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East Midlands Rail Franchise

Volume 658: debated on Thursday 11 April 2019

(Urgent Question): To ask the Parliamentary Under-Secretary of State for Transport if he will make a statement on why Stagecoach has been disqualified from bidding for the east midlands rail franchise.

On Wednesday 10 April, it was announced that Abellio is the successful bidder to operate the east midlands rail franchise and will be responsible for delivering new trains, smart ticketing and more frequent services for passengers. Passengers in the east midlands are to get new trains, more peak-time services, reduced journey times and over £17 million of station improvements as Abellio takes over the franchise from August 2019.

Abellio will invest £600 million in trains and stations between August 2019 and 2027, while the Government continue with their £1.5 billion upgrade to the midland main line—the biggest upgrade to the line since it was completed in 1870. This is part of the Government’s £48 billion investment to modernise our railways over the next five years.

As we informed the House in yesterday’s written statement, Abellio was awarded the contract “following rigorous competition.” It was a fair, open competition and Abellio provided the best bid, in which it demonstrated that it will not only meet but exceed the Department’s specifications.

Stagecoach chose to put in a non-compliant bid, which resulted in its disqualification, in line with the terms of the published invitation to tender. That said, Stagecoach has played an important role in our railways, and we hope it will continue to do so after the conclusion of the rail review. However, it is entirely for Stagecoach and its bidding partners to explain why it decided to ignore established rules by rejecting the commercial terms on offer.

Thank you, Mr Speaker, for allowing this urgent question.

The Minister did not really answer the question. Abellio has been awarded the contract as the best bidder, but the bid of the existing franchisee was not even allowed. Generally, Stagecoach has performed reasonably well on the contract, so will he explain when the requirement was first introduced that a bidder has to cover pension costs? Is this the first franchise for which the requirement has been introduced? Why was it applied?

How much, in total, are the Government trying to cover in costs through the franchising process? When were the bidders notified of the requirement—was it at the beginning of the process?—and why was no one else told about it? Are any other companies refusing to cover such costs? Are any other franchises affected? If they are, what will be the effect on competition within the franchising system? What would happen to future competitions and to the costs that the Government seek to cover if all companies refused to cover those costs?

Finally, on the bid that has been accepted, do these hybrid trains actually exist now? When will they be introduced? What will the Government do if existing rolling stock is not disability-compliant in 2020? The Government have promised improvements to the timetable, but can we be assured that, at the beginning of the new franchise, journey times will be at least as good, and at least as short, as they were before the botched timetable changes of last year?

There are a lot of questions there. First, Stagecoach has acknowledged to the Department that it had bid non-compliantly. We have received offers from other bidders in all competitions that are fully compliant in providing the required pension arrangements for railway workers so, to answer the hon. Gentleman’s question on whether this means the bid process is failing and others are refusing, clearly they are not because we have a compliant bid that won in good form.

Stagecoach is an experienced bidder and fully aware of the franchise competition rules, so it is regrettable that it submitted a non-compliant bid that breached the established rules. In doing so, Stagecoach is responsible for its own disqualification. Bidders were invited to bid on the basis of a pension deficit recovery mechanism. They knew that at the very start of the process[Official Report, 25 April 2019, Vol. 658, c. 8MC.]. Stagecoach did not accept it and made some amendments as it submitted the bid. On what would happen if all companies refuse, clearly, by definition, they are not all refusing, so the question does not apply.

We will see an entirely new fleet of trains—a full replacement fleet—come into service. Inter-city services will receive new bi-mode trains, and regional services will receive new diesel trains. The express fleet, which is the Corby-Bedford-London service, will receive new electric trains that offer significantly enhanced environmental improvements.

What is interesting in this franchise is that we will see the first trial of a hydrogen-powered train. [Hon. Members: “When?”] In terms of timing, we will see the new trains coming into service in a phased way. We hope to see the first trains coming in next year, and so on over the next three years.

The bidding process was conducted in a fair and consistent way, applying the rules of engagement equally to all bidders. We have provided feedback to those who have not been successful. The reasons are always commercially confidential. Losing bidders may publicise them if they wish, but we will not do that because they are commercially confidential. The key thing that we are seeing here is a franchise awarded in the typical way that franchises are awarded in our rail industry, delivering passenger benefits.

