East Coast Main Line

Sharon Hodgson Excerpts

Tuesday 12th November 2013 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Bone. It has been brought to my attention that today’s debate coincides with the beginning of a new documentary series on Sky about East Coast trains and the staff who work on them, so I want to assure you that the only interest I have to declare is as a regular traveller on East Coast trains and as an MP whose constituents are similarly frequent travellers; I definitely do not have an interest as a public relations executive for East Coast or BSkyB. The reason why my colleagues and I wanted this debate was not to promote that programme, but to discuss developments in a process that will have a significant impact on the staff and travellers featured in it.

It has been just over five months since we discussed the plans in a debate in this Chamber called by my hon. Friend the Member for Middlesbrough (Andy McDonald). As I did then, I pay tribute to hon. Members who have led the campaign in Parliament so successfully, particularly my hon. Friends the Members for Edinburgh East (Sheila Gilmore), who is in her place, and for City of Durham (Roberta Blackman-Woods). I thought and hoped that the strength of feeling and argument shown then, and in debates since, might have caused the Government at least to enter one of their now trademark pauses. There is still time for them to do so. In fact, we have not seen a pause, a rethink or any evidence that they are listening to the chorus of opposition to their plans, even among their own voters.

[Ian Lavery (Wansbeck) (Lab)]

I am sure my hon. Friend will make a powerful speech in favour of the east coast main line. Is it not a fact that only about one in five—21%—of the general public supports the re-privatisation of the east coast main line, so why is Tory dogma prevailing?

[Mrs Hodgson]

That is a very good question, which the Minister will perhaps answer. For all of us here and our constituents, that is the question, and our only answer is that dogma and ideology are forcing re-privatisation to go ahead. The Government have pressed on regardless, and the tendering process is well under way, which is why my colleagues and I thought it was time for another debate.

[Karl MᶜCartney (Lincoln) (Con)]

It is a pleasure to serve under your chairmanship, Mr Bone. The hon. Member for Wansbeck (Ian Lavery) made an interesting intervention in which he mentioned that the Opposition are blaming the current Government. Will the hon. Lady tell me exactly how many train companies were renationalised in the 13 years of the Labour Government?

[Mrs Hodgson]

We are not talking about the renationalisation of the east coast main line—it has already been nationalised—but about how to stop it from being re-privatised. The point is that it is already in national ownership.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

I congratulate my hon. Friend on securing this important debate. I suggest that there have been many changes at East Coast in the past few years. In fact, for the first time in a long time, it seems to be working well, to the point that the east coast main line has a record level of customer satisfaction. The company has won 13 industry awards since 2012, including as Britain’s top employer. It is surely endorsement enough that so many Opposition Members who travel on East Coast trains week in, week out want to fight for it to remain as it is and against changing it again.

[Mrs Hodgson]

That is the point—the east coast main line does not need to change. The process might ultimately lead to a significantly worse deal for all our constituents, as well as for the Exchequer, when there is absolutely no need to go down such a path.

As I and others said in the last debate, East Coast is doing very well under the current arrangement, both for passengers and the Exchequer. Since the failure of National Express, thousands more services have been timetabled; hundreds of thousands more passengers have used services; significant investment has been made in passenger comfort and stations, including at Newcastle; customer satisfaction has been at record highs, notwithstanding the recent blip; and complaints have been handled in a timely way 98% of the time, compared with 73% of the time under private ownership.

[Karl MᶜCartney]

Will the hon. Lady give way?

[Mrs Hodgson]

No, I will not. I will make some progress, because many hon. Members want to speak.

This is the people’s railway. It is delivering real improvements for our constituents, unencumbered by the primary purpose of having to pay dividends. That is not to say that Directly Operated Railways is squandering millions on such trivial things as improving the experience of their customers and therefore winning more of them; it is also chipping in a lot of money to the Exchequer. By the end of this financial year, it will have returned £800 million to the Treasury and put the rest of its surplus of nearly £50 million back into the service. It of course gets the lowest rates of public subsidy of all the train operators, except London commuter services.

Ministers have always talked about the need for a private operator to bring in extra investment, but have failed to make clear how much will be brought in by this process. What investment we know about appears to come from the public purse. Just as with Royal Mail, Ministers seem to be privatising the profit, while keeping the ongoing costs on the public books.

