When politics trumps truth

Politicians fight to win - but debate must be truthful

Forgive me for returning to the East Coast franchise, but at the time of the last issue of RAIL going to press, I hadn’t quite finished my research into Labour’s repeated claim that it had banned National Express from bidding for franchises after the EC failure of 2008-09. This is too important not to resolve.

On February 6, the Labour Party published a press release in which Shadow Transport Secretary Andy McDonald said: “This Government is propping up a crumbling system of rail privatisation. Chris Grayling should and could have banned Stagecoach from the rail industry for defaulting on its contract. His claim that there is ‘no record’ of any previous ban is false. Labour banned National Express in 2009 and he should have done the same. Chris Grayling should apologise to Parliament and retract his statement.”

It’s all strong, tub-thumping knock-about - a classic bare-knuckle, take-no-prisoners political attack designed to hole the Government at, or below, the waterline. Fair enough. But it all needs to be true. After all, being dishonest to Parliament ends ministerial careers and can bring governments to their knees - and down.

The problem here is that despite extremely detailed research, aside from his political opinions, I can find nothing - not a word, clause, paragraph or anything else - to indicate that McDonald’s claims hold water. A lie? I make no such allegation. Maybe it’s a failure of research - but not a word of what McDonald claims about Labour’s NX ban is true.

I said in my last Comment that there was (and remains) no legal way in which NX then, or Stagecoach now, could be banned. And as we know, NX did bid successfully to retain the c2c franchise in 2014. There was no ban. And therefore no reversal of ban.

To broaden the research, I’ve had experts look at the National Audit Office report into the Labour Government’s termination of the NXEC franchise in 2008- 09 and the creation of Directly Operated Railways. I wanted to ensure my interpretation of civil service-ese is correct. It is. The NAO report also makes it crystal clear that there was never a ban on NX, in any form.

Actually, quite the reverse is true. Here’s paragraph 19: “In December 2010, National Express also agreed to transfer franchise assets that it had valued at £45m at nil cost to the public sector operator. This transfer was good value for the taxpayer. As part of the final settlement negotiations, the Department provided an assurance that the termination would not preclude the company from bidding for future franchises.” (my italics).

That’s clear: not only no ban, but an assurance that the company was clear to continue to bid. My expert franchise analyst agreed: “The NAO would without question have commented about any ban - and it doesn’t. Because there is absolutely, totally, zilch about a ban - though it’s very clear that HMG wasn’t happy. But HMG hostility doesn’t add up to a ban - and just to be clear, hostility isn’t a concept in procurement law!”

This is a difficult and complex enough debate as it is. Having to spend time establishing the true and accurate terms of reference on which to even have that debate is dangerous and disruptive. And before the flaming starts, this is not a party political point - RAIL is as tough on Government and indeed the industry when the truth suffers. All sides need to keep it honest. Labour must take more care with its arguments and claims: this episode leaves a very sour taste indeed.

But what next for East Coast? Current options are: resurrect DOR (nationalisation? I’ll be surprised if Chris Grayling does this!); an operator of last resort (politically problematic as it would involve big payments to a private sector in outsourcing EC management); and a Direct Award (the least worst option as it would maintain continuity and is financially efficient, so is best for passenger and taxpayer alike, although politically difficult).

But in The Guardian, strategic thinker Will Hutton (always worth reading) recently came up with a third option. He argues that the public is increasingly distrustful of business and cites Thames Water in particular. It has built up massive debt while distributing excessive dividends to its private equity owners, via a holding company in Luxembourg - specifically to minimise UK tax obligations.

Even though those who truly understand the figures know that these arguments are not applicable in railways the public believes that they are, hence the resonance for nation- alisation. Hutton argues that however noble the principles of public ownership sound in advance, the inevitable reality is that they are destroyed by the politicisation of decisionmaking and the dead hand of Treasury spending limits, which chokes off investment.

He floats the idea of securing the best of the spirit and aspiration of public ownership while not losing private sector investment and management, through what he calls a ‘public benefit company’ (PBC). This would be a new kind of private company into whose constitution would be woven the prioritisation of public service over profit. The Government would hold a ‘foundation share’ with the right to appoint non-executive directors who would ensure that the public interest priority was being properly discharged. Such a company would have to be based in the UK for tax purposes.

Crucially, because these companies would remain in the ownership of private shareholders, they could raise borrowing which would not be classified as public debt - which would be attractive to governments of all political hues. The rights to dividends would, however, remain and so no compensation would be needed to acquire/create these PBCs. Hutton argues that there would also be the enormous benefit of Secretaries of State not being drawn into operational matters.

Hutton claims his new PBCs would combine the best of public and private worlds (check out his full article on The Guardian website). It struck me that the idea could be made bespoke on the East Coast. What if the VTEC Virgin-Stagecoach company was reconstituted as Hutton outlines, but also incorporating NR Route Managing Director Rob McIntosh alongside VTEC MD David Horne in an intriguing extension of NR devolution?

It would enable continuity of the service with which 92% of EC passengers are happy. It would be financially efficient. It would logically extend NR devolution. It would make real SoS Chris Grayling’s mantra about bringing track and train back together. It would prioritise the public interest. It would provide the potential to secure the best of public and private sectors and at minimum cost and disruption. What’s not to like?

There’s widespread agreement that the system needs a reboot after 20 years. We have a perfect opportunity here to try something radical.

It’s got to be worth a discussion, surely?

“All sides need to keep it honest. Labour must take more care with its arguments and claims: this ...leaves a very sour taste.”