East Coast Main Line Franchise

Andy McDonald Excerpts

Thursday 20th June 2013 Commons Chamber

[Mr Jackson]

I think that is semantics. I made it clear that I was talking about the 12 months to 31 March 2013. If the hon. Gentleman wants to write to me to take issue with me, that is fine.

[Andy McDonald (Middlesbrough) (Lab)]

Will the hon. Gentleman give way?

[Mr Jackson]

No, I want to make some progress, but I will give way later to the hon. Gentleman, whom I know has a special interest in the subject.

The Labour Government accepted that public service provision by this train operating company was always going to be a short-term expedient because of a special set of circumstances on the east coast main line. As the Minister has said, in order to leverage key, private sector capital, it is important that we have a new, long-term private partner to innovate and drive up standards on the east coast main line.

It is all very well for Lord Adonis to have a road-to-Damascus conversion. Obviously, being in opposition concentrates one’s mind, but when he was a Minister he spoke out strongly for private sector provision on this particular line. I challenge the Labour party: is its policy now wholesale renationalisation of the railways, or is that just for the east coast main line? I know that the hon. Member for Blyth Valley (Mr Campbell) would definitely give me a clear answer, but I am not sure that he and the hon. Member for Nottingham South (Lilian Greenwood) would have a meeting of minds on the issue.

--- Later in debate ---

[Andy McDonald (Middlesbrough) (Lab)]

I will be brief, Madam Deputy Speaker. I congratulate the hon. Members who secured this important debate.

The passions that questions of democratic control arouse in all parts of the House are understandable, and falling into dogmatic defence of the present or romanticised views of the past is a constant danger, but the main problem of franchising is not the money skimmed off the top by the train operating companies—the money paid out in dividends was 2% of sales in 2012—or even the massive fiscal drag caused by fragmentation, payments to rolling stock leasing companies and the excess interest on Network Rail debt, paid for no other reason than to keep it off the public balance sheet. The biggest problem of franchising, which echoes through the McNulty report, the Brown report and every major policy discussion of the past 20 years, is that the debate about the future of rail in this country has become a debate about what colour the trains are. The real debate must be about whether rail is a private enterprise or a public service.

The Minister himself has been caught in such narrow thinking, insisting time and again in Westminster Hall that Directly Operated Railways could not run a railway indefinitely, because it was not intended to do so when it was set up in the dim and distant days of 2009. With respect, though, what previous Transport Ministers imagined DOR’s role to be is of no consequence. The question surely must be not whether it was intended to run indefinitely, but whether it is capable of doing so. The tremendous success of East Coast demonstrates that it is. Total premium plus operating profit amounted to £647.6 million in the four years to 31 March 2013, and as hon. Friends have pointed out, the total by the end of the term will be £800 million. That is more in both cash and real terms than any previous franchisee on the line has achieved. All that money is available for reinvestment in our railway network.

[Roberta Blackman-Woods]

My hon. Friend is making a powerful speech. Could not the Government, if they wanted to, amend the Railways Act 1993 to enable East Coast to bid for the franchise as a public company? That might not be exactly what we want, but it would at least help.

[Andy McDonald]

My hon. Friend makes a good point. Such a leap of imagination—if people opened their mind to other possibilities that are available—would be welcome.

East Coast has achieved revenue growth of 9% over three full years, with 4.3% growth in 2012-13. Journey numbers have increased from 18.1 million in 2009-10 to 19.1 million in 2012-13. All that has resulted in a £40 million surplus. I was disappointed to hear Government Members criticising the service East Coast provides, when the record shows the contrary is true. Nine out of 10 trains are on time, according to the latest public performance measure, and the national rail passenger survey gives the service a 92% overall customer satisfaction rating—the highest score of any franchise on the line since records began in autumn 1999. Government Members’ critical comments are therefore highly regrettable.

If East Coast remains in public hands indefinitely, it will be to the benefit of passengers, communities and taxpayers. Several times in the course of this debate, the idea has been floated that such an arrangement would be more attractive than Ministers realise and that the public would find it engaging. More than that, it would mark a fundamental change in the thinking of the past 30 years—the economic voodoo that says that involving the private sector always, magically, creates benefits.

The truth is that railways cannot be run for profit. British Rail was subsidised. Network Rail is subsidised. No railway in the world is not subsidised in some shape or form. In that environment, train operating companies are simply one more player lobbying for a share of taxpayers’ money. They are required to return a profit for their shareholders, but their profits are not won in the marketplace; they are created by legislation.

The efforts of train operating companies are not turned outward, focused on striving towards greater efficiency or customer satisfaction; they are turned inward, focused on ringing out as much subsidy as possible from the taxpayer. Fares cover, on average, only 65% of the cost of the network, so all dividends are the result of Government largesse—and Governments have been more than generous. In the two years from September 2010 to September 2012, Network Rail’s debt, for which the taxpayer is ultimately responsible, has increased by £4.1 billion.

I would like to take this opportunity to praise the Department for Transport for resisting the self-defeating austerity advocated by the rest of the coalition Government and borrowing at very low interest rates to invest in upgrading our national infrastructure. I also offer my consolation for the fact that, in order to keep that off the Chancellor’s radar, the Department has had to pretend that it is not Government debt and pay an additional £150 million a year in interest as a result.

Surely now is the time for honesty. Private companies in the rail sector do not spur innovation. They extract value and are unnecessary, as East Coast shows. The investment in the railways is all Government money, underwritten with Government debt. The current system is unsustainable, because Network Rail now spends more on servicing its debt than on maintaining and upgrading the network, and that debt is increasing. The taxpayer paid for the service, pays for the service and will always pay for the service. It is only fair that they get what they pay for.

[Several hon. Members]

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