Transport Secretary: East Coast Franchise

Lord Johnson of Marylebone Excerpts

Wednesday 23rd May 2018 Commons Chamber

[The Minister of State, Department for Transport (Joseph Johnson)]

As we have heard from right hon. and hon. Members, the railways always stimulate passionate debate, even if some of the arguments made by Labour Members do not seem to have moved on much since the 1970s.

Leaving aside Labour’s unwarranted, ad hominem, vindictive attacks on the Secretary of State, which only serve to underline how thin its substantive arguments are, it would have us believe that our future lies in returning to the bad old days of British Rail. However, scores of Conservative Members have used this debate to restate the merits of what has been achieved since privatisation, and they are entirely right to recall its considerable successes.

As my hon. Friends the Members for Spelthorne (Kwasi Kwarteng) and for Milton Keynes South (Iain Stewart) made clear, privatisation has transformed the railway. Passenger numbers have doubled, with 1.72 billion journeys in 2016-17. Passenger satisfaction has increased—ours has the second-highest satisfaction levels of any railway in Europe—and we have unprecedented levels of safety, meaning that the British railway is one of the safest in Europe. The public and private sector, working together, have responded to demand by delivering more services to more stations across a busier network. Some 71 more stations are open today than in 1994-95, and more than 7.3 million passengers services were planned on the Great Britain rail network in 2016-17, which represents an increase of 29% from 1997-98.

[Paula Sherriff]

The Minister seems to be referring to some utopian paradise with his talk of all the great things about the current rail system. Has he looked at Twitter this week and seen the complaints of many thousands of people, including many of my constituents, who are experiencing a living hell just commuting to work and college?

[Joseph Johnson]

We are of course dealing with the challenges of managing a busy, successful and growing network. The hon. Lady will acknowledge that we have just introduced one of the biggest—if not the biggest—timetable changes in the history of the railways to reflect the surge in demand for rail services. We recognise that there are problems, of course, and we are focusing on them so that we minimise disruption, but we should acknowledge that we are dealing with the challenges of success, rather than failure.

Let us not forget about freight either—it is one of the great success stories of privatisation. The private rail freight operators that took over from British Rail in the 1990s brought a new spirit of commercial enterprise and customer focus, and an innovative approach, to operations. That transformed a sector that had been in steady decline into one that, over 20 years, has doubled its share of the land-based freight market.

Privatisation has driven innovation, new private investment and customer service excellence, drawing in more than £4 billion of private investment in our railways since 2010 to deliver faster, more convenient and more comfortable journeys. Thanks to private investment, 7,000 new carriages are to be introduced on the rail network between now and 2021.

[Lilian Greenwood]

By talking about freight, the Minister is avoiding the main subject of the debate. He will know, however, that the rail freight sector is in some difficulty following the loss of important business.

Virgin Trains has identified one reason for its underperformance as people switching from rail to road due to rising rail fares and falling petrol prices. Given the Government’s supposed commitment to tackling air quality and climate change and to a modal shift from road to rail, why did he not anticipate that and do something about it?

[Joseph Johnson]

The hon. Lady mentions climate change, which is of course relevant to freight, as one reason for the freight sector’s difficulties in recent years has been the withdrawal of coal from use in power stations and the declining coal tonnage in freight. And, of course, the Government are committed to our climate change targets, and we are on track with our various carbon budgets.

I will turn now to the main subject of the debate: last week’s decision on the east coast. Our decision ensures that the taxpayer will recover all the money possible under the terms of the contract, and Virgin and Stagecoach have lost nearly £200 million in the process.

Throughout all this we need to remember that, fundamentally, the Intercity East Coast rail operation, as a train service business, continues to be a successful enterprise that returns good value to taxpayers now and will do so in the future. VTEC could not meet the agreed costs of its contract with the Department but, as an operating business, Intercity East Coast services are in good shape, and commercial revenues more than cover the direct costs of the train business. In fact, VTEC paid back more money to the taxpayer than when the line was in public sector ownership.

[Alex Sobel]

Does the Minister see in any merit at all in the public sector running of the east coast line between 2009 and 2015?

[Joseph Johnson]

We are putting together the new east coast partnership, which will constitute a new approach to how we run the railways. It will bring together the best of the public sector and the best of the private sector, ending the blame game that has seen train companies blame the track operator and vice versa.

Let us not forget that, as a passenger service, this was a well-run railway. The dedication of the staff responsible for the delivery of railway services has maintained high levels of passenger satisfaction—more than nine out of 10 passengers are happy with their journeys.

Opposition Members have suggested that we have nationalised the railway. That is, of course, not the case; rather, this is a temporary return to public control. Indeed, that was envisaged in the original design of privatisation in the early 1990s. The use of the operator of last resort—our public sector operator—is an integral part of the franchising system, not an alternative to it. It is used on a routine basis when we negotiate with private companies to provide a genuine alternative in negotiations, ensuring that we secure real benefits for passengers and taxpayers, and keep people moving. They are given a better deal because they know that the Government have this option in their back pocket.

As was emphasised in the 2013 Brown review, passengers remain protected through the Department’s ability to handle default with an operator of last resort on hand to take over. In this situation, the OLR will do what it is supposed to do: work with the Department on the next competition for a commercial train operator. It will help us to shape the new partnership railway on the east coast, preparing the ground for the line to be transformed into a public-private partnership that will deliver the best of both worlds.

[Alec Shelbrooke]

The hon. Member for York Central (Rachael Maskell) commented on the French nationalised railways. Does my hon. Friend agree that they are in terrible straits and that the President has recognised that the present system cannot continue because it is haemorrhaging billions of euros every year?

--- Later in debate ---

[Joseph Johnson]

Indeed. Advocates of the full renationalisation of our railways should heed what President Macron is saying about the sustainability of the French model. It is a warning indeed.

The east coast provides an opportunity for the first of a new generation of long-term regional partnerships, bringing together the operation of track and train under a single leader and a unified brand and delivering more effectively for rail users.

[Martin Whitfield (East Lothian) (Lab)]

Will the Minister give way?

[Joseph Johnson]

Not at the moment.

That brand is the London and North Eastern Railway, LNER. This will evolve into a partnership between the public sector and a private partner, procured through a competitive process.

Of course, we are always seeking to improve the way in which we deliver. We continually refine the franchise model and monitor the performance of all franchises closely. We know that passengers have had enough of the blame game between train operators and Network Rail. We have also improved bid assessments since 2014 by introducing a new process to ensure that bids are more financially robust, such as when there is a lower level of growth in passenger numbers than was anticipated. We have developed new approaches to sharing risk with train operators, which means that they do not take on risks that they are not able to control, including impacts due to wider economic changes. Let me be clear: this means that the Government will continue to run a system that requires train operators to face financial penalties if they do not meet their commitments and ensures that we get the best deal for passengers and taxpayers.

Some Members have raised concerns about other franchises. I can reassure the House that the Department closely monitors the performance of our franchises, assessing a range of measures such as levels of bonding and parent company support, as well as assessing liquidity ratios to establish their health.

Colleagues have commented that this week has seen the launch of the biggest change to rail timetables in a generation. This timetable change will deliver improved passenger services across the country, including the delivery of substantial passenger benefits from the Thameslink programme and the great north rail project. By 2020 there will be over 2,000 extra services a week, with room for 40,000 extra passengers. There will be faster and more comfortable journeys, and new and direct services across the north and beyond.

This vindictive motion diminishes those Opposition Members who support it. I reinforce the Secretary of State’s message that we put passengers at the heart of the railway by making the best use of expertise from the public and private sectors, just as the Labour Government in Wales have done this morning.

Question put.