Labour

Ministers must not sign the West Coast franchise contract before it is considered by parliament - Maria Eagle

Maria Eagle MP, Shadow Secretary of State for Transport, has written to the Transport Secretary to call for the West Coast franchise contract not to be signed before parliament has returned and had an opportunity to scrutinise the decision:
 
"I am writing to request that you make a statement to parliament on the award of the West Coast Main Line franchise at the earliest opportunity once the House returns on Monday 3rd September. Your decision to approve the announcement of this decision during August meant that Members of Parliament, many of whom with constituencies served directly or indirectly by this important strategic route, have had no opportunity to raise concerns and ask questions about the potential impact of this decision and the process followed in reaching it. It is particularly worrying that there are reports that you intend to sign the contract with the successful bidder, First Group, as early as next week – again, before MPs have had the opportunity to raise the concerns that exist directly with you on the floor of the House. The concerns relating to this decision broadly fall into three categories.

First, the decision appears almost exclusively a ‘bottom line’ one, driven by a particularly high pledge of payments to government. First Group’s successful bid of £5.5bn was significantly higher than any other bid including the £4.8bn offered by the incumbent. You will know of the history of franchise contracts being brought to an early end, at least in part because of over-ambitious payment promises that proved impossible to realise. There are fears that lessons have not been learnt. There is a particular concern that, not least on a line with an impending capacity crunch, the very high premium payments promised will be difficult to meet through growth alone, leading to pressure to raise fares or reduce services. There have been reports of pressure on you and your Department from the Treasury to make a decision focussed only on the headline figure offered. More generally, there are a number of concerns about the way the risk and evaluation process was carried out within your Department. From the limited information in the public domain, it is specifically difficult to follow the method of scoring or wider assessment that led to the conclusion reached in a number of areas.

Second, there are concerns about the impact of this decision on fares and levels and quality of services. It is the stated policy of the Government to be less prescriptive in these franchises than was the case in the past. The Invitation to Tender, in line with your policy on fares, included a promise that the successful bidder could increase fares by RPI+3%+5% in 2013 and 2014 and then by RPI+1%+5% in each of the remaining years of the franchise. Consequently, it is possible that some routes could see ticket prices increase by up to 11 per cent for each of the next two years and then up to 8 per cent each year until 2026. In addition, the tender documents provide new flexibilities to reduce services, close ticket offices, cut passenger-facing staff and even axe CCTV from trains. The successful bidder has sought to allay some of these fears, yet passengers would welcome clarity from government on the extent to which these new ‘freedoms’ can be used – not least if the very ambitious predicted revenue does not materialise and puts pressure on the company to raise fares or reduce services and standards.

Finally, there is a specific concern that the successful bidder has only recently exercised their contractual right not to continue delivering a service on the Great Western Main Line until the end of the full franchise period. This has reportedly enabled the company to avoid payments to the government of more than £800million. As you will know, the profile of payments to government in the new West Coast Main Line franchise similarly rise throughout the length of the contract, from just £26m in 2014 rising to £739m by 2026. This incentivises an early exit from the franchise as premium payments rise and the recent history of the company heightens concerns that this is a very real possibility, not least when the penalty for terminating the franchise is a fraction of these amounts.

Due to the wide-ranging nature of these concerns, I would therefore urge you to delay any signing of this contract until after you have made the statement to parliament – a statement I’m sure you will agree is appropriate for such an important and contentious decision. You will also of course be aware that the Transport Select Committee has also rightly requested a delay to the signing of the contract to allow the Committee to scrutinise this decision.

Coming before the House would also provide an opportunity to respond to the considerable concern that exists amongst MPs of all parties at the scale of rail fare increases due to be implemented in January. You will be aware that the higher than expected inflation rate, combined with the Government’s decision to switch to an RPI+3% fare rise formula (up from the RPI+1% rate you inherited after the election) and the decision to give back to train companies the right to add up to another 5 per cent to some fares means that passengers face increases of up to 11.3% in the New Year. I am sure that, in addition to the concerns over the award of the West Coast Main Line franchise, MPs will welcome the opportunity to express the concerns of their constituents. You may also appreciate the opportunity to update the House on any progress you have made with your stated aim of persuading the Chancellor of the Exchequer to enable you to cap January’s fare rises as the Opposition has proposed.

I look forward to hearing from you and, more importantly, to debating these issues in Parliament when the House returns on September 3rd."