Rail Franchising

Debate between Ian Mearns and Maria Eagle

Wednesday 10th January 2018 Commons Chamber

[Ian Mearns (Gateshead) (Lab)]

On my hon. Friend’s point about the east coast main line, because of the ideological decision by the Government, profits of £1 billion going back to the Treasury have been forgone. At the same time, we are allowing a private franchise not to pay £2.1 billion to retain its franchise. Does she agree that it is economic madness to retain that service in the private sector?

[Maria Eagle]

My hon. Friend is correct. Money is clearly no object in trying to avoid the embarrassment of yet another failure of the franchise in the hands of a private operator. Why did the coalition Government decide to re-privatise the operation? The date is a clue, as it happened just weeks ahead of the 2015 general election. The decision was cynical, ideologically motivated and costly to the public purse.

Our policy at that time was clear. We wanted to keep East Coast in public hands to act as a public sector comparator to the private franchises. We wanted to keep the operational expertise in Directly Operated Railways to enable us gradually to take the operation of the railways back into public ownership as franchises ended without having to pay enormous amounts to buy out contracts. Just changing the order of franchise competitions to enable that re-privatisation cost the public purse hundreds of millions of pounds. Indeed, the consequences of that lamentable decision are being seen today in the ongoing chaos and waste of money that the franchising system is inflicting on our railways—now spectacularly reinforced by the Transport Secretary’s capitulation to the financial interests of the private train operating companies on the east coast main line.

The Transport Secretary is effectively institutionalising massive taxpayer bail-outs, which he has renamed “partnerships”, and I predict that this will not be the last such bail-out. He is effectively institutionalising giving in to the tendency that the private companies have shown over the years of gaming the franchising system to keep taxpayer subsidies while avoiding making the payments that they are contracted to make. Virgin-Stagecoach is not the first train operating company to do that and it will not be the last. The system delivers lucrative near-monopoly rail contracts on the basis of post-dated payment promises by private companies that can simply be abandoned when they become due, with no penalty attached for behaving badly.

The Government are now institutionalising the reality that the private companies take the profits but the taxpayer provides almost all the investment in trains, track and infrastructure and covers any losses. That is the very definition of a licence to print money. Private train bosses are simply laughing all the way to the bank, and this Secretary of State, for ideological reasons, is allowing them to do so. We cannot go on like this. It is time that this costly and failing system was ended. It has not worked, and it will not work in the future. We need to ensure that we do things better.