West Coast Main Line

Debate between Rosie Cooper and Daniel Kawczynski

Monday 17th September 2012 Westminster Hall

[Rosie Cooper]

I was not a Member of this House when that decision was taken, so was not in a position rigorously to examine it. Overall, though, I do not have great confidence in the various projections of the Department.

To continue, let us take, for example, the objective to achieve sustainable value for money. That is a stated objective, yet the process encourages risky bids because companies know that if their bid is £250 million more than any other bid their competitors’ bids do not go forward for further evaluation. I have deep reservations about a system that does not attempt to answer why one bid is so much higher than all the rest, and then does not quantify the difference.

[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

The hon. Lady intimates that she has concerns about the way in which matters are carried out at the Department for Transport. Like me, she was at a meeting when Virgin Trains, which had been invited to talk to MPs, said very clearly that it had discussed its concerns with Lord Adonis. What did the previous Labour Administration do to allay Virgin’s fears at the time?

[Rosie Cooper]

I did not clearly hear that part of the meeting. Perhaps it happened before I arrived. I was there when the hon. Gentleman said that he called the meeting so that Virgin and FirstGroup could say how they had arrived at their current situation—of one being awarded the contract and the other having started a judicial review. I pointed out that nobody from the Government had bothered to turn up to answer MPs’ questions and that democracy had been short-changed.

I understand that the Government use a computer programme to test the assumptions within the bid, which the Minister will no doubt tell me is a robust approach. My response would be to ask whether this was the same modelling package that was used by the consultants who said that the west coast main line should be carrying an extra £15 million of fares during the period of the Olympics and Paralympics? It was never physically possible to get that volume of passengers within that time frame to deliver £15 million of sales. In the end, the additional revenues amounted to between £1 million and £2 million. Such projections were for a single event over a short period of time and they were way, way off. How much confidence does that instil in us over projections that are supposed to last 15 years?

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[Rosie Cooper]

Indeed I will, and I will seek further advice from my right hon. Friend on that point as well.

There is considerable difference in value when one bidder offers £800 million worth of investment and the other bidder offers £350 million. Unbelievably, there are reports that FirstGroup scored higher in the bidding process on customer service than Virgin did. Can the Minister tell me how the scoring system squares that with the results from various customer satisfaction surveys of FirstGroup’s current users—in other words, FirstGroup’s passengers—that show that those users rated the Great Western service as the second worst service around? It is not unfair or illogical to assume that, if a company offers a certain service on one line, it may offer something similar on another line. So can he explain how an anonymised scoring system is better informed than the passengers who actually use the railway system and FirstGroup in particular?

Sustainability is one of the watchwords in every aspect of public expenditure. Ensuring that the bids that are submitted can be sustained over the life of a franchise is essential. One of the reasons why hon. Members asked for the debate is that recent franchise experiences have shown that the highest bids—the riskiest bids—are not necessarily sustainable bids. The Government have even admitted that the successful bid for the west coast main line is indeed the riskier bid.

I was intrigued to hear that, during the tendering process, the Department for Transport informed one bidder that it did not view a 5% margin as sustainable. In the light of that information, that bidder reworked its bid and achieved a 7% margin. That leaves me perplexed, when I read that the successful bid is based on a 5% margin. If that is true—I assume that it is—given the lack of information and transparency, a whole series of questions are raised. Does the DFT believe that a 5% margin is sustainable? Did DFT officials give each of the bidders the same information? If they did offer the same view on sustainability to each bidder, why was a bid accepted with a figure that they believed to be unsustainable? That is an important question because it relates to risk and, in turn, how that relates to the guarantees being sought by the Government.

There is considerable contention about the guarantee that the successful bidder was asked to put against the bid. In the first case, my understanding of the guarantee is that it is based on the assessment of risk using a set formula. It is argued that if the Department had applied that formula uniformly, FirstGroup would expect, reasonably, to have been asked to put up a guarantee of around £600 million, not just the £215 million asked of it initially, which was finally reduced to £200 million. Secondly, did any negotiation take place with FirstGroup on the level of guarantee? If so, what were the circumstances? How did we reach the very small guarantee figure of £200 million, if the Department had been applying the same formula across all bids? If there was no provision within the invitation to tender for the guarantee to be negotiated, how does the Minister explain the variation in the figures from potentially £600 million down to £215 million, and finally to £200 million? Those figures are relevant to mitigating taxpayer risk.

