11 December 2008

S3M-3075 ScotRail Franchise

Scottish Parliament

Thursday 11 December 2008

[THE PRESIDING OFFICER opened the meeting at 09:15]

ScotRail Franchise

The Presiding Officer (Alex Fergusson): Good morning. The first item of business is a debate on motion S3M-3075, in the name of Des McNulty, on the ScotRail franchise.


... ... ...


The Minister for Transport, Infrastructure and Climate Change (Stewart Stevenson):

Good franchise management is critical to the success of Scotland's rail services. I very much welcome Audit Scotland's finding that Transport Scotland manages the core aspects of the franchise contract well. Audit Scotland also states that the franchise is performing well—there are more trains running on time, passenger numbers are well ahead of expectations and passenger satisfaction is up. That performance, together with Transport Scotland's comprehensive recommendations, helped us to make the informed decision to extend the contract.

The rigorous appraisal process, as described by Audit Scotland, delivered value for money—more than £70 million—and, for the first time, a cap on the profits that FirstGroup may take from the franchise. It has delivered for passengers, taxpayers and ScotRail staff.

In raising an issue about a bus company, Mr McNulty said that he did not know the details. In a debate of such seriousness, will he please not raise such matters when he does not know the details? I do know the details, and he would be wise to be careful.

The negotiated position, which external views from the experts Ernst & Young aided us in arriving at, followed consideration of the full range of options, from doing nothing through to granting the extension. We also tightened the contract, requiring more from First for the same subsidy and tying it into the delivery of new services, while creating, for the first time, a profit cap.

Much has been made of Audit Scotland's comments that governance of the extension could have been better. The fact that we do not agree with all of Audit Scotland's analysis could no doubt be explored in more detail by the Public Audit Committee, but Transport Scotland will act on the report's recommendations when that is appropriate.

I turn to the role of individual directors. The management commentary of Transport Scotland's annual accounts for 2007-08 notes, as it did in 2006-07, that it records board members' interests in a register that is publicly available. The interests that have been referred to were documented there in 2007.

Transport Scotland's directors gave assurances that no conflicts of interest arose in the exercise of their duties. I have received assurances that processes—which were signed off by Audit Scotland—were adhered to throughout the extension discussion. The agency's processes, established under the previous Administration, are not only rigorous, but ensure that no conflicts of interest impact on decision making.

This is not the first time that the extension of the franchise has been used to try to make political capital. When we announced it in April, some opposition MSPs suggested that it represented a policy shift without consultation. That is entirely wrong. The extension was always contemplated by the original contract, which was consulted upon and then let in 2004.

Patrick Harvie (Glasgow) (Green): The minister refers to an issue that is addressed in part by the Conservative amendment, which refers to the fact that

"the original contract, negotiated by the previous Labour-led Scottish administration, 'did not specify the conditions under which an extension should be considered'".

In other parts of the United Kingdom, if the original contract did not specify the conditions, extensions have been consulted on. Did the minister make the decision not to consult, or was it some other part of the Government?

Stewart Stevenson: Ministers, in considering this option, were aware of the provisions that were described in a letter from the then-transport minister, Iain Gray, to the Transport and the Environment Committee on 2 December 2002, that the franchise would be a seven-year contract with a possible three-year extension. We exercise the powers and the ability given to us by the contract that Iain Gray put in place when he was the minister.

The Executive of the day said that it favoured a 15-year franchise, but upheavals in the industry at the time, such as the replacement of Railtrack with Network Rail, meant that that was not advisable. Instead, when a Strategic Rail Authority review in 2003 moved to shorter franchises, ministers followed suit, but with the extension there to provide for the necessary flexibility.

That move also fitted the assumptions at the time about the implementation of major investment projects. The Government of the day effectively put in place a contract that envisaged that those services would be in place by the 2011 termination date, as it was then. The extension that we secured delivers what could not be guaranteed in 2004—a contract that will see the major projects and now the Commonwealth games services delivered reliably and safely.

The extension also grants us an opportunity that a refranchise in 2011 would not: to explore the option of moving the next franchise to a not-for-profit model. I have had encouraging discussions with the Scottish Trades Union Congress and union representatives, who are pleased to explore the opportunities that we have created. We will carry out a full consultation and give all stakeholders the chance to comment and input during 2009. This is an exciting development—one that would not have been possible without the extension.

We are committed to delivering real improvements to our rail network, in recognition of the important role that it plays in supporting sustainable economic growth. This is the right deal at the right time. It benefits passengers and businesses and supports sustainable economic growth. I welcome members' support for that commitment.

I move amendment S3M-3075.3, to leave out from "expresses" to first "Transport Scotland".


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