West Coast Main Line

Derek Twigg Excerpts

Monday 17th September 2012 Westminster Hall

[Derek Twigg (Halton) (Lab)]

I congratulate my hon. Friend the Member for West Lancashire (Rosie Cooper) on securing this unique debate and for the interest that she has taken for many years in transport issues, rail and the west coast line.

I was a bit worried earlier when my hon. Friend the Member for St Helens North (Mr Watts) was criticising the Department for Transport for getting decisions wrong all the time. He mentioned rail. As a former rail Minister, I thought, “Does he mean me?” He has since popped over and said that he did not.

I was rail Minister for 18 months, and it was a fascinating period. We discussed franchising; I am certainly sceptical about it. I had to appear before the Transport Committee, then chaired by Gwyneth Dunwoody, the former Member for Crewe and Nantwich, a formidable individual who is, sadly, no longer with us. We always used to look forward to appearing before her in Committee to answer her questions. It was an experience. I remember asking the officials what franchising adds and what it brought to the party to improve things. I found it difficult to get an answer. The best that they could come up with was that it improves customer service, is more innovative and has brought improvements in service, but their answer was not overwhelming.

We had various problems with franchises. Southern was one that was sort of operated by the Department; now we have East Coast as well. There are alternatives to be considered. Franchising creates many problems, some of which we have heard outlined during this debate.

I welcome the Minister to his new job. I am sure that he will be helpful in answering our questions, and I am sure that he is finding out that the matter is not at all straightforward and has many difficulties and pressures.

I wanted to speak in this debate primarily because I believe that all politics is local. My constituents have contacted me asking me to put forward their views, both on behalf of passengers and because Runcorn station, one of the best-used stations on the west coast main line, is in my constituency, and numerous staff there are my constituents. I worry about their employment and their future. Surprisingly, a lot of people who have contacted me have said that they are disappointed that Virgin lost, because they think Virgin made a difference. Even one long-standing critic of Virgin has come to accept that in the circumstances of franchising Virgin has made a difference, but I will come to that shortly.

The hon. Member for Warrington South (David Mowat) has kept intervening to say that the risk to shareholders and taxpayers is crucial. That has not been made clear at all. Maybe the Minister will make it clear. It is a key issue, because the arrangements must be a good deal for both the fare payer and the taxpayer. We have no idea at the moment whether they are. I am sure that he will want to explore that.

The franchise decision was announced during the summer recess, denying Members of Parliament, many of whom have a close interest in the matter, recourse to questions to the Minister about the ramifications, the process and how the franchise award was arrived at. The decision to award the franchise to FirstGroup has created a lot of concern—I cannot recall a recent franchise award that has been so much criticised—so it is clear that this debate is important.

We are all well aware of the findings of the Transport Committee, chaired by my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), on previous franchise fiscal failures. To dwell on Virgin for a bit, I will not pretend that things have been trouble-free under Virgin—there were certainly a lot of difficulties in the early days—but it had and continues to have fantastic staff, whether at my station at Runcorn, which has won award after award for customer care and service, or on the trains. If I have any criticisms of Virgin, one is that it changed a good thing. Passengers travelling on a line got to know the train crews, and Virgin decided to change them and swap them around the country. A lot of people thought that that added to the drop in service. It was not popular, and it led to a drop in morale.

The prices that Virgin charges for walk-on fares are frankly scandalous; I think that we all know what sort of prices I am talking about. However, it had many innovative ideas about advanced ticketing. Gating along the line could have been done better, as has been discussed in relation to the franchise. Parking charges have been a problem. If I had not stepped in to confront Virgin about parking charges at Runcorn, they would be much higher than they are now, adding to the massive parking problems around the station faced by my constituents.

To return to the franchise, the Department for Transport still has questions to be answered regarding its failure on the relative bid risk assessment; FirstGroup’s bid posed a risk not properly mitigated through adequate risk insurance. My hon. Friend the Member for West Lancashire has asked many questions that are in the public domain, so I will not repeat them. The Minister has heard them, and I hope that he will answer them.

[Mr Leech]

Does the hon. Gentleman agree that as part of that risk, FirstGroup should have to risk losing all its other franchises if it is unable to deliver this one?

[Derek Twigg]

We would have to explore the consequences to the rest of the rail users on the system, but it should certainly be explored.

I return to a key issue that several hon. Members have pointed out. A cloud of controversy has surrounded the back-loading of the premium payments to the Government in the final few years of the franchise, whereas Virgin pledged more cumulative premiums to the Government for the first nine years of the franchise. I know the west coast line well, not just from travelling it but from my experiences as the rail Minister, and there were major problems on the west coast line during the early 2000s, for various reasons. At one stage, it was almost in a state of collapse, and the train services provided were pretty awful. Income dropped massively during those early years, for obvious reasons: people were not using the service. Because of the problems, they were using alternative transport such as cars, planes and so on. Income jumped in 2004 or 2005, and the timetable came out and so on. As the Minister will be aware, in 2009, a new timetable was introduced with weekend running and faster trains, which I mentioned. Did the bid take account of, or did Ministers ask questions about, that unusual situation at the beginning at the 2000s and its impact on longer-term predictions of income?

