Meeting of the Parliament

Meeting date: Thursday, March 2, 2023

Official Report 1161KB pdf

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Caledonian Sleeper Train

The next item of business is a statement by Jenny Gilruth on the Caledonian sleeper train. The minister will take questions at the end of her statement, so there should be no interventions or interruptions.

14:57  

For more than 150 years, a sleeper rail service has run from Scotland to England. The current Caledonian sleeper serves 43 Scottish stations, including the United Kingdom’s most remote rail station, Corrour, which is also the highest in the UK. From Montrose to Kirkcaldy, from Crianlarich to Fort William, the sleeper is about more than just Scotland’s cities; it provides communities across Scotland a service to access London and beyond.

Earlier this year, I undertook to provide Parliament with an update on the successor arrangements for the Caledonian sleeper. That follows my decision last October not to rebase the franchise agreement with Serco. Today, I can announce that, from 25 June this year, the Caledonian sleeper service will be provided by an arm’s-length company of the Scottish Government, in line with our duty as operator of last resort.

That means that, from the expiry of the current franchise, Caledonian sleeper services will be provided within the public sector by an arm’s-length company owned by the Scottish Government. That will provide stability and certainty for passengers and staff and will place the operation of Caledonian sleeper services in public hands from the end of the current contract. I am confident that, under those arrangements, we can build on our experience of public sector operation to ensure that the bright future that we see for the Caledonian sleeper is protected.

My predecessors in this role took the decision to separate sleeper services from the ScotRail franchise, and I stand firmly by that forward thinking. The step forward taken by the Government in how sleeper services were specified allowed that historic service the level of dedicated management that it deserves, which has led to a rejuvenated service and the specification and delivery of an entirely new fleet of trains.

Indeed, the sleeper has surpassed any other train service in the UK in relation to its recovery from the pandemic. Its revenues over the past year outstrip pre-pandemic performance, and its forward bookings are stronger than ever. Even a brief snapshot of bookings in January and February shows the highest rate for forward bookings at any stage of the franchise.

In the Caledonian sleeper, we see a service that is now thriving. That is testament to the quality and attractiveness of a service that continues to exceed passenger satisfaction targets. It is also testament to the staff who provide a world-class service to those using the sleeper; to the teams of staff in the depots, who ensure the highest quality of operations; to the drivers who ensure that passengers arrive at their destination safely and on time; and to the cleaning staff who take pride in the presentation of all that the sleeper represents.

In recent times, the Caledonian sleeper has adapted in a post-pandemic market to attract a substantial tourism footfall. Indeed, travelling on the Caley sleeper has become an experience in itself, with small Scottish businesses being promoted through the food and drink on board, for example.

As members will recall, late last year, I took a decision not to accept the rebasing proposal that we received from Serco Caledonian Sleepers Ltd. As a consequence of that, the current franchise agreement will end on 25 June 2023. I must repeat that the decision not to rebase was in no way a reflection on the quality of the product that has been developed or the commitment of the staff who deliver the service every day. As I have already stated, the sleeper is a highly valued and iconic rail service with a dedicated management and delivery team that provides excellent customer service and passenger experience. Rather, the decision that I had to take on rebasing was a question of the terms of the rebase offer, and, in the Government’s view, those terms did not represent the best value for money.

Since the rebase decision was taken, my officials in Transport Scotland have been analysing the full range of options that are available for the continuation of services once the current franchise comes to an end. As we have undertaken our analysis and considered options, it is right that I remind members that, for the current time, rail powers remain largely reserved to Westminster.

Scottish ministers have made repeated calls for the full devolution of rail powers. That would give ministers in Scotland a much more radical range of powers to enact change and unleash the full potential of Scotland’s railways by bringing together track and train in a cohesive and integrated manner and making them fully accountable to Scottish ministers.

Reform of the railway is necessary and long overdue. It is worth saying that that view is held not only by Scottish ministers. Keith Williams, who led the UK Government’s rail review process, has said publicly that

“franchising cannot continue in the way that it is today.”

