Meeting of the Parliament 18 December 2019
I would like to take the opportunity to update Parliament on the ScotRail franchise contract.
The benefits that our railways bring are well rehearsed: they help our economy to grow; they connect our cities and our communities with jobs, education, health services and leisure activities; they enable our visitors to explore all that Scotland has to offer; and they help to reduce the impact on our environment of moving people and goods.
Our commitment to investing in rail is unquestionable. We have spent more than £8 billion since 2007, and we will spend more than £5 billion between 2019 and 2024. That investment is delivering new services, new and refurbished trains and infrastructure improvements that will increase capacity and improve reliability.
Since last weekend, growing communities in the north of Glasgow have had access to a new station at Robroyston. The December 2019 timetable change, which took place this week, has resulted in an additional 10,000 seats on the network every day. That means extra carriages on our Edinburgh to Glasgow routes and on our busy, peak-time Fife and Borders services, as well as additional services in the north-east to maximise the benefits of our infrastructure investment. Since the start of the franchise in 2015, we have increased capacity by around 125,000 seats per day across the network. It is therefore vital that we make those considerable investments in a way that ensures best value for passengers and for taxpayers.
The current ScotRail franchise contract commenced in 2015. As required under the current legislative framework, the Scottish Government let the contract through open commercial competition. Under the terms of the contract, in its fifth year the Scottish Government and Abellio ScotRail must revisit cost and revenue assumptions. Those assumptions provided the basis for the franchise subsidy levels set at the start of the contract, in 2015, and we must consider whether they should be revised.
That is referred to as the rebasing process. In that process, the Scottish Government and Abellio ScotRail could agree to rebase and continue with the contract until March 2025, on the basis of revised revenue and cost inputs that would determine future franchise subsidy levels. Alternatively, either party could issue a no-rebasing notice, which means that the revenue and cost assumptions that determine subsidy levels remain as they are and the contract comes to an end at an earlier point, which would be expected to be March 2022.
The rebasing process commenced on 1 October this year and a decision on whether to serve a no-rebasing notice is required by no later than 31 December. My officials have undertaken extensive and rigorous analysis of the information provided by Abellio ScotRail about the rebasing option and commercial issues concerning a 10-year franchise term. As well as consideration of the effects on passengers, there has been a detailed and thorough analysis of the key financial, legal, economic and operational aspects. Of critical importance was that we measured the information provided against the policy principles that underpin the franchise, which include value for money, passenger satisfaction and full exploitation of the utility and capacity of the network.
I thank the team at Abellio ScotRail for the proposal that they have made and the wide range of information that they have provided in support, which has allowed me to consider the range of issues that are pertinent to the rebasing decision. After careful consideration, the Scottish ministers have decided not to rebase the contract. We are not satisfied that the significant increase in public subsidy that would otherwise be required would generate commensurate benefits for passengers, communities and the economy. As such, we do not consider that rebasing would secure the delivery of the policy objectives that underpin the current franchise.
I can confirm that I have, today, issued a notice to inform Abellio ScotRail of the decision. Therefore, the current franchise agreement is expected to come to an end in March 2022. The existing provisions in the franchise agreement continue as they are set out in the contract, and we will work closely with Abellio ScotRail to ensure the delivery of the requirements of the franchise, including performance and service quality. We will also maximise the benefits of our significant investment in our railways, in order to provide the best possible services for passengers and support growth.
There have been successes and challenges over the first five years of the franchise. We have maintained a good working relationship with Abellio ScotRail throughout that period and I fully expect that that will continue for the remainder of the contract and that it will support us in the delivery of our ambitious programme of transformation on Scotland’s railways.
I believe that the decision that I have advised the Parliament of today in respect of the ScotRail franchise is the right one for passengers, communities, the economy and taxpayers. It is, of course, necessary to plan for the future provision of ScotRail services, and I can confirm that work has already been undertaken to examine the options open to the Scottish ministers after the current contract comes to an end. This will, of course, mean regular engagement with trade unions and other stakeholders.
Looking further ahead, I fully expect that changes in the structure of railways, not just in Scotland but across the whole of the United Kingdom, will take place as a consequence of the UK rail review undertaken by Keith Williams. While we await the outcome of the review, I very much hope that it will see an end to the present complex and costly franchising system for rail services. For now, services will, of course, continue to operate. Abellio ScotRail remains contractually committed to delivering quality rail services. This Government has made significant investment in our railways and we will ensure that we maximise the benefits for passengers and taxpayers.
I conclude by recognising the role of ScotRail staff, their continued hard work and their commitment to delivering essential services to the people of Scotland.