Oral Answers to Questions
Ian Mearns Excerpts(10 years, 6 months ago)
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Mr McLoughlin
I well understand the concerns raised by my hon. Friend. This is one of the problems when major work is done on the railways. As he may have heard earlier, I travelled in the cab of one of those trains on Monday to see some of the work that is already ongoing in preparation for the electrification of the whole line. There will be some disruption—that is unavoidable. Nottingham station was closed for five weeks over the summer, but the whole job was done on time and it actually came in £5 million below budget.
Ian Mearns (Gateshead) (Lab)
T3. The Secretary of State will be aware that there has been significant disruption on the east coast main line because of infrastructure failure. I think we have now had three Mondays on which there has been significant disruption, and a fortnight ago 30,000 passengers were stranded, some for five or six hours, while repairs were carried out. The east coast main line was electrified on the cheap—many engineers tell us that, and there has been severe disruption. Can we do something about it, please?
Mr McLoughlin
I understand the hon. Gentleman’s point. It relates to what we are doing with HS2 to increase capacity in the longer term, although that is not the short-term answer he wants. I was disturbed to read the reports about the delays on the line, and I will talk to Network Rail to see if there is anything we can do.
East Coast Main Line Franchise
Ian Mearns Excerpts(10 years, 10 months ago)
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Mr Jackson
If it is such a popular idea, why has the hon. Gentleman’s party not put it in its manifesto? Why in 13 years did it not repeal the Railways Act 1993 and go back to the good old days of British Rail, which did not get us to our destination very often or on time?
Mr Jackson
Let me make some progress and I will give way to the hon. Gentleman shortly.
The Labour party has to bear some responsibility for the series of events that culminated in the current situation. As in so many areas, this Government are having to tackle that legacy. The Labour Government should have been more flexible with Sea Containers and Great North Eastern Railway, which was a very popular provider: it had good staff, good management and was well liked. Obviously, it was undermined—this was out of its control—by the parlous financial situation of Sea Containers, but the previous Labour Government was pretty inflexible and allowed National Express to overbid hugely and deliver a poor level of service. I think that the National Express management team is pretty hopeless. In fairness, the Labour Government did not have much chance or choice to do anything differently at that stage. Nevertheless, unless Labour gives an unambiguous commitment to renationalisation across the network, old Labour hon. Gentlemen will be whistling in the wind.
Mr Jackson
No, I must make some progress, because Mr Deputy Speaker will reproach me otherwise.
It is worth mentioning that, in terms of premium, National Express paid £338 million to the Treasury between 2007 and 2010. It was not a basket case. It ran into difficulties as a direct result of the economic crisis and the less than benign economic circumstances, but it did pay in. As I have already told the hon. Member for Edinburgh East, the track access charges were significantly higher for National Express than they are for the current company.
I welcome the improvements in control period 4, which covers 2009 to 2014, including the new platform 0 at King’s Cross, the junction remodelling and in particular the removal of the major bottlenecks between Huntingdon and Peterborough and the overall budget of £240 million. I think we all welcome the new inter-city express trains, extra seats and the replacement of the slam-door rolling stock, which will come on stream in due course.
I am a fair-minded person, so I will admit that there have been mistakes in the franchising process. I challenged the Secretary of State about this in Transport questions a few months ago and the Public Accounts Committee looked at the issue, specifically on the west coast main line, in February and identified some key things. There was a failure to follow due procedures and, essentially, a failure of culture. There were Chinese walls between the permanent secretary and the franchise and procurement teams, which seemed strange and is unusual in the civil service. There was also a failure of oversight, with no one person being in charge of oversight and having responsibility for the franchising process from beginning to end.
In July 2011, the Public Accounts Committee published a report on Network Rail. Network Rail is an integral part of any debate about the east coast main line and its future. The Committee found that Network Rail was still less efficient than comparator organisations in Europe, but it did not know why. The Committee also found that the system of penalties and bonuses that were meant to drive improvements in efficiency were not doing so. Because it is an overly complex industry, the risk of poor value for money and inefficiency is endemic. Those were the key lessons of the PAC report.
There is a need to impose clear objectives on train operating companies to avoid overcrowding, or bear the costs of overcrowding. I am not convinced that the Department for Transport has addressed that important issue adequately. We need more clarity on the link between fares and new passenger places and on the balance of costs between the taxpayer and the passenger.
In its contribution to the debate about franchising, through the Brown report and the McNulty report, Passenger Focus has suggested some simple things that would improve the passenger experience, including right time performance information; better ticket information; making restrictions simpler and more apparent on ticket machines; and having performance indicators for the line of route and not just for the franchise as a whole. Those are simple things, but they would make the experience of our constituents who travel to the north of England, Scotland or London much better.
