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Westminster Hall

Monday 17 September 2012

[Mr Peter Bone in the Chair]

Backbench Business

West Coast Main Line

[Relevant documents: Uncorrected transcripts of oral evidence taken before the Transport Committee on 10 September 2012, on Rail 2020: West Coast Main Line, HC 537-i, and on 12 September 2012, on The Work of the Department for Transport, HC 584-i.]

4.30 pm

Rosie Cooper (West Lancashire) (Lab): I beg to move,

That this House has considered the e-petition from Ross McKillop and others relating to the West Coast Mainline franchise decision.

The motion reflects the concerns of more than 170,000 people who have signed the e-petition and it calls on the Government to reconsider the decision to award the west coast main line franchise to FirstGroup.

It is a pleasure to serve under your chairmanship today, Mr Bone. I understand that this is the first Backbench Business Committee debate to take place in Westminster Hall on a Monday. I wish to thank the Committee for accepting the application for this debate and for granting us time before the conference recess. I congratulate the Minister on his new role at the Department for Transport. I am sure that he would have welcomed a less contentious issue so early in his post.

Due to Committee business, members of the Transport Committee are unable to join us today. My hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) and her Committee colleagues are already interrogating people over this matter.

Iain Stewart (Milton Keynes South) (Con): I am a member of the Transport Committee and I am here.

Rosie Cooper: I am glad that the hon. Gentleman is here and is able to contribute to the debate. His colleagues, I believe, are away on business.

The Transport Committee is considering this matter through the work of its Rail 2020 inquiry. Several hon. Members from Lancashire, who are currently attending a meeting with Ministers on employment matters in their constituencies, wish, with your permission, Mr Bone, to speak later in the debate.

More than 170,000 people put their name to an e-petition, which was started by Ross McKillop, calling on the Government to reconsider their decision on the west coast main line franchise. That huge number of signatures, which was collected over a short period of time, reflects strong feelings and shows that the subject deserves to be debated in the House.

On the west coast main line, we are talking about 31 million passenger journeys a year and a £5.5 billion contract that will last for 15 years—that is this Parliament and the two that follow it. Hon. Members from all parts

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of the House have called on Transport Ministers to give Members an opportunity to scrutinise in more detail the actual process through which the decision was made. In August, my hon. Friend the Member for Garston and Halewood (Maria Eagle) wrote to the then Secretary of State for Transport, asking her to make a statement to the House. This will be the first opportunity for Members from all parts of the House, apart from the Transport Committee, to ask questions of the Minister, to begin to scrutinise the decision and to put their views and those of their constituents directly to the Minister.

A considerable amount of press coverage and opinion seeks to make the issue one of FirstGroup versus Virgin. Personally, I do not care much about the name of the company that provides the service. My priority is to ensure that the final decision, taken by the Department for Transport, is the best deal for taxpayers and fare payers. I hope to get from the Minister today the guarantees and reassurances necessary to be satisfied that the decision-making process is robust, so that the right decision is made with taxpayers’ money.

Given the determined efforts of Transport Ministers to avoid answering questions on this franchise decision, I do not begin this debate from a position of resounding confidence. We are told over and over that the process is rigorous, detailed and fair. It is as if by repeating that mantra we will all believe it. Yet there have been many complaints that the process does not even deliver against its own objectives.

The basis of the judicial review is that the Department for Transport broke its own rules when evaluating the bids, and we need to get to the bottom of that. There are those who argue that the entire franchise bidding process is flawed, and driven solely by the promise of large sums of money no matter what the cost, and irrespective of the stated objectives.

Mr Dave Watts (St Helens North) (Lab): Does my hon. Friend share my concern that the Department for Transport officials, who looked at the Virgin contract when it was let, underestimated the amount of money that would be made by Virgin? Given that there is that lack of credibility, how much credibility does she place on the assessment of the First bid?

Rosie Cooper: I was not a Member of this House when that decision was taken, so was not in a position rigorously to examine it. Overall, though, I do not have great confidence in the various projections of the Department.

To continue, let us take, for example, the objective to achieve sustainable value for money. That is a stated objective, yet the process encourages risky bids because companies know that if their bid is £250 million more than any other bid their competitors’ bids do not go forward for further evaluation. I have deep reservations about a system that does not attempt to answer why one bid is so much higher than all the rest, and then does not quantify the difference.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): The hon. Lady intimates that she has concerns about the way in which matters are carried out at the Department for Transport. Like me, she was at a meeting when Virgin Trains, which had been invited to talk to MPs,

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said very clearly that it had discussed its concerns with Lord Adonis. What did the previous Labour Administration do to allay Virgin’s fears at the time?

Rosie Cooper: I did not clearly hear that part of the meeting. Perhaps it happened before I arrived. I was there when the hon. Gentleman said that he called the meeting so that Virgin and FirstGroup could say how they had arrived at their current situation—of one being awarded the contract and the other having started a judicial review. I pointed out that nobody from the Government had bothered to turn up to answer MPs’ questions and that democracy had been short-changed.

I understand that the Government use a computer programme to test the assumptions within the bid, which the Minister will no doubt tell me is a robust approach. My response would be to ask whether this was the same modelling package that was used by the consultants who said that the west coast main line should be carrying an extra £15 million of fares during the period of the Olympics and Paralympics? It was never physically possible to get that volume of passengers within that time frame to deliver £15 million of sales. In the end, the additional revenues amounted to between £1 million and £2 million. Such projections were for a single event over a short period of time and they were way, way off. How much confidence does that instil in us over projections that are supposed to last 15 years?

Tim Farron (Westmorland and Lonsdale) (LD): The hon. Lady points out that it is very easy for all of us to be experts after the fact. Does that not demonstrate that the real problem here is that this decision was taken maybe completely appropriately, but it was announced during the summer recess so that Parliament had no chance to discuss or interrogate this issue? Moreover, perhaps one criterion that ought to be added to the process is what the public and the users of the service think about it.

Rosie Cooper: The hon. Gentleman raises several of the points that I am about to discuss in more detail, but I absolutely agree with him.

Surely projections about the contract should score highly on the basis of value for money for the taxpayer and the commuter. There is a belief that passenger growth could continue to be 10% per annum. However, such growth figures were achieved at the top of the economy. Even for a non-economist such as me, it does not take a great leap of faith to think that such growth rates are not sustainable in an economy that is in the doldrums and with fears of a double-dip recession not having gone away.

David Mowat (Warrington South) (Con): The hon. Lady is quite right to say that all these projections for the future are estimates and guesses, that they may be too low or too high and that FirstGroup made very aggressive ones. However, is not the key point of a procurement process to ensure that the risk in respect of those projections is with FirstGroup’s shareholders and not with the passengers? The issue is how we manage that risk and not what the estimates were.

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Rosie Cooper: Absolutely, and I will come on to that point later in my remarks, because it is absolutely clear that the risk here, with such a small guaranteed sum, is with the taxpayer.

Joan Walley (Stoke-on-Trent North) (Lab): I congratulate my hon. Friend on securing this debate, because it is important that this matter is debated in Parliament. However, the particular issue that we are considering here needs to relate to the deliverability of the process by which the contract has been offered, and there is no real way that we can assess, all those years into the future, whether the winning bidder can produce what is meant to be there. Therefore it is a matter of great concern that there does not seem to be a proper assessment process about how the bid is actually given out.

Rosie Cooper: I agree, and again my hon. Friend raises points that I will return to later in my remarks.

It is absolutely for sure that we are dealing with risk—risk in the assumptions and economic risk. However, the only bidder for the contract that does not seem to have put up a lot of money is the company that has been awarded the contract. Again, I will return to that point later.

Economic assumptions are central to franchise bids. Governments expect rail companies to predict GDP trends over the lifetime of a franchise. As the Government cannot manage to predict GDP over the short term, how can we have confidence that any bids based on long-term projections have credibility? If an economist can tell me that those projections are credible, I suggest that the Government employ that economist as the current lot of economists cannot manage to.

Mr Watts: Is not the point that the Department for Transport has a long record of getting everything wrong? It gets it wrong on roads, on airports and on rail. The only thing that it seems will protect the Minister is that some penalties will be imposed if the contract is not delivered in the way that his officials propose. Should not we be transparent and absolutely clear about how this contract was let, know how any penalties are going to work and be quite clear that there will be no payment by the taxpayer if things go wrong?

Rosie Cooper: I absolutely agree with those comments, and those points are central to why I asked the Backbench Business Committee to allow a debate on this subject today. It is clear that there should be an open and transparent process. Perhaps we should be at the point now of comparing bids.

Let me return to my train of thought. There are other anomalies. For instance, the Virgin bid offers £133 million more in the period of the franchise up to March 2020. After that point, FirstGroup says that it will pay £1.23 billion more between March 2020 and March 2026. It does so based on a forecast of huge growth in passenger numbers, which comes at a time when there is no planned investment and when there will be huge disruption from the High Speed 2 rail project. So I ask again: how is sustainability at the heart of this decision?

Besides the computer modelling, there is also the anonymised scoring system, which I hope would prioritise sustainable value for money over high-value promises.

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Mr William Cash (Stone) (Con): We know that the Transport Committee is looking at this issue. Has the hon. Lady asked whether the Public Accounts Committee should look at it? As we are dealing with public money and value for money, is not what she is referring to today an ideal issue for the PAC to consider? Perhaps later, after the debate, she could address that question to the right hon. Member for Barking (Margaret Hodge), who is the Chairman of the PAC.

Rosie Cooper: I will indeed do that. I had not considered the idea of asking the PAC to look at this issue, but I undertake now to ensure that I send a letter to that effect to the Chairman of the PAC before I leave Parliament today.

Joan Walley: When my hon. Friend does so, will she ensure that she asks for the recommendations of an earlier PAC report on procurement to be considered within the context that has just been described by the hon. Member for Stone (Mr Cash)?

Rosie Cooper: Indeed I will, and I will seek further advice from my right hon. Friend on that point as well.

There is considerable difference in value when one bidder offers £800 million worth of investment and the other bidder offers £350 million. Unbelievably, there are reports that FirstGroup scored higher in the bidding process on customer service than Virgin did. Can the Minister tell me how the scoring system squares that with the results from various customer satisfaction surveys of FirstGroup’s current users—in other words, FirstGroup’s passengers—that show that those users rated the Great Western service as the second worst service around? It is not unfair or illogical to assume that, if a company offers a certain service on one line, it may offer something similar on another line. So can he explain how an anonymised scoring system is better informed than the passengers who actually use the railway system and FirstGroup in particular?

Sustainability is one of the watchwords in every aspect of public expenditure. Ensuring that the bids that are submitted can be sustained over the life of a franchise is essential. One of the reasons why hon. Members asked for the debate is that recent franchise experiences have shown that the highest bids—the riskiest bids—are not necessarily sustainable bids. The Government have even admitted that the successful bid for the west coast main line is indeed the riskier bid.

I was intrigued to hear that, during the tendering process, the Department for Transport informed one bidder that it did not view a 5% margin as sustainable. In the light of that information, that bidder reworked its bid and achieved a 7% margin. That leaves me perplexed, when I read that the successful bid is based on a 5% margin. If that is true—I assume that it is—given the lack of information and transparency, a whole series of questions are raised. Does the DFT believe that a 5% margin is sustainable? Did DFT officials give each of the bidders the same information? If they did offer the same view on sustainability to each bidder, why was a bid accepted with a figure that they believed to be unsustainable? That is an important question because it relates to risk and, in turn, how that relates to the guarantees being sought by the Government.

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There is considerable contention about the guarantee that the successful bidder was asked to put against the bid. In the first case, my understanding of the guarantee is that it is based on the assessment of risk using a set formula. It is argued that if the Department had applied that formula uniformly, FirstGroup would expect, reasonably, to have been asked to put up a guarantee of around £600 million, not just the £215 million asked of it initially, which was finally reduced to £200 million. Secondly, did any negotiation take place with FirstGroup on the level of guarantee? If so, what were the circumstances? How did we reach the very small guarantee figure of £200 million, if the Department had been applying the same formula across all bids? If there was no provision within the invitation to tender for the guarantee to be negotiated, how does the Minister explain the variation in the figures from potentially £600 million down to £215 million, and finally to £200 million? Those figures are relevant to mitigating taxpayer risk.

