Wales and Borders Franchise

Debate between Jonathan Edwards and Albert Owen

Tuesday 7th November 2017 Westminster Hall

[Jonathan Edwards]

I am grateful for that intervention. My hon. Friend, who is the parliamentary leader of our party, serves on the Select Committee on Welsh Affairs, which has done very detailed work on this issue and specifically on the initial franchise procurement. The Committee, which consists of members from across the House, was especially damning of how that franchise was constructed.

Let us fast forward to 2015, when the story of this not-so-great train robbery steps up a gear. The then Prime Minister, David Cameron, and his deputy, Nick Clegg, graced Wales with their presence to announce a new devolution deal. As part of the so-called St David’s day agreement, we were told that powers over the procurement of the next rail franchise would be devolved. The cheers at our national stadium, where they made the announcement, were reminiscent of those at a Six Nations match. Finally, we thought, Wales would get the power to create a rail system fit for our people. Sadly, as is often the case, that optimism was misplaced.

In the next section of my speech, I will try to piece together what is a complex picture of confusion, chaos and ineptitude by Governments at both ends of the M4. As is often the case with such matters, each individual element of the story seems unremarkable—inconsequential even. However, in the round, we see an intriguing episode of incompetence, which has already cost millions of pounds and could mean chaos for rail users in Wales.

The story starts just over a year ago, in September 2016. Combing through what was then the Wales Bill—it is now the Wales Act 2017— I spotted what I assumed was an error. Despite the Government’s boy scout promises, devolution of the franchise was not included in the Bill. Being the assiduous and diligent parliamentarian that I am, I decided to flag up that omission to the Secretary of State for Wales. Following the appropriate procedures, I tabled an amendment to the Bill that would devolve the franchise. On 12 September, in a Report Stage debate on the Wales Bill, I sought the Minister’s assurance that the error would be rectified. I said:

“Before I get into my speech, may I say that I will gladly not say a word”—

regarding devolution of the franchise—

“if the Secretary of State or the Minister intervenes to say that they will proceed with that promise and if they outline the legislative vehicle whereby these powers will be devolved to Wales?”

The Secretary of State replied:

“We are negotiating with the Welsh Government over the use of a transfer of functions order under the 2006 Act.”—[Official Report, 12 September 2016; Vol. 614, c. 671.]

The more naive may have thought that that was job done, but as a veteran of many a Wales Bill, I know that devolving powers is not such a simple task, so we continued to push. During the Welsh Affairs Committee inquiry into procurement of the next Wales and Borders franchise, my hon. Friend the Member for Dwyfor Meirionnydd (Liz Saville Roberts) repeatedly asked how the Welsh rail responsibilities would be devolved. Every time she asked the question, whether to a UK or Welsh Government representative, she met with the same complacent response, “It’s just a technical thing; it will all get sorted,” yet everything seemed not to add up. Why wait to devolve the franchise if we could already do so? Why risk waiting? Why circumvent parliamentary scrutiny? Why be so complacent about the powers required for a multibillion-pound contract? Was the reason ignorance, incompetence or something more sinister?

Thanks to my hon. Friend’s excellent work, people will find on page 13 of the report two recommendations calling on the UK and Welsh Governments to update the Committee on the progress of the talks on the transfer of functions and to ensure that there is effective scrutiny of the transfer of functions and the way in which the Governments have agreed to devolve the powers. Of course, neither of those recommendations has been followed.

On 13 October 2016, despite still not having any powers actually to procure the franchise, the Welsh Government announced four shortlisted operators for it: KeolisAmey, a joint venture between French transport giant Keolis and public service provider Amey; MTR Corporation, which has interests globally from Australia to Sweden and is based in Hong Kong; Abellio Group, which operates bus and rail networks across Europe and is the international arm of the Dutch national rail operator; and the existing German state-owned operator Arriva. Those were the only four to enter a bid to run the next franchise.

