The next item of business is a statement by Keith Brown on the Caledonian sleeper franchise. The minister will take questions at the end of his statement, so there should be no interventions or interruptions.
14:41
I am grateful to the Parliament for the opportunity to make a statement on the future of the Caledonian sleeper franchise.
This morning, I advised the Parliament that the procurement process for the Caledonian sleeper rail franchise had been completed on time and to plan. The competition has been evaluated rigorously on the basis of the most advantageous balance of quality and price, and the Scottish Government intends to award the contract to Serco Caledonian Sleepers Ltd.
The new franchise contract confirms the Scottish Government’s commitment to transform this iconic Scottish rail service. It will commence on 1 April 2015 and will deliver investment in the service for the next 15 years. It is good for passengers, good for staff and good for Scottish business. In short, it is good for Scotland. The contract secures the future of the Caledonian sleeper and will ensure that it delivers a service that is fit for the 21st century and that it provides, as it has done for more than 100 years, a unique, valued and high-profile overnight service between Scotland and London.
Before I give some details on the contract, I wish to say a few words about the context of railway franchising. As members will be aware, franchising is a requirement under the Railways Act 1993, which was introduced by a previous Conservative Administration. That act precludes any United Kingdom public sector organisation from bidding to operate a railway service. However, no such barrier applies to state-backed organisations from Europe or elsewhere, and I believe that that is fundamentally unfair and constraining.
It is unfair because it discriminates against UK or Scottish interests, and it is constraining because it restricts the range of options that are available for the operation of our railway services. As I have stated publicly on many occasions, it is the unfairness of the restriction that I find objectionable as much as the relative merits of the case for private or public franchise operation. During my term of office, I have written to numerous secretaries of state to request a change in the law and each request has been refused.
I am aware that the Labour Party has hinted that it might move from its most recent stance. It now says that it would consider making changes to the law should it win the UK general election next year. I am pleased that the Labour Party is finally coming round to my way of thinking, because it did nothing to address the issue at Westminster from 1997 right through to 2010 and was happy to leave us operating patently unfair procedures.
We must follow the franchising rules that were imposed by Westminster and we have always stated that we would do so competently. Accordingly, we have set out a prudent programme and process for the Caledonian sleeper and ScotRail franchise procurements, which are managed by a properly resourced and expert team within Transport Scotland.
Following a pre-qualification process, we were delighted to have attracted three high-quality final bids from Arriva, First and Serco. The fact that all three bidders are well-established and well-respected railway service providers represents clear evidence of the strength of our procurement exercise. I am advised that each of the bids was of extremely high quality, although I should stress—as many members will appreciate—that ministers play no part in the evaluation of bids or in selection of the winning bidder. That is controlled by the process that is administered by officials.
After a rigorous evaluation exercise, Serco Caledonian Sleepers Ltd came out on top, but it would be remiss of me not to thank Arriva and First Group for their participation and their confidence in the Scottish Government’s vision for our rail services. I also thank First Group and its hard working staff for their management of the service since 2005, and I acknowledge the hard work of Bill Reeve and the rail officials at Transport Scotland throughout the process. It is also appropriate to acknowledge the £50 million contribution to the sleeper that was announced by the Chief Secretary to the Treasury, Danny Alexander.
Our specification stated that we would place passengers’ interests at the heart of the service, and the new franchise will deliver on our commitments. The new Caledonian sleeper will transform the whole passenger experience from booking tickets through on-board comfort and hospitality to post-travel aftercare. Before boarding, passengers will benefit from a revamped website that will allow them to view information and book tickets, manage their booking and even pre-order food online. A new smartphone app will also be available in recognition of the fact that more of us are communicating that way.
At stations, lounges will be improved and special sleeper interactive information totems will be placed on platforms to provide real-time information to passengers. On board, the franchise will deliver improvements for all passengers from backpackers to business travellers, increasing the pleasure of travel and opening the service to new audiences.
The Scottish Government’s commitment to investment has led to real success. New trains that have been designed especially for this service and which have been developed in consultation with passengers will be built, and that new fleet will be ready and on the tracks in 2018. Its key features will include, in the seated accommodation, modern comfortable cradle seats and innovative pod seats that can transform into flatbeds; new standard-class sleeper berths; and business berths with en-suite shower and toilet facilities, making the train truly a hotel on wheels.
Improved security will be built in for all passengers and their luggage, and there will be closed circuit television in all public areas of the train. Wi-Fi and power points—facilities that the modern traveller rightly expects—will be available to all passengers.