We must not forget that in recent years a number of train operators have handed the keys back to the Government on franchises such as the east coast main line. I believe that Members want to be assured that that will not happen again and that taxpayers have an assurance that they will not be held to ransom by Dick Turpin train operators asking them to stand and deliver, having secured the contract on a bogus premise, taking their profits and scarpering when it is time to deliver the promised high return.

Daniel Kawczynski: I hope that the hon. Lady is not referring to any train operators as Dick Turpin-type figures.

Rosie Cooper: Oh, I think there are a lot of Dick Turpin-type figures about.

I would very much like to hear from the Minister on this precise point: has the Department applied its own rules or not? Given the whole handling of the process, a judicial review has been applied for, which has left us in a position where re-nationalising the line is being considered. The new Secretary of State for Transport has stated that he would seek to re-nationalise the west coast main line if there is a failure to reach an agreement before 9 December.

David Mowat: The hon. Lady suggests that an operator might walk away from a franchise having made the money in the early years of the contract. Is it not key for the Government to make it clear at this point that if the operator did that—giving the keys back, as she said—it would do no further work with the Government in any other contract? Therefore, for all intents and purposes, they would be barred from any further procurement processes in the future. If the Government made that clear, they would be acting in a much more private sector-type mentality, in a way that Governments often do not do. Does she agree?

Rosie Cooper: I would agree that, initially, we need a proper figure to mitigate taxpayer risk, to ensure that taxpayer costs are covered in the eventuality. However, if we have any more shenanigans, those operators should be barred from Government contracts.

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Mr Watts: One of the problems that we see daily is that companies can go out of business and then start again under a new name. If First did that, could it not overcome that problem by reorganising itself, developing a new company and then bidding for future contracts? I do not see how we could legally stop it from doing so.

Rosie Cooper: I think that is a real option. I understand from the grapevine that First does not intend to brand the west coast main line “FirstGroup”, but that there is a great possibility that it will be called Horizon. We might be in that kind of territory; I am not sure.

If there is a failure to reach an agreement before 9 December, it would mean instituting a directly operated railway service on the west coast, matching the current system on the east coast. The Government’s own guidance says that 120 days are required to get that kind of operation in place, and here we are 90 days away from the end of the current west coast franchise. Will the Minister enlighten us on how that will be achieved to ensure the smooth transfer of services to the DOR, if necessary? There is much to consider and address: safety matters; employment and contracting issues; even the simple thing of setting up a website to sell tickets. What would be the associated costs of the DOR in the initial set-up and the monthly costs thereafter? Those costs would be incurred by the taxpayer because of the Government’s failure to handle the situation adequately.

We must consider the staff. Come 9 December, they will have no idea for whom they will be working—FirstGroup, the DOR, or perhaps even Virgin. As part of any transfer of a franchise, there is a responsibility for the incumbent to work with the new operator.

The Parliamentary Under-Secretary of State for Transport (Stephen Hammond): The hon. Lady has been speculating quite a lot about the steps that the Secretary of State may or may not take as a result of a comment that he made yesterday. Let us be clear: he has a statutory duty under section 30 of the Railways Act 1993 to provide or secure the provision of services. As he made clear, that would be a temporary measure should the franchising arrangements not come into place.

Rosie Cooper: Is the Minister saying that any offer from Virgin to run the service at no cost and the best-value operation will affect his decision? I will ask him some questions about the associated costs should we set up a DOR.

I understand that two mobilisation processes are running side by side. Will the Minister tell us how that is working in practice? What are the associated risks and costs that arise from the lack of clarity? What assurances can he offer staff that their positions will be secure and the situation resolved?

The Minister has partially intimated the answer to the question that I am going to ask. If a DOR is to run the service, will it have the contract for a defined period, or will another mobilisation process be undertaken where an operator is awarded the contract? What will be the cost of that process?

One of the reasons for securing this debate is the manner in which the Department has handled the entire process, from the timing of the announcement to

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the consistent reluctance to answer hon. Members’ questions. We keep being told that this Government are open and transparent, and I want to believe that. We are told by the Department that it is confident in its decision on the west coast franchise. If I accept that both those statements are true, why have Transport Ministers not had the courage of their convictions and been willing to come to the House to make a statement to allow scrutiny of the process and the decision? There is a claim that one of the bidders had submitted questions to the Department seeking clarification on certain matters, but it has yet to receive a response. We are basically being told by the Department, “Trust us. Trust what we are telling you.”

Daniel Kawczynski: Before the announcement was made before the recess, I asked the Prime Minister a question about the process at Prime Minister’s Question Time. I do not recall hearing any questions from shadow Ministers or Labour Members challenging the process or the timing of when the decision would be made. Is that not the Labour party jumping on the bandwagon after concerns were generated in the media?

Rosie Cooper: Protecting taxpayers’ interests is a great bandwagon to jump on. We will protect their interests. The Department says, “Trust us. Trust us. Trust us,” and the hon. Gentleman is inferring that we should trust it. In the week that we had the Hillsborough revelations, “Trust us” is a very hollow call; I am not simply being cynical.

If the Government believe the decision is right, they should open the books and allow the bids to be compared. They should be open and transparent. To be honest, within the context of the east coast main line and the Great Western line, sadly I do not think we can put our faith in the Department.

During my comments, I have raised questions on the risk assessment, the funnelling of bids, the application of the rules and the soundness of growth projections. I ask the Department to try putting its faith in the democratic process and the parliamentary system so that, through debate, questioning and scrutiny, we can be assured that we have arrived at the best outcome for all parties.

Those who fail to learn the lessons of history are doomed to repeat them. The Government will not be forgiven if they allow history to repeat itself with any company taking profits from running our railways and then walking away from the contract without paying a huge penalty to cover taxpayers’ costs and, as the hon. Member for Warrington South (David Mowat) said, being barred from future Government contracts. Unless the Government can evidentially support their case, I, as one of the 170,000 people who signed the e-petition, call for them to reconsider their position.

5.1 pm

Iain Stewart (Milton Keynes South) (Con): It is always a pleasure to serve under your chairmanship, Mr Bone.

I draw attention to my entry in the Register of Members’ Financial Interests. My interests in this important subject are threefold. First, as I suspect is true for most

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hon. Members in the room, the west coast main line serves my constituency. Secondly, I use the line on a regular basis for both business and leisure. Finally, I am a member of the Select Committee on Transport and, as the hon. Member for West Lancashire (Rosie Cooper) has mentioned, we are undertaking an inquiry into the bidding process as part of our general Rail 2020 inquiry. I stress that I speak today entirely in a personal capacity and not on behalf of the Committee.

I want to take a step back and remind hon. Members of what we are debating. We are talking about a highly congested, highly used multi-use railway line that links Glasgow, north-west England, the midlands and London. The west coast main line is one of the country’s key railway arteries and has seen exceptional rises in demand from both passengers and freight over recent years. All the indications are that that demand will continue to grow over the next 10 to 15 years. Indeed, that is one of the main reasons for the High Speed 2 debate, because the line will eventually run out of capacity and intermediate steps such as lengthening trains, remodelling junctions and the rest will not deliver the capacity we need.

Within the passenger context, there is also a conflict of needs on the west coast main line. Some users want London, Birmingham, Manchester and Liverpool to be linked with very fast services, and other places on the line, such as my constituency, want inter-regional services that stop so people can travel from Milton Keynes to Glasgow or from Nuneaton, Rugby and elsewhere to other destinations on the line. Plus, of course, there is all the commuter traffic in and around the major conurbations on the line. The west coast main line is a complex railway system, and it is vital that, over the next 15 years before High Speed 2, we make the most efficient use of that line.

No one, other than the Department’s senior officials and Ministers, has seen the full detail of the two bids, which I believe run into thousands of pages and have been assessed over many months. We should, therefore, be a little careful how we approach this debate. We have all heard the accusations and counter-accusations made by the two companies, but we have not seen that information. Indeed, picking up on one of the points raised by the hon. Member for West Lancashire, I am not sure we can see the bids in any detail because the information they contain is commercially sensitive, and no bidder would want such information released during the bidding process.

Several hon. Members rose—

Iain Stewart: I will first give way to my fellow Hutchesonian.

Anas Sarwar (Glasgow Central) (Lab): I am not sure that is something I want said with some of my Labour colleagues in the room!

There has been a debate on the two companies, but does the hon. Gentleman agree that it is not about which company operates the line but about getting the right deal for the taxpayer and the passenger? People need reassurance that we will get the same quality and frequency of service and the same low fares and that taxpayers will not eventually have to foot the bill.

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Iain Stewart: I agree with the hon. Gentleman. I also put it on record that I have no preference as to whether Virgin or FirstGroup wins the franchise. Virgin operated the franchise perfectly competently, and I would have had no problem had it been the successful bidder. Equally, FirstGroup has made a very attractive offer, so I approach this from a neutral perspective.

Albert Owen (Ynys Môn) (Lab): In his introduction, the hon. Gentleman omitted the fact that the west cost main line also serves north Wales. I will address that important point if I catch your eye, Mr Bone.

The hon. Gentleman mentioned that we may never know the detail of the bids, but surely that is the purpose of the Transport Committee’s inquiry. Ministers are there to answer such questions, and it would be in the Government’s interest if we were to have at least a summary so that we could clear up some of what he calls “speculation.”

Iain Stewart: I apologise to the hon. Gentleman; of course the route also serves Chester and the north Wales coast, and I will refer to that a little later.

We have had a summary of the respective bids, but to assess fully whether the FirstGroup bid is deliverable in preference to the Virgin bid, we would need to see the very detailed evidence that supports the headlines we all know about. My contention is that we cannot expect to see that while the bidding process is ongoing, because the bids contain commercially sensitive information. That would be like a card game in which each player has to reveal their hand before they play.

David Mowat: My hon. Friend is right that the bids contain a huge amount of detail that is very hard for anyone here to understand. In his Select Committee role, he might like to investigate—I have heard this several times—the Virgin bid not being evaluated against the other bid because of the £250 million price gap, which has been highlighted by the hon. Member for West Lancashire (Rosie Cooper). That would be worth understanding.

Iain Stewart: That is a fair question. I cannot answer, but perhaps the Minister will.

Mr Brian H. Donohoe (Central Ayrshire) (Lab): What is the purpose of the Select Committee’s report, or an inquiry, if it cannot be given the evidence that will show the difference, if there is a difference, between the two bids? The press, for instance, have suggested that the FirstGroup bid is back-loaded. How will the Select Committee work to the advantage of the taxpayer in such circumstances?

Iain Stewart: That is a fair question. When the Select Committee debated whether we should call Sir Richard Branson, Tim O'Toole and their colleagues, I made the point that we would not be able to probe them fully because we did not have access to the information because of the legal position. I would love to be able to go further, but we shine as much light as we can.

Mr Russell Brown (Dumfries and Galloway) (Lab) rose—

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Iain Stewart: I will give way one last time, but I must then make some progress.

Mr Brown: I thank the hon. Gentleman for giving way. Obviously, the bids contain significant detail. As he and other hon. Members have indicated, we may never find out all of it. There are so many claims and counter-claims, and through the Select Committee and this debate we are looking for a clear indication from the Minister, without the detail, of whether every claim and counter-claim was carefully considered. Has he covered everything to ensure that the outcome is fair for the taxpayer?

Iain Stewart: Some of those questions are for the Minister to answer. I shall come in a moment to some reasons for my own conclusions about the two bids, but there is a caveat attached to what I say, because I do not have access to that information.

For the first half of the franchise period, up to eight to 10 years, the two bids are remarkably similar. There may be a higher premium payment from one than the other in a given year, but the lines on a graph are broadly consistent. They diverge only in the last period. The shorthand explanation is that FirstGroup believes it can continue to grow the market throughout the franchise, whereas Virgin believes that revenue growth and passenger numbers will tail off towards the end. The first bid is therefore more ambitious, and consequently riskier. What we must assess is whether that risk is acceptable. My conclusion is that it is within the bounds of acceptability.

