Future of Rail Manufacturing
(7 months ago)
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Grahame Morris (Easington) (Lab)
I beg to move,
That this House has considered the future of rail manufacturing.
It is a pleasure to serve under your chairmanship, Sir Gary. I must declare an interest as a member of Unite the Union and chair of the Unite parliamentary group. I am also a member of the RMT and ASLEF parliamentary groups and I am on the Transport Committee.
For several years, industry organisations such as the Railway Industry Association, trade unions and manufacturers have urged timely action to prevent significant job losses in rail manufacturing here in the UK. The industry employs over 30,000 people in the United Kingdom and contributes at least £1.8 billion annually in gross value added. It is currently facing a very dangerous—indeed, critical—situation. The Minister, a former Chair of the Transport Committee, is very familiar with the situation. I have engaged with him on a number of occasions recently and in the Select Committee, so I am fully aware that he understands the nature of the problem.
In December last year, I raised an urgent question following evidence given to the Transport Committee by Nick Crossfield, the managing director of Alstom—Alstom is based in Derby. He impressed on the Committee the need for urgent action from the Government to expedite the bidding process for new British-manufactured trains. Four months later, it is clear that the Government have been too slow to prevent potential job losses at the Derby train manufacturer.
Similarly, I met workers at the Hitachi train manufacturing facility in Newton Aycliffe, next door to my constituency, who are also members of Unite the Union. They warned that we could see redundancies as early as June this year if the Government continue to drag their heels on extending the contract to build further trains for the west coast main line.
British railways are rooted in the north-east of England. The Stockton and Darlington railway was inaugurated in 1825 and was the world’s first passenger railway. It also linked the coalmines near Shildon in County Durham to the River Tees at Stockton, facilitating coal exports from Teesport. The Stockton and Darlington railway’s success, alongside growing demand for transport, spurred the development of a national railway network. The railways transformed Britain, enabling all social classes to travel further, and the network was developed to move coal from thriving collieries in County Durham to global markets. However, County Durham continues to struggle with the legacy of the loss of its coal industry, with limited skilled employment due to insufficient investment in levelling-up efforts, alongside a lack of a coherent industrial strategy under successive Conservative Governments.
In 2015, Hitachi opened a plant in County Durham, bringing skilled jobs to the region and reviving the north-east’s rail manufacturing tradition after 90 years. The 750 skilled jobs at Hitachi, and about 1,500 jobs in the supply chain, are fundamental to the success of the local economy.
Today, the excellent Sheffield Hallam University has released its “State of the Coalfields 2024” report, which shows evidence of a lack of jobs and businesses in the former coalfields despite recent growth. Job density in former coalfields is only 57 employee jobs per 100 working-age residents; that compares with a national average of 73 jobs per 100 residents, and an average in major regional cities of 88 jobs per 100 residents. There is a disparity, and a long way to go.
The report from Sheffield Hallam illustrates, as clear as day, the ongoing struggle for prosperity in former coalfield communities.
Mr Kevan Jones (North Durham) (Lab)
Would my hon. Friend agree that the issue is not just the number of jobs that Hitachi has brought to the region but the improvement in the skill base? Hitachi is training apprentices and increasing the skill base locally through investments in higher education and other things. That helps not only Hitachi but the regional economy.
Grahame Morris
Absolutely. My right hon. Friend makes an excellent point about the broader benefits to the economy. Indeed, the loss of rail manufacturing in County Durham or Derbyshire would devastate their respective regional economies and threaten British rail manufacturing.
Alstom, Hitachi, Siemens and CAF—Construcciones y Auxiliar de Ferrocarriles—remain the only train manufacturers in the UK. A similar situation arose with the steel industry. To a reasonable person, it would seem illogical for the Government to permit the UK to lose its capacity to build trains, especially as our existing network is in need of modernisation.
The Minister and I have fenced about the age of the rolling stock and trains, but the UK still operates trains built before privatisation, with the average age of trains on the Chiltern line estimated to be 30 years; that was in March last year, from the Office of Rail and Road report. Additionally, nearly half all operators use trains over 22 years old. The Railway Industry Association has urged the Government to upgrade or replace approximately 2,600 vehicles by 2030, and to renew around 1,650 diesel trains that will be 35 years old after 2030.
The industry-wide consensus is that our rolling stock is outdated and inefficient. Therefore, my question to the Minister is: why are the Government not protecting British rail manufacturing, especially given the rising demand for new trains to enhance the passenger experience and to meet our net zero targets? In relation to our environmental targets, all 2,898 diesel and 912 bi-mode trains in the UK emit carbon dioxide and nitrogen oxides, with nitrous oxide—N2O—having various health impacts and being up to 280 times more potent than CO2 in warming the planet over a 20-year period. That is according to the latest Intergovernmental Panel on Climate Change report to the United Nations.
To achieve net zero by 2050, a solution must be found to replace diesel trains, which are currently used by 14 operators—especially since only 38% of the network is currently electrified. My constituents, who travel on unreliable, second-hand ScotRail Sprinter trains—no offence to my friend from Scotland, the hon. Member for Paisley and Renfrewshire North (Gavin Newlands)—built in the 1980s, find it inconceivable that the rolling stock companies’ profits are sky high while our UK-based rail manufacturers are crying out for orders. Taxpayers are forced to travel on substandard trains purchased with Government funds, while subsidies remain at twice pre-pandemic levels. The system is inefficient and does not serve the taxpayer or the travelling public.
