Britain tries to get rail award process back on track

LONDON Tue Mar 26, 2013 12:33pm GMT

A Virgin train travels towards Euston rail station in London August 15, 2012. REUTERS/Neil Hall

A Virgin train travels towards Euston rail station in London August 15, 2012.

Credit: Reuters/Neil Hall

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LONDON (Reuters) - Britain has announced a shake-up in the way it awards rail franchises, battling to restore confidence in a privatised network which has been dogged by financial problems at rail companies and costly errors in the bidding process.

The government said on Tuesday it would implement the recommendations of an independent review set up after mistakes in the way bids were assessed forced it to tear up the award of the West Coast mainline franchise last year.

The recommendations include staggering the award of franchises and creating a new advisory panel.

Britain's railways have faced a string of problems since they were privatised in the 1990s, including fatal crashes that led to expensive and disruptive network upgrades, as well as financial problems at rail companies which led the government to bring the East Coast mainline back into public hands in 2009.

The Department of Transport said on Tuesday it would immediately start a competition to return the East Coast service to the private sector, and gave a schedule for other franchises, with the West Coast line up for grabs from April 2017.

"The new programme will provide long-term certainty to the market and support the delivery of the government's 9.4 billion pounds rail investment strategy for 2014-2019," said Transport Secretary Patrick McLoughlin.

Virgin Trains, which was to lose the West Coast service before flaws in the award process led the government to ask it to stay on, gave a cautious welcome to the new proposals.

"It seems a lot of things we were arguing for have come to pass," said a spokesman. "It's clear they've learnt their lessons. Let's hope we can move on."

However trade unions, which oppose the privatisation, said the East Coast line had "flourished" under state control.

"This is privatisation for privatisation's sake, as ministers steadfastly ignore what is best for the rail industry and the people who work on it and use it," said Trades Union Congress general secretary Frances O'Grady.


Virgin Trains, a venture between businessman Richard Branson's Virgin Group and Stagecoach, was asked last year to continue running the West Coast service until November 2014.

Its spokesman said the new timetable for the franchise meant its contract was effectively being extended, although the company would need to sit down and negotiate with the Department of Transport as it "would prefer an incentivised contract."

He said Virgin also expected to bid for the East Coast service, which runs the London to Edinburgh route and is now slated to return to the private sector from February 2015.

An eight-year East Coast contract was won by National Express in 2007 after the demise of the original holder, GNER. But the service was renationalised after the company said funds set aside to cover losses on the line would run out.

The new staggered timetable means extensions on existing contracts will be needed to get expiring franchises into place.

This should benefit current operators Go-Ahead, FirstGroup, Stagecoach and National Express, said analysts at Jefferies.

"While that should be seen as a small positive for all, it may be most so for FirstGroup, which should secure some needed cash flows for longer out of this," they said.

FirstGroup - which runs Capital Connect, Great Western and TransPennine Express - and Stagecoach both welcomed the timetable publication in separate statements.

FirstGroup was awarded the West Coast franchise - which links London to Glasgow - last year, before the government cancelled its decision at a cost of around 40 million pounds to the taxpayer.

(Editing by Tom Pfeiffer and Mark Potter)

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Comments (1)
joe2027 wrote:
The Tories could save the public a great deal of money in these austere times, instead of awarding rail franchise extensions, they could renationalise the railways.

A renationalised railway would be cheaper than the £1.2bn as year that is given to privatised railways. The government could take back into public ownership each part of the national rail network, when a rail franchise expires or when the franchisee is unable to meet the franchise conditions. The East Coast main line has been in public ownership since 2009. It should be made permanent.

New Zealand privatised their railways, saw that it was very expensive to run and for passengers, so renationalised their railways.

The problem with the three main parties, is that they still hold onto the dogma that private enterprise is more efficient than public ownership. Anyone that has travelled on German or French state-operated railways, can’t say they are less efficient. The German and French railways are far cheaper to run and for passengers. Also, they are not so overcrowded, as our sardine like packed trains, were passengers pay up to 10 times more. British Rail did a much better job, and with much less public money.

The real winners of rail privatisation have been the banks, accountancy firms and capitalists like Richard Branson, that has hoovered billions pounds of taxpayers’ subsidies, to them it’s been one great financial bonanza.

Mar 26, 2013 11:07am GMT  --  Report as abuse
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