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Westminster Hall

Tuesday 12 November 2013

[Mr Peter Bone in the Chair]

East Coast Main Line

Motion made, and Question proposed, That the sitting be now adjourned.—(Stephen Crabb.)

9.30 am

Mrs Sharon Hodgson (Washington and Sunderland West) (Lab): It is a pleasure to serve under your chairmanship, Mr Bone. It has been brought to my attention that today’s debate coincides with the beginning of a new documentary series on Sky about East Coast trains and the staff who work on them, so I want to assure you that the only interest I have to declare is as a regular traveller on East Coast trains and as an MP whose constituents are similarly frequent travellers; I definitely do not have an interest as a public relations executive for East Coast or BSkyB. The reason why my colleagues and I wanted this debate was not to promote that programme, but to discuss developments in a process that will have a significant impact on the staff and travellers featured in it.

It has been just over five months since we discussed the plans in a debate in this Chamber called by my hon. Friend the Member for Middlesbrough (Andy McDonald). As I did then, I pay tribute to hon. Members who have led the campaign in Parliament so successfully, particularly my hon. Friends the Members for Edinburgh East (Sheila Gilmore), who is in her place, and for City of Durham (Roberta Blackman-Woods). I thought and hoped that the strength of feeling and argument shown then, and in debates since, might have caused the Government at least to enter one of their now trademark pauses. There is still time for them to do so. In fact, we have not seen a pause, a rethink or any evidence that they are listening to the chorus of opposition to their plans, even among their own voters.

Ian Lavery (Wansbeck) (Lab): I am sure my hon. Friend will make a powerful speech in favour of the east coast main line. Is it not a fact that only about one in five—21%—of the general public supports the re-privatisation of the east coast main line, so why is Tory dogma prevailing?

Mrs Hodgson: That is a very good question, which the Minister will perhaps answer. For all of us here and our constituents, that is the question, and our only answer is that dogma and ideology are forcing re-privatisation to go ahead. The Government have pressed on regardless, and the tendering process is well under way, which is why my colleagues and I thought it was time for another debate.

Karl McCartney (Lincoln) (Con): It is a pleasure to serve under your chairmanship, Mr Bone. The hon. Member for Wansbeck (Ian Lavery) made an interesting intervention in which he mentioned that the Opposition

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are blaming the current Government. Will the hon. Lady tell me exactly how many train companies were renationalised in the 13 years of the Labour Government?

Mrs Hodgson: We are not talking about the renationalisation of the east coast main line—it has already been nationalised—but about how to stop it from being re-privatised. The point is that it is already in national ownership.

Catherine McKinnell (Newcastle upon Tyne North) (Lab): I congratulate my hon. Friend on securing this important debate. I suggest that there have been many changes at East Coast in the past few years. In fact, for the first time in a long time, it seems to working well, to the point that the east coast main line has a record level of customer satisfaction. The company has won 13 industry awards since 2012, including as Britain’s top employer. It is surely endorsement enough that so many Opposition Members who travel on East Coast trains week in, week out want to fight for it to remain as it is and against changing it again.

Mrs Hodgson: That is the point—the east coast main line does not need to change. The process might ultimately lead to a significantly worse deal for all our constituents, as well as for the Exchequer, when there is absolutely no need to go down such a path.

As I and others said in the last debate, East Coast is doing very well under the current arrangement, both for passengers and the Exchequer. Since the failure of National Express, thousands more services have been timetabled; hundreds of thousands more passengers have used services; significant investment has been made in passenger comfort and stations, including at Newcastle; customer satisfaction has been at record highs, notwithstanding the recent blip; and complaints have been handled in a timely way 98% of the time, compared with 73% of the time under private ownership.

Karl McCartney: Will the hon. Lady give way?

Mrs Hodgson: No, I will not. I will make some progress, because many hon. Members want to speak.

This is the people’s railway. It is delivering real improvements for our constituents, unencumbered by the primary purpose of having to pay dividends. That is not to say that Directly Operated Railways is squandering millions on such trivial things as improving the experience of their customers and therefore winning more of them; it is also chipping in a lot of money to the Exchequer. By the end of this financial year, it will have returned £800 million to the Treasury and put the rest of its surplus of nearly £50 million back into the service. It of course gets the lowest rates of public subsidy of all the train operators, except London commuter services.

Ministers have always talked about the need for a private operator to bring in extra investment, but have failed to make clear how much will be brought in by this process. What investment we know about appears to come from the public purse. Just as with Royal Mail, Ministers seem to be privatising the profit, while keeping the ongoing costs on the public books.

The Minister will say that decisions should not be taken on the basis of ideology, and to an extent I agree, although I must of course confess to having a default

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opinion when it comes to the ownership of public services. However, the returns to the Treasury and the improvements in services provide the business case in support of our argument that the line should remain directly operated. Perhaps that is why nearly half of Tory voters oppose the Government plans. If anyone is guilty of ideological decision making on this issue, it is surely the Government.

As if the west coast main line shambles, which cost taxpayers £55 million, was not bad enough, the contract extensions for other franchises—the Government have had to negotiate them so that they could bring forward the east coast main line tender—will cost taxpayers millions more in lost revenue. For example, First Great Western paid £126 million in premiums last year, but will pay only £17 million next year, as a result of the extension terms it has been given by the Government. Ministers are actually throwing money away hand over fist, just so they can make a point of privatising a franchise that they know is doing perfectly well in public hands.

Ian Mearns (Gateshead) (Lab): My hon. Friend is making an excellent speech. Is it not ironic that the Government want to return the east coast main line to the private sector when it is clearly succeeding very well in the public sector, while the private sector has failed twice on that line?

Mrs Hodgson: That is exactly the point. Despite all the evidence to the contrary, the Government clearly do not think that a state-owned company can run the franchise viably and deliver the investment in service improvements that we want.

How ironic it is that many of the probable bidders for the service are subsidiaries of state-owned railways. Eurostar and Keolis have confirmed that they will team up to bid for the franchise. As the Minister will be aware, those two companies are majority-owned by the National Society of French Railways—SNCF—which is France’s state-owned operator. Arriva, which already operates so many franchises, including the Tyne and Wear Metro in the north-east, and has received much Government investment over the past few years, will probably throw its hat into the ring. It is of course owned by Deutsche Bahn. Abellio, which, with Serco, runs Northern Rail trains in my area, might well be tempted. It is a part of the Dutch state-owned rail operator. The Government are therefore quite happy for the east coast main line to be run for public benefit—just as long as the British public do not benefit.

Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): Does not the way in which contracts are handed out to such foreign, state-owned companies mean that taxpayers in the Netherlands, France and Germany will gain at the expense of British ones?

Mrs Hodgson: Yes, I agree. That is exactly the point. Instead of profits generated by the franchise benefiting British commuters through investment in service improvement and dividends to the Treasury, the Government prefer profits to be channelled to other European countries, in some cases to subsidise fares in

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those countries. If we are to achieve the modal shift from cars to rail that we need to ease pressure on our trunk roads and to reduce carbon emissions, we must have the investment and the ambitious targets and standards in place to ensure that services are reliable and can carry on improving. Unfortunately, it appears that the Government intend to put that improvement into reverse over the next few years.

It was brought to my attention yesterday that in the past couple of weeks, the Office of Rail Regulation has published a document setting out the desired outputs for the whole rail network for the next five-year control period. That document makes it clear that the standards expected of whichever company wins the east coast franchise will be significantly lower than the national average, and possibly even lower than those of most European routes. For example, the national standard for cancelled or seriously late trains—which I have had some experience of on the east coast over the past month: the fault for that lay not with the company but with all the storms and so on—is no more than 2.2% of journeys. The east coast’s standard will be 4.2%.The national standard for just mildly late trains, which can be anything between 10 minutes and two hours, will be 8.1% in the first year. For the east coast, it will be 17%, which is more than double the national standard, and equates to more than one in six journeys. That rate will be required to come down to 12% by 2018-19, but it will still be much higher than the national rate of 7.5%.

Over the control period, we could see an additional 15,500 trains officially late and more than 2,500 trains cancelled without the operator being deemed to be breaching its required standards. Why should the east coast be given a lower standard? It is way below what the public would expect, and way below the standards set by Labour for the current control period. The apparent loosening of the required standards does not appear in any of the preceding documents on which the public have been consulted, but has now appeared at a point when they can no longer have their say. Will the Minister explain why the standards are set so low and have been revealed in a document on which the public will not be consulted? Will he give us an assurance today that that is in no way linked to the tendering process, or the Government’s desire to get the most money for the franchise to hold up as a sign of success? If we move the goalposts and make things easier for whichever train operator comes in, it makes the deal more attractive to them, and that is what seems to be going on here.

If the Government are to go through with the privatisation, it is important that the Exchequer get as much cash as possible now and over the course of the contract. However, we cannot sacrifice performance standards to achieve that goal, because people will just give up on trains that are allowed to be late on one in six, one in seven or even one in eight journeys.

If the proposal is not linked to the tendering process, perhaps it is related to the fact that investment in tackling congestion over the coming control period will be less than half the £500 million that the Labour Government allocated. That investment has resulted in improvements in north London, flyovers at Doncaster and Hitchin, and the upgrading of a parallel route for slow freight between Doncaster and Peterborough. Will the Minister assure us that service standards are not being lowered to match the investment the Government

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are prepared to make? Our constituents rightly expect not just a punctual service but a decent service, particularly when they might be on the train for three or four hours or more when travelling to or from the north-east or Scotland—it can take up to six hours to get all the way up to Inverness.

Will the Minister rule out the introduction of a lower-tier or third-class service, which is allegedly in the prospectus that was sent to potential bidders? Indeed, will he rule out any degradation of standard-class service in a three-class system by a future operator?

The Parliamentary Under-Secretary of State for Transport (Stephen Hammond): There is no suggestion of a third-class service in the prospectus. One version of the document was leaked, but even that did not refer to a third class, but to the possibility of a service between standard and first class. Some might like to call it premium economy. No one has ever called it third class. Can we just lay that myth to rest?

Mrs Hodgson: I am sure the Minister is aware that the National Society of French Railways introduced a “no frills” service in France this year, below standard class. If Keolis and Eurostar win the contract, will he guarantee that we will not see the same here? I am happy to give way to the Minister if he wants to make that guarantee now; perhaps he will make it in his closing remarks. By way of assurance, perhaps he could place a copy of the document in question in the Library. I know he said that such a claim was never in the document, but if there is such a document, could he place it in the Library so the public can see that we are not being sold down the river—or in this case down the railway line? The Government are always keen to bolster their transparency credentials, and this would be an excellent way of conducting themselves in an open and honest way.

Stephen Hammond: This Government are so open and transparent that all those documents are available for the hon. Lady to see now. I am surprised she did not choose to read them before the debate today.

Mrs Hodgson: I will go away and look more closely at the matter. I may have missed the part to which the Minister refers. Perhaps he could write to me about it, so we can be assured that there will not be a third-class rail service.

I will conclude because many Members wish to speak in the debate. I leave the Minister with the words of one of his departmental predecessors, the noble Lord Adonis. He was regularly cited by Ministers as being against public ownership when he was Secretary of State, and that was correct. However, given the success of Directly Operated Railways, he recently had this to say:

“In the last four years East Coast has established itself as one of the best train operating companies in the country, both operationally and commercially…This has fundamentally changed the situation, and it is right and proper that East Coast should be allowed to continue as a public sector comparator to the existing private franchises.”

Lord Adonis is a wise man. He had an opinion. He looked at the evidence that contradicted his opinion and, like many a wise man before him, accepted that his opinion had been wrong and changed his mind. There is still time for the Minister and his colleagues to demonstrate similar wisdom and halt this process before more money

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is spent by the Department and the companies that might bid. They should accept that this experiment in public ownership, forced upon a reluctant Secretary of State at the time by the failure of a private provider, has been a success and can continue to be a success.

Karl McCartney: Will the hon. Lady give way?

Mrs Hodgson: No, I am just winding up. I am sure the hon. Gentleman will get his chance to speak in a moment.

