ScotRail Franchise
Good morning. The first item of business is a debate on motion S3M-3075, in the name of Des McNulty, on the ScotRail franchise.
There was widespread concern and disappointment in April, when the Scottish National Party announced that it had, without consultation with passenger bodies, trade unions or anyone else, agreed to extend First ScotRail's train contract to 2014. Ministers did not seek separate advice when First ScotRail claimed that the negotiations were sensitive, in that they could affect the company's share price. They put the company's interests before those of passengers and employee representatives, who were denied any input, even on a confidential basis.
Ministers could have waited until Audit Scotland had completed its programmed review of the operation of the franchise, which was deliberately timed to help Transport Scotland learn lessons that could be applied in developing the franchise in the event of a three-year extension being granted or a new franchise being tendered for, but the minister and Transport Scotland decided not to consult and not to wait.
They did a deal that they claimed would guarantee that £73.1 million would be made available to reinvest in the network. In the context of a £2.5 billion contract, that is not much of a dividend. Moreover, it turns out that the provision of that sum is not even guaranteed, as it depends on First ScotRail meeting revenue targets. The revised terms kick in only after First's profits exceed £27.247 million per year. The agreements were adjusted so that First will retain a greater proportion of income before anything is paid back to the Government. First is protected from any downturn in passenger revenue, as the Government is now contractually obliged to step in with additional financial support. That is not a bad deal from First's point of view. The company can coin it during the good times, when revenues are on the increase, and is protected from financial risk when times are harder.
As Iain Gray pointed out last week,
"lack of consultation created practical difficulties."—[Official Report, 4 December 2008; c 13095.]
Strathclyde partnership for transport had agreed to fund closed-circuit television on its stations for the full term of the contract, at a cost of almost £0.5 million a year, but the Minister for Transport, Infrastructure and Climate Change did not bother to ask where the money for that would be found, with the result that a hole was left, which Transport Scotland will have to fill using its £73.1 million piggy bank—if, indeed, it gets that money.
If the minister had asked his officials to supply him with a properly documented business case and had tracked the detail carefully, such omissions could and probably would have been identified but, according to Audit Scotland, the contract—which is huge—was let on the basis of presentations to the minister.
The minister must have been aware that his signature is worth a huge amount of money to FirstGroup. Parliament and the Scottish people have a right to expect a level of due diligence commensurate with the scale of the contract; they do not expect the approach that the minister adopted yesterday, when he announced a huge raft of vaguely costed and specified projects, for which there is no timetabled programme. He admitted that he had not based his plans on any projections of how much the Government would have to spend on transport projects in the 2014 or 2017 spending review periods.
In the Audit Scotland report, it was revealed that the finance director of Transport Scotland, the man whose job description presumably includes advising on financial issues, had a substantial shareholding in First. The handling of that conflict of interest does not seem to have satisfied Audit Scotland, and I feel sure that the Public Audit Committee will want to consider that as part of its investigation, the holding of which I understand was agreed to yesterday.
If the contract is price sensitive, surely someone must have recognised the sensitivities in relation to a financial conflict of interest. How on earth could a situation have been allowed to come about in which someone who had a financial interest was sitting at the table and had access to financial information? What judgments were made by those whose job it was to deal with such matters to protect the reputation of Transport Scotland?
Let me put the questions that the politicians must answer. When were ministers made aware of the conflict of interest involving the finance director? What view do they take of the handling of such staffing and governance matters by Transport Scotland? Have further investigations been carried out? Is any action being taken as a consequence?
On Saturday, The Sun ran a story that suggested that Mr Houston had been under investigation in relation to a separate matter—the M80 extension—about which my colleague Cathie Craigie has been seeking a meeting with Transport Scotland, unsuccessfully, for weeks. I do not want to take that issue any further, as we might be getting into personnel matters, which it is inappropriate to air in the Parliament.
However, this week I received a faxed copy of a letter to Transport Scotland from the former operators of a bus company in Scotland, who complained that the finance director of Transport Scotland, Mr Houston, had treated their company unreasonably in relation to payments under the concessionary fares scheme, for which he had managerial responsibility, with the result that they were forced out of business. They claim that the only beneficiary of that is FirstGroup.
I do not know the full background to the issue or where the truth lies, but problems are stacking up on the issues of probity and governance. It is the job of both Transport Scotland and the minister to ensure that such matters are properly dealt with. The problems are not resolved by the departure of Mr Houston. We must find out why the conflict of interest arose, what its implications might have been, why it was not prevented, what steps should have been taken and why they were not, and whether the monitoring and scrutiny of Transport Scotland, which is ultimately the responsibility of the minister, has been properly carried out.
We should have had a proper consultation before the franchise extension was agreed to, not a sham consultation afterwards. There would have been far more point in discussing the options that could have been delivered before negotiations on the contract were completed rather than carrying out a consultation on priced options afterwards. Ministers claimed at the time that the agreement would lock in various benefits and would secure increased investment from ScotRail, but that is dependent on the revenue that is generated; it is not a cast-iron guarantee.
The whole process needs to be investigated properly, and the Public Audit Committee would be best placed to do that. It is only reasonable to ask the minister to answer the questions about what went wrong, why that happened and what he intends to do about it.