We must not forget that in recent years a number of train operators have handed the keys back to the Government on franchises such as the east coast main line. I believe that Members want to be assured that that will not happen again and that taxpayers have an assurance that they will not be held to ransom by Dick Turpin train operators asking them to stand and deliver, having secured the contract on a bogus premise, taking their profits and scarpering when it is time to deliver the promised high return.

[Daniel Kawczynski]

I hope that the hon. Lady is not referring to any train operators as Dick Turpin-type figures.

[Rosie Cooper]

Oh, I think there are a lot of Dick Turpin-type figures about.

I would very much like to hear from the Minister on this precise point: has the Department applied its own rules or not? Given the whole handling of the process, a judicial review has been applied for, which has left us in a position where re-nationalising the line is being considered. The new Secretary of State for Transport has stated that he would seek to re-nationalise the west coast main line if there is a failure to reach an agreement before 9 December.

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[Rosie Cooper]

Is the Minister saying that any offer from Virgin to run the service at no cost and the best-value operation will affect his decision? I will ask him some questions about the associated costs should we set up a DOR.

I understand that two mobilisation processes are running side by side. Will the Minister tell us how that is working in practice? What are the associated risks and costs that arise from the lack of clarity? What assurances can he offer staff that their positions will be secure and the situation resolved?

The Minister has partially intimated the answer to the question that I am going to ask. If a DOR is to run the service, will it have the contract for a defined period, or will another mobilisation process be undertaken where an operator is awarded the contract? What will be the cost of that process?

One of the reasons for securing this debate is the manner in which the Department has handled the entire process, from the timing of the announcement to the consistent reluctance to answer hon. Members’ questions. We keep being told that this Government are open and transparent, and I want to believe that. We are told by the Department that it is confident in its decision on the west coast franchise. If I accept that both those statements are true, why have Transport Ministers not had the courage of their convictions and been willing to come to the House to make a statement to allow scrutiny of the process and the decision? There is a claim that one of the bidders had submitted questions to the Department seeking clarification on certain matters, but it has yet to receive a response. We are basically being told by the Department, “Trust us. Trust what we are telling you.”

[Daniel Kawczynski]

Before the announcement was made before the recess, I asked the Prime Minister a question about the process at Prime Minister’s Question Time. I do not recall hearing any questions from shadow Ministers or Labour Members challenging the process or the timing of when the decision would be made. Is that not the Labour party jumping on the bandwagon after concerns were generated in the media?

[Rosie Cooper]

Protecting taxpayers’ interests is a great bandwagon to jump on. We will protect their interests. The Department says, “Trust us. Trust us. Trust us,” and the hon. Gentleman is inferring that we should trust it. In the week that we had the Hillsborough revelations, “Trust us” is a very hollow call; I am not simply being cynical.

If the Government believe the decision is right, they should open the books and allow the bids to be compared. They should be open and transparent. To be honest, within the context of the east coast main line and the Great Western line, sadly I do not think we can put our faith in the Department.

During my comments, I have raised questions on the risk assessment, the funnelling of bids, the application of the rules and the soundness of growth projections. I ask the Department to try putting its faith in the democratic process and the parliamentary system so that, through debate, questioning and scrutiny, we can be assured that we have arrived at the best outcome for all parties.

Those who fail to learn the lessons of history are doomed to repeat them. The Government will not be forgiven if they allow history to repeat itself with any company taking profits from running our railways and then walking away from the contract without paying a huge penalty to cover taxpayers’ costs and, as the hon. Member for Warrington South (David Mowat) said, being barred from future Government contracts. Unless the Government can evidentially support their case, I, as one of the 170,000 people who signed the e-petition, call for them to reconsider their position.