Most importantly, it is time for the Government to put British passengers and taxpayers first, before taking profits out of the system—especially where such profits then go to subsidise passengers in other countries. As I said in June, I hope the Minister will listen to what parliamentarians are telling him here today. We have already had the shambles over the west coast main line. It is in everyone’s interests for the Government not to make the wrong decision on the east coast main line as well. Let us call off the tender and give Directly Operated Railways the stability and support it needs to carry on improving services and sending much-needed cash back to the Treasury. At the very least, let us allow it to bid to run the service again in the coming years, and weigh up the public benefit that that would provide in a fair and open way. Come on, Minister: it is public versus private. Surely he is up for that.

9.49 am

Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): It is a pleasure, Mr Bone, to serve under your chairmanship. I pay tribute to my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) for securing and leading the debate today.

This is not the first Westminster Hall debate on the east coast main line and, unless the Government change their position, it will probably not be the last. The Government might not like to have such repeated debates, but the Opposition make no apologies for bringing the issue back for discussion time and again. We will do so until the Government change their policy, because there is an overwhelming case against forcing East Coast trains back into the private sector without even giving the public sector a chance to offer an alternative.

My hon. Friend reminded us of the positive financial record of East Coast trains and that the public are clearly against the return of the east coast service to the private sector. The staff on the line, and the cities up and down the line, do not want the service to return to the private sector, and public opinion is overwhelmingly against the proposals that the Government seem determined to push forward.

Sheila Gilmore (Edinburgh East) (Lab) rose—

Mark Lazarowicz: I give way to my hon. Friend, whose constituency neighbours mine.

Sheila Gilmore: My hon. Friend and I have spent a considerable time campaigning on this issue in Edinburgh. Does he agree that the overwhelming response of the people we have spoken to while we were gathering signatures has been that they do not want the line to be re-privatised?

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Mark Lazarowicz: Absolutely. As my hon. Friend has said, she and other colleagues have spent quite a bit of time with me outside the railway stations in Edinburgh and at other locations, and not one person has come up to us and said, “Yes, we want East Coast trains to be re-privatised.” They have all recognised the value of this service being in the public sector.

Grahame M. Morris (Easington) (Lab): I compliment my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) on securing this very timely and important debate and on making some excellent points. On the point about the value of having the east coast main line within the public sector, are there not lessons to be learned from what is happening with gas and electricity companies? When the private sector has no benchmark of public sector provision, does the consumer not get ripped off? Is there not an overwhelming argument for retaining at least one main line in public ownership, by which we could benchmark the other lines?

Mark Lazarowicz: That is a very good point. Let us be clear—we are not calling today for a renationalisation of the entire railway operating network.

Grahame M. Morris: We are! [Laughter.]

Mark Lazarowicz: My hon. Friend might be, but that is not the issue today. What we are talking about today is giving an alternative to the private sector. He just referred to other industries, and one of the issues about those industries is this: to what extent is there real competition?

One of the problems is that within the railway sector in the UK, a very limited number of UK companies are able and willing to put in a bid for a line. On the east coast and west coast lines, we all know that the major UK bidders will always be drawn from Virgin, First Group, National Express and possibly Stagecoach.

Of course, Virgin also runs planes to Edinburgh and Aberdeen, and First Group and the other companies operate other rail services. Some of them also operate bus and express coach services. So the issue is ensuring that there is at least some competition in the system, which the existence of Directly Operated Railways on the east coast main line would certainly provide.

Ian Mearns rose—

Mark Lazarowicz: I will give way to my hon. Friend and then I will move on, to ensure that I make some progress.

Ian Mearns: It is ironic that, despite the number of Eurosceptics on the Government Benches, the Government are clearly in favour of state ownership—but Dutch, German and French state ownership of UK railways, not UK state ownership of UK railways.

Mark Lazarowicz: Indeed. However, my hon. Friend is being perhaps a bit too restrictive, because I understand that one of the companies shortlisted for one of the Scottish railway franchises is the mass transit railway system—MTR—in Hong Kong, which I presume is ultimately owned by the Chinese Government. It appears

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that although the Chinese are able to build our nuclear power stations and run our railways, the British state is unable to do so.

I come to the essence of the argument. The Government say that one of the reasons why the east coast line should go back into the private sector is the success that there has been since the railway system was privatised. One of the oldest logical fallacies in the book is to say that because event B followed event A, event B must have been caused by event A.

What the Government are saying, of course, is that because passenger numbers have gone up since the railways were privatised, that must be because they were privatised. However, the fact is that we have not been able to establish that link between the two. For example, I can look at the local bus company in Edinburgh, my home city, which is municipally owned. The number of bus passengers has gone up dramatically in the past 20 years. That company is in the public sector, but I will not say that the rise in passenger numbers is just because of that.

Equally, however, saying that the rail network’s being in the private sector is why the number of passengers has gone up seems a very weak argument. In fact, the number of passengers on other state-owned railways in other parts of the world has gone up as well. The argument about privatisation seems very weak.

As my hon. Friend the Member for Washington and Sunderland West pointed out, Lord Adonis, when Transport Secretary, made references to privatisation that are continually mentioned by the Government in defence of their policies. However, he has made it clear that he has learned from experience and is approaching this issue in a non-dogmatic fashion, in a way that the Government are signally failing to do.

Let us not forget that it was a Conservative Government who privatised the railways in the first place, against the wishes of the Labour party. Labour colleagues in Parliament at the time voted against that privatisation. Of course, the Labour Government after 1997 had a large number of priorities and I can certainly see why the issue was not, at that time, their No.1. However, as I have said, we are talking about the situation here and now. We have an opportunity to judge from experience and to ensure that the public get the best value for money and the best service, which, in my and my colleagues’ view, would be obtained by ensuring that the east coast line stays in the public sector.

Reference has been made to the way in which foreign companies are able to bid for the franchise. I will not develop that point any further, given that it has already been raised by other colleagues. However, I will again make the point that there is a real issue about the lack of genuine competition within the rail franchising sector in the UK, including among British-based companies. Also, the point that my hon. Friend the Member for Easington (Grahame M. Morris) made about comparing rail with the utilities was very well made.

One of the points made by Ministers when they have argued why the east coast main line should go private again is that—as I think one of the Minister’s predecessors, the right hon. Member for Chelmsford (Mr Burns), said—the record of East Coast trains on punctuality had “plateaued”. Again, that is another example of desperation and of the Government trying to grab arguments to support a weak case.

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The fact is that East Coast trains has a good record on punctuality. As we all know, the main reason why there have been problems with train punctuality in recent times is certain factors—first of all, the recent storms, which were clearly beyond anyone’s control. Above all, however, they have been due to problems with infrastructure, which have not been the fault of East Coast trains.

I asked a parliamentary question on the issue a while ago. I received an answer about the 2012-13 split in responsibility for delays on East Coast trains: 18% of them were due to East Coast itself, 13% were due to “Other Train/Freight Companies” and 69% were due to Network Rail. We know that one of the reasons why 69% of delays were due to Network Rail was problems with the overhead line system, which was, of course, put in place on the cheap, and for which—again—a previous Conservative Government clearly have to take responsibility.

My hon. Friend the Member for Washington and Sunderland West referred to the new targets from the regulator regarding punctuality. One of the things that the regulator said in its recent report was that there is a problem with reliability on the east coast main line, and I welcome the fact that it did. However, like my hon. Friend, I am concerned about how the performance measurements for the east coast service have been reduced in comparison with those for many other lines in the country.

I know that it only sounds like a marginal reduction if the performance target is reduced from 90% to 88%, but of course what we want to aim for is 100% reliability. Obviously, we will never get 100% reliability, but every time the target is reduced—even by 1% or 2%—we release the pressure on that operator to ensure that, as far as possible, all their trains arrive on time.

The fact is that the new target for cancelled or seriously late trains was set at a rate that would allow 4.2% of east coast line trains to arrive more than two hours late or not at all. That does not sound like much, until we put those figures in another context and say that one in every 24 trains could be cancelled without any penalties whatever being imposed on the operator responsible.

As my hon. Friend the Member for Washington and Sunderland West has said, there are concerns about the fact that that particular change was not referred to in draft proposals for the new punctuality performance targets; it was a change that people could not be consulted on. The Minister should give an explanation as to why that was the case. Bluntly, if he cannot provide one today, he should go away and look at the issue, because it was a major defect in the process.

It is time for the Government to drop their dogmatic approach to the east coast line and to give the public sector operator a chance. Let Directly Operated Railways put forward an alternative model and we will see what represents the best value for money and the best service for the public. Please, Minister, do not come forward with the argument that I heard from one Minister some time ago, which was, “We couldn’t do this because the law wouldn’t allow us to do it, and we had to put it out to the private sector.”

As a Back Bencher, I cannot speak for those on the Labour Front Bench, but were the Government to come forward and say, “Yes, we will change the law to allow East Coast trains to continue to operate the franchise”,

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I cannot think that my party would oppose that. Perhaps the Minister will make that offer today. I am sure that my hon. Friend the Member for Nottingham South (Lilian Greenwood) would be happy to respond to that.

It is time for the Government to change their policy. It is not what the public want, what the staff want or what the communities want—and it is not in the best interests of the public purse, either.

10 am

Sheila Gilmore (Edinburgh East) (Lab): It is a pleasure to serve under your chairmanship, Mr Bone. I congratulate my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) on securing the debate. It is important that we continue to raise and debate the issues on the east coast main line, with a view to persuading the Government, I hope, that they have gone down the wrong track. It is not too late to go into reverse. I am a regular railway traveller, but this is one time when I will be more than happy for the train to stop and go backwards.

It was not such a joy to arrive at Newcastle station a couple of weeks ago and be told that the best advice was to get off the train and go home. My hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) and I were so determined to get here that we ignored that advice and soldiered on to Peterborough. That delay was due not to the train operator, but to the stormy weather; the line was certainly not the only one affected on that date. Some might suggest that East Coast let us down, but we were clear that that was not the case. Indeed, when we tried to take other lines to get from Peterborough to London, we discovered that they were all affected, whether they were privatised or not.

Things like that will happen in any travel system, but the service has—many regular travellers will say this—improved over recent years. People enjoy their journeys. I have said this before and I will say it again, because it is important from a Scottish perspective and an environmental perspective: the improvements are making inroads into getting those important business travellers, who otherwise might always travel by air, to use rail. If we are serious about creating a modal shift in transport, we have to make rail both attractive and reliable to get that kind of traveller. That is one thing the service has done extremely well.

I have taken part in at least four of the several debates we have had on the east coast main line. As well as the Westminster Hall debate referred to by my hon. Friend the Member for Washington and Sunderland West, we had a Backbench Business Committee debate in the Chamber in which many colleagues spoke. We have had many opportunities to ask oral questions, and we have all taken them up. At this stage, one might think that we should find something new to say and look at the matter from some new angle, but the problem is that our questions have never been answered. It is important that we go back over those questions. Perhaps on this occasion we will get responses to some key points.

Ian Mearns: My hon. Friend is absolutely right. Ministers might ask why the public have so little confidence in the re-privatisation of the east coast main line, and the answer is simple: for the bulk of the time since the

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railways were privatised, the franchise has been in the hands of the private sector. The orders for new rolling stock on the line have only been secured since the franchise has been in the public sector. Much of the existing rolling stock is 35 or 40 years old. For the bulk of that time, it has been in private hands with little investment, apart from a lick of paint.

Sheila Gilmore: I thank my hon. Friend for making an important point on East Coast that speaks to how we run the railways. A lot of the public assumed that privatisation would mean that investment would be brought in and that everything would be brought up to scratch. That was the selling point.

The track investments are necessary and we need to see considerable improvement in the infrastructure on the east coast main line, particularly with the overhead lines, which have caused a lot of the recent problems. We need to see that crucial investment and we need to see the rolling stock upgraded, but none of the onus will be put on those who are being asked to tender for the service. Whatever investment there is will come from all of us as taxpayers.

That notion that we have to privatise to get investment was the selling point at the beginning, which people perhaps swallowed. They probably thought, “Yes, if that is a way of improving things, we will at least give it a try”, but that investment is not happening and will not happen in this case either. All the things that desperately need to be done will not get done through this privatisation process, which is, in many ways, a distraction from the measures that could lead to a real step change. We have talked about improvements and we are not complacent. We do not think that everything is perfect. We want to see a step change in the line, but it will not come through this process.

