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The bidding process has figured in this debate. It is another aspect of franchising that has gone seriously awry. What we have witnessed during the tendering process is the Government’s ever-increasing desire to recoup from train operating companies some of the vast sums that have been spent on the rail networks since the demise of Railtrack. The companies, in turn, have ratcheted up their bids in the knowledge that the overriding point of interest to the Department, or rather the Treasury, is the size of the premium they are willing to pay. Christopher Garnett, former chief executive of GNER, made the well-publicised comment that it was far better to overbid drastically for a new franchise than to underbid and lose it. Yet there is no point in the Department accepting absurdly high bids when it is
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quite clear that they cannot be met. My hon. Friend alluded to GNER’s particular problems as a result of a court judgment, but the wider point applies. Everyone ends up losing out. Fares go on and on rising to cover the premiums, and the taxpayer ends up forking out when the premiums cannot be delivered.

The Government should be awarding contracts not just to the highest bidder but to the one that shows that it has serious plans for enhancing the service it wants to operate. Unfortunately, recently re-awarded franchises have been tied up with such tight specifications that the operating companies are left with little or no room to innovate. It is clear that the franchising process is going wrong mainly because of too much Government interference at the time of setting and sometimes subsequently. Can it really be right that 12 civil servants are involved in writing timetables? Is it not madness that all procurement decisions lie in the last resort with Government? Is it not altogether crazy that in 2006, the Secretary of State has operational involvement in and control of the railways? It must stop. Politicians should set and agree the railways’ strategic framework with industry and passenger groups—a number of speakers have made it clear that that is not happening—but the railway professionals should run the railways. The Government should not be in the business of micro-managing them, but unfortunately they are.

The Transport Committee report has been referred to several times, but I shall quote it:

I entirely agree. The Government need to stop dictating and give the companies that operate the railways the scope to respond to demand.

Undoubtedly the greatest failure of the current franchising system is the fact that it does not allow for capacity increases in line with the rise in passenger numbers. That problem is going to get worse. The Office of Rail Regulation forecasts that although passenger numbers will grow by 28 per cent. by 2014, rail capacity will grow by just 2 per cent.

Kelvin Hopkins: Perhaps unusually, I want to defend the Government. Pressure is put upon them by the electorate who travel on trains, who say, “Sort the railways out, because they don’t work and I’m standing, having a miserable journey every day”. However, the hon. Gentleman says that the Government should not intervene, so they are caught between a rock and a hard place—they are damned if they do, damned if they do not. The Government are right to intervene and say that things must improve, and right to give some direction, to ensure that passengers have a slightly better time than they have now.

Mr. Brazier: I am afraid that I profoundly disagree. I hope that I am not going beyond the rules of order in saying that there is a direct parallel with the NHS, where more and more Government intervention, targets and rules are not helping. The way to do things is to have a structure that enables the operators to do better, not to sit over their shoulders and micro-manage them on detail. That applies in management of all sorts.

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Kelvin Hopkins rose—

Mr. Brazier: I shall give way once more, but I am conscious of the time.

Kelvin Hopkins: I so am grateful to the hon. Gentleman for giving way, and I shall try to make this my last intervention. There is a difference between the health service, which is still essentially a public service in the public sector, and the railways, which are run by private companies that try to operate like a public service. Would the railways not be better in the public sector, where there would be more accountability, rather than being left to the private sector?

Mr. Brazier: I would try your patience if I gave a long answer to that, Mr. Weir. Briefly, I firmly believe in the delivery of services free at the point of contact in the NHS. However, there is only one part of the health service in my constituency about which I have never received a letter of complaint, and that is the Pilgrims hospice in Canterbury, which is a voluntary organisation and wholly independent from the NHS.

