DEREK TWIGG, MR MARK LAMBIRTH AND MR ROGER JONES

19 JULY 2006

  Q540  Chairman: Yes.

  Derek Twigg: Yes.

  Q541  Mr Goodwill: When gauging customer satisfaction, do you think you possibly rely too much on some self-appointed groups who are purporting to represent passengers and do you feel you should be doing more actually to plug into what people are saying on the platform?

  Derek Twigg: It is an interesting question. We have set up now Passenger Focus which is now the body which represents and they are independent in terms of how they go about their work. I think what is interesting about what they have done is that they developed through the Chairman a better and more focused approach in terms of a research-based approach to the issues and developing that, so I think they are quite good and I think their passenger link managers, which they have set up as well, they are working okay. I think if you talk to Colin Fox, the Chairman, he would say there was more work to be done, but I think they are doing a pretty good job in terms of taking over the passenger survey, some of the results of which we have been discussing today. We do go through the consultation process as well in terms of franchises and clearly that is with local authorities, the regional bodies, the PTEs, et cetera, but again there is a way for people actually to feed into that. Certain rail groups have certain issues and certain problems, but I do talk to quite a lot of rail groups and, whilst I may not always agree with them, they always have some very valuable things to say, so I think there are lots of opportunities for people to actually get their views across.

  Q542  Chairman: Well, Minister, I hope you have enjoyed speaking for the whole of the British Government—

  Derek Twigg: Can I just say because I forgot to mention this before, but the point you made about the train operating companies and others who are a bit confused about the franchising process and especially about specification, we did actually hold, our officials held a trade day about a month or two ago where they were all invited in. Quite a large proportion of them came in and they had quite a long session going through the processes and what we do and what we do not do as part of that franchising specification process. As far as I am aware, there were no major issues that were brought up that they were so confused in understanding, so we did go out of our way to actually explain the system to them, invite them all in and discuss the process with them.

  Q543  Chairman: Let me ask you this one simple question: why does Her Majesty's Government feel it necessary to compensate train operating companies when there is, for any reason, industrial action against them?

  Derek Twigg: Well, the reason basically is to ensure that any unplanned and excessive financial pressures are taken account of in terms of any strike action which may take place.

  Q544  Chairman: I beg your pardon! Do private companies not normally face all sorts of exigencies and it may even be that people do take action against them and that may actually include industrial relations? What is so special about the train companies that they need to be treated differently? I thought we were treating all these people as if they were independent, sovereign companies.

  Derek Twigg: Well, we have got to be clear that any action, industrial action does not jeopardise the viability of any train service. That is obviously very important.

  Q545  Chairman: So we are not treating them in the same way that we treat normal companies in the independent sector, but we are treating them on the assumption that we must not allow them to go bankrupt in case they cannot continue to provide a service?

  Derek Twigg: Well, they are not necessarily susceptible because it is also pressures in terms of things they may or may not agree to and how that affects their viability, so in terms of pressures in terms of what they may do and what they may agree to, it may affect the viability of the service, of the franchise, so we had to look at that. Yes, we are aware of this point, so we have looked at it and, as you are probably aware, we decided to take it forward. We have not used it.

  Q546  Chairman: Well, why? What is different? I am confused, and it is very easy to confuse me, I accept that, but given that these are supposed to be independent train operating companies, and that is how they call themselves, why should they be compensated if somebody takes industrial action?

  Derek Twigg: As I say, if it threatens the viability of the train service.

  Q547  Chairman: I see, so although they are independent train operating companies, they are not so independent that we will not underwrite them if there is a problem?

  Derek Twigg: They would have to justify to officials in the Department that they have actually gone through every possible way of trying to resolve disputes in a fair way.

  Q548  Chairman: So what is the problem? Why have the officials been unable to unhook themselves from this situation in which you find yourselves? Presumably because the SRA agreed it. Is that what you are saying?

  Derek Twigg: The reason, as I have explained to you, is to continue with that policy. We have not used it since the DfT Rail Group was put in place.

  Q549  Chairman: Well, no, because has there been any great industrial action against any of the train operating companies—

  Derek Twigg: It is not something that would be used lightly, Mrs Dunwoody. As I say, it is really an issue around the viability of the train service.

  Q550  Clive Efford: So the circumstances where you would use it are those where the Department would deem the trade unions to be acting unreasonably?

  Derek Twigg: To put it another way, we would have to be satisfied that the train operating company had acted in the best possible way and tried all they could to try and resolve the dispute in a fair way.