I am rather surprised at the late withdrawal, or barring, of Stagecoach from this franchise. It seems to have come right at the end, so it is odd that my hon. Friend is saying that somehow Stagecoach knew it was non-compliant, because if the Department knew so early that it was non-compliant, one would have thought it would have been told quite some time ago. These franchise bids are not cheap to make and they are very expensive for the company.

Will my hon. Friend be more specific, as usually is the case, about where the new trains are coming from? If they are to be in operation from next year, presumably an order is about to be made very soon. Where will that order come from? I congratulate the Government on widening state ownership of the railways, albeit that of other states.

There were a number of points in my right hon. Friend’s question. As soon as the decision was taken on this franchise, all the bidders were notified. That is entirely standard. He has a great track record of delivering improvements across our rail network. Bidders were notified, of course, across all competitions, so that they did not incur extra costs. These things are expensive to operate, so this was awarded in a fair and consistent way.

Obviously, the contract to deliver the rolling stock will be between the successful bidder and its rolling stock provider, but we expect to see significant improvement in the rolling stock, and the feedback I have had from passengers along the line and from colleagues who serve along the line is that they are looking forward to seeing the benefits that those will bring.

Clearly, the franchise system is in complete disarray. It seems that Stagecoach boss Martin Griffiths and Richard Branson have been taken completely by surprise by the announcement of the decision to disqualify Stagecoach from the discredited franchise process, seemingly for failing to provide sufficient commitments in terms of the pension scheme, bidders having been asked to bear full long-term funding risks on relevant sections of the railways pension scheme. Can the Minister inform the House about the pension commitments made by Abellio that warranted the award of the east midlands franchise and the extent to which any such commitments were distinct and more acceptable to the Department for Transport?

Is not this really payback for the east coast collapse, two years ago? The question on the airwaves today was whether this decision would propel Richard Branson back into his favourite hobby of suing Her Majesty’s Government over the awarding of contracts, which has served him so profitably over the years. What preparations has the Minister’s Department made in readiness for potential costly litigation flowing from this decision?

Why did the Department change the pension rules in the middle of the bids? On south eastern, that was only made clear after two rebids. Is not that moving the goalposts?

The real issue is that this Government, by sleight of hand, are trying to reduce their support for the railways pension scheme. They are trying to pass these costs on to the private sector. That is why both Stagecoach and Arriva defaulted on their bids for the east midlands franchise. The rail industry has a plan to reduce the deficits in its pension schemes, yet the Government have ignored that and are attempting to bulldoze through changes without consultation. That is reckless. It will concern rail workers and worsen the rail service for passengers. What discussions were there with the trade unions? Moreover, given that Keith Williams has been instructed to conduct a root-and-branch review of the operation of our railway, why has such a lengthy franchise been awarded before the Williams review reports later this year?

The announcement is accompanied by the decision to extend the franchise award on south eastern to Govia. How can it be right for that company to be given the nod to continue when it has delivered such a miserable service and completely failed its passengers? Is that not further reward for failure? Surely even this beleaguered Government can see what is staring them in the face: the franchise system is in total collapse. They need to respond to long-suffering passengers and do what the next Labour Government will do: bring track and train back together in state ownership—this state.

The hon. Gentleman asked a number of questions. Is the franchising system in disarray? Of course it is not. If we look at what has happened to our railways over the past 25 years, we see unprecedented passenger growth. We now have more people travelling on our railways and more services run on our railways, and at a greater level of safety than ever before. The franchising system has been a key ingredient in that delivery. Do I think the franchising system is over? Absolutely not. I think we need to look at how it will evolve in future, and that is what the Williams review is doing. Franchising has helped get the system from A to B, reversing years of decline. We now need to see what system we will have as we take it through to the next stage.

Stagecoach knew that its bid was non-compliant—it acknowledged that to the Department. The hon. Gentleman asked about litigation. The Government are completely confident that the bid was evaluated and decided fairly. It is business as usual in the awarding of a franchise on our rail network. He asked whether the decision on the east coast main line was payback. That question is absolute nonsense. This is an entirely separate matter. The bid was won on merit by the strongest bidder. It offered the best bid, with new trains and more services, including more Sunday services and more early and late services. It was won on merit. If a company chooses to bid non-compliantly, that is its fault.