My first reason for believing that is that population growth along the route is likely to be considerable over the 15 years. The Milton Keynes area has 25,000 housing permissions over the lifetime of the bid, and other towns and cities on the route have similar housing growth ambitions for that time. Feeder services into the main line will also be enhanced. The east-west rail link in my area will, I hope, open by 2017. One of its attractions is that it will build feeder services into the west coast, for people from Oxford or Bedford who might want to travel to stations in the north-west, or Scotland. That will drive demand on the line. Similarly, in the Manchester area, the northern hub will we hope attract more rail users on to the line and enable it to continue its ambitious growth, taking passengers away from the air route. For those reasons I believe there will be sustainable demand in the next 15 years.

The next question is whether the line can deliver the capacity to meet the demand. One of Virgin’s accusations was that by the end of the franchise First will have to fill every seat on every train every day to meet its premium payments. We need to examine the detail of what First proposes. It proposes more trains than the Virgin bid does. Both companies propose to buy new electric train sets for parts of the network. I understand that the difference is that First will augment the existing fleet. Virgin would replace the Voyagers with the new electric ones, whereas FirstGroup would keep the Voyager fleet and lengthen five-car trains into 10-car trains. First also wants to use more ambitious ticketing structures: a new class of travel between standard class and first class. It makes a point about capacity; the figure for the trains across the week is only 35%, whereas other franchises run at near 50%.

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Anas Sarwar: Is not the hon. Gentleman concerned that with that predicted doubling of user numbers on the service in the next 15 years, and given that figure for capacity of 35%, fares will go up, and will be much higher in peak times, to attract people to travel off-peak? That could lead to a massive increase in fares for people using the service at the most important times.

Iain Stewart: Without wanting to put words in his mouth, I think, from our questioning in Committee of Tim O’Toole of FirstGroup, that he would reflect whatever changes the Government make to the definition of the peak period. The ambition is indeed to try to get a more equitable spread of rail demand across the day so that trains are not packed at certain times while others run comparatively empty. That is a sensible ambition. However, the long-term answer to the hon. Gentleman’s question is a step change in rail capacity, which will come with High Speed 2. In the mean time, the question is how to make best use of the capacity that we have.

Mr John Leech (Manchester, Withington) (LD): I thank my fellow Select Committee member for giving way. I felt that one problem with the questions to Tim O’Toole was that he seemed to argue that First would be able to get people on to those peak-time trains that are under-utilised at the moment with a 15% discount on rail fares. However, that still seems significantly more expensive than the off-peak saver returns or first advance tickets. There is a danger that the ambition to fill those trains will not be realised without increasing the cost of some first advance tickets, so that people cannot get them on off-peak trains.

Iain Stewart: I thank my hon. Friend and fellow Select Committee member for that point. There will still be a peak period and an off-peak period. My perspective is that we should be able to manage a more effective distribution. However, Mr O’Toole also made the point that he will not realise his ambition to fill the trains if fares are so high that people will not use them. His ambition is to achieve a modal shift from car and air to train.

Mr Watts: Perhaps the hon. Gentleman can clarify one point. The operators do not buy the trains; they lease them. If the increase in question does not happen, and Virgin is right and First is wrong, will First be forced to lease trains in the 10th, 11th, or 12th years—up to 15 years? Alternatively, will it just be able to decide that perhaps it will not increase capacity then, because there would be no justification?

Iain Stewart: I am not privy to the contractual details in relation to the trains. From memory, First would be obliged to continue with the existing Pendolino fleet, which is the mainstay of the route. The trains in question are additional ones, to meet the capacity. Things could easily go the other way. The trains that are being bought are six-car ones; if, suddenly, passenger numbers go up beyond expectations, it might be feasible to lengthen them, in the same way that the Pendolinos have been lengthened from nine to 11 cars.

Mr Watts: The hon. Gentleman is being generous with his time. If what he said is the case, the commitment to long-term investment may never materialise. It is one

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of the main planks of the argument for First, but First may not build the capacity because there might not be a justification for it. Does the hon. Gentleman agree that that is why it is important that we have more transparency, and can all see the details of the contract?

Iain Stewart: Perhaps it is a case of whether we see the glass as half-full or half-empty. I see an attractive proposition for growth in use. Why would FirstGroup, an experienced rail operator, want to tarnish its reputation by not delivering on what it promises? I will come on to one difficulty that I anticipate—or on which, at least, I would like reassurance. However, I think First’s ambition is genuine. As I have tried to explain, I think that there is underlying growth in the market, and that First will be able to innovate with new products to attract people on to the railways.

I do not want to continue much longer, because other hon. Members want to contribute. I have a concern about one aspect of the matter, and the hon. Member for West Lancashire touched on it. There will be considerable work on the west coast main line over the franchise period, particularly in the Euston area, if it is decided that that will be the High Speed 2 terminus. That may have an impact on the ability of the line to deliver the extra capacity. I should be grateful for a comment from the Minister, whom I welcome him to his post. He has long taken an interest in rail, and richly deserves his position. Perhaps he could say a little about how the upgrade work at Euston and elsewhere on the line will be accommodated, along with growing passenger numbers, over the period in question. I believe that there are solutions. For example, it might be possible to divert some commuter traffic on the London midland line into the Crossrail terminus while Euston is being upgraded, and for extra capacity to be created there. If the Minister would say a few words about that, I should be grateful.

David Mowat: Will my hon. Friend give way?

Iain Stewart: I will give way one last time, but then I must conclude.

David Mowat: The thrust of my hon. Friend’s remarks is that if there is an issue with Euston or the revenue projections, that is a problem for the Government, but it must be a problem for FirstGroup, and the contractual basis must make that clear. Such points, although interesting, do not mitigate FirstGroup’s liability. That must be a principle.

Iain Stewart: That is a fair point. I genuinely do not believe that FirstGroup would be making the bid if it did not believe that it could deliver. However, we do not have the full details, and I do not think that we can. I believe that the process has been rigorous. The bids were anonymised; the Government could not have displayed any commercial bias for or against any operator.

In conclusion, it is healthy that we have such a high level of ambition and competition. It is to the benefit of all who use the railway that different companies want to develop the line in innovative ways. I hope that my constituents and those of other hon. Members will see an improvement in their rail services over the life of the franchise.

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Mr Peter Bone (in the Chair): It might help Members to know that the winding-up speeches will begin no later than 6.55 pm, and that I intend to call first those who have given notice to Mr Speaker.

5.21 pm

Derek Twigg (Halton) (Lab): I congratulate my hon. Friend the Member for West Lancashire (Rosie Cooper) on securing this unique debate and for the interest that she has taken for many years in transport issues, rail and the west coast line.

I was a bit worried earlier when my hon. Friend the Member for St Helens North (Mr Watts) was criticising the Department for Transport for getting decisions wrong all the time. He mentioned rail. As a former rail Minister, I thought, “Does he mean me?” He has since popped over and said that he did not.

I was rail Minister for 18 months, and it was a fascinating period. We discussed franchising; I am certainly sceptical about it. I had to appear before the Transport Committee, then chaired by Gwyneth Dunwoody, the former Member for Crewe and Nantwich, a formidable individual who is, sadly, no longer with us. We always used to look forward to appearing before her in Committee to answer her questions. It was an experience. I remember asking the officials what franchising adds and what it brought to the party to improve things. I found it difficult to get an answer. The best that they could come up with was that it improves customer service, is more innovative and has brought improvements in service, but their answer was not overwhelming.

We had various problems with franchises. Southern was one that was sort of operated by the Department; now we have East Coast as well. There are alternatives to be considered. Franchising creates many problems, some of which we have heard outlined during this debate.

I welcome the Minister to his new job. I am sure that he will be helpful in answering our questions, and I am sure that he is finding out that the matter is not at all straightforward and has many difficulties and pressures.

I wanted to speak in this debate primarily because I believe that all politics is local. My constituents have contacted me asking me to put forward their views, both on behalf of passengers and because Runcorn station, one of the best-used stations on the west coast main line, is in my constituency, and numerous staff there are my constituents. I worry about their employment and their future. Surprisingly, a lot of people who have contacted me have said that they are disappointed that Virgin lost, because they think Virgin made a difference. Even one long-standing critic of Virgin has come to accept that in the circumstances of franchising Virgin has made a difference, but I will come to that shortly.

The hon. Member for Warrington South (David Mowat) has kept intervening to say that the risk to shareholders and taxpayers is crucial. That has not been made clear at all. Maybe the Minister will make it clear. It is a key issue, because the arrangements must be a good deal for both the fare payer and the taxpayer. We have no idea at the moment whether they are. I am sure that he will want to explore that.

The franchise decision was announced during the summer recess, denying Members of Parliament, many of whom have a close interest in the matter, recourse to

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questions to the Minister about the ramifications, the process and how the franchise award was arrived at. The decision to award the franchise to FirstGroup has created a lot of concern—I cannot recall a recent franchise award that has been so much criticised—so it is clear that this debate is important.

We are all well aware of the findings of the Transport Committee, chaired by my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), on previous franchise fiscal failures. To dwell on Virgin for a bit, I will not pretend that things have been trouble-free under Virgin—there were certainly a lot of difficulties in the early days—but it had and continues to have fantastic staff, whether at my station at Runcorn, which has won award after award for customer care and service, or on the trains. If I have any criticisms of Virgin, one is that it changed a good thing. Passengers travelling on a line got to know the train crews, and Virgin decided to change them and swap them around the country. A lot of people thought that that added to the drop in service. It was not popular, and it led to a drop in morale.

The prices that Virgin charges for walk-on fares are frankly scandalous; I think that we all know what sort of prices I am talking about. However, it had many innovative ideas about advanced ticketing. Gating along the line could have been done better, as has been discussed in relation to the franchise. Parking charges have been a problem. If I had not stepped in to confront Virgin about parking charges at Runcorn, they would be much higher than they are now, adding to the massive parking problems around the station faced by my constituents.

To return to the franchise, the Department for Transport still has questions to be answered regarding its failure on the relative bid risk assessment; FirstGroup’s bid posed a risk not properly mitigated through adequate risk insurance. My hon. Friend the Member for West Lancashire has asked many questions that are in the public domain, so I will not repeat them. The Minister has heard them, and I hope that he will answer them.

Mr Leech: Does the hon. Gentleman agree that as part of that risk, FirstGroup should have to risk losing all its other franchises if it is unable to deliver this one?

Derek Twigg: We would have to explore the consequences to the rest of the rail users on the system, but it should certainly be explored.

I return to a key issue that several hon. Members have pointed out. A cloud of controversy has surrounded the back-loading of the premium payments to the Government in the final few years of the franchise, whereas Virgin pledged more cumulative premiums to the Government for the first nine years of the franchise. I know the west coast line well, not just from travelling it but from my experiences as the rail Minister, and there were major problems on the west coast line during the early 2000s, for various reasons. At one stage, it was almost in a state of collapse, and the train services provided were pretty awful. Income dropped massively during those early years, for obvious reasons: people were not using the service. Because of the problems, they were using alternative transport such as cars, planes and so on. Income jumped in 2004 or 2005, and the

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timetable came out and so on. As the Minister will be aware, in 2009, a new timetable was introduced with weekend running and faster trains, which I mentioned. Did the bid take account of, or did Ministers ask questions about, that unusual situation at the beginning at the 2000s and its impact on longer-term predictions of income?

I assume that High Speed 2 will have a major impact on Euston, unless the Minister can tell me something different. Has any care been taken about that and the possible impact on the west coast?

The other question for the Minister relates to the GDP forecast on which the bids were based. Will the Minister confirm whether the bidders went along with the Government’s forecasts—a major failing in recent years—or a lower forecast? That will have an important impact on the bids. Projections are guess work, but I am not sure—we have not seen all the details, because we keep being told that they are confidential—whether the details actually add up. There is no doubt that the line has the potential for a great amount of growth. A point was made earlier about capacity and future investment. I am slightly sceptical about High Speed 2, because it has the potential to have an impact on necessary investment in the west coast main line.