The club car will be at the heart of the new trains, providing a welcoming place to eat, relax and socialise, and there will be special themed evenings to enhance the travel experience. Post journey, the guest services team will help passengers with onward connections as well as wider holiday and business planning.
The new Caledonian sleeper franchisee—as I have said, we intend at this stage to award the contract to Serco, but I point out that there is still the 10-day Alcatel period to go through—has been made well aware of the Scottish Government’s policy of bearing down on rail fares wherever possible and ensuring accessibility to the sleeper for all budgets. The Scotland to London rail travel market—indeed, that travel market in general—is fiercely competitive. To meet its commitment to delivering strong growth in passenger numbers, the Caledonian sleeper franchisee plans to offer a range of competitive and attractive fares and ticket promotions and to widen interest in the service for all budgets.
I have also been careful to ensure that the interests of Caledonian sleeper staff are addressed in the new franchise contract. Accordingly, we have engaged with the rail unions to ensure that staffing issues are appropriately covered, and I am grateful for the unions’ assistance in that respect. The Transfer of Undertakings (Protection of Employment) Regulations 2006 will of course apply, and for staff who transfer to the new franchisee there will be continued inclusion in a fully funded section of the railway pensions scheme. We have also ensured that Caledonian sleeper staff who currently benefit from the rail staff travel scheme will retain those benefits.
I can also confirm that the long-term future of Inverness train maintenance depot is secure. I have spoken to the chief executive of Serco Group and have asked for, and received, specific assurances about the living wage—staff currently receive in excess of the living wage and will do so in future—and assurances that Serco has no intention of using zero-hours contracts. According to the most recent figures, nearly 90 million passenger journeys are undertaken in the whole of Scotland, and the Scottish Government is investing in growing train service levels in the Highlands through franchising and rail infrastructure enhancements. Given that Inverness depot is well located to support that growth, we have required that the next ScotRail franchisee must maintain the depot at Inverness for the maintenance of its own trains, which constitutes the majority of the work there, as well as the sleeper carriages, which will continue to receive daily servicing at the depot. I am delighted that 15 apprentices will be taken on in the first two years, which underlines our commitment to investing in Scotland’s future talent.
The franchise is good for Scottish business. The new Caledonian sleeper franchisee will partner with Scottish businesses to deliver the hospitality service, supply excellent Scottish produce and provide furnishings, and the franchisee has committed to increasing its annual hospitality and catering spend with local Scottish small to medium-sized enterprises to 75 per cent by year 5 and to 90 per cent through the life of the contract.
We have great produce in Scotland, and the sleeper will provide yet another opportunity to showcase it to the wider public. Many businesses, from Shetland to Stranraer and from Stornoway to Stonehaven, will directly benefit from contracts to support the service. The franchise is good for passengers, staff and Scottish business, and it will be good for Scotland in general.
The franchisee will manage the Caledonian sleeper business and the Government’s substantial investment to deliver better value, obtain a good return on investment, and achieve a financially sustainable operation. Growing passenger numbers will drive growing revenue so that annual franchise payments will reduce by more than 70 per cent at current price levels over the life of the contract. That is a saving of around £130 million, I think, in the price of the contract.
This is a new beginning for night rail travel in Britain that will, as I have said, provide a hotel, an office and a restaurant on the move. With the skills of the franchisee and its partnering organisations, our investment will ensure that the Caledonian sleeper endures, builds on its strong heritage, and is renewed for a great future.
The minister will now take questions on the issues raised by his statement. I intend to allow around 20 minutes for questions, after which we will move on to the next item of business.
I thank the minister for advance notice of his statement.
As the minister said, the Caledonian sleeper franchise is unique, valued and high profile, but there are concerns about the franchise award. We would like to see a not-for-profit rail operating model. The Scottish Government has said that it, too, is committed to that, but that was nowhere to be seen in the First Minister’s big six demands of the Scotland Act 2012. The next Labour Government is committed to giving the Scottish Parliament full powers over rail. Why was the franchise offered for 15 years? Will there be a break point to allow different models of rail ownership when we have those powers?
Concerns have been raised that train drivers will not be covered by the TUPE process, as they are employed on a sub-contract from ScotRail and DB Schenker. Serco has stated that it intends to employ GB Railfreight drivers for the franchise. Can the minister give a cast-iron guarantee that, after the award, existing drivers will have a job that is based in Scotland?