However, the reforms that are proposed by the UK Government do not go far enough. Indeed, there is continued uncertainty regarding the pace and impact of those proposals.

The Williams-Shapps plan for rail was published back in May 2021 and proposes that a new public body called “Great British Rail” be established to run and plan the rail network. That body would replace Network Rail, over which the UK Government retains responsibly, for the current time. However, it is not at all clear how it is intended that that should work in relation to rail services such as the Caley sleeper and ScotRail services, for which Scottish ministers are responsible. Nor is the position clear in relation to rail infrastructure in Scotland, which the Scottish Government funds. Not only that, it is, at present, unclear when any of the proposals set out in the plan are likely to be implemented.

Despite that uncertainty, with the sleeper franchise coming to an end in June this year, I am required to make my decision about successor arrangements in accordance with the current UK legislative framework and the Scottish ministers’ franchising policy statement. The detailed consideration of the options that are available to provide Caledonian sleeper services beyond June this year has taken place in accordance with UK railway legislation. The decision is also set against the background of substantial uncertainty about future market conditions, with issues including post-pandemic recovery, the on-going cost of living crisis, wider economic instability and continuing uncertainty regarding the pace and impact of the UK Government’s rail reform process.

I have already informed Parliament that I do not consider that the prevailing conditions in the UK rail market and the wider economy would enable the pursuit of a competition for the re-letting of the franchise at this time. I have also carefully considered the possibility of a directly awarded contract to Serco to continue to run services beyond June 2023. In particular, I have considered how that option would align with our revised franchising policy statement and policy objectives. Based on those considerations and against the background conditions that I have set out, I have concluded that a direct award to Serco would not be appropriate.

A key role that is undertaken by my officials at Transport Scotland is to ensure that I can fulfil my duties under section 30 of the Railways Act 1993 and deploy the operator of last resort arrangements, should they be required. I can, therefore, confirm that, from the expiry of the current franchise, Caledonian sleeper services will be provided by an arm’s-length company owned and managed by the Scottish Government.

That is in line with our duty, in the absence of a franchise agreement, to provide or secure the provision of sleeper services, which is referred to as our operator of last resort duty. That decision will provide a stable platform for the provision of sleeper services, and it will provide certainty for staff and the travelling public.

I make it clear that Caledonian sleeper staff will transfer to the Scottish Government-owned entity with their terms and conditions protected. Due to the lack of clarity from the UK Government in relation to rail reform proposals, I am not able, at this stage, to confirm how long I expect operator of last resort arrangements to be in place. That will be considered further as market conditions develop, in respect of both the rail sector and the wider economic conditions that prevail. The pace and impact of UK rail reform, when that becomes clearer, will also have to be taken into account.

I pay tribute to every rail worker across Scotland for the role that they play in making Scotland’s railways a success. We cannot make our railways a success without them, and we cannot encourage people back to our railways without their support.

In taking the approach that I have outlined, we will secure the stable delivery of our historic Caledonian sleeper services under Scottish Government ownership, which will give certainty for passengers and our rail staff.

Rail travel is good for our economy. It helps to deliver our net zero ambitions, and it creates a greener Scotland for all. The Scottish Government’s vision for rail is of a thriving industry that meets the needs of passengers and is sustainable in the long term. The Caledonian sleeper service is a core part of that vision and will, I am sure, only continue to flourish.

The minister will now take questions on the issues that she raised in her statement. I intend to allow around 20 minutes for questions. We will then move on to the next item of business.

I thank the minister for advance sight of her statement.

When we debated the future of the Caledonian sleeper service last month, I pointed out how successful the service had become under Serco. The year saw the highest revenue since the start of the franchise, with guest levels back to pre-Covid levels. Performance, guest satisfaction and employee satisfaction were all going up.

The minister has just agreed with all of that. She has just said that the Caledonian sleeper has

“surpassed any other train company in the UK in its recovery from the pandemic.”