Mr Watts: Does my hon. Friend agree that it seems that the First bid will deliver premium payments at the end of the contract, which will mean that the Government will have less money to invest in the west coast main line in the early years? Is there not an argument for doing the opposite, so that we can invest to deal with the congestion problems we will face while waiting for High Speed 2? Given the fact that no one knows whether HS2 will go ahead, is it not crucial to invest early rather than later?

Derek Twigg: As ever, my hon. Friend makes an important point. One key failure of the system—I hold my hands up as a former rail Minister—is in being unable to get investment into certain franchises to improve rolling stock, passenger experience, gating and so on. Some companies that have won franchises have decided not to invest, for various reasons that we do not have time to go into.

As I said, all politics is local. Runcorn, in my constituency, has benefited significantly from improvements put in place in the past 10 years or so. I am concerned that we will not build on those improvements and, because of problems with the franchise, take a step backwards. What has happened in recent years is remarkable. Virgin has achieved a good partnership with Halton borough council, which has been crucial in the reconstruction of Halton’s economy. The previous Government’s massive £8 billion investment in the west coast main line, after decades of underinvestment by other Governments, was crucial in achieving the improvements we now see, and Virgin became part of that achievement because it ran the franchise. We have seen massive improvements. From Runcorn, it now takes just under two hours to get to London, with the fastest train taking 1 hour 50 minutes.

Mr Marcus Jones (Nuneaton) (Con): Some things that happened under the last Labour Government and during Virgin’s franchise were not actually that positive for people on the west coast main line. Through his

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Government’s actions, my constituents in Nuneaton were severely disadvantaged in 2008, when all their fast off-peak services were taken away, something that hopefully the new franchise will rectify.

Derek Twigg: I understand the hon. Gentleman making an important point about his constituency, but faster trains to London were part of the attractiveness of the changes that were made. Where most passengers got on was important in making those decisions, and I am sorry that that disappointed the hon. Gentleman. I was very pleased for my constituency. I have not seen the details of the new franchise, but I hope there will be no attempt by the winning bidder to reduce the number of trains that stop at Runcorn. Merseytravel has pushed strongly for trains to stop at Liverpool Parkway, but we do not want any reduction in the number of trains stopping at Runcorn because of the economic impact the excellent service has on my constituency.

There have been massive station improvements. Mick Noone, the transportation strategic director at Halton borough council, has said the line is

“extremely attractive and well used”.

He went on to say:

“The quality, frequency and reliability of the services have undoubtedly encouraged more people to use the train”.

After years of persistent lobbying by me and Halton borough council, we were able to secure investment for a £650,000 refurbishment programme in Runcorn station. Its tired old 1960s appearance has been upgraded with new cladding, improving the experience for passengers and for my constituents who work there and provide such brilliant service.

Mark Pawsey (Rugby) (Con): The hon. Gentleman’s experience as a former Minister is valuable, and on many occasions he has referred to the substantial public investment in the west coast main line. Is it not that investment itself that makes it important for the Government to go for the bid that gives the maximum return?

Derek Twigg: If the Government go for a bid that says it will give the maximum return but it does not stack up, that is a problem. I am glad that the hon. Gentleman made the point about the massive amount of public investment that took place under a Labour Government; it has made a massive improvement.

Daniel Kawczynski: On borrowed money.

Derek Twigg: Most of the problems with the west coast main line were due to the lack of investment during the 18 years of the previous Conservative Government, so if the hon. Gentleman wants to get into a political argument I am happy to do so.

Ann McKechin (Glasgow North) (Lab): My hon. Friend is making some excellent points. Does he agree that there are a lack of effective penalties in this contract? If the return to the taxpayer is back-loaded, there is no guarantee that the investment required on this vital line will take place in the way envisaged by the Government. I have to yet to hear where the effective penalties will apply.

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Derek Twigg: My hon. Friend is absolutely right and we need to know. The Minister is probably getting the answer as we speak, which I hope he will be able to give us later.

I am concentrating on what this issue means to the passenger and the taxpayer. For the passengers in my constituency, the experience has been superb. We want it to continue and do not want it to be put at risk. From 2010-11, there was a total of 619,882 entries-exits at Runcorn station, up almost 16% on the previous year according to data from the Office of Rail Regulation—a significant improvement.

I have asked the Minister some specific questions that fold in nicely with those asked by my hon. Friend the Member for West Lancashire. I do not want to put the improvements that have benefited my constituents in the past 10 years or so, particularly in the past five years, at risk. We want to continue to see improvements. The west coast main line is vital to the economy of Merseyside, Cheshire and my constituency of Halton in particular. I hope the Minister will take into account the points raised when he makes the final decision, and that he answers them as openly and as transparently as possible.

5.37 pm

Mark Pawsey (Rugby) (Con): It is a pleasure to serve under your chairmanship, Mr Bone.

I would like to speak about the importance of the rail connection to my constituency of Rugby. I am pleased to see the Minister in his place. He will recall, in his former role, standing on a drafty Rugby station platform months before the 2010 general election. The rail connection is of massive importance. We are in the centre of the UK and we benefit from the crossroads of the motorway network. We also benefit from the 50-minute journey time on the existing Virgin service from London Euston. That service has enabled us to attract businesses to our town, where we offer lower wages and lower premises costs than businesses based in the capital. It has also led to a large increase in the number of people who commute on a daily basis from Rugby to London. The quality of the service they receive is fundamental.

The recent history of the line has been one of substantial improvements in service from Virgin. I put on record my thanks, and that of my constituents, and congratulate it on the way it has improved. My predecessors as MP for Rugby would have had a far busier time dealing with constituents on rail issues than I have had. In fact, one of my predecessors, Andy King, the MP from 1997 to 2005, was instrumental in setting up the Rugby rail users group, a campaign body set up to deal with service problems. I often attend that group, but I am not told of significant problems or failures on the line. In fact, in the immediate aftermath of this decision being announced, I went on local radio and advised that there had been no complaints about the service provided by Virgin in the time that I had been Rugby’s Member of Parliament. Somebody got in touch with me to remind me that there was an issue, but it was a ticketing issue rather than a service issue.

We have gone through a very public tender process. We knew that the tender was coming up at around this time; it had been shadowed for a great deal of time,

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there had been lots of publicity and the requirement was known. When assessing this tender, the Department for Transport would have known that this decision would come under massive scrutiny. I am confident that such scrutiny will have led to the utmost probity in respect of its decision.

As hon. Members have mentioned, the Government have a duty to secure the best deal. They have invested £9 billion in the west coast main line. There is no use trumpeting big numbers if we do not get some benefit from that investment. It is important that we get the return not only to fare payers, as users of the line, but to the taxpayer more broadly.

Mr Watts: It is also the duty and responsibility of the Ministry of Defence to get value for money for contracts, but as we know that often does not occur. So what people want to achieve and what is actually achieved can be two different things. Does the hon. Gentleman agree that the GDP factor is crucial? If the GDP figure is halved, will First’s bid still be deliverable? If it is not, surely that may put at risk the whole analysis of this contract.

Mark Pawsey: I will come on to the First bid, including questions that other hon. Members and I have put to it about the accuracy of its bid and where its bid stands. I am not sure that making comparisons with other Departments in this debate is helpful, Mr Bone. We need to ensure that the Government get the maximum value for money for every item of expenditure.

John Hemming (Birmingham, Yardley) (LD): As a Birmingham MP I use that train, although, to make a declaration of interest, I came down on the Chiltern line. Does my hon. Friend agree that consideration should be given to whether closing down one competitor may reduce the competitive nature of tendering in future and increase aggregate costs?

Mark Pawsey: I am about to talk about my own business experience in tendering. Clearly, the more tenderers available in the tender process, the greater the competition and the better chance of getting the best deal.

The First bid is worth more. I have run a business and, on occasions, have missed out on a contract, so I understand Virgin’s concern. In my business, from time to time we lost contracts, which was particularly frustrating when we were confident in a bid and had given exceptional customer service in recent years. It is appropriate and shrewd business for Virgin to encourage their satisfied customers to make representation through the petition. That activity has stimulated this debate.

It is estimated that 2,000 service users from my constituency are among those who signed the petition. I have received many letters and e-mails from constituents asking me to participate in this debate and drawing attention to the substantial improvements in service that they have experienced over the years. I am happy to do that. There are, of course, those who have not had such a good experience and I have in front of me an e-mail from one of those.

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In addition to the increase in revenue to the Government, FirstGroup’s offer contains other positives. My hon. Friend the Member for Milton Keynes South (Iain Stewart) drew hon. Members’ attention to the additional seats and services that would be made available. I can, perhaps, support my hon. Friend the Member for Nuneaton (Mr Jones), because I met the managing director of FirstGroup only last week and he told me that he hoped that additional services might be available between Rugby and London early in the morning, and that access from Rugby to the north-west might be improved through Nuneaton, using Nuneaton as a hub station for the north-west. Innovation and proposals are coming from FirstGroup that were not available through Virgin.

The issue distils down to whether First has got its sums wrong. Did it get something about the maths wrong when preparing its bid—something that it did not take into account? I put that to First’s managing director last week and suggested that, if there were anything about his tender that in the clear light of day—in the light of discussions or ideas coming from Virgin and Opposition Members—he is not sure about, right now, before the new contract is awarded, First has the opportunity to withdraw. It might choose to say, “Yes, there are some points that people have drawn to our attention. We did not quite get our maths right. Our projections in the back end are just a little bit ambitious.” There is a window of opportunity for it to say, “Yes, we got it wrong,” and to leave. It does not wish to take that opportunity.

I have looked the managing director of First in the eye and asked “Are you able to deliver what’s proposed?”, and I am confident that he understands the significance of what he has done. Ultimately, he is part of a management team responsible to shareholders within FirstGroup. If First has got anything about the tender wrong, it needs to be called to account through the courts and be held to the commitment that it has made. It happens in plenty of other businesses; I do not see why that should not happen in this instance.

The delays in the process are unfortunate. Certainly, there is no benefit to anybody, whether the companies, the staff or rail users, if there is a short-term nationalisation, such as has been suggested if First is not able to receive its contract before the judicial process is concluded.

I advise the Minister to please get on with the process. I call on Virgin to withdraw its application for a judicial review. A decision has been taken. Let us get on with it and ensure that we get the right service for rail users in our constituencies.

5.47 pm

Albert Owen (Ynys Môn) (Lab): I congratulate my hon. Friend the Member for West Lancashire (Rosie Cooper) on securing this important debate. As a number of hon. Members have said in interventions, we have not had the opportunity to discuss this matter since the announcement was made. That is regrettable. I pay tribute to Labour Front Benchers, including my hon. Friend the Member for Garston and Halewood (Maria Eagle), for raising this point over the summer, and the 170,000 people who bothered to sign the petition. The discussion has been too one-sided in respect of one company, although the details are not known. I mention that because the purpose of this debate is to find out the details so that we can know for sure.

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I met a number of the bidders prior to the process. I was concerned about the process and put my concerns to them, including my concern about the record of some of them. I mentioned to First, which was preparing its bid, my concerns regarding its franchise in the south of Wales. First said that it would learn the lessons, would not back-load as much in future and would look at the whole period. That is why I am raising this issue. Of course, First could not talk about the detail of the bid, but I was concerned that it had handed back the franchise on the south Wales route at great expense to the taxpayer.

Mr Marcus Jones: Did the hon. Gentleman raise his concerns directly with the Government when the draft invitation to tender was published, or did he wait until after that process was complete?

Albert Owen: Just to help the hon. Gentleman, I have been raising rail issues for many years. I am the son of a railway man. Yes, I have raised it with Conservative/Liberal Democrat and Labour Ministers.

As for the process, what was clear from my meetings with the potential bidders was that they could not speak about the detail, so we were not that concerned. Now that we have heard the outcome, we have concerns—genuine concerns—on behalf of the taxpayer and the fare payer. That is why it is important to have this debate and why I congratulate my hon. Friend the Member for West Lancashire.

