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Mr. Ivor Caplin (Hove): I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.

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Rail Franchises

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Caplin.]

12.55 pm

Dr. Vincent Cable (Twickenham): I have great pleasure in initiating this debate. I want to focus on one aspect of railway policy: the role of franchising, especially as it applies in the South West Trains area. I represent part of that area and, if my geography is correct, so does the Under–Secretary of State for Transport, Local Government and the Regions, the hon. Member for Southampton, Test (Dr. Whitehead). The hon. Gentleman is looking at me quizzically, so perhaps he does not.

The debate is appropriate at this time and there are three reasons for it. I am aware that a big national debate is under way about the role of the Secretary of State in the liquidation of Railtrack, but I do not want to be part of that—it is taking place at a different level.

My first concern is the effect of the structural changes on day-to-day services in areas such as mine. The brutal fact is that my part of outer London, the adjacent areas and their feeder lines are daily suffering a rapid and visible deterioration in service provision. That can be seen in the growing number of cancellations, of late departures and even later arrivals, and in increasing overcrowding. Those points are not anecdotal. I have checked with the railway management—an authority—who confirm that their internal statistics show that rapid deterioration is taking place. The system of fines and incentives cannot cope with the problem because the infrastructure itself is declining.

My second reason for holding the debate is to isolate certain issues that do not form part of the big question as to whether Railtrack should have been liquidated. I support the Government's action on Railtrack—as did my party. The Government took the correct approach, so I am not trying to score political points. However, many issues subsidiary to the Railtrack ownership question are unclear.

Many of us have an interest in the matter as constituency MPs and we are unclear about the way forward. For example, what is to happen to the management vacuum at the heart of Railtrack? Under the 10-year plan, what will happen to the transmission of funding for service enhancement? How will that finance chain be affected by the change in ownership? What will happen to the three tiers of responsibility: the infrastructure providers, the franchise operators and the subcontractors? Currently, they all have their own profit margins and there are confused lines of responsibility.

The Minister knows well that such confusion has lain at the heart of all the failures of privatisation. We do not yet know how the problem will be tackled. In this case, we do not yet know the Government's thinking on vertical integration, which is an essential and topical issue—certainly in my area. I want to sound out the Government on at least their provisional thinking on that subject.

I want to ask about the role of South West Trains. I am not an apologist for South West Trains, nor have I come here to give the company a caning. It simply happens to be the franchise operator.

South West Trains got off to a bad start. The company sacked a substantial number of key staff soon after it was awarded the franchise. The service deteriorated badly.

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Staff had to be re-hired, and arguments about terms and conditions caused further disruption. The company endeared itself neither to my constituents nor to many other people. When the new franchising round began, I was more impressed by some of the alternative bidders, such as Dutch Railways.

However, that is history. South West Trains was provisionally awarded the new franchise; it was the preferred bidder. I am impressed by the quality of the new senior management. I have talked to the chairman of the company who seems genuinely committed to railways and to making them work. As a constituency MP, my job is to work with the company to help it to get the franchise operating so as to deliver the service improvements that it promised. That is why I have introduced the debate.

South West Trains has undertaken to provide three specific aspects of service improvement. One is a doubling of the service on some of the suburban loop lines, but that in turn requires investment in new rolling stock. The company has undertaken to provide longer trains, which also requires improvements in stations and the length of platforms. It has undertaken to provide better coaches, CCTV, and more comfort and safety. All those things require money, and as long as there is uncertainty about the franchise arrangement, it will not be clear how South West Trains can make its way forward.

To crystallise the debate and perhaps to help the Minister, I shall encapsulate what I want to say in five questions. He may not be able to answer them all in full today, but perhaps he can do his best and let me have the other answers in writing. First, what exactly is the status of the South West Trains franchise? I asked the Minister a parliamentary question about that a few weeks ago, and received the predictable reply that a decision would be made in due course. I am sure that that is factually true, but it is not terribly helpful.

The franchise has been in limbo for more than six months, and it expires in February 2003. We are rapidly reaching the point at which key decisions on investment cannot be made owing to uncertainty. When will a decision be made, and what form will it take? I fully understand that the Government cannot divulge details of the Strategic Rail Authority's commercial negotiations with companies, but if the Minister can give us as much clarity as possible about the timing and nature of the franchise, the company and those of us living in the franchise area will at least be able to see what the future holds. Before I entered Parliament, I worked in a big corporation in which we operated on 10, 20 or 50-year planning horizons. It is necessary to do that in many industries. The railways have been required to operate on a short leash, and that is simply not the way forward.