I assume that High Speed 2 will have a major impact on Euston, unless the Minister can tell me something different. Has any care been taken about that and the possible impact on the west coast?

The other question for the Minister relates to the GDP forecast on which the bids were based. Will the Minister confirm whether the bidders went along with the Government’s forecasts—a major failing in recent years—or a lower forecast? That will have an important impact on the bids. Projections are guess work, but I am not sure—we have not seen all the details, because we keep being told that they are confidential—whether the details actually add up. There is no doubt that the line has the potential for a great amount of growth. A point was made earlier about capacity and future investment. I am slightly sceptical about High Speed 2, because it has the potential to have an impact on necessary investment in the west coast main line.

[Mr Watts]

Does my hon. Friend agree that it seems that the First bid will deliver premium payments at the end of the contract, which will mean that the Government will have less money to invest in the west coast main line in the early years? Is there not an argument for doing the opposite, so that we can invest to deal with the congestion problems we will face while waiting for High Speed 2? Given the fact that no one knows whether HS2 will go ahead, is it not crucial to invest early rather than later?

[Derek Twigg]

As ever, my hon. Friend makes an important point. One key failure of the system—I hold my hands up as a former rail Minister—is in being unable to get investment into certain franchises to improve rolling stock, passenger experience, gating and so on. Some companies that have won franchises have decided not to invest, for various reasons that we do not have time to go into.

As I said, all politics is local. Runcorn, in my constituency, has benefited significantly from improvements put in place in the past 10 years or so. I am concerned that we will not build on those improvements and, because of problems with the franchise, take a step backwards. What has happened in recent years is remarkable. Virgin has achieved a good partnership with Halton borough council, which has been crucial in the reconstruction of Halton’s economy. The previous Government’s massive £8 billion investment in the west coast main line, after decades of underinvestment by other Governments, was crucial in achieving the improvements we now see, and Virgin became part of that achievement because it ran the franchise. We have seen massive improvements. From Runcorn, it now takes just under two hours to get to London, with the fastest train taking 1 hour 50 minutes.

[Mr Marcus Jones (Nuneaton) (Con)]

Some things that happened under the last Labour Government and during Virgin’s franchise were not actually that positive for people on the west coast main line. Through his Government’s actions, my constituents in Nuneaton were severely disadvantaged in 2008, when all their fast off-peak services were taken away, something that hopefully the new franchise will rectify.

[Derek Twigg]

I understand the hon. Gentleman making an important point about his constituency, but faster trains to London were part of the attractiveness of the changes that were made. Where most passengers got on was important in making those decisions, and I am sorry that that disappointed the hon. Gentleman. I was very pleased for my constituency. I have not seen the details of the new franchise, but I hope there will be no attempt by the winning bidder to reduce the number of trains that stop at Runcorn. Merseytravel has pushed strongly for trains to stop at Liverpool Parkway, but we do not want any reduction in the number of trains stopping at Runcorn because of the economic impact the excellent service has on my constituency.

There have been massive station improvements. Mick Noone, the transportation strategic director at Halton borough council, has said the line is

“extremely attractive and well used”.

He went on to say:

“The quality, frequency and reliability of the services have undoubtedly encouraged more people to use the train”.

After years of persistent lobbying by me and Halton borough council, we were able to secure investment for a £650,000 refurbishment programme in Runcorn station. Its tired old 1960s appearance has been upgraded with new cladding, improving the experience for passengers and for my constituents who work there and provide such brilliant service.

[Mark Pawsey (Rugby) (Con)]

The hon. Gentleman’s experience as a former Minister is valuable, and on many occasions he has referred to the substantial public investment in the west coast main line. Is it not that investment itself that makes it important for the Government to go for the bid that gives the maximum return?

[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.

[Ann McKechin (Glasgow North) (Lab)]

My hon. Friend is making some excellent points. Does he agree that there are a lack of effective penalties in this contract? If the return to the taxpayer is back-loaded, there is no guarantee that the investment required on this vital line will take place in the way envisaged by the Government. I have to yet to hear where the effective penalties will apply.

--- Later in debate ---

[Derek Twigg]

My hon. Friend is absolutely right and we need to know. The Minister is probably getting the answer as we speak, which I hope he will be able to give us later.

I am concentrating on what this issue means to the passenger and the taxpayer. For the passengers in my constituency, the experience has been superb. We want it to continue and do not want it to be put at risk. From 2010-11, there was a total of 619,882 entries-exits at Runcorn station, up almost 16% on the previous year according to data from the Office of Rail Regulation—a significant improvement.

I have asked the Minister some specific questions that fold in nicely with those asked by my hon. Friend the Member for West Lancashire. I do not want to put the improvements that have benefited my constituents in the past 10 years or so, particularly in the past five years, at risk. We want to continue to see improvements. The west coast main line is vital to the economy of Merseyside, Cheshire and my constituency of Halton in particular. I hope the Minister will take into account the points raised when he makes the final decision, and that he answers them as openly and as transparently as possible.