I will finish my remarks by talking a little about competition and open access. I welcome the consultation paper that was published this month, “On-rail competition: Consultation on options for change in open access”. Open access is an important issue that we need to look at. The east coast main line is a good example of open access. It has brought significant benefits to parts of the network. Only a small part of the passenger rail network is open to competitive pressures. On the east coast main line, two non-subsidised open access operators, Grand Central Trains and First Hull Trains, compete with the franchiser. They have shown that competition leads to more journeys, higher revenues for the train companies, lower fares, and more and happier passengers.
The Centre for Policy Studies publication in March showed that passenger journeys increased by 42% at stations that enjoy rail competition, compared with 27% at those without it; that revenue increased by 57% at those with competition, against 48% at those without it; and that average fares increased by only 11% at stations with competition, compared with 17% at stations without it. So the franchise holder faces competition and still pays an increased premium to the Government, as East Coast has done. Open access competition has led to more routes and more high-speed access to new locations, including in London.
As a one nation Conservative—I suppose we are all one nation now, whether one nation Labour or one nation Conservative—I think that it is important that we have good transport infrastructure to places such as Sunderland, Hartlepool, Halifax, Hull and Bradford. All those places have seen a significant boost to their economic footprint and their direct access to markets. In the course of the public consultation on open access, we need to consider the benefits to local economies and, ultimately, to the taxpayer. Hitherto, the Office of Rail Regulation and the Department for Transport have set their face against open access and have been inflexible in the design of the franchise regime.
In conclusion, 20 years on from the Railways Act 1993, I believe that privatisation has been a success. Labour will not reverse it in government if it wins the next general election. The review of the franchise regime gives the industry an opportunity to facilitate more competition, more investment in our railways, more choice, and greater value for money and efficiency for our constituents. Ministers should seize this chance while they can.
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.
Ian Mearns (Gateshead) (Lab)
I congratulate my hon. Friend the Member for Edinburgh East (Sheila Gilmore) on securing this important and timely debate from the Backbench Business Committee—I have to declare an interest, because I sit on it. Like many colleagues, given the recent history of the east coast main line and privatisation, not to mention the present Government’s failure on the west coast main line franchise, I am deeply concerned about the Government’s plans and the impending privatisation of the east coast main line.
The Secretary of State for Transport’s announcement to start the tendering process for the east coast main line and nine further franchises paid no regard to public interest. It will result in the return of a profitable rail service to private hands within the next two years. The plans are no doubt a recipe for disaster. We already know that South West Trains, another private franchise, is in operating difficulties.
We have clearly established that Government Members are in favour of state ownership of the railways. I am sure that the hon. Member for Beckenham (Bob Stewart) and the Minister of State, Department for Transport, the right hon. Member for Chelmsford (Mr Burns), are in favour of state ownership, but not UK state ownership; they are in favour of German, French or Dutch state company ownership of UK railways. Do we honestly think for one moment that Angela Merkel would allow such a situation to prevail in the Federal Republic of German? I do not think so.
Roberta Blackman-Woods
My hon. Friend makes an excellent point. Is it not ludicrous that a publicly owned company in the UK cannot bid but publicly owned companies in other European countries can?
Ian Mearns
Given how Eurosceptic so many Government Members are, I think that it is utterly bizarre that they would rather see profits from UK railways going to France, Germany or Holland.
If Members have any doubts about the way this is all coming about, they need only look back a few years to the Government’s rescue of the line from the failing £1.4 billion National Express franchise. However, despite the private sector’s record of failure, the Government are determined to press ahead regardless of the interest of the travelling public. They would pursue the foolish policy of privatisation, despite history repeatedly telling us that the privatisation of railway lines and rail infrastructure is detrimental to cost and service for the customer and to the Government because of huge financial bail-outs.
The state-owned Directly Operated Railways, which runs the east coast main line, has generated and paid the Government £640 million in premiums and profits since 2009, and it is anticipated that by the end of this financial year that figure will be £800 million in total. Surely even the Chancellor or the Finance Ministers whom I faced on the Finance Bill Committee earlier this afternoon would want to see those moneys returned to the Chancellor’s coffers. Even this Government, given the current financial state of the country, should want to keep the franchise in public hands and see those profits repatriated to the Treasury.
The Government should pocket the profits for the public and use them to help cut the deficit and perhaps even invest in infrastructure. One thing that we have to accept about the east coast main line—railway engineers have told me this—is that, unfortunately, when it was first electrified I am afraid to say that it was done on the cheap; it was not a good model of electrification in the first instance. This Government, however, do not want to see that money reinvested. It is clear that, for them, private shareholder interest comes before the public interest. This is yet another example of this Government’s failed and ideologically driven economic policies.
