Over the last couple of weeks OnTheWight has been running a series of email exchanges between Nick Finney, Isle of Wight Conservative MP Andrew Turner‘s transport advisor, and David Pugh, who is connected with the Keep Island Line in Franchise (KILF) group.
As mentioned before, the Island Line franchise is a complex subject, so we feel that it’s only right that the exchanges are published unedited, so details are not missed out.
Here’s the seventh exchange. The email is from David Pugh in response to Nick Finney’s earlier email.
Dear Nick
I write in reply to your email of 12:22pm yesterday (copied further below).
I will seek to respond as comprehensively as possible, so apologies for those copied in for the length of this email – but you raise some serious points which need addressing.
However firstly, I do note that you have completely ignored how I have exposed your complete misreading of information in the Stagecoach Annual Report. As I set out in my email of 8:48am yesterday, you cited a figure of £301.3m (the revenue support for the Stagecoach Group received in 2013/14), and tried to pass this off as a gross subsidy figure for South West Trains (SWT). As I made clear, it is nothing of the sort – as the Stagecoach Annual Report clearly sets out.
Given the level of influence you appear to have secured over public policy – both in the MP’s office and in access to DfT officials – this is deeply worrying. Is the future direction of our local train service being shaped by someone who cannot even properly comprehend some fairly rudimentary elements of a set of accounts? I think the MP should give serious consideration to your continued suitability to act as his transport adviser, given how you are providing input / advice of such poor quality. I am not surprised the Isle of Wight Council has made clear that you are not an adviser to them.
If you wish to recovery any credibility on this subject, it may be helpful if you concede the fundamental errors that you made in your earlier analysis. Rather than saying to me that “an apology would be appropriate”, I would suggest you offer one yourself – and also to the MP for letting him down so badly.
Your latest claims re “subsidy”
In your email copied further below, you suggest that we examine my proposition that Island Line gets “a free ride on the back of a profitable franchise”. You then refer to the revenue support (not a default “subsidy” as you suggest) received by SWT over the past five years. According to the attached spreadsheet (sourced from the DfT), South West Trains received revenue support of £149.7m in 2013/14, while making a net franchise payment of £461.7m, resulting in a £312m total train operator premium (a figure referred to in my original email).
However, for the sake of completeness, the DfT have helpfully allocated a proportion of the Network Grant (paid to Network Rail) to each franchise’s share of fixed track access charges – which is the case of SWT is £247.9m. This brings the total net premium figure for SWT down to £64.1m – even when taking into account their proportion of the public funding going to Network Rail. It is quite remarkable that even when all costs are added, it is still in surplus – confirming that there is no public subsidy whatsoever. Let’s be clear on that point. The comparative figure for 2012/13 was £42.8m, and the 2014/15 figures are due out this month, which will probably follow a similar trend.
You then turn to address my proposition that Island Line receives not one penny of public subsidy, and you go on to explain that bidders factor the profitability of all routes within the franchise when setting their bid price. Of course they do. You then say that “all bidders will discount the anticipated losses in their bid to Government”, “so the Government gets a lower premium than it would otherwise expect”. You then say “so the taxpayer is short changed again”.
Of course this argument only stacks up if you work on a purist model where franchises only include those routes which on an individual basis make a profit. If we follow this argument through its obvious conclusion, franchises should be stripped down to a core of busy commuter routes, and all others should be excluded, to prevent the Government getting a lower premium than the maximum possible – or to use your other words to prevent the taxpayer being “short changed again”.
Of course this argument is totally flawed, and you do yourself a disservice by trying to advocate it. Those routes within a franchise which do not – on their own – make a profit, may in theory result in the Government getting a lower premium, but this doesn’t take into account the fact that these are “feeder” routes into the main lines, thus helping making them busy and profitable. Island Line is one such route, albeit on a smaller scale, that contributes to rail users joining the undoubtedly profitable Portsmouth Harbour to London Waterloo route.
