Oral statement to Parliament

West Coast Main Line

West Coast procurement reviews terms of reference published and negotiations with Virgin Rail Group to continue as operator commenced.

From:
Department for Transport and The Rt Hon Sir Patrick McLoughlin
Published
15 October 2012
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Delivered on:
The Rt Hon Sir Patrick McLoughlin

Mr Speaker, with permission I would like to make a statement on the West Coast Main Line.

On Wednesday 3 October I announced the cancellation of the InterCity West Coast franchise procurement.

This decision was taken as the result of significant flaws found within the procurement process undertaken by my department.

These made the continuation of the competition and the award of the franchise untenable.

I know how important the West Coast Main Line is to the economy of this country and to the constituents of members.

This franchise operates over 300 train services a day, carries over 26 million passengers a year and employs more than 3,000 staff.

Mr Speaker, this is a regrettable outcome caused by unacceptable mistakes made by officials in my department during a complex procurement process.

It has also meant that I have paused the ongoing franchising programme, including live competitions on Essex Thameside, Great Western, and Thameslink.

I would like to reiterate that there is no suggestion that First Group or any of the other bidders including Virgin Trains acted in anything other than good faith during the bidding process.

First Group is a great British company and a leading transport operator both here and in the United States.

It provides jobs for 13,000 people across the UK and operates 4 railway franchises, which together carry over 300 million passengers a year.

I want to make it clear today that the cancellation of the West Coast competition should not be seen as a comment on FirstGroup, its bid, or its approach to running rail franchises now or in the future.

Furthermore, as I have said to the Transport Select Committee, Virgin has also made a fantastic contribution to both the railways and aviation in this country.

It would be premature at this stage to speculate on where and how the errors in the process emerged.

That is why, when I announced the cancellation of the procurement, I also asked for two urgent investigations to be carried out.

Both reviews are now well underway.

The first of these is an inquiry led by Sam Laidlaw, the Chief Executive of Centrica. He is the lead non-executive director on procurement across government and the lead non-executive director of the departmental board.

His review is examining what happened during the West Coast procurement and why. It will establish the lessons to be learned.

I have asked for the initial findings of the review by the end of October and expect the full report by the end of November.

The second review is looking at the implications of the flaws on the West Coast procurement for the rest of the franchising programme.

This review is being led by Richard Brown, a highly-respected industry figure and the Chairman of Eurostar.

My expectation is that the Brown review will report no later than the end of the year on lessons for the future franchising programme - so that it can be resumed as soon as possible.

Mr Speaker, I am today publishing the terms of reference for both reviews, and these have already been laid in the Library of the House.

Before these reviews have been completed, and particularly before the findings of the Laidlaw review have been published, any speculation as to the nature of the flaws is just that - speculation.

I will of course report to the House on the findings of these reviews at the earliest opportunity.

However, I would like to take this opportunity to restate the government’s commitment to ensuring that we continue to have private sector innovation and investment in the railways.

Since privatisation, the number of passenger miles travelled has nearly doubled.

This growth brings significant benefits to the country’s economy and to the environment, relieving congestion, improving connectivity for businesses, commuters and leisure travellers.

Passenger satisfaction is up. So is punctuality.

I want to see these benefits continue. That is why I want this pause while the reviews are carried out to be as short as possible.

We will restart our refranchising programme - including the competitions on Essex Thameside, Great Western, and Thameslink as soon as possible.

Mr Speaker, I would now like to turn to the future operation of the West Coast Main Line.

I am committed to ensuring that passengers will see no impact as a result of these mistakes.

Passengers will be able to make the journeys they have planned, with the tickets they have bought.

Clearly we will need to learn lessons from the two reviews. And we will need to run a new competition for the West Coast franchise.

I want this to happen as quickly as possible, but we want to get it right which will take time.

It is also important that in the intervening period we secure a deal which secures best value for the taxpayer, including, continuing improvement in service quality.

For this reason, I am today (15 October 2012) announcing that we are commencing negotiations with Virgin Rail Group with a view to them remaining as operator of passenger services for the West Coast Main Line.

Subject to ensuring value for money for the taxpayer, I expect this to last for a short period of around 9 to 13 months.

In this period we will run a competition for an interim agreement. This interim agreement, which would be open to any bidders, will then run until the new long-term West Coast franchise is ready to commence.

I will keep this approach under review so it can be informed by Richard Brown’s findings and recommendations, and so it ensures value for money.

Mr Speaker, I am grateful to the team at Directly Operated Railways for all their preparation so far. Directly Operated Railways will continue to stand ready should they be required.

Britain’s railways are a great success and I am determined that this incident does not get in the way of this government’s real record.

We have launched the biggest programme of investment since the Victorian era. We have also just announced reductions in regulated fares rises over the next 2 years, recognising the importance of access to the railways for millions of commuters.

And we are pressing ahead with the most ambitious and visionary infrastructure agenda in recent years - most notably in pursuing the transformative programme for High Speed 2.

I commend this statement to the House.

Updates to this page

Published 15 October 2012

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