Exclusive: Southern Railway contract to be investigated by National Audit Office

southern-railway-train-pic-credit-bbc

A Southern Railway train: often overcrowded even if it runs. Pic Credit:BBC

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The badly managed and strike prone Southern Railway contract is to be investigated by Parliament’s financial watchdog, the National Audit Office.

After months if not a years of misery for commuters caused by failing services and strike action over safety  the NAO has quietly decided to investigate the Department of Transport’s  handling of the contract alongside another investigation into the modernisation of Thameslink services. Both are major commuter services  into the capital and both are owner by Govia, the country’s biggest privatised train operator.

The decision by the NAO has been quietly slipped out on its website as an update to the Thameslink investigation without an official announcement. Such a move is bound to cause some consternation for transport secretary, Chris Grayling, and his officials.

Publication of the report due this summer will trigger an investigation by MPs on the Commons Public Accounts Committee where officials will be called to account depending on the NAO’s findings.

Southern is one a series of franchises owned by Govia, a consortium set up by the British  Go Ahead bus company and the French state owned railways, SNCF, whose international arm trades as Keolis.

The NAO investigation comes after the disclosure that Peter Wilkinson , a senior civil servant who is paid £265,000 a year, as director of rail passenger services at the Department for Transport, has been exposed by an investigation in The Guardian for an apparent conflict of interest.

He awarded Govia both contracts but it was revealed that he was, at the time, a
director and the main shareholder of First Class Partnerships, a consultancy which had Govia as a longstanding client.  He has declined to comment about the internal inquiry which is said to have decided that this was a conflict of interest.

Since then Govia’s Southern Railway has been involved in a long dispute with unions over plans to abolish guards on trains. The company has been backed by Chris Grayling, the transport secretary, and unions fear safety is at risk and the plan will be extended to other franchises they run like London Midland.

Southern also decline to provide a comprehensive service to disabled passengers.

The NAO statement on its site announcing the extension said :

“The Department for Transport is sponsoring a £7 billion programme to increase passenger capacity on the Thameslink route through central London. The programme involves the improvement of tracks, signalling and stations, a new fleet of trains and new franchise arrangements for running the passenger service on the Thameslink route.

“Since 2015, train services on the Thameslink Southern Great Northern (TSGN) franchise have been subject to significant disruption, particularly on the Southern services. Alongside our work on the Thameslink Programme, we also plan to report on the Department’s management of the TSGN franchise.”

Rail unions are welcoming the investigation with ASLEF, the train drivers union, keen that such an inquiry will bring transparency to how the contract was monitored by the ministry and also how it was awarded.

Meanwhile  government spin operators have indicated that perhaps the line might be taken back into public ownership if it continues to fail. While this story is officially denied ministers do not like being wrong footed by a detailed National Audit Office investigation and often plan some diversionary tactics when a report is about to be published.

It is question of watch this space. I have also written about this in Tribune.

 

How the government is allowing the Japanese to profit from captive London and Brummie commuters

 

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Earlier this month the Department of Transport extended its recommended list of bidders to run Britain’s railways to a privatised rail company in Japan.

It shortlisted East Japan Railway as a minority partner with the Dutch state rail company Abellio, in the consortium West Midlands Trains Ltd as one of three groups bidding to take over the West Midlands franchise next October. which provides commuter services into London and Birmingham including my home town of Berkhamsted.

But more significantly it decided that East Japan Railway would qualify as an approved bidder for any other franchise up for grabs until 2020.

The Telegraph presented  the bid as a move by a company at the cutting edge of technology as it provides some of  Japan’s bullet train services.

But anyone thinking those on the crowded commuter routes will be whisked in by a super bullet train service should think again.

The story is in fact the exact opposite once you study the company’s latest annual report.

What it shows is that the bedrock of the company’s regular income is its commuter services around Tokyo not its bullet trains. And the prospect for making any more money out of them is a tad bleak.

It reveals that the company is currently facing a downturn in its commuter services serving Tokyo partly caused by a declining population and is looking to expand abroad. It currently provides no services outside Asia – where it is helping develop a mass transit rail system for Bangkok and improve train services in Indonesia.

