Transport Secretary: East Coast Franchise

Kwasi Kwarteng Excerpts

Wednesday 23rd May 2018 Commons Chamber

[Andy McDonald]

I think the explanation is quite simple: it was done out of ideological obsession and to put the franchise outwith the reach of anybody else.

By contrast, the next Labour Government will allow rail professionals to get on with their jobs free from political interference. [Interruption.] They do not seem to understand the difference.

[Kwasi Kwarteng (Spelthorne) (Con)]

rose—

[Andy McDonald]

No, I am not taking any more interventions. Sit!

Last week, the Secretary of State failed to address my concerns about four other highly vulnerable rail franchises being provided with revenue support by the Department. Is it his intention to take these contracts within the operator of last resort function should they fail?

[Kwasi Kwarteng]

How does the hon. Gentleman square his statement that there is too much political interference in the rail network with his party’s stated desire to nationalise the entire network? It does not make any sense.

[Andy McDonald]

Had the hon. Gentleman been here for the entirety of the debate, he might have heard me refer to that; I know he has just walked in. The object of the exercise is to put rail professionals in charge of the railway system.

Is it not the reality that the franchise system is totally broken? It is finished; it’s a dead parrot; it is no more. The one thing the Secretary of State is right about is that track and train should be unified, but that should not be done simply to further his ideological obsession with parcelling up public services for profiteers. I am glad, therefore, that this service has been taken out of the franchising system and placed under public control, although the fact that it is a consortium of private companies brought about during the partial privatisation of the operator of last resort prevents it from being properly described as full public ownership.

A minimum estimate is that £725 million flows out of the railway every year into the pockets of shareholders. In addition, £200 million each year is wasted through a disjointed system. Breaking the railway up into pieces was necessary to sell it off, but it has created an inefficient railway. A few years ago, the McNulty report found our railways to be 40% less efficient than European comparators.

I do not agree with the Members who favour a “halfway house” option—having a degree of public ownership, but retaining the broader franchising model, along with a public sector operator or two—as that would mean failing to realise the full benefits of public ownership. What is needed is a fully integrated railway that is fully in public ownership. A unified railway in public ownership, serving the interests of British citizens, their communities, their jobs and their businesses is what Labour will deliver, and the sooner we can have a general election to bring it about, the better. I commend the motion to the House.

--- Later in debate ---

[Iain Stewart]

No; if it is cheaper for people to use motor vehicles, they are more likely to do that than to use the train. There is a question mark over the extent to which Network Rail’s non-delivery of some of the upgrade projects is a factor; that is part of the picture about which I do not yet know and is something that we will scrutinise. There is also something more fundamental happening in the nature of rail usage, relating to different travel-to-work arrangements and work patterns. There is currently no clear idea of what is behind that, but it will affect other franchises, as well as the east coast line.

[Kwasi Kwarteng]

My hon. Friend and I served together on the Transport Committee for three years, and his speech is compelling and highly knowledgeable. Does he feel that nationalisation should be part of the solution to the problems we face?

[Iain Stewart]

Absolutely not. I will come to that point and refer to the evidence that the Select Committee heard on Monday from Iryna Terlecky, who has many decades of experience in the rail industry.

The shortfall in projected revenue would have happened irrespective of who owned and ran the railway. The difference is that under a nationalised system, the public purse would have taken an immediate hit from the loss of revenue, whereas under the system we have, the parent company and the bond that it put up has taken the brunt of it.

--- Later in debate ---

[Kwasi Kwarteng (Spelthorne) (Con)]

I am grateful to you, Mr Deputy Speaker, for calling me to speak in this very important debate.

We have had a to-ing and fro-ing about the merits of nationalisation, the merits of privatisation and all the rest of it, but what has struck me about the debate is the hypocrisy, I think, that I have heard from many Opposition Members. It is a strong word, used by my right hon. Friend the Secretary of State in his opening remarks—

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

Order. Let me just say that “hypocrisy” is not a word that we would use against fellow Members, as we are all honourable Members. I am sure you would like to withdraw it.

[Kwasi Kwarteng]

I will withdraw it, although if you were to look at the record, Mr Deputy Speaker, you would see that the word had been used earlier in the debate, so I was just repeating it, but we will leave it there.