Mrs Cheryl Gillan (Chesham and Amersham) (Con): I have been listening carefully to the hon. Lady, but would she care to speculate on whether the very investment that she and her colleagues are looking for in the east coast main line could be diminished once the Government get their way on HS2? Does she share the fear that such vast amounts will go into this bright, shiny new railway that, as in France, the existing lines might fail to get the investment that she and her colleagues desperately want?

Sheila Gilmore: I think the right hon. Lady knows that I do not share her views on this matter. We should not cast one railway line against another, because one of the advantages of HS2 is that it provides an opportunity to improve some of the other services, not least by dealing with the capacity question.

One issue is the opportunity cost of prioritising East Coast over some of the other long-distance franchises. Under the original franchising timetable from August 2011, a new contract for the west coast main line was due to start in October 2012, with Great Western starting in April 2013 and the east coast main line thereafter. However, following the debacle of the west coast main line bidding process, a new timetable was announced in March this year. The east coast main line, which was previously the last in the trio of intercity franchises to be let, was brought forward to be the first. That was

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only made possible by the current operator of the west coast main line, Virgin, being given a franchise extension of four and a half years to April 2017. At the same time, the Great Western operator, First, has been given an extension of two and a half years to September 2015. In total, that is 77 months’ worth of extensions.

The Government justify prioritising East Coast by referring to the Brown review, which was carried out after the problems with the west coast main line. They are restating their belief that competition in the bidding process should drive down the level of subsidy required or drive up the level of premium payments offered. They say that that will push operators to be more efficient and innovative, and prompt investment in new services. One can argue that franchise competitions might achieve these goals, but the one thing that certainly will not achieve those goals is franchise extensions. That is because the Government, by setting up this particular arrangement, have no option but to negotiate with the existing operators on other lines. The only bargaining chip that Ministers can use is to threaten to call in East Coast’s parent company, Directly Operated Railways, but they are reluctant to do so, as is highlighted by their desperation to extract DOR from the east coast main line. How are the other franchisees threatened by Ministers saying, “If you don’t agree reasonable terms, we’ll take you into the fold of Directly Operated Railways,” when Ministers are running as fast as possible in the opposite direction with the east coast main line?

Mark Lazarowicz: My hon. Friend is making an excellent speech. When there were problems with East Coast trains, as there were with Southern some years ago, Directly Operated Railways was able to step in and provide an alternative when the private sector failed. If Directly Operated Railways is taken off East Coast trains—I do not know what will happen to the organisation, but I presume that there might still be a shell company—the nucleus that allows it to operate an alternative may disappear, so there might not be an alternative even if a future private sector operator fails.

Sheila Gilmore: My hon. Friend gives a helpful example of where, instead of increasing competition and providing opportunities for the Government to exercise some control over the rail companies, that possibility might be being reduced.

The contract extensions, which were made necessary by the Government’s determination to pull East Coast forward, will cost the taxpayer a lot of money. In 2011-12, Virgin paid the Department for Transport a premium of £165 million, and First Great Western paid £110 million. Will the Minister confirm that there will not be payments of anywhere near those sums during the extension period? Will he also confirm that, apart from the roll-out of wi-fi on First Great Western, which all train operators are beginning to offer, the two extensions offer no improvements for passengers? There is less money coming in and no improvements; the extensions need not have been given had the Government stuck to their original timetable.

If the east coast main line had not been prioritised, the extensions simply would not have been necessary. There could have been fresh competitions, if that was the Government’s will, for the west coast main line and the Great Western main line. If East Coast had been

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performing badly in the public sector, there might have been some justification for what has happened—the imperative of turning East Coast around would have trumped other disadvantages of negotiating extensions on the west coast main line and the great western main line—but East Coast is performing well, so that reason simply does not apply.

The Government clearly hope that they can get to the next election with all the main line routes back in the private sector. The Government could take credit for that in the hope that it would be extremely difficult for any incoming Government to do anything about it. If that is not the motive, the Government have to say what is their real motive for proceeding in that way.

Public opinion has changed. People have seen the reality. Some people, although not necessarily all of us—there are always some critics—warned that privatisation of rail might be a step too far. Members of the public who were prepared to give privatisation a chance now see Directly Operated Railways as an opportunity to have a rail service in public ownership that brings money back to the Treasury. As I said earlier, when we talk to people they enthusiastically support our campaign. The Government sometimes say that they listen to public opinion, and on this occasion I suggest that they do indeed listen to public opinion and stop the process before it goes any further.

Mr Peter Bone (in the Chair): I call Graeme Morrice.

Grahame M. Morris rose—

10.14 am

Graeme Morrice (Livingston) (Lab): People wait all day in Westminster Hall for one Graeme Morrice to turn up, then two turn up at the same time.

It is always a pleasure to serve under your chairmanship, Mr Bone. I congratulate my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) on securing this important debate on the future provision of the east coast main line rail service. She mentioned that she is a regular user of the East Coast service to London King’s Cross, and I travel regularly on the service from Edinburgh Waverley. We are both aware, as I am sure are many other hon. Members, of the benefits provided by the service to Scotland, the north-east of England, Yorkshire and beyond.

I note that, like me, my hon. Friend appreciates the general reliability, frequency, excellent customer service and value for money the service provides to all passengers. As a state-owned operator, the ethos of putting the customer first and ensuring the most effective and efficient use of public resources is the company’s prime objective. Private companies can be just as good, of course, but their foremost loyalty is to their shareholders and any profits not reinvested go on share dividends, often to already wealthy people.

The difference with East Coast being a subsidiary of Directly Operated Railways, a holding company owned by the Department for Transport, is that its surpluses are paid back to the Exchequer. As my hon. Friend has already mentioned, £800 million has been returned to the taxpayer since 2009. Moreover, East Coast has invested some £40 million in infrastructure and asset improvements in that period.

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East Coast also has the best punctuality on the line since the service was privatised, and all passenger surveys and polling indicates that the overwhelming majority of people are satisfied with East Coast and wish it to remain in public ownership. So why are the Conservative-led coalition Government, supported by their compliant fellow travellers in the Liberal Democrats, intent on re-privatising what is evidently a most successful, lucrative and popular public service? Has re-privatisation been proposed for the right financial and service reasons, or is there another, perhaps more partisan, explanation? From the evidence available, it is apparent that that privatisation is born of ideology, not necessity.

Indeed, in answer to a parliamentary question in April, the previous Minister with responsibility for railways, the right hon. Member for Chelmsford (Mr Burns), implied that investment in the east coast main line’s infrastructure is not dependent on re-privatising passenger operations:

“Funding for the 2014-19 upgrade of the east coast main line will be delivered through the Office of Rail Regulation approving a £240 million increase in the value of Network Rail’s regulatory access base. Network Rail may then borrow up to this amount to fund the upgrade works.”—[Official Report, 15 April 2013; Vol. 561, c. 2W.]

For the sake of clarity, it would be helpful if the new Minister with responsibility for railways stated whether any elements of replacing and upgrading the electrification on the east coast main line are dependent on the transfer of the operation of passenger services to the private sector. Similarly, it would be useful if he explained how that investment will be delivered more swiftly if privatisation takes place. Finally, will he provide details of the increased investment, over and above the taxpayers’ money being put into the line, that would be delivered as a result of privatisation?

The past, current and planned public investment in the east coast main line has been and continues to be highly effective. If further investment is required, however, it could easily be provided by public means, given that the service returns far more to the Exchequer than it receives in subsidy. Furthermore, given the thoroughly negative history of private involvement in the east coast main line, it is highly probable that, if the East Coast service is privatised, taxpayers will be left to pick up the tab, as we have seen in so many other botched franchise deals, including, not least, on the west coast main line.

The British taxpayer has funded the east coast main line service successfully since November 2009, following 12 years of declining profits and eventual failure under Great North Eastern Railway and National Express. The service became hugely profitable almost immediately after re-nationalisation and has returned its soaring profits to the Exchequer every year, with the estimated total returned by the end of this financial year in excess of £800 million.

It is unfathomable that the coalition Government’s response to that success, which came about so quickly after years of failed management by the private sector, is to decide that this is a good time to give the private sector not just a second, but a third chance. It is appalling that the Minister and his Department are so eager to overlook the clear demonstration of the high quality of our public rail service management, the dedication of train staff and the co-operation of rail unions.

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Rather than continue with this charade, the Minister should focus his efforts on sorting out the debacle of the west coast main line and other, similar franchise fiascos. It is ill-advised for the Government to create an issue out of nothing and to waste resources trying to solve a problem that does not exist, when they struggle to deal with real problems and real issues, often of their own making. I can conclude only that political dogma is driving this agenda, which I hope will ultimately be derailed.

10.21 am

Karl McCartney (Lincoln) (Con): I will make a short speech, because a number of Opposition Members want to get in before the shadow Minister and the Minister reply. I did not say this in my intervention earlier, but I thank the hon. Member for Washington and Sunderland West (Mrs Hodgson) for securing the debate.

There has been some striking ideological dogma from the Opposition, and it smacks of having a brass neck to accuse the Government of dogma.

Grahame M. Morris: Will the hon. Gentleman give way?

Karl McCartney: No, not at this point. I would like to make some progress, if I may, and then I will certainly give way.

I liked the fact that the hon. Lady started her speech completely against re-privatisation, but seemed by the end to be quite content to support it, albeit only in a way that she wanted and that benefited her constituents. Of course, that is what we would all want as Members of Parliament: we all want the best for our constituents.

The hon. Lady claimed not to be a PR cheerleader for East Coast. Indeed, like her, not one Opposition Member—I waited until quite a few had spoken—declared an interest. Since 2009, however, they have seen a real increase in services for their constituents. That is to be welcomed, and I am sure Opposition Members are pleased. However, some of us represent seats that have not seen services increase to the level we were promised they would be once East Coast was taken back into the public sector. Lincoln was promised seven trains down to and up from the capital a day, but we have ended up with one. Members can now see why I am perhaps not as big a cheerleader for East Coast as some Opposition Members.

Lilian Greenwood (Nottingham South) (Lab): Will the hon. Gentleman give way?

Karl McCartney: No, not at this point.

The real elephant in the room is perhaps the fact that Opposition Members are worried that re-privatisation might bring some change to services. Although I agreed with some of the points made by the hon. Members for Edinburgh East (Sheila Gilmore) and for Edinburgh North and Leith (Mark Lazarowicz), they might consider the fact that seats to the south of theirs are not just “and beyond”, as they were referred to. Lincoln is not

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“and beyond”; it is my constituency, and I will fight for it as hard as I can and as hard as Opposition Members, I am sure, do for theirs.

I would like to see better services from Lincoln to our capital city, as I am sure Opposition Members would from theirs. However, I am also aware that if trains on the east coast main line stopped at Edinburgh, and passengers then had to cross a platform to catch another train to go further north, people south of Edinburgh would see a vast improvement to their service. That is something a private operator might consider, although I am not saying it will. In Lincoln’s case, however, I would certainly like to see more direct trains daily and even at weekends.

Mark Lazarowicz rose—

Graeme Morrice rose—

Grahame M. Morris rose—

Karl McCartney: I am being surrounded. I will take all three Members on if they like, but I will give way to the hon. Member for Easington (Grahame M. Morris).

Grahame M. Morris: The hon. Gentleman argues there is an evidence base that suggests that the east coast main line is better off privatised. However, whatever measure is used—whether customer satisfaction, profitability or prices—the evidence is that the line is better off as part of a directly operated public service, and I heard nothing to contradict that. The profits that are being made can be reinvested to improve the service or they can be used elsewhere by the Treasury.

Karl McCartney: I thank the hon. Gentleman for that erudite and timely intervention, which is typical of the interventions he might make, but I would refer him to my first intervention. If he and the Labour party feel that way, why did they not re-nationalise the rail service across the whole country in their 13 years in office? They did not do that.

