InterCity Trains Back In Public Ownership
16 May 2018, 14:01 | Updated: 16 May 2018, 14:34
The historic railway brand of LNER is returning next month as the Government has announced it's cancelling the current Virgin Trains East Coast franchise.
Transport Secretary Chris Grayling's confirmed he is pulling the plug on the East Coast rail franchise, currently owned by Virgin Trains East Coast - which is a joint venture between Stagecoach (90%) and Virgin (10%).
The franchise as awarded the right to operate the Kings Cross to Edinburgh line for eight years in 2014.
But the private operators have since complained of losing money on the line between London and Edinburgh.
So Mr Grayling has announced the franchise is coming back under public control.
In a stock market statement, Stagecoach chief executive Martin Griffiths, said:
"We are surprised and disappointed that the Department for Transport has chosen not to proceed with our proposals. We believe our plans offered a positive, value-for-money way forward for passengers, taxpayers and local communities, ensuring the continuation of the exciting transformation already under way on East Coast and a smooth transition to the Government's new East Coast Partnership.
However, we respect the Government's decision. We will work constructively with the DfT and the OLR in the weeks ahead to ensure a professional transfer to the new arrangements, supporting our employees and maintaining the same clear focus on our customers as we have over the past three years.
Today's decision should not detract from the hard work and dedication of our people at Virgin Trains East Coast, who have been central to the transformation we have been delivering for our customers over the past three years. During that time, we have attracted more passengers, greatly increased investment, achieved industry leading customer satisfaction and made significant payments to the taxpayer to reinvest in public services.
Despite today's news, we believe that we can continue to make a positive contribution to the UK rail market, delivering long-term customer benefits and sustainable returns for taxpayers and investors."
Anthony Smith, chief executive of independent watchdog Transport Focus, said:
"Whichever organisation runs East Coast services, under whatever new arrangements, passengers will be looking for the quality of current services to be maintained and built on.
East Coast is currently the top-rated franchised train service in Great Britain - with 92% overall satisfaction with the last journey in the latest National Rail Passenger Survey.
While reliability must continue to improve, and promised and new investments made, passengers will continue to judge services by the performance on the day of the train company and Network Rail, value for money, cleanliness of the train and crowding levels.
Having more stability in the underlying contract between Government and the train company will help achieve these things that matter most to passengers."
Rail, Maritime and Transport union general secretary Mick Cash said:
"This is the second time that the Government have called upon the public sector to launch a rescue operation on the East Coast Main Line and instead of being a temporary arrangement Chris Grayling should listen to his staff and the public and make it permanent.
After three shambolic private sector failures on the East Coast the message should now sink in that these cowboys cannot be trusted and should be locked out of the system on a permanent basis.
Anything else risks playing out the same expensive farce over and over again. RMT will now be seeking an urgent meeting with the new operator to bolt down guarantees for staff on jobs, conditions and pensions."
Transport Secretary Chris Grayling told the Commons:
"I will terminate Virgin Trains East Coast's contract on June 24 2018. I plan to use a period of Operator of Last Resort control to shape the new partnership.
So on the same day we will start with the launch of a new long-term brand for the East Coast Main Line through the recreation of one of Britain's iconic rail brands, the London and North Eastern Railway, the LNER.
The team that's been working for me since last autumn to form the Operator of Last Resort will take immediate control of passenger services.
They will then begin the task of working with Network Rail to bring together the teams operating the track and trains on the LNER network."
Mr Grayling said he has received "official advice" that Virgin and Stagecoach should be allowed to continue bidding for future rail franchises.
He told the Commons:
"A multi-disciplinary panel has considered the situation and recommended that both companies continue as train operators.
They have advised that there is no suggestion of either malpractice or malicious intent in what has happened.
Clearly we have to be vigilant about future financial commitments."
He added that the firms have paid a "high financial and reputational price" in relation to the East Coast route.
Shadow transport secretary Andy McDonald said Mr Grayling had "gifted" the operators a "£2 billion bailout" after they failed on the main line, adding:
"And he has the audacity to come to that despatch box and say it's not reasonable to remove or place conditions on their passport. Absolutely ludicrous."
The service's most successful period had come under public ownership, Mr McDonald said, until it was "cynically reprivatised".
He went on: "The Government's incompetence has been disastrous for passengers and led to misery for millions.
We've been here before, many, many times. Year after year, the Secretary of State and his predecessors have stood at the despatch box and told the House that privatisation is being reformed.
We've had reform, reform and reform. We've had bailout after bailout. Rail companies win, passengers and taxpayers lose.
There's a definition of insanity, doing the same thing over and over again and expecting the same results. This is the situation we find ourselves in today.
Franchising remains at the heart of the alleged partnership. No amount of tinkering can solve the failings of a broken privatised system, where the public takes the risk and the train companies take the profit, aided and abetted by the Transport Secretary."
Labour Transport Committee chairwoman Lilian Greenwood called on Mr Grayling to apologise, saying her committee would be subjecting the failure to detailed scrutiny.
She said: "The Secretary of State must take responsibility for this serious repeat failure. If Virgin-Stagecoach got their figures wrong then so did his department and he should apologise to passengers and taxpayers for that failure."
Ms Greenwood also asked about the impact of the decision on other rail franchises which were "struggling to meet their obligations".
Mr Grayling insisted this railway had continued to deliver a higher level of contribution to the taxpayer than it did prior to 2014 and a higher level of customer satisfaction.
Mick Whelan, general secretary of Aslef, the train drivers' union, reacting to the East Coast announcement by Chris Grayling, said: "We hope that he will now bring the rest of our railways back into public ownership, too.
"This is the third time in 10 years that a private company has messed up on the East Coast main line. When it was run in the public sector, it returned more than £1 billion to the Treasury.
"It's important that staff, and passengers, are properly protected while, once again, the Transport Secretary tries to patch up a failing franchise system that everyone knows doesn't work. Britain's railways should be run, successfully, as a public service, not for private profit.
"It's only sad that Tory dogma - wedded to the failed model of privatisation - means they will return this line to the private sector, doubtless to fail again, in the not too distant future.
"And when Failing Grayling talks about vertical integration - to which we are not, in principle, opposed - it's important to keep the profit motive out of the infrastructure."
AFTER 3 FRANCHISE FAILURES, WHAT HAPPENS NEXT?
Virgin Trains East Coast (VTEC) is the third private operator to fail to complete the full length of a contract to run services on the East Coast route.
GNER was stripped of the route in 2007 after its parent company suffered financial difficulties.
Just two years later, National Express withdrew in 2009 with services run by the Department for Transport for six years up to VTEC taking over in 2015.
On the 24th of June, the current franchise will be terminated and the line from King's Cross to Stevenage, Peterborough and Edinburgh will then be re-launched under public ownership under the recreation of one of Britain's iconic rail brands, the London and North Eastern Railway, the LNER.