Transport Secretary: East Coast Franchise

Alec Shelbrooke Excerpts

Wednesday 23rd May 2018 Commons Chamber

[Simon Hoare]

Will the hon. Gentleman give way?

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Will the hon. Gentleman give way?

[Andy McDonald]

I’ll tell you what: I will answer one intervention and when I have finished with that one, I’ll see if I should answer another one—how does that go as a deal?

My hon. Friend the Member for Blaydon (Liz Twist) is entirely correct about that, and she is right about the response from the people who work on the railway. The investment in their training and performance reflected that and the benefits of the quality of the railway are because of the hard work and dedication of the people who work within it.

The Secretary of State said more than once that Virgin-Stagecoach got its numbers wrong when its bid for the east coast franchise was accepted in 2014. Why, then, did the Department accept the bid? What due diligence of the bid took place? Two of the Department’s franchise bid advisers told the Transport Committee on Monday that the Virgin-Stagecoach bid got through the DFT’s financial robustness test and financial risk assessment test. If that is the case, the financial robustness test and the financial risk assessment test are wholly ineffective and inadequate. Those same witnesses—the Department’s own advisers—suggested that the east coast franchise was doomed from day one. That is hardly a ringing endorsement from those in the know. In all those circumstances, what faith can we have in the Department’s processes?

This week it emerged that the Secretary of State allowed HS2 to appoint Ernst and Young to investigate Carillion, notwithstanding that EY was advising HS2. Clearly that is a direct, obvious and major conflict of interest. The Business, Energy and Industrial Strategy and the Work and Pensions Committees asked if appropriate diligence took place. It seems that the Secretary of State’s failure to conduct proper due diligence is not isolated. EY, it should be recalled, is one of the Department’s technical advisers on the east coast operator of last resort.

Stagecoach knew that it would not meet its revenue targets weeks after taking over the east coast franchise in March 2015. The company was in constant dialogue with the Department about it. The Secretary of State has been in post since July 2016 and must have known about this for that period of time. Why did he do nothing? Has not this Transport Secretary been asleep at the wheel?

We learned this morning that the Government knew that Carillion was at risk for more than a year before the company went bust. As with the east coast franchise, the Government sat on their hands and did nothing. What about the Department’s managing director for passenger rail services, Peter Wilkinson, who was brought in at such great expense in 2012 to “get rail franchising back on track”? I am not a personnel expert, but I would say that Mr Wilkinson must be in breach of his contract.

Let us get into some of the details. On 14 Feb 2018, DFT OLR Ltd—presumably OLR stood for “operator of last resort”—was renamed London North Eastern Railway Ltd. It is a company limited by shares to a nominal value of just £1. The company has six directors, four of whom are listed with the occupation “civil servant”. They include the DFT’s head of passenger service, Peter Wilkinson; the DFT’s lead on in-franchise change, Richard Cantwell; and the DFT’s head of franchise policy and design, Simon Smith—the other civil servant does not show up on the DFT’s organogram.

Not only was LNER established in February, but the domain name was registered on 29 March. Why has it taken the Secretary of State three months to inform the House of a decision that he took all those months ago? Last year, it emerged that the Government decided to cancel rail electrification projects in March but they did not announce the decisions until after the general election in July. The collapse of the east coast franchise should set alarm bells ringing at the Department for Transport.

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[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Is there not a much bigger problem with the Labour party’s policy of nationalisation? Labour Members are trying to keep us in the single market, but the state aid rules within the single market mean that we cannot nationalise.

[Chris Grayling]

That is absolutely true. The irony is—I shall say more about this later—that it is the rail unions that have been campaigning against the same European laws that the Labour party wants to keep. This is another example of Labour’s nonsensical position.

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[Stephen Hammond]

The former Minister of State is a friend of mine from when we were both in the Department for Transport. I wholeheartedly concur, as ever.

The second part of the motion is about the future, which is where the biggest divide is. I enjoy a good reminiscence as much as the next person. I remember my fifth birthday treat—my parents took me on the railways, because I always wanted to do it.

[Alec Shelbrooke]

Was steam still around?

[Stephen Hammond]

Yes, steam was still around.