As I said to you in my email of 11:36am yesterday, I do recognise that if Island Line was not in the South Western rail franchise then an even higher annual premium could probably be paid to the government, so in this sense there would be a crude benefit to the taxpayer (through the Treasury) of removing it. The same applies – in theory – if other individually non-profitable routes were excluded from the franchise, for the reasons I have touched on above. But I do not buy your argument that the taxpayer is short changed, as the taxpayer (i.e. the public) generally recognises that best value is about more than just pure monetary terms – it is about value for society as well.
As I said yesterday, the fundamental question is whether it is socially desirable for the Government – as you suggest – to seek an even higher total net premium at the expense of Island Line’s exclusion (and possibly other routes) from the franchise, or should the Government instead encourage franchise bidders to put forward proposals that seek to improve the revenue vs costs ratio for Island Line within the efficiencies of a wider franchise. It would seem obvious that the professionals with the train operating companies (the prospective franchisees), competitively bidding through a franchise process, would be far better placed (and incentivised) to do this than a bunch of well-meaning local amateurs who would not be able to draw on the economies of scale that a large operator can.
Your crude point about whether the “taxpayer is short changed again” relies on the assumption that the taxpayer (be that the public or the Treasury) suffers by not sweating the franchise for every last penny, through just running the purely profitable services. While this may appear to be your view (perhaps shared by Andrew), thankfully it does not appear to be that of the Government. Read this Telegraph article from April 2014 (Firstly, as it confirms, South West Trains was one of two train companies which received no money from the public purse last year.)
Significantly it then goes on to quote a Department for Transport spokesman who said that heavily-subsidised services provided a lifeline to rural communities, saying “many services would not be commercially viable without taxpayer funding, and we subsidise them because they deliver wide social, environmental and economic benefits”. Although – as I have repeatedly pointed out – South West Trains (and consequently Island Line) does not receive a direct subsidy from the taxpayer, the fact that the Government choose to forgo a potentially even higher premium is no doubt because they recognise how such services “deliver wide social, environmental and economic benefits”.
And this quote was given by the DfT in 2014, when the Conservatives were leading the then Coalition Government, and Patrick McLoughlin was Secretary of State, as he is now. I have no doubt that the current Conservative Government (with the same Secretary of State) continues to hold this view regarding the “social, environmental and economic benefits” of supporting non-commercially viable services. It is reassuring that we have such a sound and sensible government, even if our local MP and his transport adviser take a more hard-nosed view about the taxpayer being “short-changed”. However at least we know where you stand.
No incentive on the successful bidder to invest
You then go on to say that there is “no incentive on the part of the successful bidder to invest in the loss maker because the duration of the franchise is too short to make a return on the investment”. Clearly it is down to the Government to decide on the duration of the franchise, but what is for certain, is that if Island Line is not in the next franchise for its duration, the successful bidder will not be incentivised (nor could be reasonably required) to make any such investment at all in the short-term. Only Island Line’s inclusion in the entire duration of the next franchise (however long it is) would allow the Government to place such obligations on the franchisee.
Which brings me to the powers the Government has in this respect. The House of Commons Library briefing I sent you the other day makes clear that “franchising involves the Government setting out a specification for what it would like a franchisee to do over a set period (level of service, upgrades, performance etc.)”. So there you have it. It is in the power of the Government to set out a specification, to prospective bidders, of what level of service they should provide, along with upgrades etc.
So it would be perfectly reasonable for the Government to require the bidders for the South Western rail franchise to set out the upgrades they have to undertake – not just for other parts of the franchise, but also for Island Line. Clearly this has not been done explicitly and forcibly enough in the past, and that is why we believe the Government should be urged to set out such requirements in the tender specification.
And as I said above, it would seem obvious that the professionals within the train operating companies (the prospective franchisees), competitively bidding through a franchise process, would be far better placed (and incentivised) to do this than a bunch of local amateurs who would not be able to draw on the economies of scale that a large operator can – let alone the resources that come from a profitable franchise that can comfortably absorb such costs.
