Railway ownership structure "a mess"

LONDON Mon Jul 27, 2009 3:42pm BST

National Express trains wait at the platform at King's Cross station in London July 1, 2009. REUTERS/Luke MacGregor

National Express trains wait at the platform at King's Cross station in London July 1, 2009.

Credit: Reuters/Luke MacGregor

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LONDON (Reuters) - Britain's railway franchises have been branded "a mess" by a group of MPs, who called for major reforms including the nationalisation of the troubled East Coast mainline.

The government's cross-party Transport Select Committee said in a report on Monday that the current ownership structure allowed rail operators to walk away when times were bad and levy large fare hikes on passengers.

It called for the East Coast, set to be taken off the hands of current operator National Express (NEX.L) later this year after the company complained of heavy losses, to be kept under state ownership and used to compare against the performances of private companies.

"Rail franchising remains a mess where private operators can abandon their obligations when times get tough. The time has come for fundamental reform," the report said.

Referring to the National Express fiasco, it added: "Many more franchises may be struggling to meet their financial obligations, without our knowledge. More failures in the franchise system will cost a lot of public money."

It echoed the views of Transport Minister Andrew Adonis, who has said National Express should be stripped of its two other franchises. The company has lost its chief executive and become a takeover target since the problems with East Coast emerged.

Britain's railways were privatised in the mid-1990s and are now run by several operators, most notably FirstGroup (FGP.L), Stagecoach (SGC.L), Go-Ahead (GOG.L), Arriva ARI.L, Virgin Trains as well as National Express.

The latter is the third operator to lose or be stripped of a rail franchise in the past six years, following France's Connex in 2003 and GNER -- also on the East Coast line between London and Edinburgh -- in 2007.

The report said franchises should be let on a longer term basis to encourage investment rather than short-term cost cutting. It also called for an overhaul of the pricing allowances, which it said was too complex and costly.

"The fare rises we saw this year were excessive," Committee Chairman Louise Ellman said in a statement.

Trade unions welcomed the report.

"This report exposes the chaos of the franchise system on our railways and the risk of more companies going bust in a mirror of the National Express fiasco on the East Coast route," RMT General Secretary Bob Crow said in a statement.

(Editing by Rhys Jones and Leslie Adler)

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