East Coast line may be renationalised in a matter of months
THE Virgin East Coast main line could be renationalised in a matter of months, the Transport secretary announced yesterday.
Chris Grayling revealed last month that the franchise – run jointly by stagecoach and sir Richard Branson’s Virgin Group – was running out of cash and likely to break up before 2020.
But yesterday he told MPs that the situation had become ‘much more urgent’ after the operators breached a ‘key financial covenant’.
He said: ‘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.’
Delivering an urgent statement in the Commons, he said he had already asked officials to conduct a ‘full appraisal’ of the options to ensure the trains continue running as normal.
Perth-based stagecoach – which owns 90 per cent of the franchise – and Virgin could be awarded it on a short-term ‘not for profit’ basis, or it will be ‘directly operated’ by the UK Department of Transport.
If this happens, it would be the third time the line has been renationalised in 11 years. It last happened in 2009 when National Express defaulted on its payments, before Virgin and stagecoach took over in 2015.
They won the contract after promising to pay £3.3billion premiums. But they have struggled to meet the repayments as they overestimated how many passengers would use the service.
Mr Grayling also confirmed the Government intends to give a ‘direct award’ to Virgin Trains to continue to run the West Coast main line until at least March 2019, meaning no other operator is allowed to bid.
Labour shadow transport secretary Andy McDonald said the ‘bail out culture at the Department of Transport is alive and well’.
He added: ‘What makes me weep is that he has given more gifts to Richard Branson and [stagecoach founder and chairman] Brian souter.’
Referring specifically to the East Coast line, he said: ‘The announcement today is yet another monumental misjudgment to add to a growing list of miscalculations by this secretary of state.
‘It’s increasingly clear that he doesn’t care about taxpayers, rail passengers or the rail industry itself but he’ll do everything in his power to protect Virgin, stagecoach and their ilk and the failed franchise system.’
But Mr Grayling hit back at Labour for failing to cost its proposals to renationalise the railways. He said: ‘We have done this in this country before – it was called British Rail – and it became a national laughing stock.’
Mr Grayling admitted that stagecoach and Virgin are in line for a windfall from the Government if officials allow them to continue to run the East Coast line temporarily and they hit performance targets.
stagecoach chief executive Martin Griffiths, said: ‘Contrary to much misinformed recent comment, we’ve neither walked away from the East Coast franchise nor asked for, or received, any special treatment.’
‘It became a national laughing stock’