With regard to passing the costs on to the private sector, that is also nonsense, because these are private sector pension schemes. The rail operating companies have a section of the rail pension scheme. Their trustees will meet the Pensions Regulator to discuss that. Is this a question of the Government seeking to remove responsibility? No, this is a private matter and the trustees will be dealing with that in their own way.

The hon. Gentleman asked whether I have met the trade unions. I have met the National Union of Rail, Maritime and Transport Workers and ASLEF, and on this occasion I have written to them to highlight the award today.

Williams said in his recent speech that the franchise system in effect is already broken, and today’s announcement proves it. Abellio is hopeless. The Minister will recall an Adjournment debate he had with a number of MPs a couple of months ago—the business of the House had collapsed early so lots of us piled in. I think six or seven Members from Essex, whose constituents suffer that company every day, got up and told him, one after the other, how utterly useless that company is. We have been waiting for years for new trains from Abellio, yet still they do not turn up. It is Dutch-Japanese owned and it does not give a monkey’s about the passengers. I am sorry, but this is a massive mistake and yet another Grayling cock-up.

I do not agree with anything my right hon. Friend has just said. That Adjournment debate was very enjoyable; we had many discussions because there were so many interventions. The core of the debate, which was secured by my hon. Friend the Member for Colchester (Will Quince), was about the introduction of the Delay Repay 15 offer for customers, which went live on 1 April and has been widely welcomed by passengers on the line. Indeed, on 1 April, I went to stations in Norfolk, Suffolk and Essex, and I met passengers, the Transport Salaried Staffs Association and the rail operating company, and the arrival of DR15 was widely welcomed. The key thing that people were looking for was the consistent delivery of a timetable, so the requirement to pay any form of compensation would not be necessary. That is, of course, at the heart of the Government’s CP6—control period 6—investment. We are investing £48 billion over the next five years to modernise and upgrade our railway to make sure that we can deliver the network and services that passengers rightly expect. Is Abellio a failing provider? No.

I have looked at the measures in terms of performance data and customer satisfaction. I recognise that we have had frustrations across our rail network over a number of years and that we had very poor performance last May, but I do not accept that Abellio is a failing performer. It operates 6,000 trains in the UK each day. The service is improving in all areas—[Interruption.] My right hon. Friend the Member for Rayleigh and Wickford (Mr Francois) is doing an awful lot of chuntering using fairly robust language, as he normally does—or as he has taken to doing recently. The point remains that we are delivering a network that is operating at the best that it has operated for a significant number of years. It has turned around decades of under-investment and underperformance. We are now seeing a network carrying more people with a higher level of safety than at any point in British history and this franchise award takes that further.

Yet again, we have not had a statement from the Department for Transport. We have to rely on media announcements and urgent questions to hold the Department to account, but when the Minister comes to the Dispatch Box, he says, “Oh, that’s a lot of questions.” That is because we are not getting information. Virgin Trains East Coast walked away from the east coast main line owing £2 billion. Many people called for Stagecoach not to be allowed to bid for other franchises, but the Department for Transport dug its heels in, saying that it could bid for franchises and then sat on the non-compliant bid for a long time. Why has the Department adopted such contradictory positions? Martin Griffiths, the Stagecoach chief executive, said:

“We are extremely concerned both at the DfT’s decision and its timing. The Department has had full knowledge of these bids for a lengthy period”.

Again, what discussions were held on pensions and how long has the Department sat on the non-compliant bid before making a decision?

What will happen with the west coast main line franchise, as we are told by the media that Virgin Trains will disappear in a year? Virgin previously won the 2012 franchise after a legal challenge, so what are the risks of further challenges from Virgin after this decision today, and will the Minister provide any legal advice that the Department has taken?

Abellio in Scotland pays the living wage. Is it part of this franchise award that all employees get the living wage? How robust are the pension protections in this Abellio franchise and how will pensions be protected in other franchises? Clearly, this is now a major issue.

Many of us have called for the Transport Secretary to resign. Now we have the irony of the Transport Secretary threatening the Prime Minister to resign over her position on Europe. Will he follow through on his threat, or will the Government take action and make the Secretary of State resign and shake up the Department?

