Lord McLoughlin
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West Coast Main Line
Lord McLoughlin Excerpts(12 years ago)
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The Secretary of State for Transport (Mr Patrick McLoughlin)
With permission, I would like to make a statement on the west coast main line. On Wednesday 3 October, I announced the cancellation of the inter-city west coast franchise procurement. This decision was taken as the result of significant flaws found within the procurement process undertaken by my Department. These made the continuation of the competition and the award of the franchise untenable.
I know how important the west coast main line is to the economy of this country and to the constituents of Members. This franchise operates more than 300 train services a day, carries more than 26 million passengers a year and employs more than 3,000 staff. This is a regrettable outcome caused by unacceptable mistakes made in my Department during a complex procurement process. It has also meant that I have paused the ongoing franchising programme, including live competitions on Essex Thameside, Great Western, and Thameslink.
I would like to reiterate that there is no suggestion that FirstGroup or any of the other bidders, including Virgin Trains, acted in anything other than good faith during the bidding process. FirstGroup is a great British company and a leading transport operator both here and in the United States. It provides jobs for 13,000 people across the UK and operates four railway franchises, which together carry more than 300 million passengers a year. I want to make it clear today that the cancellation of the west coast competition should not be seen as a comment on FirstGroup, its bid, or its approach to running rail franchises now or in the future. Furthermore, as I have said to the Select Committee on Transport, Virgin has also made a fantastic contribution to both the railways and aviation in this country.
It would be premature at this stage to speculate on where and how the errors in the process emerged. That is why, when I announced the cancellation of the procurement, I also asked for two urgent investigations to be carried out. Both reviews are now well under way. The first of these is an inquiry led by Sam Laidlaw, the chief executive of Centrica. He is the lead non-executive director on procurement across Government and the lead non-executive director of the departmental board. His review is examining what happened during the west coast procurement and why. It will establish the lessons to be learned. I have asked for the initial findings of the review by the end of October and expect the full report by the end of November.
The second review is looking at the implications of the flaws on the west coast procurement for the rest of the franchising programme. This review is being led by Richard Brown, a highly respected industry figure and the chairman of Eurostar. My expectation is that the Brown review will report no later than the end of the year on lessons for the future franchising programme, so that it can be resumed as soon as possible.
I am today publishing the terms of reference for both reviews, and these have already been laid in the Library of the House. Before these reviews have been completed, and particularly before the findings of the Laidlaw review have been published, any speculation as to the nature of the flaws is just that—speculation. I will of course report to the House on the findings of these reviews at the earliest opportunity.
I would like to take this opportunity, however, to restate the Government’s commitment to ensuring that we continue to have private sector innovation and investment in the railways. Since privatisation, the number of passenger miles travelled has nearly doubled. This growth brings significant benefits to the country’s economy and to the environment, relieving congestion and improving connectivity for businesses, commuters and leisure travellers. Passenger satisfaction is up, and so is punctuality. I want to see these benefits continue, which is why I want this pause, while the reviews are carried out, to be as short as possible. We will restart our refranchising programme, including the competitions on Essex Thameside, Great Western, and Thameslink, as soon as possible.
I now turn to the future operation of the west coast main line. I am committed to ensuring that passengers will see no impact as a result of these mistakes. Passengers will be able to make the journeys they have planned, with the tickets that they have bought. Clearly, we will need to learn lessons from the two reviews, and we will need to run a new competition for the west coast franchise. I want this to happen as quickly as possible, but we want to get it right, which will take time. It is also important that in the intervening period we secure a deal that secures best value for taxpayers, including the continual improvement of service quality.
For that reason, I am today announcing that we are commencing negotiations with Virgin Rail Group with a view to it remaining as operator of passenger services on the west coast main line. Subject to ensuring value for money for the taxpayer, I expect this to last for a short period of about nine to 13 months. In this period, we will run a competition for an interim agreement. This interim agreement, which will be open to any bidders, will then run until the new long-term west coast franchise is ready to commence. I will keep this approach under review so that it can be informed by the Brown findings and recommendations and so that it will ensure value for money.
I am grateful to the team at Directly Operated Railways for all their preparations so far. DOR will continue to stand ready should it be required. Britain’s railways are a great success, and I am determined that this incident will not get in the way of the Government’s record. We have launched the biggest programme of investment since the Victorian era and have just announced reductions in regulated fare rises over the next two years, recognising the importance of access to the railways for millions of commuters. I commend this statement to the House.
Maria Eagle (Garston and Halewood) (Lab)
I thank the right hon. Gentleman for advanced view of the statement. I well understand why, when he announced this embarrassing debacle earlier this month, he did so at one minute past midnight, when he hoped everybody would be asleep, because this is yet another staggering example of the monumental incompetence of this shambles of a Government. It is a failure of policy, a failure of process, a failure of ministerial oversight and a failure of ministerial leadership.
The Government’s new franchising policy, which requires risks to be calculated 15 years into the future, was designed by the current Secretary of State for Northern Ireland, announced by the current Secretary of State for Defence and implemented by the current Secretary of State for International Development; and it has shamefully been left to the former Chief Whip to try and deflect the blame for it on to three officials in the Department for Transport. It is just as well it has not been left to the current Chief Whip to deal with, or he would probably have blamed it on the police at the gates of Downing street.
