East Coast Main Line

Lord Grayling Excerpts

Wednesday 16th May 2018 Commons Chamber

[The Secretary of State for Transport (Chris Grayling)]

Mr Speaker, I would like to make a statement about the future of the east coast main line. As was made clear in the point of order that we have just heard, it has been quite important to try today to handle the release of this information in as controlled a way as possible. We did, of course, approach the Opposition earlier this morning, and explained how we were going to communicate the information to them. My officials shared this statement with the Opposition parties shortly after 12 o’clock, at approximately the same time that Stagecoach was itself told about this—both would expect to be given warning of what is a significant and, for them, market and price sensitive announcement.

Let me set out what I have to say today. The House will recall that, back in November, I set out details of our rail strategy, and our plans to integrate the operation of track and trains. I also indicated that one of the key parts of that plan was to address what were then well-documented problems on the east coast main line by creating a new, integrated rail operation on that route.

In February, I gave the House an update on the financial problems on the east coast main line, and indicated that the current franchise would run out of money within months. This is not because the route is failing—it continues, and will continue, to generate substantial returns for the Government, and the most recent figures show passenger satisfaction at 92%. The route has its challenges, but it is not a failing railway. However, as I explained in February, Stagecoach and Virgin Trains got their bid wrong and they are now paying a price. They will have lost nearly £200 million meeting their contracted commitments. This means that taxpayers have not lost out because revenues are lower than predicted; only Virgin Trains East Coast and its parent companies have made losses at this time.

As the Brown review said in 2013, in an effective railway industry franchises can occasionally fail. But we do not, and cannot, expect companies to hold unlimited liabilities when they take on franchises—they would simply not bid for them if they had to. This means that franchises sometimes do fail, which is why a Conservative Government previously created the structures for the operator of last resort to ensure that we can always guarantee passenger services if franchises cannot continue.

In my statement in February, I said that I was considering two options to continue delivering passenger services in the run-up to the creation of the new east coast partnership. The first was to permit Stagecoach to continue to operate the railway on a not-for-profit basis until 2020, and to permit it to earn a performance-related payment at the end of its contract. The alternative was to implement an operator of last resort, bringing the route back into the temporary control of my Department, as provided for in legislation. Last autumn I established a team to prepare this as an alternative to use if required.

In the past two months, my Department has carried out a full analysis of these options, focusing on how each performs against the key principles that I set out in February: protecting passenger interests; ensuring value for money for taxpayers; and supporting investment and improvement in the railway. I am today publishing my Department’s assessment. To summarise, the analysis suggested that the case was very finely balanced, with some elements favouring a contract with the existing operator and others favouring the operator of last resort. When judged against my key principles, neither option was obviously superior. I have, however, taken another factor into account. I want to make the smoothest possible transition to the creation of the new east coast partnership. Given this finely balanced judgment, I have taken into account broader considerations and decided to use the current difficulties to drive forward sooner with our long-term plans for the east coast partnership.

I have decided to begin the transition process towards creating the new partnership now. This will be in the long-term interests of passengers, as every member of staff on the railway will be focused solely on delivering an excellent service for the future. I am therefore informing the House that I will terminate Virgin Trains East Coast’s contract on 24 June 2018. I plan to use a period of operator of last resort control to shape the new partnership. On the same day, we will start with the launch of the new, long-term brand for the east coast main line through the recreation of one of Britain’s iconic rail brands, the London and North Eastern Railway.

The team that have been working for me since last autumn to form the operator of last resort will take immediate control of passenger services, and will then begin the task of working with Network Rail to bring together the teams operating the track and trains on the LNER network. I am creating a new board, with an independent chair, to oversee the operation of the LNER route. The board will work with my Department to build the new partnership. It will have representatives of both the train operating team and Network Rail, as well as independent members, who importantly will ensure that the interests of other operators on the route are taken into account. I will appoint an interim chair shortly, and will then begin the recruitment process for a long-term appointment.

When the new LNER operation is fully formed, it will be a partnership between the public and private sectors. In all circumstances ownership of the infrastructure will remain in the public sector, but I believe that the railway is at its strongest when it is a genuine partnership between public and private. The final structure of the LNER will need to be shaped in conformity with the primary legislation that governs the industry, but my objective remains to move to a situation that leaves one single team operating the railway, with the simple goal of ensuring that they continue the work of the existing operators in improving services for passengers.

The rigorous process that we have followed underlines our commitment to ensuring that businesses operate under firm but fair rules. This Government are willing to take tough decisions when necessary to ensure that we build a stronger, fairer economy for all. I do not want these changes to cause passengers any anxiety at all. I want to reassure them that there will be no change to train services, the timetable will remain the same, tickets purchased for future travel—including season tickets—will continue to be valid, and customers will continue to be able to book their travel in the normal way. The ambitions that we have for services will also continue.

I want to reassure staff that the changes will not impact on their continued employment. It will be no different from a normal franchise change. Indeed, I want the LNER to have employees at its heart, so I am instructing the new board, working with my officials, to bring forward proposals that will enable employees to share directly in the success of the LNER as a pure train operator and subsequently as the new partnership. I am pleased to announce that Andy Street, the Mayor of the West Midlands and the former chief executive of John Lewis, has agreed to provide the team with informal advice about how best to achieve this.

