Rail Engineering (Jobs)

Jim McGovern Excerpts

Tuesday 29th March 2011 Commons Chamber

[John McDonnell]

I will explain, but first I will give another example of what I found among ex-Jarvis workers. We met workers who are now touring the country picking up days of work. These are skilled engineers, but some of them are unable to afford proper accommodation because they are now agency workers on low wages and are having to sleep in cars and vans so that they can pick up a day’s work wherever they can.

Let me explain what happened, because lessons need to be learned from what happened for the future of rail engineering in this country. Jarvis’s bankruptcy did not need to happen. It was forced into administration because Network Rail deferred renewals work to comply with the Office of Rail Regulation’s decree that it needed to make a 21% saving over the five-year control period 2009 to 2014. Jarvis’s bankruptcy was not the result of the recession. Despite the cash-flow problems, it had £100 million-worth of work on its order book.

My hon. Friend the Member for Islington North (Jeremy Corbyn) referred to the fact that Network Rail refused a rescue plan from the administrator for Jarvis’s rail division. The administrator put forward a proposal for a £19 million investment to cover the running costs and wages for a couple of months of operation, which would have enabled the staff of Jarvis to be transferred in an orderly way to other companies that were picking up the Jarvis contracts. That was rejected by Network Rail, and the Government refused to intervene and use their legal powers under the Railways Act 2005 to treat Jarvis’s work as an essential railway activity, as that would have allowed them to step in and protect the work and the workers themselves. We now know from freedom of information requests that the Government knew months in advance of Jarvis’s imminent crash.

The lesson is that we must never again allow the failure of one company to put railway engineering at risk in this way, because the results of this fiasco are horrendous. One year on, the majority of the ex-Jarvis workers are still on the dole and Network Rail is re-letting former Jarvis contracts to agency labour. We are discovering exploitative wages and conditions. Even if ex-Jarvis workers have followed their work, they have moved across to inferior terms and conditions. There is now a fear about the commitment and quality of the work being done by the agency work force.

The irony is that we now know from Deloitte, which communicated this to Jarvis’s creditors, that the book value of the rail debts that were written off was £10.7 million, and the vast majority of the amount that was written off was owed to Network Rail. If we add to that the cost of redundancy, which fell on the taxpayer because the staff were not transferred under TUPE, and the drain on the staff funds of the benefit payments for the unemployed workers, we find that the overall cost of allowing Jarvis to collapse into administration in this way outweighs the £19 million cost of the rescue plan that the administrator proposed. It was a false economy not to accept the rescue plan, and it had a tragic outcome for the workers.

There is also a longer-term cost that threatens the future of the rail industry and safe transport, because we are undermining the rail engineering skills base that we developed over two centuries. One of our concerns is that we have a demoralised work force, many of them unemployed, and that insecure work is being offered to agency workers with no stable future. We seem also to have undermined the attraction of a career in rail engineering, thereby jeopardising the recruitment of a future generation of rail engineering workers.

[Jim McGovern (Dundee West) (Lab)]

Is my hon. Friend aware, as I am, having found out just 10 minutes ago, that there are people employed in this House—in the Palace of Westminster—through an agency that charges £20 per hour and pays them £6.15 per hour?

[John McDonnell]

The reason why I raise the issue of agency workers in the rail industry is that such employment practice is becoming the norm for a number of companies. It is reflected throughout industry, and if it has now invaded the House. I find that disappointing. We as Members should take it up, because it does not seem to be a particularly cost-effective way of employing staff. The agency receives a large cut, but there is very little reward for the workers themselves.

The irony of what happened to the Jarvis workers is that, during the period in which they were laid off, the previous Government and the incoming Government were planning one of the largest railway industry expansion and modernisation programmes that we have seen for perhaps 50 or 70 years. It has happened just at a time when there is a huge job of work to be done in modernising the rail network, with the arrival of Crossrail, High Speed 2 and the electrification of the Great Western main line. We need a stable and skilled rail engineering work force and a national strategy that will retain and develop those skills, so that we can complete that modernisation and renew and enhance our rail network. In the long term, if we are to ensure that stability, we should bring renewals back in-house, back into Network Rail.