She said:

“we see a service that is now thriving.”

She calls it “a world-class service”. There can be no conclusion other than that the decision is ideological.

Jenny Gilruth said nothing about how this world-class service can be improved under the Scottish Government. She has made no case at all for the decision. If it is about value for money, perhaps she can answer this: has she requested or received a costed proposal from Serco for a direct contract award? If she has not—which I suspect is the case—how can she claim or show that she is demonstrating value for money for the Scottish taxpayer?

I will start by setting out the Scottish ministers’ limitations in responding to the required legislation, which is, of course, reserved to the UK Government—Mr Simpson’s party is in power in the UK. Some of that relates to the on-going challenges in relation to the detailed assessment of the options that have been considered in the framework. Under the legislation, ministers in Scotland are required to consider a direct award, as Mr Simpson has outlined, but also to rule that out if it is not feasible. A direct award was, of course, considered by my officials, but it was ruled out. Mr Simpson knows that rebasing was similarly ruled out because it was presumed that it was not value for money.

In addition, it is worth noting that the Scottish ministers do not just need to have regard to the reserved legislation that I have outlined; we also need to have regard to the Scottish ministers’ “Franchising Policy Statement”. Mr Simpson can access that statement on the Scottish Government’s website if he would like to do so. The factors that I, as the minister, am required to consider include the alignment and integration of our rail services. Having ScotRail, for example, and now the Caledonian sleeper under the same umbrella brings that integration. The factors include the ability to respond quickly to rail reform. There is great uncertainty, and I do not know what the UK Government is going to do next in relation to the Williams-Shapps review, because it has not come forward with any legislation as yet. Finally, there is consideration of value for money. On all those factors—this is underlined by the fact that the legislation is reserved—I do not accept the picture that Mr Simpson has painted of how the decision was reached. [Interruption.] Mr Simpson should allow me to speak. He is heckling from a sedentary position.

Mr Simpson made a point about the success of the Caledonian sleeper. I absolutely accept that, and I acknowledged that success in my statement. I also acknowledged it in January, I think, when we had a members’ business debate on the subject. However, as I have outlined, I am required to consider the necessary legislation, and there is a real opportunity for us in relation to the delivery of sleeper services in the future.

The UK Government is actually a fan of public ownership in the railways these days. In 2021, I think, Southeastern was brought into direct public control. So were London North Eastern Railway and Northern. The UK Government has also offered a stay of execution to Avanti West Coast, which is somewhat bizarre, given the poor service that has been delivered on the west coast. The service that is being delivered by TransPennine Express has, of course, been critiqued by the UK Government’s rail minister, who said that its performance is “clearly unacceptable” and that the operator needs to “turn it around”.

I hope that Mr Simpson will welcome this news for Caledonian sleeper staff and also for the taxpayer in Scotland. Had we gone down the road of running a competition, I feel that Mr Simpson would have been in the chamber today critiquing the public expense associated with that.

I thank the minister for advance sight of her statement.

Over recent weeks, we have become used to hearing a lot of bad news from the transport minister, so it is a relief to hear positive news today. It is welcome that the Caledonian sleeper service is to be publicly run from June and I praise the efforts of the National Union of Rail, Maritime and Transport Workers, the Associated Society of Locomotive Engineers and Firemen, Unite the union and the Transport Salaried Staffs Association, which have been instrumental in making the case for public ownership.

However, we fundamentally disagree with the minister on the decision to split the ScotRail and sleeper franchises. It was wrong in 2015 when the Scottish National Party made that decision and it remains wrong to split those services now. Does the minister not see the benefits of a unified ScotRail operator delivering both when she says that she is concerned about fragmentation and when current structures are already overly bureaucratic? Does the minister not accept that cross-subsidy is another reason why we need one unified ScotRail operator to make the service more affordable?