I have already set out my plans to restructure the Thameslink, Southern and Great Northern franchise, following the successful delivery of the Thameslink programme. I have indicated that we will separate it into two or more franchises after the end of the current contract in 2021. We have not yet reached a decision on how to operate Great Northern services. However, I have had initial discussions with the Mayor of London about the possibility of transferring some of these to London Overground, as recommended in Chris Gibb’s report. Any change will be subject to consultation, but there is also an operational case for integrating Great Northern services from King’s Cross into the new LNER operation. I am asking my officials and the new LNER board to do feasibility work on this option.

I have also taken official advice about the future of the passports currently held by Virgin Holdings and Stagecoach, determining whether they are fit and proper to operate on our railways. A multidisciplinary panel has considered the situation and recommended that both companies continue as train operators. The panel advised that there is no suggestion of either malpractice or malicious intent in what has happened. Clearly we have to be vigilant about future financial commitments, but in my view those organisations have paid a high financial and reputational price for what has happened. This Government operate firm but fair rules in their dealing with business, and I have been advised that it would not be reasonable to remove or place conditions on the companies’ passports. However, this decision is provisional and will be subject to further review at the point at which the VTEC contract is terminated.

It is vital that we remember the benefits that the railway has seen since privatisation. Passenger numbers have doubled. New trains with new technology are being rolled out right across the network. Innovation has driven up passenger satisfaction. We are seeing a huge amount of private investment in the future of our railway, and the lessons of the financial failure of the east coast main line are already being, and must continue to be, learned. But our ambitions are bigger.

In the rail strategy that we published last year, we began to look at the future of the industry in order to make the private sector model fit for changing travel patterns and new technology, and to focus on a better quality passenger experience. These advances would not be possible if we returned to nationalisation and lost private sector innovation. This work will conclude in time for the spending review to ensure that we improve how we enhance the private sector drive to improve services for passengers in the coming years in a way that is fair for taxpayers and passengers.

Of course, the passengers on the east coast main line are the most important people in all this, and 92% of them say that they are happy with their travel experience. The steps I have put in place today will help to deliver even more for them, with the recreation of one of Britain’s most iconic rail brands; the start of the proper recreation of an integrated regional rail operation; and the arrival of the brand new intercity express trains later this year, the majority of which will be built at Hitachi’s plant in Newton Aycliffe in County Durham, continuing to support 700 jobs in the north-east. I believe that this strategy will set this railway on a path to a better future. I commend this statement to the House.

[Andy McDonald (Middlesbrough) (Lab)]

May I just comment on the point of order made by my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown)? I was given sight of this statement 30 minutes before I entered this House. I was not given an electronic copy, I was not allowed to take one away and, as I sit here right now, I have still not been provided with a copy of the statement. I consider this absolutely reprehensible. The Secretary of State does this every single time—relying on confidentiality and market sensitivity. Every single time he treats me with contempt, Her Majesty’s Opposition with contempt, and the House of Commons with contempt. It is about time he changed his ways. This is a shameful practice.

Today, the i newspaper reported that the millennial railcard announced in the 2017 Budget has been scrapped because the Treasury will not agree to fund it. In that case, why did the Chancellor announce it? This Government have nothing to offer that age group other than spin and broken promises.

In the past year, the Transport Secretary gifted Virgin and Stagecoach a £2 billion bail-out after they had failed on the east coast main line at the same time as awarding those same companies a lucrative contract extension on the west coast main line. Yet he has the audacity to come to the Dispatch Box and say that it is not reasonable to remove or place conditions on their passport. It is absolutely ludicrous. Three times in under a decade, private companies have failed on the east coast main line. Its only successful period was from 2009 to 2015 under public ownership, when £1 billion was returned to the Treasury. It was the best-performing operator on the network before being cynically re-privatised on the eve of the 2015 general election. The then Secretary of State for Transport said:

“I believe Stagecoach and Virgin will not only deliver for customers but also for the British taxpayer.”

What nonsense! Report after report by the Public Accounts Committee, which described the Government’s approach as “completely inadequate”, and by the Transport Committee detail the failure of the privatised franchising system on its own terms. The Government’s incompetence has been disastrous for passengers and led to misery for millions of people.

We have been here before many, many times, year after year. The Secretary of State and his predecessors have stood at the Dispatch Box and told the House that privatisation is being reformed. We have had reform, reform and reform. We have had bail-out after bail-out. Rail companies win; passengers and taxpayers lose. There is a definition of insanity: doing the same thing over and again and expecting different results. This is the situation we find ourselves in today. Franchising remains at the heart of the alleged partnership. No amount of tinkering can solve the failings of a broken privatised system where the public take the risk and the train companies take the profit, aided and abetted by the Transport Secretary.

Can we really believe anything that the right hon. Gentleman says? Rail investment is promised; rail investment is cancelled. He makes claims about technology despite his civil servants telling him that it does not exist. No one takes his announcements seriously. Every announcement is a smokescreen to divert attention from the failures of his rail franchising policy. The east coast main line is but one vulnerable rail franchise. What about Northern, TransPennine, Greater Anglia and South Western? Will there be bail-outs for operators on those lines who fail to meet their targets?

Let us be clear about the privatised public sector operator of last resort—how ridiculous is that?—on the east coast main line. These companies—multinational Canadian engineering company SNC-Lavalin, Arup, and big-four accountancy firm Ernst and Young—are not running the east coast main line for nothing. This is Conservative-style public ownership—more private profit. Only Labour’s version of public ownership will deliver what the railway needs.

