Shadow transport secretary says Labour would enable DOR to compete for rail franchises

Shadow transport secretary Mary Creagh has indicated that the Labour Party would change the law to enable Directly Operated Railways to bid for rail franchises should it win the next general election. However, she ruled out “fantasy” renationalisation of train operations as a matter of policy when current franchises expire, as demanded by a group of prospective Labour candidates earlier this month.

At a meeting of the all party parliamentary rail group on May 13, Creagh denounced current restrictions on DOR which prevent it competing for contracts despite operating the East Coast business since 2009 after National Express Group returned the franchise back to the Department for Transport.

“It’s unfortunate the government is obsessing about handing East Coast back [to the private sector],” Creagh said. “It will have returned about £1bn to the taxpayer by March 2015 … Having tried it and seen that it works we would like to keep it. We think it ludicrous that state railways in France and Germany and the Netherlands are operating British franchises but the law is geared up so our own British state operator can’t bid and we want to change that.”

Although Creagh pledged that Labour would “not be going back to old style British Rail” industry structure, she argued that whether the party’s plans could be seen as nationalisation depended on what was meant by the term. She said Labour believes many issues need to be addressed in the national interest to provide better value to passengers and taxpayers, highlighting the need to limit fare rises as a key issue. Creagh said one move under Labour would be to set an absolute fares cap which could not be manipulated by applying high fare rises on popular ticket types and routes offset against lower rises elsewhere.

She was also highly critical of the government’s handling of Direct Award franchise agreements. Creagh claimed it had resulted in £400m a year additional government funding for train operators in the five contracts let so far, with Great Western a particular beneficiary. However, the DfT has repeatedly stressed that the reduction in premiums for Direct Award contracts is related to issues including a low profit margin being provided to franchises that were previously loss-making, restructuring franchises and some projects being funded with private finance. DfT figures also show that the cost is less than half the £400m quoted by Creagh.

Other issues Creagh set out as key policy priorities included strengthening the supply chain through ensuring a stable stream of rolling stock orders, greater provision for SMEs to win contracts in infrastructure construction projects, and addressing a potential skills shortage as railway engineers retire.


Comment: Does virtue excuse dishonest claims?

Creagh is a great performer, but what about the truth?

Mary Creagh, the shadow transport secretary, is clearly of the view that, as she drips with virtue and good intentions, she is entitled to make claims which are blatantly dishonest. “Economical with the actualité” is how it used to be described.

I heard her at a recent parliamentary meeting. For the first 10 minutes I thought “Wow”: articulate, well informed, persuasive. A great performance.

But then we got 10 minutes which went something like this.

“I listen to passengers. They tell me their top complaint is high fares; and I know where the money is going.

“Great Western was paying the government £170m in the previous year but under their franchise extension that will be only £33m for the whole 23 months. Add up the difference,” she said.

The difference which she was inviting us to calculate comes to £290m.

She went on: “All this money is leaching out of the industry . It is good for profits but bad for taxpayers and passengers – every £X” – I forget the figure – “could have cut fares across the country by 1%, etc., etc.”

But she must have known that her conclusion did not follow. She is no ditsy airhead. She taught business studies at Cranfield for seven years. She must have known that the difference was largely due to Great Western being required to carry out various works and to other changes in circumstance and was not available to cut fares.

Does this matter? Yes it does. It shows that the current attacks on the franchising system are based on bogus claims.

She is obviously extremely talented and we should expect better from her.

Note – As this magazine reported at the time about the franchise extension: Great Western’s net premium payments to the Department for Transport will fall from £170m in 2012/13 to a total £33m over the short term franchise. The DfT said the fall was due to First funding a new depot at Reading; required maintenance on the HST fleet; compensation payments relating to disruption caused by infrastructure works; full revenue risk being taken as a result of revenue support payments ceasing; and restructured track access charges. A spokesman told Passenger Transport that accounting for these factors, net payments to the DfT had been broadly maintained at the current level.


This article appears inside the latest issue of Passenger Transport.

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