West Coast Main Line

Iain Stewart Excerpts

Monday 17th September 2012 Westminster Hall

[Rosie Cooper (West Lancashire) (Lab)]

I beg to move,

That this House has considered the e-petition from Ross McKillop and others relating to the West Coast Mainline franchise decision.

The motion reflects the concerns of more than 170,000 people who have signed the e-petition and it calls on the Government to reconsider the decision to award the west coast main line franchise to FirstGroup.

It is a pleasure to serve under your chairmanship today, Mr Bone. I understand that this is the first Backbench Business Committee debate to take place in Westminster Hall on a Monday. I wish to thank the Committee for accepting the application for this debate and for granting us time before the conference recess. I congratulate the Minister on his new role at the Department for Transport. I am sure that he would have welcomed a less contentious issue so early in his post.

Due to Committee business, members of the Transport Committee are unable to join us today. My hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) and her Committee colleagues are already interrogating people over this matter.

[Iain Stewart (Milton Keynes South) (Con)]

I am a member of the Transport Committee and I am here.

[Rosie Cooper]

I am glad that the hon. Gentleman is here and is able to contribute to the debate. His colleagues, I believe, are away on business.

The Transport Committee is considering this matter through the work of its Rail 2020 inquiry. Several hon. Members from Lancashire, who are currently attending a meeting with Ministers on employment matters in their constituencies, wish, with your permission, Mr Bone, to speak later in the debate.

More than 170,000 people put their name to an e-petition, which was started by Ross McKillop, calling on the Government to reconsider their decision on the west coast main line franchise. That huge number of signatures, which was collected over a short period of time, reflects strong feelings and shows that the subject deserves to be debated in the House.

On the west coast main line, we are talking about 31 million passenger journeys a year and a £5.5 billion contract that will last for 15 years—that is this Parliament and the two that follow it. Hon. Members from all parts of the House have called on Transport Ministers to give Members an opportunity to scrutinise in more detail the actual process through which the decision was made. In August, my hon. Friend the Member for Garston and Halewood (Maria Eagle) wrote to the then Secretary of State for Transport, asking her to make a statement to the House. This will be the first opportunity for Members from all parts of the House, apart from the Transport Committee, to ask questions of the Minister, to begin to scrutinise the decision and to put their views and those of their constituents directly to the Minister.

A considerable amount of press coverage and opinion seeks to make the issue one of FirstGroup versus Virgin. Personally, I do not care much about the name of the company that provides the service. My priority is to ensure that the final decision, taken by the Department for Transport, is the best deal for taxpayers and fare payers. I hope to get from the Minister today the guarantees and reassurances necessary to be satisfied that the decision-making process is robust, so that the right decision is made with taxpayers’ money.

Given the determined efforts of Transport Ministers to avoid answering questions on this franchise decision, I do not begin this debate from a position of resounding confidence. We are told over and over that the process is rigorous, detailed and fair. It is as if by repeating that mantra we will all believe it. Yet there have been many complaints that the process does not even deliver against its own objectives.

The basis of the judicial review is that the Department for Transport broke its own rules when evaluating the bids, and we need to get to the bottom of that. There are those who argue that the entire franchise bidding process is flawed, and driven solely by the promise of large sums of money no matter what the cost, and irrespective of the stated objectives.

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[Iain Stewart (Milton Keynes South) (Con)]

It is always a pleasure to serve under your chairmanship, Mr Bone.

I draw attention to my entry in the Register of Members’ Financial Interests. My interests in this important subject are threefold. First, as I suspect is true for most hon. Members in the room, the west coast main line serves my constituency. Secondly, I use the line on a regular basis for both business and leisure. Finally, I am a member of the Select Committee on Transport and, as the hon. Member for West Lancashire (Rosie Cooper) has mentioned, we are undertaking an inquiry into the bidding process as part of our general Rail 2020 inquiry. I stress that I speak today entirely in a personal capacity and not on behalf of the Committee.

