West Coast Main Line

Daniel Kawczynski Excerpts

Monday 17th September 2012 Westminster Hall

[Rosie Cooper]

I was not a Member of this House when that decision was taken, so was not in a position rigorously to examine it. Overall, though, I do not have great confidence in the various projections of the Department.

To continue, let us take, for example, the objective to achieve sustainable value for money. That is a stated objective, yet the process encourages risky bids because companies know that if their bid is £250 million more than any other bid their competitors’ bids do not go forward for further evaluation. I have deep reservations about a system that does not attempt to answer why one bid is so much higher than all the rest, and then does not quantify the difference.

[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

The hon. Lady intimates that she has concerns about the way in which matters are carried out at the Department for Transport. Like me, she was at a meeting when Virgin Trains, which had been invited to talk to MPs, said very clearly that it had discussed its concerns with Lord Adonis. What did the previous Labour Administration do to allay Virgin’s fears at the time?

[Rosie Cooper]

I did not clearly hear that part of the meeting. Perhaps it happened before I arrived. I was there when the hon. Gentleman said that he called the meeting so that Virgin and FirstGroup could say how they had arrived at their current situation—of one being awarded the contract and the other having started a judicial review. I pointed out that nobody from the Government had bothered to turn up to answer MPs’ questions and that democracy had been short-changed.

I understand that the Government use a computer programme to test the assumptions within the bid, which the Minister will no doubt tell me is a robust approach. My response would be to ask whether this was the same modelling package that was used by the consultants who said that the west coast main line should be carrying an extra £15 million of fares during the period of the Olympics and Paralympics? It was never physically possible to get that volume of passengers within that time frame to deliver £15 million of sales. In the end, the additional revenues amounted to between £1 million and £2 million. Such projections were for a single event over a short period of time and they were way, way off. How much confidence does that instil in us over projections that are supposed to last 15 years?

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[Rosie Cooper]

Indeed I will, and I will seek further advice from my right hon. Friend on that point as well.

There is considerable difference in value when one bidder offers £800 million worth of investment and the other bidder offers £350 million. Unbelievably, there are reports that FirstGroup scored higher in the bidding process on customer service than Virgin did. Can the Minister tell me how the scoring system squares that with the results from various customer satisfaction surveys of FirstGroup’s current users—in other words, FirstGroup’s passengers—that show that those users rated the Great Western service as the second worst service around? It is not unfair or illogical to assume that, if a company offers a certain service on one line, it may offer something similar on another line. So can he explain how an anonymised scoring system is better informed than the passengers who actually use the railway system and FirstGroup in particular?

Sustainability is one of the watchwords in every aspect of public expenditure. Ensuring that the bids that are submitted can be sustained over the life of a franchise is essential. One of the reasons why hon. Members asked for the debate is that recent franchise experiences have shown that the highest bids—the riskiest bids—are not necessarily sustainable bids. The Government have even admitted that the successful bid for the west coast main line is indeed the riskier bid.

I was intrigued to hear that, during the tendering process, the Department for Transport informed one bidder that it did not view a 5% margin as sustainable. In the light of that information, that bidder reworked its bid and achieved a 7% margin. That leaves me perplexed, when I read that the successful bid is based on a 5% margin. If that is true—I assume that it is—given the lack of information and transparency, a whole series of questions are raised. Does the DFT believe that a 5% margin is sustainable? Did DFT officials give each of the bidders the same information? If they did offer the same view on sustainability to each bidder, why was a bid accepted with a figure that they believed to be unsustainable? That is an important question because it relates to risk and, in turn, how that relates to the guarantees being sought by the Government.

There is considerable contention about the guarantee that the successful bidder was asked to put against the bid. In the first case, my understanding of the guarantee is that it is based on the assessment of risk using a set formula. It is argued that if the Department had applied that formula uniformly, FirstGroup would expect, reasonably, to have been asked to put up a guarantee of around £600 million, not just the £215 million asked of it initially, which was finally reduced to £200 million. Secondly, did any negotiation take place with FirstGroup on the level of guarantee? If so, what were the circumstances? How did we reach the very small guarantee figure of £200 million, if the Department had been applying the same formula across all bids? If there was no provision within the invitation to tender for the guarantee to be negotiated, how does the Minister explain the variation in the figures from potentially £600 million down to £215 million, and finally to £200 million? Those figures are relevant to mitigating taxpayer risk.

We must not forget that in recent years a number of train operators have handed the keys back to the Government on franchises such as the east coast main line. I believe that Members want to be assured that that will not happen again and that taxpayers have an assurance that they will not be held to ransom by Dick Turpin train operators asking them to stand and deliver, having secured the contract on a bogus premise, taking their profits and scarpering when it is time to deliver the promised high return.

[Daniel Kawczynski]

I hope that the hon. Lady is not referring to any train operators as Dick Turpin-type figures.

