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When granting franchises, the Government focused solely on cost and how much money could be squeezed out of train operators. Cost must not be the only consideration. I accept that it will be the overwhelming consideration, but a qualitative judgment of what else will be being delivered must be made. The Opposition believe that there should be an opportunity for train operators to have a much stronger incentive to invest to
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improve the quality of service that they offer and to provide new capacity to help to tackle overcrowding. It must also become a realistic option for passenger operators to buy their own rolling stock. Longer franchises will provide an incentive to both operators taking decisions on buying and leasing rolling stock.

Chris Mole: Given that the principal factor in the failure of the National Express east coast franchise bid was the uncertainty about whether it had made a robust assessment of forward economic projections, and if the hon. Gentleman and his party are suggesting that a 20-year franchise is the magic bullet that fixes all franchises, how does he anticipate a business being able to forecast the economic scenario that far into the future with sufficient confidence to allow it to commit to such a long franchise?

Stephen Hammond: Presumably by listening to the advice that KPMG gave to the Minister's Department on economic reset mechanisms for 20-year franchises. It has been well publicised that advice was given to the Department on how longer franchises would need either an economic deflator, or economic reset mechanisms. I presume that an incoming Government-I hope that they are of our colour rather than the current colour-will take that advice when considering longer franchises. There is plenty of international experience of longer franchises, and I cite Australia. There are economic mechanisms that are not the same as the cap and collar-economic deflators and reset mechanisms. For the Minister to suggest that there would have to be a completely new science, or that his Department has not taken advice, is wrong.

Norman Baker: Does the hon. Gentleman share my perplexity that the Minister seems to be arguing against longer franchises when his Secretary of State has indicated a policy in favour of them? It might be helpful if he talked to his Secretary of State.

Stephen Hammond: The answer must be that given that the Chancellor and the Prime Minister cannot agree, we should not be surprised that that disease is prevalent further down the Government.

The key point must be that a change of vision is needed that will pave the way for more flexible and less prescriptive franchises, giving operators real scope for innovation and giving passengers a better service. Over the past 10 years, there have been unprecedented levels of control and micro-management, which means that railway professionals find it more and more difficult to find ways of innovating to bring benefits forward more quickly and cheaply to customers. Over-specification of franchises was taken up by the Select Committee in its third recommendation. It said that on the east coast network, the current service level commitment is 45 pages long and contains great detail on frequencies and stopping patterns for each route. But if the Government had wanted, they could have set first and last trains with minimum times and the number of stations to be stopped at. It was not necessary to go into great detail of each pattern, which has the effect of inhibiting flexibility. Some straightforward timetable adjustments could reduce
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overcrowding by providing a better match of supply and demand as the franchise moves forward, and increasing route capacity for both passengers and freight.

On the line between London, Tilbury and Southend, c2c's franchise is 15 years. It was let in 1996 when the Government did not specify franchises so tightly. That flexibility has enabled its management to focus on delivering to its customers, improving station environment, introducing a wholly new fleet of trains, and focusing on operational performance with better stations and platforms. It has transformed what was once known as the misery line into a line with some of the highest levels of customer satisfaction and punctuality within the profile of the original franchise agreement.

Within the rail industry, there is a clear and well-understood relationship between journey times, revenue and punctuality. Faster scheduled journey times lead to increased revenue, provided that that is not at the expense of punctuality. Faster journey times enable improved rolling stock utilisation, as it becomes possible to operate more train services for the same fleet of rolling stock. There is no need to specify journey times. The TOCs will work to optimise those requirements within the framework of the overall performance.

Several times, I have debated with the Government-in the guise of various Ministers-the practice of civil servants setting detailed timetables across the network. The Government occasionally tell us that that is not happening, but a previous Minister has put it on record that at one stage he had 14 civil servants writing detailed timetables. Of course the Department for Transport has a role in monitoring franchises, but it should concentrate less on inputs, and set more outputs for the TOCs to deliver in the most effective way in areas such as operational performance, passenger satisfaction and station cleanliness. That is the way forward.

Chris Mole: I have listened with interest to the hon. Gentleman, and I thank him for giving way yet again. He talks as if train stopping patterns and timetables should be purely a matter for each train operating company on the line and service that it operates, without regard to the fact that lines and services interconnect. We need to ensure that people who transfer at a station from one franchise to another are able to interconnect and catch trains between the two different operators.

Stephen Hammond: Is the Minister telling us that it needs a pyramid of civil servants in the Department, rising up to senior civil servants writing timetables, for us to be sure that as we jump off the train somewhere on the network, we can jump on to another? Should we not say that those closest to the passengers inside franchises with minimum specified details could deliver as well and as effectively? I do not suggest anything wholly new; that model worked and was in place for many years. It was put in place by some of the Minister's predecessors. My lesser specification is an acknowledgement that that system works and has been seen to work.

