Britain to renationalise rail line sparking new row over ownership

Andy Street was chief executive of John Lewis

A city leader says the latest failure of the East Coast Main Line franchise casts a shadow on York's economic future.

Transport Secretary Chris Grayling has admitted that the East Coast line will return to the "not-for-profit" London and North Eastern Railways, after just three years with Stagecoach and Virgin.

He added that the firms operating the franchise, which is held under a joint venture between Stagecoach and Virgin owning 90% and 10% respectively, "will have lost almost £200mln" but this had not been a loss to taxpayers "at this time".

Rail operators Stagecoach and Virgin are handing back control of the East Coast train line to the United Kingdom government after admitting they can not afford to keep it running, the transport secretary said Wednesday.

Speaking to parliament today, Grayling said after two months of analysis he had concluded that taking the East Coast line back into public ownership would provide the smoothest transition to a new operation.

Stagecoach confirmed that negotiations had been under way over a new direct award to replace the present franchise, which began in March 2015 and should have run until 2023.

The company's subsidiary, East Coast Mainline (trading as Virgin Trains East Coast), is the current operator of the InterCity East Coast rail franchise under an agreement with the department for transport.

"However, Virgin and Stagecoach got their bids wrong".

Mr Grayling said there would be no impact on passengers or train staff as the switch would be "no different from a normal franchise change". Grayling suggested that Virgin and Stagecoach had lost around £200m supporting VTEC, while the franchise had returned approximately £1bn in premium payments to government.

Better that those losses be borne by shareholders of companies like Stagecoach than by taxpayers - the vast majority of whom never actually use a train from one year to the next. He said the service's most successful period had come under public ownershi until it was "cynically reprivatised".

Many people have criticised the government's decision to allow Virgin Trains East Coast to walk away early.

Grayling said he had chosen to bring in the operator of last resort to expedite his plans to introduce a partnership model for the east coast railway from 2020, where a single team including Network Rail and a private train operator would take decisions on both track and trains on the route.

Stagecoach chief executive Martin Griffiths said he was "surprised and disappointed". Supporters claim it saves the taxpayer money in the long run, and improves customer service and reliability. Grayling said that while there'll be no nationalization, East Coast will be recast as a partnership between public and private sectors.



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