East Coast Main Line Franchise

Hugh Bayley Excerpts

Thursday 20th June 2013 Commons Chamber

[Sheila Gilmore]

I am glad the hon. Gentleman made that intervention, because it enables me to say that one of the most important things for all of us in politics is to experience, to look at the evidence, to learn and to come to a view based on that evidence. No doubt he would be interested to read an article published in The Northern Echo today in which Lord Adonis is reported as saying that, on the basis of that experience, his view is that the line should not be refranchised. If we could not learn from our experience and change our politics, it would be a sad thing indeed. I hope that, having heard that people who previously held that view have changed their mind, the present Government will be prepared to follow suit.

[Hugh Bayley (York Central) (Lab)]

As I happen to have the article from The Northern Echo in my hand, it might help if I read out what Lord Adonis says:

“In the last four years, East Coast has established itself as one of the best train operating companies in the country, both operationally and commercially.

This has fundamentally changed the situation and it is right and proper that East Coast should be allowed to continue as a public sector comparator to the existing private franchises.”

[Sheila Gilmore]

I thank my hon. Friend for clarifying the position. Perhaps for the rest of this debate, unlike the one in Westminster Hall, we will concentrate on the main issues before us and the reasons why the Government made the decision they have.

In the Westminster Hall debate, a number of hon. Members questioned the Minister’s claim that East Coast’s performance had plateaued, noting the remarks the right hon. Gentleman made to the Select Committee on Transport on 24 April:

“If you look at the latest monthly figures for reliability and punctuality, it is the worst of the 19 franchises.”

That struck me as odd, because in my experience East Coast trains are, more often than not, on time. That was borne out in the debate, in which many speakers pointed out that the Minister was quoting figures from a narrow four-week period in which bad weather had caused flooding and brought down overhead wires. East Coast is powerless to prevent such incidents, and responsibility for subsequent delays lies with the infrastructure manager, Network Rail. In fact, according to the moving annual average punctuality figures, which offer a more balanced picture, East Coast is in the top three of the seven long-distance franchises.

--- Later in debate ---

[Mr Stewart Jackson (Peterborough) (Con)]

I speak not only as the representative of the fine railway town of Peterborough, but as a member of the Public Accounts Committee, which has looked at different aspects of rail travel in recent years, including most recently the west coast main line franchising process, and as a commuter. Like the hon. Member for Edinburgh East (Sheila Gilmore), I travel frequently, although I am not always as familiar with the timetables as I should be. One Wednesday a few weeks ago I was running very fast through the brand spanking new, recently refurbished King’s Cross station in order to catch the 8 o’clock train. I clambered on board only to find after it departed that it was a fast service to York. I passed various Labour MPs in first class, while holding my standard ticket in hand, and then saw my hon. Friend the Member for York Outer (Julian Sturdy). He asked what I was going to do, and I said I would have to get off at York and go back to Peterborough. With typical sympathy and pithy Yorkshire wit, he said, “I hope you’ve written to me to say you’re going to be in my constituency”—although I think it was probably the constituency of the hon. Member for York Central (Hugh Bayley) that I was visiting.

This debate gives us an opportunity to look specifically at the major infrastructure challenges facing the east coast main line. I will focus not on a sterile argument about private being bad and public being good, but on the challenges and opportunities we face in looking at public policy on that line. In the past 10 years we have seen a 43% rise in passenger demand. By 2031 there will be a capacity gap of 1,500 seats in the busiest morning hour on suburban services into King’s Cross. Indeed, journeys from Peterborough and Cambridge are expected to rise by as much as 20% by 2016. I think it is fair to say that, irrespective of our party or our views on the debate about rail privatisation, we all have a common interest, on behalf of our constituents who commute, whether from Scotland, Yorkshire or Cambridgeshire, in safer, cleaner and more punctual trains and in value for money.