The west coast line is important to my constituency. It is an historical link with north Wales, but it also linked the capital of England with the capital of Ireland. Many of the trains that went from Euston to Holyhead carried the Royal Mail—the great Irish Mail trains—but another reason why the link was so important was that it brought Members of Parliament from Ireland to this place for important votes. In those days, Members of Parliament from different parts of the country had real influence over train services—less so today—and one of the reasons for the service was to get all those Irish MPs over.

I have taken a great interest in the line for many years, and I represent a railway town that was and still is a major employer in the area. Today, after many years of investment, in particular over the past decade, we have fast and frequent trains. Now the Super Voyagers or Class 221 trains can do the run from Holyhead to Euston in three hours and 40 minutes. On top of that, there has been an increase in the number of trains to Chester, which has helped my constituents going along the north Wales coast or those going to Anglesey on other occasions. Although having to change at Chester is not always nice, it is better than standing in Euston for hours, which we had to do in the 1980s and early ’90s when trains were less frequent.

Susan Elan Jones (Clwyd South) (Lab): I take on board my hon. Friend’s point about Chester, but does he agree that still more needs to be done with the direct link to Wrexham, Gobowen and so forth? That was not put in the tender, but the current situation is unacceptable and, when we consider the Wrexham and Shropshire line, all the more urgent. Whether Virgin or FirstGroup, it needs to be addressed properly.

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Albert Owen: My hon. Friend is absolutely right, and my hon. Friend the Member for Halton (Derek Twigg) also made the point that we want continued improvement on the west coast line. People in all parts of the House want to improve the line, but many people including the petitioners have real concerns. It is absolutely right that we want the best deal for our areas, but we also want the best deal for the taxpayer and the fare payer.

I can recall a modernisation programme for the west coast in the early ’90s, which was hampered slightly by privatisation, with things put on hold. Many people, including Conservative supporters, thought that rail privatisation was a privatisation too far. There was a lot of under-investment and the programme was put back slightly, and there was also the Railtrack debacle, with Network Rail having to take over. There were therefore massive issues, but that huge investment of £9 billion—mentioned by the hon. Member for Rugby (Mark Pawsey)—still went ahead and made significant improvements, bringing business from the regions of north-west England, Scotland and north Wales closer to London. Many business people, some of whom I travelled down with today from Bangor station, now come to London and can do business in a day. That is how important the west coast line is to many people and why the debate is so important. We need to get things right for the future.

In the early days, there were issues with the operator—Virgin—which hampered the service, for example on safety, with many line speeds and signalling having to be improved. Stations such as Nuneaton, Rugby and Stafford, represented by Members here, had huge investment simply to improve the safety of the lines, because a lot of work needed to be done. Now we can see the results of that investment—faster, cleaner and safer trains travelling on the west coast.

Virgin is a popular brand. I have been contacted by many constituents—not natural Labour supporters—who are concerned about the franchise and how it will run. They want safeguards, and answers to questions, which is what we want from this debate. I understand about franchising, the judicial review and the difficulties for the Minister—whom I welcome to his post, because he has a great interest in the railways—but I hope that he will be able to answer some of the questions asked by my hon. Friends and Government Members today. We are not asking about the details of the franchise, but about some of the principles.

The Minister and the Secretary of State mentioned that if we do not get the matter resolved by 9 December, the franchise might have to be taken into state ownership of some sort and to be renationalised—I think that was the word he allegedly used—temporarily. If that happens, however, it is important for the Department for Transport to have a contingency plan, which I hope that the Minister can tell us about. We understand that there is a responsibility for that to happen under the franchise agreement, but we need to get that plan. The staff and the travelling public need to know, and ticketing for the future has to be set up and run. State ownership might be an attractive proposition to many people, but it was brought into the debate by the Secretary of State, and we need some answers. The Minister should clarify whether that contingency is being planned for, so that

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we do not have a period when people do not know where to get their tickets if the judicial review is not complete and the new owner not in place.

Robert Flello (Stoke-on-Trent South) (Lab): I have been listening carefully to my hon. Friend’s speech. Does he want to comment a little further on the effect that all the uncertainty and confusion might have on staffing levels, and therefore on service? If staff are, understandably, concerned about their future, they might decide to go elsewhere, if such opportunities are available, and that might affect the service that the travelling public can expect.

Albert Owen: That is absolutely right. There is huge anxiety, and morale has been sapped, so it is important to get clarification on where we are going. Yes, the judicial review is out of Minister’s hands, but if the Secretary of State makes announcements about temporary renationalisation, he needs to reassure people that he has the plans in place so that any such period is dealt with as smoothly and efficiently as possible.

I speak to rail staff regularly, and did so only a few hours ago on the train journey down, and they are very anxious. To be fair, they have been given assurances about their future by both Virgin and FirstGroup, but the hiatus because of the judicial review is causing greater anxiety. It is incumbent on the Government, who award the franchises, to make it clear, if they are to take temporary measures, what those measures are.

Many issues have been raised, but some are important and need repeating. We need to know whether all the bids were treated exactly the same and whether the risk of all the bids was assessed, not just for the leading or highest bid. We are not talking about a casino, but about running our transport system—the process is hugely important and needs to be done properly. I hope that the Minister can answer some of the questions and confirm whether he has had a list of questions from Virgin and explain why he has refused to answer some of those questions. Some of them may be commercially sensitive, which I understand, but the ones that I have seen and that I was supplied with by Virgin were general. We want the answers to some of them, in the interest of the 170,000-plus petitioners. I hope that we will deal with the issues of renationalisation over that short period and whether the risk for all bids was assessed equally. A tendering system has to be done in that way—robustly over the 15-year period and not only on the basis of the highest money value to the Government.

A lot of questions have been asked by Members in all parts of the House. I know the sensitivity of the judicial review, but it should not be a shield for the Minister to hide behind and to use to avoid answering general questions. The public have a right to know—the rail is in public ownership and a lot of taxpayer money goes into the franchise agreement—and they deserve those answers, which the Minister could give today and help the debate.

I had a quick response from the Minister of State, Department for Transport, the right hon. Member for Chelmsford (Mr Burns), saying robustly that he was happy with what the Government had done. He also said that the contract remains alive, and that he expects

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it to be signed soon. He has that confidence and information at his fingertips, and I am sure that the Minister present can share some of that information with us today. It is important that the Government are seen to be open and transparent, because we are talking about billions of pounds of investment.

We all want the west coast main line to be improved. I am not interested in the logo on the side of the trains, but I am interested in the quality of service on the west coast. It has improved considerably over the past decade, and I want it to improve further. I want investment in areas such as Anglesey so that we have connectivity with rail services. This debate is about the petitioners and their concerns rightly being aired by Members of Parliament, and being answered efficiently by the Government.

Mr Peter Bone (in the Chair): I see seven hon. Members trying to catch my eye, and we have less then 55 minutes remaining for Back Benchers to speak. Hon. Members can do the arithmetic.

6.1 pm

Eric Ollerenshaw (Lancaster and Fleetwood) (Con): It is great to follow the hon. Member for Ynys Môn (Albert Owen). Across the divide, we share many concerns with other hon. Members who represent the regions, as I do. We have come from Liverpool via Milton Keynes, Runcorn, Rugby, and Holyhead to Lancaster, but I am not sure whether there is a through ticket for that; perhaps the two groups might suggest one.

[Philip Davies in the Chair]

I congratulate my fellow Lancastrian, the hon. Member for West Lancashire (Rosie Cooper) on getting the debate under way, but I have one stricture about her Dick Turpin analogy. I was always taught that, because he took from the rich and gave to the poor, he was a good guy. Never mind; perhaps history has changed since I last taught it.

I welcome the debate, and like many hon. Members with constituencies on the west coast main line, I have received e-mails about it and have seen the petition. All credit is due to the Backbench Business Committee for getting this debate under way so quickly. My concern, which is shared by others, is that regional areas such as mine depend hugely on rail connections. I will not repeat what the hon. Member for Ynys Môn said, but I share what he said about the impact on business and improvements on the west coast main line.

My confidence in the Department for Transport has increased following what has happened in the past two years, particularly in my part of the north-west. The Government have made commitment after commitment on rail in a way that we have not seen for a long time under previous Governments. They include electrification on a huge scale all the way to Blackpool and extra carriages, and that represents a total completion of the commitment on the northern hub. Before my time, people petitioned Government after Government on that. My confidence has increased, and I believe that the present Department for Transport is fully committed to those improvements and understands the impact on the regions. That is why I have a bit more confidence in the process.

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My hon. Friend the Member for Milton Keynes South (Iain Stewart) spoke eloquently about commercial sensitivity. We have not seen all the minutiae, and we now have judicial sensitivity on top of commercial sensitivity, so we are left just with the bits that we have seen. Credit is due to the two companies for their impact and for trying to get across to us what has been going on.

Like many other hon. Members, I speak as a regular user of the west coast main line, and I have my own opinion of the Virgin Stagecoach service. I have seen an improvement in the service over the past couple of years. One of the worst problems in my part of the north-west was overcrowding, so I was pleased with the Government’s support for extra carriages, which has had an impact.

I believe that the Virgin Stagecoach service is relatively good, and many of my constituents have signed the petition, so they agree. However, I accept that it can always be improved and that we need more value for the amount of money that has gone into such commercial operations. The issue is how to weigh that up.

I have talked to FirstGroup, and its offer seems to be attractive, with extra trains, extra carriages, reduced overcrowding, smart ticketing and even reduced fares on some services. Like my hon. Friend the Member for Rugby (Mark Pawsey), I shall be parochial about what happens in my constituency. My concern about the FirstGroup bid was that it was talking about faster trains from Glasgow to London, and my immediate instinct was that that would mean fewer trains stopping at Lancaster, but I have been reassured that Lancaster will have the same number of stops, so I am pleased about that. I am also pleased about the offer to upgrade parking arrangements at Lancaster station and at Preston, which affects me down the line.

The biggest impact will be the through service to Blackpool, which edges through part of my constituency. Discussions are still taking place, but FirstGroup is prepared to consider the possibility of a stop at Poulton station, which is not in my constituency but is the nearest station to Fleetwood. I shall digress slightly because we have a new Transport Minister and, as his Parliamentary Private Secretary knows, he will hear from me frequently about Fleetwood, which is one of the 10 biggest towns in the country still without a direct rail connection.

Mark Hendrick (Preston) (Lab/Co-op): The hon. Gentleman touched on Preston station, which is in my constituency. Like him, I am concerned about the developments. We have had an excellent service from Virgin, and I have been pleased with it. We have had many promises from FirstGroup, but does he agree that a major concern is whether jobs will be secure with FirstGroup if there is a change in the franchise? Clearly, the Government are intent on continuing the deal, and FirstGroup won the franchise, subject to the review. Is he, like me, worried about the job situation and ensuring that the hard-working staff continue in employment?

Eric Ollerenshaw: My neighbour in Lancashire raises a valid point about staff that had not previously been raised. There have been improvements in staff approachability and deliverability, and I hope that

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whoever wins the bid—whether Virgin or FirstGroup—will protect those good employees. I have seen real improvements.

Another matter that we need to be secure about if FirstGroup takes over is travel cards, about which constituents have contacted me. For many years, I have received promises, but I am still not sure about long-term use of the cards. Many senior constituents—I declare an interest because I include myself—find them extremely useful.

I will finish my contribution shortly to enable other hon. Members to speak. For me, the public relations battle has not been particularly useful. On the performance at the Transport Committee, Virgin tried to say that it provided an altruistic service, but it is, rightly and like any other commercial company, in it for money. In 2011, Virgin Rail and Stagecoach declared a dividend of around £10.5 million. That is good, because they ran a good service, but let us not hide the fact that they provide a commercial service at a profit.

I have an issue with Virgin because a year or so ago Grand Central proposed a direct service from London to Blackpool, and I understand that Virgin used its franchise to block that. Let us be under no illusions. The competition is a commercial one between two companies, and one of them is Virgin, but I call it Virgin Stagecoach because Stagecoach has a 49% stake. We must understand the situation.