The McNulty interim report demonstrated that, when Network Rail brought maintenance in-house in 2004, there was a saving of £400 million per annum. I believe that bringing the renewals back in-house would achieve the same savings, but all the potential for the development, improvement and modernisation of our rail network will be jeopardised if we go through another Jarvis-type disaster.

I should welcome the Minister addressing several issues, and I express my gratitude to the Ministers we have met in recent months. The RMT parliamentary group, RMT union officials and the TUC have discussed with Ministers the plight of Jarvis workers and the future of rail engineering, and I am grateful to the Minister of State, Department for Transport, for writing to Network Rail to urge it to work closely with the unions and to meet members of the RMT parliamentary group. We have heard that the new chief executive at Network Rail, David Higgins, has expressed a willingness to attend a round table of stakeholders to discuss where we go from here on rail engineering.

I should like to ask the Minister here tonight to look at a number of concerns about the future. First, what is to happen to the ex-Jarvis workers who are still on the dole? Network Rail could assist in resolving some of the problems of the ex-Jarvis workers by stipulating that new contractors employ Jarvis workers or at least give them first refusal in any application for jobs. Part of the problem is that it is not clear where the former Jarvis contracts have been awarded, so it would be helpful if Ministers could intervene, asking Network Rail to identify through its Sentinel system exactly how many former Jarvis workers have been employed by contractors and how many are still out of work. In that way, we could work with them to secure their re-entry into the industry.

It would be helpful also if pressure could be put on the individual organisations—the five main companies that took over the Jarvis work—to meet the unions and other representatives of the work force to ensure that we overcome some of the outstanding claims from Jarvis’s going into administration. The companies are BAM Nuttall, Babcock Rail, Freightliner, DB Schenker and VolkerRail. In the long-term interests of the rail industry, we should do all in our power to ensure that this never happens again in this industry—that we never go through another collapse of a company when all the various agencies and stakeholders just stand to one side and allow it to happen.

[John McDonnell]

Certainly. I will come on to an idea that I have about that, which I think will interest the hon. Gentleman.

To deal with the more immediate questions about learning the lessons of how this occurred, one of the concerns expressed was about the failure by Government to apply the powers of the Railways Act, which would have protected not only the contract work that was being undertaken but the workers who were undertaking those contracts. It would be helpful if the Minister could offer interested Members from all parties a meeting with the appropriate civil servants to discuss the procedures and criteria for when Government can apply the powers under the Railways Act if companies are threatened or in danger of going into administration, so that at least we get those procedures clear in case this occurs again.

I also ask the Minister to look at the arrangements under the Transfer of Undertakings (Protection of Employment) Regulations 1981 to see how they can be amended so that we are never again in a situation in which workers are unprotected and are made unemployed, not transferred across, and then taken back on under agency conditions, and, as a result, on worse wages and with worse conditions.

I would also welcome the Minster working with us to review the protection of railway workers’ pensions. The original pension rights of those who worked for British Rail, which Members from parties across the House thought would be protected on its privatisation, have been undermined by subsequent pensions legislation—I think unintentionally so.

[Jim McGovern]

Does my hon. Friend agree that it is a scandal that TUPE does not apply to pensions?

[John McDonnell]

It is a gap in the protection of workers’ living standards, and this instance is a classic example of how people’s futures have been damaged when they thought they were secure. The material that was provided to railway workers on privatisation of British Rail—the leaflets and documents that they received in the consultations that took place—assured them of the security of their pensions for the long-term. But then, as privatisation proceeded and individual companies took over individual contracts, those assurances were unfortunately not adhered to, and subsequent pensions legislation has undermined the protections that they had. Because this is not covered by TUPE, many of the workers have suffered detriment. That is something that we need to look at, on a cross-party basis, I hope.