The Government's role in buying rolling stock should be radically scaled back. It makes no sense for us to pretend that Ministers or civil servants should have day-to-day control over moving new rolling stock around. That degree of detailed involvement is slowing up the delivery of new capacity and driving up costs for the taxpayer and the fare payer.

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We have witnessed the chaos surrounding the procurement of what was promised to be 1,300 carriages-although it is now generally accepted that there are 978-and the subsequent cancellation and moving around of the InterCity express process. There has been the failure to see the Thameslink process reach a decision, and the failure of the cascade to deliver trains, particularly to Northern Rail where the franchise suffers from carriages that are in excess of 25 years old.

Three weeks ago in this Chamber we debated Thameslink and I am sure that the Minister is almost ready to sign off the letter that he promised in answer to a number of questions. However, in conjunction with what was said in the Transport Committee, perhaps he will answer a few more points this afternoon, or again promise to deliver a letter. Will he confirm that the InterCity express contract will be signed on time? Will he confirm that, as he announced in the earlier debate, the Thameslink upgrade is going to be delayed for a year? Should we assume that the train procurement contract is therefore also going to be delayed for a year? Will he confirm how many of the 1,300 carriages have been ordered and how many are in production? How many have been delivered and when will they be in service? When can Northern Rail expect the cascade of trains?

As in the previous debate, I will give the Minister the opportunity to confirm whether the Government are postponing the decision on or have stopped the order of 42 extra Pendolino trains, and that we will not see an increase from trains with nine cars to those with 11 cars on the west coast main line. I hope that the Minister will be able to answer those questions. The Transport Committee report touches on rolling stock and procurement and for many people, particularly passengers, the Government's rolling stock procurement programme seems to have come to a halt or gone into chaos. That has a direct impact on passengers. I look forward to the Minister enlightening us with those details in a short period of time.

I believe that franchise agreements should be more flexible and less prescriptive. They should allow more decisions in the rail industry to be taken by rail professionals, subject to a more powerful consumer-facing regulator. That should improve the ability of the rail industry to react to capacity needs, plan for the future and deliver value for money for the fare payer.

My third point is that if the reason for lengthening franchises is to improve services, enhance capacity and incentivise operators to invest in the railways, we must ensure that not only is there value for money, but that any investment enhances capacity. That brings us to the issue of whether TOCs should be able to invest in rail infrastructure. At the moment, that area of responsibility is solely for Network Rail. The problem that we often hear about from passenger groups and operators is that Network Rail's culture can prevent what are relatively small and modest improvements to stations-such as short works outside stations or improvements to line capacity-from going ahead. Often, an operator might identify a platform that needs lengthening and be prepared to invest in that and work with Network Rail, but finds that Network Rail has not prioritised that issue.

We believe that contracts and funding for smaller scale capacity enhancement projects, which are currently dealt with by Network Rail, should be opened up to other providers, including-although not exclusively-
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passenger and freight operators, on the basis that those investments will enhance capacity. We would encourage rail franchise bids to contain projects of that type. Joint bids for funding by Network Rail and local passenger and freight operators would also be welcome. Network Rail says that it is receptive to the idea, and I look forward to that happening. It would also be important to amend Network Rail's licence to include a specific duty to co-operate with operators and other entities carrying out those sorts of capacity enhancements. The advantages of that are clear. It would speed up the construction of much needed capacity enhancements, improve efficiency and provide a cost comparison against the bulk of Network Rail's current functions. It would provide useful benchmarks against which to measure the whole of the infrastructure industry in this country, and it would encourage passenger and freight operators to invest in important capacity enhancements.

The last part of the Committee's report deals with National Express. Reading from the evidence-taking sessions, I want to point out a couple of issues that are particularly important. With the benefit of hindsight, the comments made by the Secretary of State to the Committee appear to suggest that the Committee was not given the fullest evidence about the state of the east coast franchise.

On 17 June, and again on 15 July, the Committee was told that the Secretary of State had no knowledge about the severity of the problems on the east coast main line. However, freedom of information requests have revealed that not only was the Secretary of State aware of the problems with the franchise when he went before the Committee, but that he, or one of his predecessors, had attempted to negotiate a management contract with National Express. That is clear from the evidence in the freedom of information request, and the letter written by Mr. Ray O'Toole to the Government on 21 April 2009, which stated that although National Express was not in breach of any term of the franchise, it would not be able to continue with that franchise. It is clear from details of a meeting between the Secretary of State, Mr. Bowker and Mr. O'Toole on 9 June 2009, which were surrendered under the Freedom of Information Act, that Network Rail had no viable alternative but to withdraw from the franchise from 1 January 2010. Both 21 April and 9 June were prior to 17 June and 15 July, when the Committee was given evidence.

