East Coast Main Line

Ian Mearns Excerpts

Tuesday 12th November 2013 Westminster Hall

[Mrs Hodgson]

No, I will not. I will make some progress, because many hon. Members want to speak.

This is the people’s railway. It is delivering real improvements for our constituents, unencumbered by the primary purpose of having to pay dividends. That is not to say that Directly Operated Railways is squandering millions on such trivial things as improving the experience of their customers and therefore winning more of them; it is also chipping in a lot of money to the Exchequer. By the end of this financial year, it will have returned £800 million to the Treasury and put the rest of its surplus of nearly £50 million back into the service. It of course gets the lowest rates of public subsidy of all the train operators, except London commuter services.

Ministers have always talked about the need for a private operator to bring in extra investment, but have failed to make clear how much will be brought in by this process. What investment we know about appears to come from the public purse. Just as with Royal Mail, Ministers seem to be privatising the profit, while keeping the ongoing costs on the public books.

The Minister will say that decisions should not be taken on the basis of ideology, and to an extent I agree, although I must of course confess to having a default opinion when it comes to the ownership of public services. However, the returns to the Treasury and the improvements in services provide the business case in support of our argument that the line should remain directly operated. Perhaps that is why nearly half of Tory voters oppose the Government plans. If anyone is guilty of ideological decision making on this issue, it is surely the Government.

As if the west coast main line shambles, which cost taxpayers £55 million, was not bad enough, the contract extensions for other franchises—the Government have had to negotiate them so that they could bring forward the east coast main line tender—will cost taxpayers millions more in lost revenue. For example, First Great Western paid £126 million in premiums last year, but will pay only £17 million next year, as a result of the extension terms it has been given by the Government. Ministers are actually throwing money away hand over fist, just so they can make a point of privatising a franchise that they know is doing perfectly well in public hands.

[Ian Mearns (Gateshead) (Lab)]

My hon. Friend is making an excellent speech. Is it not ironic that the Government want to return the east coast main line to the private sector when it is clearly succeeding very well in the public sector, while the private sector has failed twice on that line?

[Mrs Hodgson]

That is exactly the point. Despite all the evidence to the contrary, the Government clearly do not think that a state-owned company can run the franchise viably and deliver the investment in service improvements that we want.

How ironic it is that many of the probable bidders for the service are subsidiaries of state-owned railways. Eurostar and Keolis have confirmed that they will team up to bid for the franchise. As the Minister will be aware, those two companies are majority-owned by the National Society of French Railways—SNCF—which is France’s state-owned operator. Arriva, which already operates so many franchises, including the Tyne and Wear Metro in the north-east, and has received much Government investment over the past few years, will probably throw its hat into the ring. It is of course owned by Deutsche Bahn. Abellio, which, with Serco, runs Northern Rail trains in my area, might well be tempted. It is a part of the Dutch state-owned rail operator. The Government are therefore quite happy for the east coast main line to be run for public benefit—just as long as the British public do not benefit.

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[Mark Lazarowicz]

My hon. Friend might be, but that is not the issue today. What we are talking about today is giving an alternative to the private sector. He just referred to other industries, and one of the issues about those industries is this: to what extent is there real competition?

One of the problems is that within the railway sector in the UK, a very limited number of UK companies are able and willing to put in a bid for a line. On the east coast and west coast lines, we all know that the major UK bidders will always be drawn from Virgin, First Group, National Express and possibly Stagecoach.

Of course, Virgin also runs planes to Edinburgh and Aberdeen, and First Group and the other companies operate other rail services. Some of them also operate bus and express coach services. So the issue is ensuring that there is at least some competition in the system, which the existence of Directly Operated Railways on the east coast main line would certainly provide.

[Ian Mearns]

rose—

[Mark Lazarowicz]

I will give way to my hon. Friend and then I will move on, to ensure that I make some progress.

