Oral statement to Parliament

Laidlaw inquiry final report

Oral statement by Rt Hon Patrick McLoughlin MP, Secretary of State for Transport.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Sir Patrick McLoughlin MP

Mr Speaker, with permission I would like to make a statement on what went wrong with the West Coast franchise agreement and what we are doing to put things right.

First, I will update the House on the Laidlaw inquiry and the decisive action that we are taking in response.

Second, I will inform the House of the new deal with Virgin Trains, including an enhanced service, that will begin this weekend.

In dealing with all this, from the start, my approach has been to come to the House to explain the situation openly, quickly and clearly.

And it is in that spirit that I make my third statement on this subject today.

First, I turn to the Laidlaw inquiry.

On the 3 October I announced the cancellation of the competition to run the Inter-City West Coast franchise because of the discovery of unacceptable flaws in the process run by the Department for Transport.

As I explained to the House on the 15 October, I launched 2 independent inquiries.

I asked the first inquiry, led by Sam Laidlaw, to look into what happened and why.

Today I am publishing his final report.

I asked the second review, led by the Eurostar chairman Richard Brown, to focus on any lessons to be learned for future of rail franchising.

This is well advanced. I expect to receive his report by the end of the year. I will publish it after that.

I am placing a copy of Mr Laidlaw’s final report in the Library alongside a copy of my department’s response.

I do not hide from the seriousness of his findings.

They make extremely uncomfortable reading for the department.

They caused serious problems for bidding firms including First Group who were in no way at fault.

They must – and will – be acted upon.

Let me turn to the detail.

Mr Laidlaw confirms much of what he first touched on in his interim report.

He finds that the department wrongly calculated the amount of risk capital bidders would have to offer to guarantee their franchise proposals against default.

And he says that these incorrect figures vary in ways that were wrong.

Significantly, he also states for the first time that ministers made the original 14 August provisional award without being told about the flaws and after being given “inaccurate reports”.

Mr Laidlaw also confirms that if his recommendations on strengthening the organisation are acted upon quickly the department will be able to do its job correctly in the future.

There is nothing in the report to suggest that the flaws discovered in this franchise competition existed in other procurements in the department.

Finally, Mr Laidlaw confirms that he has seen no evidence of bias against Virgin.

He also offers a clear prescription which we are already acting upon.

The department will ensure that all future franchise competitions are delivered with a clear timeline, rigorous management and the right quality assurance.

We will also create a simpler and clearer structure and governance process for rail franchise competitions.

This will include the appointment of a single director general with responsibility for all rail policy and franchising.

And we will ensure that we have the right mix of professional skills inside the department and, where necessary, from professional external advisers.

I want to thank Mr Laidlaw for carrying out such a comprehensive review to such a tight timetable.

Any specific personnel issues resulting from what has gone on are, and must of course remain, an issue for the Permanent Secretary.

Second, let me turn to the future of the West Coast Main Line.

In all my actions, I have put the service to the passenger first.

That is why I am pleased to tell the House that my department has negotiated terms with Virgin Rail Group to allow Virgin Trains to continue running the West Coast service for up to 23 months.

Our intention is to run a full competition for the longer term franchise to follow on from this.

The terms we have negotiated with Virgin secure continued service for passengers at the same levels they enjoy today, and in some cases better.

The timetable that was already agreed for December 2012 will operate.

And today, the last of the 106 government-funded Pendelino carriages comes into service.

That will allow more trains and longer trains on this vital route.

That timetable includes a new hourly service between London and Glasgow.

I also want to see more improvements.

Among them, the introduction of new services from London to Blackpool and Shrewsbury.

Subject to Virgin securing the track access rights to provide these, and to our completing a value for money assessment, I would hope that both of these new services will be introduced from December 2013.

Mr Speaker, the Laidlaw inquiry has told us that changes to the department’s governance and structure are needed.

We are and will carry them out.

And we have a new deal for the West Coast Main Line.

This has been extremely serious issue for my department. But I am determined that we learn the lessons and get on with the job we are here to do.

Together with our commitment to High Speed Two and the increase in capital spending on roads announced by my RH Friend the Chancellor of the Exchequer this week, this government is committed to improving our transport network and backing our railways.

I commend this statement to the House.

Published 6 December 2012