The reality is that Ministers are responsible. It was Ministers who redesigned franchising policy to make it much more difficult to calculate which bidder should win. It was Ministers who slashed faster than any other Department the expertise and staffing available to carry out the task, including apparently making the director of procurement, the director of rail strategy and the director of rail contracts’ posts redundant along with those of senior finance staff; and it was Ministers who reportedly cancelled an external audit that was routinely done in other competitions to check the outcome of the franchise award ahead of its announcement.
It is incredible that Minsters continue to maintain that these problems only came to light late in the day, just before they made that midnight announcement less than two weeks ago. We know that Ministers were sent a report warning of precisely the problems that led to the competition being cancelled five days before the contract was awarded. Today was the opportunity for the new Secretary of State to begin to put things right, yet he has failed his first test and announced a way forward that adds to the chaos and confusion and risks even greater costs to taxpayers, replacing one franchise competition with three, opening up the prospect of three owners in three years, increasing the risk of further legal action and further costs to taxpayers, and adding to the uncertainty for passengers and staff.
Can the Secretary of State update the House on the likely final cost to taxpayers of the Government’s failure on franchising? If reimbursing bidders for the west coast will cost £40 million, what will be the costs of the stalled Great Western, Essex Thameside and Thameslink franchises? What legal advice did he receive on his decision to extend Virgin’s contract? Specifically, what advice has he received on EU competition law, procurement law and the impact on the fairness of future competitions for the franchise? In the light of this debacle, does he agree that it makes sense to maintain a public sector rail company that is equipped to step in at short notice in future, as well as providing a useful comparator? Will he therefore abandon the planned privatisation of the east coast service, which is delivering nearly £200 million back to taxpayers every year, which is profit that in future will be shared with shareholders?
Can the Secretary of State not see that it is completely inappropriate for a member of his own Department’s board, no matter what his other qualities are, to carry out an investigation that has to look at the decisions taken or approved by other members of that board, including Ministers? Will the Secretary of State think again and make his review truly independent? What impact has the 37% turnover of senior civil servants in the restructuring of the Department in the last two years had on its capability to conduct competitions such as this? As the Secretary of State mentioned his fares U-turn, will he now agree to make the train companies apply the cap to every route, so that passengers do not find, as they did last year, that fares may still rise by up to 5% above the cap?
This was a franchise fiasco made by Ministers—a policy scribbled on the back of an envelope in opposition; cuts that go too far, too fast, implemented in government. The result is chaos across the rail industry and tens of millions of pounds of taxpayers’ money down the drain—the direct consequence of decisions taken by Ministers. Now we have a proposal for an independent review that is not independent at all, while the Secretary of State’s solution to the west coast franchise fiasco is a decision to do it all over again—that is, twice in just two years. What an appalling waste of taxpayers’ money! What a shambles from this incompetent Government!
Mr McLoughlin
I thank the hon. Lady for her reasoned response to my statement.
The last Labour Secretary of State for Transport was not a Member of this House, but he said some very interesting things. Lord Adonis said:
“Ten year franchises, with the possibility of longer contracts should bidders make sensible and affordable proposals, will allow operators to invest and suggest new innovations.”
At that point the Labour party increased the minimum for franchises to run to 10 years, with an option of 22 years. There is therefore a long-standing position that longer franchises can work, including to the benefit of passengers, which it is important they should do.
The hon. Lady mentioned a number of points. One of the things that I was keen to do, on hearing of the problems we were facing in the Department, was to get to the answers as quickly as possible. That is why I set up the inquiries as quickly as I possibly could. I believe that Mr Laidlaw is perfectly capable of bringing his expertise to bear and showing us—[Interruption.] The hon. Lady ought to wait until he has done the inquiry before prejudging it, because at least we have taken the action to get the inquiry under way. I think that is the right way to go.
The hon. Lady talks about the reduction in members of staff in the Department. There has indeed been a reduction. Bearing in mind the economic climate in which we found ourselves, that was absolutely necessary and I make no apologies whatever for that. I am determined to see that the provision of services to the customers who use the west coast main line—of which there are many, with many constituencies involved—is carried out continuously, and that is why I believe Virgin are the best people to carry that forward.
Sir George Young (North West Hampshire) (Con)
The House is grateful to my right hon. Friend for coming here at the earliest opportunity to explain what has gone wrong and to describe the action that he proposes to take. I welcome that. Does he recall that, at the beginning, franchising was done not by his Department but by an independent, arm’s-length body? Twenty-four franchises were issued in some 18 months, none of which was subject to a legal challenge, and this led to the major investment in the railways to which he has referred. Franchising was subsequently brought in-house to the Department. Can he confirm that the Brown review will consider whether franchising should continue to be the job of his Department or whether we should revert to the initial model?
Mr McLoughlin
Given that my right hon. Friend was closely involved in setting up the original model, I should naturally defer to his great expertise in this matter. I do not want to prejudge the findings of any of the reviews that I have set up, but I am sure that Mr Brown will have heard my right hon. Friend’s comments and that he may well want to investigate that solution further.