My final point is about the long-term future of rail engineering, and it relates to the comments made by the hon. Member for Strangford (Jim Shannon). We are now facing an immense task in seeking to modernise our railways, and the success of that cannot be put at risk by the lack of a skilled engineering work force. One proposal that I have for the Minister is that he convene an urgent, industry-wide jobs seminar to examine rail engineering employment needs not only now but for the long term, so that we can work together to safeguard and enhance skills in railway engineering.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Transport (Norman Baker)]

I welcome the opportunity to debate in some detail the issues raised by the hon. Member for Hayes and Harlington (John McDonnell), who spoke with his usual integrity and humanity.

The hon. Gentleman will appreciate that the Minister of State, who has responsibility for this matter, is not able to be with us tonight, but I will make sure that his comments are drawn to her attention. I will ensure that a written response to the questions that I am not able to answer tonight is sent to him. I am grateful for his comments about her involvement. I understand that she is well aware, from the recent meeting and from correspondence, of the importance that the hon. Gentleman attaches to addressing the impact of events such as Jarvis plc’s entry into administration on the rail industry skills base and on former employees. I have sympathy for those who have lost their jobs, and for the impact that it will have on their families. It is always a tragedy when someone loses their job, and the impact is much more widespread than just the effects on the individual concerned.

The Government are progressing with an ambitious programme for rail investment, because we believe that the railway network is vital to economic growth and reducing carbon emissions. However, funding is not unlimited. We must ensure that every pound is spent efficiently, and secure the maximum long-term benefits and value for money. Of course, that includes having a safe railway.

The spending review settlement demonstrated the Government’s commitment to rail transport. We have announced that we will fund and deliver a wide-ranging programme of investment in rail infrastructure and rolling stock. As the hon. Gentleman said, the projects include Thameslink and Crossrail, and the associated 2,100 new carriages; the intercity express programme; extending the electrification of the Great Western main line to Bristol and Cardiff; and electrifying the lines between Liverpool, Manchester, Preston and Blackpool. Major station development projects will proceed at Reading, Birmingham, London King’s Cross and Gatwick airport. There are a number of other projects, including those announced in the Budget last week.

The sustained financial support that we have offered now needs to be matched by a relentless drive for efficiency on the part of the rail industry. Sir Roy McNulty’s value-for-money study will have a crucial role in tackling that challenge from an industry-wide perspective. Sir Roy’s emerging findings give a strong indication of the scope for improved value for money in our railways. The potential savings of up to £1 billion that are identified in the report are efficiencies that should be achievable while keeping the same level of services. From my point of view, achieving efficiencies in the railway means making a stronger railway for the future.

One of the key principles for making those savings is much closer working and an alignment of incentives between train operators and Network Rail. Alongside the Government’s response to Sir Roy’s interim findings, we therefore confirmed plans to reform the rail franchising system to make franchises longer, more flexible and more responsive to the needs of passengers, while providing better value for taxpayers. The railway as a whole faces significant challenges in terms of costs and affordability. Finding effective responses to those challenges will not be easy in such a large and complex industry. The study team has been encouraged by the ready co-operation it has received from many people within the industry. Its aim, with their help and support, is to chart a route to a sustainable future for rail in this country.

It is widely recognised that getting better value for money is key to a sound future for rail in this country. We want rail to be in a good place to compete with other modes, not least for carbon reasons. Sir Roy’s recommendations, and the industry’s response, will shape the Government’s proposals for the reform of the industry, which we intend to set out later this year.

However, we recognise that a bigger and more efficient railway needs the very best of engineering and other skills to succeed. The industry’s success in meeting the challenge of the future will depend on the skills, motivation and capabilities of its work force. That is tied into the issue of how the industry manages its supply chain, and how we manage our investment in the industry. We have registered the widely held view that the Government should try to avoid driving peaks and troughs in demand for various skills. In the future, the industry leadership needs to be able to play a greater role in addressing the issue, and it must consider the impact that investment decisions can have right down the chain and how those decisions can be balanced to provide the best value for the taxpayer.

