Fresh East Coast agreement with Virgin and Stagecoach would be ‘real scandal’

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It will be a “real scandal” if Virgin and Stagecoach continue running train services on the East Coast Main Line after their franchise agreement is terminated, Lord Adonis has said.

The Labour peer said the firms are already being given a “bailout” with the Government ending the £3.3 billion contract to operate services between London and Edinburgh early.

Transport Secretary Chris Grayling previously said he would either put the franchise into public control through an operator of last resort – a consortium led by Arup – or negotiate a short-term deal with the incumbent.

(PA Graphics)
(PA Graphics)

In November 2014, Virgin Trains East Coast – a joint venture between Stagecoach (90%) and Virgin (10%) – was awarded the franchise to run trains for eight years.

Stagecoach reported losses on the line and in November last year Mr Grayling announced that the franchise would be terminated in 2020 to enable it to become a public-private railway.

Two months later Mr Grayling told the Commons the franchise would only be able to continue in its current form for a “very small number of months” as Stagecoach had “got its numbers wrong” and “overbid”.

He said the firms would only be allowed to continue running services on a “not-for-profit basis”, with any financial rewards being performance-related and delivered at the end of a new contract.

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Chris Grayling said Stagecoach had ‘got its numbers wrong’ (Danny Lawson/PA)

“Stagecoach will be held to all of its contractual obligations in full.”

Lord Adonis, who resigned as chairman of the National Infrastructure Commission following the announcement, claimed a new agreement with the companies would be a “huge bailout by another name”.

He said: “Don’t fall for (the) words ‘not for profit’. Virgin and Stagecoach will do very nicely out of this ‘not for profit’ contract.

“It is a real scandal if they get it, since they have just been given a £2 billion bailout from their previous contract.”

Stagecoach chief executive Martin Griffiths told the Commons Public Accounts Committee the collapse of the franchise was a “very painful experience”.

He said Stagecoach will lose more than £200 million over the course of the franchise, including forfeiting a £165 million guarantee.

GNER was stripped of the route in 2007 after its parent company suffered financial difficulties, while National Express withdrew in 2009. Services were run by the Department for Transport (DfT) for six years up to 2015.

Mick Whelan, general secretary of train drivers’ union Aslef, said: “This is the third time in 10 years that a private company has mucked up the East Coast Main Line. In contrast, when it was run in the public sector, it returned £1 billion to the Treasury.

“That shows what we have been saying all along – that Britain’s railways should be run, successfully, as a public service, not for private profit. Because they can’t do it.

“Virgin and Stagecoach have managed reverse alchemy – by turning gold into base metal, and profits into losses on the East Coast.”

The Department for Transport would not confirm when the decision on the future of the franchise will be announced.

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