Frank Dobson (Holborn and St Pancras) (Lab)
May I express my sympathy for the new Secretary of State’s having to deal with this mess? However, in view of the fact that the Department could not come up with figures that would be valid 10 years hence, how can he believe that the same Department, the same officials and the same advisers can come up with accurate predictions on passenger levels, and on inflation generally, in relation to High Speed 2, which does not exist and for which there is no evidence to draw on? I think he needs to look at that matter again. I will not say that he needs to go back to the drawing board; in the case of HS2, it is more a matter of going back to the ouija board.
Mr McLoughlin
I am interested to hear what the right hon. Gentleman says. A number of points have been raised since I made the announcement. The HS2 business case has undergone an extensive quality assurance process, and we are confident that it is accurate. The August 2012 update on the economic case was supported by a 400-person day of independent quality assurance, and HS2 Ltd has appointed independent auditors to undertake a line-by-line check of the analysis being prepared for the deposit of the hybrid Bill. This is all in addition to the existing quality assurance arrangements. I am glad to say that there was a commitment to these proposals in the right hon. Gentleman’s party manifesto to the country as well as in our own.
Mrs Cheryl Gillan (Chesham and Amersham) (Con)
My right hon. Friend has come into the Department for Transport like a breath of fresh air. However, like the right hon. Member for Holborn and St Pancras (Frank Dobson), he must know that the failure of the west coast main line franchise process has really shaken people’s faith in the facts and figures that are being used by the Department. Notwithstanding the answer that he gave to the right hon. Gentleman, while he is in the mood for ordering investigations, will he now order a full review of the facts and figures that were used to justify HS2, in order to prevent the Department from making a serious mistake?
Mr McLoughlin
As I do not want to incur your wrath, Mr Speaker, perhaps I should refer my right hon. Friend to the answer that I gave to the right hon. Member for Holborn and St Pancras (Frank Dobson) a few moments ago. I also addressed this issue in one of my first major speeches, in which I outlined the importance of this particular piece of infrastructure to the United Kingdom.
Mr Speaker
I am always very interested to hear what the Secretary of State has to say on this subject, as he will readily appreciate.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
The Secretary of State emphasised in his statement that he would seek “best value for taxpayers” in the interim arrangements. He will understand that there is a degree of scepticism in the House about his ability to deliver that. Will he please tell us how he intends to achieve that best value and what comparators he will use? How can he believe that a short-term, nine-to-13-month deal followed by an interim arrangement before the tendering process begins can possibly deliver best value for the taxpayer?
Mr McLoughlin
When we conduct negotiations with Virgin, that will obviously be one of the things that we will want to discuss. The right hon. Gentleman will have plenty of time to check whether we have done that.
Tim Farron (Westmorland and Lonsdale) (LD)
The short-term fix of asking Virgin to continue operating the west coast service will come as some relief and will provide some certainty in the short term, but how will the Secretary of State convince this House and, more importantly, passengers using the west coast main line, that the two-year interim franchise deal will not lead to a complete lack of investment, given that the new franchise holder will not have the confidence of a long-term deal?
Mr McLoughlin
I would say that the position in which we find ourselves is not the position I would have wanted to be in. What I am trying to do is to move forward with some certainty so that when we learn the lessons from the Brown review, they can be implemented and acted on. There is considerable interest in this particular line—it is very important—and I think we will see the sort of developments we want, with companies putting forward proposals, with respect to both the two-year contract that we are proposing to let and the longer-term one in due course.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
I welcome the Secretary of State to his position. I listened intently to what he said in his statement, but he made no mention of any contingency funding that will need to be put in place as a result of this debacle. Is it proper to suggest that it is possible for this amount to be as much as half a billion pounds—half a billion pounds that taxpayers will have to pay?
Mr McLoughlin
I have read many figures, but I have not previously read that one. No doubt I am going to read a lot more in due course. I have already said that the estimated cost of refunding the franchises, which is the right thing to do, will be in the region of £40 million.
David Mowat (Warrington South) (Con)
This decision was one of the two or three major pieces of work done in the Department for Transport this year. If the permanent secretary will not hold himself accountable for this, what is he accountable for?
Mr McLoughlin
As I have said, I have announced two major inquiries. The permanent secretary took a decision to suspend certain members of staff. This is a suspension—not any prejudging—while these inquiries continue.
Derek Twigg (Halton) (Lab)
I would like to quote what the Under-Secretary of State for Transport, the hon. Member for Wimbledon (Stephen Hammond) said on behalf of the Government in a debate on 17 September, just a few weeks ago. He said:
“The Department is confident that we have taken the right decision in the interests of taxpayers and passengers. We expect to sign the contract soon, but we intend to defend the judicial process robustly.”—[Official Report, 17 September 2012; Vol. 550, c. 236WH.]
Given that the Secretary of State has been in the job for only a few weeks, is he confident that the financial information that he is getting throughout the Department for any major projects—including the Mersey gateway project—is robust and can stand up to scrutiny in the future?
