Rail Franchising

Lord McLoughlin Excerpts

Thursday 10th January 2013 Written Statements

[The Secretary of State for Transport (Mr Patrick McLoughlin)]

When I took the decision last October to cancel the competition for the inter-city west coast rail franchise and to put the wider franchising process on hold, I commissioned two independent reviews.

I am today laying before the House the second of these, by Richard Brown, the chairman of Eurostar and a highly respected industry figure. His report sets out his recommendations on how best to get the franchising programme back on course. I welcome this report, and am grateful to Mr Brown and his team for their swift and thorough consideration of the issues.

Mr Brown concludes that franchising is a fundamentally sound approach for securing the passenger railway services on which so many people rely. He has identified a number of detailed recommendations for improving the way that franchises are specified and franchise competitions are run. The issues he has identified deserve, and will get, very careful consideration. His recommendations include:

that the franchising programme should be restarted as soon as possible, but at a pace that both the Department and the industry can sustain;

that franchise term should be determined by the circumstances and size of each individual franchise;

proposals to strengthen and simplify the bidding and evaluation process for each franchise;

proposals for the financial and contractual structure of future franchises, including in relation to risk allocation and capital requirements; and

that the Government should plan to devolve responsibility for further English franchises to the relevant authorities.

Mr Brown also makes recommendations on how to strengthen my Department’s capability to manage the future franchising programme, echoing the findings of Sam Laidlaw’s independent inquiry into the lessons to be learnt from the inter-city west coast competition. My Department has already published a response to Mr Laidlaw’s report, setting out a series of actions that will allow it to resume the franchising programme, with the confidence of the rail industry, as soon as possible. The permanent secretary has now appointed a single director-general with responsibility for rail, including franchising.

The review recommends that the Government should determine, by February, our plans for the three franchise competitions which I put on hold last October. I accept that recommendation, and I will update the House when I have determined those plans.

Until then, however, I consider that it would be inappropriate to publish Mr Brown’s specific recommendations about these three franchise competitions because of their stock market sensitivity, and so I have redacted the relevant paragraphs from the version of the report I have published today. I will publish the redacted paragraphs once I have decided the way forward for those three competitions.

Mr Brown also recommends that we should set out a clear programme for future franchise competitions. I will do so in the spring, alongside a further statement of the Government’s rail franchising policy in the light of Mr Brown’s recommendations and the Transport Select Committee’s “Rail 2020” report.