The next time I see our mutual friend Keith Williams I shall tell him that the noble Lord, Lord Moylan, said he was ghostly.
I thank noble Lords for explaining their amendments in this group, which consider, as we have heard, various alternatives to public ownership. Amendments 3 and 5,
tabled by the noble Lord, Lord Lansley, would allow contracts to be awarded to private operators following a competitive process. Amendments 28 and 29, from the noble Lords, Lord Young of Cookham and Lord Moylan, would allow franchises to be continued where the current operator is providing a satisfactory service. I do not support these amendments.
The Government were elected on a manifesto commitment to return passenger services into public ownership—having published, for the avoidance of doubt, the detailed plan entitled Getting Britain Moving—and we have a clear democratic mandate to do so. Despite what has been heard this afternoon, public ownership is a change with clear public support. Last month, YouGov published a survey showing that 66% of people nationally agree that railway companies should be run in the public sector; only 12% favoured private operation.
We are determined to return to a passenger railway which is run for the public, by the public, with passengers, not private shareholders, at the heart of the system. We will not leave the back door open to franchising, a model which has failed passengers and taxpayers. We are committed to public ownership because continuing with franchising would mean continuing to pay fees to private operators, ultimately for the benefit of their shareholders, when that money could be retained for the public good. Franchising would not allow us to integrate track and train in the way we propose to do under Great British Railways, which is the only way to put a stop to the fragmentation and waste of the franchising system, otherwise we will not be able to sweep away the outdated, complex and costly mechanisms that make the fares system impossible to understand for passengers, and even now prevent rational change because of “commercial confidentiality”, even though all the revenue risk is now taken by government. There is no benefit to continuing franchised operations on our railways.
Contrary to views expressed by noble Lords previously, there is no meaningful private sector investment being funded by franchised operators at present, so we are losing nothing by moving to a public ownership model. The Government are already reimbursing the legitimate operating costs of private sector operators and receiving all their revenue. Even before Covid, the main private investment in our railways was in rolling stock, which was generally funded by the rolling stock market and not by train operators or their owning groups.
I turn to Amendments 4, 14 and 15, tabled by the noble Lord, Lord Moylan. These amendments require competitive awards to be made to private sector companies on the basis of a concession model, along the lines of Transport for London’s approach, rather than bringing them into public ownership. These amendments would remove the opportunity to deliver the benefits of public ownership, which, as I have said, a clear majority of the public support and which was a specific commitment in the manifesto on which this Government were elected.
The Government’s first objection is that a concession model would mean the private sector continuing to earn substantial profits. Public ownership will put a stop to the flow of money that already sees in excess of
£100 million paid out in fees to the private sector each year, even when operators are bearing no significant financial risk.
A TfL-style concession model would expose operators to more financial risk than the current national rail contracts, which means that operators would want to earn significantly more in profits at the taxpayers’ expense and would price their bids accordingly. Not only would concessions be more expensive than this Government’s plans for public ownership but they would be even more costly to taxpayers than the current contracts.
In addition, the TfL concession model involves a very closely defined and largely unchangeable service specification developed in detail by the public authority, with therefore little room for the operator to negotiate changes post tender award in circumstances where they would always have the upper hand on pricing. Our national railway system is much larger, flows alter over time, and one of the great benefits of GBR is that it will be able far more easily to adapt to changing and growing markets and to save costs without endless contract renegotiation with contractors which, except at the point of contract award, always have the upper hand.
The noble Lord, Lord Moylan, referred to the TfL experience of contracting the London bus market. In two previous jobs I was responsible for that market for virtually 15 years. It is a different market because there are a large number of small contracts changing hands, so if a contractor is sufficiently unwise to suggest expensive changes when contracts need to be altered then there is the opportunity to at least counter that by the next award of contracts for other bus routes. That has not been the case in the railway market. It is never likely to be the case. It is a different circumstance.