When we are through the judicial review, I am sure that Ministers will provide us all with a degree of security that lessons have been learnt about private finance initiatives under the previous Government and about the way in which the upgrade on the west coast main line caused chaos for years under that same Government. Because of Ministers’ commitment to the north-west, electrification and the northern hub, I have great confidence that they are as determined as I am, as a regional Member of Parliament, to see an improved service that provides better value for my constituents. I feel that we will see that when the judicial battle is over.

At the end of the day, however, I am not interested in which company runs the service. I want a better deal for my constituents and for the Department to be able to put its hand on its heart and say that it did its best to deliver that deal and to provide security about the risks.

6.10 pm

Barbara Keeley (Worsley and Eccles South) (Lab): It is a pleasure to serve under your chairmanship, Mr Davies, and to follow another hon. Member from the north-west. I apologise for being absent during the first part of the debate; as I notified the Speaker, I was attending a funeral in my constituency earlier this afternoon.

Like many hon. Members, I travel on the west coast main line every week. Since first entering the House, I have seen the service improve greatly over the past few years, when it has been run by Virgin. Thinking back to 2005, when I was first elected, many colleagues flew to London and back rather than using the train, which is not the case now. The service takes around two hours from Stockport to Euston, and there are three trains an hour. Since the upgrade—which was, indeed, painful—to the infrastructure on the west coast main

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line and the introduction of Pendolino trains, passenger numbers have grown from 13 million to 31 million.

The debate this afternoon is about letting the franchise for the main line go to FirstGroup, even though there are strong concerns about that company. I shall focus on those issues in my remarks. There are worries about FirstGroup’s bid, as the company will make premium payments of £5.5 billion during the core term, based on 66 million customers being carried. That point is important; the number of passengers has increased from 13 million to 31 million, but can it increase to 66 million?

Compared with FirstGroup, Virgin Rail Group bid premium payments of £4.8 billion. That amount was based on 49 million customers being carried, which I think is much more realistic. I find it hard to see how the number of customers carried on the west coast main line can more than double, and if it does not, FirstGroup will not have the income to pay its premium payments. We have seen unrealistic bids in rail franchising that turned out to be undeliverable. After winning bids for the east coast main line franchise, Great North Eastern Railway and National Express fell short of their forecasts and were forced to hand the franchise back. There would be more chaos down the road if a similar thing happened.

I want to focus on FirstGroup’s track record, which, in Greater Manchester, is not at all positive. As a constituency MP, I have had very negative experiences of the way in which FirstGroup operates as a public transport provider in Salford and across Greater Manchester. During my first few years in the House, the company undertook a major reorganisation of routes and bus service timetables in our constituencies. As time is short, I shall refer quickly to the restrictive and extremely disruptive impact that that had on constituents. Although a different mode of transport is involved, it indicates how FirstGroup regards passengers and its customers.

For example, a bus service from Leigh to Bolton was re-routed and changed to run hourly, so that it went nowhere near the major supermarkets that many of my older constituents, in particular, wanted to visit. After the alterations, people had to change buses, cross a busy dual carriageway and walk 500 metres uphill to make the same journey that they had previously made on just one bus. At the time, many people told me that those journeys became impossible for them. FirstGroup’s changes, in spite of many representations being made to the company, had a debilitating effect on older people’s lives, chipping away at their independence. They also had a major impact on families, because many families have one member or more who commute into Manchester.

A single parent in my constituency needed to travel 10 miles into the city for her work. She had arranged her working hours completely around one of FirstGroup’s services, which the company threatened to withdraw. It was the only way that she could get to work. I found myself, as a new MP, constantly making representations, presenting petitions and putting concerns forward.

Perhaps worst of all, given the economic situation we are in, changes made by FirstGroup became a barrier to people’s ability to work. Little Hulton ward in my constituency is in the top 10% of the most deprived

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wards nationally. Only 53% of the people there have access to a car. There are very few local sources of employment, so constituents have to travel to find work. However, FirstGroup withdrew the bus stop for services from that ward to Manchester, even though that bus service allowed people in that deprived part of my constituency to travel to work. The withdrawal also made it much more difficult for people to search for work. I believe that FirstGroup’s attitude and its changes tied the hands of people searching for jobs by restricting their options for work to destinations that had a bus link to where they lived.

Such changes were not only a major issue five years ago; FirstGroup are still making similar alterations to services today. It has recently changed the frequency of a service to the Roe Green area of my constituency from half-hourly to hourly. When I made representations to the company on behalf of angry constituents—something I have had to do an awful lot as an MP—it responded:

“First keeps its network under constant review, which means services can be changed or reduced”.

That change was made with seven days’ notice.

Following years of bad experiences with FirstGroup as a public transport provider, I have little confidence in the company at all. That feeling is shared by many constituents, as well as more widely. I note that the 2012 bus passenger survey found that 13% of FirstGroup’s users were dissatisfied with its services, compared with only 7% dissatisfaction among Stagecoach’s customers. On value for money, 35% of FirstGroup’s users described themselves as dissatisfied, compared with a figure of 19% for Stagecoach. With similar services, therefore, FirstGroup is not doing a good job, and that has been entirely my experience of the company.

Furthermore, constituents, along with many people who have signed this petition, have expressed their concerns about the franchising process, commenting most unfavourably on their experience of rail journeys with FirstGroup. One constituent told me:

“I want to express my total dismay at First Group being granted the franchise for the North West rail route. Our regular experience of First is little short of scrabbling for a place in a cattle truck. We have actually been afraid when forced into a crowded carriage during a busy period... It would be a disaster if a passenger suffered an epileptic episode or a heart attack under such conditions. The lack of capacity makes the idea of a return journey a nightmare. We are both elderly and having to stand in a crowded carriage is not a good experience.”

In such a context, we must remember that FirstGroup has bid to more than double the number of passengers carried on the west coast main line.

My constituent continued:

“By comparison, Virgin trains have given us nothing but satisfaction. We travel to London regularly to see our family and the service is excellent.”

My constituent concluded that the franchising decision

“seems to be badly thought through—and seems to rest on a desire to increase revenue, rather than provide a service for this era”.

I wholeheartedly agree. I have had years of bad experience of FirstGroup. I cannot face the situation that I think we will find ourselves in if it takes over the efficient, effective service currently run by Virgin. I urge the Minister and the Government to think again.

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Philip Davies (in the Chair): We have five hon. Members left and less than 40 minutes remaining. I hope hon. Members will bear in mind the desire of others to speak.

6.18 pm

Daniel Kawczynski (Shrewsbury and Atcham) (Con): Thank you, Mr Davies. The Shropshire MPs have been campaigning on a cross-party basis, together with our Welsh neighbours, on trying to secure a direct rail service for Shrewsbury. That issue is extremely important for us, bearing in mind tourism and business investment, and that is why I was delighted by the announcement that FirstGroup had been selected and would provide the direct service for Shrewsbury.

My first reaction when I heard about Virgin’s judicial review was frustration and concern, and I felt a little as though it was a case of sour grapes. Subsequently, I met representatives of FirstGroup, who stand by their figures unequivocally. I also met representatives of Virgin and held a meeting in the House of Commons that was attended by 40 colleagues, who came to interact with Virgin’s senior managers and directors. They tried to explain to us why, in their view, and from a commercial procurement perspective they felt that FirstGroup’s figures did not stack up.

Interestingly, Virgin Trains claims that it has been raising concerns about the whole procurement process with various Ministers over an extended period. Indeed, it raised the fact that it had tried to lobby Lord Adonis on this issue. It is therefore rather difficult for me to accept the flavour of some of the comments from Labour MPs that this problem has somehow developed recently. According to Virgin Trains, it had concerns at the time when Lord Adonis was in charge and it raised them with him. As I said, I invited representatives of Virgin to meet me and fellow parliamentarians, and 35 or 40 MPs came to that meeting. I have sent my right hon. Friend the Secretary of State for Transport minutes of the meeting.

I believe that immediately after the announcement, the shadow Secretary of State for Transport, the hon. Member for Garston and Halewood (Maria Eagle), whom I was watching on television, was calling for an urgent inquiry because the decision had been made when Parliament was in recess. I think that she expressed a great deal of frustration about that. However, I have been trawling through all the questions that she has submitted to the Secretary of State for Transport and the Department for Transport, and the Library has also been checking them and—she may correct me on this—I cannot find any questions from her during the past six months about the timing of the decision or the procurement process. As I said, she may correct me if I am wrong, but I feel that this is the Labour party jumping on a bandwagon.

Maria Eagle (Garston and Halewood) (Lab): The Government have chosen to delay the completion of the process by six months. They negotiated with Virgin an extension to the contract that it was running. Therefore, the timing has been a matter for the Government. Obviously, I was not aware that they would make the announcement in the middle of August, when Parliament was in recess. That would be a matter for the Government.

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Daniel Kawczynski: That is very strange, because I knew that the announcement was to be made in August and I am just a humble PPS. I raised this issue with my right hon. Friend the Prime Minister at Prime Minister’s questions, asking him to try to intervene to ensure that we have a direct rail service for Shrewsbury, and he clearly stated in his response on the Floor of the House in July that the result of the process would be announced in August and that he was sure that the train operators would have listened to my point about Shrewsbury. That is a matter of record during Prime Minister’s questions in July.

Glyn Davies (Montgomeryshire) (Con): My hon. Friend rightly makes references to Shrewsbury. I want to associate with his comments my comment about how important a direct line to Shrewsbury is for the whole of mid-Wales. Shrewsbury is our station as well, and a direct line from Shrewsbury to Euston will make a huge difference to the ability of the people of mid-Wales to use the train. I thank him for allowing me to put that point into the debate.

Daniel Kawczynski: I thank my hon. Friend and constituency neighbour and pay tribute to the intense work that he has done to campaign for his constituents across the border in Montgomeryshire, many of whom will, of course, rely on this service.

I had the pleasure of meeting Sir Richard Branson the other day to talk about this issue. I would like my hon. Friend the Minister to know that Virgin is very keen—I am just making observations—to talk to the Secretary of State. It claims that it has tried to engage in high-level discussions over a long period. It is very keen to meet the Secretary of State to highlight its concerns. Interestingly, the impression that I get is that the Department for Transport is not keen to meet Virgin at this time because of the judicial review. I would be grateful for an update from the Minister. What is the situation?

I think that the judicial review will cost a fortune for both sides, and I very much regret the fact that taxpayers’ money will be used in trying to defend that challenge through the courts. An awful lot of money will be made by lawyers at the expense of the companies and the Government. We need to engage with the operators on the procurement process for the future. I want us to avoid these problems in the future. I want all train operators to agree on some form of bidding or procurement process that has buy-in, so that we can try to avoid these disputes. It is highly regrettable, when constituents are looking forward to better train services, that we have somehow degenerated into this legal quagmire, which could take a great deal of time and cost a great deal of money to resolve.

We are very pleased that there will be a direct service for Shrewsbury from FirstGroup. Apparently, Virgin Trains is now claiming that its bid also included provision of a direct rail service for Shrewsbury. However, I reiterate to the Minister that one of the biggest problems that we have is the lack of parking capacity at Shrewsbury station. I intend to meet Network Rail shortly to discuss that and will be trying to secure a meeting with him on that point as well.

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6.25 pm

David Morris (Morecambe and Lunesdale) (Con): This subject has been so contentious during the past few weeks that we can all agree that some questions need to be answered. It is right, therefore, that we hold a debate to bring greater understanding of the issues that led to the decision to award the west coast main line franchise to FirstGroup. In discussions that I have had, I have always been clear that I remain neutral on who gets the franchise. What is important to me is that the process is transparent and understandable. Does it reassure the public and does it result in improvements and greater connectivity to the service? I am referring not just to the places that the west coast main line MPs represent, but to the areas that filter people to the stations. Most people do not have the time to study the process in great detail. I hope that this debate will help to create a greater understanding of it. The fact that we are having the debate sheds light on the process, and that is bound to make people feel more engaged.