Bill Wiggin (North Herefordshire) (Con)
I congratulate my right hon. Friend on his decision and on his statement. In it, he said that he has paused the ongoing franchise programme. Will he use that pause to ensure higher minimum standards and that the Great Western franchise is not given to FirstGroup as a sop?
Mr McLoughlin
I can assure my hon. Friend that the pause is while we wait to see what the Richard Brown inquiry says and whether there are things that we need to put right in these live competitions. Obviously, there will be no sops to any organisations. These are very competitive bids and a lot of work and effort goes into them. Overall, we are seeing far better services for this country’s passengers as a result of franchising and of the very brave decisions taken by my right hon. Friend the Member for North West Hampshire (Sir George Young) some years ago.
Albert Owen (Ynys Môn) (Lab)
I genuinely welcome the Secretary of State to his position. The performance of his two predecessors has not set a very high bar when it comes to competence in this matter. [Interruption.] The Minister of State, the right hon. Member for Chelmsford (Mr Burns) is growling at me from a sedentary position, but it was his colleague who said that this was robust. The Secretary of State said that Directly Operated Railways is on standby. What does that mean, and will it be used for the three other franchises that he has suspended?
Mr McLoughlin
I have not suspended the three other franchises; I have put them on hold, which is quite an important differential. I thank the hon. Gentleman for his compliments. I am always cautious about compliments coming from the Opposition Benches, but who knows?
As I have said, the three franchises have not been stopped. They have been put on hold, and I hope very much that we can return to operate and lease them once we have learnt the lessons of the Brown report. I do not think that there is any need to contemplate using DOR on those services.
James Duddridge (Rochford and Southend East) (Con)
When the Essex Thameside franchise comes off hold, will the Secretary of State look again at the possibility of mandating the quality of the rolling stock that will be used to ensure that it is as good as the quality of the rolling stock that is used now, or, indeed, even better?
Mr McLoughlin
I well understand my hon. Friend’s wish to procure better services for his constituents, and I know that a number of other Members will be pushing me for the same thing. I will of course consider his suggestions and see whether we can adopt some of them.
Sir Gerald Kaufman (Manchester, Gorton) (Lab)
Now that the right hon. Gentleman has rightly put an end to the shambles that he inherited, will he bear in mind the watchword “If you are in a hole, stop digging”? Rather than engaging in an interim process that prolongs uncertainty, will he be fair to the marvellous train crews of Virgin Trains, who give extraordinarily good service, and tell them that their future is assured? Will he simply award the franchise to Virgin, which has carried it out brilliantly?
Mr McLoughlin
I am very pleased to hear the right hon. Gentleman give such a strong endorsement of the service that he already receives. However, what we are trying to do with franchising is improve that service, not just for his constituents in Manchester but throughout the line, and I do not think that it would be appropriate—in fact, it would not be possible—for me to do as he wishes. I think that what I have set out today is the best course for the next three years on that particular line.
Andrea Leadsom (South Northamptonshire) (Con)
I do not want to give my right hon. Friend cause to roll his eyes, so I shall not mention HS2. He can clap if he wants to.
I congratulate my right hon. Friend thoroughly on his decision to call a halt to the west coast main line franchise problem, but does he agree that now is the right time to start looking creatively at how to get fares right down and capacity right up? Perhaps he could consider introducing “standing room only” tickets for short journeys. That would both increase capacity and make journeys far cheaper for passengers who need to travel on a low budget.
Mr McLoughlin
I am not sure how popular that would be, but, as I have said in the House on other occasions, I am looking at the whole issue of fares and the way in which they are calculated.
Mr Dennis Skinner (Bolsover) (Lab)
What a way to run a railway! Now that we have seen this shambles, why do we not take the opportunity to stop the practice of lining the pockets of the railway bosses, and use the money to lower fares? We could do it through a “one nation” system of public ownership. Let’s start that: we have had enough of this business.
Mr McLoughlin
The hon. Gentleman obviously speaks from a past era when nationalisation was the apple of his eye. We have seen substantial changes and improvements in the whole railway system since we introduced the private sector to it. The right hon. Member for Manchester, Gorton (Sir Gerald Kaufman) has just told us that he gets a fantastic service from a privatised railway, and I think that most people feel that they get a fantastic service too.
Andrew Stunell (Hazel Grove) (LD)
I thank the Secretary of State for his statement. May I remind him that when that train gets to Manchester, many people transfer to Northern Rail trains, and that the Northern Rail franchise will come up in 2014? There are some innovative proposals for work to be done on that with Greater Manchester and others. Can the Secretary of State assure us that the delay, the pause, or whatever the word is will not interfere with the development of those innovative and constructive ideas for the Northern Rail franchise?
Mr McLoughlin
One of the interesting things that I have seen since franchising began, and in how these franchises are being worked on, is the engagement with local stakeholders in local communities. They have all come forward with suggestions and ideas, a number of which can be incorporated in the franchise agreements.
David Wright (Telford) (Lab)
There is real concern in Shropshire that the interim arrangements that the Secretary of State has put in place will mean that we will not get back a direct service to London. Will he confirm that when he looks again at the franchise process at the end of his interim arrangement—however long that may last—he will write in services to Shropshire?
