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East Coast train line to be put into public control | East Coast train line to be put into public control |
(35 minutes later) | |
Rail services on the East Coast Main Line are being brought back under government control, following the failure of the current franchise. | |
Operators Stagecoach and Virgin Trains will hand over control from 24 June. | |
The Department for Transport will run the service until a new public-private partnership can be appointed in 2020. | |
Transport Secretary Chris Grayling said it would smooth the transition to a new operator, but critics said it was evidence of private sector failure. | |
Mr Grayling said the franchise had failed because Stagecoach and Virgin Trains had "got their bid wrong", overestimating the profitability of the line. | |
It is the third time in a just over a decade that the government has called a halt to the East Coast franchise. | It is the third time in a just over a decade that the government has called a halt to the East Coast franchise. |
The London to Edinburgh line has been run by a joint venture between Stagecoach and Virgin, since 2015. | The London to Edinburgh line has been run by a joint venture between Stagecoach and Virgin, since 2015. |
The companies promised to pay £3.3bn to run the franchise until 2023, but at the end of last year it become clear they were running into trouble. | |
In February it was announced that the franchise would end early, leading to accusations the government was bailing them out. | |
A history of failure | A history of failure |
This is the third time a franchise on the East Coast Main Line has failed. | This is the third time a franchise on the East Coast Main Line has failed. |
In 2005, GNER signed a £1.35bn, 10-year deal in what was then the biggest contract in European railway history. One year later it was stripped of the route. | In 2005, GNER signed a £1.35bn, 10-year deal in what was then the biggest contract in European railway history. One year later it was stripped of the route. |
In August 2007, National Express agreed a £1.4bn deal, but then handed it back to the government in 2009 amid the financial crisis. | In August 2007, National Express agreed a £1.4bn deal, but then handed it back to the government in 2009 amid the financial crisis. |
It was then government-run until Stagecoach and Virgin's £3.3bn bid in 2015. | It was then government-run until Stagecoach and Virgin's £3.3bn bid in 2015. |
Read more: What went wrong at the East Coast Main Line? | |
Mr Grayling said the companies had overestimated growth in passenger numbers and revenues and were having to reach into their own pockets to fulfil the terms of the franchise. | |
He told the Commons that Stagecoach and Virgin have lost almost £200m, but there had not been a loss to taxpayers "at this time". | |
The rail companies have blamed their problems on Network Rail, saying it had failed to upgrade the line which would have allowed them to run more frequent services. | The rail companies have blamed their problems on Network Rail, saying it had failed to upgrade the line which would have allowed them to run more frequent services. |
Shadow Chancellor, John McDonnell tweeted that he welcomed the move, which he said was implementing Labour's Manifesto promise to renationalise the railways. | Shadow Chancellor, John McDonnell tweeted that he welcomed the move, which he said was implementing Labour's Manifesto promise to renationalise the railways. |
Green Party MP Caroline Lucas tweeted that public ownership should be extended the rest of the rail network. | Green Party MP Caroline Lucas tweeted that public ownership should be extended the rest of the rail network. |
For the next two years the operator of last resort, overseen by the Department of Transport will operate the East Coast Main Line. | For the next two years the operator of last resort, overseen by the Department of Transport will operate the East Coast Main Line. |
It will be advised by the engineering firm Arup. | It will be advised by the engineering firm Arup. |
New franchise | New franchise |
In 2020 there will be another tender process for operating the franchise. | In 2020 there will be another tender process for operating the franchise. |
Mr Grayling would like to see closer co-operation between the state-owned Network Rail which owns the track infrastructure and the private train operators. | Mr Grayling would like to see closer co-operation between the state-owned Network Rail which owns the track infrastructure and the private train operators. |
Despite their failure on the East Coast Main Line, Virgin and Stagecoach will be allowed to bid for future rail franchises. | Despite their failure on the East Coast Main Line, Virgin and Stagecoach will be allowed to bid for future rail franchises. |
Analysis: By Theo Leggett, business correspondent | |
To have one rail company fail to fulfil its contract may be regarded as a misfortune. To lose three looks like carelessness. | |
The government insists that the East Coast service is not failing, and will continue to make generate revenues for the public purse. | |
It says Stagecoach and Virgin have only themselves to blame for their inability to make enough money from the line. | |
That may be true. But critics say that if operators keep over-bidding, then that suggests a problem with the tender process. | |
The assumptions made by the Department of Transport (DfT) when inviting bids have also been widely questioned. | |
Now the DfT wants to use the line as a model for a new type of franchise, based on a public-private partnership. | |
That may help to solve some issues - for example, reducing the friction between the track operator, Network Rail and the train operator. | |
But whether it will help to make the line viable for the new operator is open to question. | |
After looking into problems with the service, Mr Grayling said he was advised "that there is no suggestion of either malpractice or malicious intent in what has happened". | After looking into problems with the service, Mr Grayling said he was advised "that there is no suggestion of either malpractice or malicious intent in what has happened". |
He added that the firms have paid a "high financial and reputational price" in relation to the East Coast route. | He added that the firms have paid a "high financial and reputational price" in relation to the East Coast route. |
Stagecoach said it had attempted to negotiate a new contract with the Department for Transport, without success. | Stagecoach said it had attempted to negotiate a new contract with the Department for Transport, without success. |