I want to take a step back and remind hon. Members of what we are debating. We are talking about a highly congested, highly used multi-use railway line that links Glasgow, north-west England, the midlands and London. The west coast main line is one of the country’s key railway arteries and has seen exceptional rises in demand from both passengers and freight over recent years. All the indications are that that demand will continue to grow over the next 10 to 15 years. Indeed, that is one of the main reasons for the High Speed 2 debate, because the line will eventually run out of capacity and intermediate steps such as lengthening trains, remodelling junctions and the rest will not deliver the capacity we need.

Within the passenger context, there is also a conflict of needs on the west coast main line. Some users want London, Birmingham, Manchester and Liverpool to be linked with very fast services, and other places on the line, such as my constituency, want inter-regional services that stop so people can travel from Milton Keynes to Glasgow or from Nuneaton, Rugby and elsewhere to other destinations on the line. Plus, of course, there is all the commuter traffic in and around the major conurbations on the line. The west coast main line is a complex railway system, and it is vital that, over the next 15 years before High Speed 2, we make the most efficient use of that line.

No one, other than the Department’s senior officials and Ministers, has seen the full detail of the two bids, which I believe run into thousands of pages and have been assessed over many months. We should, therefore, be a little careful how we approach this debate. We have all heard the accusations and counter-accusations made by the two companies, but we have not seen that information. Indeed, picking up on one of the points raised by the hon. Member for West Lancashire, I am not sure we can see the bids in any detail because the information they contain is commercially sensitive, and no bidder would want such information released during the bidding process.

[Several hon. Members]

rose—

[Iain Stewart]

I will first give way to my fellow Hutchesonian.

[Anas Sarwar (Glasgow Central) (Lab)]

I am not sure that is something I want said with some of my Labour colleagues in the room!

There has been a debate on the two companies, but does the hon. Gentleman agree that it is not about which company operates the line but about getting the right deal for the taxpayer and the passenger? People need reassurance that we will get the same quality and frequency of service and the same low fares and that taxpayers will not eventually have to foot the bill.

--- Later in debate ---

[Iain Stewart]

I agree with the hon. Gentleman. I also put it on record that I have no preference as to whether Virgin or FirstGroup wins the franchise. Virgin operated the franchise perfectly competently, and I would have had no problem had it been the successful bidder. Equally, FirstGroup has made a very attractive offer, so I approach this from a neutral perspective.

[Albert Owen (Ynys Môn) (Lab)]

In his introduction, the hon. Gentleman omitted the fact that the west cost main line also serves north Wales. I will address that important point if I catch your eye, Mr Bone.

The hon. Gentleman mentioned that we may never know the detail of the bids, but surely that is the purpose of the Transport Committee’s inquiry. Ministers are there to answer such questions, and it would be in the Government’s interest if we were to have at least a summary so that we could clear up some of what he calls “speculation.”

[Iain Stewart]

I apologise to the hon. Gentleman; of course the route also serves Chester and the north Wales coast, and I will refer to that a little later.

We have had a summary of the respective bids, but to assess fully whether the FirstGroup bid is deliverable in preference to the Virgin bid, we would need to see the very detailed evidence that supports the headlines we all know about. My contention is that we cannot expect to see that while the bidding process is ongoing, because the bids contain commercially sensitive information. That would be like a card game in which each player has to reveal their hand before they play.

[David Mowat]

My hon. Friend is right that the bids contain a huge amount of detail that is very hard for anyone here to understand. In his Select Committee role, he might like to investigate—I have heard this several times—the Virgin bid not being evaluated against the other bid because of the £250 million price gap, which has been highlighted by the hon. Member for West Lancashire (Rosie Cooper). That would be worth understanding.

[Iain Stewart]

That is a fair question. I cannot answer, but perhaps the Minister will.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

What is the purpose of the Select Committee’s report, or an inquiry, if it cannot be given the evidence that will show the difference, if there is a difference, between the two bids? The press, for instance, have suggested that the FirstGroup bid is back-loaded. How will the Select Committee work to the advantage of the taxpayer in such circumstances?