I move,
That the Parliament notes the Audit Scotland report on the extension of First ScotRail's contract to 2014; expresses serious concern regarding the lack of consultation over the extension of this franchise and the failure of ministers to require a fully documented business case; notes the resignation of the former finance director of Transport Scotland; calls on the Scottish Government to cooperate with any Audit Committee investigation, and urges the Minister for Transport, Infrastructure and Climate Change to issue a statement to the Parliament should any investigation into the probity or governance within Transport Scotland make that necessary.
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.
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?
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 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".
The quality of train services in Scotland is often far lower than passengers and taxpayers have a right to expect. It is generally accepted that FirstGroup has presided over an improvement in service levels over the past four years. First ScotRail's managing director, Mary Grant, is widely credited with having overseen improved performance of the company and deserves credit for that success. We are therefore confident that rewarding First with an additional three years is the correct decision.
While the recent Audit Scotland report contained some criticism of Transport Scotland's handling of the franchise and the extension process, its overall assessment of the franchise was generally positive. It is therefore strange that the Labour Party places so much emphasis on the report's findings. Much of the criticism contained in the report refers to Transport Scotland's oversight of the franchise since 2004. As the Labour Party—together with the Liberal Democrats—was responsible for Transport Scotland during most of that period, it is they who are being criticised, at least as much as the present Government.
It should also be borne in mind that it was the previous Labour-led Executive that established Transport Scotland, awarded the current franchise to FirstGroup and provided the three-year extension period as an option. It is therefore at best disingenuous and at worst outright hypocrisy for the Labour Party to seek to blame others for failings for which it is at least partially responsible. While there is no doubt that mistakes were made in the way in which the franchise extension was conducted, and that civil servants at Transport Scotland and the ministers concerned must ensure that lessons are learned, it is hard to escape the conclusion that this debate has as much to do with the Labour Party playing politics as with any serious concerns about the handling of what remains an overall success for ScotRail.
Will the member give way?
No. I have only four minutes.
On the future of rail services in Scotland, we are encouraged by some of the concessions that the Government has secured from FirstGroup as part of the franchise extension. The list of priced options that the Government may require First to implement during the term of the franchise includes a number of interesting proposals. I particularly welcome the opportunity that it has given to reopen the station at Laurencekirk. Improvements to Edinburgh to Glasgow services, among others, are important opportunities that have been taken up.
We would like the Government to use today's debate to outline any further improvements that it intends to implement over the coming years, including further improvements to the Edinburgh to Glasgow service, the potential for additional rolling stock to be brought in from other parts of the country and possible improvements to the Caledonian sleeper service.
Ultimately, we would like effort to be focused on ways of rebalancing the present ratio of public-private funding for the franchise in favour of reducing the enormous public subsidy, while simultaneously increasing commercial freedom for the operator. The present irony is that while the railways are officially privatised, micromanagement by the state—through civil servants at Transport Scotland—is arguably far greater than it was even in the days of British Rail. Increased commercial freedom in return for an increased share of private sector funding would therefore be a worthy aim for the Government to pursue.
Des McNulty introduced additional issues to the debate. I will not take a position on the information that he presented to us and will wait to hear more about that.
I move amendment S3M-3075.1, to leave out from "expresses" to end and insert:
"notes from the report that the original contract, negotiated by the previous Labour-led Scottish administration, "did not specify the conditions under which an extension should be considered or the criteria to be used to decide whether an extension might be appropriate"; believes that practice and procedures for future contract management can be improved and notes the report's recommendations for Transport Scotland; considers that, in light of the finding that "First ScotRail was performing above its punctuality and capacity improvements targets within its first year of operating" and "key aspects of the original franchise contract were no longer fit for purpose", the decision to extend the contract, inserted into the original contract under the previous Labour-led Scottish administration, was on balance justifiable."
I welcome the chance to debate the extension of the First ScotRail passenger franchise. Although I welcome the debate, I cannot help but feel that it is a debate that we should have had a long time ago, perhaps before the Government committed an extra £800 million of taxpayers' money. Back in the spring, before the Government made its decision, we might have been able to hold a constructive debate on the case for the extension. Instead, we are left with an inquest. How could Transport Scotland make its recommendation without a formal consultation process? How could the minister make such a huge decision—the largest contract that the Government has handed out—without ever seeing a documented business case? I do not have the answer.
Any member here, with the possible exception of those on the Government's benches, might easily fill the whole morning going over the shortcomings—no, the downright failures—of the process. As tempting as that may be, however, our time is brief and I will have to settle for the highlights, if that is not a contradiction in terms. What we get from them is a damning indictment of the decision-making process of this Government. Although the problems started before the minister got in on the act, we do not need to look much further than him for the root cause. If someone knows that the boss will say yes to whatever they present him with, why bother following what the rest of us would consider to be a proper process?
Will Alison McInnes enlighten Parliament about what her last remark meant? I do not understand her point about the boss saying yes.
Mr Stevenson is less than thorough in some of his decision-making processes. Yesterday, he brought us an enormous document with absolutely no details in it. He seems to be less than interested in some of the details.
Audit Scotland's report is, as we well know, highly enlightening on the subject. It said that Transport Scotland established criteria
"to determine whether the extension should be awarded"
and that it
"considered risks during meetings".
But Transport Scotland did not think it necessary, or even sensible, to make any formal records of that.
Although a—now former—senior director holds shares in FirstGroup, we are assured that he had no vote on any decision and was not involved in the review. However, yet again, we have no record of any declaration of interests—other than those in the formal register—or of whether he absented himself from discussions.