[Ian Mearns]

It is ironic that, despite the number of Eurosceptics on the Government Benches, the Government are clearly in favour of state ownership—but Dutch, German and French state ownership of UK railways, not UK state ownership of UK railways.

[Mark Lazarowicz]

Indeed. However, my hon. Friend is being perhaps a bit too restrictive, because I understand that one of the companies shortlisted for one of the Scottish railway franchises is the mass transit railway system—MTR—in Hong Kong, which I presume is ultimately owned by the Chinese Government. It appears that although the Chinese are able to build our nuclear power stations and run our railways, the British state is unable to do so.

I come to the essence of the argument. The Government say that one of the reasons why the east coast line should go back into the private sector is the success that there has been since the railway system was privatised. One of the oldest logical fallacies in the book is to say that because event B followed event A, event B must have been caused by event A.

What the Government are saying, of course, is that because passenger numbers have gone up since the railways were privatised, that must be because they were privatised. However, the fact is that we have not been able to establish that link between the two. For example, I can look at the local bus company in Edinburgh, my home city, which is municipally owned. The number of bus passengers has gone up dramatically in the past 20 years. That company is in the public sector, but I will not say that the rise in passenger numbers is just because of that.

Equally, however, saying that the rail network’s being in the private sector is why the number of passengers has gone up seems a very weak argument. In fact, the number of passengers on other state-owned railways in other parts of the world has gone up as well. The argument about privatisation seems very weak.

As my hon. Friend the Member for Washington and Sunderland West pointed out, Lord Adonis, when Transport Secretary, made references to privatisation that are continually mentioned by the Government in defence of their policies. However, he has made it clear that he has learned from experience and is approaching this issue in a non-dogmatic fashion, in a way that the Government are signally failing to do.

Let us not forget that it was a Conservative Government who privatised the railways in the first place, against the wishes of the Labour party. Labour colleagues in Parliament at the time voted against that privatisation. Of course, the Labour Government after 1997 had a large number of priorities and I can certainly see why the issue was not, at that time, their No.1. However, as I have said, we are talking about the situation here and now. We have an opportunity to judge from experience and to ensure that the public get the best value for money and the best service, which, in my and my colleagues’ view, would be obtained by ensuring that the east coast line stays in the public sector.

Reference has been made to the way in which foreign companies are able to bid for the franchise. I will not develop that point any further, given that it has already been made by other colleagues. However, I will again make the point that there is a real issue about the lack of genuine competition within the rail franchising sector in the UK, including among British-based companies. Also, the point that my hon. Friend the Member for Easington (Grahame M. Morris) made about comparing rail with the utilities was very well made.

One of the points made by Ministers when they have argued why the east coast main line should go private again is that—as I think one of the Minister’s predecessors, the right hon. Member for Chelmsford (Mr Burns), said—the record of East Coast trains on punctuality had “plateaued”. Again, that is another example of desperation and of the Government trying to grab arguments to support a weak case.

The fact is that East Coast trains has a good record on punctuality. As we all know, the main reason why there have been problems with train punctuality in recent times is certain factors—first of all, the recent storms, which were clearly beyond anyone’s control. Above all, however, they have been due to problems with infrastructure, which have not been the fault of East Coast trains.

I asked a parliamentary question on the issue a while ago. I received an answer about the 2012-13 split in responsibility for delays on East Coast trains: 18% of them were due to East Coast itself, 13% were due to “Other Train/Freight Companies” and 69% were due to Network Rail. We know that one of the reasons why 69% of delays were due to Network Rail was problems with the overhead line system, which was, of course, put in place on the cheap, and for which—again—a previous Conservative Government clearly have to take responsibility.

My hon. Friend the Member for Washington and Sunderland West referred to the new targets from the regulator regarding punctuality. One of the things that the regulator said in its recent report was that there is a problem with reliability on the east coast main line, and I welcome the fact that it did. However, like my hon. Friend, I am concerned about how the performance measurements for the east coast service have been reduced by comparison with those for many other lines in the country.