It would be unfair and churlish not to concede the progress we have seen in Peterborough. New work has begun and is due to be completed next year. We have three new platforms and platform extensions for the new Thameslink trains and the new inter-city trains. We have a new island platform and a new freight loop. The station has been remodelled over the past few years, and we have 150 new, safe and secure cycle racks to help to develop Peterborough as a local transport infrastructure hub.

It is vital that I make the point that Peterborough is dependent on the railway. Indeed, it is integral to the financial and economic viability of my constituency, given that it is 47 minutes away from central London and King’s Cross. I was delighted to welcome the Minister to Peterborough station last autumn to open, with Network Rail, the reconfigured, remodelled station.

We have to concentrate on value for money, which is a very important issue in the private-public debate. An East Coast train season ticket costs my constituents £6,888 a year—£7,472 with a travel card—which is about 25% of the average annual salary in Peterborough. A First Capital Connect season ticket costs £5,800 a year and £7,000 with a travel card.

Putting partisanship aside, the current provider of the service has done a good job, and I think that the Minister and the Secretary of State have conceded as much. It would be unfair not to concede that it has returned £640 million to the Exchequer by way of premiums since 2009—£187 million in the last financial year. The staff on East Coast trains at Peterborough do a superb job and I know many of them. They are hard-working, decent people with a public sector ethos and a commitment to doing a very good job. I am very proud that we have people who do that, even when the things that go wrong are not their fault, but that of Network Rail. They always smile and try to explain what has happened.

Nevertheless, the situation is not perfect. It is only fair to say that East Coast is the worst performing train company in terms of punctuality. [Hon. Members: “No!] It is true. Only 82.8% of East Coast services arrived on time in the period up to 31 March 2013, compared with 97% of services provided by c2c, which is owned by National Express and is the best performing train operating company. Hon. Members may groan, but those are the facts and we have to agree on them in order to improve the service.

[Hugh Bayley]

The hon. Gentleman will know that the Government’s official timing period does not pick one month or two months as he has done, but considers the situation over one year, and over one year East Coast has performed substantially better than the operator on the west coast, which is the best comparator.

[Mr Jackson]

I think that is semantics. I made it clear that I was talking about the 12 months to 31 March 2013. If the hon. Gentleman wants to write to me to take issue with me, that is fine.

--- Later in debate ---

[Hugh Bayley (York Central) (Lab)]

Let me start by saying something that I think everybody in the Chamber will agree with. The east coast main line is an absolutely vital economic artery, pumping the lifeblood of our economy—jobs, investment and growth—through all the regions and cities that it serves from London to Edinburgh. That is why this debate is so important. It is not a technical or ideological debate about how the service should be run; it is a debate about how the railways can assist economic recovery in our regions. That is the question we need to debate today.

We had a similar debate in Westminster Hall two weeks ago, in which many hon. Members spoke. I have some sympathy for the Minister: he was left with absolutely no time to respond to the many questions that were asked. However, we have more time today. To recap briefly, I would like to pose two questions that I posed a fortnight ago to which the Minister was unable to respond.

First, if the Government go ahead with refranchising, will the headquarters of the new service be based in York? The headquarters currently provide over 200 jobs, but they act as a sheet anchor for thousands of other jobs with railway engineering companies, suppliers and for Network Rail’s operation of the east coast main line, which employs more people than the train operating company. The Government are legally able to make that a condition of the franchise and there is a precedent. When the train operating company last changed hands, I asked my right hon. Friend the Member for Tooting (Sadiq Khan), the then Minister, whether he would give a commitment to ensure stability by keeping the headquarters in York. He said:

“The headquarters to which my hon. Friend referred are in York. I can reassure him that when the holding company”—

that is, East Coast—

“takes over the running of the contract later on this year, the headquarters will stay in York.”—[Official Report, 1 July 2009; Vol. 495, c. 431.]

For the sake of stability for the business now at a time of economic fragility, will the current Minister make a similar commitment?