There is a clear solution to the problems on the east coast main line. It was a successful public company between 2009 and 2014, thanks to the previous Labour Government. I am just sorry that the Secretary of State will not accept the stark staringly obvious answer: an integrated railway under public ownership, run for passengers, not for profit.

[Chris Grayling]

The first thing to say is that I could have done what has been done previously and made a stock market announcement at 7 am this morning, and not come to the House first. I actually chose on this occasion to come to the House first to provide the information, albeit price sensitively, in the best possible way. I am disappointed that the hon. Gentleman does not believe that that is a more appropriate way to handle such an issue than making a 7 am announcement to the stock market, as has been past practice.

The hon. Gentleman talks about nationalisation. Let us deal with this issue head on. Labour has spent the past few months desperately trying to take us back into the ambit of the European Union. Let me explain this to him very simply: his policy on rail nationalisation is illegal under European law. It is all well and good Labour Members arguing that we should stay in the single market and have a second referendum and all the rest of it, but his version of nationalisation is not legal under European law, so why would we take him seriously when he talks about this? I am interested in what works, and that is what we are doing with today’s announcement.

The hon. Gentleman harks back to the period of public operation of this railway. During that period, fewer staff were employed, it generated less money for the taxpayer, and passenger satisfaction was lower than it was subsequently. So it was not some great nirvana period. Yes, things were done in a way that moved things beyond the collapse of National Express in 2009, but the performance of the team currently running the railway has been good. It is not their fault that the parent company got its sums wrong. We should pay tribute to the team who work on that railway and say that it is not their fault that I have had to make today’s announcement.

The hon. Gentleman keeps going on about a £2 billion announcement. That is another example of why Labour does not understand any of this, because otherwise he would realise that no bail-out has taken place, any more than Labour bailed out National Express. This railway line is continuing and will continue to make a substantial contribution to the taxpayer. When he talks about a £2 billion bail-out, he does not understand the finances of the railway. It is not true today and it was not true when National Express collapsed. The reality is that this is the best way to take forward what has been a difficult situation on this railway on a path that I believe in and I think the public believe in: it is better to bring back the operation of track and train, and that is what we will do.

The hon. Gentleman raises the issue of the railcard having been scrapped. That would justify his not believing everything he reads in the papers.

[Stephen Hammond (Wimbledon) (Con)]

I welcome my right hon. Friend’s statement. As I understand it, with the formation of LNER there is no bail-out and nor is there any renationalisation, which will be widely welcomed. On the basis that taxpayer value has been protected, will he say what extra investment might be available to LNER, whether there will be opportunities for private sector investment and whether he will open up the line to open-access competition?

[Chris Grayling]

The latter point is really important. We want open access to continue. This line has some excellent open-access operators. The system we are putting in place will do nothing to preclude that from happening. I am very clear that that has to continue and that the interests of both the open-access operators and the freight companies needs to be protected as we take this forward. I assure my hon. Friend that that is what will happen.

I want to continue to see private investment in our railways. The Labour approach would mean that each year the railways were competing for public capital with schools, education and the rest. That is something that Labour Members do not quite understand. The railway gets more investment through a partnership between the public sector and the private sector than ever it would through their renationalisation policy. Going back to the days of decline and failure under British Rail is their way for the future. We just have to look at what is happening in France, where people are desperate to move away from that model because it is not working.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Let us go back to 2012 and look at the failed west coast main line franchise. Back then, when Virgin was going to lose out, it was happy to go to court. It ran a public campaign—“Keep Virgin on the west coast”. Oh, how it squealed; we were to feel sorry for it. What happened? Yes, it got a direct award. Returning to the here and now, it gets to walk away from this franchise—no harm, no foul. We do not hear it squealing now. It is an absolutely sick joke. Virgin should not be allowed to bid for future franchises.

On this franchise, it is not just Virgin Trains East Coast that got its sums wrong. We keep hearing about how it got its sums wrong, but that means that the Department for Transport got its sums wrong when it assessed the tenders. Where is the due diligence? What is going to happen within the Department to make sure that it does not make the same mistakes in future? What about the other consortiums that lost out if VTEC got its sums wrong? Do they now have grounds to go to court having missed out because the Government awarded the franchise to a company and now just blithely say, “Oh, it got its sums wrong. Don’t worry about it—that’s what happens with some franchises. They get their sums wrong, and we move on and re-tender.”

Will Virgin and Stagecoach be allowed to bid for the new partnership? That really would be rubbing salt into the wounds of this process. Richard Branson has blamed Network Rail. He says, “It’s not our fault, guv—it’s Network Rail.” What is the truth in this? How much of this problem has been caused by Network Rail, and is that going to be sorted out? Will the Secretary of State please devolve Network Rail to Scotland, so that at least the Scottish Government can take care of these matters in Scotland? The current system cost an extra £60 million last year. He says that this is not a failing railway and that Virgin and Stagecoach are reliable. In fact, what we have is a failing Government.

[Chris Grayling]

If we want to find a failing Government, we just need to look north of the border. I do not plan to devolve responsibility for Network Rail to the Scottish Government because I do not believe the Scottish Government are capable of overseeing it properly. They are messing up education and health in Scotland. They should concentrate on doing the things they already have right before they take on any extra powers.