[Rosie Cooper]

Oh, I think there are a lot of Dick Turpin-type figures about.

I would very much like to hear from the Minister on this precise point: has the Department applied its own rules or not? Given the whole handling of the process, a judicial review has been applied for, which has left us in a position where re-nationalising the line is being considered. The new Secretary of State for Transport has stated that he would seek to re-nationalise the west coast main line if there is a failure to reach an agreement before 9 December.

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[Rosie Cooper]

Is the Minister saying that any offer from Virgin to run the service at no cost and the best-value operation will affect his decision? I will ask him some questions about the associated costs should we set up a DOR.

I understand that two mobilisation processes are running side by side. Will the Minister tell us how that is working in practice? What are the associated risks and costs that arise from the lack of clarity? What assurances can he offer staff that their positions will be secure and the situation resolved?

The Minister has partially intimated the answer to the question that I am going to ask. If a DOR is to run the service, will it have the contract for a defined period, or will another mobilisation process be undertaken where an operator is awarded the contract? What will be the cost of that process?

One of the reasons for securing this debate is the manner in which the Department has handled the entire process, from the timing of the announcement to the consistent reluctance to answer hon. Members’ questions. We keep being told that this Government are open and transparent, and I want to believe that. We are told by the Department that it is confident in its decision on the west coast franchise. If I accept that both those statements are true, why have Transport Ministers not had the courage of their convictions and been willing to come to the House to make a statement to allow scrutiny of the process and the decision? There is a claim that one of the bidders had submitted questions to the Department seeking clarification on certain matters, but it has yet to receive a response. We are basically being told by the Department, “Trust us. Trust what we are telling you.”

[Daniel Kawczynski]

Before the announcement was made before the recess, I asked the Prime Minister a question about the process at Prime Minister’s Question Time. I do not recall hearing any questions from shadow Ministers or Labour Members challenging the process or the timing of when the decision would be made. Is that not the Labour party jumping on the bandwagon after concerns were generated in the media?

[Rosie Cooper]

Protecting taxpayers’ interests is a great bandwagon to jump on. We will protect their interests. The Department says, “Trust us. Trust us. Trust us,” and the hon. Gentleman is inferring that we should trust it. In the week that we had the Hillsborough revelations, “Trust us” is a very hollow call; I am not simply being cynical.

If the Government believe the decision is right, they should open the books and allow the bids to be compared. They should be open and transparent. To be honest, within the context of the east coast main line and the Great Western line, sadly I do not think we can put our faith in the Department.

During my comments, I have raised questions on the risk assessment, the funnelling of bids, the application of the rules and the soundness of growth projections. I ask the Department to try putting its faith in the democratic process and the parliamentary system so that, through debate, questioning and scrutiny, we can be assured that we have arrived at the best outcome for all parties.

Those who fail to learn the lessons of history are doomed to repeat them. The Government will not be forgiven if they allow history to repeat itself with any company taking profits from running our railways and then walking away from the contract without paying a huge penalty to cover taxpayers’ costs and, as the hon. Member for Warrington South (David Mowat) said, being barred from future Government contracts. Unless the Government can evidentially support their case, I, as one of the 170,000 people who signed the e-petition, call for them to reconsider their position.

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[Derek Twigg]

If the Government go for a bid that says it will give the maximum return but it does not stack up, that is a problem. I am glad that the hon. Gentleman made the point about the massive amount of public investment that took place under a Labour Government; it has made a massive improvement.

[Daniel Kawczynski]

On borrowed money.

[Derek Twigg]

Most of the problems with the west coast main line were due to the lack of investment during the 18 years of the previous Conservative Government, so if the hon. Gentleman wants to get into a political argument I am happy to do so.

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[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

Thank you, Mr Davies. The Shropshire MPs have been campaigning on a cross-party basis, together with our Welsh neighbours, on trying to secure a direct rail service for Shrewsbury. That issue is extremely important for us, bearing in mind tourism and business investment, and that is why I was delighted by the announcement that FirstGroup had been selected and would provide the direct service for Shrewsbury.

My first reaction when I heard about Virgin’s judicial review was frustration and concern, and I felt a little as though it was a case of sour grapes. Subsequently, I met representatives of FirstGroup, who stand by their figures unequivocally. I also met representatives of Virgin and held a meeting in the House of Commons that was attended by 40 colleagues, who came to interact with Virgin’s senior managers and directors. They tried to explain to us why, in their view, and from a commercial procurement perspective they felt that FirstGroup’s figures did not stack up.