The annual report says: “Generally, Japan’s declining population is seen as unfavourable for the transportation industry. However, our performance in fiscal 2015 proved that, even in an era of population decline, we can grow revenues by steadily implementing various measures.”

These include developing stations and encouraging more retired people to use local trains as the number of commuters decline.

With lower fares in Japan than the UK, the move could give the operator access to the lucrative London commuter market and it could also offer its services to maintain and build new trains for the British market.

So in other words commuters using London Midland trains to get into Birmingham and London Euston will be contributing to  profits which can be repatriated to Tokyo to offset the declining  Japanese market.

Which makes an investment in London Midland a one way bet for the Japanese since the current Tory government will ensure fares rise every year and the growing population in the UK will all help boost profits.

I would not be surprised to see government ministers in the transport department helping themselves to directorships and consultancies with the company a couple of years after they have stepped down from their posts. After all they have done them a great favour.

I have written about this in Tribune. The three consortia bidding are:a consortium run by London and West Midlands Railway Ltd, a subsidiary of Govia Ltd (a joint venture between Keolis and Go-Ahead Group)’ West Midlands Trains Ltd, currently a wholly owned subsidiary of Abellio Transport Group Ltd with East Japan Railway Company and Mitsui & Co Ltd as minority partners; and MTR Corporation (West Midlands) Ltd, a wholly owned subsidiary of MTR Corporation (UK) Ltd which runs the Hong Kong rail system.

The new London Midland operator will take over in October this year.

Top mandarins revolt over ministers wasting taxpayers money

Martin Donnelly, permanent secretary at Department of Business, Innovation and Skills, challenged ministers twice

Martin Donnelly, permanent secretary at Department of Business, Innovation and Skills, challenged ministers twice

CROSS POSTED FROM BYLINE.COM WHERE MY WHITEHALL AND WESTMINSTER SCOOPS NOW APPEAR AND NEWS STORY IN TRIBUNE MAGAZINE

A revolt is stirring in Whitehall among the country’s top mandarins. While a top Treasury civil servant backed as “value for money” a £1 billion loss on the sale of RBS shares, in six other cases this year senior civil servants have revolted against ministerial requests to spend money.

The figure is remarkable since in the previous three years of coalition government not a single civil servant demanded a direction from ministers to spend money.

Now in eight months ministers have been challenged six times and all involve giving money to the private sector.

The one most recently highlighted was the charity Kids Company where two Cabinet Office ministers had to overrule a refusal by the then Cabinet Office permanent secretary, Richard Heaton, to spend £3m on the charity. He was proved right when the charity went bust.

But there have been similar tussles between senior officials and ministers in three other departments over payments to cover a private coal mine closure, new trains for the Trans Pennine Railway, consultant fees for an airport study, free shares for Rail Mail workers and subsidising private insurance policies in areas of flood risk.

This objections either happened in the dying days of the coalition or since the Tories won a majority.

The private coal mine objection came over the closure of Hatfield Colliery. Originally the government were involved in trying to save the mine but instead this was reversed and the money earmarked for saving the mine was switched to closing it. In this case Martin Donnelly, the permanent secretary of the Department for Business and Innovation seemed to want a direction to do this.

Phillip Rutnam, p;ermanent secretary at the Department of Transport before the Public accounts Committee; Still credit:BBC

Phillip Rutnam, permanent secretary at the Department of Transport before the Public Accounts Committee. Still credit:BBC

The row over the early £250m replacement of Pacer diesel units came in the Department of Transport when the permanent secretary, Philip Rutnam said their early replacement in 2020 was not economic but this was overruled by Patrick McLoughlin as part of George Osborne’s Northern Powerhouse policy.

Mr Rutnam said their replacement was poor value for money and there were better ways of achieving improvements including modernising existing units. Mr McLoughlin decided the units were unpopular with the public and needed replacing.

Mr McLoughlin also overruled his permanent secretary, when he objected to spending money on consultants to review a decision to build houses on Manston Airport in Kent because of objections from Thanet Council, then Conservative now UKIP controlled. Mr Rutnam could not see why the money was justified and Mr McLoughlin admitted it was to help the council which could not finance the work.