The hon. Gentleman talks about there being no harm to Virgin-Stagecoach. It has just lost 20% of its market capital. Most people running a business would say that that is a pretty big blow. It is not happy about that, and nor will any of its shareholders be. We have changed our approach since this franchise was let. There are new risk-sharing mechanisms in place. Most recently, we did not accept the highest bid for the last franchise we awarded, and we have to continue to work on this. I have asked my hon. Friend the Minister of State, who is the rail Minister, to work closely with colleagues in the Treasury to identify the best way to ensure that we have the right risk-sharing mechanisms for the future, so that we look after the interests of passengers and the taxpayer.

The hon. Gentleman asks about the new partnership and the bids. This is a completely different paradigm. This is not another franchise bid in two years. We are looking at shaping a different kind of railway, and we will set out plans for that to the House in due course.

[Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

Can my right hon. Friend confirm that all planned investment in the line will continue and that the extension of direct services to Middlesbrough will be unaffected?

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[Chris Grayling]

I have every intention of continuing to meet the commitments to new services in the original VTEC document. The only complication that has arisen is around engineering works by Network Rail and when those take place, but there is no intention to withdraw any future service plans. Most will be able to start on time in 2019. A small number may be delayed beyond that, but that will be for reasons outside the control of the train operator.

[Lilian Greenwood (Nottingham South) (Lab)]

In November 2014, the then Secretary of State promised that the new franchise awarded to Virgin-Stagecoach would run for eight years and return £3.3 billion in premium payments to the taxpayer. He said:

“These figures are robust and have been subject to rigorous scrutiny, including by independent auditors.”—[Official Report, 27 November 2014; Vol. 588, c. 1080.]

The Secretary of State must take responsibility for this serious repeat failure. If Virgin-Stagecoach got its figures wrong, so did his Department, and he should apologise to passengers and taxpayers for that failure. The Transport Committee will be subjecting this failure to detailed scrutiny, but what does the decision today mean for other franchises that we know are struggling to meet their obligations?

[Chris Grayling]

There is no other franchise today in the same position. We are seeing some changed patterns of ridership on the railways. For example, people are choosing to travel to work three or four days a week and work from home one day a week, and we are doing careful work on what that means for the future. As I said, my hon. Friend the rail Minister is working on that very issue and any implications for the future of franchising. The reality, as I keep saying, is that this railway has continued to deliver a higher contribution to the taxpayer and a higher level of customer satisfaction than it did prior to 2014.

[Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

For the residents of Berwick-upon-Tweed, the east coast main line is critical infrastructure, until the Secretary of State manages to dual the rest of the A1 all the way through. Can he confirm that there will be no disruption and that my constituents will be able to continue using what has always been an excellent train line?

[Chris Grayling]

I can give that commitment. I hope that it will become an even more excellent train line, though passengers may be tempted away, as tomorrow I will do the formal opening of the last link of motorway-grade road between London and Newcastle—something that should have happened a long time ago but did not happen in the 13 years when the Labour party was in power. It is this Government who are bringing better transport services to the north-east.

[Hilary Benn (Leeds Central) (Lab)]

This is the third time that a private franchise on this line has failed. The Secretary of State just told the House that when it is fully formed, the new LNER operation will be a partnership between the public and private sectors. Can he clarify that, until that time, it will in effect be a publicly run service? If so, he could have made a considerably shorter statement if he had just got up and said, “For the time being, I am renationalising the east coast main line.”

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[Chris Grayling]

It will be a publicly run service, and over the next two to three years, we will be developing the new model of the future. As I say, the operator of last resort is a publicly run service—so, yes, it will be, and we will be making the transition to the new arrangements over that period.

[Philip Davies (Shipley) (Con)]

Further to the Secretary of State’s answer to my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke), he will know that extra services between London and Shipley and Bradford are scheduled to operate from next year onwards. What reassurance can he give that those extra services will operate? Can he ensure that Network Rail privatises the work required, so that those extra services are in operation on time, because they are very important to the local economy in the Bradford district?

[Chris Grayling]

My recollection is that the Bradford services and the ones going through my hon. Friend’s constituency are due to start next year, and I know of no reason why that should not happen.

[Mr Ronnie Campbell (Blyth Valley) (Lab)]

As has been said, three private companies have run the east coast main line, and they have all failed, except for the one that was disposed of by the last Government under the previous Transport Secretary. I wonder sometimes whether we should look at the current Secretary of State’s slush bucket and see how much Stagecoach put into it.

[Chris Grayling]

That suggestion is not worthy of an hon. Member of this House. The hon. Gentleman knows that decisions about procurement are taken predominantly by officials, and I regret the fact that he has made such an allegation.

[Mr Speaker]

Forgive me, but I do not know whether it was an allegation. It happened very quickly, and I did not deem it in any way to be disorderly. I will look at the record later, but the hon. Gentleman has made his point and the Secretary of State has responded to it.

[Steve Double (St Austell and Newquay) (Con)]

I suspect the Secretary of State is of a similar age to me and therefore remembers the last time our railways were nationalised. Is he therefore bemused by the somewhat romantic image that the Labour party portrays of what the railways were like? My recollection is that they were dirty, inefficient and nearly always late, not to mention the terrible sandwiches. They were a far cry from the modern and efficient railways we have today, thanks to private investment. Most of our challenges now are a result of rapid growth in passenger numbers.

[Chris Grayling]

We do not even have to look back to the days of British Rail. We just have to look across the channel to a railway that is heavily indebted, where there are threats of line closures, where the leadership of our friends in the French Government are saying that it simply is not acceptable to carry on the way they are and where they are looking to take their railway in the direction of ours and not the other way round.

