Government to renationalise East Coast rail after string of failures
Chris Grayling, the Transport Secretary, announced on Wednesday that he will pull the plug on the East Coast rail franchise after a string of failures by Stagecoach and Virgin Trains and rename it the London North Eastern Railway.
Labour accused the Government of giving Stagecoach and Virgin Trains a £2 billion "bailout" and of "incompetence" after Mr Grayling made the announcement in the House of Commons.
The Transport Secretary told MPs: "I am therefore informing the House that I will terminate Virgin Trains’ East Coast contract on the 24th of June 2018.
“They will then begin the task of working with Network Rail to bring together the teams operating the track and trains on the LNER network.”
Mr Grayling defended the policy of franchising as Labour claimed the collapse of East Coast as evidence that the nation's railways would be better run in the hands of the state.
He said: “It is vital that we remember the benefits the railway has seen since privatisation. Passenger numbers have doubled. New trains with new technology are being rolled out right across the network. Innovation has driven up passenger satisfaction.”
He said: “Three times in under a decade private companies have failed on the East Coast. Its only successful period was from 2009 to 2015 under public ownership when £1billion was returned to the Treasury.
“It was the best performing operator on the network before being cynically re-privatised on the eve of the 2015 general election.”
Stagecoach and Virgin Trains have run the franchise on a 90:10 split since 2015 and had already announced they would be handing it back to the Government three years early.
They had originally signed on to run the line until 2023. Critics believe the collapse of the franchise will cost taxpayers hundreds of millions of pounds, something the Government has fiercely disputed.
Last year it emerged that the franchise was to be scrapped three years early after Stagecoach and Virgin Trains admitted they had overestimated passenger numbers and suffered a revenue shortfall.
The Government had two options relating to the future of the East Coast mainline: nationalising the line temporarily or renegotiating a not-for-profit management deal with the two operators.
The Government had indicated it remained open to the possibility of allowing Stagecoach to keep the franchise until 2020 on a not-for-profit basis.
But ministers have ditched that option and opted instead to take “direct” control of the line.
The renationalisation of the line is expected to last for the next two years.