Interestingly, Virgin Trains claims that it has been raising concerns about the whole procurement process with various Ministers over an extended period. Indeed, it raised the fact that it had tried to lobby Lord Adonis on this issue. It is therefore rather difficult for me to accept the flavour of some of the comments from Labour MPs that this problem has somehow developed recently. According to Virgin Trains, it had concerns at the time when Lord Adonis was in charge and it raised them with him. As I said, I invited representatives of Virgin to meet me and fellow parliamentarians, and 35 or 40 MPs came to that meeting. I have sent my right hon. Friend the Secretary of State for Transport minutes of the meeting.

I believe that immediately after the announcement, the shadow Secretary of State for Transport, the hon. Member for Garston and Halewood (Maria Eagle), whom I was watching on television, was calling for an urgent inquiry because the decision had been made when Parliament was in recess. I think that she expressed a great deal of frustration about that. However, I have been trawling through all the questions that she has submitted to the Secretary of State for Transport and the Department for Transport, and the Library has also been checking them and—she may correct me on this—I cannot find any questions from her during the past six months about the timing of the decision or the procurement process. As I said, she may correct me if I am wrong, but I feel that this is the Labour party jumping on a bandwagon.

[Maria Eagle (Garston and Halewood) (Lab)]

The Government have chosen to delay the completion of the process by six months. They negotiated with Virgin an extension to the contract that it was running. Therefore, the timing has been a matter for the Government. Obviously, I was not aware that they would make the announcement in the middle of August, when Parliament was in recess. That would be a matter for the Government.

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[Daniel Kawczynski]

That is very strange, because I knew that the announcement was to be made in August and I am just a humble PPS. I raised this issue with my right hon. Friend the Prime Minister at Prime Minister’s questions, asking him to try to intervene to ensure that we have a direct rail service for Shrewsbury, and he clearly stated in his response on the Floor of the House in July that the result of the process would be announced in August and that he was sure that the train operators would have listened to my point about Shrewsbury. That is a matter of record during Prime Minister’s questions in July.

[Glyn Davies (Montgomeryshire) (Con)]

My hon. Friend rightly makes references to Shrewsbury. I want to associate with his comments my comment about how important a direct line to Shrewsbury is for the whole of mid-Wales. Shrewsbury is our station as well, and a direct line from Shrewsbury to Euston will make a huge difference to the ability of the people of mid-Wales to use the train. I thank him for allowing me to put that point into the debate.

[Daniel Kawczynski]

I thank my hon. Friend and constituency neighbour and pay tribute to the intense work that he has done to campaign for his constituents across the border in Montgomeryshire, many of whom will, of course, rely on this service.

I had the pleasure of meeting Sir Richard Branson the other day to talk about this issue. I would like my hon. Friend the Minister to know that Virgin is very keen—I am just making observations—to talk to the Secretary of State. It claims that it has tried to engage in high-level discussions over a long period. It is very keen to meet the Secretary of State to highlight its concerns. Interestingly, the impression that I get is that the Department for Transport is not keen to meet Virgin at this time because of the judicial review. I would be grateful for an update from the Minister. What is the situation?

I think that the judicial review will cost a fortune for both sides, and I very much regret the fact that taxpayers’ money will be used in trying to defend that challenge through the courts. An awful lot of money will be made by lawyers at the expense of the companies and the Government. We need to engage with the operators on the procurement process for the future. I want us to avoid these problems in the future. I want all train operators to agree on some form of bidding or procurement process that has buy-in, so that we can try to avoid these disputes. It is highly regrettable, when constituents are looking forward to better train services, that we have somehow degenerated into this legal quagmire, which could take a great deal of time and cost a great deal of money to resolve.

We are very pleased that there will be a direct service for Shrewsbury from FirstGroup. Apparently, Virgin Trains is now claiming that its bid also included provision of a direct rail service for Shrewsbury. However, I reiterate to the Minister that one of the biggest problems that we have is the lack of parking capacity at Shrewsbury station. I intend to meet Network Rail shortly to discuss that and will be trying to secure a meeting with him on that point as well.

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[The Parliamentary Under-Secretary of State for Transport (Stephen Hammond)]

I congratulate the hon. Member for West Lancashire (Rosie Cooper) on securing this debate. It is obviously an important debate and it is, of course, historic; as she will recognise, this is the first debate held on a Monday afternoon in Westminster Hall under these auspices. I have joy in responding to it on behalf of the Government—I am delighted to do so—but I would probably not have quite the same joy if my hon. Friend the Member for South Staffordshire (Gavin Williamson) suggested that I might be here every Monday afternoon from 4.30 pm to 7.30 pm. Mr Davies, it is also a pleasure to serve under your chairmanship.

We have had a fascinating debate. I thank a number of hon. Members, including the hon. Member for Garston and Halewood (Maria Eagle), for their kind comments and for the questions that they have put. I will attempt to answer those questions. Of course, some of them tempt me to go down a line that, if I were to take it, would probably mean I had the shortest ministerial career in history, and I do not propose to do that this afternoon. However, where possible, I will be as helpful as I can. Where I can, and at the right time, I will answer some questions now, and where I can, and at the right time, we will look at perhaps responding more fully in writing.