[Iain Stewart]

That is a fair question. When the Select Committee debated whether we should call Sir Richard Branson, Tim O'Toole and their colleagues, I made the point that we would not be able to probe them fully because we did not have access to the information because of the legal position. I would love to be able to go further, but we shine as much light as we can.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

rose—

--- Later in debate ---

[Iain Stewart]

I will give way one last time, but I must then make some progress.

[Mr Brown]

I thank the hon. Gentleman for giving way. Obviously, the bids contain significant detail. As he and other hon. Members have indicated, we may never find out all of it. There are so many claims and counter-claims, and through the Select Committee and this debate we are looking for a clear indication from the Minister, without the detail, of whether every claim and counter-claim was carefully considered. Has he covered everything to ensure that the outcome is fair for the taxpayer?

[Iain Stewart]

Some of those questions are for the Minister to answer. I shall come in a moment to some reasons for my own conclusions about the two bids, but there is a caveat attached to what I say, because I do not have access to that information.

For the first half of the franchise period, up to eight to 10 years, the two bids are remarkably similar. There may be a higher premium payment from one than the other in a given year, but the lines on a graph are broadly consistent. They diverge only in the last period. The shorthand explanation is that FirstGroup believes it can continue to grow the market throughout the franchise, whereas Virgin believes that revenue growth and passenger numbers will tail off towards the end. The first bid is therefore more ambitious, and consequently riskier. What we must assess is whether that risk is acceptable. My conclusion is that it is within the bounds of acceptability.

My first reason for believing that is that population growth along the route is likely to be considerable over the 15 years. The Milton Keynes area has 25,000 housing permissions over the lifetime of the bid, and other towns and cities on the route have similar housing growth ambitions for that time. Feeder services into the main line will also be enhanced. The east-west rail link in my area will, I hope, open by 2017. One of its attractions is that it will build feeder services into the west coast, for people from Oxford or Bedford who might want to travel to stations in the north-west, or Scotland. That will drive demand on the line. Similarly, in the Manchester area, the northern hub will we hope attract more rail users on to the line and enable it to continue its ambitious growth, taking passengers away from the air route. For those reasons I believe there will be sustainable demand in the next 15 years.

The next question is whether the line can deliver the capacity to meet the demand. One of Virgin’s accusations was that by the end of the franchise First will have to fill every seat on every train every day to meet its premium payments. We need to examine the detail of what First proposes. It proposes more trains than the Virgin bid does. Both companies propose to buy new electric train sets for parts of the network. I understand that the difference is that First will augment the existing fleet. Virgin would replace the Voyagers with the new electric ones, whereas FirstGroup would keep the Voyager fleet and lengthen five-car trains into 10-car trains. First also wants to use more ambitious ticketing structures: a new class of travel between standard class and first class. It makes a point about capacity; the figure for the trains across the week is only 35%, whereas other franchises run at near 50%.

[Anas Sarwar]

Is not the hon. Gentleman concerned that with that predicted doubling of user numbers on the service in the next 15 years, and given that figure for capacity of 35%, fares will go up, and will be much higher in peak times, to attract people to travel off-peak? That could lead to a massive increase in fares for people using the service at the most important times.

[Iain Stewart]

Without wanting to put words in his mouth, I think, from our questioning in Committee of Tim O’Toole of FirstGroup, that he would reflect whatever changes the Government make to the definition of the peak period. The ambition is indeed to try to get a more equitable spread of rail demand across the day so that trains are not packed at certain times while others run comparatively empty. That is a sensible ambition. However, the long-term answer to the hon. Gentleman’s question is a step change in rail capacity, which will come with High Speed 2. In the mean time, the question is how to make best use of the capacity that we have.

