East Coast Main Line Call Centre

Ian Lavery Excerpts

Thursday 19th May 2011 Commons Chamber

[Ian Mearns (Gateshead) (Lab)]

It is timely that on the day Sir Roy McNulty’s report on why Britain’s railways cost more than other European railways is published, and on the day he recommends yet further fragmentation of our rail network and fails to consider seriously the benefits of reintegrating the railways under public ownership or why billions of pounds are drained from the industry in profits to the train operating companies, we have this opportunity to consider East Coast’s decision to threaten the future of 180 jobs on Tyneside by transferring an important customer service part of its operation to Mumbai in India.

As Members will be aware, the east coast main line service is wholly owned by Directly Operated Railways Ltd, trading under the name East Coast. DOR Ltd is, in turn, wholly owned by Her Majesty’s Government in the guise of the Secretary of State for Transport. I know the Minister will argue that it is not appropriate for the Government to seek to intervene in operational matters of this type that are properly for East Coast to address, but I am a little incredulous about that.

The Minister will probably argue that as the east coast main line service is owned by DOR Ltd and not the Government, the Government have no right to intervene. However, I listened very carefully to the Secretary of State’s statement today, during which he said: “The Government want Britain’s railways to continue to prosper and have demonstrated by their actions their commitment to them. Despite the difficult fiscal climate, we have allocated funding to complete Crossrail and Thameslink, and to support the upgrade of the London underground. We have announced electrification on the great western main line and in north-west England. We have resumed the intercity express programme to improve reliability, comfort and journey times on the east coast and Great Western main lines.” The Secretary of State therefore plainly takes credit for investment in the railways that, we hope, will improve the service, but he will probably in due course deny any responsibility for, influence over, or right to interfere in the affairs of, East Coast and its decision to close a call centre in Tyneside. The use of the term “we” in the statement followed by a list of all the actions taken proves that the Government can intervene. That leads me to raise the issue of Ministers taking the practice of using smoke and mirrors to evade responsibility to new heights.

The purpose of this debate is absolutely clear. I want to ensure that the Secretary for State cannot evade responsibility on this issue. I want to defend 180 local jobs in Tyneside, where unemployment is already well above national averages. I want to highlight the ridiculous scenario whereby a state-owned company—supported by millions of pounds of taxpayer subsidy—is pursuing a policy of exporting jobs to exploit cheaper labour market conditions abroad and throwing local people on to the dole in an unemployment black spot. I want to highlight the false economy savings for both the railway and the United Kingdom Exchequer. I want to highlight that this is simply the latest train franchise cut, in order to make it more attractive to potential bidders when it is put up for re-privatisation. Finally, I want to highlight the context of Sir Roy McNulty’s report and the east coast main line’s place in the chaotic structure of the public and privatised railways.

East Coast intends, via a re-tendering process, to move the work currently undertaken at the customer contact centre in Baron house in Newcastle upon Tyne away from the north-east to Mumbai in India, Plymouth and Wolverhampton—but mostly to Mumbai in India. The following jobs are currently performed at Baron house: customer contact centre and associated services; inquiry and booking services for telesales, group travel, assisted travel and business travel; ticket fulfilment; web support; and customer relations activities. This action will culminate in the loss of 180 jobs on Tyneside, which will be a bitter blow for the people in a region that is already reeling from the impact of this Government’s economic policy, where between 28% and 32% of the work force depend on the public sector for employment, and which is already braced for the disproportionate impact of the Government cuts, especially in local authority expenditure. The work will now be undertaken outside the north-east of England and a high proportion of it will be undertaken outside the UK, in Mumbai.

The following operations will now take place in the following locations: group and assisted travel and ticket fulfilment will go to Plymouth; public telesales will go to Mumbai; web support and ticket fulfilment will go to Wolverhampton; business travel services will cease as a telephone service and will be online only, supported in Wolverhampton; East Coast customer relations will go to Intelenet in Plymouth; delay repay, processing only, will go to Intelenet in Mumbai; and lost property will go to Plymouth.

[Ian Lavery (Wansbeck) (Lab)]

Does my hon. Friend remember the Prime Minister suggesting, before the election, that the north-east would be hit hardest and first? Does my hon. Friend agree that this is just another case—a shining example—of an attack on decent hard-working people in the north-east and that that should not be tolerated any more?