No one denies that the east coast main line suffers its own problems of chronic under-investment, particularly with regard to what is now very tired rolling stock. We have discussed rolling stock reinvestment, but the problem is that we are being promised jam not tomorrow, but the day after tomorrow. The first new rolling stock on the east coast main line will be the diesel replacement, but that will not actually occur until 2018, with the rest of the fleet following further down the line. Let us not forget that the east coast main line inherited this burden from the privately owned rail firms, Great North Eastern Railway and National Express.
There has been very little rolling stock investment on the line for many decades. There has been some refurbishment, but that was mainly on carriages that were damaged following the tragic Hatfield and Selby rail crashes. The only way to run an effective rail service is to ensure that the infrastructure is up to scratch through continued investment, yet the overriding objective from a private sector perspective is not to invest in maintenance and customer satisfaction, but to return money to shareholders.
Privatisation in the rail sector is consistently lacking and detrimental to customers and the industry. Why privatise a service that has been successful? In short, it is not broke, so why fix it?
Let us recall the demise of Railtrack in 2002. The problems were numerous, but the straw that broke the camel’s back was the requirement for essential safety repairs following the Paddington and Hatfield disasters. Railtrack—a privately owned company under the failed model—was answerable to shareholders rather than the public. It was, to put it bluntly, badly managed, effectively bankrupt and unwilling to try to fund urgent safety improvements as well as normal running costs. Subsequently, as we know, the company was put into administration and Network Rail, a not-for-profit body, was invented to take over the rail network.
Given the inherent debt of Network Rail, is any Government Member suggesting for one moment that we re-privatise it? Of course not, because it would be completely and utterly stupid. Even if it were privatised—let us be honest—who really trusts this Government to introduce a fair and transparent, or even competent, tendering process in the current rail industry? Let us not forget the west coast franchise, for instance, which has cost the Government at least £50 million. What a complete shambles—a shambles that has resulted in Virgin, which lost to First Group in the tendering process, having to have its contract extended until 2017. The whole model does not produce competition; it produces a series of service monopolies on individual lines. That is not competition as anyone would understand it.
In among all this, the staff on the east coast main line have worked diligently and conscientiously through all the management changes over the years, but they have seen the equipment and rolling stock that they work on slowly deteriorate around them. Those staff are a credit to the service and deserve our congratulations. They and the travelling public they serve on the east coast main line deserve so much better.
The east coast main line should remain where the vast majority of the travelling public want it—in the public sector, in public ownership—and some of the surpluses that it generates should be reinvested into the service itself.
East Coast Main Line
Ian Mearns Excerpts(10 years, 11 months ago)
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Ian Mearns (Gateshead) (Lab)
It is a pleasure to serve under your chairmanship, Dr McCrea. I congratulate my hon. Friend the Member for Middlesbrough (Andy McDonald) on the fantastic speech he made in opening the debate.
Like many of my colleagues, given the recent history of the east coast main line—not to mention the Government’s failure on the west coast franchise—I am deeply concerned about their plans for the impending privatisation of the east coast main line. The announcement by the Secretary of State for Transport about the start of a tendering process for the east coast main line and nine further franchises pays no regard to the public interest, and a profitable rail service will return to private hands within the next two years. The plans will no doubt be a recipe for disaster.
My hon. Friend the Member for Middlesbrough established in his speech that Government Members support state ownership of the UK rail network, but importantly, that does not mean UK state ownership. Instead, they support German, French and Dutch Government ownership of the UK rail network. It has been interesting to hear about the lack of understanding of the complex interrelationships in the way our rail franchising system works, such as the relationship between Network Rail, the train operating companies and the rolling stock leasing companies, and about the failed diffuse franchising model established by the Tory Government from 1979 to 1997.
We are promised new rolling stock on the east coast main line, but initially only the diesel trains will be replaced, and that will not happen until 2018. No one denies that the line suffers from chronic underinvestment, particularly as there is now very tired rolling stock. However, let us not forget the burden that East Coast inherited from the privately owned rail firms, GNER and then National Express. Those problems were exacerbated, given the limited amount of rolling stock available on the line, by the Hatfield and Selby rail crashes. When full train sets are taken out of a service of that nature, it means that the operator is operating on very tight margins indeed.
The only way to run an effective rail service is to ensure that infrastructure is up to scratch through continued investment, yet from a private sector perspective the overriding objective seems to be not investing in maintenance and providing customer satisfaction, but retaining funds for shareholders.
Like the travelling public, I am deeply concerned about what is being proposed for us. If we acted on the proposal that my hon. Friend the Member for York Central (Hugh Bayley) has suggested and asked the travelling public on the east cost main line what they want for the future, we would get proof of the undoubted fact that the vast majority of them want the franchise to stay exactly where it is—in public ownership.