[Jenny Chapman (Darlington) (Lab)]

Franchising on this line has failed repeatedly. The Secretary of State could make himself incredibly popular in my constituency, which is the birthplace of the railways, if he just stood up, looked behind him and said, “My name is Chris Grayling, and I have just nationalised a rail line.”

[Chris Grayling]

I have just explained why I do not think nationalisation of our railways is the long-term answer: we just have to look across the channel and see the chaos there to understand that a trip back to the days of British Rail is not right for the future of the travelling public in this country, however much Opposition Members might want it.

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

I have been working closely with the Rail Action Group, East of Scotland to reopen stations at Reston and East Linton. In the light of today’s announcement and given the impact that the operation of the east coast main line has on those stations, will the Secretary of State meet me and the hon. Member for East Lothian (Martin Whitfield) to discuss those projects and how the east coast main line might be able to progress them further?

[Chris Grayling]

I would be happy to do that. I want to see services on this route develop, and I want to see new destinations and new kinds of service. Of course, once High Speed 2 opens, there will be an opportunity for a whole raft of new services on this route, because of all the extra capacity that will be freed up.

[Christine Jardine (Edinburgh West) (LD)]

I wonder whether I could first address the point of order. Correct me if I am wrong, but I think the Secretary of State said that all Opposition parties had been informed of the contents of the statement before we came into the Chamber. That was not the case for my party. We had no notification at all, other than an email with a heading saying that there would be a statement. We did not receive an electronic notification until two minutes past 1 o’clock, when we were all already in the Chamber. Could the Secretary of State comment on that?

The Government cannot simply go on bailing out failing rail franchises. There will be a knock-on effect on other rail franchises, and what are other companies to do if there is a further reduction in economic growth and they are finding it difficult? Are the Government going to bail out every one of them, or will they take the opportunity to look at how public ownership works in this case and examine the future of the railways?

[Chris Grayling]

I will make two points. The custom and practice is to provide an advance copy of a statement to Her Majesty’s Opposition. It has also been the custom in recent years to provide one to the third party. Both of those were done this morning, so I have followed conventions as per normal.

The hon. Lady talks about bailing out a private franchise. I have not bailed out any private franchise; I have just taken away its contract.

[Andy McDonald]

On a point of order, Mr Speaker.

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

Will my right hon. Friend confirm that nothing he has announced today will affect the investment in new rolling stock and the introduction of the new Azuma trains on the east coast main line? In the spirit of cross-party co-operation, may I give him a cheer for reintroducing the LNER brand back into our railways? LNER was one of the four great private railway companies that developed our railways in the last century.

[Chris Grayling]

I give my hon. Friend an assurance that the Azuma trains will be joining the network later this year. They will deliver a fantastic new service for passengers, and they will indeed be LNER Azuma trains instead.

[Grahame Morris (Easington) (Lab)]

The Secretary of State said that he was not aware of any problems with other franchises. Perhaps he was not in the House during Prime Minister’s questions, when problems with the Northern franchise were identified. Private companies are walking away from franchise bids in Wales and the east midlands. Is this not clear evidence that the rail franchising model is broken, and that the answer is a truly integrated railway under public ownership?

[Chris Grayling]

First, the number of firms asking for passports to apply for franchises is actually increasing, not decreasing. As I keep explaining to Opposition Members—they are causing as much trouble as they can for the Government over the European Union, instead of working together in the interests of this country—what they are proposing is illegal under European law.

[Stephen Kerr (Stirling) (Con)]

I commend my right hon. Friend for taking this tough decision and bringing forward his plan for a public-private partnership for the east coast main line. Will he confirm what this decision will mean for the customer experience before and after 24 June? What will be the travelling public’s experience as a result of this decision?

[Chris Grayling]

The travelling public are the most important people in all this. Tomorrow, and indeed on 25 June, they should notice no difference to the timetable or the tickets; they can buy tickets in advance. The difference is that from that point on they will notice a change to the trains, which will become LNER livery trains. Later this year, there will of course be brand-new LNER livery trains, providing a much better experience for the travelling public—and a more reliable experience at that.

[Judith Cummins (Bradford South) (Lab)]

The Secretary of State said in his statement that there is “no suggestion of either malpractice or malicious intent in what has happened.” Does he agree with me that what has happened smacks of a pattern of failure and incompetence, and that he, as the Secretary of State, should take responsibility?

[Chris Grayling]

Clearly the Government have to act in a situation like this, and we have done so: we have acted decisively. The reality is—I stand by what I said—that there is no malicious intent. A major corporation has made a major mistake, and it has paid a price equivalent to a fifth of its market capitalisation, which is a big cost for any business.

[John Penrose (Weston-super-Mare) (Con)]

I welcome the Secretary of State’s response to my hon. Friend the Member for Wimbledon (Stephen Hammond), who asked about open access. The Secretary of State was clear that open-access services will be maintained, but may I ask him to go further? In preparing for the end of the current deals in 2021, may I ask him, instead of going back to a failed nationalisation model or indeed of relying on the evident fragility of the franchising model, to consider greatly extending open-access rail to cover the entire line once the current deals are over?

[Chris Grayling]

I know my hon. Friend is a great believer in open access, and I think that this line proves that it can make a real difference. I give him an assurance that we will do all we can to continue to encourage open access to maximise the capacity of the railway network.