According to the original plan, the four bids would be assessed by Transport for Wales, a Welsh Government-owned company. Through a process of “competitive dialogue”, the four bidders would work to create one of the most ambitious franchises ever, with the south Wales metro and the rest of the Welsh network covered by a single operator.

[Albert Owen (Ynys Môn) (Lab)]

I am listening carefully to what the hon. Gentleman is saying. He referred to the 2016 Bill. He will remember that both he and I supported amendments for a not-for-profit franchise. Does he believe that that is now possible? In 2017, both his party and mine, in our manifestos, asked for that. The Conservatives were soundly beaten in Wales, so they should not pursue this. There should be secondary legislation to add that to the Bill, so that Wales can have a fall-back situation.

[Jonathan Edwards]

As ever, the hon. Gentleman speaks with great experience and makes a very valid point. With the two major parties supporting such a policy, it is clearly the will of the National Assembly. I am not sure whether that is the reason why the UK Government are delaying the transfer of functions. Is ideology driving what we are seeing at the moment?

Let me reiterate that on 13 October 2016, when the shortlist was announced, the Welsh Government had no authority to procure a Welsh rail franchise. That still remained in the gift of the Department for Transport and the Minister. Now let me pull focus back to Westminster for a moment. On 6 December 2016, I asked, in Transport questions,

“now that the UK Government are devolving responsibilities for the Welsh franchise to Wales, is it not logical to devolve responsibility for the Welsh network?”

The Secretary of State’s response was dumbfounding. He said that

“we are not devolving responsibility for the whole Welsh franchise as he describes; we are doing so in part. I have said to the Welsh Government that I am happy with their taking control of the Welsh valleys lines, with a view to developing the metro system that they hope to put into service, but the Welsh franchise is not purely Welsh; it runs through large parts of England as well. We cannot have a situation where we, the Government in Westminster, give up control over services in England to the Welsh Government without checks and balances. That is not going to happen.”—[Official Report, 6 December 2016; Vol. 618, c. 128.]

Whether it was ignorance or incompetence, the UK Government and the Welsh Government were saying and doing diametrically opposed things. In fact, the UK Government, in the form of the DFT, and another bit of the UK Government, the Wales Office, were saying and doing diametrically opposed things. The Transport Secretary’s response set alarm bells ringing in Cardiff. As a result, later that day, Plaid Cymru forced an urgent question in the National Assembly. On 6 December, the very same day, the Welsh Government Cabinet Secretary responsible for railways, Ken Skates, assured the Senedd that everything was on track. He said that the Welsh Government

“have agreed with the UK Government that all services operated under the current Wales and Borders franchise will be included in the next Wales and Borders franchise and that we”—

the Welsh Government—

“will lead in the procurement of these services.”

Mr Skates’ response clearly stated that the Welsh Government continued to believe that responsibility for the procurement and management of the whole of the next Wales and Borders franchise, which covers all of the existing routes, will be devolved in time.

It is clear that the Wales and UK Governments have a fundamental difference of understanding. I wrote to the Secretary of State to notify him of this confusion and continued to raise the issue in Westminster, and my colleagues did the same in Cardiff Bay, in the hope of shunting them along the track, but still there is nothing: no clear plan, no public timetable, no parliamentary scrutiny of how the devolution of rail was—or more correctly, was not—happening.

It was only a few months before the snap election. Over this period we continued to raise concerns regarding the devolution of the franchise with questions in the National Assembly. From our conversation with industry we knew that deadlines were drawing closer. On my return to Parliament, I therefore tabled written question 3534, seeking clarity on when the devolution of powers over the rail franchise will take place. This clearly acted as a catalyst, as a few days later, on Sunday 13 July, Pandora’s box was opened. The UK Government confirmed that the necessary transfer of functions will not take place until autumn 2017. This meant the 18 August date set for the official tender submissions would be missed. However, the Department for Transport said that all would be resolved by moving that date to 26 September. What transpired, however, was hardly a simple procedural matter. An exchange between the Secretary of State and the Cabinet Secretary in the Welsh Government came to light, which showed a plethora of unresolved issues, including disputes over the ownership of the valleys lines infrastructure and how the Welsh Government will exercise powers over English railway stations served by the Wales and Borders franchise.