Finally, I am told that the new rolling stock will be procured and manufactured in Spain. Will the Caledonian sleeper service run with trains that will be built outside the UK?
The not-for-profit issue was the first issue that Mark Griffin raised. We have said, and I have certainly said consistently, that we were more than happy—in fact, we were eager—to see a not-for-profit bid come forward, and we would have considered it on its relative merits, as we are obliged to do.
Talking about future powers that might come hides the point that the Labour Party had the chance and failed to deal with the matter over 13 years in government. It had every chance to deal with it. Two transport bills went through the Westminster Parliament in which it could have changed the ground rules, but it did not do so. It stuck with franchising.
The Labour Party supports franchising. The last words of its last transport secretary, Lord Adonis, were about the benefits and effectiveness of rail franchising. That is the process that Labour left us with. We cannot favour one particular franchise over another. We were bound to follow the process, and we have done it competently.
I think that I covered existing drivers in my statement. If Mark Griffin wants more information, I am happy to provide him with it, but we have said that TUPE will apply. That is the same guarantee that previous Governments gave. Existing staff, including drivers, will have the protection of TUPE. They will have the protection of the existing terms and conditions, the rail travel benefits that they currently have, and a new pension scheme established with the support of the Scottish Government to cover their pension requirements. That was perhaps the staff’s most fundamental concern. I have also mentioned the increased training and apprenticeship opportunities.
That represents a very good deal for employees of the service. We have been very careful to ensure that we protect the interests of employees, and what I have said demonstrates that we have done that.
The last question that Mark Griffin raised was on rolling stock. It is of course down to whoever wins the bid where they place a contract for new rolling stock. We have no legal ability to influence that. I go back to the legislation that the Labour Government supported during its 13 years that means that we have no ability to prescribe that rolling stock should be built in a particular place. That is down to the discretion of the contractor, but Mark Griffin should at least welcome the fact that over £100 million will be spent on new railway rolling stock. What did his party do when it was in Government? Nothing like that. This is a good deal for business in Scotland and for the staff in the new franchise.
I thank the minister for advance sight of his statement and I take the opportunity to congratulate Serco on achieving success in the franchising process. I extend my commiserations to those who were unsuccessful, particularly FirstGroup, a company based in the north-east of Scotland that provided an excellent service over the length of the previous franchise.
It is of some disappointment to me that the minister has taken the opportunity to attack the apparently successful franchising process. He demonstrated during his statement his long-standing aversion to private enterprise and fair competition, something that I will defend at every opportunity in this chamber.
The specific issue that I want to address, though, is the £50 million mentioned in the statement that comes from the UK Government. That fact did not seem to be highlighted in this morning’s press announcement, which appeared to claim that the Government money was all coming directly from the Scottish Government. I am glad that it has now been acknowledged that £50 million will come from the UK Government. I hope that the minister will take this opportunity to offer me further reassurances—I have asked after that money many times—that it is being properly looked after in its current temporary home. More important, will the minister explain how that money will be returned to the franchise to provide the sleeper service and how the £50 million of match funding that he promised—one month after the earlier money announcement—will be included in the financing of the franchise?
I thank Alex Johnstone for his questions. I have made it very clear a number of times what the Scottish Government thinks of the franchise process and its limitations. It would have been nice to have heard from Alex Johnstone some condemnation of the fact that public-sector owned UK and Scottish businesses are precluded from the franchise process, whereas German, French or Dutch publicly owned businesses are not precluded. Perhaps he could have mentioned that.
At least we have done the franchising efficiently and competently. Look at the mess that the UK Government, which Alex Johnstone supports, made in relation to the west coast mainline franchise. Perhaps he could have mentioned that as well.
I have said already that the likely value of the rolling stock will be in excess of £100 million. Other work will also be done, on infrastructure and on services. All that shows where the £50 million pledged by the UK Government and the commensurate amount pledged by the Scottish Government—I think that our contribution will end up being perhaps £60 million—is going.
There are clauses in the contract that allow half of any excess profits to be taken by the Scottish Government—and all of them to be taken if they become particularly excessive. That money will then be reinvested in the service. We have ensured that the contract is constructed in such a way that we first have a step change in improvement in the service, then continuous improvement thereafter. I would have thought that the Conservative Party would have welcomed that.
We now come to back-bench questions to the minister. Many members have requested a question. I remind them that there should be one question and that it should be brief. Minister, if we could also have brief answers, we will make progress.
Can the minister tell the chamber how small and medium-sized enterprises can benefit from the new franchise more than they did in the past from the previous one?