Finally, it can cost more than £500 for a family of four to get a return from Glasgow to London, and that is with a family rail card. It is ridiculously expensive for people and for businesses. It surpasses any other rail service when it comes to fares. To make the most of this positive step, what changes are planned by the Scottish Government to make the service more affordable?

I welcome the collegiate support that Mr Bibby has shown today for this Government’s action and indeed for me as transport minister. It was not that long ago—it was back in January—that Mr Bibby’s former boss was heckling me, suggesting that this would not be the approach that the Scottish Government would take, so I welcome the Labour Party’s warm words today.

The decision to split ScotRail and the sleeper is a historical one that, as Mr Bibby alludes to, dates back to 2015. The most important thing just now is to provide certainty and clarity. That is what operator of last resort arrangements allow us to do and it is important for the staff involved in this that we provide that certainty and clarity.

I would broadly agree with the member’s assertion about expense. He will know that, in Scotland, our fares are on average about 10 per cent cheaper than in other parts of the Great Britain network. Also, we will be removing peak fares later this year, which is another thing that is being welcomed by our rail union partners. That step is important because we need to facilitate modal change—we need to get folk out of their cars and on to public transport—and the only way to do that is by making public transport more affordable. The member’s point about expense is a fair one and I am keen to work on that issue with the Caledonian sleeper as we move forward with the new arrangements.

When will the transfer under the Transfer of Undertakings (Protection of Employment) Regulations take place, what does this mean for employees and what engagement has taken place with rail unions?

I can provide an absolute assurance to Caledonian sleeper staff that they will be able to transfer to the new entity with their terms and conditions protected. The TUPE transfer will take place on 25 June, which is when the current contract ends, and discussions will begin imminently with staff and unions. As I mentioned in my response to Mr Bibby, I have listened to the calls from our rail trade unions to nationalise the Caledonian sleeper. Of course, the unions campaigned for public ownership of ScotRail. I very much hope that they will welcome this decision today. As transport minister, I meet the rail unions regularly and I look forward to engaging with them on this important decision as we look to make public ownership a success for Scotland.

In turning the sleeper into the exemplar that the minister has described, Serco made a loss of more than £60 million over the duration of the franchise. How does the minister plan to ensure that the franchise turns a profit, so that the taxpayer is not picking up those £60 million losses? Can she promise that she will not cut jobs, salaries, services, or maintenance, or put up prices, to do so?

The figures that the member has outlined have been widely reported in the press and relate to historical decisions that were taken by Serco. I emphasise that the Scottish Government provides a substantial subsidy to Serco to run the current contract. That is worth putting on the record.

In relation to jobs, as I outlined in my response to Audrey Nicoll, all jobs will transfer under their current terms and conditions. There are no proposals on the table for any job losses today. I want to make that clear.

The minister has spoken a fair bit about the operator of last resort arrangement and why going for that has been the right decision. Does she want to expand on that and on what the timescale will be? Are we totally dependent on Westminster? Do we have no indication of when that Parliament might legislate?

As I mentioned in an earlier response, the decision regarding successor arrangements for sleeper services has been taken following a detailed analysis, which included the option of a direct award to Serco. As the member has asked, that analysis was conducted in accordance with the current UK legislative framework, which is reserved, and in accordance with our franchising policy in Scotland. That requires me as the minister to look at the process. We had to look at whether a new franchise contract competition was required, which, as members will recall, was ruled out. Then, we needed to consider the option of a direct award of a franchise contract to a suitable contractor, which was ruled out due to market instability. Only when options 1 and 2 have been decided against can an operator of last resort mobilisation be deployed.

To answer the member’s further question, we are currently curtailed in relation to the legislation due to the powers being reserved to the UK Government. However, there would be an opportunity to do things differently if those powers were to come back to Scotland—the member and I share that sentiment—and we could have power over all our railways and could have real integration across the network, which we need.

I remind members of my entry in the members’ register of interests.

Today is a red-letter day, so can I ask if this is a decision that has been taken to, and ratified by, the whole Cabinet?

