Rail franchises operators & contracts

12.04.19

Unions and MPs protest TOC’s potential £7.5bn funding gap in ‘deadly serious’ rail pensions row

The Pensions Regulator has warned that train operators face a black hole of up to £7.5bn and the RMT has threatened national strike action as the row over rail pensions comes to a head after the DfT blocked Stagecoach’s franchise bids.

The issue of has exploded in the past few days after the DfT disqualified Stagecoach’s three rail franchise bids for breaching the pension rules, with MPs criticising the government and the RMT union now threatening national industrial action if there is any attack on staff pensions.

The regulator has been investigating a potential shortfall in train companies’ £28bn industry-wide pension scheme for some time, and made the warning in a letter to lawyers representing the Rail Delivery Group.

In its response, an “extremely concerned” Stagecoach said it had been told its exclusion was because of its refusal to shoulder responsibility and extra risk for unquantified pension contributions.

The transport group said it was because of the government’s choice to go with a “higher risk approach” instead of the industry’s proposed solution, and was “shocked” the DfT expected private operators to take the extra risk.

The DfT said Stagecoach had proposed “significant changes” to the commercial futures of the three franchises and said it was “responsible for their own disqualification” after it “repeatedly ignored established rules.”

Yesterday Sir Richard Branson warned that Virgin Trains, which was making a joint franchise bid with Stagecoach, could disappear from the UK railways from November because of the decision, and agreed that “we can’t accept a risk we can’t manage – this would be reckless”

Branson said: “We have significant concerns over the latest developments and their implications for the future of the UK rail market.”

Speaking in the Commons, Labour’s shadow transport secretary Andy McDonald said the government was trying to reduce their support for the railway pensions scheme through “sleight of hand.”

In a letter sent last June, the Pensions Regulator said the deficit “has increased from £4.8bn to £7.5bn in just three years,” although it recognised that the DfT had consistently said that privatised companies must take responsibility.

The RMT’s Mick Cash said: “The pension rights of RMT members are not there to be used as bargaining chips in a row between the train companies and the government. Any threat to our members pensions will be met with ballots for action and we will co-ordinate any response across the country.

“This situation is deadly serious and we are preparing to fight if need be and the Government and the train companies should wake up to that fact.”

Meanwhile, the DfT has started discussions with Southeastern about an extension of the current franchise to allow more time to review and reward a winner for the next franchise, with an initial five months from 23 June to 10 November 2019 and the option to extend further to April 2020.

Image credit - PingchengZuo

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