Stephen Byers was such a weak minister that it is laughable to think he has any influence on the current government. He is yesterday’s man; an overpromoted Blair loyalist who made such a long series of gaffes that even his mentor was forced to sack him when his tendency to try to please everyone did the opposite and he was found to be telling porkies.
The collapse of the National Express east coast franchise last year was a complicated business; it took the Department for Transport into uncharted waters, which it navigated rather badly. None of the various players come out of the episode with much credit but Byers’s claim that he influenced the deal and saved several hundred million pounds for the company illustrates more that the man lives in a fantasy land in which the prime minister is still his mate Tony than reflecting any reality.
It had been known for several months that National Express was losing so much money on the franchise that it wanted to renegotiate the deal. The then chief executive, Richard Bowker, the former head of the Strategic Rail Authority, thought that he knew how to deal with Whitehall and therefore decided to play hardball. The fact that Bowker’s SRA had been abolished because of his failed attempt to outsmart ministers and civil servants should have been a warning to National Express that Bowker was perhaps not the man to try to negotiate with the government.
Bowker threatened ministers with abandoning all catering on the trains and running down other services such as cheap tickets if they did not agree to cough up more money to save his franchise. He had a weak hand to play and the transport secretary, Lord Adonis, was in no mood to acquiesce to his demands and forced the company to throw in the towel.
The claim that the intervention by Byers saved several hundred million for the company does not, however, stand up. The liability for franchisees is limited since no private company will sign a deal with unlimited potential liabilities, and in this case the amount of the contingency and the bond placed with the department was around £75m, the amount which National Express duly lost.
The one concession Adonis made was to allow National Express to keep its other two franchises rather than be forced to relinquish them which the government can under its “cross-default” rules that are supposed to stop owners of several franchises retaining profitable contracts if they abandon loss-making ones. Adonis initially threatened to foreclose on C2C and East Anglia, but then announced he would not do so as it was not in the interests of passengers and pointing out that they only had a couple of years left anyway. In fact, he was fearful of a legal challenge by National Express as the rules had been badly framed.
In truth, the department has always been ready to do deals with franchisees. First Great Western was bailed out a couple of years ago, when it was in trouble, and allowed to keep its franchises in return for promises of extra investment. Therefore the notion that it was Byers which made the difference is fanciful. What he has done, however, is throw a spotlight on the murky world of government contracts with the private rail companies which are shrouded in secrecy under the all-too readily used commercial confidentiality rules.