Finally, the pay anniversary for staff who work on the Caledonian sleeper is 1 April. The Serco temporary measures agreement does not end until June. The Scottish Government must therefore sign off any pay award for this year. So will the minister commit today to a fair pay award for those staff this year, and will she commit to direct negotiations with the trade unions over pay and conditions once the service is back where it belongs, where it should always have been, in public ownership?

Certainly, the First Minister has signed off the approach and Cabinet members will be aware of it, as I know that it would have been discussed at the Cabinet. As I am a junior minister, I do not attend the Cabinet, but my cabinet secretary will have brought the matter to its attention.

In relation to his question about the pay award, the member knows that I spent the first six months of my time in this job meeting railway unions on a regular basis, which was instrumental to my experience and to my forming good relationships with our railway unions, which is hugely important. Direct negotiations would be a matter for the new entity but, as transport minister, I would be more than happy to meet the railway unions, and I do so regularly. I am sure that we will be meeting in the near future as a result of today’s decision.

I am delighted with the news that the Caley sleeper is to be brought into public ownership and with the overall continued nationalisation of Scotland’s railway. I hope that that will provide the opportunity for the sleeper service to be made more attractive to, and more useful for, my constituents in the Highlands and Islands, rather than the sole focus being on Londoners coming to enjoy my region. Given the history of near-empty trains being run on the southbound journey from Inverness, can the minister tell us whether any consideration has been given to how journeys and the opportunities that the service creates can be marketed to Highlanders?

The member makes an important point. The Caley sleeper reaches many different communities. It is not just about the central belt; I have alluded to some of the places that the sleeper reaches—it reaches 43 stations across Scotland. The rail network also reaches parts of the country that roads are not able to reach.

With the current franchise coming to an end at the end of June, we have an opportunity to look again at the delivery of services. However, as a local MSP, the member will know that services to the Highlands are already heavily used and are highly valued by passengers, irrespective of where they come from. If the member has ideas about what more we might be able to do under OLR arrangements to promote the service, I would be happy to meet with her to discuss that. In the meantime, we will continue to promote the Caledonian sleeper’s contribution to tourism in the Highlands and as a sustainable form of transport to and from London.

The Caledonian sleeper is the greener option by miles, but travelling on it has often been significantly more expensive than travelling by plane. Rather than a luxury service, we need cheaper fares and a quality service. Public ownership of the sleeper may be the way forward, but the Scottish Government’s nationalisation of ScotRail does not inspire confidence. How is the Scottish Government going to ensure that the sleeper is the greener, credible, competitive way to travel?

I am sorry that Ms Wishart is not inspired by public ownership of Scotland’s railways. I use those services regularly—I do not know whether she does—and find them to be in the main very efficient. They are among the most efficient railway services in the whole of the United Kingdom.

I am sympathetic Ms Wishart’s point about expense, which Mr Bibby also alluded to. Obviously, under the Serco franchise, the approach has been more focused on tourism and luxury products, but that might be different in the future. I do not want to prejudge what it will look like, but that has been Serco’s approach.

As I alluded to in my response to Mr Simpson, Serco has been successful in driving an increase in tourism, and it is important that we do not lose the benefits of that approach. However, I am sympathetic to Ms Wishart’s overall assessment of expense. We need to make public transport, irrespective of mode, more affordable, so we will require to look at that opportunity in more detail under the new arrangements.

The minister has highlighted the strong performance of the Caley sleeper. Will she outline how that will continue under the governance arrangements for the operator of last resort?

Jackie Dunbar raises an important point. The sleeper has performed well, as we have discussed, and it is important that we use that success as a barometer to build on under the OLR arrangements. As I mentioned, the new arrangements will provide stability and certainty for passengers and staff, which is really important, and will allow us to move forward with public ownership from the end of the contract.

