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Mr. Martlew:
Obviously, I do not agree with my hon. Friend about where the railway line should go, but that is not the point that I want to make. He said that a line
between Manchester and Leeds would be good for the environment. I believe that that is a myth, because conventional trains use much less energy than a high-speed train, and nobody catches a plane from Manchester to Leeds. A high-speed line may have many benefits, but not environmental benefits.
Graham Stringer: Carbon dioxide costs become negative at over 200 mph approximately. There is a big change- around point at that speed. Of course, very few people fly between Leeds and Manchester, but having a route the whole length of the country would take some passengers off aeroplanes.
Graham Stringer: The hon. Gentleman is right.
My next point deals with the conundrum of expenditure on Network Rail. If one imagines British Rail with the number of passengers that now travel on the rail system, and an average of £5 billion of subsidy every year—in real terms, approximately three times what British Rail had—it would be in huge surplus. That is the first indication of inefficiency in the Network Rail system. I have asked many Ministers why rail in this country costs so much. The answer is beginning to become clearer. One obvious answer is that 100 companies are now involved in the railways, with 100 chief executives, 100 finance officers and 100 bottom lines, out of which to make profits. Obviously, that costs.
There are also perverse incentives. When lines are closed, Network Rail pays the train operating companies. If a business is to benefit from something—investment means that the railway system will be getting better for those train operating companies—it normally pays. We are talking about a perverse incentive and a perverse reward.
I guess that most people do not know the next reason for the cost of Network Rail. When Network Rail closes a line for improvements or because something has gone wrong, it puts on buses, and calls that—it is a dreadful word—“bustitution”. Twelve of the 13 major rail franchises that bus companies run effectively use themselves as agents. Arriva uses Arriva; National Express uses National Express; FirstGroup uses FirstGroup; Stagecoach uses Stagecoach and so on. That means that anyone bidding does not get the bus service operator grant because it goes to the agent of the main company. There is very little control over the costs.
I have talked to representatives of bus operating companies that have been put out of business because they do not believe that they can compete with bodies that effectively award the contracts to themselves. They are told that it is a matter of quality as well as price, but when one talks to the bus drivers, one finds that the agents are paid two and three times what the competitors would charge. There is a cost to Network Rail and there is, therefore, a cost to the public purse. I have talked to several bus operators. One—Fraser Eagle—was recently put into administration. It believes that that has happened because of those unfair, if not corrupt, practices by train operating companies that also run the buses. Those are most of the points that I want to make.
I say to my hon. Friend the Member for Carlisle (Mr. Martlew) that it makes sense to run a high-speed line into the main centres of population, but that does not mean that when the line is a success, as it undoubtedly
will be, we cannot have tracks running off it. We are talking about a huge investment over a long period. The £60 billion of benefits from a high-speed line that were identified in the second Atkins report will come about only if it goes to the major centres of population. Let us make that a success, and then we can have routes to Liverpool and up to Carlisle and Glasgow. We should not limit our horizons in seeing what high-speed trains can do for this country.
8.29 pm
Mr. Stewart Jackson (Peterborough) (Con): It has passed into folklore that the privatisation of our railways was a disastrous error, without mitigation, that it was driven not by pragmatism and necessity but by ideology, and that it destroyed a golden age—I was almost misty- eyed listening to the hon. Member for Carlisle (Mr. Martlew)—between Dr. Beeching’s axe and the mid-1990s and the Railways Act 1993. There has never been any evidence for those assertions or for the lazy received wisdom of the commentariat and those with an axe to grind.
Mr. Jackson: I will make some progress first.
More to the point, what was the policy alternative? In the period immediately before privatisation, the number of passenger miles travelled was dropping each year. In 1980, investment in the railways was £900 million; by 2003, it was £4 billion. The state-owned monolith of British Rail would never have secured the requisite funding to invest in major capital infrastructure and the upgrading of rolling stock, signals, the permanent way and stations. British Rail was only ever an inert supplicant for inadequate state funding, under both Labour and Conservative Administrations, with poor management and planning. It could never have developed a coherent case for rebalancing our transport policy away from road freight and car use towards greater equilibrium and sustainability.
Kelvin Hopkins: I am afraid that the hon. Gentleman is just in error. Tom Winsor, the former rail regulator, said that when British Rail handed over the railways to the privateers, they were handed over in good order and that British Rail had worked miracles on a pittance. A report was produced three or four years ago showing that at the time British Rail had the highest level of productivity in Europe, simply because it was so starved of funds that it worked miracles on a pittance.
Mr. Jackson: The last two years of British Rail’s existence was under a Conservative Government, when it was indeed making progress. However, I am talking about facts, not a set of value judgments, although I respect the hon. Gentleman’s consistency and policy clarity on the issue.
Hugh Bayley: Will the hon. Gentleman give way?
Mr. Jackson: I will not. I will make some further progress.