There was no external consultation on the extension—although Transport Scotland had "concerns". Was it not even a little worried about the appearance that would be given by keeping things hidden from view? Multimillion pound decisions should not be taken—cannot be taken—in such a way. A lack of proper consultation leaves passengers and stakeholders disconnected from the process and can all too easily lead to unintended consequences, as has already been pointed out by Des McNulty.
I think that we are all agreed that Transport Scotland should know better. It should understand the need for proper procedure and for openness and transparency throughout. Perhaps the problem is that it also knows that this Government is not as concerned with those things as the rest of us. As we know, the minister blithely backed the extension, never asking to see a proper business case. Indeed, as far as we know, he never even considered the need for a consultation, and never saw a problem with the nature of Transport Scotland's work. In fact, if we consider his amendment, perhaps we can say that he was proud of it. The sad thing is that none of this surprises me.
Still, even after the catalogue of errors, the extension itself brings an opportunity in the form of £73.1 million to reinvest in transport projects—investment that the whole of Scotland could benefit from. That is, of course, if the minister does not have his way. It worries me that he may already have committed much of the money to improvements in the central belt. No doubt work needs to be done there—but not there alone. The franchise return funds must be used in a way that will benefit every region. Investing some of the money in improving services between Aberdeen and Inverness, Perth and Edinburgh, and Glasgow and the south of Scotland could play a huge role in making the railway an attractive alternative to the car for people across the country.
Almost as important as the decision on how to spend the funds is the manner in which it is made. The minister must make a commitment—here, today—to come back to Parliament following the current consultation. How to spend money in a way that will best benefit Scotland is a matter for this chamber, not for secret meetings behind closed doors.
I move amendment S3M-3075.2, to insert at end:
"requires the Scottish Government to conduct the next steps of the franchise extension process with the greatest possible transparency, and therefore calls on the Minister for Transport, Infrastructure and Climate Change to bring before Parliament the draft proposals on how the £73.1 million accrued through the franchise extension will be reinvested to allow close scrutiny of the plans before any further funds are committed."
We now come to open debate. We have a little flexibility, so if members are minded to accept interventions, I will be able to add on time for that luxury.
I was one of the MSPs who, in April in this chamber, expressed surprise at the timing of the extension of the ScotRail franchise. I thought that it was unnecessarily abrupt, and not at all transparent.
As a co-signatory, in a previous capacity, to the first franchise for ScotRail, I know for sure that it is perfectly possible to balance public accountability with commercial confidentiality in such circumstances. I do not at all accept that it was necessary for things to be done in secret and with no public consultation—which was bemoaned by, among others, the body that represents the interests of rail passengers.
Rushing ahead with the extension to the ScotRail franchise before a study—a scheduled study—by Audit Scotland, was risky; but it has now emerged, through Audit Scotland's work, that rushing ahead may well have been reckless.
The extension delivers a win-win deal for First ScotRail. To be fair, it is true that the management team at ScotRail have done a competent job of running the franchise. However, that does not necessarily make them men and women of vision. For example, the team operates the Scotland to London sleeper services, but as far as I am aware they have not asked to give oral evidence to the Parliament's Transport, Infrastructure and Climate Change Committee on its current inquiry into high-speed rail services. High-speed rail may well have implications for ScotRail's services.
I will repeat a concern that I expressed to the chamber in April: hastily extending the current franchise kills off the possibility of reintegrating train operation in Scotland with track management—what I call vertical reintegration in the railways. That would bring enormous benefits, but it has, in effect, been kicked into touch.
I am interested in the member's point. Does he believe that this is the right time to transfer more responsibilities to the Scottish Parliament—including responsibility for the metal, so that the wheel-metal conjoining that he advocates can actually be delivered?
Indeed, yes. I have advocated that on more than one occasion in this chamber—and I have reminded the Scottish Government that it is not using its current powers to the full. For example, the First Minister never seems to use his legal power to give instructions—instructions—to Network Rail. It seems to me that we have been sold short by a lack of vision, not only among the rail operators in the industry, but within the Scottish Government itself.
Des McNulty started this debate in a measured way. However, if one considers press concerns about a certain individual and the M80 contract, and if one considers new concerns expressed about the same individual vis-à-vis financial relationships with bus companies, I have to ask: what are the press and the public supposed to think when ministers insist on behaving in a secretive fashion? With great glee, the minister rejoined to Des McNulty, saying, in effect, "I know the truth about that bus business and no one else does."
Presiding Officer, one of the things that I dislike most about the Scottish Parliament is when ministers, from any party, stand at the front bench and say to MSPs, "I know something you don't know, but I'm not gonnae tell you what it is." Not only does that not happen in local government, where I spent 18 years, it is actually illegal in local government not to tell elected members the full truth about the issues before them.
I will close on a point about Alex Johnstone. It made me sick to hear him bemoaning the huge subsidy to the ScotRail franchise. Does Mr Johnstone not realise that, on the day that the railways were privatised, by a Tory Government, the public subsidy that had been going into the nationalised British Rail doubled overnight? It was the Tories what did it.
One thing we can never accuse the Labour Party of is having a good sense of timing. Calling a debate on the ScotRail franchise for the day after the Scottish Government announced investment of £3 billion over 10 years in the maintenance and safe operation of Scotland's railways—yes, that was £3 billion—was a stroke of genius, and I congratulate Des McNulty on it.
