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3 Jun 2009 : Column 73WH—continued
“Operating agreements with train operating companies may be considered when appropriate to discharge the Department for Transport’s duty to ensure continuity of rail services.”—[Official Report, 8 May 2009; Vol. 492, c. 488W.]
That appears to be an acknowledgment that a franchise can be replaced by a fixed-fee agreement. Is that the hon. Gentleman’s interpretation of that answer?
John McDonnell: That is my understanding of it. We need more openness and transparency on what is happening in the negotiations that are taking place with a number of franchisees.
Mr. David Drew (Stroud) (Lab/Co-op): As my hon. Friend knows, I dealt with the Minister’s predecessor on the First Great Western’s yellow card. Speaking of franchises, it would be useful to have it on the record whether that yellow card has been expended by First Great Western. Has it met its side of the bargain? Talk about irony! It is as if a premier league striker has been fined for misdemeanours and the Football Association is paying the fine. It would be useful to know whether the Government are paying First Great Western’s fine for its yellow card for all it did wrong two years ago. It seems that the Government have to pay, yet again.
John McDonnell: My hon. Friend and I have discussed First Great Western’s yellow card and how it has been monitored with successive Ministers with responsibility for rail.
My point is that the franchises want to have it all ways. They want profits in the good times, but when the franchises become too expensive, they want Government subsidies or to hand it back and negotiate management contracts. I am bitter about National Express laying off 750 workers on the East Anglia and east coast lines. We also know that, in April, Stagecoach went into dispute with the Department for Transport over its support payment system, and the case has now gone to arbitration. Again, it is arguing that there will be an operating loss if the arbitration is not resolved in its favour. On 13 May, First Group announced increases in its rail division of £2.1 billion and an operating profit of £94.2 million, but at the same time its managing director was reassuring shareholders not to worry because the company was accepting taxpayers’ subsidies to maintain other franchises in operation. This is the economics of the madhouse, and it is time to stand back.
The Government recognise that they will have to intervene. We are aware of that because the DFT recently advertised on its public tenders website for consultants to ensure “continuity of train services” and, if necessary, run a rail franchise on the Government’s behalf. If they are admitting in adverts that they will have to intervene in some instances, we need to ensure that there is a statement to the House about how they plan to do that, especially where, when and how.
I know that other hon. Members want to speak, so I shall end on these points. It is time for the Government, and indeed all of us, to stand back and have a rethink. We need to turn this rail crisis into an opportunity. We need to move away from the dogmatic obsession with privatisation and franchising arrangements. I cannot understand why the Government are refusing to consider other options, particularly a public sector option or role. Like a number of hon. Members present, I have been asking questions about how existing franchises are assessed and whether there could be a public sector benchmark or evaluation, such as a value-for-money assessment of alternatives in the public sector as against the private sector. When Connex was taken into the public sector and lost its south-east franchise, it was run successfully by the public sector for two years. A number of us argued then that we should step back from the dogma and keep at least one franchise in the public sector that could be a benchmark against private sector operators, but what did the Government do? They reprivatised it.
Kelvin Hopkins: I agree absolutely with my hon. Friend. However, I understand that behind the scenes, very secretly, serious consideration is being given to taking the east coast main line in-house. Other franchises are in similar difficulties, so we could move in that direction. Does he agree that we should urge the Government to move rapidly in that direction?
John McDonnell: I am not party to those discussions, but the way that resignations have been going in the past couple of days, my hon. Friend may be party to them sooner than he thinks.
There is an inevitability about this. For the first time in perhaps three decades we can start having a rational debate about the future of rail as part of an integrated transport system that is free from the dogma of privatisation, and that goes back to what works best. I urge the Government to launch that rational approach as franchises go into crisis and to consider using the public sector and testing that option. I urge them to accept that there might be an opportunity on at least one franchise to use the public sector option as a benchmark for others.
