Tories Forced to Take over East Coast Mainline
Just as hypocrisy is the homage vice pays to virtue, so nationalisation is the homage capitalism pays to socialism
The story so far: after privatisation of British Rail in 1993, capitalist consortia were invited to bid for the franchises for regional train operating companies (TOCs). The East Coast mainline was run by National Express till 2009, when it pulled out because it could not fulfil its obligations, and was losing money hand over fist. The government was forced to nationalise the line.
The publicly owned line had the best punctuality record of all the TOCs. Over the period 2009-2013 it didn’t get a penny in government backing. In fact it returned hundreds of millions of pounds to the state’s coffers, and was the most efficient operation with the best passenger satisfaction of any long-distance franchise.
So what did the Tories do? They put the line out to private tender once again - an act of pure dogma.
Virgin and Stagecoach got the contract. They have now sussed out how to ‘play’ the franchise system. They make a bid. If it’s too high and they can’t make money out of the deal, they walk away and leave the mess to the public sector to sort out. That’s what they’ve just done.
The franchise was due to last till 2023. Most of the money was due to come back to the government - £3.3bn - in the last few years. So they’ve dodged that payment. As far as the Tories are concerned Virgin and Stagecoach are free to try the same scam again.
However, the shadow transport secretary, Andy McDonald, said it was “absolutely ludicrous” to not place conditions on Virgin-Stagecoach’s bidding passport. He explained, “We’ve had bailout after bailout ... Rail companies win, passengers and taxpayers lose. Franchising remains at the heart of the alleged partnerships. No amount of tinkering can solve the failings of a broken privatised system where the public takes the risk and the companies take the profit – aided and abetted by the transport secretary.”
The case for the renationalisation of the entire rail network is overwhelming.
Below is the LRC’s warning posted in 2014:
East Coast Main Line: Passengers and Taxpayers to be Looted by Private Sector Firms
Outrageously, the government has awarded the East Coast franchise to a consortium of Virgin and Stagecoach. If this is an ‘economic’ decision, it is the economics of the madhouse.
Here is a statement from the rail union RMT
In 2009 National Express handed back the franchise for the East Coast Mainline (ECML) to the government. Abandoning the franchise was a disgraceful negation of the operator’s responsibility and inevitably caused huge uncertainty and disruption.
Since the keys were handed back, public ownership (in the form of Directly Operated Railways Ltd) has provided an improved service and vastly more revenue for the Treasury.
Specifically, according to answers to questions tabled by the RMT Parliamentary Group, Directly Operated Railways Ltd has (since November 2009) paid £602m in premium payments. This is £232m more than National Express paid back during its tenure and over £209m more than the amount paid in by Virgin/Stagecoach on the West Coast Mainline since 2009-10.
And ECML in the public sector is virtually subsidy free. Public subsidy accounted for only 1.2% of ECML’s total income in 2011-12, compared to an average of 32.1% of the income of the private train operating companies on the 15 other passenger rail franchises.
Despite this, the Conservative-led government is ideologically wedded to returning ECML to the private sector.
Manuel Cortes, leader of the TSSA rail union, agrees:
Manuel said: This is nothing short of economic vandalism by a Chancellor who does not want voters to know the truth about the East Coast line - it is a public sector success story.
It has been the cheapest franchise to run for the past five years and it has produced the greatest return to taxpayers, over £600 million.
By selling it off before the election, he wants to hide those facts. We have the highest fares in Europe because we are the only country with a fragmented privately run rail network.