Mark Lazarowicz: May I respectfully point out that the private operators did not provide the direct service the hon. Gentleman is calling for to his constituency in the 13 years or longer they operated the line? The private sector did not offer his city any improvements when it was in charge. That is surely an argument for saying that Directly Operated Railways should offer an alternative. The hon. Gentleman can then decide whether he wants Directly Operated Railways and East Coast or the private sector. Surely he can accept that there should at least be a choice.

Karl McCartney: I accept that different changes might be made. I thank my predecessor in the constituency, who, as a Transport Minister, perhaps secured the promise of seven trains a day down to and up from the capital. Ultimately, I was the lucky recipient of more votes in the 2010 general election, and I replaced her. Unfortunately, at that point, unlike some Labour Members who have retained their seats, East Coast decided not to follow through with its promise. That is to the disbenefit of my constituents. As I said, I will always stand up for them to secure the best rail services I can.

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Graeme Morrice: The question I was going to put has already been asked by my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz), but given the discussion earlier about the public view on this issue, does the hon. Gentleman not accept that the overwhelming majority of the public, including passengers, oppose privatisation? Is he aware that the Government have actually consulted on the issue?

Karl McCartney: I am, and I am happy to accept that the majority of people in his constituency, and the passengers who use the rail station he uses, might, like him, not want to see any changes to the level of services they enjoy. However, some of us, in seats that do not receive such a regular service, might feel differently, and that might be where the ideological difference is.

Ian Mearns: Unfortunately, a couple of weeks ago, we had the wrong sort of trees on the line, and my hon. Friend the Member for Easington (Grahame M. Morris) and I had to get off a train at Peterborough. We had a chat with quite a lot of residents and people who work on the railway there, and I have spoken to lots of people from Peterborough since. It is quite clear that the vast majority of them do not want the line to be taken out of public ownership and re-privatised. That is not Gateshead—that is Peterborough.

Karl McCartney: I will take those comments with quite a large pinch of salt. I would probably take on board a little more the comments of my hon. Friend the Member for Peterborough (Mr Jackson) on behalf of his constituents. However, like him, I am pleased to see the new rolling stock on the east coast main line. Lincoln might—perhaps with hybrid locomotives—see better, more regular rail services, including at weekends. As I said, I have been fighting for that for my constituents.

The hon. Member for Edinburgh North and Leith managed to bring nuclear power stations into the debate and mentioned that in 1997 there were other priorities for the Labour party. Obviously there were, because you did not sort out any power stations and certainly did not sort out the rail system. You were all busy spending money our country did not have.

Mr Peter Bone (in the Chair): Order. The hon. Gentleman is using the word “you” a little too much. He should not be doing that.

Karl McCartney: Indeed I should not, Mr Bone. Thank you for that reminder.

I never refuse any opportunity to have a dig at the Independent Parliamentary Standards Authority. The hon. Member for Washington and Sunderland West mentioned talk—although it has been refuted—of a third class on the east coast. I ask her not to tell IPSA, because I am sure it would try to make us all travel on it.

10.30 am

Grahame M. Morris (Easington) (Lab): It is a pleasure to serve under your chairmanship, Mr Bone, as always. I want to compliment my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) on securing the debate, one of several about the east coast main line that we have had in Westminster Hall and the main Chamber.

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The Government have yet another opportunity to listen to what the overwhelming majority of the British public—not just in Easington or the north-east—are saying. Polling evidence shows that they believe that the east coast main line should remain a publicly operated service.

The last time we had a debate on this matter, the Minister’s predecessor, the right hon. Member for Chelmsford (Mr Burns), referred to me—and, if I recall correctly, my hon. Friends the Members for Livingston (Graeme Morrice) and for Gateshead (Ian Mearns)—as dinosaurs for believing that public services should be run for the benefit and in the best interests of the public.

I do support the renationalisation of the railways, and I certainly oppose the re-privatisation of the east coast main line—especially when there is evidence that Directly Operated Railways is providing a better service and returning more money to the taxpayer than the private sector. Furthermore, on two occasions when the private sector was operating the franchise, it failed. If my view makes me a dinosaur, so be it.

In numerous surveys 70% of the public have regularly supported calls for the railways to be completely publicly run. That applies throughout the country and even in the south and south-east. Trains there are very congested, and there are similar concerns about the fact that private sector franchise holders are not delivering.

We have been given an example, in the success of the east coast main line under Directly Operated Railways, of how a public rail operator can work and deliver for the taxpayer. As my hon. Friends have said, more than £800 million in premiums will be returned to the Exchequer by Directly Operated Railways. The east coast main line receives the lowest net subsidy of any operator—only 1% compared with an industry average of 32% or more than £4 billion. The numbers tell the story. Let us not forget what happened previously, when National Express ran the service. It returned only £370 million in premium payments and turned its back on the franchise, leaving the taxpayer to pick up the pieces. Directly Operated Trains had to step in.

We have had private sector failures on the line and the operators have not delivered on their commitments, but the Government will not prevent National Express or other failed operators from bidding for the rail franchise. Labour Members have raised queries about that. The right hon. Member for Chelmsford confirmed in an answer to my hon. Friend the Member for Islington North (Jeremy Corbyn):

“National Express and its subsidiaries are permitted to submit for the pre-qualification process”—

that is, the bidding process—

“to run passenger rail services in all franchise competitions including the East Coast Main Line.”—[Official Report, 3 June 2013; Vol. 563, c. 970W.]

We should ask questions about that, given that the private operator has a track record—if hon. Members will excuse the pun—of failure.

Ian Mearns: Given the statistics that my hon. Friend has reeled off about the public subsidy going into private sector franchises, there is a good argument that

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the new rolling stock in the private sector franchises has been put in not by private sector investment, but by public sector subsidy. The public pay for private profit.

Grahame M. Morris: My hon. Friend makes an excellent point. We are privatising the profit and nationalising the cost and risk of the investment. That is a bizarre approach to the public finances. In my view, companies in either sector that fail to deliver on commitments or promises to the taxpayer should not be allowed to take over franchises—they have shown that they are not competent to run them.

It is very expensive to travel by rail in the United Kingdom, compared with other countries. British train tickets are now the most expensive in Europe. A typical season ticket costs 14p per kilometre in the UK, compared with just 8p per kilometre in Germany. Holland and France are the next most expensive countries. A day return in the UK costs 26p per kilometre compared with 17p per kilometre in Germany. As to season tickets into the capital, a 24-mile commute into Paris would cost £924 a year; a similar commute would cost £705 to Berlin and £654 to Madrid—but for someone travelling to London it would cost £3,268 a year. Those are huge sums, and after a decade of price increases. Those are never welcome, but at a time of austerity when wages are effectively frozen and, in many cases, falling, an intolerable strain is being put on family budgets.

While fares have been shooting up, dividends to shareholders in the big five transport companies contracted to run UK rail services reached nearly £2.5 billion. When people ask, “Where is the money going?” the answer is that a big chunk of it is going there—in dividends to private train operators. There are examples of excessive boardroom pay. Some of the highest paid directors receive more than £1 million.

East Coast offers a genuine alternative, with all profits reinvested back into services—money that otherwise would go as dividends for shareholders. I hope that the Minister will listen to the concerns expressed by hon. Members and the British public and end the failed franchise bidding policy.

10.38 am

Lilian Greenwood (Nottingham South) (Lab): It is always a pleasure to serve under your chairmanship, Mr Bone.

I congratulate my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) on securing this important debate. She made a compelling case against the privatisation of east coast inter-city services, and there were other strong speeches, including that of my hon. Friend the Member for Edinburgh East (Sheila Gilmore). She rightly said that Ministers have consistently failed to justify selling off the east coast line, and hon. Members who attended previous debates may feel a sense of déjà vu. However, while I share their frustration, I make no apology for the persistent questions from the Labour Benches about an unnecessary, unwanted and wasteful privatisation. The answers have changed each time, but the absence of a credible case has remained constant.

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We were told first that East Coast had to be privatised because punctuality had plateaued; better punctuality rates, however, have been achieved than under the previous, failed private operators. We were also told that we had to sell off East Coast to secure outside investment, but Ministers then had to admit in answers to written questions that the cost of track upgrades and rolling stock procurement would in fact be met by the taxpayer.

Then we were told that privatisation would lead to better value for money, but since 2009 East Coast—as we heard—has been virtually subsidy-free; all profits have been reinvested in the service and £800 million will have been returned to the taxpayer by the end of the financial year. Finally, the Minister told us in an answer to a written question last Monday that it would never be appropriate to compare any franchise to another, even though the former Minister, his colleague the right hon. Member for Chelmsford (Mr Burns), had frequently contrasted east and west coast inter-city services.

The same confusion was at work in the leaked east coast franchise prospectus—the document that raised the prospect of third-class travel. It is clear that at a late stage a decision was taken to alter or remove positive references to East Coast performance since 2009. One statement, that

“staff engagement is at an all time high”,

was altered to:

“staff engagement has been improved”.

Then there was a reference to “the current, successful business”, which was downgraded to only “the current business”.

Some facts were erased completely. I shall share a few examples. On page 19:

“East Coast Main Line’s public reputation has remained consistently high”;

on page 20:

“Since the beginning of 2011/12 East Coast Main Line has been the recipient of 35 industry awards”;

on page 27, it was stated that East Coast’s passenger satisfaction was

“higher than the 89% for all long distance operators”;

and page 31 said:

“Over the last two years East Coast Main Line has developed a genuine choice for customers in terms of fares and customer offering.”

All were deleted, but we do not know who ordered those changes. Perhaps the Minister can tell us today.

The Secretary of State may believe that he speaks on behalf of passengers, as he told the House at Transport questions last week, but I am sure that they would not want to see Ministers rewriting history in such a way. Has the Secretary of State not seen the passenger satisfaction statistics? Since 2009, East Coast has achieved the highest ratings on the route since records began. The 2011 timetable changes introduced the equivalent of 3 million more seats a year, bringing improved services to communities along the line. Industrial relations have been improved, with employee engagement up and sickness absence levels down, from 14 days per year in 2009 to nine and a half days last year. Furthermore, polls show that twice as many people oppose the sell-off as support it. Even half of Conservative supporters are against it.

Perhaps we should not be surprised that Tory Ministers are rushing through a botched privatisation of rail services; they have form, after all. However, the Liberal

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Democrats—unfortunately, none are present today—need to be reminded of their position in opposition. At the time, the hon. Member for Lewes (Norman Baker), said:

“My view on the franchise agreements is clear…if a franchise is handed in to the Government—handed back—it should be held in the public sector as a public interest franchise, not least as a comparator for other franchise agreements currently operating.”—[Official Report, 3 June 2009; Vol. 493, c. 83WH.]

Nevertheless, in government the Liberal Democrats have voted in favour of privatisation without a word of protest. So this is not only a Tory sell-off; it is another Lib Dem sell-out.

There is an alternative. As a not-for-dividend operator, East Coast has invested all its profits—some £48 million—back into the service, instead of splitting it with shareholders. It has proved excellent value for money and will have paid back almost £1 billion by the middle of 2015, combining better services for passengers with improved value for the taxpayer. That is why we have suggested that, if the Government press ahead, at least East Coast should be able to bid for the new franchise.

As hon. Members have recognised, it is nonsense to say that the German, French and Dutch state operators will be able to bid, but that the current, successful British operator will be barred. It is also remarkable that Conservative Ministers have come before the House to tell us that they are not in favour of that additional element of competition. By doing so, Ministers have made it clear that this is about politics, not the national interest. They are content to watch profits being spent on foreign rail networks, and they have also said that they would allow National Express, which walked away from the franchise in 2009, to bid again.

Meanwhile, as my hon. Friend the Member for Livingston (Graeme Morrice) said, instead of clearing up the mess caused by the collapse of the west coast franchise competition, progress on other lines has stalled as Ministers desperately try to complete East Coast’s sale before the general election. The collapse of franchising has already cost the taxpayer at least £55 million, and the Government have been forced to seek costly direct extensions—in one case, for more than four years—in order to free up enough time to push East Coast out of the door.

