Richard Branson claims Virgin's West Coast rail loss 'bad for UK'
- 10 September 2012
- From the section UK Politics
Virgin boss Sir Richard Branson has told MPs it will be "bad for the UK" if the West Coast mainline rail franchise is awarded to rival First Group.
Sir Richard said Virgin's bid was "more deliverable and financially robust".
In evidence to the Commons Transport Committee, he said the government had not followed its own rules when it awarded the franchise.
But First Group said Virgin had made a series of "bad guesses" about its bid and it could deliver more growth.
Ministers awarded the franchise to run the line - which Virgin has operated for the last 15 years - to First Group last month after the latter made the highest bid.
Virgin has mounted a legal challenge over the decision, claiming the process was flawed although ministers have said they acted scrupulously and fully in line with proper procedures.
Sir Richard told MPs that if First Group assumed the franchise it would be "bad for the country, bad for passengers on the West Coast mainline and bad for passengers on other lines."
"A successful West Coast franchise is vital for the country. A bad decision will impact the UK...Because the Department for Transport did not follow their own rules, the most risky bid was accepted."
Sir Richard said Virgin was promising twice as much investment in new trains and stations.
Its rival's offer, he suggested, was predicated on adding an extra 66 million passenger journeys during the franchise and this was not "physically possible".
He also questioned the amount of "financial security" First Group had been asked to put down upfront and said it intended to pay £2bn in the final years of the contract and this could not be done.
"Common sense and experience of 15 years of running this railway, tells us quite a lot," he said, stressing that his rival bid had been "realistic".
"The First Group bid is absolutely preposterous when you examine it. It is taking the system for a ride literally," he said.
Asked what the "Doomsday scenario" could be for the West Coast Mainline if the contract went wrong, he said the operator could have "to hand the keys back" and the government step in to run the franchise as happened with the East Coast mainline.
He said the contract process should be put on hold pending the outcome of a wider review of the "flawed" rail franchising system.
He was challenged by Conservative MP Kwasi Kwarteng, who suggested many people might take the view Sir Richard was using his "prestige and fame to challenge" an outcome he did not like.
First Group rail boss Tim O'Toole told the MPs Virgin's suggestions that it had financially "backloaded" its bid in order to outbid its rival was "flat-out wrong".
First Group was "offering to do more, to ride more passengers and pay the government more money".
He said the two bids were "very similar" but, unlike its rival, First Group believed it would be able to secure passenger growth in every year of the contract and there would be no "dead time".
He said his firm would put in place an "attractive" fare structure, including a 15% reduction in standard tickets and new categories of fares, including a new class between standard and first.
Fare increases would "broadly follow inflation" if passenger numbers grew at the expected rate, added Mr O'Toole, but he could offer no commitment that fares would not increase at a higher rate than that if these projections proved wrong.
"We have been in the rail business for a long time," he said.
"I like to think we are very good at it.
"It is part of our business and no business who cares about their reputation - where this is a core part of it - would so cynically manipulate the process such that they would throw away their prospects of continuing to be in the business longer term."
Asked by Labour MP Louise Ellman whether the firm had a "cash problem", he replied: "No, we do not have a cash problem. We have steadily paid down our debt."