I am conscious that I had less than 10 minutes for my speech, but I shall try to get through as much as I can. I turn to the specific issue of Jarvis plc’s entry into administration. We greatly regret the failure of Jarvis and the subsequent loss of jobs and impact on individual families. I know that my right hon. Friend the Minister of State welcomed the chance to meet the hon. Gentleman and others in the RMT parliamentary group on 15 February, and to hear the group’s views on the matter at first hand. Following that meeting, I understand that Network Rail’s chief executive, David Higgins, has been in touch to confirm his willingness to meet the group to discuss its concerns.

Network Rail re-let to Babcock Rail the track renewal work previously undertaken by Jarvis on the London North Eastern and Midland and Continental routes, which led to a number of staff gaining employment with Babcock Rail. However, as the hon. Gentleman is aware, the contractual arrangements for track renewal work are commercial matters between Network Rail and the infrastructure companies, in which the Government have no locus to intervene.

Network Rail has made it clear that all current track renewal work has been allocated, and that there are no outstanding contracts to be filled. It is tasked to deliver the value for money needed to meet the output and efficiency targets for the operation, maintenance and renewal of the network set out by the independent Office of Rail Regulation. The ORR’s latest industry review makes it clear that Network Rail is delivering improved efficiency through the use of new technology and improved working practices, including the use of high-output track renewal equipment and pre-assembled modular sets of points, which allow it to carry out renewal work more quickly.

The Government recognise the importance of maintaining a skilled work force in the rail sector. That is why Sir Roy McNulty’s value-for-money study is working to identify major improvements in asset and supply chain management, and to forecast future requirements for work force skills. The Government also believe that infrastructure investment is crucial for Britain’s future, so over the next four years we will provide £14 billion of funding to Network Rail to support capital maintenance and infrastructure investment.

As the hon. Gentleman will know, we support a Y-shaped national high-speed rail network from London to Birmingham, Leeds and Manchester, with connections on to existing main lines. That would release capacity to expand commuter, regional and freight services on existing lines. The benefits of that network would bring about £44 billion to the country. Building the London to west midlands line would create about 9,000 jobs during construction, 1,500 permanent jobs following completion and 30,000 jobs around the stations of the high-speed network.

The Government are determined to achieve a sustainable, efficient and growing railway. We are equally determined that no changes should be made that would jeopardise the impressive improvements in safety and punctuality achieved across the industry in recent years. We are determined to get those responsible for track and train to work together more closely, to drive down the costs to taxpayers and fare payers while improving the quality of services.

Underlying our determination is our recognition of the need to maintain a skilled and properly resourced work force in the rail industry. Sir Roy McNulty’s value-for-money study will forecast future requirements for work force skills. We will consider Sir Roy’s final recommendations very carefully when they arrive, including in relation to the matters that the hon. Gentleman raised, against the overriding need for any reform to be designed to secure the greatest long-term benefits to the fare payer and taxpayer.

Many of the specific matters that the hon. Gentleman raised are best taken forward by my right hon. Friend the Minister of State, and as I said, I will ask her to write to him formally to provide a response. He suggested that the new contractors should give first refusal to ex-Jarvis workers, but I do not believe the Department should require that, because we have no locus to involve ourselves in commercial arrangements between Network Rail and those whom it seeks to employ, let alone in deciding who contracting companies take on. However, his comments have been noted, and I am sure that those in the rail industry will pay attention to them.

The hon. Gentleman asked whether it would be possible to meet the appropriate civil servants to examine the criteria for when the Department might intervene under the Railways Act 2005. That is a matter for the Department, and notwithstanding the fact that my right hon. Friend the Minister of State is not here, I will suggest to her that that might be a sensible way for the hon. Gentleman to meet officials.

[Jim McGovern]

The Minister mentioned billions of pounds of investment. Could he tell me, or will he meet me—