West Coast Main Line

Lord Davies of Oldham Excerpts

Monday 29th October 2012 Lords Chamber

[Lord Davies of Oldham]

My Lords, from time to time the noble Earl has a moment of difficulty at the Dispatch Box, but never one of such ignominy as to have to address himself to this Statement, which has already been delivered in the other place. It is noticeable that when Ministers are in control of their departments and the departments are carrying out their policies efficiently, you often hear them refer to “my department”. I repeat part of the Statement, although the Minister has already read it out, which states,

“because of the discovery of unacceptable flaws in the procurement process run by the Department for Transport”.

How remote that body appears, given that the Secretary of State is commenting on it. Like all other Ministers, the Secretary of State wants to be as remote as he possibly can from the shambles represented by today’s Statement and the answers we have had to Parliamentary Questions in the interim period. Nothing is more indicative of the failure of the Government than for the Minister again to emphasise today the independent nature of the reports being carried out. One of them will be carried out by a member of the departmental board. I have no criticism at all of Mr Laidlaw, who I know to be an extremely independent minded, efficient and proper individual. However, to ask him to carry out an independent review not just of the board but of Ministers as well when he is a member of the board, serving those Ministers, beggars description in terms of what this Government are prepared to defend in the wake of this shambles.

I have one or two precise questions to ask the noble Earl but I want him to be absolutely clear that the way in which Ministers have set about tackling this great difficulty with which they are confronted is not acceptable, and that they will have a difficult time on every occasion when they discuss these matters in one House or the other. We now know that some indication of difficulties with regard to this process was discovered as early as May 2011, with one executive telling the Financial Times with regard to the spreadsheet analysis of the bid:

“The spreadsheet contained certain assumptions that looked odd to our economic modellers, so we went back to the department and pointed it out”.

What did the department do? It ploughed on in its reckless way. Ministers did not intervene. Is it conceivable that when these difficulties arose Ministers were not informed? What grip did they have on the department when such a significant process was undertaken? I emphasise that this is the first of a series of decisions which have to be taken on these franchises. There are many more to come. Therefore, this matter ought to have been worked on in a very real sense as the model which dictated how all the others would subsequently be analysed. However, we have Ministers purporting to be so distant from the process that they knew nothing about these difficulties until months after the relevant events occurred. In fact, action was not taken by the department but when one party decided to take the issue to the High Court the department was forced to initiate a review. I take it that at that point Ministers at last took an interest in what was going on and forced the department to analyse criticisms of the process. At that late stage it was recognised that the process was flawed and had to be brought to a halt with very considerable costs.

So far, the department has owned up to the fact that the mistake may cost £40 million. However, everyone connected with the industry knows that that is only the start of the costs. The Secretary of State may stick to his figure but we know that this is just the cost of compensating the four bidders for the west coast main line franchise. It does not include the cost of rerunning the competition twice, preparing Directly Operated Railways to step in, or compensating bidders for the other stalled franchises because many months of delay are now built into the whole process.

It is clear that the department has been advised in this process by external companies which, of course, have provided their services at a cost. What steps is the Minister taking to review whether the department received value for money for well over £1 million spent on a flawed process, the results of which had to be jettisoned?

As regards the legal advice which the department has received, what is the department’s liability if any of the participants in these cancelled or stalled franchises seek costs from the Government as a result of the delay? What advice did the Minister receive on EU competition law, procurement law and the impact on the fairness of future competitions before deciding to extend Virgin’s contract? The noble Earl has emphasised what an excellent decision it was to extend Virgin’s contract. However, there were very few alternatives. Virgin is going to run the railway for the next 14 months although it was told that it was not as good at running it as the preferred bidder, according to the evidence which was provided and on which Ministers took a decision.

This Statement is a cover not for open government at all: it is a cover for a shambles.