Secondly, I asked the Minister whether the Government will do what they say they will do and consult users of the service about what they want. It was reported in Modern Railways in May that the Department for Transport would take into account passengers’ views in relation to the train operating companies. Will the Department therefore commission an independent body to conduct a survey to see whether passengers want the service to be taken away from East Coast? A number of Members on both sides of the House have talked about the performance of East Coast, praising the company. We know that it has returned more money to the Government in premium payments—more than £540 million so far—than any other franchise holder on the line. We also know that it is more efficient than its predecessor and is providing value for money for the Government and the taxpayer.

The hon. Member for Peterborough (Mr Jackson) is a fair-minded man. He and I should sit down together and look at the statistics. However, to quote Alan Whitehouse, a former BBC transport correspondent, on the official measure of punctuality—the percentage of trains that reach their destination less than 10 minutes late over the period of a year—the east coast main line under East Coast’s management did better than the west coast main line under Virgin’s management. If we compare the two in terms of trains that actually arrive on time—that is to say, less than 60 seconds late—East Coast scores 61% for punctuality, whereas Virgin on the west coast main line scores 49%.

[Mr Stewart Jackson]

I had no wish to cast aspersions on the current operators, but the hon. Gentleman knows that Passenger Focus, for instance, said in response to the Brown review of franchising last year that the determinants of punctuality were too loose and should be tightened up anyway. However, I concede that there are extraneous circumstances under the auspices of Network Rail that affect performance—such as the gentleman on a bridge at Walton in Peterborough last night who detained me by half an hour.

[Hugh Bayley]

It is useful that the hon. Gentleman says that we should listen to Passenger Focus, because it currently gives the East Coast service the highest level of satisfaction that it has received since Passenger Focus starting doing its surveys in 1999.

[Ian Mearns]

The hon. Member for Peterborough (Mr Jackson) has just highlighted one of the problems that franchise holders like East Coast face. They are reliant on Network Rail and on the infrastructure if their trains are to run on time. Extraneous issues—including, unfortunately, people trying to commit suicide—are completely beyond their control. Having said that, they do very well in spite of all that.

[Hugh Bayley]

My hon. Friend makes a good point.

[John Mann (Bassetlaw) (Lab)]

rose—

[Hugh Bayley]

Our speeches are time limited and we get no injury time for interventions, so I must make some progress.

The good performance that East Coast has achieved is all the more surprising because it has not been given the security of tenure of a 10 to 15-year franchise that the comparator company on the west coast has. In fact, East Coast has not really known from one month to the next where it stands or whether it will continue to run the service or not. Last year, the Department for Transport asked the chief executive of East Coast, Karen Boswell, to prepare a five-year plan for the future of her company. She submitted that plan in January this year. In March, an interview with Karen Boswell by Roger Ford was published in Modern Railways, in which she set out her plans, and there was no hint of privatisation at that point. So what has changed?

Franchising is not a low-cost option. The National Audit Office report on the east coast National Express failure estimated that that had cost the Department for Transport between £330 million and £380 million. The Department had expected to receive that money from the franchisee up to 2012 but had not done so. The funds then had to be recovered from other Department for Transport budgets. The aborted west coast main line franchising exercise cost the taxpayer £55 million. Alan Whitehouse, the former BBC transport correspondent, estimates that each one of those bidding for a major franchise such as these spends between £10 million and £13 million in pursuit of its bid. Those costs ultimately come back to the passengers in the form of higher fares.

Two weeks ago, in the debate in Westminster Hall, I argued that East Coast should continue to run the service, not indefinitely but for the period of a full franchise, so that it could be an effective public sector comparator. We have seen today in The Northern Echo that Lord Adonis, who was Secretary of State in 2009 when East Coast was given the job of rescuing the service, shares that view. It is of course consistent with what he said in 2009, which was that the service should be run by a public sector contractor, East Coast, but not indefinitely. I am not arguing for an indefinite arrangement; I am asking for a period equivalent to a private franchise so that we can compare like with like. That is still my view.

