Grayling: Stagecoach “paying the price”

Stagecoach got its sums wrong regarding the East Coast franchise, Secretary of State for Transport Chris Grayling told the House of Commons on February 5. “It overbid and is now paying the price,” he said.

Grayling denied a deal had been done on the railway, telling MPs that no decision had been made on a successor for the franchise.

“There is no question of anyone receiving a bail-out,” he said, adding that VTEC will be held to all its contractual obligations in full.

“Private businesses risk substantial amounts of their own capital, and if they fail to live up to their stretching targets they lose out, not the taxpayer,” he said.

“For anyone who thinks that the nearly £200 million that Stagecoach will lose is insignificant, let me put into context: the combined profit for every train operator in the country was only £271m last year.”

Grayling added: “In a competitive market, franchises will sometimes fail. When that happens, my duty is to protect passengers and taxpayers, and to ensure continued investment in the railway. Stagecoach has paid the price for failure, as stipulated in the contract.”

Stagecoach Chief Executive Martin Griffiths said in a videoed statement on February 5: “The Government rigorously tested our plans and financial assumptions before awarding us the East Coast contract... it decided we offered a high-quality and realistic bid... indeed, I was personally told at the time that it was the highestquality bid they had ever seen.

“That bid was based on the information and trends available at the time, including economic forecasts used by government.”