Well, much of that was absolutely ridiculous—just complete nonsense. Let us turn back the page and remind ourselves about the idea that the Government have somehow been dragged to the Dispatch Box. I remind the hon. Gentleman that this was a contract that included a market sensitive element. There are strict procedures when a market-sensitive contract is awarded by any Government—and that includes the Scottish Government. The announcement is made first of all to the City. There was a written ministerial statement at 7 o’clock yesterday morning and by 9 o’clock there was a “Dear Colleague” letter sent out to all those Members who were affected, so what he says is simply wrong.

I have to say I cannot remember exactly the full range of questions the hon. Gentleman asked, but the key thing is that this contract has been awarded in a fair and consistent way. It is delivering significant passenger benefits, including a complete renewal of the fleet. I have already highlighted that the inter-city, regional and express services will all receive new rolling stock—new trains—and that there will be more services, more seats at peak and improved environmental performance. The benefits are clearly very significant. We should welcome them, not the opposite.

I think the hon. Gentleman got carried away with his own rhetoric when he asked whether the Secretary of State should resign. Of course not—what a load of complete nonsense. This franchise was awarded in a fair and consistent way, and it will deliver for passengers. We should celebrate that, not the opposite.

Order. I am keen to accommodate colleagues, but we have the business question to follow and thereafter another statement, and after that the Prime Minister’s statement. There is a premium upon brevity, to be exemplified by single-sentence questions, pioneered by the hon. Gentleman from Bosworth, Mr David Tredinnick—one sentence, man.

Thank you, Mr Speaker. As part of his response to the new franchisee, which will be broadly welcomed in my constituency if it really does produce new trains, better capacity and improved stations—from listening to my right hon. Friend the Member for Rayleigh and Wickford (Mr Francois), I am not so sure about that—will my hon. Friend look at connectivity between Leicester and Nuneaton via Hinckley? There are also big concerns about the west coast main line.

I will of course consider my hon. Friend’s point, but we have produced an interactive map so anybody can log on and see where the benefits will fall right across the franchise area. That map is available at and may provide the detail he seeks.

I hope the Minister recognises that, although East Midlands Trains staff are covered by TUPE thanks to our membership of the EU, this will be a really uncertain time for them—especially those who have worked for Stagecoach for the last 12 years. Will he first join me in thanking them for their hard work, which I know will continue for the rest of this franchise and into the next? Does he also recognise the wider anxiety that this decision has prompted among railway staff about the security of their pensions? At privatisation, his Department promised to provide a long-term guarantee for their pensions. What assurance can he give them today that that has not changed?

The hon. Lady is quite right. I happily join her in thanking those who have worked in this franchise and, indeed, in all the other franchises to make our railway system work day in, day out. It is a hard job they do, and we should recognise that, not criticise them for it.

I also recognise that, when anything changes like this, there will be a degree of uncertainty. A level of uncertainty can come when there are takeovers in any sector of business, but when franchises change there are TUPE protections, which are positive, and I entirely support that. Pensions are a key part of having a comprehensive offer for workers in every sector, and the Pensions Regulator is working with the trustees of the railways pension scheme to ensure that workers’ benefits are protected. We want that to happen. We want to see people in the sector retire with secure, stable, good pensions.

It is very welcome that we are going to have 80% more seats in the morning peak and new bi-mode trains that can benefit from the electrification to Market Harborough, but may I ask the Minister two things? First, when in the new franchise will those new trains arrive? Secondly, does he agree that if we are going to have new trains for the east midlands, they should be built in the east midlands?

My hon. Friend rightly never misses an opportunity to mention Market Harborough, of which he is a great champion. Obviously, the contract for the new trains will be placed by the new bidder, but I am always keen to see more manufacturing take place in this country. That is why we have been working to make the environment for manufacturing in this country so much better, which is one of the ingredients of the economic turnaround from the mess this Government inherited.

I congratulate the hon. Member for Sheffield South East (Mr Betts) on securing this very important question. A large number of people across the east midlands will share his concerns about the granting of this franchise. Stagecoach at least backed the Access for All bid for Beeston station, and it is really unfortunate that the Government have not provided the money to make sure that we have that funding.

