East Coast Main Line

Mark Lazarowicz Excerpts

Tuesday 12th November 2013 Westminster Hall

[Mrs Hodgson]

That is exactly the point. Despite all the evidence to the contrary, the Government clearly do not think that a state-owned company can run the franchise viably and deliver the investment in service improvements that we want.

How ironic it is that many of the probable bidders for the service are subsidiaries of state-owned railways. Eurostar and Keolis have confirmed that they will team up to bid for the franchise. As the Minister will be aware, those two companies are majority-owned by the National Society of French Railways—SNCF—which is France’s state-owned operator. Arriva, which already operates so many franchises, including the Tyne and Wear Metro in the north-east, and has received much Government investment over the past few years, will probably throw its hat into the ring. It is of course owned by Deutsche Bahn. Abellio, which, with Serco, runs Northern Rail trains in my area, might well be tempted. It is a part of the Dutch state-owned rail operator. The Government are therefore quite happy for the east coast main line to be run for public benefit—just as long as the British public do not benefit.

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

Does not the way in which contracts are handed out to such foreign, state-owned companies mean that taxpayers in the Netherlands, France and Germany will gain at the expense of British ones?

[Mrs Hodgson]

Yes, I agree. That is exactly the point. Instead of profits generated by the franchise benefiting British commuters through investment in service improvement and dividends to the Treasury, the Government prefer profits to be channelled to other European countries, in some cases to subsidise fares in those countries. If we are to achieve the modal shift from cars to rail that we need to ease pressure on our trunk roads and to reduce carbon emissions, we must have the investment and the ambitious targets and standards in place to ensure that services are reliable and can carry on improving. Unfortunately, it appears that the Government intend to put that improvement into reverse over the next few years.

It was brought to my attention yesterday that in the past couple of weeks, the Office of Rail Regulation has published a document setting out the desired outputs for the whole rail network for the next five-year control period. That document makes it clear that the standards expected of whichever company wins the east coast franchise will be significantly lower than the national average, and possibly even lower than those of most European routes. For example, the national standard for cancelled or seriously late trains—which I have had some experience of on the east coast over the past month: the fault for that lay not with the company but with all the storms and so on—is no more than 2.2% of journeys. The east coast’s standard will be 4.2%.The national standard for just mildly late trains, which can be anything between 10 minutes and two hours, will be 8.1% in the first year. For the east coast, it will be 17%, which is more than double the national standard, and equates to more than one in six journeys. That rate will be required to come down to 12% by 2018-19, but it will still be much higher than the national rate of 7.5%.

Over the control period, we could see an additional 15,500 trains officially late and more than 2,500 trains cancelled without the operator being deemed to be breaching its required standards. Why should the east coast be given a lower standard? It is way below what the public would expect, and way below the standards set by Labour for the current control period. The apparent loosening of the required standards does not appear in any of the preceding documents on which the public have been consulted, but has now appeared at a point when they can no longer have their say. Will the Minister explain why the standards are set so low and have been revealed in a document on which the public will not be consulted? Will he give us an assurance today that that is in no way linked to the tendering process, or the Government’s desire to get the most money for the franchise to hold up as a sign of success? If we move the goalposts and make things easier for whichever train operator comes in, it makes the deal more attractive to them, and that is what seems to be going on here.

If the Government are to go through with the privatisation, it is important that the Exchequer get as much cash as possible now and over the course of the contract. However, we cannot sacrifice performance standards to achieve that goal, because people will just give up on trains that are allowed to be late on one in six, one in seven or even one in eight journeys.

If the proposal is not linked to the tendering process, perhaps it is related to the fact that investment in tackling congestion over the coming control period will be less than half the £500 million that the Labour Government allocated. That investment has resulted in improvements in north London, flyovers at Doncaster and Hitchin, and the upgrading of a parallel route for slow freight between Doncaster and Peterborough. Will the Minister assure us that service standards are not being lowered to match the investment the Government are prepared to make? Our constituents rightly expect not just a punctual service but a decent service, particularly when they might be on the train for three or four hours or more when travelling to or from the north-east or Scotland—it can take up to six hours to get all the way up to Inverness.

