Posted 12th September 2018 | 4 Comments

‘Fundamental’ railway reform needed, says East Coast report

THE Commons Transport Committee has called for ‘fundamental reform’ of the railways as it publishes its report into the failure of the Virgin Trains East Coast franchise.

It finds that the franchise was ’operationally profitable’, but that the revenue projections were over-optimistic, while the Department for Transport failed to identify the ‘weaknesses underpinning the bid’.

It concludes the Department must share responsibility, and criticises Virgin founder Sir Richard Branson for his ‘cynical attempt to divert attention’ by blaming Network Rail for failing to achieve various upgrades which would have allowed an improved timetable.

However, the Committee supports the DfT’s decision not to renegotiate the contract with Stagecoach and Virgin, although it was evident from the launch day that revenues were insufficient to cover the premiums, because a rethink would have ‘set a precedent for other operators in similar financial positions’. Transport secretary Chris Grayling, giving evidence, told the Committee that ‘it undermines the credibility of the system if you simply let somebody get away with a failure of this kind’.

It was the third early termination of an Intercity East Coast franchise in little more than a decade. Both GNER and National Express failed to stay the course in 2006 and 2009 because revenue had not been up to expectations. The franchise was then run on behalf of the Department for Transport until March 2015. It reverted to state control in June this year, and is to be replaced by a new form of Partnership franchise in due course.

Network Rail’s role had been discussed at length, and Richard Branson had blamed Network Rail failings for VTEC’s problems – at least in part. In January this year he said the bid was ‘based on a number of key assumptions’ which did not prove accurate. He further claimed that ‘poor track reliability’ cost VTEC ‘hundreds of millions of pounds and torpedoed the assumptions of our original bid’.

The Committee concludes that this was not only a ‘cynical attempt to divert attention’, but that it also caused confusion over what infrastructure upgrades were supposed to be achieved. It does not find that Network Rail was even partly responsible for the collapse of the franchise.

The Committeeˆs chair Lilian Greenwood said: ‘Franchises should be able to withstand normal fluctuations in the economic cycle. Naivety, over-optimistic expectations and a mismanaged bid process all played a role in the failure of this franchise—the third in little over a decade.

‘The secretary of state pointed the finger at Stagecoach and Virgin for getting their bids wrong, but the Department is not blameless. Even now, there is no concrete plan, nor timescales, for the interim operator of this franchise. From our inquiry, we cannot be sure, and cannot reassure passengers or public, that the arrangements for the East Coast Partnership will more successfully overcome the systemic difficulties presented by the current set-up.

‘Following the failure of the East Coast line, there is talk that the Prime Minister has ordered a major review of rail franchising—we await more details. However, if this or any other future Partnership arrangement is truly going to deliver a step-change in performance for the passenger, more fundamental reform of our railways is required.’

Transport Focus chief executive Anthony Smith said: ‘However the East Coast is run, passengers will be looking for the quality of current services to be maintained and built on.

‘Passengers will continue to judge services by performance, whether it is punctuality, value for money, the cleanliness of the train or levels of crowding. Having more stability in the underlying contract between Government and the train company will help achieve these things.’

Reader Comments:

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

  • david c smith, Bletchley

    Let's hope any review really will be "fundamental" . The whole concept of tightly state controlled private monopolies belongs to the Middle Ages as an economic model. For one thing, the rigidity of franchising prevents the operator from reacting / adapting to unforeseeable happenings, and the shorter the franchise, the less incentive there is for them to invest (one of the main justifications given for privatisation was to encourage investment of private capital, so the Treasury need not ).

    It may be no coincidence , that one of the best performing passenger operators has been Chiltern, with its 20 year franchise . So, it's up to you, Commons Transport Committee - think up a better way other than renationalisation..

  • Andrew Gwilt, Benfleet Essex

    Hope that London North Eastern Railway don’t get into the same problem as what Virgin Trains East Coast have failed to provide. As least LNER will soon benefit more reliable services once the Azuma Class 800 and Class 801 IET fleets does enter service later this year or perhaps from Spring next year as there are some issues to be done on the ECML signalling. Which has caused the delays to the introduction to the new trains that were due to enter service in December this year.

  • Tony Pearce, Reading

    There are 4 parties involved in running the Railways. The Taxpayer with their Subsidies, the Staff with their Jobs, Pay and Pensions, the Passenger who relies on the Trains to get them to work, and those that provide the private investment in new trains. All 4 must see that their interests are being looked after. That can of course be difficult as the interests of one - cheaper fares - may not be the same as those who want higher wages. I have often argued that the only way would be to have the 'John Lewis' model, where the Staff 'own' the Company and share the profits. It will therefore be in their interest to keep fares low and customer satisfaction high.

  • Chris Neville-Smith, Durham

    About time. I've been saying this for years.

    Just a pity these obvious lessons weren't learned after the National Express collapse.