06.02.18
Grayling: East Coast franchise could fail within months
The Virgin Trains East Coast franchise has cost majority-owners Stagecoach £200m and could be only “a small number of months” from collapse.
Appearing in parliament this week, transport secretary Chris Grayling told ministers that the government may have to take control of the failing franchise.
He claimed that the day-to-day operation of the railway would be unaffected but explained that the operator – owned 90% by Stagecoach and 10% by Virgin – had breached a “key financial covenant.”
According to Grayling, the problem was caused because Stagecoach “got its numbers wrong” and overbid on the original contract, leaving it unable to run the franchise.
However, the transport secretary said there was no current agreement in place for either the government or another company to take over.
He said: “Contrary to widespread speculation and rumour, no deal has been done on this railway, and I have not yet made a decision on the successor operator to run the East Coast railway until the longer-term plans for the integration of track and train can begin in 2020.
“There is no question of anyone receiving a bail-out. Stagecoach will be held to all its contractual obligations in full.”
Previously, the DfT had said that the franchise was likely to end in 2020, earlier than its initial end date of 2023, and would then be subject to the new public-private ‘East Coast Partnership’ which is likely to be similar to the model announced for the next South Eastern franchise.
While Grayling has heaped blame for the collapse on Stagecoach, Virgin founder Sir Richard Branson said much of the responsibility fell at the feet of Network Rail for failing to live up to promises of a major track upgrade.
The failure of the franchise has prompted some critics to call for nationalisation of the East Coast mainline, encouraged by the transport secretary’s admission that central control of the line is a possibility.
Handling of franchise a ‘shameful fiasco’
RMT general secretary Mick Cash said the handling of the issue so far was a “shameful fiasco” and that it should be “renationalised with immediate effect.”
Andy McDonald, Labour’s shadow transport secretary, also attacked Grayling: “The transport secretary’s failure to stand up to Virgin and Stagecoach is a disgrace. He’s supposed to protect taxpayers’ interests, not sacrifice them to private shareholders,” he stated.
“The system is broken which is why Labour will act in the public interest by taking our railways back into public ownership.”
Future plans for the franchise could see Stagecoach continue its operations on a short-term and not-for-profit basis until 2020, although Grayling has said that the company will be “held to all of its contractual obligations in full”, with “no question of a bailout.”
RTM has contacted the firm for comment.
Top image: Dominic Lipinski, PA Wire
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