THE Government will press ahead with the privatisation of the East Coast Main Line despite a £40m U-turn over the West Coast franchise, it was announced last night.
The Department for Transport (DfT) has come under pressure to delay the process to move the East Coast from public to private hands after cancelling the award of the new West Coast franchise and admitting “unacceptable” mistakes.
Three other franchise processes were put on hold yesterday as the Government ordered two separate reviews into mistakes in the franchising of the West Coast mainline.
But the DfT said the process for the East Coast franchise was in its early stages and any lessons learnt from reviews ordered into its West Coast line country could be acted upon in time to return the line to private hands by December 2013.
Rail groups and unions last night joined Labour in calling for the Government to reconsider its decision to re-privatise the line, which last week posted record figures under its public ownership.
Speaking to The Journal, Shadow Transport Secretary Maria Eagle said that East Coast operators Directly Operated Railways should stay in charge of the line and take over the West Coast as well.
“I think Patrick McLoughlin should confirm straight away that the East Coast is going to stay being run by the not-for-profit directly operated railways,” she said.
“What’s happened just confirms that, I think. I think it should be permanent. I don’t think the franchise competition should go ahead for the East Coast Main Line.
“I think we need this not-for-profit Government-owned company as a comparator at the very least.”
Ms Eagle said tens of millions of pounds handed in profit to the Government would have to be shared with a private operator if ministers went ahead with their plans.
Tony Walker, spokesman for the North East Branch of Railfuture, the national independent group that champions the cause for a better railway, said: “What has happened today almost certainly marks the beginning of the end of the franchising system.
“A new and better way of providing our train services must be found, and found quickly.”
Three officials at the Department of Transport were suspended yesterday after ministers cancelled the award of the West Coast mainline franchise to FirstGroup.
Taxpayers will now face a £40m hit as the DfT will be paying back the money the four companies spent on their franchise bids.
An angry Transport Secretary Patrick McLoughlin said the debacle was “wholly and squarely” down to “unacceptable” mistakes in his Whitehall department and ordered two independent inquiries to look at what went wrong and the wider franchising programme. The bidding processes for three other franchises - Great Western, Thameslink and Essex Thameside – were put on “pause” because of the errors.
The West Coast rail contract was due to be handed from Sir Richard Branson’s company Virgin Rail to its rival FirstGroup in December.
Describing the bidding process as “flawed” and “insane”, Sir Richard had launched a legal challenge to the decision.
The Government had planned to fight the case but Mr McLoughlin yesterday dropped his opposition, saying: “The original model didn’t take into account inflation and also some elements of the passenger number increases over a number of years.
“I want to make it absolutely clear that neither FirstGroup nor Virgin did anything wrong. The fault of this lies wholly and squarely with the DfT.”
In a post on the Virgin website, Sir Richard said his company had been proved right and expressed hope the Government would accept it should continue to run West Coast trains. FirstGroup said it was “extremely disappointed”, especially given the DfT had offered assurances that its processes were robust.
East Coast services – connecting the region with London and Scotland – are currently in public hands after two previous private operators were engulfed by financial problems.
Last week the public operators of the line announced £200m profits and the highest ever punctuality figures, but the Government wants to return it to the private sector by December 2013.
MPs call for fresh look at franchising system
JULIE Elliott, Labour MP for Sunderland Central, called for the East Coast route to be kept in public hands.
"There is a bigger point, I think that the whole franchise system needs looking at because if the big profitable lines can’t make it work, then I think that spells real problems," she added.
North East Conservative peer Michael Bates welcomed the Government-ordered review into the franchising system.
There was clearly a fundamental problem, said the peer who pointed to the issues with the West Coast franchise and how two financially struggling private operators had to give up the East Coast operation during the time of the last Labour government.
"We need to go back to the drawing board and really take a long hard look at how this process works to achieve the best standards for the passengers and the best deal for the taxpayers," he said.
But Lord Bates warned against jumping to conclusions, adding that previous Tory and Labour governments had concluded the best deal was secured via private operators.
Kevin Rowan, Northern TUC regional secretary, backed calls to keep the East Coast franchise in public ownership – with the TUC’s policy being full renationalisation of the railways.
And he welcomed Labour shadow transport secretary Maria Eagle’s pledge to consider all options for the future of Britain’s train network.
"There is a sufficient amount of evidence to say that the current system isn’t good for passengers, isn’t good for people working in the industry, isn’t good for business and ultimately isn’t good for the taxpayer," said Mr Rowan.
Sir Richard Branson, whose company Virgin Rail currently runs West Coast services, cautioned the Government against trying to take over the line itself.
"If they can’t run the process they are going to have even more difficulty running a railway. I would suggest that would not be a good idea," he said.
Sir Richard said he anticipated Virgin would submit a fresh bid once the new process was in place.
Labour leader Ed Miliband dubbed the West Coast process "a fiasco and another Government screw-up" while rail union TSSA spoke of passengers paying "sky-high prices for this long-running farce".