I want to focus on the future of the west coast main line, especially given its importance to my constituency of Morecambe and Lunesdale. We are a transport corridor, both north to south and east to west. The station for the area of Carnforth has been rebuilt and has trains going through it. However, in the words of the train buffs in the area, it is the centre of the railway universe, but nothing seems to stop there. As I said, we are a transport corridor, both north to south and east to west. I appreciate that many hon. Members have one of those elements in their constituency, but we are lucky to have both. However, the lack of flexibility in the franchise over the years has made it hard for us to capitalise on that.

I have had regular meetings with Virgin, which has made the following points to me. It was hard to bring in new destinations. Even Chester was added only because the DFT put it in as a requirement. We need the train operating company—TOC for short—to be able to respond to the market.

One thing that has been positive about FirstGroup is its willingness to consider exceeding the terms of the franchise. We will see what that comes to, but the fact is that it helped it to get the franchise. I hope that in the future the franchise document serves as a starting point, as my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) was intimating, and that bids will offer real choice rather than being minor variations on something essentially dictated from Whitehall.

One of the big concerns in my constituency is that the DFT seemed unable to think beyond existing network capacity. What I mean is that getting the most out of Euston was widely discussed, but little thought seemed to go into adding new destinations and connections. That was particularly important because it meant that Carnforth, in my constituency, was just never considered as part of the franchise, despite vigorous local campaigns spearheaded both by me and by the local rail groups. I refer in particular to Peter Yates, who is sat here today.

Obviously, many hon. Members have local interests, and I am no different. I understand that not every station can get a west coast stop, but feeling that no new stops were considered is frustrating. I might also say at this stage that the same problem of lack of vision has led to unending difficulties in trying to stop trans-Pennine

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trains at Carnforth. The platforms themselves are on the west coast main line and would need refurbishment before they could be reopened.

Historically, this essentially minor detail was something that led to Carnforth being totally ignored. If the public want the station opened and if the TOC would seriously consider stopping there, why would Whitehall stand in the way, especially if that is from a background of never really bothering to consider it anyway? As I said, I had talks with Virgin. It said to me, with regard to the west coast main line train that stops for 20 minutes three times a day at the back of Carnforth station, where there is a sealed-up platform entrance, that it would consider accessing passengers on to the train if the station was upgraded. I am glad to say today that I had the same offer from, and more consideration given to me by, FirstGroup. Whatever people thought the outcome of the franchise process should have been, at least we have started the process of breaking that mindset in my area. To that end, whatever FirstGroup’s history, it seems keen to adapt to passenger need, which must be looked into. If the DFT is also willing to think outside the box, I hope that, in summing up how the franchise was awarded, we can too.

I accept that Rome was not built in a day and things do not change overnight. There are strengths and weaknesses in both Virgin and FirstGroup, but what is most important is that no company has a right to a free ride. That has been agreed. Just because companies have been good in the past, does that give them an open-ended right? If we have learned anything from this, we should insist that the DFT facilitates companies and travellers to come up with new ideas, rather than dictating from on high how services should be run. If we continue with such a process, it will be easier to tender, offer the missing flexibility and give local communities a real opportunity to campaign for better rail services, as my hon. Friend the Member for Shrewsbury and Atcham has done so admirably.

It has been a privilege to speak in this very contentious debate. Whatever the outcome, let us ensure that we make the right decision on the franchise, and that that decision is transparent and that the public know that we, in Parliament, listen and care about how we spend taxpayers’ money on the west coast main line.

6.31 pm

Mr Marcus Jones (Nuneaton) (Con): I am grateful for the opportunity to speak in this important debate. As a member of the Backbench Business Committee, I welcome the first of the Monday debates, which rely on the public’s response to e-petitions.

The west coast main line is vital to many of my constituents, who, I must say, are a little perplexed, to say the least, about the whole saga of the letting of the west coast main line franchise. In the debate today, it is important for our constituents to understand that we are here, as Members of this House, without the power or jurisdiction to change anything at this point. It is important to state that the only people who can change the decision, unless the will of the Government changes after the judicial review, are the judiciary. The judicial process must be followed and Members must respect that process.

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That said, there are general principles that we should discuss, but as MPs it would be a grave error to delve into the minutiae of each bid, because we have not seen the information first hand, and so are second-guessing from the claims and counter-claims of the different companies involved. The issues come under two categories: first, the franchise process itself; and, secondly, how the various bids were applied to the franchise criteria. To take the franchise process first: Virgin Trains and others, particularly Opposition Members, contend that the tendering process was flawed. I have concerns and scepticism about that argument. If flaws had been identified at the outset, before the draft invitation to tender or when the Government released it, we should have seen a robust challenge from the Opposition at that point.

Maria Eagle: As far as I am concerned, nobody on the Opposition Benches has suggested that the tendering process as it was undertaken was unfair. We do not know the details, which is why it is important to have a debate, to ask the Minister what he can tell us.

Mr Jones: I thank the shadow Minister for that comment, because it illustrates the crux of the issue. There is a lot of second-guessing and a lot of assumptions are being made. The people making those assumptions do not necessarily know the full facts. As I will come on to later in my comments, it is dangerous in any such tendering process for an MP or a Government to move the goal posts once the process has begun.

Rosie Cooper rose—

Mr Jones: I will not give way at the moment, because other Members want to get in, but I will give the hon. Lady an opportunity in a few minutes.

There are a few questions about why Virgin or any other party did not raise such a high profile campaign at the outset. Why did we receive letters and ice lollies—I am not sure whether they were connected to this or were part of the Olympics—from Virgin Group on the train platform only once the bid was lost and Virgin had come in second? Why are Labour Members only now coming up with these concerns? They are not even giving their position on the matter. To me, it is a little like someone going to a restaurant and ordering liver, knowing that they do not like liver, and sending it back once it comes to the table and is put down in front of them. In the same way, we need to be careful what we wish for here.

For the Government’s part, it is important that once they have set a franchising process, it should be the benchmark against which the bids are judged. As I said in response to the intervention from the hon. Member for Garston and Halewood (Maria Eagle), it sets a dangerous precedent if, after the bids have come in and a tender has been let, we try to shift the goal posts to get the outcome that we were looking for. Not only would that completely undermine the tendering process, but there are obviously potential legal ramifications.

The critical question is whether the process was followed properly. If Department for Transport officials have not properly applied their own criteria to the bids, then yes, we have to acknowledge the concerns of Virgin Trains, and yes, the Government have to address any subsequent

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issues that might arise. At this point, that decision is a matter for the courts. It is dangerous as an MP to call for the franchise to be re-let on the basis of a petition, rather than an independent judgment to ensure that the correct procedure and process has been followed.

We should wait to see what the judicial review says, and if it is accepted by the court, the Government should deal with it appropriately at that point. If not, I will fully support the Government in signing the contract, on the basis of retaining the integrity of the tendering processes that they follow. For my constituents, the winning bidder at this point, FirstGroup, notwithstanding the legal case, is on the face of it offering the taxpayer a better deal and far better services to Nuneaton, which is what my constituents are looking for.

6.38 pm

Jeremy Lefroy (Stafford) (Con): I congratulate the hon. Member for West Lancashire (Rosie Cooper) on instigating the debate and congratulate everybody who has taken part so far. In the few minutes remaining, I want to stress why the debate is of great importance to my constituents.

More that 1 million people a year use Stafford railway station—the hon. Member for Halton (Derek Twigg) mentioned 650,000 at Runcorn, which is indeed an extremely important station. They are from not only the town of Stafford, but over the Shropshire border and throughout the rest of Staffordshire. The reaction over the past few years to the service offered by Virgin has been generally positive. There were clearly some problems at the end of the ’90s and in the first part of the previous decade, particularly after the Hatfield rail crash, which was obviously nothing to do with Virgin, but due to the state of the rails.

In a situation such as this the Government are really caught between a rock and a hard place. On the one hand, we can applaud the Virgin service and say that we want that or, indeed, a higher standard of service to continue. We can say that, in Virgin, to some extent we have a safe bet: it has proved itself over the past few years and is likely to continue to do so. However, if that had been the criterion, and the Government had accepted £1.4 billion less—or, in net present value, £700 million, which is perhaps a more accurate number—again, questions would have been raised about why the Government, on behalf of taxpayers, have accepted £700 million less, at net present value, simply because they liked the service that Virgin delivers, when a competitor claimed that it would deliver an equal service. The decision was not at all easy, which is why so many Members, including the instigator of this debate, have mentioned that the process is so important. We must see not only that it has been properly followed, but that it is the right process for future franchises.

I also have to say that I was glad that the final two bidders are headquartered in the UK. One bidder was Abellio, which is the Dutch railway; I think it also runs railways in Germany, and it runs Chiltern services very well. I wanted whoever runs the most important railway line in the United Kingdom to be a British-headquartered company. Notice that I say “British”, because both final bidders are based in Scotland—at least, Stagecoach and FirstGroup, if not Virgin, are.

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I want to comment on the effect on staff. Clearly, a number of my constituents are affected, and it is extremely important that the transition, however it goes, should first and foremost be done with regard to staff, as well as to passengers. They have clearly been put into a state of some trepidation, although I am glad to hear the reassurances given by FirstGroup about the continuation of services. The issue is not only about the continuation of employment; it is also about how the company treats its staff. It is extremely important that staff are seen as the most valuable asset—not just on paper, but in reality.

When I met the managing director of FirstGroup, I made that quite clear. I have also said that it is extremely important that the service is maintained or improved. I was therefore glad to hear him offer to come to Stafford at least yearly, if not more frequently, to talk to passengers about the service. It is vital that, if and when the transfer goes ahead, it is not just that a service is promised at one point in time, but that, month in, month out, that promise is maintained and that passengers are able to have a direct input into the company running the service.

Clearly, it is extremely important for people in Stafford to see the maintenance of vital hourly services. However, there is also the important question of later and earlier services that I and my predecessor, David Kidney, have frequently raised with both Network Rail and Virgin. Most continental railways have much later services both from the capital to other towns and cities, and vice versa. Stafford is on the Liverpool line and, from what I have heard, I know that people in Liverpool would also like later services and ones earlier in the morning for that great city. I realise that that will be subject to the limits of the track, but with the improvements—particularly those around Norton Bridge just outside my constituency; it is in that of my hon. Friend the Member for Stone (Mr Cash)—that are coming up in the next year or two, I want to see whether it is possible, with additional train paths and improvements to time, to introduce either a later or an earlier service or, indeed, both.

I suppose that, as well as the staff and the service for passengers, the Government are equally concerned about the return to the taxpayer. To me, what it is absolutely key is the confidence that the winning bidder—in this case, FirstGroup—will fulfil its commitment; that is vital. There is a penalty of some £280 million, which is clearly substantial, but that is not a deal maker or a deal breaker. Far more important, as other Members have already said, is reputation. FirstGroup is, according to its website, the largest transport group in the world. It runs Greyhound buses in the States, as well as many yellow school buses and other franchises in Britain. To me, it is absolutely beyond question that any company that walks away from a rail franchise should have no further part in the UK rail industry. That must be absolutely clear: we cannot have confidence in a bidder that fails to fulfil its commitments. I want to hear the Minister’s response on that, and whether that is part of the thinking. This is too big a deal—not only for my constituents, but for the entire country—to allow people yet again to walk away from the firm commitments that they have made.

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I have two other questions for the Minister. The first refers to the process. Whatever happens in this case, will he look very closely at the process for future bids to ensure that it is watertight and cannot be subject to the kind of public disquiet and challenge that we are now having. Above all, secondly, do he and his colleagues believe the passenger figures that we have been given? To me, that is the crux of the matter. If those passenger figures are realistic and have been calculated in a way that demands respect and is robust, I see no real problem with the contract going ahead. However, we have to be convinced that the Minister and his Secretary of State, who will stand behind the decision, are themselves convinced of the figures, and I want to hear that from the Minister today.

6.46 pm

Maria Eagle (Garston and Halewood) (Lab): It is a pleasure to serve under your chairmanship, Mr Davies.

I congratulate my hon. Friend the Member for West Lancashire (Rosie Cooper) on securing the debate. As has been said, more than 172,000 members of the public have signed the e-petition on the west coast main line franchising decision. This debate, which is a result of that petition and of the good offices of the Backbench Business Committee, has enabled Members to put their points. Many of them represent constituencies that are served directly or indirectly by this important strategic route.