[John Mann (Bassetlaw) (Lab)]

The voters along the east coast main line in England were the strongest voters in the country for Brexit, and when they voted to leave the European Union, they, including my constituents, did not vote to give away the benefits that will come from it. They saw one of the big benefits of that vote as the ability to nationalise the rail industry. Why is this Secretary of State snubbing those Brexit voters and kicking them in the teeth?

[Chris Grayling]

I know we have travellers on this line who believe they are getting a better service than they have before, and I believe that most of them would agree with me that reuniting track and train is the best way of delivering performance. This is not actually about ownership. If a railway has operational challenges or is operating at capacity, it does not matter who owns or controls it, as the problem is still going to remain. If it were taken back into the public sector and then starved of capital, as would inevitably happen, we would end up with a railway that did less well for the future.

[Henry Smith (Crawley) (Con)]

I welcome the Secretary of State’s reconfirmation of the break-up of the Govia Thameslink Railway franchise in 2021, and also the £300 million of engineering investment that is going in, but will he please re-emphasise that the company must make sure that bus replacement services are not stranding passengers during periods of engineering work?

[Chris Grayling]

I am aware of the issue at Gatwick the weekend before last. My understanding is that the problem was relatively short lived, but lessons have to be learned from that incident, just as they particularly had to be learned from the previous one. The company needs to get this right. The engineering work has to be done, but we cannot leave people stranded in massive queues on a Sunday as a result.

[Fiona Onasanya (Peterborough) (Lab)]

Three times in under a decade private companies have failed the east coast main line. It was successfully managed by a public company between 2009 and 2015. Why will the Secretary of State not accept that obvious solution to the problems faced by the east coast main line?

[Chris Grayling]

I do not believe that that is the long-term answer. We are actually taking the line back into state control now. The whole point is that, during those years, the railway contributed less to the public purse, had lower levels of satisfaction and employed fewer people than it does today, and there must be a lesson in that as well.

[Jack Brereton (Stoke-on-Trent South) (Con)]

Does the Secretary of State agree that it is the involvement of private companies through the private-public partnerships managing our railways that has helped to foster more competitivity, particularly in relation to services and ticket prices?

[Chris Grayling]

That is right. I cannot understand why the Labour party is so fixated on recreating British Rail just at the time when our friends in France are going to step away from that model and actually move closer to where we are. That is Emmanuel Macron’s vision to create a better railway. The Labour party seems to want to go in exactly the opposite direction and to return to a situation that the French say is not working for them.

[Martin Whitfield (East Lothian) (Lab)]

The Secretary of State mentioned that independent members “will ensure the interests of other operators on the route are taken into account.” Will this include First ScotRail, which operates the local service—it is itself operating at capacity and facing its own crises—on the east coast main line in my constituency of East Lothian?

[Chris Grayling]

We have to make sure that the new organisation—I have talked about this with the rail regulator, which has been involved since the start of developing this concept—has a duty to make sure both that space is available for other operators and that, in relation to the support and the service provided, there is no discrimination against other operators, such as regarding whether the signals work and so forth. This has to be structured in a way that protects such operators, whether in the case of First ScotRail in the north, or other operators in the midlands and the south.

[Huw Merriman (Bexhill and Battle) (Con)]

I have served on the Transport Committee for the past few years, during which time we have examined the challenges that face train operators as a result of record investment in our Network Rail assets. Is it the Secretary of State’s view that the issue on the east coast main line is so acute that the only way to fix the Network Rail assets is to have it all as one operating entity?

[Chris Grayling]

On a rail network that is operating absolutely at capacity all round—when there are very few, if any, spare train cars; and when anything that goes wrong is hugely disruptive to the timetable—a joint operating team that is able to plan train services and engineering works as part of that same team, rather than in two different organisations, is a much better way to operate a railway. My vision for the east coast main line, and indeed for other parts of the rail network where we are taking steps down the same path, is to create such a joined-up approach of managing track and train together. In my view, that is the best way to make a congested railway work more effectively for passengers.

[Caroline Flint (Don Valley) (Lab)]

The Secretary of State says that Stagecoach and Virgin Trains got their bid wrong, which presumably means that they undercut their competitors. Should there not be a consequence, with Virgin and Stagecoach denied the right to bid for other franchises?

[Chris Grayling]

First, there is no legal basis for taking that step. Secondly, it is interesting that the Labour Members always demand that we stop international companies getting franchises in the UK. They seem to want to drive out of the industry a company that has made a huge mistake and paid a big price for it, but which none the less has been a successful transport operator in the UK for a long time. We should take sensible decisions in the interests of the country and of passengers. That is what I am doing.

[Julian Sturdy (York Outer) (Con)]

It is clear that there are unique infrastructure challenges on the east coast main line, many of which affect my constituents. What steps will the Secretary of State take to resolve those challenges, and can he assure me that the creation of the new partnership will solve them?

[Chris Grayling]

That is very much my aim. I will ask the new joined-up board to consider how we can bring digital technology to the signalling on the line. There are not enough train paths, and the way to sort that for the future is by moving to a digital railway. This is an area in which we can supplement public investment—we are putting in a record amount over the next five years—with private investment so that, for example, we unlock the potential of digital technology to create even more capacity on our railways.

[Mary Creagh (Wakefield) (Lab)]

I congratulate the Secretary of State on following the advice I have been giving him in this Chamber and partially implementing Labour’s 2015 transport manifesto, which I had a hand in writing, by bringing track and train closer together. I also congratulate him on his decision to bring the Great Northern line under the control of London’s Mayor, thereby recreating Network SouthEast from the days of British Rail. His decision to run the railway from 24 June shows that that is legal under European law. I urge him to go further and ensure that the private sector knows there is an operator of last resort ready to step in, so that we have a public railway operated by public servants and working in the public interest.