There are needless links in the chain. The Government should streamline the system by directly purchasing trains and bypassing the ROSCOs or rolling stock companies. Indeed, RMT president Alex Gordon and general secretary Mick Lynch have been vociferous, voicing concerns about leasing costs, which have risen by over 30% over the past five years while rail industry staff costs have remained static.
A decade ago, leasing rolling stock accounted for about 13% of train operating companies’ costs; today, it accounts for 25% or a quarter. Does the Minister think that is fair or are the Government protecting profits when other areas of the network, including the staffing elements, are facing dramatic cuts?
Clearly, there is something wrong with how we procure rolling stock in Britain. Despite needing modern, carbon-neutral and sustainable trains, the Government have ignored warnings from both Alstom and Hitachi. The Rail Industry Association warned the Government that recent administrations have been a “canary in the coalmine” before the potential decimation of train manufacturing in the United Kingdom. Unite the Union warns that the industry’s performance relies heavily on Alstom Transport and Hitachi Rail, which hold 55.3% of market share.
The industry’s fate is dependent on key players like Hitachi and Alstom. However, recent forecasts indicate a bleak outlook, with revenues projected to decline at a rate of 8.1% annually over the next five years. Hitachi and Alstom face challenges, as their order books require clearing past orders before they can commence construction and setting up production lines for the HS2 trains, which are currently 18 to 24 months behind schedule.
Government intervention must go beyond rhetoric to provide tangible support to the industry. We are not asking for a bail-out—just a commitment to honouring existing contracts, and to establish a sensible industrial strategy for the industry. Beyond extending existing contracts, a focused industrial strategy is imperative. Research conducted by Make UK reveals that 99% of manufacturers support the need for an industrial strategy. Six in 10 cite the lack of an industrial strategy as a factor affecting growth in the manufacturing industry. Some 87% believe a strategy would provide their businesses with a better long-term vision on which to decide investment in future employment plans. To prevent another Alstom or Hitachi scenario, we must reassure the industry that the Government are prioritising its interests. I am hopeful that the Minister is going to give us some positive news, but the consequences of inaction are dire. Jobs and livelihoods are at risk, and it is time now for some decisive action.
The industry requires a steady stream of orders to sustain manufacturing and maintenance bases, alongside a proactive approach to replacing retiring engineers. We must abandon costly leasing, opting for direct purchases through Government procurement to bolster UK train manufacturing, which must be central to a long-term rail and industrial strategy, driving economic growth, innovation, and meeting our future transport needs.
Several hon. Members rose—
Sir Gary Streeter (in the Chair)
Order. Colleagues, we have just over 25 minutes remaining. If you aim for five minutes each, that should work.
Paul Howell (Sedgefield) (Con)
Thank you, Sir Gary. Credit to the hon. Member for Easington (Grahame Morris) for securing this critically important debate. I will try to skip parts of this as I go through.
When talking about the future of rail manufacturing, it is worth reminding ourselves of what the hon. Member for Easington has already said: the home of railways is the Stockton and Darlington railway in the north-east. As I am sure the Minister is aware, the oldest platform is in Heighington, where the Aycliffe levels are; it is also where Locomotion No. 1 was first placed on the line, starting the passenger railway service. Rail is in our blood in the north-east, and the Minister is very welcome to come and see these places for himself. It is important that we understand our history there and look after our stations. But clearly, railways are an industry not just of the past but of the future.
We saw the growth of the railways, but that declined as the motor car grew. It is now coming back again. It is important that we have sustainable and environmentally acceptable modes of transport. Rail is the key connector for passengers and freight in a cleaner, greener world. Rail undeniably has an exciting and developing future. That future needs to include the Hitachi facility based in my constituency, which has already been mentioned. Hitachi brought investment and innovation to both the rail market and the local economy. It is a first class employer that lives up to its tag line—“Inspire the Future”.
I have spoken with many employees and union members, who all express how the business consistently seeks to develop them; its partnership with the local university technical college is crucial for the people educated there. The work done by the Hitachi team in Aycliffe, since it was opened in September 2015, has been nothing short of spectacular. From a standing start, the employees and management have built a team and facility that anyone would be proud to have in their constituency. I was delighted when the Prime Minister went there last year and I hope to see the Secretary of State there shortly, too.
The skills and commitment are the foundational base for an exceptional future, and we must not allow them to dissipate. They are a core opportunity to support levelling-up in action. Those high standards are not just for the employees of Hitachi; they permeate throughout the local supply chain and the wider industrial base. Hitachi contributes to many aspects of rail in the UK, whether that be signalling or rolling stock. It is at the leading edge of new technologies such as battery power. That comprehensive footprint is a core component of its current and potential contribution to the future of rail in the UK.
Our rail manufacturing businesses and their extended supply chains are illustrative of the many areas of resilience we need as a country that have been sorely tested since covid-19. What were once reliable sources and supply routes have been tested almost to destruction. We have a clear and present need to improve our resilience in everything from food to power generation, and the rail industry has many of the skills we need as a country, both for the sector itself and for our broader manufacturing base. It is imperative that we find a way to help it through to the incredible future it can have.
