Railways: Public Procurement

Lord Bradshaw Excerpts

Tuesday 30th November 2010 Grand Committee

[Lord Bradshaw]

I have been a victim of privatisation in two industries. Your Lordships should reflect first on who benefits most from privatisation. We should perhaps do well to think about the vision. It was about small shareholders, employee shareholders and people taking part in the running of their companies, with the shares to be well spread. However, that was in the era of the carpetbagger, and the shares were disposed of by small shareholders and vacuumed up by big corporations. Moreover, the privatised companies, in particular water and electricity companies, geared up enormously. They had virtually no debt, because they had received money from the Government. They then went out and borrowed large sums of money and gave it to their shareholders, which was not what was intended. To crown it all, they then came back to the regulator and said, “We haven’t got enough money to repair what we’ve taken over. You must allow us more money”, so their prices went up to a level which I imagine would have been quite unacceptable had they remained in the state sector.

That is a bit of history. Let us turn to who benefited. I know very well that they were the professional money men, the merchant bankers, the lawyers and the consultants. It ended up with those people being paid salaries that were massively in advance of those of anyone who did the job on the floor of the business concerned, be they engineers, operators or the employees.

What do we want in future? When the Government privatise the Post Office, which seems to be next in line, and consider employee shareholding as a part of that—which is what the Prime Minister has said—how will they make sure that it remains a mutual? I believe that mutuality was one of the aims of the people who devised these systems, but the system just ran away with them. How can we privatise an organisation such as the Post Office in a way that engages its employees in the operation of their business?

The question goes much further. Once local government starts to privatise its services, how will we stop them being run by large foreign conglomerates in a way that is detrimental to the people in local government or to the customers of those organisations? We know that large American healthcare companies would be interested. Is responsibility for looking after people’s interests to be contractualised out of all recognition? It is essential to think carefully through any further privatisations or any contractual organisations that are set up.

I saw an article in the Times yesterday—I am sure that it was coat-trailed by another very expensive firm of consultants—suggesting that Network Rail should be split up into this and that. I should like the Minister, if he can, to deny that there is any truth in it. I am sure that the consultants who suggested that were not unmindful of the sort of work that it would create for them, their lawyer friends, their financier friends and their merchant banker friends, who are not really party to what Network Rail is doing. They would take money away from what Network Rail should be doing—and I have no particular brief for Network Rail.

I also ask the Minister to look very hard at the PFI schemes. Those have been, if I might say so, a financial disaster and, what is more, we are going to go on paying the bill for them for years and years. I experienced one of those in the police force, when we were made by the then Government to go out to a private finance initiative bid. It has cost a huge amount of money, not just for the new building but for the services that we were obliged to take as part of the deal. It has become a very expensive millstone around the neck of the authority.

Turning back to the railway, some railway franchises are well run, such as Chiltern Railways and Merseyrail, but I am very concerned about whether most of the people put the customer at the top of their list. I recommend that the Minister looks very hard at the survey work that is being done by Passenger Focus. It measures passenger satisfaction on many scales, which is very important in what we are doing.

--- Later in debate ---

[Lord Bradshaw]

I wonder whether the noble Lord might reflect on the fact that it is the load factors which the department insists on that make the roscos move all the seats closer together, so that they meet the target set by the department.

[Earl Attlee]

My Lords, I will certainly reflect upon that and have a chat with my officials afterwards.

The noble Baroness, Lady Greengross, spoke of future studies in other areas of public procurement. We look forward to her results with interest and we will certainly take note of them. I am confident that the public procurement processes adopted for rail will continue to represent best practice and provide transparency and equal treatment for bidders. The rail franchise specifications which are procured will evolve and reflect the results of the consultation to provide an environment where operators have the freedom to provide improved value for money and the improvement that passengers want.