Yes, I can. I mentioned during my statement the increasing percentage that Scottish SMEs will benefit from—75 per cent of hospitality and catering spend by year 5 and 90 per cent by year 15. I also mentioned the food hub in Cumbernauld, which will be used to facilitate the selection and provision of Scottish products. Glencraft in Aberdeenshire will be used to supply mattresses. Laundry services will be provided by Scottish businesses and Shetland wool will be used for blankets. The Inverlochy Castle Management International group will help provide the food, which with the help of Albert Roux should be of world-class standard.
The minister rightly paid tribute to FirstGroup and its staff who deliver the current service. Given that any direct rail service between the north of Scotland and London has to compete with aviation, can he guarantee today that there will be no reduction in quality, comfort, reliability or frequency under the new contract? In particular, can he tell us whether the new contract will enable a direct nightly rail service between Aberdeen and London seven nights a week instead of six?
Both we and the franchise holder have the ability to look at extending the services. That is written into the contract. If we think back to the rail 2014 consultation, the scare stories about the sleeper service going altogether have been proven to be pretty unfounded.
I can give the assurance that Lewis Macdonald seeks in relation to quality of service. I have tried to lay out the ways in which that can happen. It is bound to be improved, not least by the investment in new rolling stock, although that will take until 2018 to come on board. All the other customer-facing service improvements should happen as soon as the franchise holder takes over, so there will be that increase in quality of service.
As for extending the service, that is a matter for dialogue between us, the public and the franchise holder.
I am pleased that the minister has explained how he hopes to avoid the mistakes of previous franchising, not least his predecessor Stewart Stevenson’s mishandling of the 2008 extension.
It is worth recollecting that in November 2011 the Scottish Government did not understand the value of the sleeper. It proposed terminating all cross-border services, day and night, at Edinburgh. It took vigorous campaigning by Liberal Democrats who are ambitious for the north-east and the Highlands and action from Danny Alexander in the Treasury to keep Scotland connected.
I am grateful that the Scottish Government belatedly recognises the value of the service.
Can we get a question, Ms McInnes?
The minister has acknowledged the £50 million investment from the Treasury. Does that not show the importance of having strong Scottish voices in the UK Cabinet that are able to deliver investment in cross-border services?
First, I should say that strong Scottish vices—[Interruption.] Strong Scottish voices—vices too, perhaps—in the Cabinet may be in short supply after the next election if Lord Oakeshott’s poll is to be believed.
Alison McInnes is just making it up when she says that we proposed to abolish the sleeper. She is just making this kind of stuff up, and it is completely wrong. That is demonstrated by the fact that what we now have is a sleeper service that is about to have a huge amount of investment placed into it, with a qualitative jump from the time when her party was running the franchise. Perhaps she is a wee bit scunnered about the fact that we have done something that her party never managed to do, and perhaps that is why we have this sour note coming from the Liberal Democrats.
As far as I am concerned, the key things that we have tried to do were to ensure that the process was run properly, which she and her colleagues in the Westminster Government failed to do in relation to the west coast main line, and to ensure that we kept focused on passengers’ needs. That is why the contract will be good for passengers and good for staff and Scottish business.
I thank the minister for ensuring that the interests of staff will be fully addressed in the new franchise contract, but what further assurances can the Scottish Government provide that, in realising its ambition for the Caledonian sleeper to become truly world class, that will at all times be reflected in the terms and conditions of the staff on whom its future success depends?
In addition to what I have already said, I should say that I will be speaking to Tim O’Toole this afternoon about the efforts of FirstGroup staff over the previous term of the franchise and thanking them for the efforts that they have made and will continue to make when they transfer to the new franchise holder.
During the mobilisation period and beyond, we will ensure that pay and conditions are protected. TUPE will help us to do that, and I have mentioned the railways pension scheme. We will ensure that the commitment to training and apprenticeships is contractualised, and there is a personal guarantee on the living wage and the use of zero-hours contracts. That looks after the interests of staff to a great extent.
I am absolutely delighted that Inverlochy Castle Management International is going to be involved with the franchise. How does the minister believe that that will benefit local Highland and Scottish businesses and indeed the consumers who will use the service?
Let us put ourselves in the place of somebody who travels on the new service. When they step on to the sleeper train in London, they will be confronted with the best of Scottish produce, with the involvement of world-renowned chef Albert Roux and the Inverlochy organisation that Dave Thompson mentioned. That really starts to send a message about what we think of the service and what we want other people to think about it. With the attractiveness of the onward journey to the Highlands, we think that it will be a great selling point for Scotland with much wider benefits than merely the transportation of people from place A to place B.