The Minister will say that decisions should not be taken on the basis of ideology, and to an extent I agree, although I must of course confess to having a default opinion when it comes to the ownership of public services. However, the returns to the Treasury and the improvements in services provide the business case in support of our argument that the line should remain directly operated. Perhaps that is why nearly half of Tory voters oppose the Government plans. If anyone is guilty of ideological decision making on this issue, it is surely the Government.

As if the west coast main line shambles, which cost taxpayers £55 million, was not bad enough, the contract extensions for other franchises—the Government have had to negotiate them so that they could bring forward the east coast main line tender—will cost taxpayers millions more in lost revenue. For example, First Great Western paid £126 million in premiums last year, but will pay only £17 million next year, as a result of the extension terms it has been given by the Government. Ministers are actually throwing money away hand over fist, just so they can make a point of privatising a franchise that they know is doing perfectly well in public hands.

[Ian Mearns (Gateshead) (Lab)]

My hon. Friend is making an excellent speech. Is it not ironic that the Government want to return the east coast main line to the private sector when it is clearly succeeding very well in the public sector, while the private sector has failed twice on that line?

[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?

[The Parliamentary Under-Secretary of State for Transport (Stephen Hammond)]

There is no suggestion of a third-class service in the prospectus. One version of the document was leaked, but even that did not refer to a third class, but to the possibility of a service between standard and first class. Some might like to call it premium economy. No one has ever called it third class. Can we just lay that myth to rest?

[Mrs Hodgson]

I am sure the Minister is aware that the National Society of French Railways introduced a “no frills” service in France this year, below standard class. If Keolis and Eurostar win the contract, will he guarantee that we will not see the same here? I am happy to give way to the Minister if he wants to make that guarantee now; perhaps he will make it in his closing remarks. By way of assurance, perhaps he could place a copy of the document in question in the Library. I know he said that such a claim was never in the document, but if there is such a document, could he place it in the Library so the public can see that we are not being sold down the river—or in this case down the railway line? The Government are always keen to bolster their transparency credentials, and this would be an excellent way of conducting themselves in an open and honest way.

[Stephen Hammond]

This Government are so open and transparent that all those documents are available for the hon. Lady to see now. I am surprised she did not choose to read them before the debate today.

[Mrs Hodgson]

I will go away and look more closely at the matter. I may have missed the part to which the Minister refers. Perhaps he could write to me about it, so we can be assured that there will not be a third-class rail service.

I will conclude because many Members wish to speak in the debate. I leave the Minister with the words of one of his departmental predecessors, the noble Lord Adonis. He was regularly cited by Ministers as being against public ownership when he was Secretary of State, and that was correct. However, given the success of Directly Operated Railways, he recently had this to say:

“In the last four years East Coast has established itself as one of the best train operating companies in the country, both operationally and commercially…This has fundamentally changed the situation, and it is right and proper that East Coast should be allowed to continue as a public sector comparator to the existing private franchises.”

Lord Adonis is a wise man. He had an opinion. He looked at the evidence that contradicted his opinion and, like many a wise man before him, accepted that his opinion had been wrong and changed his mind. There is still time for the Minister and his colleagues to demonstrate similar wisdom and halt this process before more money is spent by the Department and the companies that might bid. They should accept that this experiment in public ownership, forced upon a reluctant Secretary of State at the time by the failure of a private provider, has been a success and can continue to be a success.

[Karl MᶜCartney]

Will the hon. Lady give way?

[Mrs Hodgson]

No, I am just winding up. I am sure the hon. Gentleman will get his chance to speak in a moment.

Most importantly, it is time for the Government to put British passengers and taxpayers first, before taking profits out of the system—especially where such profits then go to subsidise passengers in other countries. As I said in June, I hope the Minister will listen to what parliamentarians are telling him here today. We have already had the shambles over the west coast main line. It is in everyone’s interests for the Government not to make the wrong decision on the east coast main line as well. Let us call off the tender and give Directly Operated Railways the stability and support it needs to carry on improving services and sending much-needed cash back to the Treasury. At the very least, let us allow it to bid to run the service again in the coming years, and weigh up the public benefit that that would provide in a fair and open way. Come on, Minister: it is public versus private. Surely he is up for that.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Transport (Stephen Hammond)]

It is a great delight to see you in the Chair this morning, Mr Bone. I thank the hon. Member for Washington and Sunderland West (Mrs Hodgson) for securing the debate, which provides yet another opportunity to present the benefits of rail franchising and to talk about the east coast main line franchise.