Critics point to the disaggregation of the railways after privatisation, but they disregard the growth in passenger numbers and the increase in rail freight that
followed on from those structural changes, as well as disregarding better punctuality and safety and enhanced investment in stations and rolling stock. It is an inconvenient truth that privatisation arrested a 50-year decline in freight traffic. After all, if privatisation was “a privatisation too far”, the key question is: why did the Labour Government never renationalise the railways?
The political agenda of this Government from 1997 was viscerally hostile to Railtrack and, later, to the rail regulator. They pursued a policy of undermining the system of rail governance by stealth, in a quite deliberate and cowardly way, eventually forcing Railtrack into receivership and seeking to destroy it by subversion, as they had neither the political courage nor, most importantly, the taxpayer funds to renationalise the railways. In addition, despite paying lip service to the unreconstructed left on their Back Benches, even this Government had to concede that privatisation was a success. Private investment in the rail system rose by an unprecedented level, from £120 million in 1995 to £1.4 billion in 1997.
Hugh Bayley: Would the hon. Gentleman at least have the decency to accept that his constituency got the benefit of electrification under British Rail? Could he also explain why the then Conservative Chairman of the Transport Committee, Robert Adley, was so passionately opposed to rail privatisation?
Mr. Jackson: Neither of us is in a position to ask my former esteemed colleague the reasons for that. He made his views clear before privatisation and the debate on the 1993 Act.
Mr. Jackson: I will not invite the hon. Gentleman to intervene again, as time does not permit.
The former rail regulator wrote last week in The Times of his experience of “government by vendetta”, as the then Secretary of State for Transport, with the connivance of the then Chancellor and now Prime Minister, used threats of primary legislation to avoid the inconvenience of contractual liabilities between Railtrack, the train operating companies and the Government. The defenestration of Railtrack in October 2001, the traducing of the independent regulator and the duplicity inherent in so much of this Government’s modus operandi represented a shattering blow to private sector confidence and to the prospects for long-term investment, from which some might argue the rail industry has yet to recover.
That brings me to the east coast main line franchise, which is of particular interest to my constituents. Its current holder, National Express East Coast, won the franchise in August 2007 after the previous franchisee, GNER, was forced to relinquish it after 11 years when its parent company, Sea Containers, applied for chapter 11 bankruptcy status in the United States. National Express East Coast’s franchise payments are due to grow steeply in the next five years, from £85 million to £395 million by 2015. It has already made 750 people redundant, and it is pursuing a major cost-cutting programme in addition to being encumbered by a £1.2 billion debt. In order to meet its next payment on the east coast franchise of £133 million, the company needs revenue growth of 10 per cent. and an estimated
increase in passenger numbers of 4 per cent. That will need to happen against a background of falling passenger journeys and declining passenger revenues across the country in the year to December 2008.
One wonders whether any comprehensive analysis of the macro-economic impact of a recession or depression on passenger numbers, income streams, debt servicing and liquidity was undertaken by the company, the Office of Rail Regulation or the Department for Transport in August 2007. In the absence of any undertaking by Ministers to assist the train operating companies, we could be forgiven for asking two pertinent questions. First, was the east coast franchise overpriced and a product of Treasury greed and myopia? Secondly, what is the Government’s plan B, if the costs prove prohibitive for the company? The medium-term financial viability of the franchisees on the east coast main line is integral to Network Rail’s proposal to upgrade Peterborough station over the next few years, and that project is inextricably linked to the regeneration of Peterborough city centre and the economic competitiveness of the greater Peterborough travel-to-work area.
My hon. Friend the Member for Chipping Barnet (Mrs. Villiers) is on record as wishing to move to a culture of longer franchises in order to facilitate more stable business planning and investment and less interference in the day-to-day running of the railways by the Department for Transport. Certainly, the idea of renegotiating franchises to deliver a worse service, at the same time as increasing fares, would be the worst option to pursue, as the Campaign for Better Transport has stressed. It cannot be impossible for the Department for Transport to undertake a modelling exercise, or even a pilot programme, in which the RPI plus 1 formula is revisited and fares could be reduced.
According to the Office of Rail Regulation, ticket prices have risen by 13.6 per cent. in real terms since 1995, yet passengers consistently complain of poor service and a lack of value for money. Indeed, I am sure that my constituents who use First Capital Connect to travel to King’s Cross will have been reassured by the comment of the Department for Transport spokesman, who said in June 2007 that rising fares were
“a good commercial solution to the problem of overcrowding.”
Above-inflation rises in fares are a sure method of driving people back into their cars and losing their custom, possibly on a permanent basis.
My party is a strong supporter of rail, not least because it is a low-carbon mode of transport, and of enabling people to make intelligent choices other than those involving ever more car journeys. Over the past 12 years, the Government have failed to tackle the issues of overcrowding on our rail network and achieving better value for money for our railways. Why, for instance, is a walk-on train fare on average almost five times as expensive as an advance ticket? Why is our ticketing system still so complicated? If the Government are truly committed to sustainable transport—I speak as someone who represents a sustainable transport local authority—why did it take them 11 years to launch the 31 pilot schemes for station travel plans, following on from the rail White Paper published in 2007?