The main way that we can build on that success is through staff, because it is the people who are behind our railways who make them successful. I am very confident that, under those arrangements, we can build on our experience of public sector operation to ensure that the bright future that we all want to see for the Caledonian sleeper is protected while we wait for clarity from the UK Government on its rail reform proposals.

I am delighted that the Government is able to deliver an integrated publicly owned ScotRail, now complete with a world-class sleeper service. Alongside the rail unions, we have been clear from the start that a nationalised sleeper service is central to our vision for a people’s ScotRail, including delivering that climate-critical shift from plane to rail and better connectivity with our friends in Europe. Does the minister agree that, with a nationalised Caledonian sleeper, we are one step closer to a fully integrated affordable rail route from Scotland to mainland Europe?

Yes, I broadly agree with the member’s assertion. This is a real opportunity to take a more joined-up approach to transport—not just within Scotland, of course. The sleeper gives us great opportunities in that respect.

However, nationalising rail services and extending the service to Europe would require the full devolution of rail powers to Scotland. I am sure that Mr Ruskell would support me in calling for those rail powers to come back to Scotland, and in asking people with a genuine interest to get behind the calls for those powers to be devolved to Scotland to allow us to take the opportunities that are presented to us by the OLR arrangements.

How much has implementing operator-of-last-resort arrangements cost the Scottish taxpayer to date, and can the Scottish Government afford to run and improve the Caledonian sleeper?

As I outlined in my statement, I have instructed officials to proceed with the implementation of OLR arrangements, and the final cost will be published in due course as part of normal Government accounting processes. More broadly, we have made available funding that would be considered appropriate to maintain support for the net cost of running sleeper services.

I am sat here trying to digest that answer. We have a thriving and attractive service that is of the highest standard and exceeds passenger expectations, so we are nationalising it. We have no idea of the cost, but are taking that action before we find out the cost. We know that ScotRail costs us north of £1.3 billion a year. How can the minister make that move without knowing the cost? Does she at least have an estimate if she does not know the exact cost?

Doom and gloom from Mr Mountain. It is unfortunate that he cannot recognise that I am curtailed by reserved UK railway legislation that I have to adhere to as the Minister for Transport. If Mr Mountain does not like that, I suggest that he gets behind calls to devolve powers back to Scotland to give me full powers over Scotland’s railways.

I refer to my entry in the register of members’ interests.

I warmly welcome that the Caledonian sleeper will be publicly run and note what the minister said about the length of the arrangement and the UK Government review. The ScotRail contract is for five years, with the option to extend for five more. Does the minster agree that it would be preferable to have certainty on the length of the contract with a Government-owned arms-length company?

I agree with the member’s sentiments. In relation to the sleeper service, there is uncertainty in relation to where the Williams-Shapps review will go next. That uncertainty also extends to the delivery of ScotRail services, which will be impacted by any decision that the UK Government takes. I am sure that the member would agree with me that the UK Government needs to come forward with those plans. As minister, I do not feel that I have been adequately consulted in relation to what the plans will mean for Scotland. The way around that is to devolve powers over rail infrastructure back to Scotland to give us the full powers over railways. I do not know whether Mr Bibby supports that, but it would allow for greater accountability of the Scottish Government, so I am sure that Labour members would welcome it.

Will the decision to take the contract back under Government control incur any compensation or further contractual payments to Serco?

I am not aware of any contractual requirements that would allow for that, but I am more than happy to check with Transport Scotland officials and clarify that with the member.

If Serco loses millions running the service at near capacity, what will a state-run service do differently, so that those losses are not borne by the taxpayer?

I am sure that Mr Lumsden joins me in wanting the service to be a success. We will work very closely with the staff at Serco, who will, of course, be TUPE-ing over to the new OLR arrangements. Fundamentally, making a success of the Caledonian sleeper service depends on the staff who work on our railways, and I very much hope that they will welcome the decision today.

That concludes the statement on the Caledonian sleeper train.

There will be a short pause to allow front bench teams to change position, should they wish to do so.