  Q551  Chairman: So when we got some evidence from Mr Franks, the Chief Executive of National Express Group who quite inadvertently, I am sure, misled us by saying he had not any money, he wrote and said, "I responded, stating that no such payments had been received by the National Express Group. Since then, I have been made aware that a payment was received principally in relation to the ScotRail franchise. This related to driver and role of the guard dispute". What was the reason for that?

  Derek Twigg: I could not comment on that particular dispute. That was done during the SRA time as well, I think.

  Q552  Chairman: Well, it may have indeed been during the SRA time, it might not, but it is actually State money, it is taxpayers' money.

  Derek Twigg: As I say, there are a variety of issues that need to be considered in terms of what the company has done and what reasonable steps it has taken, et cetera.

  Q553  Graham Stringer: It is possible to ask this question in two ways. Why should the Government be involved in trying to smash the trade union, is the aggressive way to ask the question, but asking it in a less aggressive way, when you have got a huge group like FirstGroup, why should the taxpayer pay for the loss to a subsidiary company during a strike rather than FirstGroup?

  Derek Twigg: I cannot really add much more to what I have said, Mr Stringer, in terms of again it is about the issue about unplanned and excessive pressures in terms of the viability of the train service. Now, I could not say in what circumstances it would be that we might decide to do it, but it could be that a strike could cost quite a lot of money, but it is difficult to say and we have to judge each case on its merits.

  Q554  Graham Stringer: I understand that any sensible minister says that he has to judge every case on its merits—

  Derek Twigg: I should say our officials.

  Q555  Graham Stringer: And officials, that is completely reasonable, but this is a principal question about why taxpayers' money should go into a particular private sector company, even if it is going to go to the wall. Why should taxpayers pay? Why should the company not go to the wall if its industrial relations are so bad that its staff go out on strike for a period of time? Why should you stand behind them?

  Derek Twigg: Because, as I say, it affects the viability of the train service.

  Q556  Graham Stringer: Let me put it another way. You told us earlier on in this session that these companies could go to the wall and that you would not be bailing them out unless, we find out now, they have very bad industrial relations. Why is that sensible?

  Derek Twigg: I think it has not been a secret that the SRA and the Department have actually had this policy. I do not want to repeat myself, but that is the reason, that our judgment is based on the viability of the train operating company to provide passenger services because clearly it would depend on the circumstances. I agree that it is difficult to get into what might happen and what might not happen in terms of if and when we took such a decision.

  Q557  Graham Stringer: You are repeating yourself, Minister. What is the difference between the viability of a company affected by bad industrial relations which has a strike and the viability of a company that gets its sums wrong and it cannot refranchise, so it goes to the wall? Why does the Government make the distinction to stand behind the company and put millions of taxpayers' money in in one case and not in the other case?

  Mr Lambirth: I think the risk, as I understand it, that is being guarded against here is not the risk of the train operating company going bankrupt, and we have set out our position on that very clearly. The risk that concerns people, and I think it is an issue that you picked up in relation to particularly the last years of a franchise, is that if you have a company which is operating a business that is going to continue in perpetuity, its approach to an industrial relations dispute will be different from that of a franchisee who has only one or two years to go in the life of the franchise. Therefore, I think that the risk that is being guarded against is almost the other way round, that the train operating company will make a concession to avoid a strike which makes financial sense to it looking over a two- or three-year time horizon which would not have made the same sort of sense to an employer or a business that was a permanent business.

  Q558  Chairman: So it is really an insurance against irresponsible behaviour on the part of the franchisee? You are saying that companies cannot be relied upon in the last years of their franchise to behave in a responsible way and they are very likely, if they think they are going to lose the franchise, to agree to something which might cause considerable difficulties? Is that what you are saying?

  Mr Lambirth: I am not sure what is irresponsible about that. If the franchisee has only two years left of a franchise to look at, whether it is looking at an investment or an industrial dispute or anything else, its perspective must be different from that of a company which has 10 years to run. It is one of the sort of few very powerful arguments that there are for longer franchises. That is, I think, what I am saying.

  Q559  Chairman: Well, £12.65 million to National Express in respect of revenue lost by ScotRail is not a small amount of money. That is some insurance for the company, is it not? How many hours of overtime would they have to agree to before £12.6 million was actually good value on the part of the taxpayer?

  Derek Twigg: I am sure we are not going to agree on this, Mrs Dunwoody, but I can only repeat what I have said in terms of a concession to passenger services in terms of viability of the service. At the end of the day part of it is as Mr Lambirth has said, but it is also that they have got to provide absolute evidence that they took all reasonable steps and that they have done everything possible.