We are all aware that the future of rail is coming at us like the proverbial train down the track. There are £3.6 billion-worth of rolling stock orders, but they are just over the horizon. We are all aware of the investments, such as in the Northumberland line, as well as the potential for Ferryhill station and the need for the Leamside line in the north-east. All those things are critical, but if we cannot see past the horizon to where the orders actually are, that runaway train of hope will not get here in time. It needs to get across the valley of uncertainty. Everyone I speak to is ready to help construct the bridge, but first we need to understand the size of the valley. We need to ensure that we can get there.
I have met with management many times, spoken incessantly to the Secretary of State and to the Minister, and facilitated a meeting between the unions and the Secretary of State. Everyone understands the complexity of the challenge and wants to do their bit to build the bridge, so I encourage the Minister and his Department to do all they can to help us get clarity on the size of the bridge that needs to be built, and to do all they can to minimise its size. I encourage the companies to be as creative as they in finding work to fill the gap. From the immensely positive discussions that I have had with the unions, I know that they will be as flexible as possible and do their bit to help the companies get them and their members across the valley of uncertainty to the future beyond.
I strongly encourage the Opposition Members who are politicising these concerns and trivialising the ability to resolve this matter to take a step back and not play politics. The political imperative could not be greater. If the Government wanted to be political, they would just use the pen as suggested, but it is clear that, for this particular order, they cannot. We need a real solution, not one that looks good but does not deliver.
I see real understanding and a commitment to resolve the issue. We are genuinely at an inflection point for the future of UK rail manufacturing. History will judge whether we get it right. For the employees in the rail manufacturing sector, it is imperative that we do.
Mr Kevan Jones (North Durham) (Lab)
May I say what a pleasure it is to serve under your chairmanship, Sir Gary?
I congratulate my hon. Friend the Member for Easington (Grahame Morris) on securing this very important debate. He and the hon. Member for Sedgefield (Paul Howell) said that the north-east has a long tradition in rail manufacturing, and it is one we should be proud of, but it also has a future. It had a future when we secured the investment in the Hitachi factory in Newton Aycliffe, which supported not only 700 highly paid jobs but the supply chain. People should remember the history of how we got Hitachi in the north-east. I pay tribute to Durham County Council; the NDA, which the coalition Government abolished, and Phil Wilson, who was the MP for Sedgefield and a great champion of getting that investment.
Why did Hitachi come to Newton Aycliffe? It saw opportunities in the tradition, but also the opportunities in the workforce. It came there because it saw the growth in the UK market, as well as in exports to Europe. Well, Brexit has dealt a hammer blow to that, but Hitachi was still determined to contribute to the development of the UK rail industry. Remember that the Japanese do not take short-term decisions; they take long-term investment decisions. They invested because they saw a pathway of work in the UK.
The hon. Member for Sedgefield talked about the challenge and about not making the issue political. Well, I am sorry, but this is a political decision. As he said, it is about ensuring that we have a rail strategy, and that is about UK factories, including Newton Aycliffe, having consistent orders. The answer is in the Government’s hands. He is a member of the governing party, and he cannot say that there is no solution. There is. The solution is ensuring that there is a drumbeat of orders, not just for Newton Aycliffe but for the rest of UK rail manufacturing, so that we get long-term supply chains in place and retain skills.
Hitachi quite clearly has a gap coming up for two years before HS2 comes on stream. I am sorry to tell the hon. Member, but we cannot treat the skills that have been developed at Newton Aycliffe like a tap, turning them on when we want them and turning them off when we do not. We have to invest in them and keep them there. Those people’s livelihoods are important. If the next generation of rail workers are to come through, we need the investment and the certainty that those young people will have a future, not just necessarily at Hitachi but in the wider rail industry.
Paul Howell
I will probably surprise the right hon. Member by agreeing with him. The way in which the Japanese and Hitachi work is all about generational levels of training, investment and continuity. I endorse his point about the need for skills to be invested in and continued over long periods of time.
Mr Jones
I agree with the hon. Member, so why does he not criticise his own Government, who are not investing in the long-term strategy we need? We have had it in the shipbuilding industry and we have a shipbuilding strategy that makes that exact point: we need a drumbeat of orders. That the Government decide to put warships over to Spanish and not UK yards makes a mockery of their commitment to such long-term strategies.
If we are serious about levelling up, this is it in action. Levelling up is nothing new; the last Labour Government saw the need for it. It was the reason why we were involved in the NDA and why we attracted Hitachi to the north-east. I must say that it takes a lot, having dealt with Japanese politicians and industry for a number of years, for them to make the public statements they have made about the future of Newton Aycliffe. It is in the Government’s hands to ensure that we have the continuation of skills. Without that, it has a bleak future.
I pay huge tribute to the management and staff at Newton Aycliffe. With my hon. Friend the Member for Easington, I met representatives of Unite the union the other day and they are fully committed to the future of the plant. They are the people who want to ensure that not only they but future generations have jobs. The answer to Newton Aycliffe’s future is in the hands of the Government, who can make sure that in the next few years we have a continuous stream of orders going through, but this is not just an issue for Newton Aycliffe; other plants face it as well. It comes down to the sad fact that for the last 14 years of Conservative Government, there has been a lack of industrial strategy across the UK. This is a good example not only of how that lack of strategy will endanger our great jobs in Newton Aycliffe but of how hollow all the nonsense spoken about levelling up over the last few years has been.
