World

East Coast rail franchise brought back under public control

East Coast rail franchise brought back under public control

Virgin Trains East Coast - a joint venture between Stagecoach (90%) and Virgin (10%) - was awarded the franchise to run trains for eight years in 2014.

Mr Grayling said Stagecoach and Virgin, as well as the financial losses, had suffered reputational damage.

United Kingdom government will take back control of the running of the rail route between London and Edinburgh from private operator Stagecoach (temporarily) after the company failed to make the contract work financially.

"Shadow transport secretary Andy McDonald said Mr Grayling had "gifted" Stagecoach and Virgin a "£2 billion bailout" after they failed on the main line, adding: "And he has the audacity to come to that despatch box and say it's not reasonable to remove or place conditions on their passport.

The company's subsidiary, East Coast Mainline (trading as Virgin Trains East Coast), is the current operator of the InterCity East Coast rail franchise under an agreement with the department for transport.

Stagecoach and Virgin Trains got their bid wrong and they are now paying the price.

It comes after operators Virgin and Sir Brian Souter's Stagecoach could no longer meet the promised payments in the £3.3bn contract.

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However, he said, the decision to elect an operator of last resort was selected to provide a better transition towards the partnership model the Tories want to implement.

Mr Grayling said there would be no impact on passengers or train staff as the switch would be "no different from a normal franchise change".

Better that those losses be borne by shareholders of companies like Stagecoach than by taxpayers - the vast majority of whom never actually use a train from one year to the next.

The contract with Virgin Trains East Coast which began only in 2015 will end on 24 June 2018 when the government will recreate what the Transport Minister described as one of Britain's iconic rail brands, the London North Eastern Railway (LNER) thus reinstating what was in place nearly 100 years ago in 1921.

He added: "However, we respect the Government's decision". After the effects of the Network Grant had been taken into account, Virgin Trains East Coast yielded £20.8 million for the Treasury. Quite the contrary. The disciplines of private sector operation returned more investment and better returns to taxpayers than public sector operation did.

The future of Virgin Trains East Coast has been in doubt since the Transport Secretary Chris Grayling announced in February the line may need to be taken back under government control after the franchise holder breached its contract.

Stagecoach said it was "surprised and disappointed" that the government had decided not to proceed with proposals it had previously put forward to continue the franchise.


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