Mr McLoughlin
I will certainly listen to representations. I know that I will get many.
Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)
I welcome my right hon. Friend’s statement, and the candid and honest way in which he has handled this whole issue. I also welcome his comments about Virgin and FirstGroup. Will he confirm that Virgin, FirstGroup and the other bidders all acted with total propriety during the bidding process?
Mr McLoughlin
I can certainly confirm that, and I am grateful to my hon. Friend for asking me the question. That is wholly the case, and the mistakes we found were mistakes made in the Department.
Mr Iain McKenzie (Inverclyde) (Lab)
We have now witnessed two procurement fiascos from this Government in quick succession. We have seen that contracts are not being monitored and we are seeing tendering processes that are clearly flawed. One would think that the Minister would be well aware of these and that if he had been alerted to them, he would not have awarded this contract. The question therefore arises: why did he award this contract when he knew that it was flawed?
John Stevenson (Carlisle) (Con)
May I extend my support to the Secretary of State for taking prompt action once he was aware of the problems with the west coast rail franchise? My concern now is about the length of the term of any new franchise, once it is finally in place, as that can affect the investment decisions of a rail company, particularly as regards stations such as Carlisle. Will the length of the new franchise be the same as that initially proposed?
Mr McLoughlin
I understand my hon. Friend’s point. What I do not want to do at this stage is prejudge what the Brown report may eventually say, but I will say that it was commonly accepted that longer franchises would lead to more investment and a better return for the taxpayer. We will need to look at this properly and to investigate what went wrong with this particular process before we come to long-term decisions. A number of people in the industry, including the former Secretary of State who sat in another place and not in the House of Commons, have also made that point.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
I want HS2 to happen, because it would be good for Birmingham, but I also want to ensure that it is based on accurate and reliable figures. Will the Secretary of State ensure that his review will identify any errors and miscalculations, and whether or not they relate to HS2, and will he ensure that this is a sound calculation?
Mr McLoughlin
I am grateful for the hon. Lady’s support for HS2. As I said a few moments ago, that is a separate process and a lot of work is going into the preparation for the HS2 Bill that will come before the House. There will be a lot of opportunities to debate that over the coming months.
Michael Fabricant (Lichfield) (Con)
Can my right hon. Friend, who is sorely missed as Chief Whip, assure my constituents that services will not be damaged by these changes and that stations such as Lichfield Trent Valley, which are badly in need of improvements for disabled access, will not have new works delayed as a consequence?
Mr McLoughlin
I hope we see no delays in investments as a result, and I am always grateful to my hon. Friend, who is always trying to be helpful.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
FirstGroup’s bid included a £190 million guarantee, which would in no way have been large enough to compensate the Government if its optimistic bid had failed to deliver the goods—in fact, it gave a strong financial incentive to walk away. Has the Secretary of State yet understood why that basic feature did not set alarm bells ringing before the bid was announced? Will he ensure that future contracts contain no financial incentives for bidders to walk away?
Mr McLoughlin
The time that bidders walked away was under the previous Government, when the operators on the east coast main line did so. There are lessons to be learned. I shall not prejudge what the inquiries might tell us, but I am looking forward to their results and hope that we can then move on based on a safer footing.
Charlotte Leslie (Bristol North West) (Con)
I welcome the Secretary of State’s announcement about the Brown review. Will he assure me that this pause will be an opportunity to ensure that on other franchises, such as the Great Western franchise, we seize opportunities when they exist? In my area, that would include a full Bristol metro with a full Henbury loop line to complete the circle line around Bristol.
Mr McLoughlin
I am not sure whether the second part of my hon. Friend’s question was a bid, but on the first part I can assure her that the reviews will inform us and that we will take note of them. I would not have set them up if we were not going to do so.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
I came here today on the west coast main line; the train was late. May I ask the Secretary of State—[Interruption.] May I be the first to ask him to resign?
Let me say what I would like the Secretary of State to do. We will have the short period negotiation, the interim agreement and the long-term franchise. To ensure value for money, will he guarantee a public sector comparator for each of them?
Mr McLoughlin
I heard one colleague shout out, “Not late enough.” Obviously, we have set up the two reviews and we will look at what they produce. When we have put such things out to franchise, we have seen huge competition and interest, and it is a matter of getting the best deal for the taxpayer in the longer term.
David Tredinnick (Bosworth) (Con)
I congratulate my right hon. Friend on his common-sense decision to keep Virgin running the west coast main line, particularly in the run-up to Christmas. There are concerns, however, about an interim agreement, which will surely prolong the process. Would it not be better to go to a final agreement and not make things more complicated?
Mr McLoughlin
I can understand my hon. Friend’s frustration, but there has been a huge amount of investment in the west coast main line and it is right and proper that after the initial nine months, during which we will set up the two-year interim contract, we should seek to get the best return for the taxpayer. I think that an open competition is the best way to do that.
Gloria De Piero (Ashfield) (Lab)
The Campaign for Better Transport has been quoted today as saying that operational changes in the Department have not been focused on passengers but have been all about the bottom line. Does it not have a point?