The Government need to stop dictating and allow the companies that operate the railways the scope to respond to demand and to innovate. Undoubtedly the greatest failure of the current franchising system is the fact that it does not allow for capacity increases in line with the rise in passenger numbers. I have made the point that the problem will get worse with the differential rates of growth. Even now, commuter routes are heavily congested. Capacity on trains travelling into London is regularly exceeded by more than 40 per cent. The seating capacity on the Cambridge to Liverpool Street route is exceeded by more than 80 per cent., which is way beyond the official definition of crowding. Put another way, some trains are carrying 200 more people than they have space for.

One might think that the Government might look for increases in capacity when putting new franchises out to tender. Not a bit of it. Two recently awarded franchises demonstrate that fact. First Capital Connect had to remove trains from its routes in order to meet its franchise specifications, and the hon. Member for Twickenham has already taken us through the South West Trains saga of ripping out seats and lavatories to provide more room for people to stand.

In order to achieve greater flexibility for the operating companies, the Government must consider extending the length of franchises, which is something to which my right hon. Friend referred. The central problem with the current seven-year franchises is that they leave a small window of opportunity for train operating companies to invest, if they want to see a return on that investment before the franchise expires. The most important example of that is obviously new rolling stock. From purchase to delivery takes several years, but it makes little sense for a company to spend a lot of money on an asset out of which it might get very little use. If franchises were extended to 15 years, the train companies could expect to enjoy a long period of use. They would also be in a position to invest more in all the station facilities that passengers want. My right hon. Friend gave examples of those, from car parking to platform lengths, as did other hon. Members.

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Ultimately, the capacity problem will begin to exert a stranglehold on our economy. Overcrowding is not just bad for people’s quality of life. A buoyant economy requires people to be able to get from place to place in a timely fashion. We need the integration of track and operator, by some means or other. We need less Government micro-management, and above all we need the longer horizons that would come from much longer franchises. Privatisation has delivered some fruits, but we need to think again about its structure.

3.45 pm

The Parliamentary Under-Secretary of State for Transport (Mr. Tom Harris): I welcome you to the Chair, Mr. Weir, and say what a pleasure it is to see you where you rightly belong: at the centre of the British establishment. Long may you remain there.

This has been a useful debate and I congratulate the hon. Member for Twickenham (Dr. Cable) on instigating it. The debate has been extremely well informed, as usual. Most of the colleagues who take part in these debates have long experience of and genuine support for the railways—my hon. Friend the Member for Luton, North (Kelvin Hopkins) is a perfect example of that. That always makes the debates more interesting and worth while. It is also a delight to see the former Secretary of State for Transport, the right hon. Member for North-West Hampshire (Sir George Young).

I am pleased to have the opportunity to explain the present position and future plans for passenger rail franchises. As was pointed out a number of times, we recently announced the award of the new south western franchise, which encompasses the present South West Trains and Island Line franchises. At the end of last month we issued invitations to tender for three new franchises—the new cross-country, east midlands and west midlands franchises. I am of course aware of concerns that arise about service levels and other matters when rail franchises are replaced, and I shall deal with those.

The Transport Committee’s report has been referred to a number of times. The Department for Transport will obviously consider the report, and we shall issue a formal response in January. However, I want to make it clear that my remarks today are not intended in any way as a formal response to that report.

John McDonnell: My hon. Friend the Minister has mentioned the range of new franchises. The east London line extension is critical for London. It has been welcomed by all, and was to be transferred to London Underground, but can he clarify—if not today, then in correspondence—whether it was a condition of transfer to the Mayor of London’s responsibilities that the line should be franchised out?

Mr. Harris: My hon. Friend might anticipate my answer to that. I shall have to write to him once I have checked the details.

The current franchising system is delivering. More than 1 billion passenger journeys were made last year, which was 40 per cent. more than 10 years ago. Performance has continued to improve, with almost 88 per cent. of trains running on time over the past 12 months. People are seeing newer trains and investment
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in stations. Not only do we have one of the fastest-growing rail networks in Europe, but we have one of the youngest. We are making changes so that more people can use smartcards. Those improvements are being made under the current franchising system. Capacity improvements have been referred to. They are part of current contracts, but future growth will be addressed as part of the high-level output specification, which is the longer-term framework for the railways that we will publish next year.

