Claim of whitewash as Sam Laidlaw tells select committee hearing into his report staff cuts and new procurement methods were responsible
The businessman investigating the west coast mainline fiasco has told MPs of “appalling inadequacies” in the Department for Transport, where no proper minutes were taken of a key meeting and staff cuts left officials with nowhere to report problems in the new procurement process.
Sam Laidlaw said he had received many different accounts from the 14 people present at a meeting in June where the financial guarantees for FirstGroup’s winning bid were discussed and at which an individual apparently gave illegal advice.
Laidlaw, the boss of British Gas parent Centrica, told the transport select committee: “It was not entirely clear about what happened at that meeting and why decisions were taken.”
His inquiry was commissioned after the award of Britain’s most lucrative rail franchise to FirstGroup was scrapped in the face of a legal challenge from Virgin. Following the challenge the flaws in the bidding process emerged.
Laidlaw, a non-executive director of the Department for Transport, told MPs questioning him about his report, published on 6 December, that officials felt “inhibited” from raising problems in the process.
Laidlaw said that because Justine Greening, then transport secretary, had received a letter on 23 July with complaints from Virgin she was “recused” from the process to preserve the anonymity of the bidders.
Senior civil servants, including the permanent secretary, were likewise kept apart and there was therefore “no one to escalate concerns to” when it became clear things were going wrong. He added that the policy of anonymising bids was “severely counter productive” and would be changed.
He said ministers had to “satisfy themselves that due process is being followed … and that it has good integrity and good transparency”.
“What happened here did not conform with those principles – but not for lack of questioning from the ministers.”
He added that it was “quite clear they asked penetrating questions” of senior officials, but said those officials themselves had no reason to suppose the process was flawed as the lower levels were not escalating the problems to them.
Laidlaw refused to blame ministers or senior officials for the failings. But after the hearing, committee chair Louise Ellman said: “It’s astonishing that nobody was in charge and no senior officials were present when critical decisions were made, with disastrous consequences.
“I think the committee has exposed the appalling inadequacies of the department, the way it was structured and the way it was run. Ultimately the minister has to be responsible for the running of the department.”
One senior industry source described Laidlaw’s refusal to point blame at top officials and ministers as a “whitewash”. Laidlaw’s appointment to head the inquiry had been resisted in October by Labour, whose shadow transport secretary, Maria Eagle, described it as “scandalous”, demanding a “truly independent figure”.
It emerged that Laidlaw’s co-author, Ed Smith, had sat on a meeting scrutinising the franchise process as late as 2 August, although Laidlaw said he “had provided a lot of challenge” to officials.
Laidlaw revealed that he had delivered his report to the transport secretary, Patrick McLoughlin, on 28 November, eight days before it was published with a swath of redactions.
One redaction was the name of the senior civil servant who advised officials to exercise discretion in determining the size of the bond First and Virgin should pay to guarantee their bids, in contravention of procurement law.
Labour MP Louise Powell asked Laidlaw whether “ministers were not doing their job at all or doing their job badly?”
Laidlaw replied: “I think that would be an incorrect characterisation. They were asking the wrong people because the people at the senior level were not fully briefed.
“This was a sequence of errors. There was no ownership and no obvious route to escalate concerns. This process had to be done against the clock and that sense of urgency made people more reluctant to escalate concerns.”
Laidlaw agreed that cuts in the department created “a loss of capability, and the failure to replace it with senior rail franchising people” which led to “an asymmetry of resource” between the taxpayer and the bidding companies.
He also said the new, more complex franchise bid process was launched without the mechanisms for calculating the figures having been tested. The complexity was compounded by the franchise’s long duration. But he refused to apportion blame, saying the fiasco was “an accumulation of events”.
Earlier this month Virgin was awarded a 23-month management contract to continue running the London-Manchester-Glasgow line, three days before its existing contract was due to expire. A second review into the lessons of the fiasco for wider franchising, by Richard Brown, is due to be published next month.