Alun Cairns (Vale of Glamorgan) (Con)
I pay tribute to the Secretary of State for the way in which he has handled a very difficult situation, not only accepting responsibility for an error made by an officer in his Department but moving forward swiftly with the review. Will he reassure me that renationalisation is off the cards for a range of reasons, including financial ones?
Mr McLoughlin
I thank my hon. Friend for his kind words. The truth is that both parties have agreed in the past that franchising is the proper way to go and gets better returns for the taxpayer. This particular episode is not acceptable and we need to learn the lessons from it. I am determined to do that.
Tony Lloyd (Manchester Central) (Lab)
Does the Secretary of State not agree with the many people who use the line that a public sector interim arrangement would have been preferable as it would have given him control over pricing and quality? Will he explain how he will guarantee those things in the interim period?
Mr McLoughlin
Obviously, there is a difference in view between the hon. Gentleman and the right hon. Member for Manchester, Gorton (Sir Gerald Kaufman), who praised the current operators of the west coast main line. Indeed, a number of people have praised the operators so I am rather surprised that when I have made a decision to keep the service with them, some people have found a way to attack that decision. The short period involved means that the best way to ensure continuity of service is to do a deal with Virgin, and we are about to embark on that.
Jeremy Lefroy (Stafford) (Con)
Those bidding for the franchise offered a number of improvements that were welcome to my Stafford constituents, including fare reductions. Will my right hon. Friend see whether it is possible to introduce some of those improvements in the interim period, along with his welcome cap on rail fares?
Mr McLoughlin
I thank my hon. Friend. As I have pointed out, there will be a two-year franchise that will be negotiated some time next year, and I hope that some of the benefits that were initially to come from a longer-term franchise agreement can be replicated in it.
Mr Jim Cunningham (Coventry South) (Lab)
In an age of high food prices, high oil prices and high fares, will the Secretary of State, when he negotiates the west coast main line franchise both in the interim and in the longer term, put a special emphasis on fares, because they are far too high?
Mr McLoughlin
I am glad that we have been able to reduce the proposed increases from RPI plus 3 to RPI plus 1. I hear what the hon. Gentleman says about fares. Of course, some pre-booked fares can cost a reasonable amount, but others are very high, and that is something I think we should all look at.
Jason McCartney (Colne Valley) (Con)
What time scale implications will this all have for the east coast main line franchise? Will my right hon. Friend take note of the fiasco that occurred under the previous Government when two train operating companies on the east coast main line collapsed in only two and a half years?
Mr McLoughlin
I thought that it was a utopia under the previous Government and that nothing ever went wrong, but my hon. Friend is right to say that the only time a rail franchise collapsed was under the previous Government. The Opposition seem to have forgotten that today in their attacks on me. I hope that we can learn the lessons and move on and that this will not lead to too long a delay in any of the other franchises.
Richard Burden (Birmingham, Northfield) (Lab)
The west coast main line is obviously important to my constituents in Birmingham, but I am worried about the knock-on effects of this fiasco on other franchises coming up for renewal. I draw the Secretary of State’s attention to London Midland and the countless delays there have already been in the west midlands because of driver shortages. There is no long-term thinking on planning for new stations and ticket office hours are being cut, and that is because it is not looking at the long term. What impact will this fiasco have on trying to give passengers in the west midlands the kind of service they deserve?
Mr McLoughlin
I want all taxpayers and passengers to get the kind of service they deserve. There have been some specific cases of cancellations on the line, as the hon. Gentleman has just mentioned. I hope that the company will put that right and train more drivers, which I think it is in the process of doing.
Daniel Kawczynski (Shrewsbury and Atcham) (Con)
I echo what the hon. Member for Telford (David Wright) said. Shrewsbury is the only county town in England without a direct rail service. All the Shropshire MPs have campaigned very hard over the past year to ensure that that comes about, and both Virgin and FirstGroup have committed to it. Will the Secretary of State do everything possible to ensure that that vital service for our constituents is not delayed more than it needs to be?
Mr William Bain (Glasgow North East) (Lab)
The west coast main line matters hugely to the Glasgow and Scottish economies, but so does value for money for the taxpayer. Can the Secretary of State identify any previous franchising process that was not subject to external audit, and is it not the case that a decision made by his Department to save hundreds of thousands of pounds has ended up costing the taxpayer tens of millions of pounds?
Mr McLoughlin
The hon. Gentleman is seeking to prejudge the two inquiries I have set up, which is something I am not prepared to do.
Rehman Chishti (Gillingham and Rainham) (Con)
On train franchising, will the Secretary of State clarify when Southeastern’s franchise is likely to be concluded, because it is currently undergoing a process of renewal?
Mr McLoughlin
I have announced a pause on three franchises, and there are others that have not yet been concluded in the final bidding process. We will obviously learn lessons from the Brown inquiry and the Laidlaw inquiry, but I hope that this will not have a long-term impact that will delay any of the other franchises that are going to be negotiated.