For most of the first part of my professional life, I used British Rail to commute. The idea that it was a paragon of virtue and good service is just nonsense. My memory, which I do not think has deserted me, is of old and failing rolling stock, poor maintenance, timetables that were never operated and a lack of investment. That is not the reality now. Since privatisation, the Government have invested billions in railway infrastructure. Over the next five years, they will ensure that there is another £20 billion—actually, there will be much more than that coming directly from the private sector investing in new rolling stock, which will be the biggest benefit for the public.

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[Alec Shelbrooke (Elmet and Rothwell) (Con)]

The problem this afternoon is that we are just going to fall into the ideological arguments about nationalisation and privatisation, rather than getting down to some of the key causes of why we are in this position today. Quite frankly, the nationalisation argument has been blown out of the water with the single market argument, as I said earlier.

I am pleased to be following the hon. Member for Cambridge (Daniel Zeichner) because he raised the issue of timetabling, which has affected all of us. I have certainly seen the comments from my constituents who use the trains and heard about the struggles that they have had. What is at the heart of the timetabling issue? Well, train companies normally plan their timetable six to nine months ahead, but the delays of Network Rail meant that they had two to four months. It is therefore not exactly surprising that they ended up in a situation in which the timetabling is not exactly working as smoothly and efficiently as we would hope.

Network Rail had a large part to play in where we are today. We have made comparisons with the west coast main line, and talked about Virgin keeping the contract and Stagecoach making the profits and so on, but Network Rail simply has not delivered on the basis that was laid down in the bids that were put forward. Companies made promises about power upgrades in their bids, but they have not occurred. They also promised to eliminate bottlenecks, and that has not occurred.

[Several hon. Members rose—]

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[Alec Shelbrooke]

Just give me two seconds. When we look at the money that was earned, some £1 billion was returned in three years compared with £1 billion in five years under nationalisation.

[Alan Brown]

The hon. Gentleman is talking about the problems caused by Network Rail. Will he remind the House who was in charge of Network Rail for the Government?

[Alec Shelbrooke]

I am delighted that the hon. Gentleman has made that point. Indeed, that is the problem with a nationalised company. Many people have said, “Oh, it’s the Secretary of State’s responsibility in a nationalised company, ” but that is not how it works—it is not how it has ever worked. On the one hand, people are saying that the Secretary of State should take complete control of the railways, and on the other that he should get out. People who are running a nationalised operation do not share the sense of urgency of those in the private sector. There are litanies of delayed or missing projects under Network Rail.

[Ian Mearns]

The hon. Gentleman should just remember that Railtrack was privatised. It failed, and the Government had to take it back in-house to save the railway network.

[Alec Shelbrooke]

Railtrack failed due to the vandalism of John Prescott when he was Transport Secretary. He took advantage of the opportunity when British Rail’s failure to keep its system upgraded and safe culminated just three years into privatisation under Railtrack. The track that broke, which caused Railtrack to fail and to be transformed into Network Rail, did not degrade in the three years of privatisation. It broke as a result of a catalogue of rail mismanagement that led up to that point. It is one of the biggest disgraces—

[Mike Amesbury (Weaver Vale) (Lab)]

rose—

[Alec Shelbrooke]

I am sorry, but I have taken two interventions and I will not have any more.

It was a disgrace to use that failure as an opportunity to act according to political ideology. I am very clear on that point. One of the fundamental problems with the railway is that we have got to a point where we are looking back through rose-tinted glasses. I recommend to everyone—perhaps some people have seen it—a programme on Channel Five at the moment called “InterCity 125: The Train That Saved Britain’s Railway”. It is fantastic. I really enjoyed the first episode. What was the first part of that episode? The state of the railways in this country when they were under British Rail, and the lack of investment by Governments of all colours during that time.

We talk about the east coast main line. We are going back to a period when, given the resources that were available at the time, with the overhead powering, the gantries were as far apart as they could possibly be, so of course high winds displaced the wires. These were all failures of trying to deal with a nationalised company that has to compete for its money with the health service, benefits and pensions, education and all the other things the Government have to spend money on. They were also due to the fact that whatever those failures were, staff would still come to work the next day and get paid, because they did not have the responsibilities that they would have had in the private sector.

