WHITEHALL’S spending watchdog is probing the collapse of the East Coast rail franchise, The Journal can reveal.
The National Audit Office (NAO) is investigating the award of a 2005 contract to rail firm GNER to run East Coast services – subsequently torn up last December and replaced with a temporary deal after the company said it could not pay an agreed £1.3bn premium.
The investigation forms part of a wider NAO study into rail franchising, including the process for selecting winners, which should be completed next year.
Ministers are set to reveal later this year which firm has won a replacement East Coast franchise.
Arriva Trains, National Express Group, First Group and a partnership of Virgin, Stagecoach and GNER are in the running.
NAO chief Sir John Bourn last month told then shadow transport secretary Chris Grayling that the inquiry was under way. New shadow transport secretary Theresa Villiers said last night: “The collapse of the GNER franchise is the worst example of the chaos created by refranchising under this Government.
“That is why the Conservatives wrote to Sir John Bourn last month to request the matter be investigated by the National Audit Office.
“With the Government trying to squeeze ever more money out of the franchising system, it is essential they learn the lessons of the past so we do not end up with another fiasco like we have had with GNER.”
Tyne Bridge MP David Clelland, who sits on the Commons transport committee, said: “I think it is fair to look into circumstances of the GNER collapsed franchise and see exactly what did go wrong there.”
A GNER spokesman said it was not in a position to comment on details of the NAO’s response, but said GNER had continued station and service improvements under its management contract, including a £45m transformation of its diesel trains and the installation of wireless internet on all services.
A Department for Transport spokesman said it was good practice that the NAO reviewed major policy issues and added that it was co-operating fully.
In his letter to Mr Grayling, NAO chief Sir John Bourn said: “We are currently studying rail franchising, including the process for selecting winners, including the risks and rewards involved, the criteria used in decision making and risks to viability.
“This study will include the East Coast Main Line franchise, and we hope to complete it in 2008.”
He said the now-defunct Strategic Rail Authority let the contract in May 2005, before responsibility for franchising was transferred to the DfT.
The SRA decided on the franchise award following detailed analysis of bids received, including robustness of revenue projections, said the watchdog boss.
Checks on our cash
EXPERTS will investigate whether the Government has spent taxpayers’ cash well in awarding passenger rail franchises – around £1.7bn a year goes on supporting services.
A study by the National Audit Office (NAO) will examine where public money goes, how the Department for Transport (DfT) shares risks and rewards – and the consequences for passengers.
The research will examine competitions for passenger rail franchises from 2005, concentrating on those already in operation.
The NAO says it is important for quality and reliability of services and overall cost to the Government that the DfT develops the right specifications and incentive regimes for train operators.
Allocating risks well, awarding franchises on the basis of realistic and robust assessments of each bid, and managing subsequent deals effectively, are other key areas for the study.