I know that it only sounds like a marginal reduction if the performance target is reduced from 90% to 88%, but of course what we want to aim for is 100% reliability. Obviously, we will never get 100% reliability, but every time the target is reduced—even by 1% or 2%—we release the pressure on that operator to ensure that, as far as possible, all their trains arrive on time.

The fact is that the new target for cancelled or seriously late trains was set at a rate that would allow 4.2% of east coast line trains to arrive more than two hours late or not at all. That does not sound like much, until we put those figures in another context and say that one in every 24 trains could be cancelled without any penalties whatever being imposed on the operator responsible.

As my hon. Friend has said, there are concerns about the fact that that change was not referred to in draft proposals for the new punctuality performance targets; it was a change that people could not be consulted on. The Minister should give an explanation as to why that was the case. Bluntly, if he cannot provide one today, he should go away and look at the issue, because it was a major defect in the process.

It is time for the Government to drop their dogmatic approach to the east coast line and to give the public sector operator a chance. Let Directly Operated Railways put forward an alternative model and we will see what represents the best value for money and the best service for the public. Please, Minister, do not come forward with the argument that I heard from one Minister some time ago, which was, “We couldn’t do this because the law wouldn’t allow us to do it, and we had to put it out to the private sector.”

As a Back Bencher, I cannot speak for those on the Labour Front Bench, but were the Government to come forward and say, “Yes, we will change the law to allow East Coast trains to continue to operate the franchise,” I cannot think that my party would oppose that. Perhaps the Minister will make that offer today. I am sure that my hon. Friend the Member for Nottingham South (Lilian Greenwood) would be happy to respond to that.

It is time for the Government to change their policy. It is not what the public want, what the staff want or what the communities want—and it is not in the best interests of the public purse, either.

[Sheila Gilmore (Edinburgh East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bone. I congratulate my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) on securing the debate. It is important that we continue to raise and debate the issues on the east coast main line, with a view to persuading the Government, I hope, that they have gone down the wrong track. It is not too late to go into reverse. I am a regular railway traveller, but this is one time when I will be more than happy for the train to stop and go backwards.

It was not such a joy to arrive at Newcastle station a couple of weeks ago and be told that the best advice was to get off the train and go home. My hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) and I were so determined to get here that we ignored that advice and soldiered on to Peterborough. That delay was due not to the train operator, but to the stormy weather; the line was certainly not the only one affected on that date. Some might suggest that East Coast let us down, but we were clear that that was not the case. Indeed, when we tried to take other lines to get from Peterborough to London, we discovered that they were all affected, whether they were privatised or not.

Things like that will happen in any travel system, but the service has—many regular travellers will say this—improved over recent years. People enjoy their journeys. I have said this before and I will say it again, because it is important from a Scottish perspective and an environmental perspective: the improvements are making inroads into getting those important business travellers, who otherwise might always travel by air, to use rail. If we are serious about creating a modal shift in transport, we have to make rail both attractive and reliable to get that kind of traveller. That is one thing the service has done extremely well.

I have taken part in at least four of the several debates that we have had on the east coast main line. As well as the Westminster Hall debate referred to by my hon. Friend the Member for Washington and Sunderland West, we had a Backbench Business Committee debate in the Chamber in which many colleagues spoke. We have had many opportunities to ask oral questions, and we have all taken them up. At this stage, one might think that we should find something new to say and look at the matter from some new angle, but the problem is that our questions have never been answered. It is important that we go back over those questions. Perhaps on this occasion we will get responses to some key points.

[Ian Mearns]

My hon. Friend is absolutely right. Ministers might ask why the public have so little confidence in the re-privatisation of the east coast main line, and the answer is simple: for the bulk of the time since the railways were privatised, the franchise has been in the hands of the private sector. The orders for new rolling stock on the line have only been secured since the franchise has been in the public sector. Much of the existing rolling stock is 35 or 40 years old. For the bulk of that time, it has been in private hands with little investment, apart from a lick of paint.

