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May 16, 2018

Government to renationalise East Coast rail after string of failures | Politics | The Telegraph

telegraph.co.uk

Government to renationalise East Coast rail after string of failures


Chris Grayling
Chris Grayling, the Transport Secretary Credit: Danny Lawson/PA
The Government will renationalise one of Britain's busiest railway lines after its private operators admitted they could not afford to keep running it.
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.
The decision to temporarily bring the line back into public ownership is politically embarrassing for the Government, which has repeatedly defended the private franchise model for the railways.
It comes amid concern from Tory MPs that Jeremy Corbyn’s call to renationalise the railways is cutting through to the electorate.
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.
Jeremy Corbyn
Jeremy Corbyn, the Labour leader Credit: Robert Perry/Getty Images Europe 
“I plan to use a period of operator of last resort control to shape the new partnership so on the same day we will start with the launch of the new long term brand for the East Coast main line through the recreation of one of Britain’s iconic rail brands, the London and North Eastern Railway, the LNER.
“The team that has been working for me since last autumn to form the operator of last resort will take immediate control of passenger services.
“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.”
Andy McDonald, the shadow transport secretary, said the Government had previously "gifted Virgin Stagecoach a £2billion bailout after they failed on the East Coast mainline at the same time as awarding these same companies a lucrative contract extension on the West Coast”.
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.”
He added: “The Government’s incompetence has been disastrous for passengers and lead to misery for millions.”
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.
Andy McDonald and Jeremy Corbyn
Andy McDonald and Jeremy Corbyn  Credit: Ian Forsyth/Getty Images Europe
Mr Grayling said in February that the financial outlook for Stagecoach had rapidly deteriorated in recent months, with the company incurring losses of almost £200m.
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.
After 2020 the expectation is for the East Coast mainline to be operated on a new “public-private partnership model”.