[Ian Mearns]

I am grateful to my hon. Friend for raising that issue. Members from the north-east of England have mentioned on numerous occasions how the cuts imposed by the Department for Communities and Local Government in particular have disproportionately hit the north-east of England. Councils in our region have lost four times the measure of public finance from the central Government grant than those in the south-east outside London. The impact is disproportionate on an area that is already struggling in this economic climate.

Staff have been advised that they will lose the benefits that would normally accrue to people working in the rail industry and that their rail travel facilities will be retained only until 31 December. The transfer of work is being phased and will begin on American Independence day, 4 July, with the last shift work to be done on 23 July. Over those three weeks, the work will gradually be moved from Baron house in Newcastle.

Surely it is totally unacceptable for a state-owned company such as East Coast, supported by taxpayers’ money, to export jobs abroad.

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[Mrs Villiers]

Of course I am well aware of the performance issues on the east coast route at the moment. However, I draw the hon. Gentleman’s attention to the improving performance of the train operator. The bulk of the problems that are currently being experienced are the result of problems with the infrastructure, over which East Coast has no control. I hope that in future, with the McNulty-style reforms, we will see shared incentives and improved performance from Network Rail. It is a mistake for the hon. Gentleman to blame those running the East Coast operation for the current performance problems. They bear a share of the responsibility, but the bulk of it, I am afraid, is Network Rail’s.

Turning to the facts of the case, National Express Services Ltd, or NXSL, was providing call centre services to National Express East Coast—NXEC—before its franchise terminated in 2009. NXSL is a separate commercial entity from NXEC and therefore was not taken over by Directly Operated Railways—DOR—at the handover. To ensure business continuity, contact centre services continued to be provided from Baron house to East Coast Ltd on a temporary basis, but two major problems stood in the way of this arrangement continuing on a longer term basis: first, the cost base of the Newcastle call centre; and secondly, the fact that telesales volumes have been falling rapidly across the rail network as customers switch to internet buying.

[Ian Lavery]

rose—

[Mrs Villiers]

I am going to continue for a moment.

In 2006, 11% of East Coast ticket sales were made over the telephone—today, that figure has fallen to just 1.9%—and 50% of East Coast advance ticket sales are now made via the internet.

Following the failure of the NXEC franchise, the services provided by the customer contact centre were reviewed by East Coast and by National Express. That review concluded that it was not commercially viable for the call centre to continue to provide telesales services to the new east coast operator.

--- Later in debate ---

[Ian Lavery]

Will the Minister give way?

[Mrs Villiers]

No, I have been very generous.

Greater flexibility was sought to enable a better response to sudden peaks in demand for call centre services—for example, as occurred over the winter. A priority for East Coast Ltd was to ensure a stable future for its contact centre services. Due diligence was conducted to establish if it was feasible for DOR to purchase NXSL and the contact centre and operate it as a subsidiary. However, this proposition was not viable because of the significant liabilities associated with the call centre. A working capital injection of approximately £2 million would have been required, plus further investment to turn around a loss-making business.

East Coast worked with National Express to see whether the Newcastle operation could be sold to a third-party expert in call centre services. Bids were received, but they faced the same purchase problems identified by East Coast and fell through when it proved impossible to agree a price. East Coast also considered whether some of the services could be provided in-house, but it is not a telephone contact centre specialist, and it concluded that it did not have the capacity or expertise to provide in-house services to the high standards that its customers wanted and that it was possible to get from a third-party supplier.

Having exhausted all possible options, East Coast concluded that the only viable way forward was to seek a new specialist supplier to provide call centre services. In parallel with National Express’s efforts to secure a third-party purchaser, East Coast initiated an Official Journal of the European Union procurement process to invite bidders to provide contact centre services. The legal requirements of that process meant that East Coast was not permitted to specify the location from which these services were to be provided. The Utilities Contracts Regulations 2006 prevent this unless a particular location is essential for the provision of the service. As the hon. Gentleman said, the outcome of the process was a contract with Intelenet UK for public telesales, group and assisted travel, ticket fulfilment and customer relations, and a further contract with Atos Origin for web support and web ticket fulfilment.

I appreciate that this process has a downside and is a real blow for those working at the National Express call centre, but there is an upside for passengers. I am advised that East Coast believes that the new contract—