Passenger Railway Services (Public Ownership) Bill

Debate between Helen Whately and Richard Burgon

Committee of the whole House
Tuesday 3rd September 2024 Commons Chamber

[Helen Whately]

There are a few problems with what the hon. Member has just said. One is that he talks about those figures, but the Government have not taken the time or trouble to set out what the impact of the Bill on passengers and taxpayers is expected to be. Were the Government confident about that impact, I am sure they would have set it out, but they have not. That is why our amendment proposes that they should set it out. We also know that while on the one hand, there are some savings to be made from management fees—I will come to that later in my speech—the benefits of competition, and the pressure of profit and loss and the bottom line, drive innovation and bring efficiency. That does not necessarily happen to the same extent in the public sector.

[Richard Burgon (Leeds East) (Ind)]

Will the hon. Lady give way?

[Helen Whately]

No, I will make some progress.

For the reasons I have described, we have also tabled amendments to put some conditions on franchises moving into the public sector. Under the Secretary of State’s plan, the running of trains on our network will increasingly be tasked to a little-known Government company called DFT OLR Holdings Ltd, or DOHL, the current operator of last resort. It seems to me a huge risk to expect DOHL to successfully take over and run every franchise in the country. DOHL has had, shall we say, mixed results with the franchises it has taken over, and expecting it to run a further 10 on top of the four it is currently operating strikes me as a lot to ask. I recognise that the Bill makes reference to that risk by providing for franchise extensions where it would not be practical to bring the service in-house, but under the current plans, that would be decided by the Secretary of State. It is not that I do not trust the right hon. Lady, but she has shown herself to have a great deal of confidence in public operators, in the absence of any substantial grounds for that confidence.

I have been told that there is no plan to increase headcount, budget or resources of any kind for DOHL as it takes on that increase in workload from four to 14 franchises. I welcome the Government making an effort to achieve efficiencies at the centre, but I struggle to believe that more than tripling the number of franchises brought in-house will not involve some increase in resources. We therefore think it would be prudent for the Office of Rail and Road to form an independent judgment on whether DOHL has the capacity and expertise to take on each new franchise as it comes up, and to run it, at a minimum, as well as it is already being run. That could be done well in advance of most contracts ending, so it would not really be a hindrance to the Secretary of State’s plan, but it would provide a great deal of reassurance to passengers, and all of us as their representatives, about the capacity of the Government to successfully take over the functions of so many train operating companies.

[Helen Whately]

I accept some of the points that the hon. Gentleman made. That is why I said that the record of DOHL had been mixed. Sometimes there has been improvement in performance, but that is not the case for all the franchises it runs. That is my reason for not being confident that it is the right organisation to take on such a large increase in its workload, particularly without any further increase in its resources, including some operators that are performing better than the train companies that he mentioned.

We want every contract that is awarded to place a duty on DOHL to look at how to modernise our network and to ensure that passengers are at the forefront of all decision making—passengers not just in urban areas and around London but, crucially, in rural areas and places that have traditionally been under-served by the rail network. Time and again, the Secretary of State has said that her No. 1 priority is passengers—that she will protect their interests above all else, and that it is for them that she is seeking this change. This is a chance to put her money where her mouth is and create a legal duty that promotes the needs of passengers in all future agreements with public sector operators. That will build in a layer of accountability on things that we all agree are important.

On amendment 8, public bodies marking their own homework is not something that Opposition Members believe leads to good results. I know from my time in government that independent scrutiny makes life harder for Ministers, but it also improves accountability, and with that outcomes. That is why we seek to introduce proper financial reporting and oversight for public sector operators. Under the franchise system, whatever its shortcomings, train operators are incentivised to increase passenger numbers and control costs. That has been an undeniable success of privatisation. Passenger numbers have doubled and costs have been controlled, increasing at a far slower rate than revenue.

In future, passengers and taxpayers will have to foot the bill for any loss of control on costs, any inefficiencies or any failures to innovate. That is a serious implication, and something we should do our best to protect people from. Creating, or recreating, some incentives is a good place to start. We will need to know how well the public train companies are performing—what they are doing to increase passenger numbers and drive growth in rail services, how reliable their services are, how well they are keeping costs under control, and how satisfied passengers are with the service they provide.