I am being very critical of Network Rail, and one reason why is that I have had it up to here—up to the top of my head, for the benefit of Hansard—with Network Rail. For several years, this Government—under the then Chancellor of the Exchequer, George Osborne—delivered a grant to Network Rail to put in place a bridge at Dartford station in my constituency under the Access for All scheme. I have constantly been in meetings about that with Network Rail, and I have heard excuse after excuse for why it is not happening. Fundamentally, whatever the reasons, it is getting to a stage where it could not manage its way out of a paper bag. I have had enough—my constituents have had enough—of Network Rail staff’s failure to take responsibility and attempts to pass the buck. There is only one reason why we have problems with electrification: the poor management and poor running of Network Rail. I have kept quiet about my criticisms of Network Rail to this point, but not today, because another failure has led to the contents of a rail franchise bid not being delivered.

Like many Members, I have used the east coast main line regularly, and none of us can deny that the carriages have been upgraded. They were refurbished. The experience in those carriages is more pleasant than it was in the recent past, and that shows that there has been investment.

Every single time we talk about an upgrade, Network Rail puts it back. Now we are looking at December 2018 before the latest set of figures come through. It beggars belief that when we see the failure of such a major company at the heart of our railways, which is charged with delivering the infrastructure for the rail operating companies to work on, nothing ever happens.

The motion states that the Secretary of State’s pay should be cut. In my view, we might instead start thinking about censuring the people who are putting together project plans but not delivering them.

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[Alec Shelbrooke]

I am sure that my hon. Friend recognises that President Macron, a centre-left politician, has recognised that the French railway system is completely unsustainable, and that has led all the workers out on strike.

[Kwasi Kwarteng]

My hon. Friend makes an excellent point that goes to the slight craziness of a lot of our debate. It is clear to me that the partnership with the private sector has put far more investment—billions and billions of pounds of investment—into the network than would have been the case if it had remained under public ownership. We all know the budgetary pressures. We all know the budgetary situation in 2010, when we had a deficit of £160 billion. It does not take a particularly sophisticated mathematician to work out that, if we had had the rail network in public ownership, as well as public ownership of vast swathes of industry, the budgetary position would have been a lot worse than even in 2010.

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[Alec Shelbrooke]

Will the hon. Lady give way?

[Rachael Maskell]

I will make some progress now and see how the time goes.

I thank my hon. Friends for their contributions in holding the Secretary of State to account: my hon. Friends the Members for Bishop Auckland (Helen Goodman), for Darlington (Jenny Chapman), for Blaydon (Liz Twist), for Leeds West (Rachel Reeves), for Nottingham South (Lilian Greenwood), for North Durham (Mr Jones), for Gateshead (Ian Mearns), for Jarrow (Mr Hepburn), for Blyth Valley (Mr Campbell) and for Weaver Vale (Mike Amesbury). My hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) used her business experience and expertise to analyse the reality of the Secretary of State’s failed franchising model and found him wanting. My hon. Friend the Member for Dewsbury (Paula Sherriff) was right about the Secretary of State’s readiness to, as she put it, bail out their rich pals no matter how badly their business is doing. My hon. Friend the Member for Leeds North West (Alex Sobel) provided a reality check to the Government’s approach, saying that it was more likely to be found on platform nine and three quarters. He was absolutely spot on when he highlighted the loss of the east coast reward scheme.

[Alec Shelbrooke]

Will the hon. Lady give way?

[Rachael Maskell]

As I say, I am going to see how time progresses.

I question why the Secretary of State has waited so long. Having registered the LNER name back in March this year, it is clear that nearly two months have passed with him withholding information from the public about the level of failure and his intention to nationalise the line. Perhaps he could not say, “Nationalisation”.

I do not want Stagecoach or Virgin to feel that they are off the hook either. While fully exploiting the Tory privatisation of the Railways Act 1993, let us be clear that the track record of companies such as Virgin is to drive profit out of the public purse—out of the pockets of taxpayers. Virgin has been particularly astute in the way that it has used litigation to sue the state over contract failure. It is the financial model of Virgin to do so, no matter the line of business, and look at how it has used that to win the lucrative contract on the west coast.

