Rail Franchise Agreements

Stephen Hammond Excerpts

Wednesday 12th March 2014 Commons Chamber

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

I thank my hon. Friend the Member for Portsmouth North (Penny Mordaunt) for securing the debate, and indeed for her closing remarks—I give all thanks for God’s good fortune that I am a Minister. I hope that she will take some comfort from my remarks about the changes we have made to the franchising system since re-establishing it in March 2013, as some of the things she spoke about are now integral to the new franchising process.

As we heard, my hon. Friend has been an extraordinary doughty campaigner on behalf of the constituents in relation to the service from Portsmouth. I know that there is a significant file of correspondence between my Department and her on the subject, and I know that she has previously secured debates on the matter in the House.

Although I am tempted to use the three hours available, that might not find favour with you, Madam Deputy Speaker, so I will limit my remarks to the standard length for Adjournment debates and speak for about 15 minutes. I will talk first about the franchising process and the reforms we have made, and then address some of my hon. Friend’s specific comments and offer some words that hopefully will help her as she continues, quite rightly, to campaign to ensure the best for her constituents.

It is important that we understand exactly what a franchising process is and the general principles the Department follows in that regard. Strictly speaking, as most people understand, a franchise agreement is merely a contract between the Department and the operating company that sets out the responsibilities of each party. In many ways that is what we are buying through the privatised railway. Our franchise agreements contain a number of schedules, all of which include obligations that the train operating companies and the Secretary of State have to one another.

It is also pertinent to the debate to point out that when we make a franchise agreement with a private sector partner we go through a number of processes to ensure that the process is run correctly and is free of influence. The Secretary of State announced a new franchising programme in March last year, including, for the first time, a long-term schedule and the direct awards that we will make. That ensures that the process can be for the long term, that bidders can bid correctly and that there is the right number of bidders in the process to ensure value for money. We plan to update that schedule annually, and I or one of my colleagues will update the House on that in the near future.

The process the Departments undertakes has been set out in detail in the franchise competition and process guide. There are detailed changes from competition to competition, but the process is broadly simple. However, there have been a number of changes that I think are pertinent. One of those changes—a huge change—has been in the consultation that takes place with the public and the rail industry. That is essential to the ongoing franchise programme. We are revising our public consultation procedures to ensure that we consult as widely as we can when setting objectives for new franchises, and that has dramatically increased the amount of consultation that the Department undertakes.

In recent competitions, we have worked extensively with Network Rail and the Office of Rail Regulation, but also, more importantly and pertinently for the issues that my hon. Friend raises, with Passenger Focus and, particularly in the London area, with London TravelWatch. That has ensured that the wider industry and the wider interests outside the bidding community have been involved in looking at what should be the proposed specifications. We are asking organisations to provide in future their own advice on bidders’ responses to franchise competitions. We have also spoken to Members of Parliament, local authorities and other local groups, and consulted widely with the Rail Delivery Group and the bidders themselves to ensure that our propositions are robust and deliverable. All those groups now have a chance to make a significant contribution to, and have a significant impact on, the specifications. It is absolutely key to the new franchising process that the Government have committed to that level of engagement as we move forward, and there has clearly been an improvement.

As my hon. Friend said, the privatisation of the railways has seen an industry that was in decline turn into a resounding success story. We are now moving into a crucial period where Government, having reset the franchising process, must work in partnership with the private sector to build on that success. That is why the process has been restarted. We are taking steps to improve the way in which we contract with the private sector. That has been highlighted most recently in the new contract procedure that we are undertaking with the east coast main line, where we set out a prospectus that provided for consultation with the public and the rail industry, as I described, before the invitation to tender. We in Government need to deliver the highest quality specifications in invitations to tender which ensure that the bids we get mean that the franchise arrangements will deliver the best possible rail services for passengers and taxpayers.