As a result, First Great Western will pay only £17 million in premium payments next year, compared with £126 million last year. When combined with the similar deal to extend Virgin’s west coast contract, taxpayers will lose out on £173 million in franchise payments in 2013-14. That is before taking into account the loss to the wider economy, as orders have been put on hold, hurting the supply chain and threatening jobs and skills.

Does the Minister really believe that those wasted millions could not have been put to better use? They could helped to alleviate the cost-of-living crisis by holding down the cost of tickets, but instead the Government are allowing some fares in January to rise by more than double the rate of inflation.

In fairness to the Government, they did announce one interesting policy: a £500 cap on the cost of a standard return. It was interesting for the wrong reasons, however, because the policy will benefit no one—there are no standard return fares that cost more than £500. When the rail industry proposed the cap, were Ministers

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aware of that fact, or were they duped? I would be happy to take an intervention on the point—but perhaps the Minister will address it in his speech.

After months of delay, the Government’s fares and ticketing review offered only cold comfort to passengers. East Coast passengers, however, will be feeling the impact of disruption, as despite the operator’s best efforts, infrastructure failings are an all-too-regular occurrence on the line. The previous Labour Government committed £500 million to the line in the current control period and a further £247 million is due to be invested in control period 5, but that pales in comparison with the billions spent on the west coast, and poor asset knowledge compounds the problem.

Network Rail is due to carry out a review of civil structures by March 2015, but the Government intend to award the new franchise in October next year. Will the Minister confirm that without adequate knowledge of the disruption ahead, the successful bidder could walk away with millions in preventable compensation payments? Is that cost to the taxpayer not reason enough to slow the reckless pace of this privatisation?

The truth is that the current operator has won national awards for the way in which it manages disruption, and its management have drawn up a five-year plan for managing upgrade work and the introduction of the intercity express trains. They should be entrusted to deliver the plan, just as they delivered record punctuality and passenger satisfaction ratings.

We all know, however, that the sell-off is not about improving services; it is about ideology and the Government’s determination to bring to an end this successful alternative to franchising. It is not too late for Ministers to halt the process, but if they continue, they will be putting privatisation before passenger interests, which would say everything about the priorities of this out-of-touch Government.

10.49 am

The Parliamentary Under-Secretary of State for Transport (Stephen Hammond): It is a great delight to see you in the Chair this morning, Mr Bone. I thank the hon. Member for Washington and Sunderland West (Mrs Hodgson) for securing the debate, which provides yet another opportunity to present the benefits of rail franchising and to talk about the east coast main line franchise.

I have listened to a number of Members speak this morning, and I hope to address some of what they have said and asked for on behalf of their constituents. Regrettably, I cannot deal with all the points, because we are engaged in a commercially confidential and sensitive procurement exercise to appoint the right service delivery partner for this vital and historic railway. On 25 October, we began the competition for the inter-city east coast main line franchise by publishing a notice in the Official Journal of the European Union, and publishing the inter-city east coast prospectus and the pre-qualifications documents so that prospective bidders can apply to take part in this important competition. The prospectus set out some of the new policies to be included in the new franchise, such as capitalisation requirements and the GDP support mechanism to mitigate the kinds of failures we have seen in the past. The Government have learned

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the lessons from the west coast main line and put in place new procedures and policies. I am confident that the competition will run smoothly.

We are now in the pre-qualification stage of the competition, so it is only right that I am careful in my comments this morning not to prejudice the competition. As is normal, the Department has set up clear processes, which I must follow, for the transmission of information to the market throughout this competition.

Mrs Hodgson: The Minister mentioned the prospectus that is in the public domain. Will he explain the difference between that and the leaked prospectus to which my hon. Friend the Member for Nottingham South (Lilian Greenwood) referred and from which I obtained information about the proposal for third-class rail travel? Where did that leaked prospectus come from, and does it even exist? It was printed in The Daily Telegraph, which I am sure he thinks is a jolly good paper that would not print something that did not exist.

Stephen Hammond: The hon. Lady is drawing me into commenting on The Daily Telegraph, and I would rather not do that at the moment, for obvious reasons. The Government rightly do not comment on leaked documents. If the hon. Lady wants to rely on it, it is for her to do so, but the Government rely on the prospectus we have issued.

I shall pick up some of the questions asked this morning. There has been a whiff of mischief in this debate. Much has been said about political dogma and the hon. Member for Easington (Grahame M. Morris) gave himself away when he said that he supports renationalisation of the railways. That is what this debate is about. It is not about securing the best deal for passengers, the railways or the east coast main line. It is about renationalisation.

The whiff of mischief continued from the Labour Front-Bench spokesman who was keen to point out what she believes is the benefit of nationalisation, but failed to point out that the previous Labour Government saw the benefits of the franchising system and privatisation, and continued with that process throughout their 13 years in office. Moreover, I gently remind the hon. Lady that when she starts a catalogue of failures, she might remember who had not done enough work on the franchising process in 2007 when National Express took it over.

Mrs Gillan: On the spirit of mischief, does my hon. Friend find the attitude of Labour Members rather odd? I understand that Labour is considering supporting HS2 if the Secretary of State raises the extra private sector funds by selling a 30-year concession on HS2 for £10 billion. Does that not sit rather oddly with the arguments that have been deployed today?

Stephen Hammond: My right hon. Friend makes an interesting point and alludes, as I did, to the whiff of mischief that we are hearing from Labour Members today.

The hon. Member for Washington and Sunderland West asked about the prospectus and where she might find it. It is available in the Library—and I have a copy here—but I will ensure that a copy is sent to her. She

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commented on performance, and I refer her to page 67, which states that the franchise agreement will include three levels of benchmarking for the performance metrics that any franchisee will have to meet.

The hon. Lady referred to third class. I intervened to say that we will not specify that and have not specified it, but I gently guide her to Eurostar, which has a standard premier class to make better use of off-peak first-class coaches. If someone wanted to make better use of first-class coaches during off-peak times, I am sure that she and her constituents would regard that as a benefit.

Ian Mearns: The Minister is generous in giving way. If a franchise runs a first-class, a standard premium class and a standard class, does not standard class, de facto, become third class?

Stephen Hammond: I am not sure that the hon. Gentleman would argue that with British Airways, and I am not sure why he should do so with the franchise. His point is nonsense.

Mrs Hodgson: I know that I cannot tempt the Minister to discuss the existence of the leaked document, but page 66 of the publicly available document states:

“We would be open to variations in the ratio of first to standard class accommodation…We would be unlikely to consider any variation which delivers a worsening of passenger experience”,

which I believe third class would. Will he confirm that no third class will be allowed under the franchise?

Stephen Hammond: The hon. Lady is dancing on a pinhead. I have made it clear that in the document we will not and have not specified a third class. I would have thought that she and her colleagues would have supported utilising first-class coaches so that more passengers can have a better experience.

I listened with interest to the hon. Member for Edinburgh North and Leith (Mark Lazarowicz) who told us that it was impossible to argue that the decline in ridership on the railways between the early 1900s and the 1990s was due to public ownership, or that the benefits of privatisation, which has seen ridership double, could be established. He then proceeded to use exactly those arguments for the east coast main line, which was slightly surprising.

I listened carefully to the hon. Member for Edinburgh East (Sheila Gilmore) who referred to securing new rolling stock under the public sector. The inter-city express programme has been running for some time. The trains will be procured by Government and will also be used by Great Western, and that is currently being operated by First Great Western. To suggest that the IEP process was not running beforehand was wrong.

It is equally odd that some hon. Members sought to suggest that the Government have been panicked into the inter-city east coast main line refranchising. What they forget is that the franchise consultation had already been held prior to the west coast franchise being stopped. It had already been announced back in 2011 that the intention was to publish the invitation to tender in January 2013. To contend that this is a rushed privatisation—we may discuss the word “privatisation” in a moment—is simply nonsense.

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Sheila Gilmore: Does the Minister accept that the original plan was for the east coast main line to be the last of the three lines to be refranchised, so the only reason that it now seems to be in line with the original date is that the whole thing was put on hold due to the complete debacle of the west coast main line?

Stephen Hammond: The hon. Lady cannot argue that we are rushing it through when she has just said that we are keeping to the original timetable. The then Secretary of State, my right hon. Friend the Member for Runnymede and Weybridge (Mr Hammond) announced a timetable and we had already started the consultation prior to the west coast refranchising process being stopped, so it is nonsense to argue that this is rushed.

Graeme Morrice: I am grateful to the Minister for giving way. I appreciate that time is running out. Will he confirm what public consultation there has been with passengers and passenger groups, and what the outcome was?

Stephen Hammond: We followed the absolutely standard procedures. We had a public consultation between June and September 2012, and there will be further consultation when the ITT has been finalised. The Government are putting in place the refranchising process that will deliver the best partner to deliver the best benefit for all customers on the east coast main line. That is the way forward.

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Premier Motor Auctions

11 am

Austin Mitchell (Great Grimsby) (Lab): May I say what a pleasure it is to serve under your chairmanship for the first time ever, Mr Bone? I want to tell the story today of the theft of a profitable Yorkshire company by the mafia—I do not mean the criminal mafia that we often speak of, but Britain’s dark-suited mafia, which in this case is represented by Lloyds bank and PricewaterhouseCoopers, both acting in collusion and neither of them subject to police controls, because both regulate themselves.

The company is Premier Motor Auctions, which had a turnover of £160 million, had 160 staff, and was profitably selling 50,000 cars a year in 2008, which was one of its most profitable years. It was described by Lloyds as a “great auction business”. However, the company had an overdraft facility of £1.75 million, because the chief executive, Keith Elliott, was pushing the limits to expand the company. That included the costs of due diligence on an aborted takeover, the purchase of a new site in Birmingham and a proposal to establish a business in the United States. The overdraft facility gave the bank the idea of taking it over and it introduced Irving Warnett of PricewaterhouseCoopers to the company as a non-executive director. He called himself, as he came in, a critical friend, and he worked for Ian Green, who was the northern leader of business recovery services for PricewaterhouseCoopers.

Warnett went through the accounts and insisted on creating a £2 million account for a Driver and Vehicle Licensing Agency contract that the company held. That turned out to be unnecessary—it was not even required by the DVLA contract—but it created a hole in the company’s finances, which Lloyds agreed to fill by increasing the borrowing limit to £3.75 million, in return for which it demanded vigorously and robustly that the company be sold via an administration in which PwC would, amazingly to me, act for both parties. That was in September 2008. It was to be sold to Lloyds Development Capital under what was called Project Tic, which was headed by the takeover specialist Matthew Packham.

Elliott fought back, and he got the support of a venture capital firm called Endless, which described Premier Motor Auctions as an excellent business. It was prepared to refund the £2 million borrowing that had been unnecessary, but Lloyds, in return, insisted on owning 50% of the business and proposed to put the business again into administration. That was described by Lloyds as Project Toc, and PwC was to handle the administration, at the end of which Lloyds was to buy the business for £1. To ensure that that happened, Lloyds then threatened to withdraw funding on 4 December, which was the day before the deal was completed. It said, in internal documents, that this was its attempt to crystallise the position and to do a deal without Keith. PwC was proposing to act for both sides, which, again, I would have thought was a conflict of interest on its part.

Elliott, not to be beaten—resourceful man as he is—did a deal with Scottish Motor Auctions, which agreed to put up £2 million and avoid administration, which, as it pointed out, would have shattered confidence in the business. That was a good deal from the point of

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view of Elliott and Premier Motor Auctions, but not from the bank’s point of view, and in 24 hours, the deal, on 11 December, had been aborted and a new deal was reached between Scottish Motor Auctions and Lloyds, over Elliott’s head. Lloyds and Scottish Motor Auctions would now take over the company, so the bank was still achieving its aim, despite Keith Elliott’s resourcefulness in getting the £2 million paid off.