Can the Secretary of State guarantee that there are no mechanisms that Virgin or Stagecoach can use to take out litigation against him or his Department in the light of this abject failure, and can he further guarantee that he will disqualify them from applying for any future transport contracts? Further, can the Secretary of State report to the House how much this abject failure on the east coast main line has cost the taxpayer? Just three years after the east coast line was ripped out of public hands, time and resources have been spent—public money—on this failed, ideologically driven project.

From my discussions with Network Rail and Virgin—

[Alec Shelbrooke]

Will the hon. Lady give way?

[Rachael Maskell]

I said I would give way if there is time at the end. From my discussions with Network Rail and Virgin Trains East Coast, it is evident that the Secretary of State’s Department, and therefore the Secretary of State, failed in the process of drawing up the franchise—failed to discuss the infrastructure upgrade, scheduling and deliverability with Network Rail when its budgets were evidently under strain. So we had one part of his Department cutting back while the other part of the Department was signing agreements to the contrary, agreeing things that would never be delivered. How did the Government let this happen? I have heard that from both Network Rail and the rail operator, so I know it to be true.

We know that there are around another four franchises that are on the brink of collapse. Will the Secretary of State therefore come to this House and make a statement on each of these contracts and bring these immediately back under public control? He has a responsibility to militate against the future failure of our vital public services, so will he take action now to avoid failure and to ensure that our rail is safely and smoothly transferred into his operator of last resort?

[Alec Shelbrooke]

I am most grateful to the hon. Lady for giving way. Will she now clarify from the Dispatch Box that in order to nationalise the railways, it is Labour’s specific policy not to be a member of the single market?

[Rachael Maskell]

I can make it absolutely clear to the hon. Gentleman that the French railway system and the German railway system have trains in national ownership, not only in their country, but in our country, too.

Right across the country, it is crystal clear that this Government’s transport policies daily fail the public. They charge more and more for the public to use the trains while signing dodgy deals to enable private companies and even foreign Governments to suck money out of our railways; and they waste money on livery and uniforms, as we have heard in today’s debate. I must put on record that it is the staff who are at the heart of the constant change, and we thank them for their endurance through this process.

Labour would put that money back into our trains, back into upgrades, back into building our public services and therefore back into our economy. Today’s debate has clearly demonstrated that the Secretary of State has completely failed this nation and has completely failed our railways. It is time for a new Secretary of State, and my hon. Friend the Member for Middlesbrough (Andy McDonald) is ready to take our rail back and get our nation back on track. Labour will rescue and generate our rail service once again.

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[Joseph Johnson]

We are putting together the new east coast partnership, which will constitute a new approach to how we run the railways. It will bring together the best of the public sector and the best of the private sector, ending the blame game that has seen train companies blame the track operator and vice versa.

Let us not forget that, as a passenger service, this was a well-run railway. The dedication of the staff responsible for the delivery of railway services has maintained high levels of passenger satisfaction—more than nine out of 10 passengers are happy with their journeys.

Opposition Members have suggested that we have nationalised the railway. That is, of course, not the case; rather, this is a temporary return to public control. Indeed, that was envisaged in the original design of privatisation in the early 1990s. The use of the operator of last resort—our public sector operator—is an integral part of the franchising system, not an alternative to it. It is used on a routine basis when we negotiate with private companies to provide a genuine alternative in negotiations, ensuring that we secure real benefits for passengers and taxpayers, and keep people moving. They are given a better deal because they know that the Government have this option in their back pocket.

As was emphasised in the 2013 Brown review, passengers remain protected through the Department’s ability to handle default with an operator of last resort on hand to take over. In this situation, the OLR will do what it is supposed to do: work with the Department on the next competition for a commercial train operator. It will help us to shape the new partnership railway on the east coast, preparing the ground for the line to be transformed into a public-private partnership that will deliver the best of both worlds.

[Alec Shelbrooke]

The hon. Member for York Central (Rachael Maskell) commented on the French nationalised railways. Does my hon. Friend agree that they are in terrible straits and that the President has recognised that the present system cannot continue because it is haemorrhaging billions of euros every year?