[Sheila Gilmore]

I thank my hon. Friend for making an important point on East Coast that speaks to how we run the railways. A lot of the public assumed that privatisation would mean that investment would be brought in and that everything would be brought up to scratch. That was the selling point.

The track investments are necessary and we need to see considerable improvement in the infrastructure on the east coast main line, particularly with the overhead lines, which have caused a lot of the recent problems. We need to see that crucial investment and we need to see the rolling stock upgraded, but none of the onus will be put on those who are being asked to tender for the service. Whatever investment there is will come from all of us as taxpayers.

The notion that we have to privatise to get investment was the selling point at the beginning, which people perhaps swallowed. They probably thought, “Yes, if that is a way of improving things, we will at least give it a try,” but that investment is not happening and will not happen in this case either. All the things that desperately need to be done will not get done through this privatisation process, which is, in many ways, a distraction from the measures that could lead to a real step change. We have talked about improvements and we are not complacent. We do not think that everything is perfect. We want to see a step change in the line, but it will not come through this process.

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[Karl MᶜCartney]

I am, and I am happy to accept that the majority of people in his constituency, and the passengers who use the rail station he uses, might, like him, not want to see any changes to the level of services they enjoy. However, some of us, in seats that do not receive such a regular service, might feel differently, and that might be where the ideological difference is.

[Ian Mearns]

Unfortunately, a couple of weeks ago, we had the wrong sort of trees on the line, and my hon. Friend the Member for Easington (Grahame M. Morris) and I had to get off a train at Peterborough. We had a chat with quite a lot of residents and people who work on the railway there, and I have spoken to lots of people from Peterborough since. It is quite clear that the vast majority of them do not want the line to be taken out of public ownership and re-privatised. That is not Gateshead—that is Peterborough.

[Karl MᶜCartney]

I will take those comments with quite a large pinch of salt. I would probably take on board a little more the comments of my hon. Friend the Member for Peterborough (Mr Jackson) on behalf of his constituents. However, like him, I am pleased to see the new rolling stock on the east coast main line. Lincoln might—perhaps with hybrid locomotives—see better, more regular rail services, including at weekends. As I said, I have been fighting for that for my constituents.

The hon. Member for Edinburgh North and Leith managed to bring nuclear power stations into the debate and mentioned that in 1997 there were other priorities for the Labour party. Obviously there were, because you did not sort out any power stations and certainly did not sort out the rail system. You were all busy spending money our country did not have.

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[Grahame M. Morris (Easington) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bone, as always. I want to compliment my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) on securing the debate, one of several about the east coast main line that we have had in Westminster Hall and the main Chamber.

The Government have yet another opportunity to listen to what the overwhelming majority of the British public—not just in Easington or the north-east—are saying. Polling evidence shows that they believe that the east coast main line should remain a publicly operated service.

The last time we had a debate on this matter, the Minister’s predecessor, the right hon. Member for Chelmsford (Mr Burns), referred to me—and, if I recall correctly, my hon. Friends the Members for Livingston (Graeme Morrice) and for Gateshead (Ian Mearns)—as dinosaurs for believing that public services should be run for the benefit and in the best interests of the public.

I do support the renationalisation of the railways, and I certainly oppose the re-privatisation of the east coast main line—especially when there is evidence that Directly Operated Railways is providing a better service and returning more money to the taxpayer than the private sector. Furthermore, on two occasions when the private sector was operating the franchise, it failed. If my view makes me a dinosaur, so be it.

In numerous surveys, 70% of the public have regularly supported calls for the railways to be completely publicly run. That applies throughout the country and even in the south and south-east. Trains there are very congested, and there are similar concerns about the fact that private sector franchise holders are not delivering.

