Mutual and Co-operative Rail Franchise Bids

Gareth Thomas Excerpts

Wednesday 20th October 2010 Westminster Hall

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

I apologise to my hon. Friend for missing the very first part of his contribution. Is there not a similarity between what he proposes for Network Rail and the model that the coalition Government have endorsed as the way forward for something that was introduced by us—foundation hospitals? Exactly that type of structure has been designed to help to hold to account the senior management of our hospitals.

[Gavin Shuker]

I thank my hon. Friend for his intervention, with which I completely agree, and I associate myself with his comments. What we have seen from the coalition Government is a desire to look at innovative models across public services, and I believe that railways should not be exempt.

As I was saying, a democratically elected members’ council with the power of appointment and pay over Network Rail’s board could drive up performance. Co-operative and mutual structures deliver organisations that act in our interests. Who would be a better boss of the rail network than the passengers and the British public themselves?

Moving on to the bulk of my remarks on rail franchising, in a reply to a question from my right hon. Friend the Member for Tooting (Sadiq Khan) in the House on 22 July, the Minister said:

“There would be no barriers to mutuals and co-operatives bidding for franchises if they fulfilled the criteria.”—[Official Report, 22 July 2010; Vol. 514, c. 541.]

However, it is clear that there are still some barriers to entry, despite the stated desire of the coalition to explore innovative models of public service delivery. We in the Co-operative party would like to see those models given all the opportunities that are before them.

The system as it stands does not make allowance for the arrival of mutual and co-operative ventures. First, bidders are required to pass a number of detailed financial tests during the bidding process. ASLEF has said that a mutual bid would not be able to meet the performance bond requirement, and has called on the Department for Transport to review the performance bond criteria. Surely that is an area for examination. Secondly, bidders are understandably required to show experience of operating transportation systems. Can the Minister provide an assurance that the interpretation of that requirement is wide enough to ensure that mutual models in which individual members have extensive experience of running transport services—even the ones that they currently work on—but in which there is a new team coming together, perhaps under a new brand, are able to bid on a level playing field? Thirdly, the fact that no franchise has yet been awarded to a mutual ownership model on the railways itself serves as a barrier to entry.

To bring about the innovation that could drive up levels of service and accountability across the industry, will the Minister carefully consider the arguments for awarding the first mutual franchise during her time as Minister? Perhaps she could start by meeting representatives of ASLEF. The union has been preparing a mutual bid to run the east coast main line rail franchise when invitations to tender are announced in 2011. It believes that the co-operative principles of sustainability and accountability should be brought front and centre in the provision of passenger rail in the UK.

A common perception is that co-operatives are small and therefore unable to step up to the financial requirements of such a large franchise. However, the Co-operative Group has a turnover of more than £10 billion, and the east coast franchise turnover is only £550 million. The Go! Co-operative is one of the most recently established train operating companies, and down the track, as it were, it seeks to run open-access train services. That co-operative has already been authorised by the Financial Services Authority to raise the required funds, and I am sure that the Minister will want to welcome that initiative. I encourage her to take the time to talk to representatives of Go! Co-operative and to understand, in real time, both the challenges and the opportunities that are presented to people who enter the franchise system.