Iain Stewart (Milton Keynes South) (Con)
It is a pleasure to serve under your chairmanship, Sir Gary. I add my congratulations to my comrade from the Transport Committee, the hon. Member for Easington (Grahame Morris), on securing this important debate.
Rail rolling stock manufacturing in the UK has a bright future in the medium to long term, as my hon. Friend the Member for Sedgefield (Paul Howell) pointed out. In the coming years, there will be significant new orders, not just from HS2 but from Northern, Chiltern, ScotRail, Southeastern and others, which will be putting through considerable orders. The challenge at the moment is how we get over this short-term trough of orders. I am heartened that my hon. Friend the Minister and the Secretary of State are meeting Alstom, Hitachi and others to find out how that can be resolved. Those conversations will be confidential, so I will not press him on that.
My main point today is that the peaks and troughs in the procurement of rolling stock and, indeed, other parts of rail infrastructure are not a new phenomenon. For many decades, the industry has had a tap-on, tap-off approach and we need to address that. There is an opportunity to do that with the creation of Great British Railways, the way for which was paved by the draft Rail Reform Bill my Committee is scrutinising. I believe that if that is done in the right way, it can help to knit together the industry’s objectives and create a long-term horizon that will engender investment from Hitachi, Alstom and others. I do not want to prejudge the outcome of my Committee’s work, but we have already received considerable written evidence, and that is what the industry is calling for. For example, the Rail Industry Association made that point forcefully.
It is not just about having a strategy of buying new rolling stock; it is about the type of rolling stock that is needed, which is why we require a whole-industry perspective for the long term. There is an ongoing and evolving debate about the extent and type of electrification of the network. For some lines, the cost of electrifying the whole line are prohibitive, so we can have what is known as discontinuous electrification with battery electric trains. To arrive at that point, which I think is eminently sensible, different parts of the industry need to work together. I believe GBR can do that, and that is one of the areas that the Committee will explore.
The second point I want to make in the little time I have left is that although the procurement of new rolling stock is important, another important part of the rolling stock industry is refurbishment. Rolling stock has a long lifespan—typically, 30 or 40 years—but it often requires a refresh halfway through. Avanti currently has a refurbishment programme for the Pendolino stock carried out by Alstom at its site near Widnes, which I had the privilege of visiting not long ago.
We can do better in other parts of rolling stock system, too. I will give a brief example from my own line—the west coast main line. London Northwestern Railway is about to take delivery of brand new rolling stock, which is great; it will be faster and have more capacity, and it will be warmly welcomed, but the units it will replace are not life expired; they are perfectly good trains. They might need a refresh and some new kit in them, but they can be used. There is a gap in the thinking about how we can most efficiently use that cascaded rolling stock elsewhere in the network, where it might be needed. I appreciate the short-term anxieties about Hitachi and Alstom, and I hope they are resolved, but we need a much longer term, holistic perspective for this industry.
Alex Cunningham (Stockton North) (Lab)
It is a pleasure to serve under your chairmanship, Sir Gary. I am terribly concerned that Britain is facing a cycle of managed decline, so I congratulate my hon. Friend the Member for Easington (Grahame Morris) on securing this debate, which addresses some of that.
I spoke to Hitachi Rail ahead of this debate, and it cannot be stressed enough that if the Government do not take robust action, the company will see a colossal loss of skills and capability, and could be talking to its staff within very few months. Let us not forget that, thanks to an agreement with the Government of the day and as a consequence of the tremendous work of my former colleague Phil Wilson, it invested £110 million to open the state-of-the-art train manufacturing facility in 2015. It has 750 highly skilled workers and supports 1,400 jobs in the wider supply chain—many in my Stockton North constituency. Now, just nine years later, the company is needlessly facing a gap in its workload. It has a two to three-year production gap from when the last train leaves in March 2025. Unite’s press release confirms that work on those contracts is set to decline by October 2024.
Hitachi Rail tells me that it started engaging with the UK Government more than two years ago on this issue, and more importantly, on the solution. There was a visit from the Prime Minister, who was briefed on the challenges and the solutions. During that visit, he promoted the world-class manufacturing taking place. Hitachi Rail identified a contract variation for an additional 29 of the Avanti West Coast trains that are currently being manufactured. The volume of work and the ability to exercise and option an existing contract in the necessary timeframe made this the best way to maintain the skills base and bridge the production gap to HS2. It is a genuine long-term solution to the challenge.
As part of those discussions, Hitachi Rail also proposed the hybridisation of the Newton Aycliffe site, which entails investment so that maintenance work, bogie overhaul and repair work can take place at the site. However, those hybridisation—that is a new word to me, Sir Gary—solutions alone cannot maintain the manufacturing skills base. After two years of regular engagement, the UK Government informed Hitachi Rail in March 2024 that they were unable to exercise that option, citing the risk of third-party legal action as being too high.