Can the minister confirm the total value of the franchise payments over the 15 years of the contract, which was omitted from the ministerial statement? Can he also explain why the contract has been awarded for 15 years and no break has been put in place as is the case with the ScotRail franchise in order that alternative funding models can be explored to keep money in the public purse?
On James Kelly’s first point, the value is about £180 million-plus over the 15 years of the contract, which equates to a reduction of about £130 million on the subsidy that we would have paid if we had left things as they were.
There is the opportunity for a break around year 7. The conditions of the break relate to a dramatic change in financial conditions. One reason why the west coast main line franchise process was a spectacular failure was the difficulty in predicting inflation and other economic factors over the franchise period. We have built consideration of that into the sleeper franchise process.
We and the proposed franchise winner have said today that we fully intend to see the contract through its 15 years, because that will allow the long-term capital investment in rolling stock that I mentioned to take place. That is much more difficult to achieve with a shorter franchise term.
Will the minister provide details of how Serco will be monitored on maintaining quality and delivering improvements to the service?
That will happen through a number of processes, including financial penalties, which could come from a break in the contract, as has been evident in other franchises. The franchisee will be measured against its execution of the contract. As many of the contract’s key measures, such as performance, will be in the public domain, the franchisee will have every incentive to ensure effectiveness.
Part of the contract’s specification was a 50 per cent emphasis on quality. Serco will be kept to the quality commitment that it has made.
I thank the minister for the positive announcement about the depot and apprenticeships. I note that he got a personal rather than a contractual assurance on the living wage and zero-hours contracts. The trade unions have been in touch to express concern about how Serco discharged its industrial relations under the northern isles ferries contract. Will he work with Serco to ensure that a better relationship is maintained under the new franchise?
I am of course happy to give the commitment to ensure that we have the best possible relationship with the trade unions and the franchise holder. The commitment that I asked for from Serco’s chief executive is not just about the living wage, because the staff involved currently earn well in excess of the living wage. TUPE and other commitments will protect existing wages and conditions, and we will go well beyond that into such things as the rail travel that staff benefit from. Another concern of unions is about staff training and apprenticeship opportunities, which have all been protected.
We have spoken directly with the preferred bidder and it has given commitments but, in addition, we have written into the contract things such as TUPE. The pension scheme was a huge issue for the trade unions and we have gone the extra mile to set up a new pension scheme to protect employees’ existing pensions.
Given that, until recently, Serco was banned from bidding for any UK Government contracts, a few eyebrows might have been raised when people heard the news this morning. Will the assurances that the minister received from Serco’s chief executive on zero-hours contracts, trade union recognition and the living wage also apply to indirectly employed and subcontracted staff?
Perhaps the news should not have made people raise their eyebrows, especially in the Labour Party, given that the Labour Government in Wales has entered into a substantial contract with Serco in the past month and that Glasgow City Council has a contract with Serco whose value is greater than that of the contract that we are about to enter into. Perhaps the Labour Party has some thinking to do about its relationship to Serco.
We have written into the contract guarantees on TUPE, pensions and training. In addition, we have what we have mentioned on the living wage. We have done a pretty good job of looking after the interests of workers. It would be interesting to know whether that is true in Wales and in Glasgow, where the Labour Party deals with Serco.
I recently had to intervene for a Glasgow-bound passenger who, along with 20-odd others, was left to spend a long, cold night at Euston station after a delayed sleeper train left without them. Does the minister agree that co-ordination and co-operation between Network Rail staff and train operating company staff need to improve to prevent such situations from arising? Does he agree that the human touch is important, however good the smartphone app and the interactive information totems turn out to be?
Those things are important to people, who want to be able to access their bookings and ensure that they have the best possible journey.
However, the member is absolutely right to say that performance—trains leaving and arriving on time—is extremely important. To achieve that, we have to have the maximum possible co-operation between Network Rail, which controls the track, and the people who control the trains. We have done a great deal to push forward that integration, although we are limited by European legislation in how far we can go, and we are getting more of it in the projects that we undertake. We will push to make the experience as seamless as possible for passengers.
If the member looks at recent performance figures across not the sleeper network specifically but the Scottish network, he will see that we have made remarkable advances. There is a challenge to ensure that that continues into the future.
I apologise to John Mason, but we must move on.
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