Mr Burns
The hon. Lady anticipates the very point I am about to make, which is that, under the Railways Act 1993, the Secretary of State has a statutory duty to ensure the continuous, seamless provision of rail services. That is why the Department for Transport has Directly Operated Railways. It is a body of last resort when there is a problem; it is not a permanent company, for want of a better term, to run a rail franchise indefinitely. My hon. Friend the Under-Secretary was correct in 2009, and the noble Lord Adonis was also correct.
Mr Burns
I am going to make progress, because I have only six minutes.
We have ensured that the delivery of the key inter-city franchises, both on the east coast and the west coast, is staggered so that they are not let at the same time in the economic cycle. The east coast is the first of those franchises to be let, and it is being returned to the private sector, as hon. Members know, after an extended and successful period of public ownership through force of necessity because of the fiasco with National Express. No one doubts that.
Oral Answers to Questions
Ian Mearns Excerpts(11 years ago)
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The Parliamentary Under-Secretary of State for Transport (Stephen Hammond)
I thank my hon. Friend for that question. She will know that the criteria for pinchpoint funds were set out with regard to the first three rounds. They fall under a certain financial limit and are completed by March 2015. We are in discussions on how further tranches will work in terms of the extension of the date of completion. I am convinced that given the record of the A64—one of the criteria is safety—it will be looked on favourably.
Ian Mearns (Gateshead) (Lab)
The east coast main line has returned £640 million to the public purse since 2009. Sadly, private ownership has failed the travelling public of the east coast franchise. What possible public benefit can be gained by another wasteful and expensive round of refranchising, when east coast is already where the vast majority of the public want it, in public ownership?
Mr McLoughlin
I point the hon. Gentleman to what was said by the last Labour Transport Secretary, the right hon. Member for Tooting (Sadiq Khan) who now sits on the Opposition Front Bench. It is worth pointing out that National Express paid £185 million in 2007-08, £145 million in 2008-09 and £8 million in 2009-10, which is when the franchise ended. The way that the track excess charges were calculated was then changed, so direct comparisons are not valid.
Rail Franchising
Ian Mearns Excerpts(11 years, 1 month ago)
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Mr McLoughlin
I am grateful to my hon. Friend, who follows this subject particularly closely, not just for his constituents but as a member of the Select Committee on Transport. I know that he sent me and my right hon. Friend the Minister of State, Department for Transport a fairly comprehensive letter, which I hope to respond to shortly, and I will see what can be done.
Ian Mearns (Gateshead) (Lab)
This morning, a statement by the Secretary of State’s own company, Directly Operated Railways, on the east coast main line said:
“Since 2009, the East Coast business has been transformed. The Company has returned more than £640 million in cash to the taxpayer”.
That is not because of privatisation, but because the public sector bailed out the private sector. There is huge support for continued public ownership. The private sector has already let down the travelling public on this route twice. Why risk it again when we are returning so much money to the taxpayer?
Mr McLoughlin
I was simply referring to what was said by the Secretary of State in the previous Government. It was a short-term measure. By putting out the franchise to the private sector, there will be better services. That is what I am interested in. I am not particularly interested in who owns it. I am interested in getting better services to the hon. Gentleman’s constituents, who want to take advantage of them.
High Speed Rail
Ian Mearns Excerpts(11 years, 3 months ago)
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Mr McLoughlin
The hon. Gentleman makes a tempting offer. We are committed to the electrification of the midland mainline, which will have substantial benefits for Leicestershire. I would add that East Midlands airport was built by the three counties—Leicestershire, Derbyshire and Nottinghamshire—and is situated at the north of Leicestershire, which the county at that time felt was beneficial to it. The Toton sidings are basically not far from the north end of the county, so I think they will have benefits for Leicestershire as well.
Ian Mearns (Gateshead) (Lab)
Twenty years ago, I could travel from Newcastle to London in 2 hours and 38 minutes. In his announcement today, the Secretary of State said that in 20 years’ time we will be able to do it in 2 hours and 18 minutes. Does he think that 40 years is enough for 20 minutes, given the importance of connectivity for the economic regeneration of a place such as the north-east of England?
Mr McLoughlin
I imagine that I would need to check out the timetable that the hon. Gentleman has just alluded to, because it is not unknown for Opposition Members to look on the past through rose-tinted glasses. Part of the problem might be that more people are now using the railways so there are more stops, which means that his journey is perhaps taking a little longer than it used to. However, I am very much minded to ensure that his region, like every other region in the north of the country, can benefit from the proposals I have brought forward today.
Rising Cost of Transport
Ian Mearns Excerpts(11 years, 4 months ago)
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Ian Mearns (Gateshead) (Lab)
I welcome the opportunity to speak in today’s debate, which is extremely timely, given the news in today’s newspapers that once again the north-east is to lose out on vital rail infrastructure investment. I want to draw some important links between fares paid, the turnover of rail operating companies, the profits they make and levels of investment.