As a practical point, this amendment would abolish the option for the Secretary of State to appoint a public sector company to run services once a franchise agreement comes to an end. What does the noble Lord envisage would happen under this amendment if an operator went bust at short notice, or lost its licence to operate or its safety certificate? What if a competition failed to deliver a satisfactory outcome? Passengers could not wait a couple of years while the Government run a competition for a new concession. I would also ask whether it is the noble Lord’s intention to tie the hands of the Scottish and Welsh Governments, as this amendment would do, and whether they support these amendments. I think he knows that they certainly would not.
Amendment 10, as the noble Lord, Lord Moylan, said, was to facilitate Amendments 4, 14 and 15, so I will pass over it.
Amendment 35, tabled by my noble friend Lord Liddle, would allow the Secretary of State, and Scottish and Welsh Ministers to award contracts to either a public/private partnership or a co-operative venture involving staff and passengers. The Government’s approach to this is driven by pragmatism, not ideology, and we are certainly not seeking to close the door on private investment, as I will explain later in Committee when we come to discuss rolling stock.
However, I point out that examples of private investment in our railway infrastructure have been fairly thin on the ground in the privatisation era. Nearly all the enhancements to the network have been publicly funded. The noble Lord, Lord Young, referred to electrification, but, as far as I can tell, there has been no electrification ever funded by any party except the Government.
The Government are certainly open to hearing proposals for how private investment might be brought to bear to improve the railway in the future. If noble Lords and others have good ideas, I encourage them to bring them forward as we develop and engage on our plans and consult in due course for Great British Railways and the wider railway reforms.
However, I do not think that involving private finance means that our plans for public ownership of train operations should change. It is fundamental to the Government’s plans for the railway that services should be run by the public, for the public. There are other ways of engaging private capital, short of ownership, and for the most part, even 100% private sector ownership of train operating companies under franchising has not resulted in large investments being funded by those companies.
As for co-operative ventures, I am all in favour of giving passengers and communities a stronger say in the decisions that affect them, but the likelihood of any co-operative venture raising any significant amount of capital—let alone the current circumstances of the owning groups of the present train operators—is, frankly, very small. Our plans are designed to give passengers and communities a stronger say in the decisions that affect them, not least by establishing a new passenger standards authority and by providing a new statutory role for devolved and mayoral combined authorities. We will get to the question of devolution in due course. The Government have shown, through our approach to resolving long-running disputes left to us to resolve by the previous Government, that we are committed to working with the workforce to address the challenges facing our railways.
The noble Lord, Lord Lansley, raised a question about future flexibility. The last legislation for the railways has lasted 31 years, and I note that it had a specific prohibition of public operation of the railways system. That might have been reasonable then but it is certainly reasonable now in the present circumstances, given our policies and manifesto commitment, to replicate our belief that public ownership is the right way of going forward with passenger railway operation.
In conclusion, the Government’s plans for the railways are founded on consolidating responsibility for track and train operations within a single entity, Great British Railways, particularly at a route and operating company level. Already, in my short period in this post, as I have said previously, we have had performance meetings with an operator and a Network Rail route. In one meeting, I enjoyed considerably one manager telling me how great collaboration was between the two parties, which were not owned by the same organisation, while the other simultaneously sat there
shaking her head vigorously, demonstrating an absence of the very co-operation that I was being told would happen.
My whole professional history tells me that the railway will run better with somebody in charge of both track and train together at a route and operating company level. That is the way that we will deliver better revenue, decreased costs and, particularly, better reliability. This is not consistent with seeking to preserve private sector operation, whether through franchises or concessions, or with awarding contracts to public/private partnerships or arm’s-length co-operative ventures. I am amused to see that Rail Partners has reversed its previous opposition to the concession model post the election, having spent several years previously explaining why it would not work on the national railway network. I rather agree with its previous analysis. I therefore urge noble Lords to withdraw and not press their amendments.