Will the Minister rule out the introduction of a lower-tier or third-class service, which is allegedly in the prospectus that was sent to potential bidders? Indeed, will he rule out any degradation of standard-class service in a three-class system by a future operator?

--- Later in debate ---

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

It is a pleasure, Mr Bone, to serve under your chairmanship. I pay tribute to my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) for securing and leading the debate today.

This is not the first Westminster Hall debate on the east coast main line and, unless the Government change their position, it will probably not be the last. The Government might not like to have such repeated debates, but the Opposition make no apologies for bringing the issue back for discussion time and again. We will do so until the Government change their policy, because there is an overwhelming case against forcing East Coast trains back into the private sector without even giving the public sector a chance to offer an alternative.

My hon. Friend reminded us of the positive financial record of East Coast trains and that the public are clearly against the return of the east coast service to the private sector. The staff on the line, and the cities up and down the line, do not want the service to return to the private sector, and public opinion is overwhelmingly against the proposals that the Government seem determined to push forward.

[Sheila Gilmore (Edinburgh East) (Lab)]

rose—

[Mark Lazarowicz]

I give way to my hon. Friend, whose constituency neighbours mine.

[Sheila Gilmore]

My hon. Friend and I have spent a considerable time campaigning on this issue in Edinburgh. Does he agree that the overwhelming response of the people we have spoken to while we were gathering signatures has been that they do not want the line to be re-privatised?

--- Later in debate ---

[Mark Lazarowicz]

Absolutely. As my hon. Friend has said, she and other colleagues have spent quite a bit of time with me outside the railway stations in Edinburgh and at other locations, and not one person has come up to us and said, “Yes, we want East Coast trains to be re-privatised.” They have all recognised the value of this service being in the public sector.

[Grahame M. Morris (Easington) (Lab)]

I compliment my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) on securing this very timely and important debate and on making some excellent points. On the point about the value of having the east coast main line within the public sector, are there not lessons to be learned from what is happening with gas and electricity companies? When the private sector has no benchmark of public sector provision, does the consumer not get ripped off? Is there not an overwhelming argument for retaining at least one main line in public ownership, by which we could benchmark the other lines?

[Mark Lazarowicz]

That is a very good point. Let us be clear—we are not calling today for a renationalisation of the entire railway operating network.

[Grahame M. Morris]

We are! [Laughter.]

[Mark Lazarowicz]

My hon. Friend might be, but that is not the issue today. What we are talking about today is giving an alternative to the private sector. He just referred to other industries, and one of the issues about those industries is this: to what extent is there real competition?

One of the problems is that within the railway sector in the UK, a very limited number of UK companies are able and willing to put in a bid for a line. On the east coast and west coast lines, we all know that the major UK bidders will always be drawn from Virgin, First Group, National Express and possibly Stagecoach.

Of course, Virgin also runs planes to Edinburgh and Aberdeen, and First Group and the other companies operate other rail services. Some of them also operate bus and express coach services. So the issue is ensuring that there is at least some competition in the system, which the existence of Directly Operated Railways on the east coast main line would certainly provide.

[Ian Mearns]

rose—

[Mark Lazarowicz]

I will give way to my hon. Friend and then I will move on, to ensure that I make some progress.

[Ian Mearns]

It is ironic that, despite the number of Eurosceptics on the Government Benches, the Government are clearly in favour of state ownership—but Dutch, German and French state ownership of UK railways, not UK state ownership of UK railways.

[Mark Lazarowicz]

Indeed. However, my hon. Friend is being perhaps a bit too restrictive, because I understand that one of the companies shortlisted for one of the Scottish railway franchises is the mass transit railway system—MTR—in Hong Kong, which I presume is ultimately owned by the Chinese Government. It appears that although the Chinese are able to build our nuclear power stations and run our railways, the British state is unable to do so.