This morning, The Journal in Newcastle announced that Network Rail’s £37 billion five-year improvement programme looked set to snub a wish list of north-east track upgrades. The Secretary of State just trumpeted that 850 miles of line were to be electrified—well, not in the north-east of England, I am afraid. He also mentioned that £240 million was to be invested in the east coast main line. On the basis of current profits and the amount of money going back to the Department for Transport from the east coast main line, that is about one and a quarter years’ operating profit—so not much to be thankful for there. Rail passenger groups have warned that, although some east coast main line work will speed up connections, almost none of Network Rail’s refurbishment money will go to north-east England. Incidentally, the east coast main line is operated by Directly Operated Railways, which is owned, in turn, by the Secretary of State and the Department, so he has significant influence over the company—or certainly should have.
Lines in the region calling out for electrification, new passenger services or full-scale reopening have had their case turned down, as money has gone instead to improving services via Manchester and Leeds, as well as improving links to London. Of the £37.5 billion budget, only a pittance is earmarked for track enhancements in the north-east—mainly for the easing of the so-called pinch points between Northallerton and Ferryhill. From a north-east perspective, projects would help to boost mobility and connectivity in our region and enhance our prospects for economic growth.
This snubbing, yet again, of the north-east is particularly galling given the range of fare deals being offered to north-east customers, compared with our Scottish counterparts, by the east coast main line. We sometimes have to pay £100 more for a journey that is an hour and a half and a 100 miles less. I have no quarrel with my Scottish colleagues and their constituents getting good deals from east coast main line, but on behalf of my constituents, I have a duty to demand the same kind of deals and discounts for the travelling public in the north-east as those from which colleagues north of the border benefit.
The east coast main line is working at a significant profit and contributing those profits to the national pot.
Ian Lavery (Wansbeck) (Lab)
I had a look at the fares on the internet just before we came into the Chamber. A return fare from Newcastle to King’s Cross was £301. With the minimum wage at £6.19, that means that people have to pay 48.62 hours of work at the minimum wage for one journey from Newcastle to London return. Is that fair?
Ian Mearns
There is an awful lot about current fare structures that is desperately unfair, particularly for people on low wages and those trying to get jobs, and particularly in a region such as the north-east, where many have to travel to get work.
As the independent report stated in September, a railway company that was temporarily renationalised by the Government three years ago reported increased profits and an improvement in passenger satisfaction. DOR, which took over the running of the east coast line from National Express, said that its operating profit increased by 7% in the year to March to £7.1 million. Turnover for the year amounted to £665.8 million—an increase of £20 million—leaving a profit before tax and service payments to the Department of £195.7 million. That was an increase of £13 million. Putting that against the £240 million proposed investment in the east coast main line makes the amount look extremely modest indeed.
I have a great deal of respect for east coast main line as a franchise. I sympathise with its staff, who often work in difficult circumstances, dealing with the failures of creaking infrastructure and worn out rolling stock and equipment, yet an awful lot of what the travelling public have to put up with on the east coast main line could be avoided through some relatively modest investment, which would be entirely affordable given its profits.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
My hon. Friend mentions the east coast main line staff, who do indeed provide a good service to passengers. I am sure that he, like me, frequently comes across people who are confused about whether they have the right ticket for a journey—a train might be late or they might get on the wrong train. The poor staff then have to deal with the problems that that creates. Is that not an example of the kind of complication that drives away passengers and often makes them go for higher fares rather than cheaper ones?
Ian Mearns
Indeed, and one criticism I would make of the last Government is that they did not sort out the complicated franchising system, which has left us with a complicated rail ownership programme across the country.
The Chancellor of the Exchequer proudly announced investment in infrastructure as a means to unlock growth. However, analysis by the Institute for Public Policy Research shows a biased picture. The think-tank examined the data, detailing the projects to be brought forward as part of the national infrastructure pipeline. Of the projects that were identified as benefiting a particular region and where public funding was involved, it found that London and the south-east accounted for 84% of planned spending, compared with 6% in the north. That equates to some £2,700 a head for each Londoner, which is more than the total for all the other regions combined, which includes £201 a head for Yorkshire and Humberside, £134 a head for the north-west and just a fiver for the north-east of England. My constituents do not believe those figures, but they are absolutely right. Why, if we get a meagre £5 of investment per head, should we pay extortionate rises in rail fares, which have risen nearly three times faster than wages since the recession? In fact, between 2008 and 2012, average rail fares increased by 26.6%, with wages rising by just 9.6% over the same period. Recent research by the think-tank Transport for Quality of Life has shown that UK rail fares are the most expensive in Europe and that rail privatisation is costing taxpayers £1.2 billion a year, with train operating companies making large profits on the back of public subsidies.
