Farewell VTEC, hello LNER
Grayling renationalises East Coast - but what comes next?
I was wrong. Always best to be upfront and admit it if you are. And I was. There were two broad options facing Secretary of State for Transport Chris Grayling for East Coast: a Direct Award for Stagecoach/Virgin as a management contract; or nationalisation, either via a reactivated Directly Operated Railways (DOR) or at arm’s length via an external Operator of Last Resort (OLR).
Even accepting Grayling’s centralist tendencies, my judgement (quiet at the back!) was that taking direct control would be to hand Labour a political advantage by adopting their policy of Nationalisation. Add that a Direct Award ensures continuity of management for passengers and it’s better taxpayer value - and I was optimistic I’d made the right call in a DA.
Then Grayling confounded everyone by opting for direct control at arm’s length through an OLR, rather than directly from within DfT via a reactivated DOR. I wasn’t the only one left flat-footed - the accompanying tweets show that Labour’s front bench was caught napping too, as Shadow Transport Secretary Andy McDonald and Chancellor John McDonnell contradicted each other.
Full details of the SoS’ proposal are reported by Richard Clinnick on pages 6-7. The VTEC franchise ends on June 24. The money has finally run out and having met its financial obligations, the VTEC franchise ends in June.
So, what happens now? The OLR (SNCLavalin) will be busy, preparing to mobilise a seamless transfer on June 24. The revived London North Eastern Railway (which incidentally has existed as a corporation since February 2018) will take over. It will be a ‘subsidiary of a subsidiary’ of the DfT - which is probably why Labour couldn’t decide if it was nationalised or not. The new LNER board may (or may not) include members of the VTEC top team. Most important is that it will be ‘business as usual’. All staff keep their jobs… the timetable runs as normal… bookings can be made… reservations will be honoured.
My understanding is that the LNER brand, as with ScotRail’s brand, is now permanent and will remain - regardless of what happens in future. In his House of Commons statement on May 16, Grayling stressed that the ECML is a successful business. Business is growing at 3%-5% a year and passenger satisfaction has been running at 92%. This is not a failing railway. We are in this mess because the franchise demanded growth of 10% a year, and this has not happened.
In the Commons, Grayling laid the blame with Stagecoach for “getting its figures wrong”, and while this is true (as Stagecoach has admitted) it is not the whole story. In a fiery intervention, Nottingham South Labour MP Lilian Greenwood tore into Grayling, demanding an apology for DfT’s own failure to get its figures right. She didn’t get her apology, but she will most certainly get her answers - she said that the Transport Select Committee won’t be deflected. She clearly wishes to examine the failings of the DfT’s Invitation to Tender (ITT) in not just rewarding ambition, but pushing it too far.
Other contributions ranged from the predictably political from Andy McDonald to the ranty and plain wrong from the SNP’s Alan Brown. Deeply depressing.
There is some logic in Grayling’s plan that we should crack on with whatever comes next, rather than wait until 2020. If only we knew what ‘whatever comes next’ is. We were told only that details of the new public private part- nership would be announced as soon as possible. The problems are huge. LNER will, like VTEC, be the highest-profile user of the route, but with only 9% of its traffic. There are 15 other operators with a 16th to come when First’s open access services launch from Edinburgh to King’s Cross, by May 2021. Blimey.
Creating this new entity was always going to be difficult - but when you add the introduction of new Azuma trains and the problems surrounding infrastructure, no one should underestimate the difficulties ahead.
There was a hostage to fortune in Grayling’s remarks. Andy McDonald rightly asked if other franchises were in trouble, and mentioned TransPennine Express, Greater Anglia and South Western Railway. Grayling said no other franchise had similar problems. Hmm. It’s widely accepted that some franchises are highly stressed: if another TOC hits the rocks his comments will return to haunt him.
Grayling has nationalised East Coast, at arm’s length. Maybe he judged that handing the unions an easy target about him stealing their clothes would be less damaging than being pilloried for being kind to a private sector perceived to have failed, had he allowed Stagecoach to continue. Maybe he wanted to send a stern message. Maybe both.
Grayling also intimated that Great Northern services from King’s Cross might be integrated into LNER. On the one hand, this is good strategic thinking in terms of sorting two messes in a single initiative. Grayling further admitted that franchising has changed significantly as a result of this experience - yet DfT has avoided any responsibility.
I’m left with an unpleasant aftertaste. It’s hard to describe, but it feels like Stagecoach has somehow been sacrificed in order to allow DfT officials to ‘muck out their own stables’. Yes, Stagecoach was too ambitious, but it admitted it and far from being bailed out, paid a very heavy price of £ 200 million. The company could be forgiven for leaving the railway, especially considering the toxic politics and the reputational damage it has suffered. I really hope it doesn’t.
Finally, please spare a thought for the 3,200 VTEC staff, who face continuing turbulence in their everyday lives while trying to give us all good service. Be kind to them.
“…it feels like Stagecoach has somehow been sacrificed in order to allow DfT officials to muck out their own stables.”
Nigel Harris asks what comes next for East Coast.