[Mr Deputy Speaker]

If I might help, I was not here earlier, and I can only make a judgment on what happens when I am in the Chair. I am sure you would respect that.

[Kwasi Kwarteng]

Thank you very much, Sir, for your very mild and modest rebuke.

I find it extraordinary to hear speaker after speaker look to the network in France, in Germany and in other countries and say that things are operating well there, when clearly, if one understands anything about the EU competition policy or the single market, the whole drift of EU regulation in the rail network has been away from the nationalisation that has been lauded by Opposition Members.

[Alec Shelbrooke]

I am sure that my hon. Friend recognises that President Macron, a centre-left politician, has recognised that the French railway system is completely unsustainable, and that has led all the workers out on strike.

[Kwasi Kwarteng]

My hon. Friend makes an excellent point that goes to the slight craziness of a lot of our debate. It is clear to me that the partnership with the private sector has put far more investment—billions and billions of pounds of investment—into the network than would have been the case if it had remained under public ownership. We all know the budgetary pressures. We all know the budgetary situation in 2010, when we had a deficit of £160 billion. It does not take a particularly sophisticated mathematician to work out that, if we had had the rail network in public ownership, as well as public ownership of vast swathes of industry, the budgetary position would have been a lot worse than even in 2010.

[Mike Amesbury]

Surely the way forward in this debate is what works. In the past 14 days alone, Northern Rail has cancelled 1,159 trains—full cancellations. It is complete chaos in my constituency. That demonstrates that the current franchise system is not working. We need public ownership and public control.

[Kwasi Kwarteng]

Everyone in this Chamber realises that the franchise system is not perfect, and I freely admit that. However, compared with what was operating before under the nationalised system, we have seen massive improvement in terms of investment and a doubling of passenger journeys since 1995. Under the old system, one of the principal jobs of the Government was, in effect, to manage this huge industry. Half the Secretary of State’s time was spent talking to the unions about the wage bill. There were civil servants running the network who were not rail professionals. The shadow Secretary of State said that we need to get more professionals running the system. His proposed solution to that was to nationalise the entire network. That is essentially giving control to the man or woman in Whitehall, who, despite their qualifications and skills, are simply not rail professionals; everyone can see that. It is extraordinary to say that we need more rail professionals to handle the network and operate the system, and then to say that the Government should nationalise the whole thing. There is an inherent contradiction in that.

When I entered this House, I was very lucky to serve on the Transport Committee for three years. We covered a great deal of ground in that time. We went to the EU—to Brussels—a number of times. It is really disappointing, frankly, to see that the debate has regressed since I served on that Committee, under the chairmanship of the hon. Member for Liverpool, Riverside (Mrs Ellman). All parties in this House were broadly in agreement with the franchise system. The debate was about how we were to manage that system and how the franchises should operate. People have mentioned the Brown recommendations, the majority of which, as I remember, were supported by the Committee. We were moving forward. There was political consensus in this House and across the country.

Now, we are faced with a radical Marxist, or whatever you want to call it, party—[Interruption.] I am sure you would not call it that, Mr Deputy Speaker. We can call it lots of things. We are confronted with a party that is openly suggesting that nationalisation is the answer. [Interruption.] The shadow Secretary of State says, “The public are agreeing with us.” The polls on aviation showed that only 18% of the public believed in privatisation at the time, but we privatised it anyway and it was incredibly effective. The reality of British Rail and a nationalised network is not the fantasy described by Opposition Members.

I want to make some specific remarks about the east coast rail franchise. It is absolutely the case that this has been a very difficult franchise. It has had recurring difficulties in terms of revenue projections, as my hon. Friend the Member for Milton Keynes South (Iain Stewart) said. Those projections would have been difficult under any administrator—any form of ownership. There are serious questions to be asked about the nature of the shareholders’ guarantees and the nature of the public sector liability. However, to suggest that the answer is to nationalise the entire network, which I believe was in Labour’s manifesto, is really, I am afraid, a case of throwing the baby out with the bathwater.

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

Unfortunately I am going to have to drop the limit to four minutes to get all Members in.