Speaking of profits, I was appalled to learn recently of a dispute over pay involving east coast main line and a subsidiary company called ISS—International Service System—which centred on its cleaning staff. Cleaners were being paid £6.08 an hour—a figure that is below the national minimum wage and is, I believe, illegal. On top of that, they got no pension scheme, no enhancements for unsocial hours, bank holidays or weekends, no sick pay above the statutory minimum and no travel allowances. The east coast franchise, which likes to promote itself as a first-class service, was treating employees of its contract cleaning company in a third-class way. ISS is a huge multinational company, with more than 500,000 employees worldwide, 43,000 of whom work in the United Kingdom. It is disgusting that it was able to do that to its hard-working employees. Indeed, following on from yesterday’s debate, this has a knock-on effect, as the Government have to fork out in-work benefits to many of these people to subsidise the industry.
Pressure must be put on Network Rail by the Government to ensure that north-east services get a fair allocation of resources. Connectivity, particularly by rail, is essential to the economic prospects of regions such as the north-east. Despite their stated commitment to reduce the deficit, the Government still find themselves, month after month, deepening the crisis yet further. When will they recognise the essential link between investment in growth, particularly in regions such as the north-east, and their prime aim of deficit reduction? The two are absolutely connected.
Transport and the Economy
Ian Mearns Excerpts(12 years, 2 months ago)
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David Mowat (Warrington South) (Con)
I, too, congratulate the Select Committee on their coherent report and I want to focus on one aspect of it, which is the issue of regional imbalances in spend and how they happen, and to give some of my thoughts on how we can avoid them. Those thoughts are about the appraisal mechanisms used in the Department for Transport and the Treasury, the approach to appraisal and the Treasury Green Book.
Let us get the facts out of the way first. Table 2 of the Committee’s report makes it clear that in the period under review—2008-09—one region received substantially more funding than any other, and that was London. In broad terms, London received about two or three times more per head than the English regions. That matters as billions of pounds of capital spend generate high-quality private sector jobs that translate, through the power of the economic multiplier, into prosperity. The effect is transformative.
I cannot be the only Member of the House who thinks that it is odd that under the previous Government, in 2009, the discrepancy in gross value added per head between London and the English regions doubled at a time when that capital spending was being poured into London. That discrepancy by a factor of two between the capital city and other parts of the country does not exist in any other European country; it is unique to Britain.
I had hoped that after the election we would get all that sorted out with the new Government, and I was confident that serious attempts would be made to use the power of capital spending to fix the north-south divide. I was disappointed, like others who have already spoken, to see that in the autumn statement 84% of the £30 billion accelerated capital spend was allocated to London. Let me put it in context: that is £2,731 per head in London compared with £150 per head in my region, the north-west, and £5 per head in the north-east. I have heard Ministers talk about and challenge those figures and I would like the Minister to address that specific point.
The difference in spend is partly but not entirely to do with Crossrail, Thameslink and the underground, but even after those projects are removed from consideration, London and the south-east still receive approximately double what is received in the north. This is very serious and makes a mockery of our attempts to use the regional growth fund, and previously the regional development agencies, to redress that balance. If we put capital spend of that quantity into one part of the country in that way, then giving £1 billion here and £1 billion there in regional spend does not make much of a difference. I am not a conspiracy theorist: I do not think that the Opposition, when they were in government, or my own Government have done that on purpose. There is a deeper issue here—a systemic bias that drives these decisions—and it is to do with the method of appraisal.
As far as I can make out, the mechanism that the Department for Transport uses—the new approach to appraisal—leans heavily on a system of multiplying small, incremental changes by the number of people involved to generate the business case. The system specifically is not allowed to take into account wider economic benefits. The consequence of that appraisal mechanism, which has been used both by the previous Government and by this Government, is that there is a bias towards the parts of the country that are most congested and where the greatest number of people will benefit from relatively small changes in journey times to create a huge economic benefit. As a consequence of that system, resources for projects are continually allocated to one part of the country.
Ian Mearns (Gateshead) (Lab)
I welcome the fact that the hon. Gentleman has brought to the House’s attention the disparities with proposed investment packages in transport. Ministers will try to argue this away but they cannot argue away the extent of the disparity when more than £2,500 per head of population is being spent in the south-east compared with just a fiver in the north-east.
David Mowat
The hon. Gentleman echoes the point I am making. Just to take the politics out of it, let me point out that broadly the same thing happened under the previous Government, so we go back to my previous point: something systemic is happening here in the way that projects are appraised within the Department for Transport. I do not believe that either the previous Labour Government or the current Government wished that to be the out-turn. Frankly, the resulting disparity is not even very good for London, because the consequence of having a mechanism that removes congestion is to enable further congestion to gravitate towards our capital city and we start all over again. Enough is enough—Ministers have to challenge the appraisal mechanism.