The second question is more concrete, which may make it easier for the Minister to answer. When will the 10-car trains that have been promised under the franchise in my area arrive? Under the franchise proposals, there was a firm planning horizon and it was proposed that the 10-car trains would arrive in 2004. Will they be delivered on time? Longer trains are crucial if we are to solve overcrowding. Is it intended that the franchise undertakings in relation to longer trains will be met on time? Can the Minister give me an assurance that that promise will be met?

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Thirdly, how does the Department propose to ensure that the finance is available for the service enhancements that have been promised under the new franchise? Where will the money come from? I am aware that the Government have an ambitious, promising, large long-term investment plan, but anyone who is following the matter closely will know that the system is close to collapse in terms of the financing mechanism.

If the Minister is following the matter closely, he will have read a revealing article in Modern Railways, a specialist journal, in July this year. It is rather technical, but revealing about the way in which funding is disappearing into the sand. It makes the point that current big rail projects are costing about three times as much as under the British Rail system for the equivalent amount of track. There is an enormous amount of waste under the existing structures. It looks as if the promising finance is not being used productively to produce the promised enhancements.

It appears, and the figures support this, that the cost of maintenance has increased by 35 per cent. in the past three years owing to the inefficiency and inflated profits of the subcontractors. Many people anticipated that that would happen when they criticised rail privatisation, and it has. The practical implication is that the pot of money available for funding service enhancements seems to be disappearing. How will those service improvements be achieved? In the case of the South West Trains franchise, we are talking not about massive capital projects but about modest ones involving station lengthening and the acquisition of new stock. Is the money available for them? Will it come from the Treasury, the SRA or private finance initiatives?

Fourthly, I turn to service and track deterioration. How is that being monitored? Are the Government aware of the extent to which quality has deteriorated? When will that curve start to turn upwards? I know that the Secretary of State is repeatedly pressed on that point, and I believe that he told the Transport, Local Government and the Regions Committee, rather hopefully, that he expected to see improvements by the time of its next meeting, which I think is in January. Perhaps he had not realised that the timetable was so strict. I am not trying to score a political point, but will the Minister give us some indication of when improvements will occur, so that I can pass that on to my constituents? When the Government have studied the inventory of their assets and the underlying technical problems, they should be able to estimate when service provision will begin to improve. We need that predictability.

Fifthly, what is the Government's provisional thinking about vertical integration? We know that it is an option because in his original statement to the House the Secretary of State indicated that he was open-minded about a variety of structural alternatives. However, I press the Minister to give specific, although not necessarily definitive, views about vertical integration.

The chairman of Stagecoach, which owns South West Trains, has gone on the record to advocate that option—I am not breaching any confidentiality—and to make what seems to me, as a layman, a very strong case for it. He argues that vertical integration would eliminate all the profit margins of the three sets of operators and ensure that there was real accountability because the franchise operating company would be responsible for the maintenance of the track as well as customer provision. It

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would be responsible also for safety, subject to an independent certification procedure. There would be a concentration of responsibility that has not been seen since the railways were privatised. Vertical integration could be introduced, on an experimental basis, in one region. Are the Government sympathetic to that approach? Are they encouraging it, or have they rejected it?

My final point is not substantive but concerns process. MPs are kept well briefed by Departments about many matters concerning their area. The Department for Work and Pensions keeps us informed about the Government's employment schemes, and we are well briefed on education initiatives as they affect our constituency. Some quangos are getting much better at communicating, and it is increasingly common for hospital trusts, for example, to keep local MPs informed about events.

The railways, however, are an absolute nightmare. It is virtually impossible for us to find out anything about what is happening in our area. We can try to develop a working relationship with the franchise company, but the whole process is extremely opaque. Will the Government consider how they can ensure that MPs are kept abreast of operational and practical developments in the railway system as they affect our constituents? I can assure the Minister that in a commuter constituency such as mine, the deterioration of rail services is perhaps an MP's biggest political headache. I am keen to find practical solutions rather than to score political points, but I would be grateful if the Government helped by clarifying the position.

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