VTEC franchise
Government could take back control of the Virgin Trains East Coast franchise in a “very small number of months”.
GOVERNMENT could take back control of the East Coast franchise for the second time in less than ten years.
Speaking in the House of Commons on February 5, Secretary of State for Transport Chris Grayling said: “I have already informed the House that the franchise will in due course run out of money and will not last until 2020 [ RAIL 845]. But it has now been confirmed the situation is much more urgent. It is now clear that this franchise will only be able to continue in its current form for a matter of a very small number of months and no more.”
A Department for Transport spokesman confirmed to RAIL on February 6 that the current Virgin Trains East Coast franchise will only operate in its present form for a “small number of months”.
He said the DfT would now conduct a full appraisal of the options for how the service will run, although it was still the intention to introduce the East Coast Partnership from 2020 ( RAIL 841).
The options include a new contract with Stagecoach to be operated on a short-term, not-forprofit basis, with the only potential financial reward for Stagecoach to be received at the end of the contract in return for clearly specified passenger benefits being delivered. Alternatively, the East Coast franchise would be directly operated by the DfT though an Operator of Last Resort. That happened in 2009 when Directly Operated Railways took over from National Express ( RAIL 631).
Grayling said: “I have asked my officials to conduct a full appraisal of the options available to the Government, to ensure continuity of service until we implement the East Coast Partnership on the route from 2020.
“My decision on which option to choose will be made in accordance with the key principles set out in the statement on how I use my rail franchising powers. This includes protecting the interests of passengers, and preserving the interests of taxpayers, by ensuring value for money and supporting investment and improvement in the railway, including the deployment of the new Intercity Express Trains on the East Coast.
“In order to inform this decision, the Department will assess the extent to which each option performs against these principles. Our value for money assessment will be based on a number of criteria, including which option returns most money to the taxpayer, the risks attached to each, and the value of any improvements in passenger services.”
Grayling added that he will also have regard to “the effect of my decision on other franchises”.
A VTEC source told RAIL that it had received no indication as to how long the deal would last.
The announcement was made on the same day that Virgin Trains and Stagecoach were awarded an extension to the Virgin West Coast deal (see pages 8-9).
Shadow Transport Secretary Andy McDonald slammed the plans, saying: “That Chris Grayling awarded a profitable contract to Virgin and Stagecoach on the West Coast while simultaneously confirming the same companies have collapsed on the East Coast shows Government policy is in chaos.
“This is yet another Tory handout to private shareholders at the public’s expense. Failing train companies should not be awarded future contracts, but this Government is rewarding them for failure by extending their lucrative deal.”
Rail Delivery Group Chief Executive Paul Plummer said: “The system for awarding franchises has evolved since the East Coast contract, and lessons continue to be learned.
“Franchising has transformed the day-to-day finances of Britain’s railway, from a £2 billion-a-year loss 20 years ago to a £200 million surplus today, keeping running costs in the black and freeing up taxpayers’ money.”
Stephen Joseph, Chief Executive of Campaign for Better Transport, said: “This statement shows that the current franchising process is in a mess. Train companies have overbid, but the entire process has encouraged them to do so.
“Failures on the East Coast are also down to Government mismanagement of the new trains -