Transport Secretary: East Coast Franchise

Iain Stewart Excerpts

Wednesday 23rd May 2018 Commons Chamber

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

It is a pleasure to speak in this debate. As a member of the Transport Committee, I hope to inject a rational perspective into proceedings. As has been mentioned, the Committee is currently scrutinising this issue. I should add the caveat that our proceedings are still under way and we might receive further evidence later.

The first point I wish to make is that this is not a failing railway in the sense that most passengers would understand it. It operates efficiently; there are high levels of passenger satisfaction; there is growing usage of it; and, yes, there is investment in it. Under Virgin, many of the trains have been refurbished and, although I appreciate that this is not a direct part of the franchise, King’s Cross station has been transformed in recent years, so the passenger experience is being enhanced.

The issue at the heart of this debate is that something went wrong with the revenue projections for the line. That is what we need to scrutinise. It is important to understand the nature of the east coast main line franchise. It has a much larger discretionary element than most other rail franchises, by which I mean that the passengers who use it have many more options for making their journeys. Those options are both on the railways, with other train operating companies running services on large parts of the line—at the southern end of the line, Hull Trains and Grand Central offer alternatives to the Virgin Trains, and further north there is TransPennine Express and ScotRail, meaning that there is a discretionary element to which service passengers use—and, because of the long-distance nature of the network, passengers can choose non-rail alternatives, including flying between Edinburgh and Glasgow or driving between some of the key towns and cities. That makes it much more difficult for anyone in the public or private sector accurately to forecast revenues over a lengthy period. I have had conversations with other train operating companies this week, and they said, “We don’t bid for these long-distance franchises because of that element of uncertainty.”

[Chi Onwurah]

The hon. Gentleman is saying that the issue with the east coast line is that there is competition and that Virgin could not handle that competition so should be bailed out. Does he realise that he is undermining the entire argument, because he is saying that when there is competition, franchising fails?

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[Iain Stewart]

No, my point is that Virgin is making a profit on the line and is very able to meet the competition, but what is difficult to forecast accurately—[Interruption.] If the hon. Lady stops chuntering and listens to what I have to say, I will answer her point. The revenues have grown, but they have not reached the very ambitious levels that we set. Many factors behind that are completely unrelated to the rail industry. I shall touch on some that are related to the rail industry, but those that are not include fuel costs, which are considerably lower than was envisaged at the time the franchise was let—

[Helen Goodman]

That should help!

[Iain Stewart]

No; if it is cheaper for people to use motor vehicles, they are more likely to do that than to use the train. There is a question mark over the extent to which Network Rail’s non-delivery of some of the upgrade projects is a factor; that is part of the picture about which I do not yet know and is something that we will scrutinise. There is also something more fundamental happening in the nature of rail usage, relating to different travel-to-work arrangements and work patterns. There is currently no clear idea of what is behind that, but it will affect other franchises, as well as the east coast line.

[Kwasi Kwarteng]

My hon. Friend and I served together on the Transport Committee for three years, and his speech is compelling and highly knowledgeable. Does he feel that nationalisation should be part of the solution to the problems we face?

[Iain Stewart]

Absolutely not. I will come to that point and refer to the evidence that the Select Committee heard on Monday from Iryna Terlecky, who has many decades of experience in the rail industry.

The shortfall in projected revenue would have happened irrespective of who owned and ran the railway. The difference is that under a nationalised system, the public purse would have taken an immediate hit from the loss of revenue, whereas under the system we have, the parent company and the bond that it put up has taken the brunt of it.

[Helen Goodman]

Will the hon. Gentleman give way?

[Iain Stewart]

No; forgive me, but I have three minutes left and the hon. Lady’s previous intervention was not really up to scratch.

There are of course lessons to be learned about how we base our revenue projections over a long period. There need to be more cautious forecasts of rail revenues over the long term. Indeed, I think that that has already happened in respect of some of the franchises that have subsequently been let. We need to revisit some of the Brown recommendations on the balance of risk that an operator takes against extraneous factors that are not to do with the direct operation of the railway. In the end, though, the franchise system does work; it does deliver enhanced performance. I, too, remember what British Rail was like when I was a child, and it was not a glorious existence.

Let me conclude on what I hope is a more consensual point. I am a sentimental old railway buff and I cheer the reintroduction of the LNER brand. LNER was one of the big four private companies that transformed this country’s rail system in the first half of the previous century. May I make one little plea? LNER had iconic liveries, from the apple green of the Flying Scotsman to what is called the garter blue of the Mallard and the Gresley class, and the teak colour of the carriages. Please can we have that back and rekindle the romance of the railways of those years? I am absolutely certain that that would help to keep passenger numbers high and ensure that this important railway line has a bright future.

[Several hon. Members rose—]