Of course, there was also other investment in our railways: up to £2.5 billion for the electrification of our rail network, and about time as well; millions on reducing journey times and on park-and-ride schemes and integrated ticketing; and up to £250 million on rail enhancements. That was excellent news for rail users, from a Government that cares about making Scotland better.
The other excellent news for rail users is that the extension of the franchise gives everyone a chance to have a proper look at what is going on in Scotland's railways today—and it will allow some organisations the time that they need to prepare a bid to run Scotland's railways.
I can entirely understand that the member is very excited about yesterday's announcement. However, does she not understand the point that passengers, members of the public, MSPs and others wanted the chance to have their say before the decisions on the strategic transport projects review or the extension of the franchise were made? Offering such a chance would not have set a precedent; other Administrations elsewhere in the UK consult on decisions before they announce them.
Yes, the member obviously has a point. However, the contract was set in place in 2002—by Iain Gray.
As I was saying, I understand that one of those bids is now likely to come from the railway unions—and I take it that Des McNulty and his Labour colleagues will be keen to welcome that interest from the unions and will welcome the contract extension that gives them the time to prepare a bid. Or perhaps not—because Labour members do not appear to remember much.
In a Labour Party news release from 28 November, Des McNulty is quoted as claiming that the SNP negotiated a deal in private to extend the ScotRail franchise. The truth is, of course, that the previous Labour and Liberal Democrat Administration negotiated the contract. In fact, I am sure that Labour members will be delighted to be reminded that the transport minister who negotiated that contract with the extension option was a fellow by the name of Iain Gray. I wonder what he is up to these days—he is not reading Labour motions, that is for sure. I am glad that the motion
"notes the Audit Scotland report".
On page 17, that report states:
"Transport Scotland reviewed the contract using a rigorous appraisal process".
Well said, Audit Scotland. The report also noted the £73 million investment that will come from First ScotRail as a result of the franchise extension. I am sure that even the Labour Party will welcome some of the fruits of that investment—it is certainly a better dividend than the one that we get from the union. There will be additional rolling stock to help improve services, even if they carry the saltire livery that Lord Foulkes insists is nationalism by stealth. There will be extra services down the west coast to Ayrshire; extra services between Glasgow and Edinburgh; extra services up the east coast; some long-awaited improvements in the Highlands; wireless internet access on trains between Glasgow and Edinburgh, which I am sure will help some MSPs when they are working while they are on the train; extra customer service staff; improvements in stations across the country; a profit cap mechanism to pump more money into improvements in our railway; and fare protection, which was completely missed from the original contract, which I believe is a travesty.
The Scottish Government is delivering so well that George Foulkes will soon be accusing us of making things better on purpose. I am delighted to be able to contrast the record of improving our railways with the atrocious record of the Labour Party. As one Labour councillor was heard to remark:
"God bless the SNP government."
While Gordon Brown thinks that he is saving the world, the SNP will just carry on making Scotland better.
There is something to be said for people in positions of power avoiding conflicts of interest, particularly where they might be open to accusations of putting personal gain before the public interest. If they cannot, or do not want to divest themselves of any private financial interest that might have a bearing on decisions that are supposedly being made in the public interest, the very least that they should do is declare their interests and exclude themselves from deliberations. How was it that the finance director of Transport Scotland participated in key meetings to discuss the extension of the ScotRail franchise without declaring his financial interests in First ScotRail's parent company, FirstGroup? He was then exposed by Audit Scotland, which led to his resignation. Why was he allowed to participate in the first place?
When the extension was announced, I, and many others, had misgivings. There was no consultation with the public, the workforce or the trade unions. The extension was agreed without assessment or a business case. Those of us with doubts had real difficulty obtaining adequate information about the extension. That was because a lot of the information that we wanted simply was not available. Meanwhile, First ScotRail was on the fast inside track, with signals locked on green and all the barriers raised.
There was no proper assessment of whether the extension was in the interest of the travelling public—the same people who are about to be hit by further price inflation in the coming year. Many already pay over the odds for their journey. Rail travel often offers little incentive for people to get out of their car and use public transport. I am sure that many members of the public will have their doubts about the extension.
What was the Scottish Government's role in all this? The Scottish Government is responsible for the £2.5 billion public subsidy to First ScotRail—and a further £900 million during the three-year extension. That is the largest contract awarded by the Scottish ministers.
Was the minister flattered by the suggestion that a presentation to him was somehow more appropriate than public scrutiny? Did he really believe that by allowing the extension in advance of the Audit Scotland report, any criticism contained in it would somehow be made irrelevant? The simple fact is that the Audit Scotland report will be made irrelevant if the ScotRail franchise extension is allowed to proceed without proper scrutiny of not only the contract itself, but the circumstances that allowed it to be extended without such scrutiny. I would call a halt to the franchise extension and instigate an inquiry by the Scottish Parliament. The very least that we should do is insist that the Scottish Government co-operate with any Public Audit Committee investigation and that the minister issues a statement to the Parliament in response to any such investigation.
I echo the comments of my colleague Christina McKelvie, who set out the detailed improvements that have been seen and will be seen throughout Scotland as a result of the strategic transport projects review, the conclusions of which were announced yesterday.