Most startling, however, was a £1 billion dispute over funding. A rebate, which is linked to track charges, is passed to Network Rail via a grant for improving railways. For the Wales routes, that amounts to £1 billion over the 15-year span of the contract. Due to a catastrophic breakdown in communication, the Welsh Government had been procuring the franchise in the belief that this was there to be used as they wish, but the Department for Transport believed that as the Welsh Government had no responsibility for the actual rail infrastructure, this money should remain in Whitehall. You could not make it up, Madame Chair, but what does all that mean for Welsh passengers?

According to Welsh Government, the delay in procuring the franchise in August cost around £3.5 million. Further delays could cost tens of millions of pounds and put the whole procurement process at risk. Surely that was all resolved by the time we got to the later September deadline I referred to earlier. Not this time. In a committee meeting with the Cabinet Secretary and his officials at the National Assembly for Wales on 27 September, it was confirmed that powers necessary to decide who runs most of Wales’ rail services may not be given to Wales until 2018. In fact, the official tender published the same day was made by the Department for Transport and not by the Welsh Government.

I appreciate that this is a long and complex narrative, but only a few twists in the track remain. Eight days ago the latest bombshell dropped: Arriva, the current franchisee, pulled its bid. Few tears will be shed at this revelation. Some commuters might even rejoice at the news, but it speaks to a deeper problem with the handling of the procurement process. The only reasonable conclusion is that Arriva’s decision to pull its bid to run the next Welsh rail franchise is largely due to the whole bungled process. Rumours are circulating that other companies are also teetering on the brink of pulling out of the franchise bid. To be fair, who can blame them? They do not know who they should be dealing with, the timetable of the process and, to put it frankly, whether this franchise will even go ahead.

In this final part of my speech, I want to understand what the next steps might be and seek clarity for commuters, train companies and perhaps even for Labour Ministers back home, as they seem incapable of getting these answers from the Department for Transport themselves. Devolution of the franchise was first on the list of hurdles in the Welsh Assembly Infrastructure Committee’s June report. Let us be frank: we are approaching a situation where the whole thing could collapse. I do not want to see that and I am sure the Minister does not want to either. I hope in his response he will be able to offer assurances that the powers will be devolved in the coming days, but contingencies must be made clear. Can the Minister confirm whether there has been any exploration of an interim arrangement with the existing operator to continue running their franchise under a direct award or—as is written into this franchise contract—there is an extension of seven “reporting periods” at the end of the franchise, which could take the existing franchise into spring 2019?

The option which I prefer, and I am sure the hon. Member for Ynys Môn (Albert Owen) would prefer, and which has always been the policy of my party, is a truly nationalised rail operator. Under the Railways Act 1993, it falls on the relevant authority to run franchises where there is no franchise agreement in place. These are known as the operator of last resort powers. The botched devolution job means there is no clarity on who exactly the relevant authority is in this case. Can the Minister confirm whether he understands the Welsh Government or Westminster to be the relevant authority?

On a more general point, my speech has been peppered with technicalities, dates and jargon, but the events surrounding the devolution of the franchise are symbolic of a wider and more fundamental symptom suffered by my country. Westminster does not care about Wales and a lethargic Labour party passively watches our managed decline. The examples can be technical, but the effects are tangible. Our society suffers at the hands of an apathetic Westminster and an inert Labour Welsh Government. The handling of the devolution of the franchise is yet again a reason for Wales to wonder why Westminster clings so tightly to our reins, when all we want is the ability to stand on our own two feet. Diolch yn fawr.