I have been thinking about the matter further, however, and I put it to the Minister that we already have a public sector comparator. By the end of this financial year, East Coast will have run the service for four years, returned about £800 million to the Treasury and provided an improved service. If the Government are hellbent on refranchising, will they commission an independent body—perhaps the National Audit Office—to analyse the bids that they receive and compare them with East Coast’s performance? If none of the bidders that responds to the Minister’s tendering exercise can produce a robust case to show that it can deliver a better and safer service with lower fares and a bigger financial return to the Government than East Coast is currently providing, he should keep the service with East Coast.

The Government seem to be hellbent on refranchising, but we know that refranchising against a short timetable is unwise, to say the least. The Laidlaw inquiry, which looked into the fiasco of the collapsed west coast main line franchising process, came up with this recommendation:

“I recommend that the Department for Transport ensures that a credible timeline, with reference to the complexity of the procurement involved, is assessed and agreed at the inception”,

and he argued that this timeline should provide time for contingencies, and for comprehensive quality and commercial reviews. The Brown report, a rather wider one on the franchising system, which was also commissioned following the west coast collapse, proposed a detailed 24-month timeline for running a franchising process.

Let us look at what happened with the west coast franchising process—the rushed, bungled and failed west coast franchising process. The invitation to tender was put out in May 2011. The franchise was awarded to FirstGroup in August 2012—15 months later—with a view to starting the service in December 2012, 19 months later. Both Laidlaw and Brown said it was too short a timetable.

What, then, are the Government proposing for the east coast main line franchise? They intend to put a notice in the Official Journal of the European Union, which I take as a starting point, in October this year, with an invitation to tender in February 2014 and with the contract being awarded in October 2014—not in 15, 19 or 24 months, as proposed in the Brown review, but in just 12 months. The franchise is intended to start in February 2015, conveniently timed just before the next general election, which would be 16 months after the process started, as opposed to the 19 months from invitation to tender through to the intended start on the west coast franchise.

The Government are proposing to do this east coast franchise not only in a more rushed and hurried way than was done with the west coast franchise—the failed west coast franchise—but in a substantially shorter period than was proposed by each of the two reports they set up to investigate why the west coast franchising process had failed. When will the Minister’s party ever learn? This looks like a fire sale, rushed through before the 2015 general election.

I served on the Bill Committee that scrutinised what is now the Railways Act 1993—the legislation that introduced the privatisation of our railways. I have seen it all before. In Committee, the Government of the day said that they would franchise rail services to train operating companies, but that they had no intention of privatising the railway infrastructure of track and signalling. Then, after the Bill went through, the Government changed their mind and decided to rush through—steamroller through—the privatisation of the rail track by creating a body called Railtrack. We know that this body spectacularly and comprehensively failed. When it collapsed, the Labour Government had to put together a public sector rescue at considerable expense to the taxpayer. They created Network Rail—and we still have it as a not-for-profit company owned by guarantee, which does not have directors and does not pay dividends. We have a public sector body.

Alan Whitehouse had this to say in the Yorkshire Post just over a week ago:

“Until just a few weeks ago, East Coast was to remain in the public sector for as far ahead as anyone could see. Suddenly, it is up for grabs. Can it be a mere coincidence that the Transport Secretary…announces a re-franchising plan that would see East Coast trains returned to the private sector by the time of the next election? Or a piece of blatant electioneering? It all smacks of a similar desperation to that of the Major government’s ‘scorched earth’ policy of making rail privatisation a fait accompli before an election that he knew he would lose.”

The Minister does not have to take it from me. He does not even have to take it from a well-respected transport correspondent like Mr Whitehouse. He need only look at the history—his own party’s history—of what a rushed privatisation on the railways led to last time his party was incumbent at the time of an election. I say to him, “Slow down, even if you believe that reprivatisation is the right thing to do. Do not make the same mistakes that you made with the west coast main line. Take your time. I have no doubt that if you win the next general election you will go ahead with it, but if you do it as a fire sale, it will be a disaster not just for the railway, but for the economies of our regions that are served by it.”