Joan Walley (Stoke-on-Trent North) (Lab)
Is not the most shocking part of this the fact that had Richard Branson not made the legal challenge, we would not even have known about this fiasco? Given the importance of the train services through Stoke-on-Trent, the lifeblood of our local economy rests on the future of the west coast main line. Will the Secretary of State give an assurance that he will give Parliament the true costs of the fiasco, because it is likely to be far more than the £40 million he talks about? We need to ensure that those funds are safeguarded for transport.
Mr McLoughlin
The hon. Lady should just wait and see, because some of the things the reviews might lead to could provide a greater return for the taxpayer in the longer term. I am not for one moment dismissing the fact that this has been very expensive and unacceptable—it is and it has been—but the most important thing is that we learn the lessons in the longer term.
Sir Tony Baldry (Banbury) (Con)
Most of my constituents just want to ensure that the trains run on time and are affordable. Will the Secretary of State confirm that he has managed to cap rail fares for the next two years? I am not sure that that point has been fully understood.
Mr McLoughlin
I am grateful to my hon. Friend for that question. I can confirm that the Prime Minister announced a cap of RPI plus 1 for not only this year, but next year and the year after.
Mr David Anderson (Blaydon) (Lab)
In this House, we have become used to the Government’s incompetence. They could not privatise the forests properly and they made a mess of the NHS; with this, they have shown that they cannot even privatise what is already out there. The job is too big for them. Why do they not just give up—and give up now?
Mr Brian Binley (Northampton South) (Con)
Will the Secretary of State give a firm undertaking that none of the costs involved in this incident will be passed on to hard-pressed consumers on the west coast main line? Furthermore, will he reassure the siren voices calling for the scrapping of HS2 that that line is absolutely necessary because the west coast main line is under such pressure that it reaches capacity in a very short period?
Emma Reynolds (Wolverhampton North East) (Lab)
The Secretary of State is right to make this decision on the west coast main line, but it is unclear to me why his predecessor—who, after all, is an accountant by trade—did not hear the alarm bells ringing for quite some time. Will he reassure me that the review that he has announced today will consider that significant and unacceptable risks were being taken by allowing one of the bidders to backload most of the premium to the end of the franchise? Will he put in place measures to ensure that franchisees cannot simply walk away from a franchise before they make substantial payments?
Mr McLoughlin
My predecessor, like me, was given firm assurances at the Department that the competition was sound. That proved not to be the case. Once I knew and had the full facts, I made the statement that I made.
Paul Maynard (Blackpool North and Cleveleys) (Con)
I used the west coast main line today and my train was early, for which I thank the Secretary of State. Can he assure me that when making decisions about the new franchises, he will take every opportunity to incorporate both quality metrics and performance satisfaction ratings from customers?
Mr McLoughlin
I am grateful to my hon. Friend, who is also a user of the west coast main line. The answer to his question is “definitely”.
Graeme Morrice (Livingston) (Lab)
In view of this fiasco and other potential franchise debacles, will the Government now realise that the game is up and take the west coast main line back fully into public ownership, as is the case with the east coast service?
Mr Robert Buckland (South Swindon) (Con)
In respect of the review of the process relating to the Great Western franchise, will my right hon. Friend ensure that the fundamental mistakes about capacity in the previous franchising round under the last Government will not be repeated?
Mr McLoughlin
I hope that the two inquiries that I have set up will help us through the unfortunate position in which we find ourselves and, in the longer term, lead to a much more robust franchising system.
Rosie Cooper (West Lancashire) (Lab)
I appreciate that assurances from the Transport Secretary, and Ministers previously, that the process was rigorous, detailed and fair were given in good faith. However, serious concerns remain that the incident was not isolated.
Bearing in mind some of the comments made about loading and how the contract was done, anyone with common sense knew that something was wrong. Will the Secretary of State categorically confirm that mistakes were not made by the Department when awarding franchises on the other routes, before the west coast main line franchise process? When did that analysis take place?
Mr McLoughlin
I am not sure that I am responsible for the franchising that took place under the previous Government, and this franchise was the first that would have taken place under the new system.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
I thank my right hon. Friend for coming to the House to make this statement. What impact will the reviews have on the Great Western railway? Is he willing to meet me and my fellow Plymouth Members of Parliament to discuss how we can improve connectivity to make sure that we have more three-hour train journeys coming into Plymouth and trains that get there before 11.17 am, as is the case at the moment?
Mr McLoughlin
Franchising gives hon. Members from all constituencies an ideal opportunity to feed into the process to say how they want services to improve; and where that can be done, it should be done. I am certainly willing to meet a delegation led by my hon. Friend.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Does the Secretary of State agree that the inquiry we really want is to have, say, the Public Accounts Committee look at all this, because it is far more important than just the chaos surrounding this particular contract? Right across Government, we see this incompetence in procurement time and again. Whether it is about the churn of Ministers or the churn of civil servants that we are all familiar with, there is something deeply rotten in the way that we run government in this country.
Mr McLoughlin
I think I need to pause before I respond to that question. The hon. Gentleman talks about the churn of Ministers under this Government, but he should look at the churn of Ministers in this Department under the previous Government, which was fairly substantial; I think that the former right hon. Member for Ashfield lasted eight months. As for what the Public Accounts Committee might look into, I have been in this House long enough to know not to tell any Select Committee what it might or might not look into.