There is real concern about rolling stock and Abellio’s ability to provide it. In short, the Minister should know that Stagecoach certainly told me that there would be no new rolling stock. As he will know, we have on this line trains that are 40 years old. There will be no new trains for at least three years. We now need to firm this up. Will he confirm that Abellio will not provide trains for at least four years, or is there any chance that it might be a shorter period?

I recognise that the east midlands franchise has been successful. However, this bid was won on merit and awarded to the strongest bidder. It was the strongest bidder irrespective of any of the compliance issues that we have been talking about today.

As regards the Access for All bid for Beeston, it was not successful in this round. I imagine that we will see further rounds of Access for All funding because it is a critical part of this. We are working to make our railway network available for as many people as possible. There is no greater champion for that than the Under-Secretary, my hon. Friend the Member for Wealden (Ms Ghani), who is sitting next to me. I therefore suggest that the right hon. Lady speaks to her to discuss potential future bids for Beeston.

I welcome any opportunity to improve the service through the east midlands and to get new trains. I echo the calls for those trains to be made in Derby if at all possible. Will the Minister confirm that the new contract includes a requirement for the new franchisee to bring forward a business case for the Robin Hood line extension through my constituency, for which we have been fighting for many years and will be a big step forward for my constituents?

I receive quite a number of lobbies on the Robin Hood line. I cannot provide the immediate reassurance that my hon. Friend is looking for, but I suggest that we could perhaps meet to discuss this further. I am aware that it will be of interest to many colleagues within the House.

The Public Accounts Committee has repeatedly highlighted the problems with the franchising system, and the fact that we were whittled down to a single bidder underlines that. I thank the Minister’s Department for sending me details of the franchise. The interesting point is the extension of the Govia contract, which will go on until November of this year, with an option to extend the agreement, the Secretary of State tells me, to April 2020. Does this mean that the outcome of the root-and-branch rail review will be so conclusive that he will have the time to run a new franchising project within six months?

Right. Well, that franchise is still under consideration and we will be announcing the results in due course. The point in the letter to the hon. Lady was that while that evaluation is taking place, there has been a short extension to the existing franchise to ensure that passenger services can continue to operate.

The main concerns of Kettering rail users are finding a seat on crowded peak time trains to and from London, the low frequency of services north on the main line to Leicester and the level of fares per mile being among the highest in the country. Does the winning bidder address any of those issues?

Yes, it does, because it puts more capacity into the franchise so that many more of the constituents my hon. Friend serves so well will be able to secure the seats they are looking for.

This is the very earliest of stages, so I am afraid I cannot provide all the details on that. However, I am extremely keen to see further environmental improvements on our rail network, and it is with great relish that I will be taking the first opportunity to bring a hydrogen-powered train on to the network.

The Minister paints a very glowing picture of this new franchise—it almost sounds too good to be true. As somebody who will be travelling on these trains every week, as he will not be, can he assure me that the quality of the brand-new trains that he has promised us, which will apparently be amazing, will be at least as good as the ones we have now and better than Abellio usually has, or will they be of inferior quality? When will they come into the franchise, and will they be stopping more frequently between London and Belper?

The quality of the rolling stock will be upgraded. The rolling stock in this area is indeed quite old. I am fully aware that I do not travel on the line as frequently as my hon. Friend, although I am quite a regular passenger. As we replace trains across our network, we are seeing a much improved service. In this instance, there will be more seats and free wi-fi across the franchise, which should benefit her and those she serves. On stopping at Belper, I will need to do some further investigation and reply separately on that point.

The franchise system is broken. It does not work for staff or in the interests of passengers. The potential for a direct line between Grimsby and London was scuppered by alleged anti-competitiveness between franchisees. Does not the process need a complete overhaul?

I have already said how I think that franchising has been a key part of the turnaround in our rail network since privatisation. On services to Grimsby, a new Nottingham to Grimsby service, with limited extension to Cleethorpes, is part of the new franchise, and the hon. Lady should welcome it.

What is the point of asking Keith Williams to conduct a root-and-branch review of the railways while at the same time awarding a very long franchise?

After a 10-year campaign for station improvement, local residents in Kidsgrove finally secured funding under Access for All for an accessible bridge and an extended car park. Problems with Network Rail have delayed the project, meaning that the car park is now delayed. The car park programme is overseen by East Midlands Trains and will go over the franchise date. Can the Minister assure me that the change in franchise will not affect my car park?