Sajid David, the new business secretary, also overruled objections from Martin Donnelly, to an extension of free shares to Royal Mail staff. Donnelly had described the policy as “novel, contentious and repercussive” and not value for money for the taxpayer.

Former Dewfra permanent secretary, Bronwyn Hill, challenged value for money on flood insurance subsidy

Former Defra permanent secretary, Bronwyn Hill, challenged value for money on flood insurance subsidy

Finally Elizabeth Truss, the new secretary of state at Defra, overruled objections from her former permanent secretary, Bronwyn Hill,  to spending taxpayers’ money on the government subsidising private insurance for homes in flood areas. Again value for money and lack of knowledge of how much this could cost were the main reason. Papers for the current draft legislation reveal it could cost the taxpayer anything between £122m and £431m over a ten year period to do this.

All this suggests that the new Conservative majority government which is due to take some very contentious decisions in the next five years is not only going to face tough parliamentary opposition. It seems that top Whitehall officials are going to scrutinise exactly where they are spending money in this new age of austerity and fight back if they think ministers are wasting it.

Even if the civil servants are overruled there are consequences. Each action will be scrutinised by the National Audit Office and could lead to questioning at the Commons public accounts committee.

Exclusive: The East Coast rail bosses tax avoidance scheme that hit the buffers

East Coast trains at Kings Cross. Pic courtesy:;  www.rail.co.uk

East Coast trains at Kings Cross. Pic courtesy:; http://www.rail.co.uk

A blunder by the Department of Transport has allowed two top state rail bosses to repeat a tax avoidance scheme which should have been outlawed in Whitehall following the exposure of Ed Lester, the former head of the Student Loans Company.

The deal allowed the highly paid chief executive, Michael Holden, and his finance director, David Walker, to avoid having tax  and national insurance deducted at source from the state-owned Directly Operated Railways, which is responsible for the East Coast mainline. They are now on the pay roll and are currently paid £244,000 and £171,000 a year respectively. Originally it appears the money was paid into their two personal service companies run with their wives.

A  full report in Exaro News today names the two top officials cited in a written Parliamentary statement from Danny Alexander, Chief Secretary to the Treasury last week which revealed that 128 civil servants had been caught on ” off pay roll” contracts that should be have been full-time employees, Some 125 former civil servants who quit have now been reported to Revenue and Customs.

 But the Treasury has put the blame on the other three on two ministries, Transport and the Department of Environment, Food and Rural Affairs and has fined both ministries over £500,000 between them for the lapse which they should have put an end after six months.

Michael Holden. chief executive of  state-owned Directly Operated Railways

Michael Holden. chief executive of state owned Directly Operated Railways

 Michael Holden appears to be all round railway buff,competitive  swimmer, fell walker, and an advocate of the beauties of Surrey living in Woking. As non executive chairman of East Coast Rail ( which I can praise for a good service to disabled people) a member of the travelling public recently asked him to pose for a picture on their mobile.

He describes himself on his Twitter account as: “A bit grumpy, mostly old, but all man, busy with railways, being dad and lots of other stuff. Looking for that elusive work-life balance thingy.”

On his Linked-In page, he says: “I lead the UK government’s business unit capable of running rail franchises when no tendered franchise can be put in place.” He runs a personal-service company, Coledale Consulting. He describes it as: “Railway-management consultancy specialising in strategic advice to railway companies. Clients include infrastructure providers, train operating groups and companies, and client side including government. UK, Ireland, Sweden.”

David Walker appears to be  a less flamboyant and is not on Twitter. He has interesting links with Romanian as well British railways..

The third case uncovered by the Treasury was at the Animal Health and Veterinary Laboratories Agency (AHVLA), which hired Claire Evans off payroll as director of corporate services in October 2012.

Her annual salary last year was between £140,000 and £145,000.

Again, the Treasury said that the AHVLA was too slow to put Evans on the payroll. 

The biggest offender for off pay roll contracts is Vince Cable’s department of business,innovation and skills and its agencies – accounting for almost half the 125.