[Chris Grayling]

I think people already know, if they did not know before, that there is an operator of last resort. The legal position, as the hon. Lady will know, is that existing European law already provides for a separation of track and train. The new European rail package that comes into force in the autumn goes further by making it illegal to let any public contract without private sector competition and a private sector alternative. That will make the Labour party’s policies completely illegal.

What matters is what works for passengers. On bringing the operation of track and train back together, I think we both agree—I am grateful for the hon. Lady’s comments. We may disagree about overall ownership structures or the overall approach to privatisation or nationalisation, but a single team operating the two will take joined-up decisions in the interests of passengers. In my view, that is the right way forward.

[Sir Desmond Swayne (New Forest West) (Con)]

What was the line’s contribution to the taxpayer between 2009 and 2015, and what has it been subsequently?

[Chris Grayling]

The equivalent contribution since the current franchise started is roughly—if I remember correctly; this is just from memory—£200 million more for the taxpayer. It is certainly the case that the franchise has been contributing more to the taxpayer since Virgin Trains took over than was the case when it was under state control. The Labour party always seems conveniently to forget that, but it is the truth.

[Paula Sherriff (Dewsbury) (Lab)]

I receive daily communications from constituents who are frankly fed up with antiquated, unreliable and overcrowded trains, including, but not exclusively, on the east coast main line. The Secretary of State has long promised improvements in investment but has failed to deliver. When will he get a grip on rail in the north?

[Chris Grayling]

I keep saying to the hon. Lady that what she wants is a Government who are providing brand new trains. The first are already being introduced. On the trans-Pennine route, the completely refurbished new trains are already in operation. The first of the new-build trains are due to arrive within a matter of weeks. I expect the first Pacer trains to go to the scrapyard later this year. The new Hitachi-built trains arrive on the east coast main line later this year. The railways are about to go through the biggest transformation of their rolling stocks since the steam engine. I hope she and her constituents will welcome that.

[Kevin Foster (Torbay) (Con)]

I know that the Secretary of State shares my view that the idea that a rebranded British Rail is the great solution for all our transport problems is faintly ridiculous. What learning from the experience of dealing with this particular franchise is being taken to the Great Western Railway, which will have a franchise soon?

[Chris Grayling]

We have to ensure that the risk-sharing mechanisms are right, which is why I have tasked the rail Minister with looking in detail at franchise contracts. On Great Western, I want a very close relationship and deep alliance—if not one step further than that—between Network Rail and the train operator. We have to ensure for all future franchises that we do not get ourselves in a position in which the franchise can fail in this way.

[Diana Johnson (Kingston upon Hull North) (Lab)]

It looks to me like the Secretary of State’s golden ministerial touch has worked again to produce a catalogue of failure: his Department’s failure; the franchise agreement failing; incompetent train operators; and taxpayers and passengers losing out yet again. Does he plan to make an announcement about a £500 million bailout of Crossrail, which was reported in the newspapers at the weekend, again adding to the disparity in investment between north and south?

[Chris Grayling]

Opposition Members keep quoting what they have read in the papers. When there are things to tell the House, I will tell the House, as I always have, Mr Speaker. I counsel Members not to just pick up newspapers.

On the disparity in investment between north and south, the flagship project for the next five years is the £2.9 billion trans-Pennine upgrade, which is by a country mile the biggest rail investment project for the next five years in the Network Rail investment programme.

[Maria Caulfield (Lewes) (Con)]

The Secretary of State’s statement mentions the break-up in 2021of the Thameslink and Southern Rail franchises, but I urge him to break them up sooner rather than later. The new timetable changes affect passengers in my rural constituency, with stations at Berwick, Wivelsfield, Seaford, Lewes, Plumpton and Polegate all losing significant services. Will he bring forward the break-up of the franchise?

[Chris Grayling]

Let me touch briefly on the question of the new franchise. The big change to timetabling is not just in my hon. Friend’s area, but all around the country. It is being driven by Network Rail, which ultimately controls timetabling across the network to try to make a very complicated pattern of services fit together. After 20 May, there will be some fantastic enhancements to services around the country. Some tough decisions have been taken about levels of demand and ridership. If colleagues have individual concerns, the rail Minister and I will be very happy to sit down and talk about them. This is a massive and broad change that will deliver far more for passengers.

[Lisa Nandy (Wigan) (Lab)]

I welcome the Secretary of State’s decision, however reluctantly he reached it, but he seems to have no comprehension of the gravity of what is happening on our railways. Northern passengers were promised a better service when the franchise was awarded a couple of years ago, but that service is dirty, overcrowded and increasingly unreliable. That is having a major impact on our economy. Will he join me, the Mayor of Greater Manchester and cross-party MPs, and, in the public interest, step in to strip this arrogant, out-of-touch company of its franchise?

[Chris Grayling]

Let us be clear about two things. First, the Northern franchise is co-managed between Rail North—part of Transport for the North, on which the hon. Lady’s northern colleagues sit—and my Department. They are delivering a massive investment programme. I would add a cautionary note. Performance issues need to be addressed and we will address them, but it would be a huge mistake to disrupt the investment programme that, over the coming months, will start the transformation of all those dirty old trains that should have been replaced a decade ago but were not. The new trains are being built. The first ones are starting to arrive and she will see a transformation that is long overdue.

