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

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  • rate this

    Comment number 43.

    Does it matter what happens next as long as it's not put in the hands of civil servants.

  • rate this

    Comment number 42.

    Both France and Germany have managed to keep, develop and maintain very modern and efficeint state owned railway systems. its a pity this country saw fit to dispose of this vital national asset in to the private sector. take it back into public ownership and put passengers first!!!

  • rate this

    Comment number 41.

    The most surprising thing about this fiasco is that people are surprised by it.

    The civil service is pretty universally incompetent, anybody within it who excels is push out because they endanger the ultra incompetents above them.

    Education, NHS, the benefits system, they all waste vast sums with nobody willing to sort it out

    Privitise the lot, and cut out the civil service.

  • rate this

    Comment number 40.

    Frightening, very. These people are running the biggest Business of all, our whole country The NHS, Benefit System, Treasury etc... add infinitum, worth billions & billion of £'s. Perhaps its our fault? we put them there. I rather feel this is what happens when the good governance & sensible managment of the Country is not the real objective of those elected to do the job.

  • rate this

    Comment number 39.

    The system should be designed, implimented and run for the convenience and benefit of the passengers.

    Then we would have a useful, affordable railway system to be proud of, which more importantly, would be used.

    Unfortunately, governments have hived off our national industries to their mates so it hasn't happened.

  • rate this

    Comment number 38.

    Yet another cock up that leaves US with the bill

  • rate this

    Comment number 37.

    The biggest single issue with our railways is a fundmental truth that none of us wish to admit to - whilst BR was so much cheaper than privatisation is now, it does not change the fact that UK railways will always cost more than other countries...

    ...for the simple fact we built ours first & everyone else learnt the lesson & avoided our mistakes as our network was experimental in it's day....

  • rate this

    Comment number 36.

    Since it has been proven that all that was wrong with British Rail was a: Management and b: Finance, can Government admit that giving public property to private companies is unnecessary? The rail system needs to be run as ONE, not fragmented. It needs good quality managers, not profit seeking venture capitalists. Together with a finance structure to match. A public owned, apolitical, company.

  • Comment number 35.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 34.

    As much as I agree the rail systeme should be nationalised, I can't help but think it will see the return of a number of negative aspects of BR, mainly political interference and meddling. Then again we have that now. The problem seems to be the people running the railway understand are are interested in how they operate, politicians don't and can't!

  • rate this

    Comment number 33.

    31.freethepeople - ".....Could someone please remind me how this is better than the old BR, when it actually costs us more?"

    I wish I could say it was, but it isn't as anyone can see...

    ...that is the key, that privatisation of the railways has cost us MORE then public onwership did...

    ...just like all privatisations of national infrastructure have.......

  • rate this

    Comment number 32.

    Even though the system for allocating franchises has been found to be flawed, does not mean Virgin Trains will win during the re-tender process.

    If they did, then that in itself would warrant an investigation?

  • rate this

    Comment number 31.

    Britain's rail system is a joke. Rather than being a source of national pride and the backbone of our transport infrastructure, we have a cobbled together mess, with private profits subsidised by public funds to the tune of billions of pounds. Could someone please remind me how this is better than the old BR, when it actually costs us more?

  • rate this

    Comment number 30.

    The structure of the railways is wrong. Franchise holders don't own the track, they don't own the trains, and have they have little interest in the long term improvement of the network so the railways remain a massive drain on public expenditure. Who wins? Not the customer but the rolling stock leasing companies, mostly owned by banks, who have guaranteed profits and no risk. It's a crazy system.

  • rate this

    Comment number 29.

    Get rid of First (better known as WORST) and 90% of the public transport problems will go away! First has to be one of the biggest rip off companies in todays market. It was bad enough to have to deal with them back 'home' in the UK but now they have spread like a virus to my neck of the woods here in the US and have already caused a massive upset with our local bus company. I 100% dislike FIRST!

  • rate this

    Comment number 28.

    If we would only apply the fact, that our taxation should solely be used for governance, and would leave all other matters to the people who are good at it. More so, when the Government is failing us in all fronts. For your information Google The World Monetary Order to Come.

  • rate this

    Comment number 27.

    Virgin want to do it! so why are they stopping him???
    just like the faulty engines he was sold!

    some one does not want Virgin to be a success.
    in space and on the ground.

  • Comment number 26.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 25.

    If we would only apply the fact that our taxation should solely be used for governance, than we would leave all other matters to the people who are good at it. More so, when we see that the people who suppose to govern are failing on all fronts. For your information Google The World Monetary Order to Come.

  • rate this

    Comment number 24.

    The great fraud of privatisation was the idea that private companies would invest in the franchises. The truth is that they themselves borrowed, and collapsed when the sums failed to add up. If the govt had the courage to change the debate on this, they could support the borrowings of co-op or staff franchises so that the haemorrhaging of the profits and cash-flow to investors could then stop.


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