I have listened to a number of Members speak this morning, and I hope to address some of what they have said and asked for on behalf of their constituents. Regrettably, I cannot deal with all the points, because we are engaged in a commercially confidential and sensitive procurement exercise to appoint the right service delivery partner for this vital and historic railway. On 25 October, we began the competition for the inter-city east coast main line franchise by publishing a notice in the Official Journal of the European Union, and publishing the inter-city east coast prospectus and the pre-qualifications documents, so that prospective bidders can apply to take part in this important competition. The prospectus set out some of the new policies to be included in the new franchise, such as capitalisation requirements and the GDP support mechanism to mitigate the kinds of failures we have seen in the past. The Government have learned the lessons from the west coast main line and put in place new procedures and policies. I am confident that the competition will run smoothly.

We are now in the pre-qualification stage of the competition, so it is only right that I am careful in my comments this morning not to prejudice the competition. As is normal, the Department has set up clear processes, which I must follow, for the transmission of information to the market throughout this competition.

[Mrs Hodgson]

The Minister mentioned the prospectus that is in the public domain. Will he explain the difference between that and the leaked prospectus to which my hon. Friend the Member for Nottingham South (Lilian Greenwood) referred and from which I obtained information about the proposal for third-class rail travel? Where did that leaked prospectus come from, and does it even exist? It was printed in The Daily Telegraph, which I am sure he thinks is a jolly good paper that would not print something that did not exist.

[Stephen Hammond]

The hon. Lady is drawing me into commenting on The Daily Telegraph, and I would rather not do that at the moment, for obvious reasons. The Government rightly do not comment on leaked documents. If the hon. Lady wants to rely on it, it is for her to do so, but the Government rely on the prospectus that we have issued.

I shall pick up some of the questions asked this morning. There has been a whiff of mischief in this debate. Much has been said about political dogma and the hon. Member for Easington (Grahame M. Morris) gave himself away when he said that he supports renationalisation of the railways. That is what this debate is about. It is not about securing the best deal for passengers, the railways or the east coast main line. It is about renationalisation.

The whiff of mischief continued from the Labour Front-Bench spokesman who was keen to point out what she believes is the benefit of nationalisation, but failed to point out that the previous Labour Government saw the benefits of the franchising system and privatisation, and continued with that process throughout their 13 years in office. Moreover, I gently remind the hon. Lady that when she starts a catalogue of failures, she might remember who had not done enough work on the franchising process in 2007 when National Express took it over.

--- Later in debate ---

[Stephen Hammond]

I am not sure that the hon. Gentleman would argue that with British Airways, and I am not sure why he should do so with the franchise. His point is nonsense.

[Mrs Hodgson]

I know that I cannot tempt the Minister to discuss the existence of the leaked document, but page 66 of the publicly available document states:

“We would be open to variations in the ratio of first to standard class accommodation…We would be unlikely to consider any variation which delivers a worsening of passenger experience”,

which I believe third class would. Will he confirm that no third class will be allowed under the franchise?

[Stephen Hammond]

The hon. Lady is dancing on a pinhead. I have made it clear that in the document we will not and have not specified a third class. I would have thought that she and her colleagues supported utilising first-class coaches, so that more passengers can have a better experience.

I listened with interest to the hon. Member for Edinburgh North and Leith (Mark Lazarowicz) who told us that it was impossible to argue that the decline in ridership on the railways between the early 1900s and the 1990s was due to public ownership, or that the benefits of privatisation, which has seen ridership double, could be established. He then proceeded to use exactly those arguments for the east coast main line, which was slightly surprising.

I listened carefully to the hon. Member for Edinburgh East (Sheila Gilmore) who referred to securing new rolling stock under the public sector. The inter-city express programme has been running for some time. The trains will be procured by Government and will also be used by Great Western, and that is currently being operated by First Great Western. To suggest that the IEP process was not running beforehand was wrong.

It is equally odd that some hon. Members sought to suggest that the Government have been panicked into the inter-city east coast main line refranchising. What they forget is that the franchise consultation had already been held prior to the west coast franchise being stopped. It had already been announced back in 2011 that the intention was to publish the invitation to tender in January 2013. To contend that this is a rushed privatisation—we may discuss the word “privatisation” in a moment—is simply nonsense.