[Graham P. Jones (Hyndburn) (Lab)]

Is the Secretary of State attributing all the problems on the east coast main line over the last few years to the franchise holders and none of them to his Department and him?

[Chris Grayling]

I attribute the problems on that line to two things: first, an unrealistic bid that has failed; and secondly, old rolling stock that is being replaced and an infrastructure that needs an upgrade and is going to get it. That is what has caused the operational problems—notwithstanding that, passenger satisfaction on that railway line is 92%,which I think is pretty good.

[Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)]

The cross-party Public Accounts Committee said last month that the Department for Transport’s forecasted earnings from the east coast franchise were wildly wrong. Given today’s announcement, how can we have faith in the Secretary of State’s Department’s handling of it, and will he now apologise for presiding over yet another privatisation disaster on our railways?

[Chris Grayling]

What I have done is take decisive action to deal with a problem that needs to be addressed to make sure that we protect passengers. That is what everybody would expect.

[Clive Efford (Eltham) (Lab)]

The Secretary of State is the one who wrote the letter saying that he would not hand over suburban services to a Labour Mayor of London, but in today’s statement he has had to eat his words about the overground services in north-east London. In south-east London, my constituents face a worse service, with less choice of destinations as a result of the new franchise, so will he reconsider the position with regard to the Southeastern franchise and allow the Mayor of London to take it over and give a better service to my constituents?

[Chris Grayling]

The issue remains twofold. The Mayor of London’s business plan for the Southeastern franchise provided virtually no new investment at all. There was a handful of extra services on the Nunhead line, and the rest of it was on a wing and a prayer. I think that the new franchise document specifying improvements for passengers will deliver, not just in London but across the whole of the Kent and south-eastern area, because this is not a London franchise.

[Kelvin Hopkins (Luton North) (Ind)]

May I remind the Secretary of State of a previous experience with public-private partnership on the railways—namely that in the London underground? It was forced on the Mayor of London and Transport for London, who resisted it very strongly. The scheme collapsed in disorder, very expensively. Tube Lines and Metronet—the two private companies involved—stuffed their pockets with money before it collapsed back into the public sector. Is that not going to happen again with this scheme?

[Chris Grayling]

I remind the hon. Gentleman that that problem happened when Labour was in power, which proves that they are not good at setting up contracting arrangements.

[Kate Green (Stretford and Urmston) (Lab)]

The Secretary of State knows, because I have raised it repeatedly, about the appalling service that my constituents are receiving from Northern Rail, with delays, cancellations, overcrowding, and trains running through stations without stopping when they should. Now the new timetable removes station stops all together. Will he finally take action to ensure that a compensation scheme that recognises the disruption that my constituents have suffered for months can actually be put in place to give them some measure of recompense for the disruption that they have suffered?

[Chris Grayling]

We continue to keep the matter under review. We are moving to Delay Repay 15 and looking at other ways of tightening performance on the railways, but the big difference to travellers in and around the Manchester area will come from the arrival of new trains and the completion of the works on the Bolton line, which have caused more disruption than I would wish. I am less than happy about the delays that have taken place and I am putting as much pressure on Network Rail as possible to get it sorted.

[Albert Owen (Ynys Môn) (Lab)]

The whole reason that we have this statement from the Secretary of State is that the current franchise arrangements are broken. I urge him, in the new franchise, to include not-for-profit and the part-nationalisation that he has announced today. That would avoid the embarrassment of a Secretary of State having to come to this House to announce that further down the line and costing taxpayers money.

[Chris Grayling]

As I keep saying in respect of what I will bring to the House in due course, as we make further progress towards the implementation of what was the east coast partnership and is now the London North Eastern Railway, this is a different paradigm, and it simply will not operate in the way the hon. Gentleman has discussed.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

Given the well known but now even better publicised problems with the rail franchising model, might this not be the moment for the Secretary of State to review the Co-op party’s recent proposals for rail reform, including a series of new mutual, not-for-profit train operating companies that are able to operate in the private sector, but are publicly owned, and able to attract significant private investment?

[Chris Grayling]

As I said in my statement, one of the things that I am looking at on the east coast route is how we secure significant employee participation in its success. I will look carefully at what the hon. Gentleman suggests. I think that we need a different approach. That is why the LNER model that we will be developing over the coming years will be a revolution for the railways.

[Thangam Debbonaire (Bristol West) (Lab)]

The Secretary of State says that he wants to protect passenger interests and ensure value for money for taxpayers, but in Bristol, as across the country, fares have gone up three times faster than wages since 2010. He also says that he wants to support investment and improvement in the railway. We have some new stock, but we have had our electrification cancelled in Bristol, despite massive disruption for constituents in Lawrence Hill and Easton. When is he going to sort out our electrification and when will he accept that the favour that he has just done for the people and passengers on the east coast needs to be done for the passengers in Bristol, so that our rail service is no longer failing?

[Chris Grayling]

The hon. Lady is being a bit churlish. She is getting brand new trains for Bristol and the best ever train service to London. We are in the process of dualling the Filton Bank. We are working with the combined authority mayor for the Bristol area to develop the plans for the Bristol metro, MetroWest, which I regard as one of the most important projects for the country—[Interruption.] MetroWest is rail. It is going to be one of the most significant developments that Bristol has seen for a very long time, developing the kind of suburban rail network that it really needs.