Alex Johnstone sets out in his amendment the history of the original contract—it will do no harm to remind ourselves of exactly what that contract was. In 2004, the Labour Executive awarded the contract for another seven years to 2011, with the opportunity for a further three-year extension. I say to Mr McNulty that it included no specified conditions, no criteria were laid down for future management, and there was no mention of consultation. That happened on the watch of the Labour Executive, so Labour should spare us its hypocrisy.
Will the member give way?
I am sorry, but I want to get through all my speech.
I remind Cathy Peattie that Transport Scotland was set up in 2006 and its membership would have been known to the Labour Executive, so she should spare us her crocodile tears.
Will the member give way?
No—sorry.
If I may be so bold, I will answer Des McNulty's calls directly in a few sentences. "Yes" and "yes" would be the answers to the calls that he makes in his motion. This Government has co-operated and will always co-operate with the committee structures of this Parliament—something that, sadly, cannot be said for the previous Executive. Furthermore, this Government—unlike Des McNulty—values the integrity and impartiality of the committee structure and will not seek to pre-empt the conclusions of any investigations by lodging spurious motions for debate in the chamber before the committee in question has had an opportunity to investigate the matter fully.
Surely Sandra White is avoiding the issue. It is all very well to talk about the committees, but the debate is about the ScotRail franchise; it is about the lack of consultation and failure to declare an interest.
I believe that Audit Scotland said that the gentleman in question did declare an interest, so Cathy Peattie's remarks are spurious. The issue is about the strategic transport projects review as well as various things that are happening in Parliament. Cathy Peattie cannot dictate to the minister or to Parliament what a committee will do. She cannot see into the future—that is the point that I am trying to make. We should not be dictating to the minister or to the committee. The minister has already said that he would not dictate to the committee. Cathy Peattie's accusations are pretty spurious to say the least.
If it is deemed appropriate for the minister to make a statement to Parliament, I am sure that he will make one. I put that point strongly.
I hope that those points answer in a nutshell the concerns of Des McNulty and others.
Des McNulty's motion seems to misrepresent the findings of Audit Scotland's report. Indeed, everyone has accepted that the report was generally positive. It stated that
"Transport Scotland's management arrangements are generally effective … Transport Scotland used the Network Modelling Framework and drew on the Department for Transport's templates and guidance on franchise continuation."
Despite that, Des McNulty expressed "serious concern"—there is possibly even a conspiracy involving unscrupulous ministers and shadowy figures within Transport Scotland. To make unfounded accusations about the integrity and impartiality of Transport Scotland and individuals in a sad attempt to make a political point is lamentable; it does the Labour Party and the Parliament no service.
I welcome the opportunity to take part in this morning's debate and rise to speak in support of the Labour Party motion. The motion is specific, not "spurious", and it deals with important issues of scrutiny and accountability.
The railways have an important part to play in this country in relation to economic growth. If we boost the rail network and improve connectivity, we can also boost the economy and retain and grow the number of jobs in Scotland. Increasing the number of passengers who use the rail network is also important to reducing carbon emissions and helping the environment.
There are serious concerns about the process. The contract's value is £2.5 billion over its lifetime and the three-year extension is worth £900 million. The fact that no formal business plan was produced for the extension is astonishing. The minister chides Des McNulty about detail, but the minister did not examine the detail of a business plan. The extension seems to have been granted on the basis of a PowerPoint presentation. Rather than signing up to a contract extension, the approach seems to have been, "Click on the contract extension button and off you go boys, that's your extension."
It is clear that several members are concerned that the extension was awarded before Audit Scotland's investigation was completed. In addition, trade unions and passenger groups were not consulted.
I draw members' attention to a case that my constituent Scott Bowie from Rutherglen raised with me recently. He and his partner were stuck on a train from Glasgow Central station to Rutherglen for two hours, during which communication about the problem was lacking and the train's toilet facilities did not work. He described other train delays in the area and said that three-carriage trains were being operated at peak times. That is clearly unacceptable against the backdrop that he and his partner spend £1,500 on rail fares each year. I have taken up those matters with ScotRail, because they are for it and not for the minister. However, when passengers have such concerns about ScotRail's service and the lack of facilities on trains, surely when the contract extension was being considered pressure should have been put on ScotRail to seek improvements. Passengers were not given the opportunity to be involved.
Another concern is that the extension agreement raised the revenue-sharing threshold by 8 percentage points. That says clearly to ScotRail that although the Government made great play yesterday of putting in place transport infrastructure, improving infrastructure and boosting the economy, ScotRail can continue earning money and can do so up to a higher limit before the taxpayer shares those higher income levels.
Questions must be answered by the PowerPoint wizard—the minister. Why did no consultation take place? Why was no business plan produced? Why was the income-retention threshold raised? It is time for answers to those questions.
The key point about the contract extension is that no formal business plan was presented to, or taken on board by, the minister before he confirmed the extension.
By April 2006, First ScotRail was outstripping contractual performance requirements, and 80 per cent of its additional revenue was being returned to the Scottish Government. Transport Scotland was concerned that that could discourage further service growth and improvements. As has been said, the previous Administration put in place the contract and the intention was that an extension would be done openly, but the minister simply set probity aside. The Government did not seem to negotiate prices. Under its extended franchise, First ScotRail has recently raised prices by well above the inflation rate, with no recourse to the Parliament, individual MSPs or the public.
Last week, the First Minister said:
"the report also highlights issues of governance for Transport Scotland, which will be considered for future improvement."—[Official Report, 4 December 2008; c 13104.]