The central question, therefore, becomes who aborted the deal with Scottish Motor Auctions. A director of Scottish Motor Auctions said that it had been given a very clear steer that SMA’s bid would be unacceptable—unacceptable, presumably, to the bank. I have had a considerably long letter of explanation from the bank, and I am grateful for that. It has given me an explanation some of which is actually correct. The bank says that it did not abort the Scottish Motor Auctions deal, and it points to PricewaterhouseCoopers. PwC has refused to answer any questions on the issue, so I do not know whether the deal was aborted by Mr Warnett or by his boss Ian Green—they both worked in the same office and shared the same secretary—but I do know that aborting the Scottish Motor Auctions deal made the difference to PwC’s fees, which went from £10,000 for the SMA deal, if it had gone through, to £500,000 for carrying out the administration, which Lloyds wanted to do. The total cost of that administration, including lawyers’ fees and everything, came to £1.2 million.

In some respects, that is the end of the story. Keith Elliott was forced out and to get his overdraft, he had been forced to sign a warrant to the bank, which is something banks tend to force on customers now, giving it the option to purchase, which it now proposed to exercise, excluding Keith Elliott entirely. That was what he was told by post earlier in December. That means that a company that was making, that year, £2.5 million, before interest and tax, was put into administration by PwC and bought back by Lloyds and Scottish Motor Auctions. It is now functioning again and generating considerable profit for them. Elliott has been forced out, and Scottish Motor Auctions, Lloyds bank, and presumably PwC, which handled the administration, are laughing all the way to the bank, having made a very considerable, generous profit out of the deal—out of effectively stealing the company. Elliott is left owing £2 million on a warrant that he signed to get the £2 million from Lloyds in the first place.

In my view, the way in which the company was taken over does not just smell—it stinks. It is a monstrous theft of the company. The Independent Banking Advisory Service, which Keith Elliott consulted, has confirmed that this is happening elsewhere to other companies taken over by banks in this fashion. IBAS says that the banks are being protected by Government and have a “special relationship” with them. I quote from a letter of 28 September 2012 in which IBAS states that that special relationship

“has allowed the banks and other professionals with whom they have conspired—to plunder and gain control of very profitable business, which the banks had marked as targets”—

as Lloyds had marked Premier Motor Auctions—

“…deliberately using the insolvency industry as a shield to conceal many acts of deception and fraud.”

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I hope the Department will inquire into that, because if it is happening on a bigger scale than at Premier Motor Auctions, it is an appalling practice to impose on businesses that want to compete, prosper and grow, and it is a threat to businesses besides Keith Elliott’s.

What smells even more and is even more worrying is the lack of redress for a company director and company in this situation. Neither Lloyds nor PwC has answered the specific questions—about who aborted which deal, why and when—that I and Keith Elliott have put to them. Lloyds has been helpful in giving its side of the story, but it still has not answered the questions and it will not agree to an independent investigation by a liquidator that Elliott will fund personally to prove that he was right. It has also prevented disclosure by six directors after he won a court order for disclosure of their internal papers.

PricewaterhouseCoopers—a distinguished name—has been even less helpful. Elliott’s inquiries were answered by a lawyer’s letter, saying that his queries were

“calculated to cause annoyance and inconvenience to our client”.

That’s a nice one. PwC has not answered my questions, either. It will not correspond further. It has told Elliot to sue it. All of that is, to me, as clear an admission of guilt on the part of PwC as we are going to get. It can get away with it, because the regulation of accountancy and insolvency is handled by the regulator, which is the Institute of Chartered Accountants in England and Wales. That would better be renamed the “society for the prevention of cruelty to the big four accountancy houses”, which manage the institute’s staff, provide time off for their partners to serve the institute, dominate its proceedings and make it judge and jury in their own case. It has not investigated Elliott’s claims. It has told him that his redress is now by means of judicial review, which it is not, of course, because that is out of time.

The Financial Reporting Council, which is the regulator of regulators, will not investigate because, it says, the number of people affected is small and doing so is not in the public interest. Well, if investigating the theft of a company is not in the public interest, it beats me what is.

The Minister and the Insolvency Service both say they have no standing in the matter. The problem that we are talking about is the theft of a viable, profitable company by one of the big banks, in close co-operation—conspiracy, one might say—with PricewaterhouseCoopers. What I am asking this morning, therefore, is, first, that there be an official inquiry into this company theft, which should cover the question whether this is going on with other banks—whether other companies are being taken over by the banks, in collusion with accountancy houses, in the same way. It is in effect the theft of companies.

I am asking, secondly, for effective independent regulation of accountancy, audit and insolvency. Regulation by the Institute of Chartered Accountants, the protective body for the big four, is just not enough, and it means that the big four are in effect their own masters and take their own decisions. That is a totally undesirable situation. The public and companies must have some right of redress and right of appeal—some knowledge that there will be an independent inquiry into abuses such as this.

I am asking thirdly for the effective regulation of the banks to ensure that they do their job, which is lending to support small and medium-sized enterprises, rather than using the power they have from granting overdrafts to take them over.

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I am asking, as a general issue, that the enormous power of those big beasts the banks—banks that are too big to fail and are in effect protected by Government—and the enormous power of the big four accountancy houses, which are too big to control and in effect regulate themselves through the Institute of Chartered Accountants, be restrained. We need a healthy, vigorous and open environment for business and we need institutions such as the banks and the big accountancy houses to be accountable and effectively regulated in the public interest. Everywhere, great power such as exists in the hands of the banks and the accountancy houses must be accountable, and it should be in this instance.

11.15 am

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson): First, I congratulate the hon. Member for Great Grimsby (Austin Mitchell) on securing the debate. He has been a tenacious advocate on behalf of his constituent, Mr Elliott, and his concerns about the administration of the companies of which he was the managing director. I applaud the hon. Gentleman’s work on behalf of constituents generally, which we all wish to undertake as MPs in our own constituencies.

I hope to be able to address some of the points that the hon. Gentleman has raised on this specific case, although he will appreciate that there are limits to what I can say—and, indeed, do—on this case. However, he has also raised his concern that these issues exist more widely, so I will also touch on what the Government intend to do to address issues in the insolvency market more widely.

[Mr Philip Hollobone in the Chair]

The concerns that the hon. Gentleman has outlined regarding this case include the alleged conflict of interest involving the administrator, the accountancy firm PwC and the bankers, Lloyds. Mr Elliott has made it clear that he considers that the close relationship between PwC and the bank enabled his companies to be sold in an inappropriate and irregular way. The hon. Gentleman described that as, in effect, the theft of the company. I appreciate that his constituent feels very strongly about this issue, not least because this was his livelihood and his company. We all understand that.

The hon. Gentleman also outlined his concerns about the wider context of the banks acting with the big four accountancy firms to sell businesses at a profit for themselves, to the detriment of creditors and those who had been running the companies. I recognise that people are worried about the independence of insolvency practitioners and I will come to those matters, but I should perhaps try to manage expectations. I may be unable to satisfy the hon. Gentleman on the specifics of this case, because I do not have the power to intervene in individual insolvencies. The issue is not whether I am willing to do so; it is simply that I am not able to do so.

The hon. Gentleman will inevitably be more familiar with the intricate details of the case than I am, but my understanding is that Irving Warnett was introduced, he says, as a non-executive director and a critical friend of Premier Motor Auctions. My understanding is also that, whatever discussions took place, he was never actually appointed as a non-executive director, so the legislation on directors’ responsibilities does not specifically

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apply to him. The issues about a conflict of interest have been investigated, and I will come to the way in which that complaint was handled.

The hon. Gentleman also highlighted the two different deals that seemed to be on the table in December 2008. One was much more appealing to Mr Elliott. The other, which ultimately was the one undertaken, was clearly not as acceptable to Mr Elliott. I understand the hon. Gentleman’s concern about where that decision was made, but I do not have the power to secure that information.

That said, I strongly encourage any company receiving correspondence from a Member of Parliament about a constituency case to engage with that Member of Parliament and answer their questions. After all, we elect 650 MPs to represent everybody up and down the country, and the office of Member of Parliament should not be disrespected by any individual company. It would be helpful if the relevant companies found it in themselves to engage a little more constructively and answer some of the questions that the hon. Gentleman understandably put to them on behalf of his constituent.

The hon. Gentleman highlighted a couple of deals, which go by the interesting names of Project Tic and Project Toc. In August 2008, Lloyds were apparently insisting that the company went into administration, which he referred to as Project Tic. Project Toc involved Endless LLP and Lloyds buying the company out of administration through a specially created new company. It is difficult to comment on those specifics, because the sale did not take place under either of those projects.

Mr Elliott complained to the ICAEW, which is the insolvency regulator of the administrator, Mr Green. As the hon. Gentleman knows, it investigated the complaint, which involved the potential conflict of interest around Mr Green becoming administrator when previously, it is alleged, there was a material relationship between PWC and the companies involved.

The ICAEW investigation concluded that no conflict of interest arose, on the basis that PwC was acting as investigating accountants for the bank prior to the administration, and therefore it was not contrary to the code of ethics with which all insolvency practitioners must comply. The ICAEW also looked at PwC’s negotiating to sell the business in the days before Mr Green was appointed, and stated that that likewise did not breach the code because PwC was trying to maximise asset realisations, which was compatible with Mr Green’s duties as administrator.

Every insolvency practitioner should be aware of potential conflicts of interest. There was an investigation in this case, because there clearly should have been awareness of that, but if an insolvency practitioner works for a particular firm, a conflict of interest is not automatically inevitable. The investigation found that there was no conflict of interest in this circumstance.

Austin Mitchell: In fact, as the Minister pointed out earlier, Mr Warnett was not appointed as a director, but the letter from Lloyds specifically said that he was to be a non-executive director. On that basis, he was received by the company and gave advice to create the £2 million hole in the accounts.

The ICAEW investigation was only a partial investigation of part of the complaint. The complaint, which put three headings together, had to be treated as a whole to show the conspiracy, but the ICAEW said that it could

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not be treated in that fashion and that it would investigate only part of it. That investigation was certainly far from thorough, because it has left open the question of whether PwC could act for both the company and the purchaser in the administration.

Jo Swinson: As the hon. Gentleman is aware, Mr Elliott was unhappy with the investigation and therefore also asked the Insolvency Service to use its oversight role to review whether the ICAEW had dealt with the case properly in its investigation of the complaint. The Insolvency Service concluded that the ICAEW had adhered to its complaints processes and that the finding of the investigation committee was not unreasonable.

I have not seen the letter of engagement from August 2008 on the appointment of a director, but whatever is in that letter, if somebody is to be appointed as a director, a formal process must be undergone through Companies House. That did not happen, so there was no status as non-executive director, even if it was supposed to happen. The investigation took place and was looked at by the Insolvency Service, and that is where the powers we have get us to in this circumstance.

I am absolutely sympathetic. I understand the concerns of Mr Elliott and the hon. Gentleman. It is important that those who deal with the insolvency of a company are seen as independent, and I understand why on this occasion there is not necessarily confidence that that was the case. I stress to all insolvency practitioners that they need to look long and hard at their position when they take on the administration of a company, to see whether there is any potential conflict. They should take appointments only where they feel that they are able to act with independence.

The hon. Gentleman placed the issues raised by the case in the wider context. It is helpful to look more generally at what we are doing for companies that find themselves in a similar situation. The Insolvency Service is taking an increased interest in conflicts of interest. It is focusing its oversight regulation work on the specific issue of insolvency practitioner independence. When it goes out to monitor insolvency regulators, it looks at how those regulators consider alleged conflict of interest cases and whether the current code of ethics is robust enough.

For example, the Secretary of State recently wound up a number of introducer firms that had inappropriate relationships with insolvency practitioners. Creditors and complainants continue to express concerns about the effectiveness of the regulatory regime for insolvency practitioners. Stronger oversight powers would help to improve confidence in the regime. We will therefore bring forward proposals, when we can find time within the legislative programme, to strengthen the powers of the Secretary of State as the oversight regulator.

The case brings to mind issues more generally. Many hon. Members have expressed significant concerns about the pre-pack process. In July, I announced that Teresa

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Graham would be appointed to undertake an independent review of the pre-pack procedure. The review is under way and is considering, among other things, whether pre-packs provide value for creditors and how confidence in the procedure can be improved. We have passed on the concerns that Mr Elliott raised to the review team, as part of its evidence-gathering process, so that it can look at a variety of different cases where people have been worried about what has happened. The review is expected to conclude by spring next year—in just a few months’ time.

