What future for railways after West Coast reversal?

 
Virgin train Virgin will be reimbursed for the cost of its bid for the West Coast train franchise

It sounded too good to be true, and perhaps we have now had confirmation it was.

First Group appeared to have won the West Coast Main Line franchise by offering the government much more than any firm had paid before for a service.

The deal would have seen the company pay back more than five times as much as Virgin paid for the previous deal.

It was an offer then that came in the middle of a recession to a government in need of every penny.

The fall-out from today now suggests it was as unrealistic as it was tempting.

Flawed assumptions

Now that deal has collapsed.

FirstGroup may challenge the decision but the government has now decided it was based on flawed assumptions about whether it was viable.

And so the West Coast Main Line could end up being run for a while by the state in the same way as its equivalent on the east coast.

In addition, the franchising process now looks so discredited that a reprivatisation of the East Coast Main Line early next year looks unlikely to happen.

FirstGroup staff FirstGroup could challenge the government's decision

So could this be the beginning of the end for rail privatisation?

Supporters of ending private ownership point to the contributions made to the public coffers by the publicly-owned East Coast.

Last year, it could pay the Treasury £187m and £170m the year before because it has no shareholders to reward.

It's possible then - as long as it is well-run - that a publicly-owned railway could actually deliver a better deal to the Treasury than a private franchise.

And Labour has now said it would keep East Coast in public hands as a comparator with the private franchises.

It also believes the West Coast should be run on the same basis.

Shadow transport secretary Maria Eagle said: "Passengers and staff deserve immediate reassurance about the future of the West Coast service.

"If the government now transfers the running of this line to its own not for private profit rail company, as seems sensible and likely, then Labour will support that decision.

"Ministers must also now abandon the planned privatisation of the East Coast line."

Policy 'minefield'

But Labour is still a long way short of committing to end privatisation.

It has not talked about unpicking any of the other franchise deals. Its transport policies are under review but would it really be prepared to enter that minefield?

Sir Richard Branson Virgin Trains ran the West Coast Main Line for 15 years but lost the franchise to FirstGroup

The existing franchising system though looks like it might have reached the end of the line.

Labour itself had huge problems with it - accepting bids from GNER and National Express on the East Coast Main Line that looked lucrative but proved undeliverable.

FirstGroup is also handing back the Great Western franchise because it cannot meet the financial commitments.

Many passengers are also unhappy that fares seem to be on a perennial above inflation, upward trajectory.

Yet, of course, there is always the danger of looking at pre-privatisation British Rail through rose-coloured spectacles.

Few would argue life was perfect then.

Future franchises

Start Quote

Patrick McLoughlin

"I want to make sure what lessons need to be learnt from what went wrong”

End Quote Patrick McLoughlin Transport secretary

But politicians may look more closely now at the state-run railways on the continent - some of whom actually run British franchises.

And for now at least the franchising contests have hit the buffers.

Three other competitions have been "paused".

Transport secretary Patrick McLoughlin said: "I want to make sure what lessons need to be learnt from what went wrong with this have not been repeated in those particular franchises."

The question is can the government reform the current system or is it irredeemable?

At the moment it's hard to predict the direction of travel for our privatised railways, and what the final destination will be.

I'd be interested to hear your thoughts and comments.

 
Richard Moss, Political editor, North East & Cumbria Article written by Richard Moss Richard Moss Political editor, North East & Cumbria

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  • rate this
    +2

    Comment number 23.

    5.

    "Is that the same SNCF that makes substantial losses year after year and keeps getting bailed out by the state?"

    You mean just like the privatised TOC's are here?

  • rate this
    -6

    Comment number 22.

    State control would be a disaster - this is merely a fiasco - no worse than many that politicians have visited upon the UK in the last decade. A £40 m loss to the public purse is shameful - but considerably less than the cost of wars of questionable legality and purpose that have consumed many more times this sum. Also much less than the cost of mismanagement of the UK plc by the last labour Gov.

  • rate this
    -4

    Comment number 21.

    Bring back British Railways, but with one condition, NO UNIONS, They are the one's to blame for BR's demise along with many other industries.

  • rate this
    0

    Comment number 20.

    I thought at the time of the reshuffle that not only was it a great loss that a senior woman cabinet minister and her woman deputy were demoted and sidelined, but it was also odd since the only policy variation was kicking the Heathrow decision out to an independent review. Clearly this cock-up disclosed 3 weeks later explains the moves, as otherwise they would both be in the firing line today.

  • rate this
    +15

    Comment number 19.