A lot of concerns and other points have been placed on the record. From my experience as an Under-Secretary, I know that the Minister—I welcome him to his place for his first debate in the role—probably will not have enough time, even if he has the inclination, to answer all the questions. However, I am sure that he will undertake to write to those Members he does not get around to answering with the fullest answers, so that we can read what he thinks about every point made.

We have had excellent contributions, first from my hon. Friend the Member for West Lancashire, but also from the hon. Member for Milton Keynes South (Iain Stewart), my hon. Friend the Member for Halton (Derek Twigg), the hon. Member for Rugby (Mark Pawsey), my hon. Friend the Member for Ynys Môn (Albert Owen), the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw), my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley), the hon. Members for Shrewsbury and Atcham (Daniel Kawczynski), for Morecambe and Lunesdale (David Morris), for Nuneaton (Mr Jones) and, last but not least, for Stafford (Jeremy Lefroy)—I would have guessed that that was his constituency from what he said. Not surprisingly, that includes many railway towns and constituencies that very much depend on stations on the west coast main line.

Many of the points made are at the centre of the debate arising from the awarding of the franchise. If Virgin Trains had not begun the legal proceedings that are now under way, Ministers would have signed the west coast main line contract before Members had had any chance to debate the issue in the Chamber. The truth is that Ministers probably rather hoped that the issue could have been done and dusted towards the end of the summer recess, with the decision slipped out while Parliament was not sitting and attention was

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focused on recovering from the Olympics. That is not helpful when we are dealing with a 15-year franchise that will cover several Parliaments. It is right that parliamentarians have a chance to debate the issue, and in that respect I very much welcome this debate.

I am disappointed that the Secretary of State—I congratulate him, too, on his appointment, as I have told him in the Chamber—was so quick to rule out a review of the process that led to this contentious decision. As a new Secretary of State, he would have been perfectly entitled to take the time to read through all the documentation and to have all the meetings. Yet, last week, he told the Transport Committee:

“I am content with the way in which the Department exercised its review of that contract.”

Despite his long-standing experience as Aviation and Shipping Minister many years ago, it is difficult to envisage how he could have conducted anything but the most cursory assessment of his Department’s action in this case. He came to his conclusion very quickly after his appointment, which is a shame. When the Minister meets the Secretary of State, I urge them, notwithstanding the legal process currently under way, to reflect on whether a decision to proceed with the signing of this contract should at the very least await the report of the Transport Committee.

One of the main concerns about the decision is that it seems to be almost exclusively a bottom line one, driven as it is by a particularly high pledge of payments to Government—FirstGroup’s successful bid was £5.5 billion compared with £4.8 billion offered by the incumbent. Obviously, such payments are an important part of any decision; I do not suggest that they should not be taken into account. None the less, there have been reports of the Treasury putting pressure on the Department for Transport, which is not unheard of in my experience, to focus precisely on the headline figure offered. The Department has admitted that it has accepted the bid that offers the largest dividend payment but that also carries with it the greatest risk to deliverability.

Two specific concerns raised by hon. Members relate to the credibility of the predictions of passenger growth and the profiling of the promised revenue payments, which are back loaded towards the end of the franchise period. There is huge variance in the rival claims about the growth in passenger numbers that each company believes to be achievable during the lifetime of the franchise. Virgin’s claim of 49 million passengers compares with FirstGroup’s claim of 66 million. The growth that we have seen on the line during the past decade has been largely driven by the £9 billion upgrade of the west coast main line infrastructure and the introduction of the fleet of Pendolino trains. The investment in track and train has delivered faster and consequently more frequent services. What is likely to drive similar growth in the next period, given that we are not about to have another such upgrade?

The invitation to tender documents also set out significant challenges that will face the west coast operator during the latter period of the licence, all of which could impact on the potential to achieve significant growth in passenger numbers. The most significant is the start of work on High Speed 2 at Euston, which will see the number of platforms for services available at any one

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time cut from 17 to 14 in order to achieve the rebuilding of that station. Yet it is in the later years of the contract that much of the projected growth is expected to come.

If the growth in passenger numbers is not credible, the only other source of additional revenue is higher fares or a reduction in services, or at least in the quality of services. As one would expect, the successful bidder has given some welcome reassurances on all those issues. The reason that concerns remain is that the Government have included in these new franchises new flexibilities to reduce services, close ticket offices, cut passenger-facing staff and even axe CCTV from trains. Such flexibilities would not enhance service provision were they to be taken up by the successful bidder.

Passengers would welcome clarity from Government on the extent to which those new “freedoms” can be used. Only today, Ministers have announced that they have agreed to requests from London Midland to close ticket offices and reduce opening hours at others, despite months of denying our claims that such measures were being planned. Passengers are nervous about the future.

The invitation to tender also gives the successful bidder significant freedoms in respect of fares throughout the term of the contract. It promises that fares can rise by

“RPI+3%+5% in 2013 and 2014 and then by RPI+1%+5%”.

Consequently, it is possible that some routes could see ticket prices increase by up to 11% for each of the next two years and then up to 8% each year until 2026. If that is to be the only way of meeting the promised revenue payments in the event of the predicted growth not being reached, it is no wonder that many passengers are concerned.

FirstGroup rightly points out that its profile of predicted growth and revenue is very similar to Virgin’s in the first two thirds of the franchise. However, it is the fact that the much higher growth and payments to Government occur towards the end of the franchise that is the cause of the concern. The figures are stark. The profile of proposed payments to Government increases from just £26 million in 2014 to £739 million by 2026.

Mark Pawsey: I am listening carefully to the hon. Lady’s argument. What I do not understand is whether, given what we now know, she would have made a different decision from that made by the Government.

Maria Eagle: The hon. Gentleman is tempting me, but it is impossible for me to make such a decision on the very low level of information that is in the public domain. As a Minister—I was never a Minister in the DfT, though I was in many other Departments—I had to make decisions like this, but I had to hand significant information––all the documentation and all the lawyers and officials. I do not have sufficient information in this Chamber today to answer that question. I hope he will regard my answer not as evasive but as plain common sense.

It is only in the final three to four years of the 13-year contract that the premium payments promised by FirstGroup exceed those promised by Virgin. The profile of payments goes steeply upwards from £26 million in 2014 to £739 million in 2026. The fear is that that builds in a clear incentive for the bidder to walk away from the contract before the payments are due, not least if the

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predicted revenue that is to fund the process does not start to appear as expected over the course of the contract and if the predictions turn out to be optimistic. FirstGroup states:

“Any suggestion we may walk away from our West Coast bid is misplaced. We would face considerable damage to our reputation and credibility if we did—and doing so would significantly impact our ability to win further franchises.”

I welcome that reassurance and I am sure that it is made in good faith, but I do not believe that, under the current Government’s approach to franchising, the consequences are as obvious.

In the past year, FirstGroup has exercised a right not to complete the maximum possible length of the contract it holds to deliver services on the Great Western main line, thus avoiding more than £800 million in dividend payments to the Government. I appreciate that FirstGroup would robustly state that that is not the same as walking away from a contract, but what is the same is that it was possible because the promised premium payments were highest during the final three years of the contract. Yet FirstGroup has secured the west coast franchise and it has been shortlisted again for the Great Western contract, so there are no consequences there for what is in effect gaming the system.

I do not accept that it is obvious that FirstGroup has cause to feel that it will suffer any damage, let alone find it harder to win future contracts, from terminating a contract early. Indeed, under Governments of both persuasions—I perhaps need to say under Governments of all persuasions, given that we have a coalition Government at present—we have not seen consequences follow from gaming the system or from failing to meet obligations. Companies have routinely been shortlisted again for franchises and have won franchises even though they have handed back keys or gamed the system to avoid making payments back to the taxpayer.

It is also said that the penalty for handing back the keys early is significant; at £190 million in the case of FirstGroup, it certainly sounds significant. However, put in the context of just one year’s payment to Government being £739 million, walking away does not seem quite such a bad deal if one is focused purely on financial considerations.

If these concerns were just being raised by the losing bidder, we might put it down to sour grapes; indeed, I think that was a phrase that one Government Member used. Clearly there is an element of that driving the judicial review and the challenge that we are now seeing. However, the fact is that many respected people across the industry are dubious about whether the bid that FirstGroup has succeeded with is viable.

Perhaps the Minister would be willing to listen to George Muir, who was the director general of the Association of Train Operating Companies between 1999 and 2008. Writing in Passenger Transport magazine, which is on my reading list, he starkly sets out the reason why there is widespread incredulity in the industry about this contract. He says:

“A 10.4% growth rate produces, in the year 2025/26, revenue of £2,982m out of which is to be paid premium payments to the government £1,696m…and profit to FirstGroup of £149m. Put it this way, in 13 years’ time this fine franchise is to have a profit margin of 62%. Wow! Surreal.

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Put it another way, the premium in year 2025/26 is £1,140m in today’s money…and this to be paid by a business with passenger revenue last year of just £824m.

Well, if you believe this, you will believe anything.”

He warns that the Department for Transport

“cannot possibly believe they will get over £1bn, in today’s money, for four years on the trot from FirstGroup. They don’t. It’s a farce.”

Those are not my words, but those of George Muir, who was the director general of ATOC for many years and understands the industry. He is clear where the blame lies—it is in the changes that the Government have explicitly made to franchising since the election. He says:

“The problem goes back to Theresa Villiers’ franchise reform white paper of a couple of years’ ago, which she had been scribbling away in opposition. It reminds me of Andrew Lansley’s NHS reform, crackpot ideas in opposition.”

I stress that those are not my words; I am quoting George Muir.

The Government are right to prepare contingency plans if the legal challenge is not settled by the 9 December deadline for transfer. It would be helpful if the Minister could confirm that the proposal is to transfer responsibility for running these services to Directly Operated Railways. He would have our support for that decision and we would agree that a more appropriate course of action than pursuing the offer from the incumbent to allow it to continue to run the service temporarily on a not-for-dividend basis.

Of course, the Government are also only days away from beginning the tendering process for the east coast main line. The taxpayer received a dividend of £187.7 million from the east coast line in the past year and £170.7 million in the year before that. From next year, that money will go either to private shareholders or to the state railway of Germany if it was to win the contract; it has made a bid for the Great Western contract. I do not believe that the east coast line has been given the stability and certainty to enable us to judge whether a not-for-dividend model could work in the longer term more widely across the rail system. Therefore, I hope that the Minister will be willing to consider our proposal that the east coast line continues to be run as a not-for-dividend publicly run comparator to some of the other companies that are running franchises.

In conclusion, let me be very clear that this issue is not about siding with any particular company, and I do not think that today’s debate has been about that. Having said that, I understand Virgin Trains’ frustration, which it frequently expresses, that it has been runner-up twice to successful bids on the east coast franchise and that the successful companies—Great North Eastern Railway and National Express—later failed to meet their contractual obligations. It is this unfortunate history of franchise contracts being brought to an early end, at least in part because of over-ambitious payment promises that later proved impossible to meet, that has sparked fears that history may be repeating itself. I hope that the Minister wants to ensure that lessons have been learned and I also hope that he will now agree that, even if it becomes legally permissible to do so, he will not proceed further with this contract until there is a chance for the House to receive and consider the forthcoming report of the Transport Committee on this issue.

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Mr Donohoe: On a point of order, Mr Davies. It is a genuine point of order. Is it in order for us to have a vote on this very important subject at the end of this debate?

Philip Davies (in the Chair): No, it is not possible to have a vote on it. There is no mechanism for votes in Westminster Hall.

Mr Donohoe: Further to that point of order, Mr Davies. If that is the case, surely somebody has to devise a method by which there can be a vote? Given that this is a new procedure that is going into unknown territory, I would think that the House authorities should be looking at that position, as to whether or not a vote is allowed on a very important subject, as this subject is.

Philip Davies (in the Chair): That is not a matter for today but something that the hon. Gentleman might want to take up with the new Chairman of the Procedure Committee, when that post is elected.