Railways: East Coast Rail Franchise

Lord Forsyth of Drumlean Excerpts

Tuesday 28th October 2014 Lords Chamber

[Baroness Kramer]

My Lords, it is certainly true that other countries have chosen to invest and own companies across a wide range of industries. This is a particularly difficult industry in which to do that. Its fixed costs are extremely high. It costs something like £7 million to £10 million to put in a bid, with no assurance of winning. It is certainly a high-risk industry and the margins, as the noble Lord will know, even for an effective and profitable company, are quite fine. It is an entirely valid decision not to enter into actually running companies when there are private options that have delivered very successfully up and down the country.

[Lord Forsyth of Drumlean (Con)]

Surely my noble friend would recognise that the whole point of competitive tendering is to get the best value and the best deal for the taxpayer. If she is right that the state-owned company would not be able to compete, why is that a reason to exclude it from the process?

[Baroness Kramer]

Again we can see the complexities of a state-owned company being involved in this. Would we give it preferential financing or would it go out on the market? Let me make this point: do we want to set up a company and pay its senior management very high fees for the possibility that, with bids ranging from £7 million to £10 million apiece, it might eventually achieve a franchise? We have a long history and I have to suggest that the history of companies run over the long term by the UK Government has not been one of outstanding success. We know that we have very successful franchises across the country, so let us take advantage of them to make sure that we get the best opportunities for the many passengers using these services.