Neil Carmichael (Stroud) (Con)
I welcome the Secretary of State’s obvious commitment to investing in infrastructure —whether new, like HS2, or old, like the Stroud and Swindon line. May I turn his attention back to tickets and urge that we have a ticketing system that is characterised by simplicity and transparency and produces more competition within it?
Mr McLoughlin
We are currently undertaking a ticketing review which I hope will address some of the points that my hon. Friend has made.
Mr David Hanson (Delyn) (Lab)
My constituents in Flintshire who use the west coast main line daily will be horrified by the potential £40 million-plus cost resulting from mistakes by the Secretary of State’s Department. This is now what is called in the civil service an unfunded pressure. Will he tell the House how he plans to fund it?
Stephen Mosley (City of Chester) (Con)
Those of us who use the west coast main line will appreciate that massive improvements have occurred since privatisation and welcome the improvements that were promised in the new franchise, including lower fares and more frequent services to Chester. Will my right hon. Friend ensure in the interim that those promised improvements are still delivered and not forgotten about?
Mr McLoughlin
My hon. Friend, like many colleagues, is calling for better services for his constituents, and I cannot think of a finer place than Chester that people want to go—
Mr McLoughlin
I had better be a bit careful, or we might get into a bidding auction. There are a number of places to which people want extra services. That shows that the railways are now held in high esteem by all, and it is very much my intention to try to provide the services that people wish for.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
It will be some years before we know the identity of the long-term operator of the west coast main line. How can anyone have any confidence in the bids for the east coast main line franchise when we have no idea of the long-term plans of the long-term operator of its main competitor on the west coast? Is not that why we should keep the east coast main line directly operated for a good few years—preferably indefinitely?
Mr McLoughlin
That is not what the last Secretary of State who sat in the Cabinet for the Labour party said, and it is not what I want to happen.
Ben Gummer (Ipswich) (Con)
May I say how pleased I am by the candour and assured manner with which the Secretary of State has dealt with this matter? He will be aware of the enormous importance that travellers, commuters and businesses in the eastern region attach to the letting of the new 15-year franchise. He received a delegation from me and my hon. Friends the Member for Norwich North (Miss Smith) and for Witham (Priti Patel) with great enthusiasm. Can he give any assurances that the programme and timetable for that franchise will not slip as a result of the decision that he has notified to the House?
Mr McLoughlin
It certainly should not slip. I can say to my hon. Friend that the recommendations that he and a number of colleagues have made to me have been fed into the process, and will I hope be reflected in the franchise when it is finally awarded.
Helen Jones (Warrington North) (Lab)
My constituents will be horrified at the shambles that this Secretary of State has presided over. Warrington relies on its transport links to promote economic development. What action was taken by his Department on the Europa Partners report, which highlighted flaws in the franchise process five days before the announcement? Was that drawn to the attention of any Minister in the Department?
Mr McLoughlin
What I can say is that the flaws were found as a result of the Department preparing for a judicial review. When they were found and I saw the report and other information, I took the decisions that I announced on 3 October.
David Rutley (Macclesfield) (Con)
Like many other Government Members, I welcome the decisive action taken by my right hon. Friend in the face of unacceptable mistakes in the Department for Transport. Will he confirm that, during the interim period and the intervening period before that, passengers in Macclesfield will continue to experience the same high levels of service that they have come to expect in recent years?
Mr McLoughlin
I realise how very important the service on the west coast main line is to my hon. Friend’s constituency. That is why I am keen that, for the sake of continuity, we carry on with the present service operators until such time that we can re-tender for a short, interim franchise. I know he will insist that the service that his constituents get now will continue.
Ian Lucas (Wrexham) (Lab)
Will the Secretary of State ask his independent inquiries to consider a mutual model for the railways? Welsh Water in Wales has delivered a 6% reduction in charges since 2001, billions of pounds’ worth of investment, and stability for business. That is what we want on our railways. Why is he so wedded to a broken system?
Mr McLoughlin
I am not wedded to a broken system; I just look at the reassurances that previous Ministers gave on improvements to the railways since the present franchise system came into operation.
Ann Coffey (Stockport) (Lab)
I am very concerned that there will now be a long hiatus in investment in the west coast main line. Will the Secretary of State talk to Virgin about making some money available for long overdue improvements to Stockport station, which were offered by FirstGroup? Alternatively, perhaps he could find some cash from his departmental budget? It seems unlikely that those improvements will happen any time soon.
Mr McLoughlin
I understand that the hon. Lady wants improvements made to her station and I will consider carefully what she has said, but I am not sure that there is any spare money in the Department.
Sheila Gilmore (Edinburgh East) (Lab)
Will the Secretary of State ensure that the Brown inquiry does not just tinker with franchising but considers other options? We have heard about the recent option on the east coast main line, but another is the concession process that was used for London Overground. Will the inquiry be able to consider that?
Mr McLoughlin
I will not tell the inquiry what to do. I have published the terms of reference and put them in the Library earlier today. They are comprehensive.