Transport Scotland's former director of finance and corporate services, Guy Houston, resigned following the publication of Audit Scotland's report, which criticised his participation in key meetings to discuss the extension of First ScotRail's franchise without having declared his financial interest in First ScotRail's parent company, FirstGroup. As the First Minister conceded last week, governance needs to be improved.
Consultation on how to spend the £73 million dividend has closed before the Minister for Transport, Infrastructure and Climate Change has made a commitment to come to Parliament and allow his plans to be scrutinised before any final decision is made. Have ministers already allocated that money? If so, what projects has the minister committed to funding with the dividend? The consultation on how best the £73 million could be spent on further services did not begin until after the contract was extended, and it closed just two days after the Auditor General's report condemning governance practices was issued on 28 November.
Des McNulty was right to say that not enough consultation happened before extension of the ScotRail franchise was announced in April. That lack of consultation created practical difficulties and showed another funding black hole in the Government's programme. The fact that the contract was let on the basis of representations to the minister is in some ways bizarre. When were ministers made aware of the conflict of interest of Transport Scotland's finance director? What are the implications and what steps should have been taken? The minister is ultimately responsible, so I hope that he will give Parliament more clarity in summing up.
The minister said that
"Good franchise management is critical to … success".
That may be true, but the process has certainly not been open or above board on the minister's watch.
Alex Johnstone said that First ScotRail had overseen improvements in the past few years but that there is more to do. I agree. Anything that First ScotRail does or that is done through the minister must be much more open and transparent.
Alex Johnstone might be happy with some franchise improvements, such as Laurencekirk station, but he might not know that that was on the way before the franchise was extended. Perhaps he should examine some of the details.
My colleague Alison McInnes touched on key points. As she said, the debate should have been held a long time ago and certainly before the Government handed out the largest contract without so much as a business case.
Is the member aware that the costed options deliver £7.8 million of benefits to north-east Scotland? That is a substantial addition to Laurencekirk station.
I am aware that not only the north-east, but many areas throughout Scotland will be helped. However, the minister must be aware that much more openness is required and that many such measures were in place before he extended the contract. That is a key point to bear in mind.
Government procedures have received a damning indictment. Audit Scotland's report was enlightening. No external consultation took place and the minister did not heed the appearance that actions were being kept hidden. Huge concerns remain not just in Parliament, but among many people outwith it.
In his amendment, the minister tries to remove reference to controversial concerns. I hope that the Liberal Democrats' amendment, in conjunction with Labour's motion, wins the day.
It is clear that the Labour Party has found a stick with which to beat the Government, but it is equally clear that it is a pretty small stick. It is also clear that the previous Administration must accept a fairly high degree of culpability for some of the criticisms in Audit Scotland's report.
First, as we have heard, the initial contract contained a clause for a three-year extension. It is staggering that the transport minister who completed that contract did not include a single term about how the extension process should work or a single criterion for operating an extension. The transport minister of that time must therefore accept some culpability.
There is another reason why the previous Administration has to accept that it is to a degree culpable, but which has not been raised in the debate thus far. We heard criticism that the franchise was extended by means of a PowerPoint presentation and that it was done at the click of a mouse, but if one reads the Audit Scotland report—I question how many members have done so—one finds that the first moves for reviewing the contract were taken by the previous Administration.
In October 2006, external consultants were engaged to provide advice and to review the Transport Scotland analysis. In November 2006, Transport Scotland acknowledged the need to review the contract. In December 2006, the Liberal Democrat Minister for Transport of the time agreed to a formal review of the existing agreement. The previous Administration is on quite shaky ground on this.
As my colleague Alex Johnstone said, we are pretty supportive of the franchise extension, albeit that we are not 100 per cent happy with the means by which it was done. The Government needs to take away some lessons from all this. As Audit Scotland said:
"Overall, First ScotRail's performance to date has been good, and continues to improve."
The reason why it was critical for the Government to examine the issue—in this respect, the Liberal Democrat former Minister for Transport was right to put the process in train in December 2006—was the bizarre situation in which we found ourselves at that time. If First ScotRail had reached over 100 per cent of its target revenue, 80 per cent was to flow back to the public purse, so there was a real disincentive for First ScotRail to invest or to improve performance. For every pound that it invested, it would have had to make £5 just to break even, which had not been anticipated at the outset of the contract. I do not criticise the former Administration for that; indeed, I applaud it for moving on the review in December 2006 once it appreciated the bizarre situation in which it found itself. A review of the contract absolutely had to take place at that time.
No—not at this time.
Coupled with that was the need to reset performance targets in line with performance at the time. As Jim Tolson said, First ScotRail was outstripping most of its performance targets. For as long as performance remained above target, First ScotRail would have incurred no penalty for reducing performance, so there was a clear need to reset performance targets. We were absolutely behind the Government decision to do that.
My criticism of the Government is on the means by which the extension was made—the process could have been more open and transparent. I take seriously the comments that Bruce Crawford made only this week that the Scottish Government is "more open than ever" and that it is "leading the way" in promoting openness and transparency. Mr Crawford also made the point that one has to "go beyond" what is in contract and statute. I hope that the Government will in the future be more open and transparent when it is considering franchises.
