East Coast rail replacement may not cope better than collapsed franchise, MPs warn
The rail line that will replace the failed East Coast franchise may not cope any better with the problems that led to its predecessor's collapse, MPs have warned.
Lilian Greenwood, chair of the Transport Select Committee, said MPs “cannot reassure passengers that the arrangements for the East Coast Partnership will more successfully overcome the systemic difficulties presented by the current set-up”.
The committee report said there was “no concrete plan, nor timescales, for the interim operator of this franchise” and that “more fundamental reform” was needed if the partnership was to deliver a “step-change in performance” for passengers.
The East coast franchise was brought into government control earlier this year after it became clear that the operators, Virgin and Stagecoach, could not meet the terms of their £3.3bn contract.
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MPs said that while "prime responsibility" for the East Coast failure lay with the two operators, the Department for Transport (DfT) was not "blameless" and should "take some responsibility" for its demise.
They said the collapse could have been avoided if the DfT had identified weaknesses in the bid process, which “lacked the necessary boundaries to temper over-optimistic bidding”.
“Specifically, the DfT’s financial stress-testing of the bids was not robust enough," the report said. "If the DfT had conducted appropriate due diligence and identified weaknesses in the assumptions underpinning the bid, it may not have been in this position today,” it said.
A DfT spokesperson said: “The Transport Select Committee have concluded that Stagecoach overbid for this franchise and paid the price. We also welcome their confirmation that losses were borne by the company, not passengers or taxpayers.
“We are now preparing for East Coast Partnership – bringing together the operation of track and train to deliver a high quality service to passengers and value for money for the taxpayer. We want train companies to have a greater role in infrastructure planning to help them act as stewards for the rail network and deliver the greatest possible benefits for passengers.
“We have introduced new measures to deter over-bidding for franchises and improved our financial modelling and stress testing. Bids are now assessed with a greater emphasis on overall value for the passenger.”
A spokesperson for Stagecoach said: "We welcome the Committee's endorsement of the high quality of service and investment provided for passengers by Virgin Trains East Coast and the operational success of what it acknowledges was a profitable franchise. We've operated railways on behalf of the government for more than 20 years and in developing our plans we used the same bold, ambitious and meticulous approach which delivered strong success in the past. As the Committee makes absolutely clear, there was no incentive to deliberately overbid and there was no taxpayer bailout in the unfortunate premature end to the contract.
"Most importantly, we are pleased the Committee has supported our positive suggestions to reform franchising, including more appropriate risk-sharing, making the system more accountable and robust, and ensuring that the customers and communities who rely on the railway see promised infrastructure and service improvements in full and on time."
Virgin declined to comment.
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