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Rail bid by Virgin and Stagecoach was 'naive', say MPs

A "naive" bid by Stagecoach and Virgin to run the Intercity East Coast rail franchise led to its failure, according to MPs.

The Transport Select Committee said the two companies' assessment of the financial risk associated with their bid was wholly inadequate.

It also says the Department for Transport (DfT) must take the blame for not managing the bid effectively.

The rail franchise was taken back under government control in June.

Getty Images

Grayling 'encouraged over-bidding' for East Coast franchise

Today Programme

BBC Radio 4

Transport Secretary Chris Grayling
Getty Images

Lilian Greenwood, the Labour MP who chairs the Transport Select Committee which produced a report into what went wrong with the East Coast Mainline franchise, says: "We're not just critical of Virgin/Stagecoach, we think the Department for Transport (DfT) also have to learn lessons from this.

"They allowed Virgin to put in this over-optimistic bid. They didn't challenge it. They had made assumptions about the timetable that turned out to be undeliverable."

"Astonishingly, they didn't get Network Rail - the infrastructure manager who determines timetables - to check that it actually was deliverable."

She adds: "Given that there had been two franchise failures on the line previously you would have expected the DfT to do proper due diligence and to do financial stress testing of this bid. In fact, this is what the Secretary of State [Chris Grayling] had told us had happened but we found in our inquiry that simply wasn't case - that they allowed, even encouraged, over-bidding."

Virgin-Stagecoach 'too optimistic' about East Coast revenues

Today Programme

BBC Radio 4

Intercity East Coast train
Getty Images

A report into the failure of the Intercity East Coast rail franchise says that the Department for Transport must take the blame for not managing the bid effectively.

Stagecoach and Virgin won the tender to take over the franchise in 2015 but it has handed back to the state in June.

Lilian Greenwood, the Labour MP who chairs the Transport Select Committee which produced the report, tells BBC Radio 4's Today programme: "They [Virgin/Stagecoach] simply were too optimistic about the passenger growth they were going to get and so they didn't get the revenues they needed to meet the very large franchise payments.

"By the time they'd used up £165m of their parent company guarantee they'd completely run out of money and that's why the franchise had to be brought to an end."

Eleven have been hurt in double-decker bus crash in Hampshire
The driver and 18 passengers were on the bus when it crashed at Oakley, near Basingstoke.

Stagecoach hit by cost of East Coast Mainline

Transport giant Stagecoach has revealed an £85.6m hit after being stripped of the East Coast Mainline franchise by the Government earlier this month.

Stagecoach, which ran the line as a joint venture with Virgin, said it was "disappointed" by the costs of the failed franchise.

The East Coast mainline was taken back into public control by the Government on Sunday after Stagecoach and Virgin failed to achieve revenue targets.

Details of the financial impact of losing the franchise came as Stagecoach reported a 4.1% fall in underlying pre-tax profits to £144.8m for the year to April 28.

Map of the rail route

I am disappointed to be reporting significant exceptional costs in respect of Virgin Trains East Coast but I am pleased that there is now clarity for both customers and shareholders."

Martin Griffiths, chief executive of Stagecoach

Stagecoach takes £85m East Coast hit

Virgin East Coast train
Getty Images

Rail and bus group Stagecoach has taken an £85.6m charge to cover the cost of the failure of the East Coast rail franchise.

Last year, the franchise - which Stagecoach ran together with Virgin - was handed back to the government.

Stagecoach said it was "surprised and disappointed by the Secretary of State for Transport's decision to appoint an Operator of Last Resort to take over the operation of InterCity East Coast train services from our Virgin Trains East Coast business".

The comments come as the company reported adjusted pre-tax profits of £144.8m for the year to 28 April, down from £151m the year before.

Stagecoach also cut its full-year dividend to 7.7p per share from 11.9p last year.

Bus operator 'set to back down on 200% child fares rise'

Daniel Clark

Local Democracy Reporting Service

Bus operator Stagecoach is set to back down on its decision to increase child fares by 200% after a raft of angry protests.

There was a public outcry when the bus company announced it was scrapping the £1 child add-on tickets which was first introduced seven years ago, without informing or consulting with councillors or passengers.

Stagecoach bus

Instead it announced it would be bringing in single fares or £3 dayriders for children, which equated to an increase of 200%.

An adult travelling with one child for a day of travel within Exeter will now have to pay £7 - a £4 adult dayrider plus £3 child dayrider - rather than £4.90 - a £3.90 adult dayrider plus £1 child add-on.

Single parents and families with tight budgets have said they are no longer able to travel by bus, are becoming socially isolated, or are finding it cheaper to take the car or train.

At a Devon County Council Cabinet meeting on Wednesday morning, Councillor Emma Brennan, said that a meeting on Thursday, the operator would be presenting a new set of fares.

This action by Stagecoach hits the poorest families hardest, including single parent families and those unable to afford a car [and] ... undermines Stagecoach's supposed commitment to working with Devon County Council to reduce traffic congestion and improve air quality."

Councillor Emma Brennan

Stagecoach has been contacted for further comment in relation to the meeting scheduled for Thursday.

Axing of child bus fares 'causing hardship'

BBC Radio Devon

The axing of a special child bus fare by Stagecoach is being discussed by Devon councillors.

Previously, a parent and child could travel together all day for £4.90 - £3.90 for the parent, with a £1 add-on for the child - but this has now increased to a total of £7.

A motion going before Devon County Council's cabinet claims the removal of the child add-on fare is causing hardship, especially to poorer families.

Operator Stagecoach said the £1 add-on started as a promotion to encourage families to use the bus more and, after not changing for a number of years, was no longer sustainable.