I have thought about how the system could work and I shall leave the Minister with my suggestion. We should allocate capital budgets by region as the starting point for where money is spent. Then we would not get the issue with the north-east getting £5 a head while London gets £2,700. I understand that one risk of such a system would be sub-optimisation and that there is a need to manage cross-regional projects, but that could be done—other organisations do things of that nature. It clearly is not satisfactory for things to carry on as they are. I would like the Minister to give his view on why the appraisal mechanisms used by the Department continue to give the answers they do.
Oral Answers to Questions
Ian Mearns Excerpts(12 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Ian Mearns (Gateshead) (Lab)
3. What assessment she has made of the safety implications of changing the frequency of MOT tests for road vehicles.
Mrs Mary Glindon (North Tyneside) (Lab)
8. What assessment she has made of the safety implications of changing the frequency of MOT tests for road vehicles.
Mr Speaker
May I just very gently say to the Secretary of State that I think the grouping is between 3 and 8, rather than 7? But I think we know what we are talking about.
Ian Mearns
May I welcome the Secretary of State to her new role? It is a fantastic opportunity for her to think again about this proposal. The MOT Trade Forum estimates that 2,200 vehicles a day fail their MOT with defects that are regarded as dangerous and would make vehicles unroadworthy—half a million vehicles a year that would be unroadworthy and dangerous to the public. Will she think again about this very strange set of proposals?
Justine Greening
I appreciate both the correction from you Mr Speaker—I do not usually get my numbers wrong—and the very genuine and balanced way in which the hon. Gentleman puts his question. It is important that we have a balanced and informed debate about any changes to the MOT, and, as he will be aware, we in this country go further with our MOT than is required under EU legislation, so the proposal was looked at as part of the red tape challenge. I am considering all the issues, however, and we expect to make an announcement soon about the timing and scope of the review.
East Coast Main Line Call Centre
Ian Mearns Excerpts(12 years, 11 months ago)
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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.
Mr Kevan Jones (North Durham) (Lab)
My hon. Friend says that the company is supported by taxpayers, but does he agree that it has also been supported under GNER and now as a state-owned company by many people in the north-east who have loyally given their custom to the railway? Does he think that because of these moves they should perhaps consider alternative forms of travel?
Ian Mearns
I am grateful to my hon. Friend for that comment. I have been in discussions with people from East Coast about a range of problems on the east coast main line service. Normally, by this time on a Thursday evening, we are travelling on the east coast main line on our way home. We are very familiar with the levels of service and the investment—
Ian Mearns
Exactly—and with how bad it has become.
Next week will see the implementation of a new timetable, but it will also see the downgrading of a number of services that East Coast has been supporting. People in the north-east are asking why we should support East Coast when there might well be better alternatives for travel across the country. That is not good from an environmental perspective.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
I thank my hon. Friend for giving way and for obtaining this Adjournment debate on an important issue. The centre at Baron house is in my constituency and it is true that the people of the north-east have always given significant support to the east coast rail service. Has there been any criticism of the work at Baron house? Is it not the case that it has always been performed well and that its performance is not the reason for moving the contract?
Ian Mearns
My hon. Friend is absolutely right. The call centre at Baron house has provided an excellent level of customer service. Nationally, people regard the north-eastern accent as reliable—
Ian Mearns
The accent is regarded as reliable and trustworthy when it comes to providing call centre services, and that is why the north-east has become a centre for call centre operations. Conversely, it is sad to reflect that unfortunately British customers are averse to call centres based offshore.
Grahame M. Morris (Easington) (Lab)
I, too, compliment my hon. Friend on securing a debate on this issue, which is important to the north-east and has some national significance. In view of today’s statement on the McNulty report and the arguments being made by Ministers about needing to reduce the public subsidy to the rail industry, is this not another example of false economy if the method of reducing the subsidy is to transfer overseas UK jobs that support the economy, particularly in areas such as the north-east?
Ian Mearns
My hon. Friend makes a very good point. At a time when the Government claim that supporting growth in the UK economy is their priority, surely exporting good quality jobs from the north-east to India cannot be defended. There is also the issue of the public’s perception of the level of service they will get as a result.
The Secretary of State denies responsibility for this while passing on millions in public subsidy. The company received £40 million in direct funding from the taxpayer in the nine months to 31 March 2010 by way of a working capital loan facility agreed with the Secretary of State. Given the investment from the UK taxpayer, surely there must be a moral obligation for a state-owned company to retain jobs in the UK. There should at least be some consideration given to those jobs being taken in-house by the operator. That work is not going to go away. It is a much-needed, public-facing aspect of the train service operation and there is no evidence that the transfer will improve the service afforded to the public.
