State takeover for failed rail franchise

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Media caption Philip Grayling says talk of nationalising the entire rail network was “missing the particular point”

Rail services within the East Coast Main Line are now being brought back under government control, adopting the failure of the current franchise.

Operators Stagecoach and Virgin mobile Trains will hand over control through 24 June.

The particular Department for Transport will operate the service until a new public-private partnership can be appointed in 2020.

Transport Secretary Philip Grayling said it would smooth the particular transition to a new operator, yet critics said it was evidence of personal sector failure.

Mister Grayling said the franchise acquired failed because Stagecoach and Virgin mobile Trains had “got their bet wrong”, overestimating the profitability from the line.

It is the 3rd time in a just over a decade the government has called a stop to the East Coast franchise.

The Greater london to Edinburgh line has been operate by a joint venture between Stagecoach plus Virgin, since 2015.

The companies promised to pay £ three or more. 3bn to run the franchise till 2023, but at the end of last year this become clear they were running in to trouble.

In Feb it was announced that the franchise might end early, leading to accusations the federal government was bailing them out.

A history of failure

This is the third time a business on the East Coast Main Range has failed.

In 2006, GNER signed a £ 1 ) 35bn, 10-year deal in what has been then the biggest contract in Western railway history. One year later it had been stripped of the route.

In August 2007, National Show agreed a £ 1 . 4bn deal, but then handed it back towards the government in 2009 amid the economic crisis.

It was then government-run until Stagecoach and Virgin’s £ 3. 3bn bid in 2015.

Read more: What went incorrect at the East Coast Main Collection?

Analysis: By Theo Leggett, business correspondent

To have one rail company are not able to fulfil its contract may be thought to be a misfortune. To lose three seems like carelessness.

The government demands that the East Coast service is not really failing, and will continue to generate income for the public purse.

It says Stagecoach and Virgin mobile have only themselves to blame for their own inability to make enough money through the line.

That may be genuine. But critics say that if workers keep over-bidding, then that indicates a problem with the tender process.

The assumptions made by the particular DfT when inviting bids are also widely questioned.

At this point the DfT wants to use the series as a model for a new kind of franchise, based on a public-private relationship.

That may help to solve a few issues – for example , reducing the particular friction between the track operator, System Rail and the train operator.

But whether it will help to help make the line viable for the new owner is open to question.

Mr Grayling stated the companies had overestimated growth within passenger numbers and revenues plus were having to reach into their personal pockets to fulfil the the franchise.

He informed the Commons that Stagecoach plus Virgin have lost almost £ 200m, but there had not been a reduction to taxpayers “at this time”.

The rail businesses have blamed their problems upon Network Rail, saying it experienced failed to upgrade the line which would possess allowed them to run more regular services.

Shadow Chancellor, John McDonnell tweeted that he made welcome the move, which he stated was implementing Labour’s Manifesto guarantee to renationalise the railways.

Eco-friendly Party MP Caroline Lucas messaged that public ownership should be prolonged to the rest of the rail network.

For that next two years the operator associated with last resort, overseen by the Section of Transport will operate the particular East Coast Main Line.

It will be advised by the executive firm Arup.

New franchise

Within 2020 there will be another tender procedure for operating the franchise.

Mr Grayling would like to notice closer co-operation between the state-owned System Rail which owns the monitor infrastructure and the private train providers.

Despite their failing on the East Coast Main Collection, Virgin and Stagecoach will be permitted to bid for future rail franchises.

Analysis: By Norman Smith, associate political editor

For a government wedded towards the benefits of the private sector and also to leaving the railways in the fingers of private companies, today’s choice is a significant blow.

It’s also further ammunition for a Corbyn Labour Party committed to renationalising the particular railways.

Mr Grayling may protest that this is only a brief measure – but it is still the 3rd time in just over a decade that a personal company has had to be stripped from the East Coast Main Line agreement.

There are also likely to be elevated eyebrows that despite their failing, Virgin Stagecoach will still be able to bet to run the line again after it really is transferred back into public private possession in 2020.

Even though memories of British Rail’s dull sandwiches may have faded – attacks, costly commuter fares, cramped carriages and failing companies are hardly more likely to endear passengers to the current crop associated with private rail operators.

After looking into difficulties with the service, Mr Grayling mentioned he was advised “that there is absolutely no suggestion of either malpractice or even malicious intent in what has happened”.

He added that this firms have paid a “high financial and reputational price” with regards to the East Coast route.

Stagecoach said it acquired attempted to negotiate a new contract with all the Department for Transport, without achievement.

Mr Grayling said passengers plus staff would not be affected by the modify to the franchise arrangement. He stated season tickets, timetables and work conditions would remain unchanged.