Transport Secretary: East Coast Franchise

Chi Onwurah Excerpts

Wednesday 23rd May 2018 Commons Chamber

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I am pleased to be allowed to speak in this very important debate. I start by thanking the staff on east coast rail who, during the eight years I have been in the House, have been unfailingly helpful on my twice-weekly journeys to and from Newcastle. They have been unfailingly cheerful and unfailingly efficient despite the turmoil that successive Conservative-led Governments have put them through.

Speaking of the workers, I would not normally support singling out one worker—in this case, the Secretary of State for Transport—for criticism and in effect a fine for a collective failure of this Government, but if anyone is responsible for that failure, it has to be him. What is more, it is not only a failure of competence; more importantly, it is a failure driven by ideology—the Secretary of State’s extreme free market ideology. If he wants to play ideology at dinner parties around the country, that is his decision, but here he is playing ideology with the east coast main line, a critical piece of national railway infrastructure serving more than 20 million passengers per year and contributing more than £300 billion annually to the UK economy. Also, independent research shows that investment in it could generate more than £5 billion in additional GDP for our country and our region. The Secretary of State’s ideology is destroying jobs in my constituency, for which he must be held accountable.

Hon. Members may have heard me mention that before entering Parliament I spent 23 years as an engineer. My last job was for Ofcom, the communications regulator. As part of that, I spent a lot of time looking at the economics of networks and the benefit of competition, which is where I shall focus my remarks.

Free markets require competition. Without competition, markets become monopolies. I hope we can all agree that private sector monopolies are bad—there are no interventions, so we agree. On the other hand, public sector monopolies can be run in the interests of the many, not the few. Many believe that rail is a natural monopoly. I agree. Railways were born in my region. The Rocket—the first commercial locomotive—was built in Newcastle by the Stephensons, and will return to Newcastle for the Great Exhibition of the North this summer.

From the very start, it has been impossible to run railways competitively in the private sector. The Office of Fair Trading states:

“Competition is a process of rivalry between firms seeking to win customers’ business over time by offering them a better deal.”

What better deal was there under Virgin? Were there more trains? No. Were there better trains? No. Were there better services? No. People could argue that the uniforms and the advertising slightly improved, but does that justify the huge costs involved in bailing out the private sector three times in 10 years? Does that justify the huge costs involved in regulating private sector companies to stop them exploiting their monopoly positions? Private sector companies always abuse monopoly positions. They cannot help it. Did it give us the investment in transport in the north-east that we need for our economic development? Transport for the North estimates that we need £27 billion invested in our transport infrastructure. Did it justify the huge costs involved in designing multiple tenders and the exposure to legal challenges? Did it justify the uncertainty that has been so bad for staff and passengers? Absolutely not. The Conservatives are ideologically constipated on free markets to the extent that they cannot see the reality of our rail network and its needs.

[Ian Mearns]

I am grateful to my hon. Friend and neighbour for giving way. The Government are ideologically wedded to the privatisation model, but they must accept that, once the regular public subsidy for the railways is netted off, the amount of private sector investment is rather small.

[Chi Onwurah]

My hon. Friend and neighbour is absolutely right, which shows why this idea that this is a competitive market is a travesty. There is really no investment. More importantly, what little investment does take place is not at these companies’ own risk, because they are bailed out. Yet so infatuated are this Government with private sector monopolies that they do not seem to see that. We see the same thing when they deal with the tech giants: this Government are happy for private sector monopolies to walk all over UK citizens and yet the Government continue to stuff these companies’ mouths with gold.

We need a Government who recognise the role that the private sector can play in many industries and many businesses, but also recognise the importance of delivering natural monopolies through the public sector in such a way that citizens, consumers and passengers benefit. We need a Government who are not in hock to the private sector. As this Government are clearly incapable of understanding the very basics of network economics, I hope they will give way for a Labour Government who will do.

--- Later in debate ---

[Iain Stewart (Milton Keynes South) (Con)]

It is a pleasure to speak in this debate. As a member of the Transport Committee, I hope to inject a rational perspective into proceedings. As has been mentioned, the Committee is currently scrutinising this issue. I should add the caveat that our proceedings are still under way and we might receive further evidence later.

The first point I wish to make is that this is not a failing railway in the sense that most passengers would understand it. It operates efficiently; there are high levels of passenger satisfaction; there is growing usage of it; and, yes, there is investment in it. Under Virgin, many of the trains have been refurbished and, although I appreciate that this is not a direct part of the franchise, King’s Cross station has been transformed in recent years, so the passenger experience is being enhanced.

The issue at the heart of this debate is that something went wrong with the revenue projections for the line. That is what we need to scrutinise. It is important to understand the nature of the east coast main line franchise. It has a much larger discretionary element than most other rail franchises, by which I mean that the passengers who use it have many more options for making their journeys. Those options are both on the railways, with other train operating companies running services on large parts of the line—at the southern end of the line, Hull Trains and Grand Central offer alternatives to the Virgin Trains, and further north there is TransPennine Express and ScotRail, meaning that there is a discretionary element to which service passengers use—and, because of the long-distance nature of the network, passengers can choose non-rail alternatives, including flying between Edinburgh and Glasgow or driving between some of the key towns and cities. That makes it much more difficult for anyone in the public or private sector accurately to forecast revenues over a lengthy period. I have had conversations with other train operating companies this week, and they said, “We don’t bid for these long-distance franchises because of that element of uncertainty.”

[Chi Onwurah]

The hon. Gentleman is saying that the issue with the east coast line is that there is competition and that Virgin could not handle that competition so should be bailed out. Does he realise that he is undermining the entire argument, because he is saying that when there is competition, franchising fails?