West Coast Main Line Franchise (Hansard, 17 October 2002)

§ Lord McIntosh of Haringey
My Lords, the agreement between the Strategic Rail Authority and Virgin Trains covers both Virgin franchises for the current year and the Cross Country franchise for next year. The value to Virgin will not exceed £106 million this year, and it will be less next year. Following a full audit, the SRA will negotiate with Virgin about the long-term future of the franchises. If no agreement can be reached, they will be terminated early and a new competition held.

Lord Berkeley
My Lords, I am grateful to my noble friend for that full Answer. If his figures differ from mine, why was that information not published at the time of the announcement? It was published by Stagecoach; nothing has yet been announced by the SRA. My question is more fundamental. Around £200 million is being awarded to Virgin for three years 954 interim. Is it normal for a government to hand out such slugs of money without any competitive tendering process?

§ Lord McIntosh of Haringey
My Lords, I do not recognise the £200 million that my noble friend referred to. I am surprised by what he said about the figures that I gave not being published before. I shall have to write to him; I understood that they were in the public zone.
We must distinguish two different stages. First, the payments for this year and next year. That was necessary, and it would have been necessary, for any franchisee. The company is losing money and greater progress on the West Coast main line modernisation had been expected. That would have brought more money in for the West Coast main line franchise. There is no advantage in having a change of franchisee now. That would be disruptive for those involved and, more importantly, disruptive for passengers. So this is the minimum necessary.
I said in my Answer that we would be renegotiating in good faith the company's long-term franchise. There is no undertaking that we will reach agreement. If we do not, there will be a competitive tender. That is the right time for a competitive tender.

§ Lord Bradshaw
My Lords, does the Minister agree that the real scandal is the fact that railway infrastructure costs have increased by between three and five times since the railways were privatised? Will he please give the House an assurance that the Government will use their best efforts with the Strategic Rail Authority, Network Rail and the rail regulator in order quickly to end this scandalous waste of public money, not on railway infrastructure, but on paying all the people who are hanging on to the coat-tails of the people who do the work?

§ Lord McIntosh of Haringey
My Lords, I am tempted to agree with the general condemnation made by the noble Lord, Lord Bradshaw. The Question is about the West Coast main line, and it is true that the cost has escalated from a little over £2 billion to £10 billion. That shows incredible lack of control and forethought by Railtrack. We must get a grip of it, and we are getting a grip of it. However, we were able to get a grip of it only after it went into administration and we were able to take the company back again.

§ Lord Roberts of Conwy
My Lords, is the Minister aware that one must have sympathy with Virgin Trains? The fact is that it has purchased the new Pendolino fast train but cannot use it for a number of years because no suitable track is available.

§ Lord McIntosh of Haringey
My Lords, that is one of the reasons why we have had to make a stabilising grant over the next couple of years. Yes, it was expecting to benefit from the renewal and upgrade of the West Coast main line and that has not yet happened. Clearly, as a result, it is losing money and, clearly, to that extent it is not its fault.

§ Lord Marsh
My Lords, did I understand the Minister to say that in any event in the first stage there will be a negotiation with Virgin Trains and that if it were not satisfactory to the Government, they would be prepared to call in the franchise and reoffer it? Why not do that at this stage when it is clear that things are not going anywhere near how they were expected to go?

§ Lord McIntosh of Haringey
My Lords, the noble Lord, Lord Marsh, rightly recalls what I said. Yes, we would seek to negotiate first before terminating the franchise early, which is the position in which we would find ourselves. As has been pointed out, Virgin Trains has purchased the tilting Pendolino train, so surely it is best to try to reach an agreement first with those who have made an investment. If that does not work to the satisfaction of the Government, the taxpayers and the passengers, we have the power to terminate the agreement. I believe that that is the right way round.

§ Lord Faulkner of Worcester
My Lords, I want to pick up the point made by the noble Lord, Lord Roberts of Conwy. Will my noble friend confirm that Virgin Trains has fulfilled its franchise in terms of refurbishing its rolling stock and ordering new trains? That is a strong reason why the agreement with the SRA as brokered is one we should welcome and look forward to.

§ Lord McIntosh of Haringey
My Lords, that is what I was trying to say but, as so often, my noble friend Lord Faulkner has said it better.

§ Lord Forsyth of Drumlean
My Lords, will the Minister explain why the borrowings by the Strategic Rail Authority, which are after all borrowings in the public sector, will not count as public sector borrowings and are being managed off balance sheet?

§ Lord McIntosh of Haringey
My Lords, I am afraid that the noble Lord, Lord Forsyth, has been misled by some of the publicity during the weekend. He must be talking about the speech Mr Bowker made on Tuesday. The proposal that Mr Bowker made for securitising fares for the future is only one of a number of options he is putting to the Government for the future financing of the Strategic Rail Authority. No decision has been taken on these financing options.

§ Lord Campbell-Savours
My Lords, would not extending sympathy to Virgin Trains be treated with complete derision by the hundreds of thousands of passengers who are fed up to the back teeth with its operations on the West Coast main line?

§ Lord McIntosh of Haringey
My Lords, my noble friend will have noticed that I confined my sympathy to the financial situation in which Virgin Trains finds itself through no fault of its own. I have made no comment on the quality of its service in other ways, in which other people—notably in this House—are more successful than I am.