Receiving a negative decision so late in the process means that finding viable solutions in the necessary timeframe increases the risk for the workforce. Of course, it is 19 years not nine years since the factory opened. Sharon Graham, Unite’s general secretary, said:
“The government needs to pull its finger out and tender the extension of the West Coast contract to Hitachi immediately. Ministers talk a good game about levelling up. The fact is, however, that at both Hitachi in Newton Aycliffe and Alstom in Derby, workers are in disbelief that ministerial incompetence is delaying announcements that would safeguard highly skilled jobs.”
We in the north-east have been let down time and again by the Tory Government. Not so long ago, the world-renowned Cleveland Bridge and Engineering Company at Darlington was abandoned. Before that, they abandoned primary steelmaking, and not long after that, they failed to support the communities that had invested in the Sirius mine and allowing it to be sold to one of the world’s biggest companies.
It is vital that trade manufacturing in the UK is seen as part of the long-term strategy for rail and that it does not go the same way as the likes of Cleveland Bridge and Engineering Company, which built the Sydney Harbour bridge and the Tyne bridge, among others. Some of the best trains are being built in this country, and we need to do much more of that. A Labour Government would exercise the option to bring forward the work, and today’s Government should do likewise. I hope the Minister understands that and will revisit all the negative decisions taken around this crisis to ensure the industry’s long-term and continual viability.
Sam Tarry (Ilford South) (Lab)
It is a pleasure to serve under your chairmanship, Sir Gary. I will keep my remarks short because, as my hon. Friend the Member for Easington (Grahame Morris), whom I thank for securing the debate, clearly set out and as many hon. Members have said, this affects people in constituencies across the country where thousands of jobs have already been lost across the supply chain. The basic issue is the lack of long-term orders on the books at many of the rolling stock manufacturers. The wasteful rolling stock company—ROSCO—system we have for leasing does nothing to help the industry, nor indeed the taxpayer. That money, which amounts to billions of pounds over the past few decades, could have been saved through a different leasing system and could be going back into support the industry right now.
The simple fact is that Alstom and Hitachi Rail have the lion’s share of the market between them—around 55%—so they dominate the entire sector. What happens to them is crucial for the whole long-term strategy of the industry. Their issue is that they were asked to clear their past order books so that they could commence construction for what they expected to be many years of building HS2 trains. Currently, those orders are 18 months to 24 months behind.
Previously, the Government have not taken seriously a procurement strategy that supports British jobs. In 2011, they gave away the contract for Thameslink to the German-based firm Siemens, which cost at least 1,400 jobs directly. On top of that—this is just one example that we know has already happened—it meant that there were 12,000 losses in the supply chain. We know that around 900 people are employed on temporary contracts at Hitachi Rail and Alstom. That means that even before any formal redundancy process has happened, those people—nearly 1,000 people—are very much at risk of losing their job. In fact, it has now been reported that in at least one of those firms, some formal redundancy processes are starting.
Part of what is absurd about this situation is that it was HS2 that enticed CAF, Siemens and Hitachi Rail to set up their operations here in the UK and to build manufacturing plants in communities where we thought, as many hon. Members have described, jobs would be kept for generations to come—as they should be, because rail is still the transport solution of the future, not just of the here and now. That feast and famine scenario means, however, that some manufacturers can maintain only a core of staff working as trained engineers on the production lines, with the vast majority of staff being employed part time or on agency contracts. That is not ideal. When manufacturers feel the pinch because of a lack of orders coming onstream fast enough, it is easy to remove those staff and potentially none of them will be re-employed any time soon. In fact, at Alstom, only one of the 40 manufacturing sheds remains in operation while it waits for parts from other parts of the supply chain.
Over the Easter holidays, I took my children on the Bluebell railway—the Minister will know it well. It is a fantastic heritage railway. Being on those amazing steam trains made me reflect on the fact that we are the country of Stephenson’s Rocket, the industrial revolution, the Mallard and the Flying Scotsman. We are also the country of advanced passenger technology. Ironically, a Conservative Government sold that to the Italians, and it has now been sold back to us so we can use it on the Pendolino trains that go up the west coast.
We are also the country of High Speed 1 and, in partnership with our French friends, built the first high-speed rail network under a seabed. We are a nation that has been more than capable for more than 150 years; we are the foremost rail manufacturing industrial country in the world. The Minister has within his hands—within the procurement strategy and the country’s long-term industrial strategy—the power to make Britain’s rail industry great again. I urge him and his colleagues in Government to stand up and do what is right, so that we have a proud manufacturing history in this country for my children and for the next 100 years.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
It is a pleasure to serve under you, Sir Gary. I congratulate my good friend and colleague from the Transport Committee, the hon. Member for Easington (Grahame Morris), on securing today’s debate. I could not disagree with a single word he said in his contribution. He spoke of the Hitachi Newton Aycliffe plant in his local area, in the constituency of the hon. Member for Sedgefield (Paul Howell), who is also my colleague on the Transport Committee. The hon. Member for Easington made a spirited plea for jobs there, and mentioned ROSCOs, as did the hon. Member for Ilford South (Sam Tarry), which I will come on to.
We have heard contributions from the Chair of the Select Committee, the hon. Member for Milton Keynes South (Iain Stewart), as well as the right hon. Member for North Durham (Mr Jones) and the hon. Members for Stockton North (Alex Cunningham) and for Ilford South. Only two of the contributors today are not current or very recent members of the august Select Committee on Transport, including the Minister himself.