Although the review is a good thing in itself, there have been one or two missed opportunities. The chamber has heard about the £73 million of additional moneys but, as Audit Scotland pointed out, at least £1.5 million of that will have to go over three years on CCTV in Strathclyde. Although that was the only cost that Audit Scotland mentioned in its report, it would be useful to know whether the minister will agree to look quickly at the matter. It is important for Parliament to know that the £73 million figure stands up, or whether it will be eaten into even more than Audit Scotland has suggested.
Another missed opportunity is that some performance measures in the contract were not made subject to review. For example, toilet facilities, which are extremely important in passengers' minds, are low on the list of penalties against First ScotRail. There is also no requirement for a routine or reliable assessment of overcrowding—one that could establish the extent of the problem.
We could have taken other opportunities and some of those that were taken could have been better done. We could also have looked at how transport could be better integrated. In saying that, I think back to what was said in the chamber in the ferries debate only a couple of months ago.
The Scottish Conservatives are supportive of the end—it is the right one. We think that it is critical to have had the review and for the terms of the contract to be changed. As I said, although we have some criticism of the way in which the extension was handled, on balance we support it. I also support the amendment in the name of my colleague Alex Johnstone.
Mr Brown made a very constructive and thoughtful speech, so it is a pleasure to follow him. He made the crucial point about why it was necessary for us to act, and why it was necessary for our predecessors by their actions to open up the possibility of extending the contract in 2006. As Mr Brown properly set out, we were in the perverse situation whereby, because of the arrangements that were in place at the time, First ScotRail was financially incentivised to reduce costs—something that would inevitably have resulted in poorer services to passengers and loss of employment in the rail industry.
If we had not as a Government acted to extend the contract, the Labour Party would have called for us to come before Parliament—and, no doubt, before its committees—to say why services were declining in parts of the country or why people in the rail industry were losing their jobs. That would have been its criticism if we had not acted, so I am glad that we did.
Obviously, the Government had to take a decision on whether to consult. Did it take the decision that it would be right not to consult after the event, before the event or at the time? If not, was a conscious decision taken not to consult?
The conscious decision that ministers took was to act within the terms of the contract that our predecessors had negotiated—a contract about which I have no complaint. The consultation on the nature of the contract had been undertaken in the period before the contract was signed in 2004. The contract that resulted was for a given period but made provision for the franchise to be extended. If a contract is in place between the two parties, the proposition that ministers should act to utilise its functions and terms is not unreasonable.
There is a clear contradiction between the two points. The cabinet secretary is saying that a substantial change had to be made and that it was not necessary to consult because the extension was a continuation of an existing contract. Those two things are poles apart.
With the greatest of respect to Mr McNulty, his point is ridiculous. I said that we inherited from our predecessors a contract that included the facility to extend it—
Will the minister give way?
Allow me first to deal with Mr McNulty, after which I will deal with Mrs McInnes.
The contract provided the Government with the opportunity to extend the terms and duration of the contract—a provision of the contract on which Mr Gray had consulted before 2004. One of the imperatives to our acting as we did—which, I assume, was also an imperative in Mr Scott's in-tray in 2006—was, as Mr Brown correctly said, that the contract had reached a point where there was incentivisation for poorer services and job reductions and not for passenger growth, the last of which is the interest of this Administration.
No one disputes the need to consider the franchise extension. I am happy to concede that the previous Minister for Transport instigated a formal review. However, the debate is substantially about a move from a formal review to one that was taken by an informal, un-minuted, secretive decision-making process. Such a process was not included in any contract that was laid in the first place.
It is lovely how Alison McInnes can get herself worked into a lather of indignation on the issue. She should instead read the Audit Scotland report, which states:
"Transport Scotland's appraisal process was rigorous and has resulted in a guaranteed £73.1 million investment by First ScotRail".
That was not some sort of secretive process, but a "rigorous" appraisal process that was undertaken by the people whom Government employs to manage the franchise.
Audit Scotland goes on to say that
"Transport Scotland is generally managing the franchise contract effectively, but there is some scope to improve".
We unreservedly accept that there will be a need for improvement and we accept that issues of governance need to be considered, so we will consider them. Of course, ministers will deal with and co-operate with any parliamentary inquiry that the Audit Committee brings forward, as was, I am aware, agreed yesterday. Parliament would expect us to do nothing less. Much of the hot air that we have heard from the Labour Party today is rather out of context when we look at what Iain Gray wanted to do back in 2002. He told the Transport and the Environment Committee that the then Government's aim was
"refranchising at the end of the existing franchise in April 2004 … on the basis of a longer franchise period—the committee will know that we hope it will be 15 years".—[Official Report, Transport and the Environment Committee, 12 June 2002; c 3267.]
The Labour Party's aspiration was to put in place a contract for 15 years, but now it complains because we have acted within the contract that it negotiated—which includes the facility to extend the contract—and have delivered £73.1 million of investment in the rail network. Members must ask themselves how much good news the Labour Party is prepared to turn its back on.
The key point is that we must have a sustained programme of committed investment in the rail industry to ensure that the franchise delivers the aspirations that we all share. I do not question anyone's motivation—we all want passenger numbers to increase and more people to get out of their cars and to use trains and other forms of public transport, which is the purpose for which we have extended the contract. We want to ensure that we have sufficient resources and the flexibilities and incentives that are required to add to services. My colleague Mr Stevenson referred to the consultation that is under way on the range of options for utilising the extra investment money. I do not have time to go through them, even in this undersubscribed debate—which I suspect tells us that we are flogging a dead horse—but there are many options for investment to be considered in every part of the country.