The second point that is key in understanding the changes to the franchising process that we have undertaken in the past year is that, for the first time ever—this is one of the biggest changes we have made—we are taking into account non-financial factors in our assessment of bids. We are doing this right now as we evaluate the bids for the Essex Thameside and the Thameslink, Southern and Great Northern franchises. In the past, ever since the start of rail franchising, we have scored bids only on the financial elements and the elements that deliver a return in terms of premium or reduced subsidy. The financial factors are obviously important, but as my hon. Friend said, the quality of service that passengers receive, and therefore the quality aspects of bids, must be taken into account. The Department now does that, particularly when, as is often the case, the financial aspects are relatively closely matched and the quality aspects can be a potential tie-breaker in the assessment of bids.

This has been put in place to drive a certain set of behaviours in bidders, which, in turn, drives a certain set of changes to the bid and the outcome for passengers once the franchise agreement is in place. Putting quality into the bidding process is not only changing the mindset of bidders but, most importantly, putting the passenger at the forefront of the franchising process. We have recognised that in the past this process has not always delivered for the passenger or the taxpayer, and that is the rationale for the change. These are often rightly referred to as the quality issues, and they will improve the experience of passengers.

Each franchise competition will inevitably assess its own approach to quality and consider the balance between affordability and appropriateness with regard to the objectives that the Secretary of State and the private sector hope to achieve in the franchising process. It will also consider the ways in which we can improve the experience for passengers and the long-term value for the taxpayer.

The Department recognises the need to provide the right environment to encourage the continuing success of the railways. A large amount of my hon. Friend’s speech rightly centred on the rolling stock. The Department faces some considerable capacity issues. The increase in the number of people wishing to travel on a number of routes means that we need to find ways to increase capacity.

People who travel often want to sit and I understand the tensions my hon. Friend has referred to with regard to the rolling stock on the Portsmouth to London line. The class 450s that were put in place by Stagecoach South West on that route have undoubtedly increased the seating capacity, but she is right to raise issues about how that capacity is reached. There is a regional trend towards the common adoption of three-plus-two seating in standard class, which allows more passengers to be seated and fewer to be required to stand, but I recognise that there is a judgment to be made on comfort.

My hon. Friend referred to an interesting report that concludes that a seat that is judged to be comfortable can lead to some pain and that, conversely, a seat that is judged to be uncomfortable may cause no damage at all. Although the report rightly highlights some of the possible complaints about the 450s and their formation, I am not sure that it is as conclusive as has been suggested to her campaign. None the less, she is right to point out that the 450s have implications for many of her commuters who do not regard them as comfortable. Therefore, as I pointed out, the new franchising process seeks to achieve a balance between affordability and quality. We must consider whether the balance between capacity and the appropriate comfort of passengers is right.

I would be delighted to meet my hon. Friend to discuss in some depth the merits of the 444 as against the 450 and its appropriateness for her commuters. I also hope that my rather long explanation of the franchising process—although it could have been much longer—has led her to recognise that there has been change that allows for the possibility of new services that would be of benefit to her commuters. I would very much welcome her contribution on that and I am sure we will discuss it at our meeting. A semi-fast Portsmouth Flyer, or even the Mordaunt Express—which would be an excellent innovation—would be possible under the new franchising process.

One of the aspects that I have not described in more detail is that, while we are setting minimum temporary speed restrictions as a train service requirement, we are also giving points to bidders to consider how new markets and opportunities, which the new capacity we are building and the huge Government investment in the railways afford, can be incorporated in the new franchise agreements. When we start the refranchising process for my hon. Friend’s line, I would urge her to take the opportunity to engage in that process. There is a real opportunity to influence it. I hope she will take it and I am sure she will make that point at her meeting with me.

My right hon. Friend the Secretary of State has quite rightly said that we need to put passengers at the heart of franchises. The changes that we are making to the franchising process are starting to make a real change in ensuring that passengers are central to the franchise competition. We are now consulting them, and we are looking at the possibility of using innovation to take that consultation through the evaluation process, so that the quality provided to passengers is assessed in the bidding process for the first time ever.

It is a new and changed process, and I hope that my hon. Friend agrees that it will certainly start to make a potential difference to her commuters when we put the line’s new franchise process in place in two years’ time. As I have just said, I am delighted to have the opportunity to meet her in the interim. I hope that my remarks have given her some comfort that the Government recognise the plight of the Portsmouth commuter and recognise that some changes are possible.

Question put and agreed to.