We welcomed Great British Railways, at least in principle, because it was a step closer to reintegrating strategic decisions on track and trains. In many ways, it sought to replicate the arrangements that have been in place in Scotland in recent years, but which have been completely absent in England and Wales for 30 years since franchising. It has been six years since the Government commissioned a report that three years ago called for legislation to formally establish Great British Railways. Too much time has been wasted over these last years.
There are not many hon. Members present who would disagree that the Rail Minister is a fundamentally decent man who wants to see a better railway. I am sure he will form part of the shadow Cabinet in the not-too-distant future—what the Lord giveth, he taketh away—but he has inherited an utterly dysfunctional system. Not for the first time, that dysfunction is threatening tens of thousands of jobs in the rail industry, not just in primary manufacturers, but across the supply chain. I say that despite the welcome but last-minute intervention last week.
While I was researching for today’s debate, I came across a similar debate that took place in the Commons nearly 30 years ago. On that occasion, the debate was secured by the former Member for Cunninghame North, Brian Wilson. I need to wash my mouth out with soap, but this is one of the few occasions where I agree with the bulk of what he said. I can guarantee that this will not become a habit. On the last day before the Christmas recess in December 1994, Brian Wilson discussed the threat to the rail manufacturing industry that was posed by the Government’s policy and strategy, or rather the lack of them. He said:
“It is a rapidly unfolding, utterly unnecessary tragedy created solely by the Government’s policies towards the railways…Ministers could not have been more effective in creating a fatal hiatus for the train building industry if they had planned to do so.”—[Official Report, 20 December 1994; Vol. 251, c. 1538.]
Again, I do not want to make a habit of agreeing with Mr Wilson—I do not think that he would welcome that—but he was on the money then. Warnings were given that the ABB rolling stock works at York were under threat, due to a lack of orders, and that prediction came to pass just two years later. In major part, that lack of orders was caused by the confusion and dislocation caused by privatisation and franchising, which in turn paralysed British Rail, as it was then.
The creation of ROSCOs did not help matters, because they were hived off by the Government to the private sector at criminally low prices. The Minister who responded to that 1994 debate told the main Chamber that the rail industry had to face up to
“the realities of the marketplace.”—[Official Report, 20 December 1994; Vol. 251, c. 1545]
Grahame Morris
The hon. Member is making some excellent points. On ROSCOs, I remind hon. Members that in the current year, I believe that they are making in excess of £400 million in profit.
Gavin Newlands
I would not disagree with the hon. Member on that.
To continue on ROSCOs, nobody has ever satisfactorily explained why we continue to have a system whereby rolling stock companies, which are all owned by private equity and investment funds, are the primary owners of multiple units, locos, passenger carriages and freight wagons, rather than the taxpayer, who ultimately pays for them. ROSCOs are generating almost risk-free profits for their owners, which are almost exclusively overseas funds, because ultimately, private rail operators have the Department for Transport as an operator of last resort. They were gifted BR stock at a bargain price and have spent the last three decades coining it in every time a new fleet is needed for an operator. That is just one example of the billions leaking out of the system to private finance that could instead be invested in the public rail network or in a sustainable and properly managed rolling stock procurement programme.
To conclude, the current model has failed. It was failing 30 years ago, it has failed since then, and it will continue to fail for the next 30 years unless this issue is specifically addressed in any rail reform package that is brought forward by this Government or any future Government.
Stephen Morgan (Portsmouth South) (Lab)
It is a pleasure to serve with you in the Chair, Sir Gary.
I start by thanking my hon. Friend the Member for Easington (Grahame Morris) for securing and opening this important debate. It has been a well-informed and timely debate, and I thank all hon. Members for their contributions to it. My hon. Friend spoke with real knowledge and understanding of the transport network, including the current challenges facing the rail sector and rail manufacturing. He spoke about the consequences of a lack of an industrial strategy and the value of rail manufacturing jobs, not only to local communities but to wider regions, stressing the need to honour existing contracts to help secure the future pipeline of work.
My right hon. Friend the Member for North Durham (Mr Jones) was absolutely right to say how vital a steady drumbeat of work is to secure rail manufacturing for the future. I know that he knows that very well from his extensive work on shipbuilding and I thank him for the points that he has made today.
Other Members made very valuable points with regard to the need for a long-term, holistic view of what is required to secure work for the future. My hon. Friend the Member for Stockton North (Alex Cunningham) shared concerns about the delays in ministerial announcements and the implications of those delays, while my hon. Friend the Member for Ilford South (Sam Tarry) spoke about the Government not taking seriously their commitments to support industry and jobs, and about what that means in terms of putting the sector at risk.
As we have heard, Britain’s rail manufacturing is in a state of crisis. In Derby, 1,300 jobs are at risk at Litchurch Lane, a factory that has been making trains for 150 years. Another 700 are at risk in Newton Aycliffe, and more than 16,000 jobs are at risk in the supply chains.
Behind these jobs are people with decades of experience and expertise and centuries of family history in our rail sector. When I visited Alstom last year, I met people who were following in the footsteps of their parents, grandparents and great-grandparents by working on that site. They had no plans to leave, but the uncertainty of the past has already caused so many to do so. This uncertainty has been extremely worrying for those in jobs that are at risk and for the rail sector as a whole, which has been unable to plan for the years ahead.
