The UK’s East Coast rail service between Edinburgh and London will be temporarily taken back under public control after UK Transport Secretary Chris Grayling said he will terminate the East Coast contract of Stageoach and Virgin Trains on June 24, 2018.
Grayling said he plans to use a period of “Operator of Last Resort control” to shape a new public-private partnership for the East Coast service from 2020.
“So on that same day we will start with the launch of the new, long-term brand for the East Coast Mainline through the recreation of one of Britain’s iconic rail brands, the London North Eastern Railway (LNER),” said Grayling.
The UK government has appointed a partnership comprising engineering company Arup, SNC-Lavalin Transport Advisory and consultants to run the interim LNER franchise as the “operator of last resort.”
Anthony Smith, chief executive of independent watchdog Transport Focus, said: “Whichever organisation runs East Coast services, under whatever new arrangements, passengers will be looking for the quality of current services to be maintained and built on.
“East Coast is currently the top-rated franchised train service in Great Britain — with 92% overall satisfaction with the last journey in the latest National Rail Passenger Survey.”
In a stock exchange statement, Stagecoach said: “The company’s subsidiary company, East Coast Mainline Company Limited (ECML, 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 (DfT).
“ECML has been negotiating a new direct award franchise with the DfT but we understand that the Secretary of State for Transport is no longer considering entering into a new franchise with ECML.”
In the same statement, Stagecoach CEO Martin Griffiths, said: “We are surprised and disappointed that the Department for Transport has chosen not to proceed with our proposals.
“We believe our plans offered a positive, value-for-money way forward for passengers, taxpayers and local communities, ensuring the continuation of the exciting transformation already underway on East Coast and a smooth transition to the Government’s new East Coast Partnership.
“However, we respect the Government’s decision.
“We will work constructively with the DfT and the OLR in the weeks ahead to ensure a professional transfer to the new arrangements, supporting our employees and maintaining the same clear focus on our customers as we have over the past three years.
“Today’s decision should not detract from the hard work and dedication of our people at Virgin Trains East Coast, who have been central to the transformation we have been delivering for our customers over the past three years.
“During that time, we have attracted more passengers, greatly increased investment, achieved industry leading customer satisfaction and made significant payments to the taxpayer to reinvest in public services.
“Despite today’s news, we believe that we can continue to make a positive contribution to the UK rail market, delivering long-term customer benefits and sustainable returns for taxpayers and investors.”
Grayling said: “The team that has been working for me since last autumn to form the Operator of Last Resort will take immediate control of passenger services.
“They will then begin the task of working with Network Rail to bring together the teams operating the track and trains on the LNER network.
“I am creating a new board with an independent chair to oversee the operation of the LNER route and work with my department on building the new partnership.
“It will have representatives of both the train operating team and Network Rail, as well as independent members who will importantly ensure the interests of other operators on the route are taken into account.
“I will appoint an interim chair shortly, and then begin the recruitment process for a long term appointment.
“When it is fully formed the new LNER operation will be a partnership between the public and private sectors.
“In all circumstances ownership of the infrastructure will remain in the public sector, but the railway is at its strongest when it is a genuine partnership between public and private.
“The final structure of LNER will need to be shaped in conformity with the primary legislation which governs the industry.
“But my objective remains to move to a situation which leaves one single team operating the railway, with the simple goal of ensuring it continues the work that the existing operators have done in improving passenger services.”
Crucially, Grayling added: “… I have also taken official advice about the future of the passports currently held by Virgin Holdings and Stagecoach, determining whether they are fit and proper to operate on our railways.
“A multi-disciplinary panel has considered the situation and recommended that both companies continue as train operators.
“They have advised that there is also no suggestion of either malpractice or malicious intent in what has happened.
“Clearly we have to be vigilant about future financial commitments.
“But the organisations have paid a high financial and reputational price for what has happened.
“This government operates firm, but fair rules in its dealing with business.
“And I have been advised that it would not be reasonable to remove or place conditions on their passport.
“This decision is however provisional and will be subject to further to review at the point the Virgin Trains East Coast contract is terminated …
“… it is vital that we remember the benefits the railway has seen since privatisation.
“Passenger numbers have doubled. New trains with new technology are being rolled out across the network.
“Innovation has driven up passenger satisfaction and we’re seeing huge amounts of private investment in the future of our railways …
“These advances would not be possible if we returned to nationalisation and lost private sector innovation.”