Rail Franchising

Maria Eagle Excerpts

Wednesday 10th January 2018 Commons Chamber

[Maria Eagle (Garston and Halewood) (Lab)]

No other nation in the world runs its railways like the UK has done since the flawed and ideological fragmentation and privatisation carried out by the Major Government in the mid-1990s, and there is a reason for that: it just does not work very well. In particular, it has not worked on the east coast main line. Since rail privatisation, of the three private operators of that franchise, one has gone bust, one has defaulted on the contract and one has been allowed to avoid payments of hundreds of millions of pounds—possibly up to £2 billion—that it undertook to pay to the taxpayer.

This latest and grossest private franchising failure is a capitulation by the Transport Secretary to Virgin Trains’ demand to be let off the consequences of its overbidding to get the contract. The Transport Secretary has done this in an effort to prevent the embarrassing spectacle of another very public failure in the private operation of InterCity East Coast. This follows his predecessor’s ideologically motivated decision to strip Directly Operated Railways of the operation of the east coast main line mere weeks ahead of the 2015 general election. In doing this, the Transport Secretary has simply given in to the self-interested and costly demands of the train operating company.

The only east coast operator that has not gone bust, defaulted or received a bail-out from the taxpayer was East Coast Main Line, a wholly-owned subsidiary of Directly Operated Railways—itself a company wholly owned by the Government—which was established by Lord Adonis when he was Transport Secretary in 2009. In other words, it was a publicly owned company. It took over when National Express defaulted, and it ran the line very successfully. Its record is clear and stands in stark contrast to what has happened before and since. It made all its required service payments, returning more than £1 billion to the Treasury. It invested all its profits straight back into services, paying out zero dividends to greedy private owners—because it did not have any—and it achieved some of the best results on the east coast of any operator since records began.

[Ian Mearns (Gateshead) (Lab)]

On my hon. Friend’s point about the east coast main line, because of the ideological decision by the Government, profits of £1 billion going back to the Treasury have been forgone. At the same time, we are allowing a private franchise not to pay £2.1 billion to retain its franchise. Does she agree that it is economic madness to retain that service in the private sector?

[Maria Eagle]

My hon. Friend is correct. Money is clearly no object in trying to avoid the embarrassment of yet another failure of the franchise in the hands of a private operator. Why did the coalition Government decide to re-privatise the operation? The date is a clue, as it happened just weeks ahead of the 2015 general election. The decision was cynical, ideologically motivated and costly to the public purse.

Our policy at that time was clear. We wanted to keep East Coast in public hands to act as a public sector comparator to the private franchises. We wanted to keep the operational expertise in Directly Operated Railways to enable us gradually to take the operation of the railways back into public ownership as franchises ended without having to pay enormous amounts to buy out contracts. Just changing the order of franchise competitions to enable that re-privatisation cost the public purse hundreds of millions of pounds. Indeed, the consequences of that lamentable decision are being seen today in the ongoing chaos and waste of money that the franchising system is inflicting on our railways—now spectacularly reinforced by the Transport Secretary’s capitulation to the financial interests of the private train operating companies on the east coast main line.

The Transport Secretary is effectively institutionalising massive taxpayer bail-outs, which he has renamed “partnerships”, and I predict that this will not be the last such bail-out. He is effectively institutionalising giving in to the tendency that the private companies have shown over the years of gaming the franchising system to keep taxpayer subsidies while avoiding making the payments that they are contracted to make. Virgin-Stagecoach is not the first train operating company to do that and it will not be the last. The system delivers lucrative near-monopoly rail contracts on the basis of post-dated payment promises by private companies that can simply be abandoned when they become due, with no penalty attached for behaving badly.

The Government are now institutionalising the reality that the private companies take the profits but the taxpayer provides almost all the investment in trains, track and infrastructure and covers any losses. That is the very definition of a licence to print money. Private train bosses are simply laughing all the way to the bank, and this Secretary of State, for ideological reasons, is allowing them to do so. We cannot go on like this. It is time that this costly and failing system was ended. It has not worked, and it will not work in the future. We need to ensure that we do things better.

--- Later in debate ---

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

We have had a full and excellent debate on the important subject of rail franchising, and I thank the Members on both sides of the House who welcomed me to my new position. I pay tribute to my predecessor, my right hon. Friend the Member for South Holland and The Deepings (Mr Hayes), who acquitted himself exceptionally well in this role over a considerable period of time.

A lot has been said in today’s cordial debate—it has certainly been a more pleasant debate for me to sit through than the urgent question on Monday—and I will endeavour to respond to as many of the points raised as possible, but let me start by recapping some of what has been achieved, initially by looking at privatisation in the round. The statistics are compelling: last year we published our rail spending commitments for 2019 to 2024, and we will be investing £48 billion in our railways, as well as investment from private sources.

My right hon. Friend the Member for Derbyshire Dales (Sir Patrick McLoughlin) asked for specific comparisons between investment from 1997 to 2010 and from 2010 to 2020. As we have repeatedly made clear, this Government are making the largest investment in our railways since the Victorian era, with £48 billion over the five years from 2019. Let me give the House an example of what that means in practice. We will have ordered 7,122 vehicles for the rolling stock fleet, compared with 5,720 in the period from 1997 to 2010. That should give Members a feel for the tangible and practical impact that the increased investment will have. It will mean improvements in punctuality and reliability for passengers, as well as supporting thousands of jobs in the supply chain and activity in the wider economy.

The privatisation of our railways has succeeded. Passenger journeys have more than doubled since 1995, and we have a claim to being the most improved railway in Europe, and the safest major railway, too. And all this is happening in what is not only one of the oldest railway networks in the world but one of the most intensively used. In fact, more people are travelling on our railways today than in any year since the 1920s, and on a smaller network. It is thanks to this success that we are investing £38 billion in Crossrail and HS2 in the period up to 2019, and £48 billion in the years to come.

[Maria Eagle]

The Minister has just said that the privatisation of our railways has succeeded. Will he tell us whether the Government will vote against the motion this evening?

[Joseph Johnson]

Privatisation is succeeding, and we can see that in the increased numbers of passengers using the network. The motion speaks for itself, and hon. Members are welcome to—