The frustrating thing is that all this has been avoidable. Both Alstom and Hitachi are clear that their uncertain future is thanks to the Government’s inaction. Ministers have been warned about the feast and famine of rolling stock pipelines for years, yet they have continued with the short-term, sticking-plaster approach, which has created a crisis in our rail manufacturing sector. Instead of confronting this problem, the Transport Secretary spent months with his head in the sand, saying that a deal to save jobs was out of his hands. As a result, deadlines were missed, skilled workers have left for jobs elsewhere and supply chain companies have gone bust. The contractor Paintbox went into administration last year when its work painting new carriages in Derby dried up. Motherson, which did the wiring on trains, pulled out of the site, and Solo Rail Solutions in Birmingham, which made the doors, appointed administrators earlier this month.
This is not just about job losses; what the Government do not seem to recognise is that huge industries cannot simply be turned on and off. Laying off workers means a loss of skillsets that take years to replace. It also means a loss of capability in the British market, which means less competition, more imports and rising costs for future procurements.
Last week, the Transport Secretary proposed a last minute order of Elizabeth line trains from Derby, but no formal deal has yet been reached. However, if one is reached, let us be clear what this will mean: another short-term sticking plaster that reveals the gaping hole in the Government’s non-existent industrial policy and means we are likely to have another groundhog-day experience with Hitachi in the months to come—more workers fearful for their job security, more families moving away due to uncertainty and more supply-chain companies struggling to survive.
Alex Cunningham
In my speech, I mentioned that the Government are using their problem with the level of risk to bring forward procurement. Does my hon. Friend agree that we have to balance that risk with the risk of losing all those skills in cases such as that of Hitachi?
Stephen Morgan
My hon. Friend is absolutely right. We need to bring consistency and clarity to the sector, so that the investment can take place. Many Members have said as much, and I thank my hon. Friend for putting that message on record.
This is a time when our rail industry needs certainty, stability and leadership. The managed decline that we have seen from this Government is only putting our railway jobs at risk. The Minister has many questions to answer. Other hon. Members have already asked many questions, so I ask him only one: what is he doing to stop a repeat of what we have seen in Derby over the past year happening in Newton Aycliffe in the coming months and elsewhere down the line? I look forward to hearing the Minister’s response and would like to restate my thanks to my hon. Friend the Member for Easington for tabling this debate.
Sir Gary Streeter (in the Chair)
I call Minister Huw Merriman to respond. If he would leave a minute or so for the mover of the debate to wind up, that would be great.
The Minister of State, Department for Transport (Huw Merriman)
With pleasure, Sir Gary. It is a pleasure to serve under your chairmanship. I start by thanking my good friend, the hon. Member for Easington (Grahame Morris), for securing this important debate on the future of rail manufacturing and for his engaging and impassioned speech. He is always a real warrior for the railway and the workforce. Rail remains a top priority for the Government. It connects people to places, delivers the goods we rely on and, as we have heard during the debate, supports jobs in our communities.
Turning straightaway to rolling stock manufacturing, since 2012 the Government have commissioned 8,000 new rolling-stock vehicles—that is out of the 15,600 we have in total. That has encouraged four train manufacturers to set up shop here in the UK. It is worth stating for the record, because it could have been missed in what has been said this afternoon, that in 2010 there was only one train manufacturer. We now are proud to have four. We are very keen to ensure that the four thrive and survive. I will come on to that point later in my speech.
These businesses are now assembling and building trains, while bringing growth to local communities. The average age of rolling stock has fallen from 21 years in 2016 to just under 17 years today. The hon. Member for Easington pointed to one particular train operator that has had a longer tenure, but I tend to look at the entirety of the network, and the average age is under 17 years, which is less than half the average life span for a vehicle, which tends to be 35 to 40 years. Britain’s modernised fleet of trains offers improved comfort and services to passengers across the country, while benefiting the UK rail supply chain, which came together to design, manufacture, paint and assemble the new trains. We have a workforce to be proud of. It is right that train manufacturing is a competitive, commercial market.
Alex Cunningham
The Minister was talking about the comfort of travelling by train. I would like to personally invite him to take a trip with me from Darlington to Saltburn on the train one day, and we will see what comfort we have to put up with in the Tees Valley.
Huw Merriman
Look, I travel by train all the time, not just on my own line, which I believe has the oldest train stock, but across the country. I spend every single week travelling by train across the country. I am sure at some point I will experience that part of the country as well. The facts do not lie. Out of our total of 15,600 trains, 8,000 are new trains that have been built since 2012. That shows that improvements are happening, but there is more to do, and I am always keen to do more.
It is vital that rolling-stock-owning companies continue to play their role. The private sector has invested around £20 billion to transform our train fleets for passengers. Trains are major assets, and there will naturally be procurement cycles. Our travel habits have changed since the covid pandemic. While passenger numbers are now stabilising, we are still seeing a reduction in revenue. Despite this, the order of 54 high-speed trains for phase 1 of High Speed 2 remains unchanged. There has also been a sizeable contract awarded recently to LNER, and there are upcoming procurements in the market being run by Northern, Southeastern, TransPennine Express and Chiltern. This process will be open to all manufacturers, as is right. Over the next two to three years, we envisage contracts being signed for over 2,000 new vehicles, with a total value of more than £3.6 billion.
