Rail franchises operators & contracts

16.05.18

DfT to take over East Coast under new London North Eastern Railway brand

The current East Coast franchise will be scrapped on 24 June and replaced by a government team tasked with running passenger services until this can smoothly transition into the East Coast Partnership, which will bring together the public and private sectors.

In an unprecedented move, especially considering his aversion to nationalisation, transport secretary Chris Grayling today announced that the failed franchise will be terminated next month and replaced under the recreated London North Eastern Railway (LNER) brand.

Instead of allowing current operator Stagecoach to continue to run it in a not-for-profit basis, Grayling’s team decided it was better to use the opportunity to drive the DfT’s plans for the East Coast Partnership – which is set to be a similar model to the next South Eastern franchise operation.

As a result, the government, or what is called the Operator of Last Resort, will take control of the franchise in June when the existing contract is terminated. The department will then “begin the task of working with Network Rail to bring together the teams operating the track and trains on the LNER network.”

A new board with an independent chair will oversee the LNER route operation and will work with the DfT on building the new partnership. This board will include representatives of both the train operating team and Network Rail, as well as independent members who will speak for the other operators on the route.

An interim chair is expected to be appointed shortly.

“When it is fully formed the new LNER operation will be a partnership between the public and private sectors,” explained Grayling in a statement to the House of Commons. “In all circumstances ownership of the infrastructure will remain in the public sector, but the railway is at its strongest when it is a genuine partnership between public and private.

“The final structure of LNER will need to be shaped in conformity with the primary legislation which governs the industry. But my objective remains to move to a situation which leaves one single team operating the railway, with the simple goal of ensuring it continues the work that the existing operators have done in improving passenger services.”

The transport secretary said the “rigorous process” undertaken underlines the government’s to ensure “businesses operate under firm, but fair rules.” But he ruled out the possibility of companies holding unlimited liabilities, otherwise they would not be motivated to bid for franchises.

“This will mean sometimes franchises will fail,” he argued.

Both Virgin and Stagecoach will also still be allowed to continue as train operators, Grayling added, explaining that a multidisciplinary panel advised there is no “suggestion of either malpractice or malicious intent in what has happened.”

“Clearly we have to be vigilant about future financial commitments. But the organisations have paid a high financial and reputational price for what has happened,” he continued.

The secretary of state confirmed that there will be no change to services, with timetables remaining the same and tickets still valid.

He also emphasised the importance of keeping employees “at the heart” of LNER. To do this, the new board will bring forward proposals that will allow employees to “share directly in the success of LNER both as a pure train operator and subsequently as the new partnership.”

West Midlands mayor Andy Street has agreed to provide “informal advice” to the team on how to best achieve this plan.

Great Northern integration

Separately, Grayling revealed that the government has not yet reached a decision about how to operate Great Northern services once the TSGN franchise is split into two or more franchises when the current contract ends in 2021.

However, he did say that he has had initial discussions with mayor Sadiq Khan about the possibility of transferring some of the Great Northern services to London Overground, as recommended in the Gibbs report.

Changes are subject to consultation, but he argued there is an “operational case” for integrating Great Northern services from King’s Cross into the new LNER operation. His officials and the new LNER route board will undertake feasibility work on this.

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Credit: David Mirzoeff PA Images

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