Government considering directly operating East Coast Mainline

Transport Secretary Chris Grayling. Picture: PA.
Transport Secretary Chris Grayling. Picture: PA.

The Government is considering directly operating the East Coast Mainline after Chris Grayling announced that the Stagecoach-led franchise would only be able to continue in its current form for a "very small number of months".

The Transport Secretary said the option of the Department for Transport operating the service was "very much on the table" and would be considered against Stagecoach continuing to operate services on the line on a "short-term, not-for-profit basis".

Delivering a statement in the Commons, he told MPs: "I have already informed the House that the franchise will in due course run out of money and will not last until 2020 but it has now been confirmed that the situation is much more urgent.

"It is now clear that this franchise will only be able to continue in its current form for a matter of a very small number of months and no more."

Mr Grayling said the franchise had breached a "key financial covenant" but stressed that the business would continue to operate "as usual with no impact on services or staff on the East Coast".

"But it does mean I need to put in place in the very near future a successor arrangement to operate this railway and to end the current contract."

He said he had "not yet made a decision on the successor operator to run the East Coast railway" and that there "is no question of anyone receiving a bailout".

Mr Grayling said one option was "to consider the possibility of Stagecoach continuing to operate services on the East Coast under a very strictly designed short-term arrangement".

But he said: "Given the circumstances in which this Government is having to step in to protect passengers on this line I am only prepared to consider this option on the basis that the franchise would be operated on a short-term, not-for-profit basis."

The second option Mr Grayling outlined would see the East Coast franchise "directly operated by the Department for Transport through an operator of last resort".

"This option is very much on the table and will be selected if the assessment I have set out determines that it offers ... a better deal for passengers than the alternative."

Shadow transport Andy McDonald said: "The announcement today is yet another monumental misjudgment to add to a growing list of miscalculations by this Secretary of State.

"It's increasingly clear that he doesn't care about taxpayers, rail passengers or the rail industry itself, but he'll do everything in his power to protect and support Virgin Stagecoach and their ilk and the failed franchise system.

"Members across this House can be in no doubt: the bailout culture at the Department for Transport is alive and well - it's never been better."

Mr Grayling, in response to calls to renationalise the East Coast Mainline, acknowledged the finances of the current operator have been "disastrous" despite claiming day-to-day operations have "proved very successful".

He told MPs: "Since this returned to being operated by Stagecoach, passenger satisfaction levels have risen, the number of employees employed has risen, the return to the taxpayer has risen, and the number of services has risen.

"So, in my judgment the day-to-day operation of this railway has proved very successful over the last two or three years even though the finances of it have been disastrous."

Liberal Democrat former minister Tom Brake asked Mr Grayling if any Virgin or Stagecoach directors received any bonuses in relation to the East Coast project and if they would be clawed back.

Mr Grayling replied: "Given the fact they lost nearly £200 million over that time, and I believe has effectively wiped out all of its profits for rail operations for the last four years, I'd be extremely surprised if its management wanted to pay any bonuses at all.

"But if they do it's not being paid for by the taxpayer, it's being paid for out of the company's reserves - but I'd be gobsmacked if they're paying bonuses on this at the moment."