The travelling public have had enough of the greed and profiteering. We have gone past the days when the market could be said always to offer the optimum solution to every area of policy. We need an end to cuts in jobs and services, and we need an improvement in the long-term investment plan, but it has to be based on a public service ethos that overrides short-term profiteering. I urge the Minister to take back the message that we all want a rational debate about the future of rail. We want to use the current failures as an opportunity for future successes. It is time to move away from dogma and get to grips with the reality of what workers in the railway industry are experiencing with job losses and what passengers are experiencing with fare increases and reductions in service delivery. We must consider the potential for the sector to tackle the recession overall, to be part of the stimulus of demand, and to introduce an integrated transport policy that will help to tackle climate change. That could make a major contribution to rehabilitating political debate across the parties, and to having a reasoned and rational debate on such an important area of policy.
Hugh Bayley (in the Chair): I intend to start the wind-ups at 10.30 am. Three hon. Members are trying to catch my eye, so they will have about eight minutes each.
10.5 am
John Barrett (Edinburgh, West) (LD): I thank the hon. Member for Hayes and Harlington (John McDonnell) for securing the debate on this serious issue, which affects people from the north to the south, and from the east to the west. He has detailed the job losses and other problems in the rail industry, which has been suffering a severe recession, but there is also an opportunity to move out of the crisis in the industry. One way out of the recession is to make sure that the UK rail industry plays a key part in that recovery, and I shall touch on a few places where such opportunities could be grasped by this Government, or whoever is in government in the years ahead.
I grew up with a railway line at the bottom of my garden and then went off to study transportation engineering at Napier polytechnic—now Napier university—in Edinburgh. As I come from Edinburgh, a key part of the railway industry that strikes me as being important is the Forth rail bridge, which was opened in 1890 and on which 4,000 workers worked. We need to see whether we can revitalise our rail industry, because much of its rolling stock and other supplies are no longer from this country. We have an opportunity to move forward to high-speed rail, as other countries have. We need to make sure not only that that high-speed rail is good for the environment, but that it stimulates the economy throughout the land and provides the shovel-ready jobs that have been mentioned. We could get the construction, civil engineering and railway industries working together to produce jobs immediately and to stimulate the economy.
When this country was growing, 100 years ago, the rail industry played a key part in that growth by improving transport links, but when we jump on to today, what do we see? We see opportunities for high-speed rail, with the Eurostar link taking passengers away from more polluting forms of transport such as air travel. We could extend the high-speed railway network throughout the UK, but I fear that opportunity has been largely missed because there has been a lack of clear vision from the Government. Many other countries have grasped that vision; there are new high-speed rail links in China, Russia, Brazil, India, Poland and Argentina, but what do we have in the UK? Very little.
There is a range of reasons for having high-speed rail, although I shall not spend too much time talking about them. One is the reduced impact on the environment of having high-speed rail links from cities such as my own, Edinburgh, from where 60 per cent. of flights go to other UK cities, causing a high level of pollution. Many of those flights come here to London, where there are protests about the need for a third runway at Heathrow airport. If we had a decent high-speed rail link, many people would decide not to fly, because they could jump on the train and it would take only a few hours to travel the length of the country. In other countries, there is clear evidence that where there are alternative high-speed rail journeys of three or four hours, people will happily move from the air to the railways. A good example of that is the Madrid to Barcelona line in Spain, which was opened in 2008, bringing massive benefits. Previously, trains had made up 15 per cent. of all journeys, but they now make up more than 50 per cent. That was one of the busiest aviation routes in the world, but it has been overtaken by trains.
The opportunities are certainly there, but there is another reason why high-speed rail has a wider opportunity at a time when we are looking at constitutional reform in the UK. There has been a push from the Scottish National party and separatist parties to say that that is the way forward. A high-speed rail system would actually unite the parties, as it is uniting the regions of Spain. High-speed rail will not come from the south of England to Edinburgh if there is a separate Scotland, so it is another reason to tie the country together.