On that issue, we had another example of beautiful consistency between the two front-bench spokespeople of the Liberal Democrats: Alison McInnes complained that there are no measures for the north-east of Scotland, but Jim Tolson told us that there is investment in every part of the country. There we have it—the Liberal Democrats facing both ways in a debate. Mr Tolson also questioned fare increases. He is absolutely right that fares have increased, but First ScotRail's fare increases are, in my opinion, at the correct end of the performance league table—they are at the bottom, thank goodness. First ScotRail is not at the very bottom of the table, as London Midland and Merseyrail are below it, but it is among the lowest and it has certainly not made the 11 per cent fare increase of CrossCountry in England and Wales or the 7.2 per cent increase of South West Trains.
Members should accept that effective activity is taking place to ensure that we have in Scotland an effective rail service that increases passenger numbers and delivers the modal shift that the Government seeks. That is supported by the negotiation of the contract extension that we have undertaken. The Government will respond constructively to the report from Audit Scotland, which is a thorough examination, if ever I saw one.
The debate has been important because it is important for members from throughout Parliament to have put on the record their concerns about how the Government arrived at its decision on the ScotRail franchise. My colleague Des McNulty laid out several of our concerns, but I will refer to a comment that he made in April this year, when we heard the initial statement from the minister on the contract extension. It was mentioned at that time, although it has not been mentioned today, that the Government was dragged kicking and screaming to Parliament to answer questions about why it extended the contract without consultation. We must remind ourselves of that. I remember that the tone of the statement that day was rather conciliatory—the tone has been different this morning as the debate has developed.
Mr McNulty pointed out some other important issues that we must consider. One is about when the Government became aware of Mr Houston's conflict of interest and what it did about that. I am sure that that will be followed through in Parliament in the coming months. Des McNulty and my colleague Charlie Gordon also mentioned Mr Houston's involvement in a bus issue, of which the minister said he is aware. It will be interesting to find out what the minister knows and what he says about that in the future. Charlie Gordon stressed that point far better than I could.
The semantics that the Government has used on the issue are breathtaking. The key issue is that there was no consultation of the workforce or commuters. The cabinet secretary and the minister know that they should have consulted, regardless of what the contract says. They should have consulted properly on the issue and they know that there is no excuse for not having done so. My colleagues Cathy Peattie and James Kelly laid that out well.
Alison McInnes made several key comments that I support. The Labour Party will support the Liberal Democrat amendment at decision time this evening. I particularly support her points about how the £73 million will be reinvested to improve services for passengers, as that is a key issue. I agree with Mr Swinney that we need to improve services. The issue is about the services that we deliver in Scotland and the services that passengers expect. It is only right that we should have much more detail on that and that we should have an opportunity to ensure that services improve.
On Sandra White's and Christina McKelvie's points, I must say that they would be the first to cry foul if a Labour, Liberal or Conservative Government acted in a similar way. Those members should have the courage of our convictions on the issue. I would love to be a fly on the wall at the next SNP meeting when they have to defend what they will do at decision time today. It is absolutely unbelievable that they stood there defending the Government's decision not to consult commuters or trade unions on the contract extension.
Alex Johnstone did a good impression of a bullet train as he went through his speech rather quickly. I know that the Tories are energetic supporters of private sector solutions, but they must recognise the need for effective and meaningful consultation. I sometimes agree with the Tories—although not often—particularly with their arguments about good governance. They know that good governance is about meaningful consultation and engagement with commuters and trade unions.
Should Iain Gray accept some responsibility for there not being a clause in the contract regarding consultation on extension?
It may seem as if we have rehearsed this, as I was coming on to that very point.
I have private sector experience and have dealt with contracts between the private sector and the public sector and the relationships between organisations. When a contract is agreed, consultation is carried out beforehand and if a contract is extended, consultation is carried out before that, too. In all my time of dealing with such issues, I have never come across a contract that has involved no consultation before a contract extension.
The role of the trade unions, in particular the STUC, has not been mentioned. I am talking not only about the contract extension, but about the Government's general relationship with trade unions. The STUC has a memorandum of understanding with the Scottish Government that is well documented and which has been lauded in Parliament by many SNP members. The memorandum was signed by the previous Executive and I am sure that there is support for it throughout the Parliament. The Government's memorandum of understanding identifies trade unions as an important social partner and one key element of that partnership is
"openness and transparency in communications".
However, there was no openness or transparency in the communications on the contract extension, which causes me grave concern about the future of the trade unions' relationship with the SNP Government.
The decision on the contract defines the SNP's relationship with the trade union movement: the SNP is the fair-weather friend of trade unions. I knew and understood that relationship before I became a member of Parliament, but I now see it at first hand day in, day out. The SNP is happy to quote the unions when it suits its political agenda on issues such as the private finance initiative or public-private partnerships, but it is much less enthusiastic about supporting the trade unions' role as social partners, particularly on issues such as the ScotRail franchise. The SNP's hidden agenda is to split Labour and the trade union movement because the SNP would, when it comes to the crunch, prefer to stand shoulder to shoulder with millionaire bankers or give a nudge and a wink to the private sector, than support the collective views of trade union members. The Government should apologise to those members and to commuters. I am pleased to support Des McNulty's motion.