Posted 7th February 2018 | 7 Comments

Chris Grayling faces dilemma over Virgin East Coast

THE failure of the Virgin Trains East Coast franchise has left transport secretary Chris Grayling in a dilemma, with no way forward announced so far.

Continuity of services has been guaranteed, but the future of the contract is unknown.

The RMT has called for immediate renationalisation, while Labour is bitterly critical of the government’s handling of the crisis.

Keeping the present franchise until 2020 no longer appears to be an option, although Mr Grayling had said that was the agreement as recently as the end of November.

With 90 per cent shareholder Stagecoach group facing a reported deficit of £200 million over East Coast, a much earlier termination of the present contract now seems inevitable.

RMT general secretary Mick Cash said: “On Monday Chris Grayling told the Commons that Virgin/Stagecoach would be allowed to lurch on for a few more months on the East Coast, he also said that staff would notice no difference and that all options for the future, including the public sector option, were under consideration.

“Since then he has not come forward with a shred of detail as to what happens next and what his operational plans actually are.  That leaves thousands of rail workers caught in the crossfire of the privatised chaos on this crucial Inter-City route in the dark as to what the future holds.”

Mr Grayling could revert to the previous arrangement and run East Coast via the DfT subsidiary Directly Operated Railways, which was in charge between 2009 and 2015, or allow Stagecoach and Virgin to continue for the time being on a ‘not for profit’ basis, with a one-off management fee payable when they surrender control to the DfT or a successor franchisee.

Labour’s shadow transport secretary Andy McDonald accused the government of propping up a ‘crumbling system’, and Mr Grayling in particular of misleading the House of Commons.

Mr McDonald said: “Chris Grayling should and could have banned Stagecoach from the rail industry for defaulting on its contract. His claim that there is ‘no record’ of any previous ban is false. Labour banned National Express in 2009 and he should have done the same. Chris Grayling should apologise to Parliament and retract his statement.

“By cancelling the franchise even earlier than planned the Government has added another £380 million to the East Coast bailout. Chris Grayling won’t ban Stagecoach because banning the operator would have meant no direct award on West Coast and taken the company out of the bidding process for East Midlands and Southeastern. It could have triggered the end of franchising and he won’t do it for that reason.”

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • John Harper, Kelso

    Greater Anglia is also in trouble with Dutch politicans worried about potential loses, and others will follow. One of the big problems is DfT and I think contractually allowing an impossible bid is a problem Stagecoach - Virgin did overbid but ? court beckons. My solution is too place the East Coast on a management fee contract, but I like the idea of switching some the IEP's to the Midland line as Bi-modes. Keeping all the Mk4 sets on the East Coast with new loco's could release 30 IEP's which could be modified to 802 standard replacing all the HST's and Meridians. A further cascade to Cross Country could give them 27x 6 car to replace Voyagers & HST's freeing up 22 sets to enable the 16 retained 4 car trains to be run as 2x4 and give 3 extra 2x4 sets. This may allow spliting and joining sets such as a Newcastle / Sunderland joining at York for Portsmouth / Poole spliting at Basingstoke or a Liverpool / Manchester join at Crewe for Plymouth/ Paignton split at Newton Abbot. I am sure the the extra 123 cars would help over crowding. To go the full hog why not look at a complete mid-life refit of the 220/1/2/ fleet to be electric - hydrogen fuel cell trains fit for 20 years service heir would be a single spare car to act as a prototype.

  • Hugh Gillies-Smith, South Milford

    Has anybody considered whether the Virgin/Stagecoach bid was 'over the top' to squeeze out the competition i.e. First?

  • david c smith, Bletchley

    Apologies if I'm labouring points made in the past, but it does seem the franchising model's flaws are now "coming home to roost".

    Franchising negates the originally intended gains from privatisation - enterprising, innovative, flexible long term investment and development. Rather than trying to apply "one size fits all" to disparate operations, why not use on - rail , in (not for) the market competition where feasible ( intercity / long distance ), whilst addressing captive market rural and commuter services through arrangements such as Community rail partnerships and local direct - democracy cooperatives, respectively ? Better accountabilty and more long - term investment ( look at Chiltern's achievements under its 20 year contract ).

  • Chris Jones-Bridger, Buckley

    I'm sure argument will continue over delay to agreed or proposed infrastructure enhancements on ECML but it has now been exposed that this franchise has failed financially in the here and now. That Stagecoach have had to raid the piggy bank to support their financial obligations under the franchise contract exposes a flawed relationship with reality. When buying financial products retail customers are warned that returns can go down as well as up. Following the collapse of the earlier ECML franchise & similar financial distress in other franchises informed industry commentators questioned the financial robustness of the Virgin/Stagecoach ECML deal when it was awarded bearng ever greater rewards. Ministers of the day may have crowed about 'value of money' to the taxpayer. This looks like short term gain for long term pain!

    Can our current Transport Secretary manage to put his political dogma to one side in favour of a practical solution to the ECML inter city service long term well being. Yes difficult questions require urgent answers. While continuity of service is assured the introduction of the IEP fleet over the next few years still has to be managed. While the DfT's last franchise competition spelt out the shape of the new fleets deployment, and was incorporated in the Virgin/Stagecoach franchise plan, will the service enhancements envisaged now see the light of day? When the Nat Express franchise collapsed expansionary plans went on hold while DOR stabilised the performance of the route. Being devil's advocate a surplus of bimode IEP units would fill a gap on the neighbouring MML where HST replacement is becoming an urgent issue. A case of history repeating itself when depressed Intercity demand on core routes enabled BR to transfer HST sets to MML to maximise profitable employment.


  • Tony Pearce, READING

    The East Coast Bid also involved Network Rail doing its share of investment such as improving the Electricity Supply, - which hasn't happened. It is a mess but their are faults on all sides.

  • Bob, London

    @Melvyn
    I don't think you should make Stagecoach liable to the point of going bankrupt. That's not good for staff and creditors of Stagecoach, I think you also have to recognise the DfT and NR's part in this where upgrades have not been done or new stock not in place. Also why accept a silly bid that can't be met.

  • Melvyn Windebank, Canvey Island, Essex

    If banning just one company from bidding ' could mean the end of franchising ' then it tells us how unfit for purpose this means of running our railways has become .

    It seems Chris Grayling is more interested in his personal dogma than a system to take our railways forward something that could become even more difficult if Brexit leads to EU state railways loosing interest in operation of U.K. railways if being outside the single market and customs union creates difficulties in operation of franchises. Chris Grayling could prove his worst enemy!

    Frankly Stagecoach made this bid and should told to fulfill their obligations in full at least until they go bankrupt . Simply look at how Gordon Brown dealt with Railtrack and avoided paying money to its shareholders when he created Network Rail.

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