I come to the essence of the argument. The Government say that one of the reasons why the east coast line should go back into the private sector is the success that there has been since the railway system was privatised. One of the oldest logical fallacies in the book is to say that because event B followed event A, event B must have been caused by event A.

What the Government are saying, of course, is that because passenger numbers have gone up since the railways were privatised, that must be because they were privatised. However, the fact is that we have not been able to establish that link between the two. For example, I can look at the local bus company in Edinburgh, my home city, which is municipally owned. The number of bus passengers has gone up dramatically in the past 20 years. That company is in the public sector, but I will not say that the rise in passenger numbers is just because of that.

Equally, however, saying that the rail network’s being in the private sector is why the number of passengers has gone up seems a very weak argument. In fact, the number of passengers on other state-owned railways in other parts of the world has gone up as well. The argument about privatisation seems very weak.

As my hon. Friend the Member for Washington and Sunderland West pointed out, Lord Adonis, when Transport Secretary, made references to privatisation that are continually mentioned by the Government in defence of their policies. However, he has made it clear that he has learned from experience and is approaching this issue in a non-dogmatic fashion, in a way that the Government are signally failing to do.

Let us not forget that it was a Conservative Government who privatised the railways in the first place, against the wishes of the Labour party. Labour colleagues in Parliament at the time voted against that privatisation. Of course, the Labour Government after 1997 had a large number of priorities and I can certainly see why the issue was not, at that time, their No.1. However, as I have said, we are talking about the situation here and now. We have an opportunity to judge from experience and to ensure that the public get the best value for money and the best service, which, in my and my colleagues’ view, would be obtained by ensuring that the east coast line stays in the public sector.

Reference has been made to the way in which foreign companies are able to bid for the franchise. I will not develop that point any further, given that it has already been made by other colleagues. However, I will again make the point that there is a real issue about the lack of genuine competition within the rail franchising sector in the UK, including among British-based companies. Also, the point that my hon. Friend the Member for Easington (Grahame M. Morris) made about comparing rail with the utilities was very well made.

One of the points made by Ministers when they have argued why the east coast main line should go private again is that—as I think one of the Minister’s predecessors, the right hon. Member for Chelmsford (Mr Burns), said—the record of East Coast trains on punctuality had “plateaued”. Again, that is another example of desperation and of the Government trying to grab arguments to support a weak case.

The fact is that East Coast trains has a good record on punctuality. As we all know, the main reason why there have been problems with train punctuality in recent times is certain factors—first of all, the recent storms, which were clearly beyond anyone’s control. Above all, however, they have been due to problems with infrastructure, which have not been the fault of East Coast trains.

I asked a parliamentary question on the issue a while ago. I received an answer about the 2012-13 split in responsibility for delays on East Coast trains: 18% of them were due to East Coast itself, 13% were due to “Other Train/Freight Companies” and 69% were due to Network Rail. We know that one of the reasons why 69% of delays were due to Network Rail was problems with the overhead line system, which was, of course, put in place on the cheap, and for which—again—a previous Conservative Government clearly have to take responsibility.

My hon. Friend the Member for Washington and Sunderland West referred to the new targets from the regulator regarding punctuality. One of the things that the regulator said in its recent report was that there is a problem with reliability on the east coast main line, and I welcome the fact that it did. However, like my hon. Friend, I am concerned about how the performance measurements for the east coast service have been reduced by comparison with those for many other lines in the country.

I know that it only sounds like a marginal reduction if the performance target is reduced from 90% to 88%, but of course what we want to aim for is 100% reliability. Obviously, we will never get 100% reliability, but every time the target is reduced—even by 1% or 2%—we release the pressure on that operator to ensure that, as far as possible, all their trains arrive on time.