I shall try to make some progress through my prepared comments, but I want to address some of the comments that hon. Members made first. The hon. Member for Twickenham referred at length to South West Trains and the improvements in the rolling stock. I should like to clarify the points that he raised. The south western franchise commits the franchisee to a 20 per cent. increase in peak-time capacity on suburban lines and a 21 per cent. increase in the number of mainline peak-time seats. The franchisee will be held to those commitments, which will be monitored constantly over the length of the franchise, so those improvements will be delivered.

The hon. Gentleman is right that the Government are dealing with the problems of success. It is useful that the right hon. Member for North-West Hampshire is in his place, because I rather suspect that previous Governments would have given their eye-teeth to be dealing with the problem of increased passenger numbers on the British railways, rather than—as happened in the past, particularly under the previous Conservative Government—what was seen as a terminal decline in passenger numbers on the British railways. The current situation obviously presents serious challenges to any Government, but I would rather deal with exponentially increasing passenger numbers on the railways than, as my hon. Friend the Member for Luton, North suggested, have to deal with the terminal decline of the railways.

Kelvin Hopkins: Like the Minister, I am a strong supporter of railways and welcome the massive increase in passenger numbers. However, there is a non-sequitur: passenger numbers would have or could have been at least that high—perhaps higher—whether the railways were publicly or privately owned. It was not privatisation or the franchising system that led to the increase in numbers. Indeed, fares have gone up considerably. Had the railways been in the public sector, they might not have gone up so much, and passenger numbers might even have been higher.

Mr. Harris: My hon. Friend makes a valid point. He may be familiar with an interesting book called “Prime Minister Portillo and other things that never happened”. It would be extremely entertaining, although not particularly useful, to speculate about alternative history—what would have happened if British Rail had not been privatised in the early 1990s.

I am content to state that under the management—the hon. Member for Canterbury (Mr. Brazier) might call it “micro-management”—on this Government’s watch, passenger numbers have increased by a healthy margin and services have improved. We are certainly content with that. I do not want to speculate about whether it would have been different under British Rail.

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Dr. Cable: May I press the Minister to clarify his answer about the 20 per cent. increase in capacity? I am glad to hear that he will monitor that, but will he explain how it will happen? As I understand it, under the franchise there will be only 10 more carriages—less than 1 per cent.—on top of the existing 1,400. That is what the company has announced. Where will the seats come from? If the Minister is monitoring the situation and the company has clearly announced that it is removing seats, at what point will the Department intervene to stop what is clearly a contrary process?

Mr. Harris: The Government have no intention of intervening at this stage; we have every confidence that the targets set in the franchise will be met. New trains and carriages will be introduced and £40 million will be spent on station improvements. That will build on the £70 million investment in new trains already made under the existing franchise, providing an extra 4,500 seats.

Some, but not all, of those trains are already in service. An additional 17 new four-carriage Desiro trains, comprising 68 vehicles, will provide those 4,500 seats for passengers on the busy routes to London Waterloo. The new trains will enable more 12-carriage trains to be run at peak times to increase capacity on busy commuter routes.

I am not sure which figure the hon. Gentleman is citing; his figures on the increase in rolling stock seem rather unambitious. I shall be happy to sit down with him to sort out exactly where he gets his figures from and to clarify the issues for him. The Government are satisfied that the capacity improvements promised by South West Trains will be delivered by the end of the franchise.

The commitment to pay a £1.191 billion premium in the bid for the south western rail franchise was also mentioned. The Government do not specify whether a premium should be paid by any rail franchise company or the level of that premium. It is entirely for bidders to decide whether they wish to pay a premium and how much that will be. However, I am sure that most Members will agree that if a company wants to force £1.191 billion on the Government—that money, incidentally, would go back into the rail budget—they will be wise to consider the offer seriously. The infrastructure changes mentioned by the hon. Gentleman are not matters for the franchises, but undertaken and progressed by Network Rail.

