When pol­i­tics trumps truth

Politi­cians fight to win - but de­bate must be truth­ful

Rail (UK) - - Network News - Nigel Har­ris nigel.har­ris@bauer­me­dia.co.uk @RAIL

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.”

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