The Insolvency Service has also worked with the regulators to develop a revised standard for pre-packs, known as SIP16—statement of insolvency practice 16. It requires insolvency practitioners to provide earlier and more detailed information to creditors about valuations, marketing and the justification for a pre-pack.

Importantly, where there is evidence of abuse by an insolvency practitioner, creditors can now use a new single complaints gateway. It is a single point of access for complainants and therefore much easier to use, given the fragmented regulatory regime with different regulators. It will also make it easier for the Insolvency Service to oversee the progress of complaints. Common sanctions guidelines have been introduced by the majority of insolvency regulators, to create more consistency in disciplinary standards.

In conclusion, I shall turn to the role of banks. Banks will undertake reviews to assess the viability of a company for continued or enhanced financial support. As a fundamental feature of our financial and insolvency law, lenders that have valid security must be able to appoint an agent, such as an investigating accountant, to protect the value of that security. Banks also need to act responsibly and consider the implications of any decision they ultimately take.

The Government recognise the problems there have been in the banking sector, which have done a considerable amount to undermine people’s faith in the banking system. We recently responded to the report from the Parliamentary Commission on Banking Standards, which marks the next step in the Government’s plan to improve confidence and build a banking sector that upholds high standards of ethics and professionalism. We will continue to strengthen standards in banking, by working with the regulators to strengthen corporate governance and ensure that firms have good systems in place to maintain standards on ethics and culture. Such issues are important.

I appreciate that what I have outlined on insolvency and banking will not necessarily help in the specific case brought to us today, but I hope that it provides reassurance that we are aware of the important general issues and are taking action.

11.30 am

Sitting suspended.

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Iran’s Nuclear Weapons Programme

[Jim Sheridan in the Chair]

2.30 pm

Jim Sheridan (in the Chair): I remind colleagues that although there are a number of issues involving Iran that could be discussed, today we are talking about its nuclear weapons programme.

Mr Philip Hollobone (Kettering) (Con): Thank you for your presence in the Chair, Mr Sheridan, and I thank Mr Speaker for granting this debate. May I say how pleased I am to see a Minister from the Foreign and Commonwealth Office here at a Defence-allocated debate? I see it as good evidence of joint working between two important Departments. I am also delighted to see so many other eminent parliamentarians in the Chamber. I welcome interventions, hostile or friendly, during my remarks.

Iran’s nuclear weapons programme poses the greatest threat to global security that we face. Surprisingly, the issue is not being taken seriously enough in Parliament, or indeed by the international community. All eyes seem to be focused on Syria, Afghanistan or Somalia, when actually the greatest risk of a global conflagration comes from Iran. Iran simply cannot be allowed to have a nuclear weapon. There are elements within the regime who are mad and bad enough to use it, and their target could be Israel, Saudi Arabia or any number of other countries in the region or further afield. I contend that we must take the issue far more seriously, and that the longer it goes unresolved, the greater the risk that Iran will get a nuclear weapon or weapons and develop the ballistic technology to project the weapon not only in the region but further afield.

Jeremy Corbyn (Islington North) (Lab): The hon. Gentleman is generous in promising to give way, although he might regret it. He and I had an interesting week in the delegation to Gaza, and he is well aware of Israel’s behaviour concerning the encirclement of Gaza and the treatment of the Palestinian people. Israel, of course, is a nuclear-armed power. Does he not think that the key to the issue in that region is for Israel to divest itself of nuclear weapons in order to remove the potential for a nuclear arms race in the region?

Mr Hollobone: I thank the hon. Gentleman for that question, and I enjoyed our joint visit to Gaza. He and I agree on many issues involving the Palestinian Authority and Israel. We can certainly agree that the situation must be resolved quickly, and that the current US-led negotiations between the Israelis and Palestinians offer perhaps the best chance of resolving those issues since the state of Israel was founded.

Mr James Clappison (Hertsmere) (Con): Will my hon. Friend give way?

Mr Hollobone: I will happily give way. In answering this intervention, I will also try to tackle the previous intervention.

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Mr Clappison: I congratulate my hon. Friend on securing this important debate. Does he not agree that Iran has shown ample evidence of its hostility towards a peaceful solution to the situation between the Palestinians and the Israelis, and that Iran’s aggression is in fact directed towards the existence of Israel?

Mr Hollobone: I agree with my hon. Friend that Iran has said some unfriendly and unpleasant things about the state of Israel and its right to exist, which he and I and most Members totally abhor. The question in the previous intervention was whether Israel’s possession of a nuclear weapon was not a big issue in itself. Of course it is, but the whole Israeli mindset has to do with defending Israel’s people, not projecting aggression elsewhere.

I know that the hon. Member for Islington North (Jeremy Corbyn) is looking at me quizzically because he will not agree with much of that, but the perspective of the state of Israel is that the Jewish diaspora throughout the world, but mainly in eastern and western Europe, suffered the horrors of the holocaust, and out of that was born the state of Israel. He and I and others can agree or disagree about that history, but the fact is that half the present world’s Jewish population lives in the state of Israel, and they have found nowhere safe in the world throughout the history of the Jewish people. The state of Israel now offers the best chance for Jewish people to live in peace. They have developed a nuclear weapon or weapons because they want to defend themselves. They do not want to deploy that weapon against anyone else; they just want to be left in peace.

Mr Ben Wallace (Wyre and Preston North) (Con): I fully accept many of my hon. Friend’s arguments about an expansionist versus a defending nation, but within the United Nations and the global community, there are rules about the development and holding of nuclear or any other weapons. Iran is a signatory to the nuclear non-proliferation treaty, which imposes certain obligations that ultimately involve its being taken to the Security Council; Israel is not. Does he therefore recognise the disparity there, and will he join me in urging Israel to sign the NNPT, or at least to allow inspection of its sites?

Mr Hollobone: Yes, I agree that Israel should be a signatory, but there would be no question of Israel giving up its nuclear weapons. Enough bad things have been done to the Jewish people over two millennia that they simply will not give them up.

Dr Julian Lewis (New Forest East) (Con): I am keen to get the focus back on Iran. One way to do so might be to point out that if Israel were led by undemocratic, tyrannical religious fundamentalists and Iran was led by a democratically elected Parliament and Government that were constitutionally capable of being removed without strife, we might be having this debate about Israel’s nuclear weapons rather than Iran’s. The key lies in democratisation, or the lack of it, in the respective countries.

Mr Hollobone: As always, my hon. Friend is on top of matters. He makes an extremely pertinent point, and he is quite right to bring us back to Iran.

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Yes, this is about Iran’s nuclear weapons programme. Would we be having this debate if the state of Israel did not exist? Perhaps, but the threat of Iran deploying a nuclear weapon would not be nearly as great. The mad and bad people in Iran have said often enough how much they despise the state of Israel. There has been argument about whether they have said that Israel should be wiped off the map, but that is clearly the intention of some people in positions of authority in Iran.

Iran is the biggest state sponsor of terrorism worldwide, not just in the middle east but in Europe and further afield, and it has an appalling human rights record. It is a very unpleasant country led by a very unpleasant regime. The idea that it should have at its disposal the ability to deploy a nuclear warhead or warheads should fill the world with absolute horror. Ever since 1945, with a brief interruption for the Cuban missile crisis, the assumption has been that nuclear weapons are so horrible that they will never be used, but I think we could envisage a situation in which Iran, if it had a nuclear warhead, might well use it. If a future regime had the ability to manufacture a warhead and the ballistic capability to deliver it on Israel, it might well decide to take the chance to wipe out 7 million Israelis.

Mr Nigel Dodds (Belfast North) (DUP): I congratulate the hon. Gentleman on securing this most timely debate. Does he agree that although we have been talking about Israel, we must underline the fears and anxieties of many of Iran’s Arab neighbours? Should we not be concerned about reports that Saudi Arabia will look elsewhere to bolster its nuclear capability, or investigate the possibility of so doing, if Iran is given what it considers to be a good deal? A good deal for Iran would, of course, be a bad deal as far as everyone else was concerned. Not only Israel and the west but Iran’s Arab neighbours are concerned about the situation.

Mr Hollobone: The right hon. Gentleman knows more about religious divides than most of us in the House. In many respects, the split between Protestants and Roman Catholics is similar to that between Shi’as and Sunnis. The divides between Shi’a Iran and Sunni Saudi Arabia date back centuries. If Saudi Arabia feels that the wrong deal is negotiated in Geneva, there is a real chance that the Saudis will buy nuclear weapons from Pakistan, because they will want to defend themselves against the threat from Iran.

The right hon. Gentleman is absolutely right to say that the situation is not just about Israel versus Iran; it is about Iran versus, frankly, the rest of the world. That is yet another reason why the international community simply cannot allow Iran to have nuclear weapons, because the likelihood of its wanting to use them in future is simply too great. That comes back to the point made by my hon. Friend the Member for New Forest East (Dr Lewis). Iran’s horrible regime is far removed from any process of democracy, and we can easily envisage circumstances in the near, medium or distant future in which someone in authority in the country might decide, “We have got a nuclear weapon. Let us use it.” That is a frightening prospect, which puts our worries about places such as Syria, Afghanistan and Somalia into the shade. It is the big issue on which the international community must concentrate.

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I am in no way an expert on nuclear technology, but I have read enough to be convinced that Iran does not want to develop nuclear technology simply to provide power for its own people. It is hellbent on developing a nuclear weapons programme. The Foreign Secretary confirmed to me on the Floor of the House that the UK Government are convinced that Iran has enriched uranium to at least 20%. That is way beyond the 3.5% needed for civilian nuclear use, which suggests that the country is trying to develop a military capability. My understanding is that uranium for use in a nuclear warhead must be enriched beyond 90%, and although the gap between 90% and 20% might seem large, in nuclear physics terms it is actually quite small. Uranium enriched to 20% is more than half way to weapons-grade uranium. One of the worries about the potential deal now supposedly being negotiated in Geneva is that Iran might be left with a stockpile of uranium enriched to 20%, which it could bank and use to develop a nuclear warhead in the future. Any interim agreement that allows the Iranians to hang on to their nuclear stockpile is not worth having.

Mr Jim Cunningham (Coventry South) (Lab): Perhaps I am wrong, but I understood the Foreign Secretary to say in a press interview that an interim agreement was being discussed, and a long-term agreement would be considered later on. I do not understand the concern about an interim agreement. Like the hon. Gentleman, I am no expert on nuclear weapons.

Mr Hollobone: There might be a problem here with my accent and that of the hon. Gentleman. I understood the Foreign Secretary to be talking about an interim agreement prior to arriving, we hope, at a full accord. The problem with an interim, short-term agreement is that, if I am right—I hope I am not—and the Iranians want to develop a nuclear warhead, such an agreement might give the Iranians time to develop enough enriched uranium to make a nuclear warhead. An interim agreement might, effectively, give the regime diplomatic cover to complete its nuclear weapons programme without the international community’s agreement.

Mr Cunningham: It is not for me to defend the Foreign Secretary, but as I understand it, he was talking about weeks rather than a long-term process that might allow Iran to develop along the lines the hon. Gentleman suggests. I am not sure that the hon. Gentleman’s fears would be realised within the short period of time the Foreign Secretary was talking about.

Mr Hollobone: There we disagree, because my understanding is that it is not a matter of weeks. I am sure that the Minister will enlighten both of us in his response, but my understanding is that it would take months or even years to reach an interim agreement.

Mike Freer (Finchley and Golders Green) (Con): I congratulate my hon. Friend on securing this debate. The prospect of the debate clearly brought Iran to the negotiating table last weekend, so I congratulate him on his international reach. Does he share my biggest concern that all the dancing around the diplomatic handbags—talks about talks, talks about resuming talks, talks about inspectors going back in and talks about what they can inspect and when they can inspect it—is a typical conjuring trick by Iran to distract the international community

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while it gets across the line and builds a bomb? Should not the Foreign Office be extremely cautious about any gift horses from Iran?

Mr Hollobone: My hon. Friend speaks wise words, and I am not surprised because he is always on top of such important issues.