    In the early 90s, I used to commute from the North West to London.
    The InterCity 125 was my mode of travel.
    Excellent service, swift comfortable and efficient transport system under BR.
    Maybe governments change things for change`s sake??
    After all, if someone approached you and said "hi there, I`m from the government, and I`m here to help", would you believe them?

  • rate this
    +3

    Comment number 18.

    A few years ago the excellent Midland Mainline company lost its franchise to the abysmal Stagecoach/East Midlands Trains company on the London - Sheffield routes. Was the same process to blame? If so, can we get rid of Stagecoach and reinstate Midland Mainline? I for one would appreciate that.

  • rate this
    +8

    Comment number 17.

    I think I'll bid into the next franchise. I've £50 spare and no trains or any experience to bring to the table. I have to stand an equal chance of getting through the bidding process given the ad-hoc nature in which it seems to be determined though. My secret weapon is going to be a subliminal message hidden within the text where I promise to give Dave and Gideon a job after 2015. Has to work!

  • rate this
    +6

    Comment number 16.

    The language to use is to not renationalisation but simply bringing each franchaise in-house. That each one that would revert to government control and responsbility when it ends.

  • rate this
    +3

    Comment number 15.

    It seems to me the Government still fund millions of tax payers pounds into the rail networks in this country and by privatizing it all is a cover to pass the buck,the trend is to blame these companies when things go wrong and to milk them when they do well.So do well put the prices up and squeeze the life blood out of good ol joe public who just wants to get from A to B on time.

  • rate this
    +6

    Comment number 14.

    Here's me being a bit thick.

    The Rail operator pays a Franchise fee of Billions to the Government.

    It meets it's operating costs and profits from fares and Freight charges.

    Does that mean rail fares & Freight charges are inflated by the Franchise fee or am I missing something?

  • rate this
    -4

    Comment number 13.

    There is no rail privatisation in the UK. The State franchises the services and determines the routes and timetable and a State-subsidised company owns the track. Very limited private involvement through franchises is not privatisation; we have a corporatist system not a privatised system.

  • rate this
    +17

    Comment number 12.

    The irony is the current railway companies require five times as much public funding (in real terms) than when the railways were publically owned. Also British Rail handled its own affairs whereas the current system needs the constant involvement of ministers to make major infrastructure decisions and to arbitrate between bickering companies.

  • rate this
    +15

    Comment number 11.

    It always seemed illogical to me that the Conservatives were desperate to break up any publically owned monopoly but were happy to allow Sky to set up a private monopoly of satellite TV in the UK.

  • rate this
    +1

    Comment number 10.

    It would be better to leave the current incumbents of all the tocs as they are...and when and IF they want to hand back the keys to office, take them and carry on as normal...as a DOR...Many slag off BR, but as an entity ran a slick operation on what it had and got from HMG...at the end of the game BR sectors were in black and a small + made..a profit however small is a + esp in Public Owned Co.

  • rate this
    +12

    Comment number 9.

    NO public service should make profit and pay shareholders. UNLESS that shareholder is the general public. It should be state run not for profit and invested in. The fiasco that is privatised rail should be erased.

    It should then be invested in and new British built rolling stock procured.

    NEVER GONNA HAPPEN. The top dogs have it all rapped up.

  • rate this
    +3

    Comment number 8.

    East Coast being run by the Government and now the West Coast, isn't it obvious the the privatistion model was deeply flawed in the first place? Nationalisation is not the answer but restructuring the whole system is, into something fairer for all ,and in particular the faceless British taxpayers who will end up paying for this Ministerial fiasco.

  • rate this
    +3

    Comment number 7.

    Surely the answer is obvious? To get the best of both worlds, have a privately-run rail system, where the shareholder is the government.

  • rate this
    +7

    Comment number 6.

    This country's fragmented, dysfunctional public transport system seems beyond repair. I have used the train to the Lake District from London for years. Virgin's price rises you could swallow as journey times and punctuality have improved. But what happens at Penrith? There is a Stagecoach bus to Keswick and Workington. When does it leave? Five minutes before the hourly West Coast train arrives.

  • rate this
    -1

    Comment number 5.

    4. Frank_Heaven

    Two, train operations and infrastructure operations need to come back under one roof, as in France. SNCF is state-owned, but operates without political interference. It's proof that a single monopoly company can run the railway effectively

    --

    Is that the same SNCF that makes substantial losses year after year and keeps getting bailed out by the state?

  • rate this
    +4

    Comment number 4.

    There are two issues here.

    One is the silly practice of giving train operating companies subsidies which they hand over to their shareholders.

    Two, train operations and infrastructure operations need to come back under one roof, as in France. SNCF is state-owned, but operates without political interference. It's proof that a single monopoly company can run the railway effectively.

 

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