I am keen to see the Access for All benefits implemented across the network as soon as possible. The detail of that question has been heard by the Under-Secretary of State for Transport, my hon. Friend the Member for Wealden, and she will make contact with the hon. Lady to discuss that issue further.

I am really disappointed that the Secretary of State, who was in his place on the Front Bench earlier, was not able to take the urgent question, because franchising is one of the key planks of the Government’s railway policy. It seems to me that, as my hon. Friend the Member for Great Grimsby (Melanie Onn) said, it is failing passengers. Now an award to 2027 has been made, at the same time as the Williams review. How can that possibly make sense?

The diary of the Secretary of State is not relevant to this point. We have got a bid that delivers more seats, more capacity, more services, reduced journey times and a new fleet of rolling stock. This is not something that is failing: it is a positive thing and the hon. Lady should welcome it.

Yesterday the Department for Transport announced it has granted the south eastern rail franchise yet another extension. This is the fourth time that has been delayed. It is preventing investment and improvement for passengers. Does the Minister acknowledge that the delay is failing long-suffering passengers who rely on this service?

I will agree that franchising is one of the best ways to deliver passenger service improvements and new rolling stock, so we agree strongly on that. The hon. Lady might wish to speak with her Front Bench. In terms of the delay on south eastern, it is a complex matter and it is still being evaluated. We will make the decision as soon as possible.

Is it not correct that the franchise system is a fundamentally flawed business model? Over the past 10 years, we have seen £3.5 billion extracted in dividends—money creamed off our railways that could have been reinvested had we had a proper model of public ownership and democratic accountability in our railway system. Indeed, Virgin Trains alone has extracted £53 million in the last year. It is a thoroughly inefficient system that needs to be corrected, and that includes ScotRail too.

The hon. Gentleman is wrong. He talks about the dividends that are paid, but he fails to remember one important point, which is the amount of investment brought in from the private sector through the franchising process. That has totalled £10 billion. Would the Labour party take that from taxation or other spending areas? Where will that money be found if we do not bring in private sector investment? Those are great questions which the Labour party is not addressing in its ill-thought-through, uncosted attempts at nationalisation.

The east coast decision is inextricably linked to the west coast decision, which is forthcoming in June and causing great uncertainty for Virgin rail users in north Wales, the north-west of England and north to Scotland. Can the Minister give an assurance that any concerns raised about the east coast franchise will be reflected on before the west coast franchise is awarded?

The bids for the west coast franchise will be assessed and the franchise awarded in the normal way. I am slightly puzzled by the Labour party’s position on this. After the east coast main line affair last year, Labour was broadly suggesting that Stagecoach should not be allowed to bid for anything; now it is broadly suggesting that it is bad to take away any franchises from it.

Can the Minister clarify the situation with Virgin on the west coast main line? And I do not want a lecture about the Labour party’s stance; I want a straight answer.

The answer is quite straightforward. Stagecoach bid for the east midlands franchise, it was not compliant and, as part of the feedback that it received, was told that it was not compliant, which it knew, on the other bids as well.

The rail industry, through the Rail Delivery Group and with the support of the trade unions, wrote to the Government some weeks ago with alternative proposals to deal with the issues around the pension scheme. Will the Minister tell us his response to those proposals and say whether they were considered in this important decision?

I received a letter last week from the rail industry on that matter. That is still being considered and we will respond in due course, but that is not part of this award. The franchise has been awarded on merit to the strongest bidder, and we should be looking forward to the passenger benefits that will flow from that award.

The Minister will know that Abellio runs part of the London Northwestern Railway, which replaced London Midland. It is now reducing its timetable arrangements, so what comfort can my constituents in Stoke-on-Trent have that the east midlands train franchise, whose services run all the way from Nottingham to Crewe through the great towns and cities of Staffordshire, will not later be subject to the same reduction in services because Abellio was the only bidder and there is no alternative?

I will look in detail at the points that the hon. Gentleman makes, but our objective is to run more services. That is the key thing that is happening right across our network. We are running more services and carrying more passengers, and with a record level of safety, than at any point in British history, so to suggest that franchising has been a failure is a complete misunderstanding. I will of course look at his points and get back to him to discuss them further.