Our proposals will allow us to identify both good and bad performance, hold the managers of those companies to account and reward them accordingly, such as by linking managerial pay to performance. Those companies will no longer have shareholders to answer to, or the financial incentives that go with a senior role in the private sector. The Government have told us that part of their rationale for these changes is to better align the incentives of train operators with the interests of passengers, but the Bill currently provides no mechanism for that. We are not seeking to frustrate a change that this Government were elected to deliver; we simply wish to bring proper transparency and accountability to the process. That includes reporting on the costs involved in bringing operating companies into public ownership.

Government Members will no doubt point to the money that will be saved by removing management fees, but this equation is not one-sided. While the Secretary of State might be saving £150 million each year on fees, industry experts have predicted that the Bill could cost passengers and taxpayers up to £1 billion a year in lost productivity and growth—and that is before accounting for the Government’s taking on all the long-term liabilities of the companies. Pension obligations, rolling stock and long-term leases will all be transferred on to the Government balance sheet, and we have had alarmingly little information on what that figure will be.

[Richard Burgon]

The shadow Secretary of State is making a case from her ideological point of view, although she denies it. Running through her speech is a deep suspicion of the public sector. Suddenly she is suspicious about the quality of service for passengers. Suddenly she is suspicious about the quality of service provided, and the amount of money being spent on it. If only those suspicions and that scrutiny had been applied by the shadow Secretary of State and her colleagues while they were in government to the disastrous privatised railway service. Is she really trying to convince this House that privatisation of the railways was in any way a success? It seems to me that she is trying to stand as a barrier to public opinion and the Bill’s progress, because the majority of people in this country support public ownership of the railways and the Labour Government were elected with that as a clear manifesto pledge.

[Richard Burgon]

I am, thank you. I will bring my remarks to a close by asking, is it not the case that the shadow Secretary of State is being deeply ideological and is only interested in the privatised model and the pursuit of profit, regardless of the effect on the public?

[Helen Whately]

The hon. Gentleman and I probably do have different views ideologically; I will acknowledge that. I think that he probably, as was implied in his intervention, thinks that profit is bad. I think that profit can be a helpful thing, and it is thanks to the motivation of people to make profits that we in this economy, and those in many similar economies, have the prosperity that we enjoy today. I think that Government can do a lot, but I am also thoughtful about when Government can help and when Government might hinder. That is why I take the view that, in rail, sometimes it is right for the public sector to do things and sometimes it is right for the private sector to do things.

One thing that I fundamentally think is missing from the Bill is scrutiny. I am not trying to frustrate the mandate that the hon. Gentleman’s party has to bring forward this legislation—I think I made that clear—but I want to improve it, and improving it involves introducing a level of transparency and accountability that simply is not in the Bill. That is why I tabled my amendments.

We also seek clarity on how the Bill will affect other privately run passenger services on the network. It is clear that deep down, those on the Government Benches know that the public sector cannot, and should not, run every service on the network. That is why open access operators like Eurostar and Gatwick Express have rightly been allowed to continue under these plans.

Open access represents a huge opportunity for passenger rail in this country. When done right it can provide nimble, cost-effective services that give passengers greater choice and bring in revenue for the network. In fact, the EU has enshrined in law the rights of open access operators in tendering for passenger services. We are not proposing that at this stage, but I am concerned about how this change will impact on those already operating on the network, and what opportunities will remain open to them or others to offer new open access services in future.

The same goes for the future of devolved concessionary models. Why, if Government Members truly believe that private providers are simply siphoning off cash, can Transport for London and Merseyside still run concessionary models? While I happen to think they should be allowed to do so, it does not seem fair to have one rule for Sadiq Khan and another for everyone else. What about Manchester, Leeds or Birmingham? What if they want to run their own transport systems in a way that suits them?

My understanding is that the Labour Government want to build on the progress we have made in devolving responsibilities to cities and regions, but this Bill looks more likely to reduce the options for other devolved authorities, leaving them able to run concessionary models only if they get an exemption under section 24 of the Railways Act 1993 to do so.