It has been a very interesting debate. The hon. Member for Halton (Derek Twigg) said that all politics is local, and that has certainly been proved by a number of the contributions today, including his own: I listened very carefully to the comments about Runcorn, the number of passengers and the more frequent service. I remember well the cold morning in Rugby; well done to my hon. Friend the Member for Rugby (Mark Pawsey) for continuing to press the case of Rugby rail users. I will respond to the questions put by the hon. Member for Ynys Môn (Albert Owen) later in my speech. May I also just say to my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) that, as I understand it, he will be able to use his rail cards on off-peak journeys in future? He also made a number of representations and I am delighted to tell him that I am sure the Minister of State, my right hon. Friend the Member for Chelmsford (Mr Burns), will be listening to his concerns avidly. As usual, my hon. Friends the Members for Shrewsbury and Atcham (Daniel Kawczynski) and for Montgomeryshire (Glyn Davies) made the case on behalf of their constituents powerfully. And my hon. Friend the Member for Morecambe and Lunesdale (David Morris) wanted more than a “Brief Encounter” with the west coast main line at Carnforth; I understand that point entirely. There were a number of other contributions that I wish to pick up as we go through.

As the hon. Member for West Lancashire said, the petition had more than 172,000 signatures. Beyond any question, the franchise process is of genuine public interest, and quite rightly so. After all, whether someone is a fare payer or a taxpayer, they have a stake in our railway networks and an interest in ensuring that they provide real value for money, as well as services that are accessible, reliable and safe. The Government clearly want the railways to succeed in that regard, which is why we are investing more than £18 billion in the railways over the spending review period.

It is important to mention at the start the Government’s objectives for the railways, which were set out in the rail Command Paper this May by my right hon. Friend the Member for Putney (Justine Greening), who was then the Secretary of State. As I am sure a number of hon. Members will remember, it was subject to extensive debate on the Floor of the House. Our aim as a Government is to work closely with the industry to ensure that our railways are financially sustainable and consumer-focused. That approach is essential if we are to ease the burden on the taxpayer and improve value for money for fare payers. We are also building on the work done by my right hon. Friend the Member for Chipping Barnet (Mrs Villiers), which looked specifically at reforming rail franchising.

I note the remarks made by the hon. Member for Garston and Halewood about George Muir. I remember discussing with George his comments on rail franchising. He was in a minority of one at the time, and I think he probably remains in a minority of one, certainly within the Association of Train Operating Companies community.

On rail franchising, the Government set out three key principles in January 2011. First, we believe that franchises should be longer, expanding the opportunity for operators to invest in improvements, as well as enabling them to strengthen their working relationships with Network Rail and other key stakeholders. Secondly, we set out that we should see demanding outcomes for operators to deliver, but give them more flexibility to decide how best to achieve those outcomes. Finally, we said that the specifics of each franchise would be decided on a case-by-case basis.

The procurement of the new inter-city west coast franchise was, as everyone would expect, a thorough and extensive process, which a number of hon. Members have stated. The process was transparent to both Parliament and the public. The first public consultation was held 18 months ago. In May 2011, the then Secretary of State, my right hon. Friend the Member for Runnymede and Weybridge (Mr Hammond), came to the House and gave an updated timetable, including the extension that was partly announced to ensure the success of the Olympics. He provided an updated timetable for the procurement, alongside a draft invitation to tender.

There was then a second public consultation on the train service specification. All bidders were explicitly encouraged to submit bids that contained proposals that reflected consultation with stakeholder groups, including local groups along the route of the franchise, many of which were spoken about today, and Passenger Focus. Following that consultation, the formal ITT was launched and placed on the Department’s website this January. As is now known, following that, four bids for the franchise were received: from Abellio; FirstGroup; a joint venture between SNCF and Keolis; and Virgin Trains, a joint venture between Virgin and Stagecoach.

[Daniel Kawczynski]

The Minister is talking about timetables. Does he agree that the date that the bids would be announced had been well known for a considerable time?

[Mr Hammond]

My hon. Friend is right to make that point. As I said, my right hon. Friend the Member for Runnymede and Weybridge had made the announcement in May 2011 and set out the timetable. It was apparent from that time when the announcement of the bids would be.

A thorough examination of the bids was carried out over nearly three months. As soon as the winning bidder was identified, in accordance with existing practice and the published timetable, the Department ensured that announcements were made to the London stock exchange that it intended to award the inter-city west coast franchise to First West Coast Ltd, a subsidiary of First.

A number of Members talked about parliamentary scrutiny today. It is not unusual that the announcement was made during a recess. On two occasions, the previous Government made announcements to the market, quite properly, on days when the House of Commons was not sitting. To suggest that that is a new way of doing something—