, and when Britain’s least-known great historic city will be available for a day trip from London.
Baroness Kramer
My Lords, I was very sure that my noble friend Lord Cormack would be delighted with this announcement.
Lord Kinnock (Lab)
Since the Minister puts emphasis on excellence of service, absolutely rightly, and since there has been acknowledgement of the great success of the publicly owned service on the east coast, which rose from the ashes of the failure in the private sector, can she tell us why that excellent service and company was not allowed to bid on the fair and equal basis of all other bidders for this franchise? Is it not conceivable that against the background of that success, it, too, could have made the commitment to investment and to the enlargement and improvement of services that is now on offer from the company that has been successful? What ideological barrier—because it could not have been a practical one—could have prevented it making a bid?
Baroness Kramer
My Lords, there are enormous practical barriers relating to the basis on which funding is provided to the public service operator differing from that available to the private operators in the bid. It is crucial to ensure that we get the best ideas, innovation and investment in the service for the people who are going to use the east coast and that is exactly what this franchise delivers.
Lord Shipley (LD)
My Lords, I welcome the Minister’s announcement. It is the right decision. It delivers more services, greater investment, more trains and new routes. In addition, the trains for destinations on the east coast main line will be built in the north-east at Newton Aycliffe. The staff of East Coast do a magnificent job. Can the Minister confirm that they will all be guaranteed their jobs on current terms and conditions of service?
Baroness Kramer
The way in which this franchise has been set up is a sale of shares. All staff will remain on their existing contracts. They will continue effectively to be employed by the same employer. Whatever those terms are will continue. It is important to notice the ambitions in this franchise to improve training and opportunities for staff. Virgin has been clear that, with new services, it is going to need to train and hire new drivers and new on-board staff. There are no plans to close ticketing, although much friendlier services will be opened up.
Lord Brooke of Alverthorpe (Lab)
My Lords, I return to the question from my noble friend Lord Adonis about performance. What will be done to examine the performance of the new franchisee against that of the previous holder over the coming 12 months and the next five years?
Baroness Kramer
My Lords, we hold all our companies to a very high standard of performance. They continue to be rigorously observed. Virgin will take on great challenges, bringing on new services and rolling stock. These will offer a great deal to passengers and we will expect a high performance from them. The noble Lord will be aware that, under the new franchising regime, the quality of output is a very important part of deciding where to award the franchise. It is no longer just on the cheapest.