East Midlands Rail Franchise

Clive Betts Excerpts

Thursday 11th April 2019 Commons Chamber

[Mr Clive Betts (Sheffield South East) (Lab)]

(Urgent Question): To ask the Parliamentary Under-Secretary of State for Transport if he will make a statement on why Stagecoach has been disqualified from bidding for the east midlands rail franchise.

[The Parliamentary Under-Secretary of State for Transport (Andrew Jones)]

On Wednesday 10 April, it was announced that Abellio is the successful bidder to operate the east midlands rail franchise and will be responsible for delivering new trains, smart ticketing and more frequent services for passengers. Passengers in the east midlands are to get new trains, more peak-time services, reduced journey times and over £17 million of station improvements as Abellio takes over the franchise from August 2019.

Abellio will invest £600 million in trains and stations between August 2019 and 2027, while the Government continue with their £1.5 billion upgrade to the midland main line—the biggest upgrade to the line since it was completed in 1870. This is part of the Government’s £48 billion investment to modernise our railways over the next five years.

As we informed the House in yesterday’s written statement, Abellio was awarded the contract “following rigorous competition.” It was a fair, open competition and Abellio provided the best bid, in which it demonstrated that it will not only meet but exceed the Department’s specifications.

Stagecoach chose to put in a non-compliant bid, which resulted in its disqualification, in line with the terms of the published invitation to tender. That said, Stagecoach has played an important role in our railways, and we hope it will continue to do so after the conclusion of the rail review. However, it is entirely for Stagecoach and its bidding partners to explain why it decided to ignore established rules by rejecting the commercial terms on offer.

[Mr Betts]

Thank you, Mr Speaker, for allowing this urgent question.

The Minister did not really answer the question. Abellio has been awarded the contract as the best bidder, but the bid of the existing franchisee was not even allowed. Generally, Stagecoach has performed reasonably well on the contract, so will he explain when the requirement was first introduced that a bidder has to cover pension costs? Is this the first franchise for which the requirement has been introduced? Why was it applied?

How much, in total, are the Government trying to cover in costs through the franchising process? When were the bidders notified of the requirement—was it at the beginning of the process?—and why was no one else told about it? Are any other companies refusing to cover such costs? Are any other franchises affected? If they are, what will be the effect on competition within the franchising system? What would happen to future competitions and to the costs that the Government seek to cover if all companies refused to cover those costs?

Finally, on the bid that has been accepted, do these hybrid trains actually exist now? When will they be introduced? What will the Government do if existing rolling stock is not disability-compliant in 2020? The Government have promised improvements to the timetable, but can we be assured that, at the beginning of the new franchise, journey times will be at least as good, and at least as short, as they were before the botched timetable changes of last year?

[Andrew Jones]

There are a lot of questions there. First, Stagecoach has acknowledged to the Department that it had bid non-compliantly. We have received offers from other bidders in all competitions that are fully compliant in providing the required pension arrangements for railway workers so, to answer the hon. Gentleman’s question on whether this means the bid process is failing and others are refusing, clearly they are not because we have a compliant bid that won in good form.

Stagecoach is an experienced bidder and fully aware of the franchise competition rules, so it is regrettable that it submitted a non-compliant bid that breached the established rules. In doing so, Stagecoach is responsible for its own disqualification. Bidders were invited to bid on the basis of a pension deficit recovery mechanism. They knew that at the very start of the process[Official Report, 25 April 2019, Vol. 658, c. 8MC.]. Stagecoach did not accept it and made some amendments as it submitted the bid. On what would happen if all companies refuse, clearly, by definition, they are not all refusing, so the question does not apply.

We will see an entirely new fleet of trains—a full replacement fleet—come into service. Inter-city services will receive new bi-mode trains, and regional services will receive new diesel trains. The express fleet, which is the Corby-Bedford-London service, will receive new electric trains that offer significantly enhanced environmental improvements.

What is interesting in this franchise is that we will see the first trial of a hydrogen-powered train. [Hon. Members: “When?”] In terms of timing, we will see the new trains coming into service in a phased way. We hope to see the first trains coming in next year, and so on over the next three years.

The bidding process was conducted in a fair and consistent way, applying the rules of engagement equally to all bidders. We have provided feedback to those who have not been successful. The reasons are always commercially confidential. Losing bidders may publicise them if they wish, but we will not do that because they are commercially confidential. The key thing that we are seeing here is a franchise awarded in the typical way that franchises are awarded in our rail industry, delivering passenger benefits.