West Coast rail franchise: Uncertain future for Britain’s railways

THE future control of Britain’s trains was thrown into doubt yesterday after the government made an extraordinary admission that it had fatally botched the bitterly contested battle for the Scotland-to-London West Coast Main Line, forcing ministers to scrap the process.

• Department for Transport (DfT) cancels West Coast competition over ‘unacceptable mistakes’

• Three department of Transport officials suspended

Experts believe the debacle could affect plans for the next ScotRail franchises from 2014 and it is also likely to further delay the return of government-run East Coast train operator to the private sector. The Department for Transport (DfT) has suspended three civil servants over apparent computational errors with assessing bids for the West Coast franchise.

The deal had been awarded to Aberdeen-based FirstGroup – which runs ScotRail – over incumbent Virgin Trains, which is 49 per cent owned by Perth-based Stagecoach.

Transport Secretary Patrick McLoughlin’s announcement early yesterday came just 24 hours before the deadline for the UK government’s submission to the High Court over Virgin Group founder Sir Richard Branson’s legal challenge to the franchise decision, which he claims is flawed.

The move sparked an unprecedented public venting of anger by Scottish Government transport minister Keith Brown, who said he had demanded an explanation from Mr McLoughlin for the “horrendous mess”.

Mr Brown, who will update MSPs today, said: “After several hours of trying, I finally managed to tie down [UK] transport minister Simon Burns to make my feelings clear on how this utterly shambolic episode has transpired and been handled.

“I made clear the Scottish Government’s disappointment and frustration at the unprofessional attitude of allowing us to hear this news through the media.”

The decision will cost the taxpayer £40 million in refunding the bidders’ costs.

Mr McLoughlin last month replaced Justine Greening who had made the franchise decision in August. Yesterday, a “very angry” Mr McLoughlin blamed Whitehall “wholly and squarely” for “significant technical flaws” which led to its cancellation.

He said he had had to scrap the competition because of “deeply regrettable and completely unacceptable mistakes made by my department in the way it managed the process”. The DfT said these stemmed “from the way the level of risk in the bids was evaluated”. The statement said: “Mistakes were made in the way in which inflation and passenger numbers were taken into account, and how much money bidders were then asked to guarantee as a

result.

• In full: Department for Transport statement

• In full: Virgin and Sir Richard Branson reaction

• In full: FirstGroup reaction

“The department cannot be confident that these flaws would not have changed the outcome of the competition or that any of the four bidders would not have chosen to submit different offers.”

Mr McLoughlin ordered two independent inquiries, led by business chiefs, into the failed process and its wider implications. The competitions for three other English franchises – Great Western, Essex Thameside and Thameslink – have also been put on hold.

However, Mr McLoughlin stressed neither FirstGroup nor Virgin had done anything wrong.

No decision has been taken over who will run trains after the current franchise expires on 8 December until a new competition is launched.

Experts believe Virgin will be given an extension rather than the service being taken over by the UK government, as happened when National Express abandoned the East Coast Main Line franchise in 2009.

Sir Richard said: “It would be madness for the government to put a team in to run it. We have a good team already”.

Shadow transport secretary Maria Eagle said Labour would support a government takeover if Mr McLoughlin ordered it, but Glasgow Chamber of Commerce said Virgin should stay on.

The West Coast franchise includes services between Glasgow and London, and Edinburgh and Birmingham.

FirstGroup lodged a £5.5 billion bid for the 13-year franchise, with Virgin offering £4.8bn, which it said was a more realistic amount to pay the government over the length of the contract.

Virgin pointed to both National Express, and before it GNER, which both abandoned the East Coast franchise after failing to meet growth targets and payments to the Treasury.

The DfT was condemned yesterday from politicians, business groups and unions.

Labour leader Ed Miliband said: “There has been an absolutely colossal shambles. The first thing David Cameron has to do is get a grip on a Department for Transport who clearly don’t know what time of day it is.”

Former Labour transport secretary Lord Adonis tweeted: “Incompetence of poll tax proportions at DfT. Note: 3 Transport Secs and 3 Perm Secs since 2010; constant churn of key officials.”

FirstGroup said it had had “absolutely no indication” of any problems. A spokesman said: “We are extremely disappointed to learn this news and await the outcome of the DfT’s inquiries.”

Virgin said it welcomed the DfT’s “frank” announcement.

A spokesman said: “We are ready to play a full part in assisting the review to help deliver a franchising system that better serves passengers, taxpayers and the interests of all bidders.”

Scottish Chambers of Commerce chief executive Liz Cameron said: “The fact the Department for Transport has blundered on this scale is simply not good enough and the cost both to the public purse and to the private sector bidders is unacceptable.”

Rail, Maritime and Transport union general secretary Bob Crow said: “Instead of re-running this expensive circus, the West Coast route should be renationalised on a permanent basis.”

More generally, this saga raises some searching questions about how we run our railways and whether the current system truly serves the public interest.