There are opportunities in the UK not only for high-speed rail, but for light rail. In Edinburgh a tram installation programme is in progress and massive investment is being made. I have seen the mock-up of the tram and it looks great, and very efficient, but what
has happened on the ground? The tram contract has been awarded to a Spanish firm. Undoubtedly it will produce high quality trams, as it is the same company that produced the trains for the Heathrow Express. The company that has been given the design, construction and maintenance contracts, the Bilfinger Berger and Siemens group, is not a local company, and although it is no doubt efficient, it would have been good if we had had the infrastructure in this country to provide the construction, maintenance and rolling stock and look forward to the future.
In Edinburgh we have had job losses as a result of the recession, as the biggest single employer in the city is the financial sector. The largest employer in Edinburgh, HBOS, is based in my constituency, and there have been many redundancies, but at the same time inward investment in Edinburgh is happening. Companies that are pulling back from investments elsewhere have said that they are going to Edinburgh because it will have an improved transport infrastructure in the years ahead. High quality public transport is absolutely vital. Providing a good quality transport system locally and then a high-speed rail system nationally will not only provide the jobs for the future, but ensure that our economy is in a fit position to take advantage of opportunities when we come out of the recession.
I have kept my remarks brief to allow other Members to speak. Edinburgh plays a key part, and not only because there are many local trainspotters—indeed, the book “Trainspotting” was based in Edinburgh—and because the Forth railway bridge is there. I would like the rail industry to play a key part in getting us out of the recession with the opportunities that are there for the future.
10.12 am
Kelvin Hopkins (Luton, North) (Lab): I congratulate my hon. Friend the Member for Hayes and Harlington (John McDonnell) on securing the debate and on his expert and detailed analysis, with which I entirely agree. I speak as a dedicated lover and supporter of the railway industry, who has commuted by rail daily for the past 40 years. The railways are important to me and, more importantly, to Britain’s future because they are the future mode of transport, especially in an era of energy difficulties and diminishing oil.
We are now seeing the beginning of the end of the mad, Dr. Strangelove experiment called railway privatisation. It has cost vast sums of money, does not work for passengers or taxpayers and was always utterly misguided. It has simply put vast sums of money into private pockets to very little benefit. The first stage in that decline was the collapse of Railtrack, which I understand had a neon sign in the foyer of its building showing its share price: that is how much it cared about railway safety and comfort and the future of passengers. Network Rail took over from Railtrack and effectively brought the network into public ownership, but its behaviour and methods continued many of the bad private sector practices.
Shortly after the creation of Network Rail I attended a waterfront conference addressed by its then deputy chief executive, who showed how the contracts would work and how they would not work. He explained how
the specifications were drawn up by Network Rail and given to the contractors, who would then work precisely to those specifications because that is what they were required to do and because they would be fined if they did not do so, even when the specifications were wrong. If the work was done incorrectly over a weekend possession, by the Monday morning it would be inspected and found to be wrong. The work would then have to be done again with another specification and the contractor would say, “Thank you very much”, having doubled its money and got twice as much work. That, of course, meant more delays and interruptions to services.
Contracting, subcontracting and sub-subcontracting creates interfaces, all of which mean costs—interfaces always mean costs. British Rail, when in operation, was an integrated system with directly employed staff, so such interfaces did not exist, and if they did they were minor, internal and easily overcome. British Rail employed staff directly, worked under cash limits and corrected engineering work as it went along. It did not have the contracting chaos we have seen under Railtrack and Network Rail. It is not surprising, therefore, that when everything is taken into account, track renewal costs are five times higher then they were before privatisation. No wonder costs are out of hand.
I am sure that the Minister has seen the book, “Britain’s Railways, 1997-2005” by the academic Terry Gourvish, which was commissioned by the Strategic Rail Authority. It is a matter-of-fact book showing that total support for the railway industry between 1996-97 and 2006-07 increased fivefold, from just over £1 billion to £5.5 billion. That was simply putting money in private pockets, although I accept that some of it accounted for extra work. Maintenance has been taken in-house, but even that has not improved as much as it should have because of the continuation of practices similar to those that grew up under the privatised contracting system.