The fact is that the new target for cancelled or seriously late trains was set at a rate that would allow 4.2% of east coast line trains to arrive more than two hours late or not at all. That does not sound like much, until we put those figures in another context and say that one in every 24 trains could be cancelled without any penalties whatever being imposed on the operator responsible.

As my hon. Friend has said, there are concerns about the fact that that change was not referred to in draft proposals for the new punctuality performance targets; it was a change that people could not be consulted on. The Minister should give an explanation as to why that was the case. Bluntly, if he cannot provide one today, he should go away and look at the issue, because it was a major defect in the process.

It is time for the Government to drop their dogmatic approach to the east coast line and to give the public sector operator a chance. Let Directly Operated Railways put forward an alternative model and we will see what represents the best value for money and the best service for the public. Please, Minister, do not come forward with the argument that I heard from one Minister some time ago, which was, “We couldn’t do this because the law wouldn’t allow us to do it, and we had to put it out to the private sector.”

As a Back Bencher, I cannot speak for those on the Labour Front Bench, but were the Government to come forward and say, “Yes, we will change the law to allow East Coast trains to continue to operate the franchise,” I cannot think that my party would oppose that. Perhaps the Minister will make that offer today. I am sure that my hon. Friend the Member for Nottingham South (Lilian Greenwood) would be happy to respond to that.

It is time for the Government to change their policy. It is not what the public want, what the staff want or what the communities want—and it is not in the best interests of the public purse, either.

--- Later in debate ---

[Sheila Gilmore]

I think the right hon. Lady knows that I do not share her views on this matter. We should not cast one railway line against another, because one of the advantages of HS2 is that it provides an opportunity to improve some of the other services, not least by dealing with the capacity question.

One issue is the opportunity cost of prioritising East Coast over some of the other long-distance franchises. Under the original franchising timetable from August 2011, a new contract for the west coast main line was due to start in October 2012, with Great Western starting in April 2013 and the east coast main line thereafter. However, following the debacle of the west coast main line bidding process, a new timetable was announced in March this year. The east coast main line, which was previously the last in the trio of inter-city franchises to be let, was brought forward to be the first. That was only made possible by the current operator of the west coast main line, Virgin, being given a franchise extension of four and a half years to April 2017. At the same time, the Great Western operator, First, has been given an extension of two and a half years to September 2015. In total, that is 77 months’ worth of extensions.

The Government justify prioritising East Coast by referring to the Brown review, which was carried out after the problems with the west coast main line. They are restating their belief that competition in the bidding process should drive down the subsidy required or drive up the premium payments offered. They say that that will push operators to be more efficient and innovative, and prompt investment in new services. One can argue that franchise competitions might achieve these goals, but the one thing that certainly will not achieve those goals is franchise extensions. That is because the Government, by setting up this arrangement, have no option but to negotiate with the existing operators on other lines. The only bargaining chip that Ministers can use is to threaten to call in East Coast’s parent company, Directly Operated Railways, but they are reluctant to do so, as is highlighted by their desperation to extract DOR from the east coast main line. How are the other franchisees threatened by Ministers saying, “If you don’t agree reasonable terms, we’ll take you into the fold of Directly Operated Railways,” when Ministers are running as fast as possible in the opposite direction with the east coast main line?

[Mark Lazarowicz]

My hon. Friend is making an excellent speech. When there were problems with East Coast trains, as there were with Southern some years ago, Directly Operated Railways was able to step in and provide an alternative when the private sector failed. If Directly Operated Railways is taken off East Coast trains—I do not know what will happen to the organisation, but I presume that there might still be a shell company—the nucleus that allows it to operate an alternative may disappear, so there might not be an alternative even if a future private sector operator fails.

[Sheila Gilmore]

My hon. Friend gives a helpful example of where, instead of increasing competition and providing opportunities for the Government to exercise some control over the rail companies, that possibility might be being reduced.