Mr. Brazier: Of course the size of the premium must be considered, but the point is surely that it is not the only factor that should be. Another is whether it is sustainable, because the taxpayer will end up in trouble if it is not.

Mr. Harris: The hon. Gentleman is absolutely right; it is not the only thing that is considered. A great deal of work is done to ensure that any potential premium that may be paid by a future franchisee is deliverable. That is a crucial part of the franchising process.

The hon. Member for Twickenham mentioned the impact of open access on GNER. He was suggesting, I think, that the impact of open access operators on the east coast main line was responsible for some of the problems that GNER is reported to be having.
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However, no open access operator gets access to the railway unless it can convince the Office of the Rail Regulator that that will have no significant impact on the revenue of existing franchises. They must always be given precedence over any open access operator, for the simple reason that open access operators do not pay track access charges.

Vertical integration was mentioned. I accept what the hon. Member for Canterbury says; a debate can be had, and the Government do not shirk from that. However, as the Transport Committee’s report into rail franchising makes clear, there is not much of a case to be made for vertical integration in respect of the benefits that might be achieved by going for that particular structure. Of course the Government would be willing to look at particular proposals made by particular authorities and operators, but in my experience train operators do not want the responsibility of repairing infrastructure and the infrastructure companies do not want the responsibility of operating trains.

Stagecoach is committed to increasing the passenger performance measure from the present level of 90.1 per cent., as a moving annual average, to 92.5 per cent. by 2009-10 and 93.3 per cent. by the end of the franchise. To put that in perspective, at present the national average of all train companies is 87.6 per cent., so whatever criticism has been levelled at South West Trains during this debate, its performance is well above the average of any of the train operating companies.

The franchise builds on progress already made. Recent timetable changes have brought about high reliability and extra services. All the train companies have been criticised for increasing fares. South West Trains currently runs some of the lowest fares on the network. It runs a low-cost operation called Megatrain—the equivalent, I guess, of the low-cost airlines—on a limited number of services on selected routes, and Stagecoach proposes to continue the scheme.

I turn to the comments made by my hon. Friend the Member for Luton, North. Neither I nor the Government approach the structure of the railways ideologically. We do not look at the privatised railways and conclude that, because they are private, they are good.

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John McDonnell: When Connex was taken over, it was run by the public sector for two years and was one of the most successful operations in the whole network. It was then privatised again. On what basis was that decision made? If what worked mattered, it would have remained in the public sector.

Mr. Harris: I disagree. I should point out that since the new franchisee took over that franchise, performance has been at least maintained or, as the hon. Member for Canterbury says, improved.

What would be the point of renationalising the rail industry unless we could show benefits for the travelling passenger? We have the highest safety record in history and performance that, although not at an all-time high, has certainly improved greatly since the Hatfield incident in 2000. Record investment is going into the network. In the context of the more than 1 billion passenger journeys being made—the highest level since 1946, I believe—what would be gained?

I say with all respect to my hon. Friends the Members for Hayes and Harlington (John McDonnell) and for Luton, North that if the only thing to be gained is the ticking of an ideological box to say, “We are on the left; we are a socialist party”, I am not convinced that moving into the public sector would achieve anything except the wearing of our left-wing conscience on our shoulders.

Kelvin Hopkins: I shall be brief. On a number of occasions, I raised the problem of costs with the previous Secretary of State for Transport. Costs have been massively increased under privatisation. That is the key.

Mr. Harris: Costs have increased, but standards have also increased. It is clear that, even if British Rail were still in the public domain, the money to be spent on the infrastructure would also be increased, not only because of higher standards but because, as my hon. Friend rightly says, the railway network was deprived and starved of investment for many decades. For the first time, the Government are putting record investment into the railways, which is why—

Mr. Mike Weir (in the Chair): Order. We must move on to the next debate.

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