By mattbuck [CC BY-SA 2.0 or CC BY-SA 3.0 ], via Wikimedia Commons
The Department for Transport denied claims that the department had bailed out on the East Coast rail franchise, as MPs said that they aimed to scrutinise the decision.
At the start of a separate session, Meg Hillier, the Chair of the Public Accounts Committee, stated: “We recognise it’s very early days, but we will be coming to look at this.”
Last week, the government said that it would intervene on the East Coast rail franchise and terminate the contract three years early.
Under a rail strategy that was unveiled last week by Chris Grayling, the transport secretary, a new partnership model takes the place of the underperforming set-up of Virgin Trains East Coast (Vtec).
The train operator is a joint venture that is led by Stagecoach with the Virgin Group of Sir Richard Branson. Back in June, Stagecoach said that it had booked a pre-tax charge amounting to £84m to cover losses on the route.
However, some critics, including Lord Adonis, the former Labour transport secretary and the current National Infrastructure Commission chair, have labelled the move “a bailout” and said that the government had “serious questions” to answer regarding the move.
Bernadette Kelly, the permanent secretary at the DfT, informed the PAC:
“It is not a bailout. What the secretary of state has announced is a plan from 2020, we will develop a new public-private partnership to ensure that we’ve got a sustainable basis for taking services forward on the East Coast in the interests of passengers.”
PAC stated that it is liaising with the Transport Select Committee over the matter, with Hillier adding that she was certain that the National Audit Office “will be looking at what happens here” also
“What we have said and what I will repeat is that we fully expect all of the financial obligations that Stagecoach has entered into to be met in full,” said Kelly.
She said: “What we need to recognise I think, is that this is a franchise which on its own admission is in some financial difficulty, so we need to find a way forward which preserves services for passengers and which delivers a good deal both for those passengers and for taxpayers. That is what we are focused on: finding a commercially sustainable way forward for this franchise which also delivers better services for passengers.”
Hillier, the PAC chair, said that the decision risked sending out wrong signals to other train operators.
Hiller stated: “There’s a danger a failed bidder being able to get out of a contract, whether or not it’s a bailout or whatever you call it, is sending negative signals to those who actually bid properly and have run a franchise properly.”
Meanwhile, Andy McDonald, the Labour shadow transport secretary, stated: “It’s worthwhile for the Transport and Public Accounts Committees to expose the full details of this waste of taxpayer cash but with three private operators failing on the route in just 10 years, we don’t need another lengthy report to tell us what we already know: privatisation has failed and our railway should be brought back into public ownership.”