Are we surprised that some lines are operating at 170 per cent. capacity and that passengers are paying more for an inferior service? On a related point, there is
little evidence of any co-ordination between the planning of rail services and either the development of other transport infrastructure or large-scale housing developments in areas such as my own, the south midlands and the Milton Keynes sustainable growth area.
Norman Baker: The hon. Gentleman seems to be arguing against the commercial decision taken by National Express to bid as it did for the franchise, and the commercial decision to set the ticket prices that it has set, but surely those are examples of the necessary consequences of privatisation, which encourages such decisions being made in the first place.
Mr. Jackson: I do not agree with the hon. Gentleman. The superstructure of rail governance has been set and established by this Government at least since 2001—post-Railtrack—so it was incumbent on them to make the necessary changes.
My party has called for an overhaul and reform of the transport innovation fund in order to allow very local sustainable capital projects to be facilitated by local authorities and other key partners such as urban regeneration companies and community rail partnerships. We need to think local and to think small.
Let me finish by looking at the issue of the high-speed rail link. It has been looked at by my hon. Friend the Member for Chipping Barnet, and it is a coherent policy. Quite frankly, the reaction of organisations such as the Institute of Directors, which has sought to rubbish our proposals, has been like Pavlov’s dog. The viewpoint of those organisations, and of Labour Members, has been short-termism. High-speed rail links work; they have social and environmental benefits, as well as massive economic benefits, as the hon. Member for Manchester, Blackley (Graham Stringer) mentioned. We have a coherent programme which is also costed to bring economic benefits, particularly to the north of England.
This Government have had 12 years of economic growth, built on the solid foundation of a Conservative Government, in which to tackle the endemic problems in the railways, whether they be overcrowding, reliability, fare increases or whatever. By low politics and skulduggery, they have failed to deliver what people expected of them. In so many areas, they are exhausted, bereft of ideas and resorting to stealing Conservative ideas. They have run out of steam and in 14 months’ time, they will be out of office.
8.42 pm
Mr. Mark Todd (South Derbyshire) (Lab): The recent decision to award the inter-city express programme for 1,300 carriages to the Agility consortium has already been mentioned by the hon. Member for Lewes (Norman Baker) and I would like to expand on the subject. As he said, the consortium is based on Hitachi, a Japanese supplier, and the decision has been greeted with anger and gloom in Derby—the home of Bombardier, which employs 2,200 people in the area with a large supply chain concentrated close to the city; it is the only major rail manufacturer in the UK. Obviously, as a Member whose constituency includes part of Derby, I am concerned about that and I want to share my concern with the House. I shall develop four points in that regard.
First, the commitment to British manufacturing and technology within the Hitachi bid is, to date, extraordinarily light. It seems likely that its tender will commit only to
assembly and maintenance in the UK; the reference to 70 per cent. of jobs being here is largely based around the maintenance activity, which is already located here. No growth in employment is being offered.
If, as the Government stated in their announcement, we are to place the UK in a strong position for rolling stock supply across Europe, it is critical that any contract ensures that high-value manufacturing of the vehicles takes place here and that the technologies to support that development of the industry are based in the UK. Mere kit assembly will proffer us no competitive advantage whatever in a European marketplace. It is intriguing to note that the welding technology that Hitachi has claimed as being critical to its bid and unique to its company was actually originally developed at the Welding Institute at Abingdon. The company has certainly supplemented that technology over time, but must we see our key technologies in a sector that we used to dominate once again reliant on foreign exploitation?
Secondly, the scale of UK employment in the Hitachi bid has been questioned. Hitachi itself has not made the claim, but the Government have stated that 12,500 jobs will be created or secured. It has so far proved impossible to get close to that figure, which appears to have been based on the fact that in its bid Bombardier quoted 12,500 jobs created or protected, but the company already had a large base in the UK that the project would indeed have protected. It appears that the Government’s estimate is based on the unrealistic multiple of four supply chain jobs to every one directly employed job. Most people would regard that as an exaggeration and would consider that a ratio of about 2:1 might be closer to reason.
So far, Hitachi has had limited contact with the supply chain network in the UK, and the company has specified that it is in discussion with 20 supply chain operators. The Derby rail forum, which encompasses the supply network in Derby, is far larger than that. Hitachi already has some relationships with Derby-based companies, but it seems most unlikely that the company will be able to achieve an integrated UK supply chain. There is genuine anxiety about where it will serve a large proportion of the high-value supply chain business from.
Mr. Edward Timpson (Crewe and Nantwich) (Con): The hon. Gentleman is talking about the fact that Hitachi does not have a supply chain in the UK. Does he agree that Bombardier does have a supply chain and that both in Derby, where trains are made and assembled, and in Crewe, where they are overhauled and maintained, we already have skilled work forces available to carry out the work for which Hitachi has been given a contract? Does he agree that awarding the contract to Hitachi does not safeguard jobs in Bombardier?
Mr. Todd: I agree 100 per cent. It is most unlikely that the local supply chain will enjoy the multiplication of opportunities that a Bombardier-awarded contract would have given.
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