Transport Secretary: East Coast Franchise

Fiona Onasanya Excerpts

Wednesday 23rd May 2018 Commons Chamber

[Alan Brown]

Yes, there we see the ideological blind spot yet again. If somebody owes me £2 billion, I would be writing off £2 billion of debt if I said, “Forget about it. It’s okay.” Let us say it is technically not a bail-out, but the Government are writing off £2 billion of debt that that company owes the taxpayer. The company is walking away and getting rid of a £2 billion liability, and I do not understand why Conservative Members are trying to argue different.

The Transport Secretary has previously justified the predicament by saying the franchisee got its sums wrong. That should not be an excuse, but, as I have repeatedly said, and the shadow Minister also touched on this, it means the Department for Transport also got its sums wrong when it thought the tender was suitable for award. It is not just the franchisee that got its sums wrong; the Department for Transport got its sums wrong, too.

The Government failed in their due diligence. What about the supposed parent company guarantees? Those guarantees clearly have not been worth much to the taxpayer. We do not know what the runner-up bids looked like, but do those runners up have a case against the Government, given they clearly failed in their due diligence by awarding this franchise, from which VTEC gets to walk away?

As the hon. Member for Edinburgh West (Christine Jardine) said, we know VTEC backloaded the track premiums. If another consortium’s bid did not backload the track premiums, the taxpayer might already have made more money, but we do not know whether there was such a bid because it is all clouded in commercial confidentiality. It also shows, yet again, that no lessons were learned from the failed 2012 west coast franchise. The Transport Secretary had a duty to ensure that lessons were learned and properly applied in awarding the east coast franchise, and it is clear that not enough analysis was undertaken.

When the story broke, although VTEC got the sums wrong, Richard Branson blamed some of the reduced numbers on Network Rail. Given the Transport Secretary also has responsibility for Network Rail, what is the truth in that statement? If it is true that Network Rail was the problem, VTEC should be compensated because that is the way the franchise model works. If it is not true, why has the Transport Secretary not come out fighting to disprove Richard Branson’s comments, instead of casually defending VTEC at the Dispatch Box? It is more smoke and mirrors from VTEC.

At the Transport Committee, the chief executive of Stagecoach used excuses such as that the Scottish referendum and Brexit hit the numbers. Considering that our referendum was in 2014, before the franchise was awarded, that is clearly patent nonsense.

Despite all that, the Transport Secretary’s new wheeze to prevent a blame game between the track owner and the franchise holder is a combined partnership model. That might improve things, but at this stage we do not know what the set-up will look like or how it will interact with other services outwith the franchise. Given the repeated Back-Bench Tory support for open access on the line, there will clearly be further complications for such a partnership to address. It is absolutely guaranteed that there will be further issues down the line.

[Fiona Onasanya (Peterborough) (Lab)]

The Public Accounts Committee found last month that the passenger growth forecast by Virgin and Stagecoach was wildly wrong. In the light of what the hon. Gentleman is saying, does that prove the rail franchising model is broken?

[Alan Brown]

It certainly proves the current model is broken. If a franchisee gets its figures wildly wrong, it goes back to the due diligence by the Department for Transport, which clearly accepted the wildly wrong and inflated figures. Action is needed to remedy that.

Even if we accept the Government’s partnership model, the Transport Secretary has made it clear he believes that the private sector always operates better than the public sector. Surely then, at the very least, he should allow the public sector to bid for franchises: if he is that confident the private sector will win, he does not have to worry about the public sector bidding. Let the public sector bid and let us see which is the most competitive.