I note with interest that MPs across the south of England are already lobbying the Government about the improvements they wish to see put in place for train services in their respective areas, as part of the next franchise arrangements. This seems an entirely sensible approach, fitting in with their duties to represent the interests of their constituents. So why doesn’t Andrew do the same as his parliamentary colleagues, and start making the case for what obligations should be placed on the next franchisee for improvements to Island Line?
You, of course, would probably disagree with Andrew taking such a sensible stance; given the efforts you have already gone to, such as bringing in your friends from Renaissance Trains and promoting a social enterprise model in your briefings to councillors etc. It may be that you now feel compromised: i.e. putting your own strongly held views ahead of those of the needs of the Island, and that you are improperly influencing Andrew, overstepping your role as an adviser. If this is the case, it may be time to consider the suitability of your continued role, so that you don’t compromise Andrew any further, or act as a continued barrier to him properly representing the interests of his constituents on this matter.
CAPS LOCK SECTION
I now turn briefly to the paragraph of your email where you turned on caps lock to emphasise how strongly you felt! (I surprised you didn’t get out the red ink!) You say that
“YOU AND YOUR COLLEAGUES PRETEND THAT WE JUST NEED TO SIGN UP FOR ANOTHER 7 YEARS OF DETERIORATING TRACK AND ROLLING STOCK WITHOUT ANY EFFORT BEING MADE TO INNOVATE, MODERNISE AND SERVE THE NEEDS OF THE ISLAND IN THE 21st CENTURY”.
No we don’t Nick. Please turn off the caps lock, and calmly read what I have outlined above.
Stewart Blackmore’s contribution
You then refer to Stewart’s email to you of 9:38am yesterday. You picked up his line that what users want is “a railway which runs on time at a decent price and is reliable”, before he went on to say that “all of the evidence says that this is exactly what they are getting under the present system”. You went on to ridicule this statement, yet it is true. I use the train almost every day. I used it this morning. It ran on time, it was a decent price and it was reliable. And it is almost every time I use it, unlike mainland trains which frequently make me delayed. That is a reality. Of course Island Line needs investment and improvements, but that would be best achieved along the lines I have set out above, rather than your amateur pipe-dream with no funding.
I have to say that many of us are getting rather weary of you constantly talking down Island Line. This appears to be your clear and determined agenda, and in the absence of a comment from Andrew, we can only assume it is being done with his blessing. Last Friday you said “we know it [the franchise] hasn’t served the Island well for the last 14 years”. This is untrue. The franchise has served the Island exceptionally well for the past 14 years. I returned to live in Shanklin 11 years ago, and visited frequently before that. For all those years, I have seen first-hand how Island Line has served the Island well – and Shanklin in particular. It is entirely wrong and wholly misleading for you to suggest otherwise, and shows your complete ignorance on this subject.
You have also referred to Island Line being in a state of “almost collapse” and being “a wreck”, but these descriptions do not reflect the fact that we have a fully functioning, well run service – albeit one that needs investment. But your hysterical descriptions of it do not reflect the reality, despite your best efforts – including commissioning a critical report from your friends at Renaissance Trains – to paint out a worst case scenario.
Your final paragraph
You then go on to urge me to understand that the Island needs to take “serious note of the longstanding advice” that Andrew Turner has given for over a year. I consider that we could take seriously whatever advice Andrew is giving (if it is indeed coming from him) if it was not influenced by someone (you) who appears to have his own agenda, and furthermore in this obsessive pursuit fails to demonstrate even a basic understanding of figures published by the government and train operating companies. How can you expect us to have confidence in this?
You say that Andrew wants everyone to start taking responsibility and show some leadership. Why doesn’t Andrew show some leadership and sack you as his transport adviser? That would be a good start. You are clearly out of your depth, and are compromising Andrew by imposing your own views and prejudices on him. Irrespective of your personal connections into his office, you should allow him to start leading this issue himself, rather than being his frontman.
Best wishes
David
Image: bethcortez-neavel/ under CC BY 2.0