Page 7 of the Committee's report states that the Government should

and the Government reaffirmed that commitment in their response to the report. Ministers are on record as saying that they do not negotiate, but the Government were negotiating. As further FOI requests show, the previous Secretary of State put in place negotiations between National Express and the Department for Transport about a possible management contract. To be kind, the evidence given to the Committee was far from the very fullest; FOI requests have subsequently shown that certain elements, which should have been disclosed to the Committee, were not. That is an important part of the debate, and it needs to be raised this afternoon.

In paragraph 16 of the report, the Committee states:

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It will not surprise the Chairman of the Select Committee to know that although I agree with much of her report, that is one thing that I emphatically reject. At a time when the newly nationalised East Coast company, after only three months in existence, has the worst punctuality and reliability figures, I would hope that the evidence is on my side. The Committee concludes that there are underlying problems with the franchising model, and everybody in this Chamber can agree with that conclusion.

Several hon. Members rose-

Janet Anderson (in the Chair): Order. I owe hon. Members an apology for having got the order of speakers slightly out of kilter. I should have called the Back Benchers first.

3.12 pm

Ms Angela C. Smith (Sheffield, Hillsborough) (Lab): One encouraging aspect of the direction that we have taken on transport policy is the growing commitment from parties on both sides of the House to the future of rail services. We may differ over how those services should be delivered, and I would certainly take issue with the comments of the hon. Member for Wimbledon (Stephen Hammond) about the east coast main line, but that commitment is nevertheless there. That has been, and will be, shown by today's contributions.

The context of today's debate is rather important. In recent years, passenger numbers have grown in a way that we have not seen for a significant time; indeed, we have the highest passenger numbers in 60 years. Some 1.25 billion passenger journeys were made last year, and rail operators are providing 22 per cent. more services than in the mid-1990s. In that sense, rail is clearly a success story.

Why? The reasons are many. We have seen significant investment in rail services in the past few years. Some may say that that investment has been on the slow side, that we should have seen more of it and that it should have been more of a priority for the Government, and I would agree, but we should nevertheless acknowledge that significant investment has been made available.

All parties involved in the delivery of rail services have also shown an increased commitment to ensuring that our railway network improves and becomes a great success story. Rail operators, passengers, passenger groups, the DFT, the Government and political parties have begun to focus on the role that rail plays in getting people from A to B and on the positive impact that rail services can have on economic growth. Increasingly, people also have an awareness of the role that rail services can play in reducing congestion on our road network and the impact of carbon emissions on the environment. There are therefore many reasons why rail services have grown in importance for the future of the country and its economy and why that will continue.

Continuing to invest in our rail services must surely be the way forward. It is interesting that the right hon. and learned Member for Rushcliffe (Mr. Clarke) made a speech in Yorkshire only the other week to the effect that transport spending should not be cut in the forthcoming period, which will be very difficult for public spending.
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That is an interesting statement, given that his party wants to cut the public deficit more quickly than any other political party in Parliament. However, on a personal level, I find those comments rather reassuring, because it is my strong view that we need to continue investing in our rail services.

We need to deliver major projects, and I am thinking of not just Thameslink and Crossrail, but the northern hub, which is otherwise known as the Manchester hub in the north-west, although those of us in the north more generally see it as much more important than that and as a genuinely northern hub. We need the rolling stock for the Northern Rail franchise to be delivered, as the first part of what I hope will be a long-term investment in improvements to passenger services in the north of England. We also need to invest in not only the promised high-speed rail developments, but expanded capacity on the traditional network.

All of that is necessary. If we do not make that investment, we will continue to see congestion on the road network. I can speak only about the north of England and from personal experience, but it is already difficult to use the M62, which is the major corridor from one side of the Pennines to the other. If people do not use it, they have to use the A roads, which are increasingly even more difficult to use. We will also start to see an increasing impact on economic growth. I would rather that the country looked to the future and made it clear that we should step up investment in rail services, rather than allowing the economy to be damaged because we had failed to invest in them. We have begun to realise that rail can promote economic growth. The point is not just that it helps to relieve congestion and keep economic growth going; it can actually promote economic growth.

In that context, it is critical that we get the arrangements for the future running of our railway services right. That is why the debate is so important. It is also why I was so ready, as a member of the Transport Committee, to sign up to the report's key recommendation, which is that the franchising arrangements for our rail services should be revised to tackle the short-termism that has characterised the granting of franchises over the past few years.

The impact of that short-term approach can already be seen. The last round of franchises was delivered on the basis that passenger numbers would grow by between 9 and 10 per cent. and profits would rise by 10 per cent. As the hon. Gentleman and my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman) have made clear, the franchises are let for a short period. That was predicated on a high premium and on a 10 per cent. growth in passenger numbers and profits. That growth has failed to materialise because of the recession, with the result that the rail sector had suffered 7,000 job cuts as of July 2009, the date of the report. Some 750 jobs were lost at National Express, 480 were lost at South West Trains and 300 were lost at Southeastern Trains. We can ill afford those job cuts at a time when we all agree that we should be investing further in our railways.

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