That leads me on to a point I was going to make about the new President of Iran, Hassan Rouhani, who was elected in June 2013. President Rouhani is meant to be the bee’s knees. The former Foreign Secretary, the right hon. Member for Blackburn (Mr Straw), has said how much he admires him. Hassan Rouhani spent some time at Glasgow Caledonian university and knows this country well, but he is not a pleasant individual at all. It is not as though he has recently emerged with an unblemished record; he has been deeply involved in the unpleasant Iranian regime for quite some time. He was involved in the Islamic revolution when it started in 1978, and he helped Ayatollah Khomeini found the regime. Between August 2003 and October 2005, the now President Rouhani was Iran’s chief negotiator in nuclear weapons talks. In 2004, he gave a speech to the Supreme Cultural Revolution Council, in which he said:

“While we were talking with the Europeans in Tehran, we were installing equipment in parts of the [nuclear conversion] facility in Isfahan. By creating a calm environment, we were able to complete the work there”.

Those words reinforce the point made by my hon. Friend the Member for Finchley and Golders Green (Mike Freer) that Iran may well be using the talks and the supposed rapprochement as a ruse to cover up the fact that it is quite close to developing a nuclear warhead but, critically, needs six to 12 months to finish its programme. What better way to ensure that it has the time and space to complete the manufacture of a nuclear warhead than to engage the international community in talks?

Glyn Davies (Montgomeryshire) (Con): I thank my hon. Friend for bringing forward a debate of such great concern to us all. Does he see any grounds for optimism—or only danger—in an Iranian leader who is so much more able to enter into discussions than his predecessor, Ahmadinejad, who was clearly a danger to everybody; or is he just packaging and is there nothing at all in his greater willingness to talk with other leaders?

Mr Hollobone: It is difficult enough to be minor politicians in this country, as we are, having to deal with different issues and factions; it must be a nightmare being a politician in an unstable and unpleasant place such as Iran. I am sure that President Rouhani has to balance all sorts of different issues and say things he does not believe to appease one faction in relation to another.

I hope I am wrong, but I suspect that Iran is attempting to buy space to cross the nuclear finish line, so that it can have a nuclear weapon. The prestige of President Rouhani and others in the Iranian regime would then be at its peak, because Iran would be a nuclear power, able to throw its weight around in the middle east and the world as never before. If I am wrong, that is great, but if I am right, we face the prospect of Iran being a nuclear power. Once it is such a power, it will be too late for the world to do anything about it.

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Graham Stringer (Blackley and Broughton) (Lab): Does the hon. Gentleman agree that it is unlikely that Rouhani has any serious differences with the Ahmadinejad regime? The fact that he was one of six chosen from 3,000 potential candidates by Ayatollah Ali Khamenei indicates that he is probably completely at one with them. Is it likely that somebody who wanted to execute demonstrators campaigning for freedom shares any of the values of democracy or of the west?

Mr Hollobone: The hon. Gentleman speaks a great deal of sense and makes some extremely pertinent points. I hope the Foreign Office has taken note of his intervention. I suspect that, going back to the 1930s, the default position of the Foreign Office and the Ministry of Defence is to try to arrive at an agreement to solve our problems through international accord. Of course, all of us see a lot of sense in that, but it must be stated in this case that no deal is probably far better than a bad deal. A bad deal will not solve anything. In fact, a bad deal will allow the Iranians under their present leadership, with all the other people behind the scenes, to cross that nuclear finish line. Once Iran has a nuclear weapon, the negotiating stance of the Foreign Office and the international community will be blown out of the water. This is our best chance to stop nuclear proliferation in the middle east.

Mr Dodds: Does the hon. Gentleman agree that whatever the merits of the argument about an interim deal giving Iran the time to develop nuclear weapons, the issue is about Iran being allowed to retain the capacity to do so? That is crucial, as is the easing of sanctions. Surely one of the greatest issues for the Iranian regime is the crippling effect of sanctions, and one of its main desires is to ease that situation. It is estimated—I would be grateful if he gave us more information about this—that the easing of sanctions might be worth up to $20 billion to the Iranian regime, which is a major motivating factor and a good one. Iran’s retention of the capacity to develop nuclear weapons, rather than its willingness to do so or its actually doing so, is the key issue.

Mr Hollobone: The right hon. Gentleman’s powerful intervention is absolutely right. I hope the Foreign Office is better informed than I am and can give us the statistics. I am not sure, however, whether sanctions have brought the Iranians to the table; I do not know. It might well be that that is nothing to do with sanctions, but is all a ruse for Iran to buy diplomatic cover. What do I mean by that? If Iran can be seen to engage with the P5+1, it makes it much more difficult for the Israelis to take out Iran’s nuclear programme with military strikes. That is the point of the rapprochement.

The right hon. Gentleman is absolutely right that any agreement, interim or full, that allows the Iranians to retain their capability to make a weapon—perhaps not now, but in the future—would be a bad deal that was not worth having. From the perspective of Israel and Saudi Arabia, and I hope ours, any capability left in Iran that enables the regime or a future one to develop nuclear warheads should be completely unacceptable.

Iran currently has all sorts of capability. The centrifuge capability has recently been beefed up, with IR-2 centrifuges that can enrich uranium five times faster than the old ones. There is the heavy water production plant at

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Arak, which nuclear inspectors have never been allowed inside. There is a facility at Fordow that is underground for one reason—so that nobody can get to it. There is also the centrifuge capability at Natanz.

Mr Clappison: My hon. Friend is making a powerful case about the multiple avenues Iran has to achieving to a nuclear capability, which are in addition to the Iranian regime’s history of stalling, lies and concealment. Would he welcome a statement from the Minister that the Government and the international community will be rigorous and exacting in their approach to the regime and will leave it nowhere near the threshold of obtaining a nuclear capability?

Mr Hollobone: I would welcome such a reassurance, but I am also looking forward to hearing my hon. Friend’s speech. I will soon sit down, because I have already spoken for far too long. Almost every Member present is more qualified to speak on these issues than me, and I am interested to hear what they say.

It seems to me that we face in Iran a country that wants to develop a nuclear warhead and that is mad and bad enough, either now or at some point, to have a high likelihood of deploying such a weapon. I do not believe that that is fanciful talk; I think it is a definite prospect, about which we should be very worried. In the next six months or so, we have a chance to negotiate a proper deal that will put Iran’s chances of making a nuclear weapon out of reach and give Israel, Saudi Arabia and every other country in the region the security they need, as we look forward to what I hope will prove to be a much more peaceful century around the world than the last one.

Several hon. Members rose

Jim Sheridan (in the Chair): Order. I ask colleagues to keep in mind during their speeches that I intend to call the Front Benchers at about 3.40 pm.

2.58 pm

Jeremy Corbyn (Islington North) (Lab): I congratulate the hon. Member for Kettering (Mr Hollobone) on securing the debate and on kindly taking so many interventions, which was very welcome.

I say at the outset that I do not want the continuation of any wars in the region of Iran. I want a process that will bring about disarmament, so I approach the debate from that standpoint. I also approach it from the standpoint of a representative of an inner-London constituency, in which many Iranian refugees live. They form almost a timeline of the political changes in Iran: there are refugees from the Shah’s period, the Islamic revolution period and all the later regimes. The human rights abuses of Persian Iranians as well as of Kurdish people and others are very real to me and to the people in my constituency. I am not unaware of Iran’s appalling human rights record and the continuing executions that go on. Any pressure brought to bear on Iran must be as much about a dialogue about human rights as anything else.

I am acutely aware of the history and deep ignorance of Iran in the rest of the world. Many think that Iran is part of the Arab world, which it clearly is not, and

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many are simply unaware of the sense of anger there is at how Iran has been treated by the west ever since the end of the first world war.

There has been the exploitation of Iranian oil by the Anglo-Iranian Oil Corporation, which later became British Petroleum. Britain has made a huge amount of money out of Iran over the decades. Likewise, the coup—a UK and CIA operation—organised against the Mossadegh Government in 1952 is remembered, and people are angry about it. The support that we gave to the Shah, and that the Shah gave to BP, resulted in a loss of national well-being.

There is a history of which we should not be unaware, and we must think about those things. The Islamic revolution of 1979 was a product of an awful lot of those issues and that pressure, including the appalling behaviour of the SAVAK secret police under the Shah, which paralleled the behaviour of the secret police under the Ayatollah after the revolution. At the time, though, they were seen to be a step forward.

Then there was the Iran-Iraq war after the break with the USA, in which the west supported Iraq against Iran. That terrible conflict cost the lives of hundreds of thousands of people—possibly 500,000 people. It was an utterly useless and ghastly war. I recall visiting the border area between Iran and Iraq some years later and was taken to a glorified scrap metal yard, which was in fact heaps of old planes, tanks and armoured personnel carriers that bore the markings of every arms manufacturer in the world bar none. The people of Iran and Iraq have suffered a great deal.

We come now to the wish of Iran to develop its own nuclear power facilities. I do not think that Iran or any other country should develop nuclear power because it is an intrinsically dangerous form of power generation. I am probably in a minority in the Chamber in having that position, but that is my view. However, in law, Iran is certainly entitled to develop nuclear power for peaceful use, although it is certainly not entitled to develop nuclear weapons.

We then move on to the issue of whether Iran has nuclear weapons or the capability or intention of having them. Along with the hon. Member for Wyre and Preston North (Mr Wallace) and two others, I had an interesting discussion with the inspectors from the International Atomic Energy Authority in Vienna on behalf of the Iran group. It was a fascinating experience. The inspectors confirmed that as of that time, Iran did not possess nuclear weapons and was not in a position to make nuclear weapons. It is important to make that clear.

Iran has a fatwa against nuclear weapons, imposed by the Grand Ayatollah, who said that it would be un-Islamic to develop nuclear weapons or weapons of mass destruction. Clearly then, there are many people in Iran who are strongly opposed to the country having nuclear weapons. That is not to say that there are not people there who support them; I am sure that there are.

Iran is, and has been for a very long time, a signatory to the nuclear non-proliferation treaty. It is therefore open to inspection—not necessarily under the voluntary or supplementary protocols, but certainly within the terms of the mandatory part of the NPT. Every other country in the region is a signatory to it except Israel, which is the only one that possesses nuclear weapons;

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apparently, despite the Foreign Secretary’s unwillingness to answer this question yesterday, it has 200 nuclear warheads, which is rather more than Britain and France.

The nuclear non-proliferation treaty review conference envisaged a nuclear weapons-free middle east and tasked Finland with setting up a conference to bring that about. That conference did not take place, and, at last year’s preparatory conference for NPT review in Geneva, which I attended, we heard speeches from all the countries of the region. There was universal anger that this nuclear weapons-free middle east proposal had not been taken further forward.

The Egyptian delegation—this was before the coup in Egypt—made it clear that Egypt was extremely angry about that, and peremptorily withdrew from the conference. As yet it has not completely withdrawn from the non-proliferation treaty system. Other countries made it clear that they were also extremely angry. It is quite obvious that unless progress is made on a nuclear weapons-free middle east, which obviously must include Iran and Israel, then clearly Saudi Arabia, Egypt and others could start to develop nuclear weapons. If anyone has nuclear power, it is not impossible for them to extend that into getting nuclear weapons. We must be well aware of that.

Since the election of President Rouhani, there has been a narrative that he is a huge reformer and a liberal compared with everything that has gone before. He is certainly different from previous Presidents; he has a wish for a relationship and an understanding with the west, and I suspect that he is feeding into the wishes of an awful lot of ordinary Iranian people who also want to have a better relationship with the rest of the world. I am no less aware than anyone else here of the human rights abuses that have happened and continue to happen in Iran. However, such considerations do not restrict British negotiations or friendly relations with Bahrain, Saudi Arabia or many other places that have totally appalling human rights records. We should be condemnatory of human rights abuses wherever they occur across the whole region.

The non-intervention in Syria by Britain and the United States has had some interesting effects. One is that within a few days of the decision there were conferences with Lavrov and John Kerry. There was a serious discussion about removing chemical weapons from Syria—and that is now happening, which is good. There have been much more serious discussions about getting a Geneva II process under way, which clearly must involve Iran if it is to mean anything.