--- Later in debate ---

[Mr Hammond]

The hon. Lady comments from a sedentary position. She is quite right; she did not suggest that, but a number of her colleagues did. It is not a new way of doing things, provided that as soon as Ministers return to the House, they make a written ministerial statement. Following the announcement on 15 August, on the first possible date thereafter—3 September—my right hon. Friend the Member for Chipping Barnet took the opportunity to make a written ministerial statement to the House.

After the announcement, the Department received a legal challenge to the procurement from Virgin Trains Ltd, which had bid unsuccessfully. I intend to try to answer as many questions as possible, but I do not need to be reminded—I am sure that hon. Members do not either—that in cases where there is a legal challenge, it is difficult to answer all the questions that may be asked. As I said earlier, if I appear reticent, it is not any wish not to be transparent, but simply that when matters are subject to the judicial process, it is impossible to make broader comment.

It is right and proper, and the Department believes so, that our choices regarding new franchises and value for money for the taxpayer are subject to scrutiny by Parliament. However, there is a right and proper time for that to take place.

Many hon. Members paid tributes, quite rightly, to Virgin Group. Sir Richard Branson and Virgin have made an undeniable and tremendous contribution to UK rail. Let me try to assure hon. Members that the winning bid offers significant benefits to passengers. First West Coast Ltd has contracted to introduce 11 new electric trains of six carriages from December 2016. That will mean an extra 12,000 seats a day for passengers. First has also committed to retaining and fully refurbishing the trains already in the fleet.

In the speech by the hon. Member for Halton, his colleague the hon. Member for St Helens North (Mr Watts), who is not currently in his place, made a point about the leasing of trains. The short answer to his question is that commitment to lease trains is in the franchise agreement. To remove any part of the train fleet, the Secretary of State’s consent is required. I hope that that clears up that issue.

Subject to the approval of the Office of Rail Regulation, First will take advantage of the increased flexibility in the contract to introduce a number of new services from London Euston to Blackpool, Bolton, Telford Central and Shrewsbury. It will also introduce ITSO-based smart ticketing, which will benefit users across the country, bringing the sort of freedom that we have already seen in London with the Oyster system. It will not have escaped the attention of hon. Members that in its bid, alongside that investment, First West Coast Ltd has committed to reduce standard anytime fares by on average about 15% over the first two years.

There have been a number of questions on staff and morale. I reassure hon. Members that, as with previous franchise transfers, existing employees, including drivers, guards and back-office staff assigned to the part of the organisation transferred to First West Coast Ltd, will be protected by TUPE regulations. FirstGroup has also given a commitment to continued investment in front-line staff.

I reassure the hon. Member for Ynys Môn that all bids were assessed independently for deliverability, and all bids were assessed as deliverable. The Department believes that the winning bid is deliverable, provides value for money for taxpayers and passengers, and capitalises on the £9 billion already invested in the west coast main line and the £18 billion the Government are continuing to invest.

None the less, as the hon. Member for Garston and Halewood said, the Government can learn lessons from the mistakes of previous Governments on handing back keys and the failure of certain people on the east coast main line to deliver. There have been several comments on the procurement process, and we are acutely aware that we need to ensure we learn lessons from past franchise failures. In designing the franchise, some of those comments and recommendations, particularly the Public Accounts Committee’s recommendations, following the failure of the east coast main line have been taken into account. We therefore required First West Coast Ltd to provide a third party-backed guarantee, the largest guarantee ever required.

We have also removed the cap and collar system that was in place for the east coast franchise and introduced a GDP support mechanism—a question was asked about that. Indeed, the mechanism supports the Government because there is protection whether GDP goes up or down. I will happily write to the hon. Member for Halton with the full details of that mechanism when I am able to do so.

[Derek Twigg]

I do not want to pursue the matter for too long, because time is short. If the Government’s projections for GDP, which the bids were based on, is low—the Minister has not said whether one bidder put in a lower projection, despite the Government’s figures—will the Government have to give money back to the successful bidder?

[Stephen Hammond]

My understanding of the GDP process currently in place is that there would be either payments back to the Government or payments from the Government. I will write to the hon. Gentleman about that.

I make it clear that GDP was only one of the external factors; it was not the only external factor. To ensure that the Government are further protected, a profit share mechanism has also been introduced. The mechanism will enable the taxpayer to benefit from a share in any super profits that the franchise generates while continuing to provide an incentive for the franchisee to outperform.

The hon. Member for West Lancashire asked a number of questions about the Government’s preparations, should the franchise end without a new franchisee being in place. I make it clear that the existing contractor has a contractual obligation to support handover activities. On the 120 days to which she referred, a departmental mobilisation manual is being used by both parties in every franchise to ensure that a franchise handover process is in place, and the activities and time scales required to effect a transfer are set out. The Government are confident that the Department is putting in place the right contingencies in the time scale, should the process not be completed. We expect the legal issues to be resolved so that contingency plans will not be necessary.