East Coast Main Line

Mark Lazarowicz Excerpts

Wednesday 5th June 2013 Westminster Hall

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

I congratulate my hon. Friend the Member for Middlesbrough (Andy McDonald) on securing this important debate.

I also congratulate my hon. Friends the Members for Edinburgh East (Sheila Gilmore) and for City of Durham (Roberta Blackman-Woods) on leading a campaign that has widespread backing inside and outside Parliament. It is not surprising that it is so well supported; as we have heard, the facts speak clearly for themselves. By the end of this financial year, East Coast estimates that it will have returned about £800 million to the Exchequer since the line was nationalised. The net public subsidy in the past financial year was just 1% of turnover, compared with an industry average of 32%.

A recent report commissioned by the TUC reveals that the firms receiving the largest state subsidies spend more than 90% of their profits on average on shareholder dividends. Of those firms, the top five recipients received almost £3 billion in taxpayer support between 2007 and 2011, which allowed them to make operating profits of £504 million. However, more than 90% of that money—£466 million—was paid straight to shareholders.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

It is also worth while pointing out that the taxpayer has been getting this money back from Directly Operated Railways in a context where the company has been able to operate only on a fairly short-term basis, because there is no certainty for the long term about the franchise. Is it not highly possible that, if the current operators had the security of knowing they were going to operate the railway system for a considerable number of years to come, they might make even better returns for the taxpayer and run the system even more efficiently?

[Mrs Hodgson]

I agree. That was a good point, and it was well made.

I am a regular user of the service, as are many Members, constituents and people across the north-east, and the improvements in service and punctuality have been plain to see. That is not to say that there are not occasional causes for complaint; of course there are, and we all know what they are—often, it is the toilets. However, the service has improved, without the need for the private sector ethos that we often hear about from advocates of privatisation.

In a written answer to my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah), the Minister said:

“The Government remains committed to benefitting from private sector innovation and operational experience in its railways.”—[Official Report, 22 April 2013; Vol. 561, c. 590W.]

Given the improvements since the line was nationalised and the low reliance on subsidy, which is 1% of turnover, as well as East Coast’s returns of £800 million to the national coffers, the private sector organisations running other franchises could learn a thing or two from Directly Operated Railways.

The east coast line is getting increasingly busy, and it needs constant investment in maintenance and capacity improvement. Incidentally, one way that we could improve capacity—I and other north-east Members recently met the Minister to make this case—would be to bring the Leamside line back into use in the north-east to take some of the freight off the main east coast line. The Minister and I have discussed that at length. The proposal would have the added bonus of providing the means to extend the Tyne and Wear Metro to Washington, in my constituency, which would bring great benefits to the town and its residents.

However those improvements are made, they do need to be made, and that will require money. The benefit of keeping the franchise in public ownership is that that investment can be made by ploughing the generous profits generated—£800 million so far—back into the service, instead of giving them to overseas shareholders. Our network sees hundreds of millions of pounds disbursed to shareholders of private companies every year, despite the fact that those companies receive state subsidies to keep going. East Coast’s performance over the past three years has shown us the folly of that model. Why send profits generated from British passengers to foreign owners abroad, when some of those owners are subsidising rail fares in their own countries? We could and should use those profits here to improve our services and to help keep our fares down.

The East Coast arrangement is not hurting my constituents; it is working. It is not broken, so it does not need fixing—apart from the toilets, of course. If anything, based on the performance of East Coast, it would be desirable to see more of our key lines under public control. What the service needed was the stability to carry on planning for the future and improving performance and service standards further, while maintaining the return to the taxpayer. What it has, however, is the uncertainty caused by being put out to the market once again, where it may even be the subject of a tender by the company that failed to run it properly last time. That would cost taxpayers millions.

Given the shambles over the west coast line, I would have thought that the Government would at least leave a successfully operating line well alone—

--- Later in debate ---

[Sheila Gilmore (Edinburgh East) (Lab)]

The ideology in this debate is clearly not on the Labour side, as is shown by the speeches we have heard. What is puzzling many of my constituents is why it is somehow so urgent to put the east coast line out to franchise now, when East Coast is working well and when the franchise process for the west coast main line was such a disaster so recently. It sounds like the answer is ideology.

A couple of misconceptions have arisen in the debate so far. One of the previous speakers suggested that refranchising would fund improvements such as electrification, but during the past few years Network Rail has made infrastructure investment from public money. It is clear that refranchising will not bring about that kind of investment. I also say to the hon. Member for Redcar (Ian Swales) that, instead of perpetuating the notion that somehow East Coast is uniquely expensive, if he took his Government’s advice to benefit claimants and became “digital by default” he could considerably reduce fares by booking in advance. That is no different from the situation with any of the other rail operators.

There is now a good argument for looking at the situation. I am sure the Minister will say, as some Government Members have already said, “Oh, but the Labour Government were going to refranchise.” We learn from experience, and we have learned that there is no inherent reason why a publicly operated railway company cannot make a success of things. One reason for that is that such a company will be operated not by some anonymous Department, but by rail professionals; it will not be run from the Department for Transport. Those rail professionals are clearly motivated to make things work, which is why we are seeing the improvements that we feel are happening on the east coast line.

The time has now come for us to look again at some of the assumptions that were made at the time of privatisation.

[Mark Lazarowicz]

Will my hon. Friend give way?

[Sheila Gilmore]

I am sorry; I do not think I have time to give way.

There was a view that the track should be separated from the trains and that the network should all be split up. However, we know from the McNulty report that the unit cost of railways in this country is 40% higher than in countries in Europe where there are publicly owned, integrated rail services. The time has come not to be ideological about this issue, nor even defensive about what anybody’s Government did in the past, but to look at what is actually happening out there.

In the first instance, we should say of the east coast line, “No, we will not put this out to franchise again at this stage. There is no need to do so.” Secondly, we should look at the whole process and analyse what is happening. Thirdly, we should perhaps look again at having an integrated rail system—