[Mr John Leech (Manchester, Withington) (LD)]

I thank my fellow Select Committee member for giving way. I felt that one problem with the questions to Tim O’Toole was that he seemed to argue that First would be able to get people on to those peak-time trains that are under-utilised at the moment with a 15% discount on rail fares. However, that still seems significantly more expensive than the off-peak saver returns or first advance tickets. There is a danger that the ambition to fill those trains will not be realised without increasing the cost of some first advance tickets, so that people cannot get them on off-peak trains.

[Iain Stewart]

I thank my hon. Friend and fellow Select Committee member for that point. There will still be a peak period and an off-peak period. My perspective is that we should be able to manage a more effective distribution. However, Mr O’Toole also made the point that he will not realise his ambition to fill the trains if fares are so high that people will not use them. His ambition is to achieve a modal shift from car and air to train.

[Mr Watts]

Perhaps the hon. Gentleman can clarify one point. The operators do not buy the trains; they lease them. If the increase in question does not happen, and Virgin is right and First is wrong, will First be forced to lease trains in the 10th, 11th, or 12th years—up to 15 years? Alternatively, will it just be able to decide that perhaps it will not increase capacity then, because there would be no justification?

[Iain Stewart]

I am not privy to the contractual details in relation to the trains. From memory, First would be obliged to continue with the existing Pendolino fleet, which is the mainstay of the route. The trains in question are additional ones, to meet the capacity. Things could easily go the other way. The trains that are being bought are six-car ones; if, suddenly, passenger numbers go up beyond expectations, it might be feasible to lengthen them, in the same way that the Pendolinos have been lengthened from nine to 11 cars.

[Mr Watts]

The hon. Gentleman is being generous with his time. If what he said is the case, the commitment to long-term investment may never materialise. It is one of the main planks of the argument for First, but First may not build the capacity because there might not be a justification for it. Does the hon. Gentleman agree that that is why it is important that we have more transparency, and can all see the details of the contract?

[Iain Stewart]

Perhaps it is a case of whether we see the glass as half-full or half-empty. I see an attractive proposition for growth in use. Why would FirstGroup, an experienced rail operator, want to tarnish its reputation by not delivering on what it promises? I will come on to one difficulty that I anticipate—or on which, at least, I would like reassurance. However, I think First’s ambition is genuine. As I have tried to explain, I think that there is underlying growth in the market, and that First will be able to innovate with new products to attract people on to the railways.

I do not want to continue much longer, because other hon. Members want to contribute. I have a concern about one aspect of the matter, and the hon. Member for West Lancashire touched on it. There will be considerable work on the west coast main line over the franchise period, particularly in the Euston area, if it is decided that that will be the High Speed 2 terminus. That may have an impact on the ability of the line to deliver the extra capacity. I should be grateful for a comment from the Minister, whom I welcome him to his post. He has long taken an interest in rail, and richly deserves his position. Perhaps he could say a little about how the upgrade work at Euston and elsewhere on the line will be accommodated, along with growing passenger numbers, over the period in question. I believe that there are solutions. For example, it might be possible to divert some commuter traffic on the London midland line into the Crossrail terminus while Euston is being upgraded, and for extra capacity to be created there. If the Minister would say a few words about that, I should be grateful.

[David Mowat]

Will my hon. Friend give way?

[Iain Stewart]

I will give way one last time, but then I must conclude.

[David Mowat]

The thrust of my hon. Friend’s remarks is that if there is an issue with Euston or the revenue projections, that is a problem for the Government, but it must be a problem for FirstGroup, and the contractual basis must make that clear. Such points, although interesting, do not mitigate FirstGroup’s liability. That must be a principle.

[Iain Stewart]

That is a fair point. I genuinely do not believe that FirstGroup would be making the bid if it did not believe that it could deliver. However, we do not have the full details, and I do not think that we can. I believe that the process has been rigorous. The bids were anonymised; the Government could not have displayed any commercial bias for or against any operator.

In conclusion, it is healthy that we have such a high level of ambition and competition. It is to the benefit of all who use the railway that different companies want to develop the line in innovative ways. I hope that my constituents and those of other hon. Members will see an improvement in their rail services over the life of the franchise.