Competitions for procurements to upgrade existing rolling stock fleets are also in the works. East Midlands, Chiltern and CrossCountry are due to modernise their existing fleets. With several other operators, such as Avanti West Coast and the Angel Trains Pendolino fleet, refurbishment is already under way. None the less, we recognise that some manufacturers face gaps in their order books over the next two to three years. I disagree with the claim by the hon. Member for Easington that the Government have not acted quickly enough on potential job losses at Alstom and Hitachi. The Secretary of State and I have been involved in discussions with both companies over several months.
This is a complex issue. There are no straightforward solutions, and any intervention must comply with the law while ensuring value for passengers, taxpayers and Governments. As I referenced in the Chamber last week, Siemens gave us a good example of that by challenging in court the award for HS2 that went to Hitachi and Alstom. The Department was found to have won on every single point. That acts as a guiding point for how we must make our tendering process work. If we do not make that work and we award contracts that are ruled unlawful by the courts, we create more uncertainty for the workforce, which we are doing our best to help.
Huw Merriman
I have not got time, so I am sorry, I will not give way.
I am pleased to report my right hon. Friend the Transport Secretary had a constructive meeting last week with Alstom’s chairman and CEO and its UK and Ireland director. We have now entered a period of intense discussion with the company. It would not be appropriate to go into the details of those conversations at this stage. Work continues at pace, and I know the Transport Secretary plans to update the House at the appropriate time.
With regards to Hitachi, last week the Transport Secretary met Unite’s assistant general secretary and representatives from Hitachi’s Newton Aycliffe plant. I met a representative from Hitachi in Parliament yesterday as well. The Secretary of State was able to explain the facts of the situation and the Government’s position, facilitated by my hon. Friend the Member for Sedgefield (Paul Howell), who has assisted greatly. The Department remains keen to work closely with Hitachi to help the company find a solution. We strongly encourage Hitachi to continue to engage constructively with us.
The future for our plants is very much focused on exports, as it has to be. Now that we have four train manufacturers it is key for us to work with those manufacturers so that products that are designed and built in the UK are exported abroad and we can grow the plant. I will add that when it comes to rail infrastructure investment, we have published a £44 billion five-year funding settlement for Network Rail’s operations, maintenance and renewal activity in 2029, which provides further opportunities for UK rail manufacturers and suppliers.
The key to the future of rail manufacturing is to continue to invest in rail across the entire network. The £12 billion that we have just announced to help Northern Powerhouse Rail better connect Liverpool to Manchester and deliver new routes and stations across the north will provide more opportunities for train manufacturers and the rolling stock that they will produce. That is where the TransPennine route upgrade will help with the TransPennine Express order, which is to market. Of course, Network North also saw our commitment to deliver on the Ferryhill scheme, subject to a successful business case at each stage. I thank my hon. Friend the Member for Sedgefield for his unwavering commitment.
It has come up a number of times, so I will thank the Transport Committee for its work carrying through rail reform as the pre-legislative scrutiny Committee. I note there are six current or former members of the Committee in the Chamber for this debate. The Chair of the Committee, my hon. Friend the Member for Milton Keynes South (Iain Stewart), is spot on in saying that it gives us a longer-term, holistic approach to allow the railway to organise itself. One would hope that industry will be better supported by that holistic approach. I am very grateful for the work that the Committee is doing.
Time does not allow me to continue, but I shall conclude by saying that I cannot overstate the role of rail manufacturing in supporting a growing economy. We are really proud of the four train manufacturers we now have in this country. We want to do everything we can to work with them and the individuals working in the wider rail supply chain. Their jobs matter hugely to us. We understand the uncertainty and we are working hard to unblock it. That is why the Government are committed to working with businesses to overcome the challenges and maximise the opportunities ahead, both at home and abroad. We work towards our shared ambition to bring track and train together with rail reform, and support our fantastic rail and train manufacturers.
Grahame Morris
Thank you, Sir Gary, for the exemplary way in which you have chaired the debate. I thank the Minister for his thoughtful and considered responses. We are all aware that he knows the solutions to the problem and we seek to push him to make the decisions that are required in the interests of retaining those jobs, directly and in the supply chain, as quickly as possible.
I thank my right hon. Friend the Member for North Durham (Mr Jones), my hon. Friends the Members for Portsmouth South (Stephen Morgan), for Stockton North (Alex Cunningham) and for Ilford South (Sam Tarry), as well as my colleagues and comrades from the Transport Committee, the hon. Members for Paisley and Renfrewshire North (Gavin Newlands), for Milton Keynes South (Iain Stewart), and for Sedgefield (Paul Howell). I particularly thank the respective Front Benchers for their responses.
Without action, we will be modernising or replacing our trains with imported units using taxpayers’ money to support thousands of jobs and apprenticeships overseas rather than in the UK. We implore the Minister to act, and to preserve the excellent jobs that we have in our existing manufacturing centres.
Question put and agreed to.
Resolved,
That this House has considered the future of rail manufacturing.