I am short of time and so will omit references to the train operating companies, as my hon. Friend the Member for Hayes and Harlington dealt with that effectively. However, I will say that Virgin has recently complained that punctuality on the west coast main line is still as bad as it was when work to the tracks was being undertaken and has not improved, so the TOCs are still unhappy with the quality of what Network Rail is providing.
Network Rail has had a good financial settlement from the Government, but at the same time it is cutting back on renewals and sacking staff. In my view, and that of many others, that is evidence of financial incompetence. Do those in Network Rail deserve their huge salaries and bonuses? I think not: they are thoroughly undeserved. Indeed, the Prime Minister, when talking about MPs’ expenses at the weekend, said he wants to apply the same rigour to executives in the BBC and the NHS, “etc.” I suggest that the biggest component of that “etc.” should be Network Rail. We should not reward it for failure.
Valuable staff are being made redundant—often the experienced staff trained by British Rail, and sometimes because they get in the way when they want to do things right, are fussy and have a sense of commitment to doing the job well. Network Rail wants people who do the job quickly, cheaply and not well. Those staff being sacked are being defended by their unions at great expense, but Network Rail pays large sums of money to
stop cases going to tribunal at the last minute when it is obvious that it will lose. That was detailed in a previous Adjournment debate by my hon. Friend the Member for Livingston (Mr. Devine).
The whole edifice of privatisation is crumbling, and I believe that it is time to recreate the integrated, publicly-owned railway industry and save vast sums of public money, and passengers’ money into the bargain. Five years ago the then Secretary of State for Transport, now the Chancellor of the Exchequer, said the lack of investment had been compounded by ill-thought-out privatisation, producing fragmentation, excessive complication and dysfunctionality. I think that is a function of privatisation and of the way it has operated.
Two years ago I had the pleasure of meeting Dr. Mehdorn, the former chairman of Deutsche Bundesbahn, the German state railways. An impressive man with a strong and forceful character, he lives in a castle and has weightlifting as a hobby. He was extremely forceful in his absolute opposition to being forced into privatisation on the British model. He said it would be a disaster if DB was fragmented in the way British Rail had been. He is no longer the chairman, but the Germans have decided, very sensibly, not to privatise DB but to keep it in the public sector.
I recently met some colleagues from the former rail freight company English, Welsh and Scottish Railway and mentioned that it had been nationalised. They responded, “Oh no it hasn’t.” I replied that it was now owned by German state railways. It is all very well being owned by German state railways, but I suggest that we should take the British railway network back into British state ownership and operate our railways the way the sensible continentals operate theirs.
10.19 am
Jeremy Corbyn (Islington, North) (Lab): I welcome this debate, and I congratulate my hon. Friend the Member for Hayes and Harlington (John McDonnell) on securing it, and on the good work that he does in chairing the RMT group, consistently taking up railway-related issues and pointing out the failure of the privatisation model.
In reality, British Rail, which was nationalised after the second world war, had a good record in trying to protect a social railway, despite the best efforts of Dr. Beeching. BR was always underfunded and under-resourced for research and development. It was privatised on the basis that it was costing too much money. The then Tory Government said that they wanted a self-sufficient railway, but, shortly into privatisation, the amount of public money going into the railway system was greater than at any time during nationalisation.
We now pay far more money to private companies to run the railway system than we ever paid when it was publicly owned, and we have closed off from ourselves the possible benefits of any profitability coming from the railways. It is, frankly, a ludicrous system.
My hon. Friend pointed out the dogma attached to the privatisation. I believe that he would agree that surely now, of all times, it is time to end that dogmatic nonsense and have a fully publicly owned, publicly accountable and publicly run railway service in this country.
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