We have been given an example, in the success of the east coast main line under Directly Operated Railways, of how a public rail operator can work and deliver for the taxpayer. As my hon. Friends have said, more than £800 million in premiums will be returned to the Exchequer by Directly Operated Railways. The east coast main line receives the lowest net subsidy of any operator—only 1% compared with an industry average of 32% or more than £4 billion. The numbers tell the story. Let us not forget what happened previously, when National Express ran the service. It returned only £370 million in premium payments and turned its back on the franchise, leaving the taxpayer to pick up the pieces. Directly Operated Trains had to step in.

We have had private sector failures on the line and the operators have not delivered on their commitments, but the Government will not prevent National Express or other failed operators from bidding for the rail franchise. Labour Members have raised queries about that. The right hon. Member for Chelmsford confirmed in an answer to my hon. Friend the Member for Islington North (Jeremy Corbyn):

“National Express and its subsidiaries are permitted to submit for the pre-qualification process”—

that is, the bidding process—

“to run passenger rail services in all franchise competitions including the East Coast Main Line.”—[Official Report, 3 June 2013; Vol. 563, c. 970W.]

We should ask questions about that, given that the private operator has a track record—if hon. Members will excuse the pun—of failure.

[Ian Mearns]

Given the statistics that my hon. Friend has reeled off about the public subsidy going into private sector franchises, there is a good argument that the new rolling stock in the private sector franchises has been put in not by private sector investment, but by public sector subsidy. The public pay for private profit.

[Grahame M. Morris]

My hon. Friend makes an excellent point. We are privatising the profit and nationalising the cost and risk of the investment. That is a bizarre approach to the public finances. In my view, companies in either sector that fail to deliver on commitments or promises to the taxpayer should not be allowed to take over franchises—they have shown that they are not competent to run them.

It is very expensive to travel by rail in the United Kingdom, compared with other countries. British train tickets are now the most expensive in Europe. A typical season ticket costs 14p per kilometre in the UK, compared with just 8p per kilometre in Germany. Holland and France are the next most expensive countries. A day return in the UK costs 26p per kilometre compared with 17p per kilometre in Germany. As to season tickets into the capital, a 24-mile commute into Paris would cost £924 a year; a similar commute would cost £705 to Berlin and £654 to Madrid—but for someone travelling to London it would cost £3,268 a year. Those are huge sums, and after a decade of price increases. Those are never welcome, but at a time of austerity when wages are effectively frozen and, in many cases, falling, an intolerable strain is being put on family budgets.

While fares have been shooting up, dividends to shareholders in the big five transport companies contracted to run UK rail services reached nearly £2.5 billion. When people ask, “Where is the money going?” the answer is that a big chunk of it is going there—in dividends to private train operators. There are examples of excessive boardroom pay. Some of the highest paid directors receive more than £1 million.

East Coast offers a genuine alternative, with all profits reinvested back into services—money that otherwise would go as dividends for shareholders. I hope that the Minister will listen to the concerns expressed by hon. Members and the British public and end the failed franchise bidding policy.

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[Stephen Hammond]

My right hon. Friend makes an interesting point and alludes, as I did, to the whiff of mischief that we are hearing from Labour Members today.

The hon. Member for Washington and Sunderland West asked about the prospectus and where she might find it. It is available in the Library—and I have a copy here—but I will ensure that a copy is sent to her. She commented on performance, and I refer her to page 67, which states that the franchise agreement will include three levels of benchmarking for the performance metrics that any franchisee will have to meet.

The hon. Lady referred to third class. I intervened to say that we will not specify that and have not specified it, but I gently guide her to Eurostar, which has a standard premier class to make better use of off-peak first-class coaches. If someone wanted to make better use of first-class coaches during off-peak times, I am sure that she and her constituents would regard that as a benefit.

[Ian Mearns]

The Minister is generous in giving way. If a franchise runs a first-class, a standard premium class and a standard class, does not standard class, de facto, become third class?

[Stephen Hammond]

I am not sure that the hon. Gentleman would argue that with British Airways, and I am not sure why he should do so with the franchise. His point is nonsense.