The contract extensions, which were made necessary by the Government’s determination to pull East Coast forward, will cost the taxpayer a lot of money. In 2011-12, Virgin paid the Department for Transport a premium of £165 million, and First Great Western paid £110 million. Will the Minister confirm that there will not be payments of anywhere near those sums during the extension period? Will he also confirm that, apart from the roll-out of wi-fi on First Great Western, which all train operators are beginning to offer, the two extensions offer no improvements for passengers? There is less money coming in and no improvements; the extensions need not have been given had the Government stuck to their original timetable.

If the east coast main line had not been prioritised, the extensions simply would not have been necessary. There could have been fresh competitions, if that was the Government’s will, for the west coast main line and the Great Western main line. If East Coast had been performing badly in the public sector, there might have been some justification for what has happened—the imperative of turning East Coast around would have trumped other disadvantages of negotiating extensions on the west coast main line and the great western main line—but East Coast is performing well, so that reason simply does not apply.

The Government clearly hope that they can get to the next election with all the main line routes back in the private sector. The Government could take credit for that in the hope that it would be extremely difficult for any incoming Government to do anything about it. If that is not the motive, the Government have to say what is their real motive for proceeding in that way.

Public opinion has changed. People have seen the reality. Some people, although not necessarily all of us—there are always some critics—warned that privatisation of rail might be a step too far. Members of the public who were prepared to give privatisation a chance now see Directly Operated Railways as an opportunity to have a rail service in public ownership that brings money back to the Treasury. As I said earlier, when we talk to people, they enthusiastically support our campaign. The Government sometimes say that they listen to public opinion, and on this occasion I suggest that they do indeed listen to public opinion and stop the process before it goes any further.

--- Later in debate ---

[Karl MᶜCartney]

No, not at this point.

The real elephant in the room is perhaps the fact that Opposition Members are worried that re-privatisation might bring some change to services. Although I agreed with some of the points made by the hon. Members for Edinburgh East (Sheila Gilmore) and for Edinburgh North and Leith (Mark Lazarowicz), they might consider the fact that seats to the south of theirs are not just “and beyond”, as they were referred to. Lincoln is not “and beyond”; it is my constituency, and I will fight for it as hard as I can and as hard as Opposition Members, I am sure, do for theirs.

I would like to see better services from Lincoln to our capital city, as I am sure Opposition Members would from theirs. However, I am also aware that if trains on the east coast main line stopped at Edinburgh, and passengers then had to cross a platform to catch another train to go further north, people south of Edinburgh would see a vast improvement to their service. That is something a private operator might consider, although I am not saying it will. In Lincoln’s case, however, I would certainly like to see more direct trains daily and even at weekends.

[Mark Lazarowicz]

rose—

[Graeme Morrice]

rose—

--- Later in debate ---

[Karl MᶜCartney]

I thank the hon. Gentleman for that erudite and timely intervention, which is typical of the interventions he might make, but I would refer him to my first intervention. If he and the Labour party feel that way, why did they not re-nationalise the rail service across the whole country in their 13 years in office? They did not do that.

[Mark Lazarowicz]

May I respectfully point out that the private operators did not provide the direct service the hon. Gentleman is calling for to his constituency in the 13 years or longer they operated the line? The private sector did not offer his city any improvements when it was in charge. That is surely an argument for saying that Directly Operated Railways should offer an alternative. The hon. Gentleman can then decide whether he wants Directly Operated Railways and East Coast or the private sector. Surely he can accept that there should at least be a choice.

[Karl MᶜCartney]

I accept that different changes might be made. I thank my predecessor in the constituency, who, as a Transport Minister, perhaps secured the promise of seven trains a day down to and up from the capital. Ultimately, I was the lucky recipient of more votes in the 2010 general election, and I replaced her. Unfortunately, at that point, unlike some Labour Members who have retained their seats, East Coast decided not to follow through with its promise. That is to the disbenefit of my constituents. As I said, I will always stand up for them to secure the best rail services I can.