The Government’s stance could be regarded as hypocritical. They declare their commitment to growth and rebalancing the economy, and day after day they preach to private business about the need to help the economy to recover by creating new jobs, but in the case of East Coast—a company that we fully own—they sit back and permit the export of jobs from a company that belongs to the taxpayer. Let me be clear: my primary concern is for the people whose lives are affected by this, but equally important is the impact on industry of exporting real jobs, particularly customer contact jobs, to another country, which represents a retrograde step away from an integrated transport policy. Despite the McNulty report’s failure seriously to consider the benefits of reintegrating the railways under public ownership, many in the House are convinced that the evidence demonstrates that the reason why railways in Europe are cheaper for the taxpayer and the fare payer is that on the whole they are in public ownership and are less fragmented.
There is a wealth of evidence to show that overseas call centres are not the answer for companies that are looking to cut costs. In May 2004, a Department of Trade and Industry study found that work force costs that had not been fully factored into business evaluations of offshoring included the additional costs of employing local law specialists, consultants and accountants, as well as the cost of redundancies, redeployment and reskilling displaced UK workers. It revealed that staff turnover at Indian call centres in particular was about 25% compared with about 15% in the UK, with an average job tenure of about 12 months compared with three years in the UK. Higher attrition rates surely cannot be beneficial to good-quality customer service.
In July 2009, there was a huge outcry when the Association of Train Operating Companies moved 200 National Rail inquiries jobs from the UK to India. Subsequently, it was widely believed that the quality of service to the British travelling public had decreased. At the same time, BT decided to move 2,000 call-centre jobs back from India to the UK as part of a long-term strategy to cut costs by £1 billion and to reduce dependency on third parties. In 2005, the Select Committee on Trade and Industry reported that customer satisfaction surveys found that UK consumers did not like businesses they believed had offshored their services, preferring to deal with call centres in the UK.
In subcontracting jobs abroad, the company has made a narrow, short-term financial decision. No account has been taken of the impact that the loss of skills and jobs will have on the north-east region, its community and the local economy. Nor has any account been taken of the obvious cost to the UK in benefits of whose who will be made redundant as a result or of the reduction in tax revenue for the Exchequer. The McNulty report states that value for money is not just about pounds and pence, but about how the railway realises its wider benefits to society. Through fragmentation and privatisation, those benefits will be lost.
The industry’s most valuable asset is its work force. These redundancies mark a wasteful loss of knowledge and skills that have been honed through years of experience. They damage the shared commitment to the overall service that a proper public service ethos can bring. They impose a hidden cost of increased interfaces in the industry, blur transparency and accountability and de-clarify lines of responsibility, which would be the hallmark of a more efficient railway.
The blow to the economy of the north-east cannot be overestimated. The loss of these jobs to the region is yet another blow to the local economy and to our local communities. Tyneside already suffers a level of unemployment above the national average. The growth in call centre work has been an important factor in providing new employment in the north-east after the decline of manufacturing and, in particular, heavy industry, which arguably was caused mainly by a previous Government of the same nature.
As we all know, the Government are determined to reduce workers’ rights in the UK. They call it removing red tape and are strongly tempted to try to remove the rights of workers through Transfer of Undertakings (Protection of Employment) Regulations. However, TUPE has been rendered irrelevant in this situation. A worker having the right to follow their work to the new company is simply not a realistic or viable option for those at Baron house, who now face the complete closure of their workplace, with a move for a few possibly to Plymouth or the bulk to India of course being impractical.
The awarding of this customer contact centre contract to a company with operations in Mumbai should not be seen in isolation. It is the next stage in trying to make the company more attractive to potential bidders in preparation for the eventual re-privatisation of the franchise in 2013. Already this week we have witnessed the end of a buffet car service on the east coast main line and the direct service from London to Glasgow has already been greatly reduced. Clearly the aim of the game is not customer service, or even value for money.
Despite the overwhelming social, environmental and economic benefits of retaining services from London King’s Cross to Glasgow, the direct services have been dramatically scaled back from 13 trains a day to just two, one in each direction—the 6.50 am service from Glasgow to King’s Cross and the 3 pm service heading in the opposite direction.
In the context of the McNulty report, clearly the east coast main line has a troubled history. I will not go into that now, but it is important that we think about the Government’s responsibility to manage that franchise. They do have a responsibility and they can change this decision.
Ian Mearns
The Minister is saying that the people best placed to make those decisions are the people in charge of the commercial considerations at East Coast—the very people who have overseen the running-down of the service and the provision of a very poor service along the east coast main line.
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.